“Mirant may end up being the largest US bankruptcy in 2003, however, the CDO market will be relatively unaffected by the default in part because the anticipated recoveries on the Mirant Americas debt are comfortably greater than those assumed in our credit models,” said Kevin Kendra, director of CDO performance analytics at Fitch in New York.
Fitch said recent market prices on Mirant and Mirant Americas Generation debt – at 45% and 75% respectively of par – suggest that few CDOs will be affected. Current market prices put a 25% recovery value on Loral. “Although the Loral recoveries are expected to be significantly lower, Fitch has been treating it as a credit-impaired asset in our modelling assumptions for quite some time,” said Kendra.
Fitch has placed 19 tranches from seven CDOs with exposure to Mirant on rating watch negative.