Fitch assigns triple-A to NCUA notes on government backing
Fitch Ratings assigned its gilt-edged rating to $3.52 billion of notes sold this week by the National Credit Union Administration. The NCUA plans to settle about $1.55 billion of Senior I-A notes, $1.6 billion of Senior II-A notes and $370 million of Senior III-A notes, with a weighted average life of 6.03, 5.90 and 4.63 respectively, as early as next week. The securities came to market backed by the full faith and credit of the U.S. government, which led Fitch to assign the triple-A ratings. The notes have an initial guarantee for timely payment of interest and principle from the NCUA. The federal agency will use proceeds to buy 255 residential mortgage-backed securities previously owned by five credit unions the NCUA put into conservatorship. Fitch said the senior notes will be collateralized by three separate pools of loans with no cross-collateralization between the three series. The two largest series will be collateralized by floating-rate residential mortgage-backed securities and fixed-rate RMBS will collateralize the third series, according to Fitch. The NCUA has been begun divesting about $50 billion of troubled assets the past few months from assets the federal regulator acquired upon placing the two corporate credit unions, and three other credit unions, into conservatorship. The two largest corporate credit unions in the nation – U.S. Central Federal Credit Union and Western Corporate Federal Credit Union – went into conservatorship in March 2009. The NCUA, which holds about 98% of the troubled assets in the MBS space, plans to bring roughly 10 total notes sales to market in the coming months as it moves through the troubled assets. Still, the federal regulator has shied away from providing specific details about its plans to issue the notes until just before the deals get to market. Write to Jason Philyaw.