Fitch Downgrades 4 and Affirms 5 Classes of Anthracite 2005-HY2 Ltd./Corp

NEW YORK--()--Fitch Ratings has downgraded four and affirmed five classes of Anthracite 2005-HY2 Ltd./Corp (Anthracite 2005-HY2) as a result of continued negative credit migration and increased principal losses on the underlying collateral. A complete list of rating actions follows at the end of this release.

Since Fitch's last rating action in November 2011, approximately 19.8% of the collateral has been downgraded and 6.4% has been upgraded. Currently, 85.9% of the portfolio has a Fitch derived rating below investment grade and 60.1% has a rating in the 'CCC' category and below, compared to 85% and 62.7%, respectively, at the last rating action. Over this period, the class A notes have received $5 million in pay downs and the collateral has experienced approximately $31 million in principal losses.

This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. The default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under the various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. Fitch also analyzed the structure's sensitivity to the assets that are distressed, experiencing interest shortfalls, and those with near-term maturities. Based on this analysis, the class A notes' breakeven rates are generally consistent with the ratings assigned below.

For the class B through G notes, Fitch analyzed each class' sensitivity to the default of the distressed assets ('CCC' and below). Given the high probability of default of the underlying assets and the expected limited recovery prospects upon default, the class B notes have been downgraded to 'CCsf', indicating that default is probable. Similarly, the class C notes have been downgraded and the class D through G notes affirmed at 'Csf', indicating that default is inevitable. The class F and G notes are currently receiving interest paid in kind (PIK) whereby the principal amount of the notes is written up by the amount of interest due.

Anthracite 2005-HY2 is backed by 54 tranches from 21 obligors. The transaction closed in July 2005 and is considered a commercial mortgage backed securities (CMBS) B-piece resecuritization (also referred to as a first loss commercial real estate collateralized debt obligation [CRE CDO]) as it primarily includes junior bonds of CMBS transactions. The portfolio is composed of 70.5% CMBS, 16.9% commercial real estate loans (CREL), and 12.6% real estate investment trust (REIT) assets.

Fitch has downgraded the following classes:

--$96,106,804 class A to 'CCCsf' from 'Bsf';

--$52,593,000 class B to 'CCsf' from 'CCCsf';

--$25,360,000 class C-FL to 'Csf' from 'CCsf';

--$7,000,000 class C-FX to 'Csf' from 'CCsf'.

Fitch has affirmed the following classes:

--$25,275,000 class D-FL at 'Csf';

--$13,500,000 class D-FX at 'Csf';

--$9,376,000 class E at 'Csf';

--$58,481,483 class F at 'Csf';

--$60,277,862 class G at 'Csf'.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (June 6, 2012);

--'Global Rating Criteria for Structured Finance CDOs' (Oct. 3, 2012);

--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 13, 2012).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=690203

Global Criteria for Cash Flow Analysis in CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688518

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Contacts

Fitch Ratings
Primary Surveillance Analyst
Matthew McGowan, +1 212-908-0733
Analyst
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Mary MacNeill, +1 212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Surveillance Analyst
Matthew McGowan, +1 212-908-0733
Analyst
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Mary MacNeill, +1 212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, +1 212-908-0278
Email: sandro.scenga@fitchratings.com