The word "cato" may have first been used as an abbreviation of "catastrophic failure" or just "catastrophe." I doubt anyone even knows who first used it and and in what context. It most likely pre-dates our usage in the context of rocketry.

But "CATO" is certainly an acronym. I'm sure it is a contrived acronym where the meaning was chosen to fit the letters. But, it is an acronym (the fact that it is in all caps is a good clue).

-- Roger