Fitch Downgrades One Class Of J.H. Whitney Market Value Fund L.P
NEW YORK–(BUSINESS WIRE)–Aug. 12, 2003
Fitch Ratings downgrades the class D junior subordinated participating secured notes issued by J.H. Whitney Market Value Fund, L.P., a market value collateralized debt obligation (CDO). At this time Fitch also affirms the ratings for the class B notes and the class C notes. These rating actions are effective immediately.
— $38,900,000 class B first senior subordinated secured notes
affirmed at ‘BBB’;
— $25,000,000 class C second senior subordinated secured notes
affirmed at ‘B’;
— $25,000,000 class D junior subordinated participating secured
notes downgraded to ‘C’ from ‘CC’.
Fitch previously downgraded the class D notes on Feb. 25, 2002 from their original rating of ‘B’ to ‘CCC+’. The downgrade was due to a significant decline in the market value of the fund’s assets, which caused J.H. Whitney Market Value Fund, L.P. (the fund) to fail its class D overcollateralization (OC) test on Jan. 18, 2002. Since the fund was unable to cure the original failure of the class D OC test within the 10 business day grace period, the trustee provided a notice to note holders on March 11, 2002 that the fund was formally in default.
Due to the ongoing stress on the market prices of the portfolio assets, the fund began to fail its class C OC test on July 12, 2002. On Sept. 10, 2002 Fitch downgraded the class D notes from to ‘CC’ from ‘CCC+’, as well as class C notes to ‘B’ from ‘BB’. At the July 25, 2003 measurement date, the latest valuation report available, the class C OC test failed by a margin of $1,500,000, while the class D OC test failed by a margin of $22,000,000. The fund also continues to fail its minimum net worth test as of the latest applicable measurement date, March 31, 2003.
Given that the fund has an ongoing default, none of the notes below the senior most class may receive current interest payments. Instead, proceeds are used to pay down the senior most notes outstanding. As of April 2003, the class A notes were paid down completely. The class B notes are currently the controlling class, receiving all proceeds to pay current interest and principal. At this time, all interest payments to the class C, D and E notes are blocked. These notes will not receive any current interest unless the controlling class waives the event of default. Additionally, the event of default gives the controlling class the right to give the trustee notice of acceleration that would cause a liquidation of all the portfolio assets, and the notes to become due and payable.
The rating action at this time reflects the less liquid nature of the fund’s assets due to the ongoing redemption of the notes and their inability to support the class D notes at their current market value. As of the July 25, 2003 valuation date, the market value of the assets was approximately $75,800,000 and the total amount of rate notes outstanding through the class D notes was $88,900,000.
Whitney Market Value Management Co. continues to review alternatives with the controlling class to look for opportunities to maximize the value of the assets. Fitch originally rated the liabilities of J.H. Whitney Market Value Fund, L.P. on March 31, 1999.
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