Fitch Takes Action on U.S. Corporate Synthetic CDOs

NEW YORK--()--Fitch Ratings has taken various rating actions on 15 U.S. corporate synthetic collateralized debt obligation (CDO) transactions. Rating affirmations are the primary rating action affecting 44 ratings from 15 transactions. Four classes of notes from one transaction were upgraded to 'BBsf' from 'Bsf', while two classes of notes from two transactions were downgraded to 'Dsf' from 'Csf'. Thirteen of the 15 transactions have not experienced any credit events in the past 12 months.

KEY RATING DRIVERS

The corporate synthetic CDO transactions have largely performed in line with Fitch's expectations since February 2013. The ratings for all 15 transactions generally reflect sufficient support for the ratings driven by an adequate level of available credit enhancement, relatively stable performance of the low-rated reference entities in portfolios and decreased time to maturity.

The rating drivers for the upgrades were decreased time to maturity and moderate improvement in portfolio quality since the last review. Two classes of notes from two transactions were downgraded to 'Dsf' due to principal losses sustained following credit event settlements. These losses were sustained primarily from both transactions' exposure to structured finance securities.

The rating drivers for 9 classes, which were affirmed with their Outlooks revised to Positive from Stable, were stable portfolio credit quality and decreased time to maturity. The Outlook for one class was also revised from to Stable from Negative as a result of stable portfolio credit quality and decreased time to maturity. Fitch assigns Rating Outlooks to notes rated at or above the 'Bsf' rating category. Fitch's Ratings Outlook indicates the likely direction of any rating change over a one- to two-year period.

RATING SENSITIVITIES

For the deals analyzed, negative migration and defaults in the portfolio beyond those projected could lead to downgrades. The five distressed transactions, with classes rated 'CCCsf' and below, have limited sensitivity to further negative migration given the highly distressed rating levels of the outstanding notes. However, there is potential for classes to be downgraded to 'Dsf' should there be principal losses sustained following future credit event settlements.

A spreadsheet detailing Fitch's rating actions for the public tranches is available on www.fitchratings.com.

Additional information is available at 'www.fitchratings.com'.

The information used to assess these ratings was sourced from transaction trustee reports, swap counterparties and the public domain.

Applicable Criteria & Related Research:

--'Global Rating Criteria for Corporate CDOs' (Aug. 8, 2013);

--'Global Rating Criteria for Structured Finance CDOs' (Sept. 12, 2013).

Applicable Criteria and Related Research: Fitch Takes Action on U.S. Corporate Synthetic CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=736376

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=715492

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718027

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=820257

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Contacts

Fitch Ratings
Primary Surveillance Analyst
Shashi Srikantan, +1-212-908-0393
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Derek Miller, +1-312-368-2076
Senior Director
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com

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Contacts

Fitch Ratings
Primary Surveillance Analyst
Shashi Srikantan, +1-212-908-0393
Director
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Derek Miller, +1-312-368-2076
Senior Director
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com