DBRS Downgrades TABS 2005-2 Oakville Limited Class A-1, A-2 and B Notes

DBRS has today downgraded the Class A-1, Class A-2 and Class B Notes (collectively, the Notes) issued by TABS 2005-2 Oakville Limited (TABS). The Class A-1 Notes and Class A-2 Notes have been downgraded to C from CCC, and the Class B Notes have been downgraded to C from CC.

TABS is a managed cash flow collateralized debt obligation (CDO) of asset-backed securities (ABS) that consists primarily of U.S. residential mortgage-backed securities (RMBS). All of the underlying ABS were originally investment grade, with most being rated BBB or BBB (low).

As part of its analysis of RMBS held by TABS, DBRS reviews all of the underlying RMBS and provides a credit assessment based on each security’s pipeline of existing defaults, likely defaults and various delinquency statistics, as well as on cash flow modelling using different assumptions for prepayments and interest rates. In the past six months, performance has continued to deteriorate significantly for many of the RMBS held by TABS. As a result, DBRS now expects that all of the underlying RMBS will default (61% of the current portfolio principal amount). In addition, 15% of the portfolio principal amount is invested in CDO tranches that are currently rated CC or lower.

As a result of the poor performance of the underlying securities, the Class A-1 Notes, Class A-2 Notes and Class B Notes have been downgraded to C. DBRS expects that holders of both the Class A-2 Notes and Class B Notes will not receive any return of initial principal over the remaining term of the transaction. However, they will continue to receive interest payments on an ongoing basis; the interest payments on the Class A-2 Notes and Class B Notes rank senior to the principal payments on the Class A-1 Notes in TABS’s priority of payments. DBRS expects that holders of the Class A-1 Notes will experience a first-dollar loss and not have their full initial investment returned.

Notes:
All figures are in U.S. dollars unless otherwise noted.

The applicable methodologies are Rating Canadian Structured Credit Transactions and Canadian Structured Credit Surveillance, which can be found on our website under Methodologies.

This is a Structured Finance rating.