CHICAGO--(BUSINESS WIRE)--Fitch Ratings has upgraded one class and affirmed two classes of notes issued by MWAM CBO 2001-1, Ltd./Inc. (MWAM 2001-1) as follows:
--$6,066,132 class B notes upgraded to 'Asf' from 'CCCsf'; assign
Outlook Stable;
--$17,641,519 class C-1 notes affirmed at 'Csf';
--$13,249,668
class C-2 notes affirmed at 'Csf'.
KEY RATING DRIVERS
The upgrade of the class B notes is attributed to the increased credit enhancement (CE) to the class as a result of the transaction's deleveraging over the last year, as well as the notes' robust performance under Fitch's cash flow model analysis.
Following the full repayment of principal to the class A notes in July 2013, the class B notes have received approximately $15.8 million or 72.3% of their initial rated balance. The CE to the notes has subsequently increased to 85.6% from 48.7%. Although the notes are able to pass higher than the 'Asf' rating stress under Fitch's cash flow analysis, the class remains susceptible to the highly concentrated portfolio of only 31 obligors.
The Outlook reflects Fitch's expectation of stable performance until the notes are fully paid down.
The class C-1 and C-2 notes (collectively, class C) are currently receiving their periodic interest due. Although the CE level of the notes has increased since Fitch's last review, it is still exceeded by the expected losses from the distressed and defaulted collateral (rated 'CCsf' or lower) in the underlying portfolio.
This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using Fitch's Structured Finance Portfolio Credit Model (SF PCM) to project future default levels for the underlying portfolio. These default levels were then compared to the transaction's breakeven levels generated by Fitch's cash flow model under various default timing and interest rate stress scenarios.
RATING SENSITIVITIES
The class B notes have limited rating sensitivity given their CE level and the likelihood for the class to pay in full within the next two to four payment periods.
The class C notes are already rated 'Csf' and have limited downward rating sensitivity. However, higher than expected recoveries, from the portfolio's distressed collateral, could lead to upgrades above the notes' current rating.
MWAM 2001-1 is a structured finance collateralized debt obligation (SF CDO) that closed on Jan. 24, 2001. As of the Feb. 28, 2014 report, the portfolio is comprised of residential mortgage-backed securities (45.3%), corporate bonds (29.5%), commercial asset-backed securities (16.8%), commercial mortgage-backed securities (5.2%), and SF CDOs (3.2%), from 1992 through 2003 vintage transactions.
Additional information is available at www.fitchratings.com.
Applicable Criteria and Related Research:
--'Global Structured
Finance Rating Criteria' (May 24, 2013);
--'Global Rating Criteria
for Structured Finance CDOs' (Sept. 12, 2013);
--'Counterparty
Criteria for Structured Finance and Covered Bonds' (May 13, 2013);
--'Fitch's
Interest Rate Stress Assumptions for Structured Finance' (Jan. 23, 2014);
--'Criteria
for Rating Caps and Limitations in Global Structured Finance
Transactions' (June 12, 2013).
Applicable Criteria and Related Research:
Criteria for Rating Caps
and Limitations in Global Structured Finance Transactions
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=709840
Fitch's
Interest Rate Stress Assumptions for Structured Finance
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=700189
Global
Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
Global
Rating Criteria for Structured Finance CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718027
Counterparty
Criteria for Structured Finance and Covered Bonds
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=707155
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=826271
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