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A.M. Best Affirms Ratings of ICONS, Ltd. and ICONS CDO Corp.A.M. Best has affirmed the issue ratings on the multi-tranche collateralized debt obligation co-issued by two bankruptcy remote special purpose vehicles: ICONS, Ltd. (Cayman Islands) and ICONS CDO Corp. (Delaware) (collectively known as ICONS or the issuers). The outlook for each rating is stable. (See below for a detailed listing of the ratings.) The principal balance of the rated notes is collateralized by a pool of trust preferred securities, surplus notes and secondary market securities (collectively, the capital securities), primarily issued by small- to medium-size insurance companies. The capital securities are pledged as security to the notes. Interest paid by the issuers of the capital securities are the primary source of funds to pay operating expenses of the issuers and the interest on the notes. Repayment of principal of the notes is primarily funded from the redemption of the capital securities. This rating action primarily reflects: the current issuer credit ratings (ICRs) of the remaining issuers of the capital securities; a stress of up to 250% on the assumed marginal default rates of insurers (derived from Best's Idealized Default Rates of Insurers); the amount of capital securities considered to be in distress; and recoveries of 0% after the defaults of the capital securities. Also considered are qualitative factors such as the effect of interest ate spikes; subordination levels associated with each rated tranche; the adjacency of very high investment grade ratings to very low non-investment grade ratings in the transaction's capital structure and the possibility that additional redemptions of highly rated entities will leave lower-rated companies in the collateral pool. The ratings could be upgraded or downgraded or the outlook revised if there are material changes in the ICRs of the remaining insurance carriers, an increase in the number of defaulted capital securities or additional capital security redemptions. The following issue ratings have been affirmed: ICONS, Ltd. and ICONS CDO Corp.- -- "aaa" on $172 million Class A Senior Notes Due 2034 -- "a+" on $40 million Class B Senior Notes Due 2034 -- "b+" on $8 million Class C-1 Deferrable Mezzanine Notes Due 2034 -- "b+" on $20 million Class C-2 Deferrable Mezzanine Notes Due 2034 -- "b+" on $6 million Class C-3 Deferrable Mezzanine Notes Due 2034 -- "ccc+" on $20 million Class D Deferrable Mezzanine Notes Due 2034 This is a structured finance rating. This press release relates to rating(s) that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2016 by A.M. Best Rating Services, Inc. ALL RIGHTS RESERVED.
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