CHICAGO--(BUSINESS WIRE)--Link to Fitch Ratings' Report: Fitch Takes Various Rating Actions on 18 SF CDOs from 1999-2004 Vintages
Fitch Ratings has upgraded eight classes, downgraded one class, and affirmed 46 classes of notes from 18 structured finance collateralized debt obligations (SF CDOs) with exposure to various structured finance assets.
KEY RATING DRIVERS
The upgrade of the class A-1 and A-2 (together, class A) notes issued by Diversified Asset Securitization Holdings I, L.P/Corp. is attributed to significant deleveraging of the capital structure since the transaction's last review. Receiving $16.5 million over the last year, the class A notes have benefited from increased credit enhancement (CE) levels and are now able to withstand losses at the 'BBsf' rating stress according to Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis.
Similarly, the upgrade of the class A notes of Solstice ABS CBO, Ltd. and the class B notes of NYLIM Stratford CDO 2001-1, Ltd./Inc. are the result of the continued deleveraging of the capital structure. The notes have received $5 million and $6.5 million, respectively, and are able to withstand losses at the 'Bsf' rating stress category.
The downgrade of the non-deferrable class A-2 notes issued by Oceanview CBO I, Ltd./Inc., to 'Dsf' follows the interest payment default caused by the transaction's acceleration.
Where CE available to the senior class of notes was exceeded by losses projected at the 'CCCsf' rating stress under the SF PCM analysis, Fitch compared each class' credit enhancement level to the expected losses (EL) from distressed ('CCsf' and below) collateral of each portfolio. For three classes, the CE level of the notes was not exceeded by expected losses and the ratings were affirmed at 'CCsf'. Under this framework, Fitch has also upgraded the class A-1 and A-2 notes of Bleecker Structured Asset Funding, Ltd. and the class A-1 (Series 1) and A-1 (Series 2) notes of Orchard Park Ltd./Inc.
For 40 classes where expected losses already exceeded the notes' CE level, the probability of default was evaluated without factoring potential further losses from the currently performing collateral of each portfolio. In the absence of mitigating factors, these classes were affirmed at 'Csf'.
Two classes, affirmed at 'Dsf', are non-deferrable classes that are expected to continue experiencing interest payment shortfalls.
The certificates issued by Blue Heron Funding IX, Ltd. have been affirmed at their current rating of 'AAAsf' with a Stable Outlook. The principal of these Certificates is protected by a zero coupon bond maturing in April 2030, issued by Resolution Funding Corporation, a U.S. government sponsored agency.
Negative migration and defaults beyond those projected could lead to downgrades for the three transactions analyzed under the SF PCM. The remaining 15 transactions have limited sensitivity to further negative migration given their highly distressed rating levels. However, there is potential for non-deferrable classes to be downgraded to 'Dsf' should they experience any interest payment shortfalls.
This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria' and 'Global Rating Criteria for Structured Finance CDOs'. None of the transactions have been analyzed within a cash flow model framework, as the effect of structural features and excess spread available to amortize the notes were determined to be minimal. Instead, Fitch compared the CE level of each class to the expected losses from the distressed assets in the portfolio. For transactions where expected losses did not exceed the CE level of the senior class of notes, Fitch compared potential losses of the transaction's entire portfolio, projected by the SF PCM, to the CE levels of the notes.
The individual rating actions are detailed in the report 'Fitch Takes Various Rating Actions on 18 SF CDOs from 1999-2004 Vintages', dated April 22, 2014. It can be found on Fitch's website at 'www.fitchratings.com' by performing a title search or by using the link below. For further information and transaction research, please refer to 'www.fitchratings.com'.
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);
--'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' (June 12, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Global Rating Criteria for Structured Finance CDOs
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions