Fitch Affirms Three Classes of N-Star Real Estate CDO I, Ltd.

CHICAGO--()--Fitch Ratings has affirmed three classes issued by N-Star Real Estate CDO I, Ltd (N-Star CDO). A complete list of rating actions follows at the end of this press release.

KEY RATING DRIVERS

The rating actions reflect the distressed nature of the underlying collateral. Since Fitch's last rating action in January 2014, approximately 23.5% of the underlying collateral has been downgraded and none has been upgraded. Currently, approximately 82% of the collateral has a Fitch derived rating of 'D' and the remaining 18.2% of the collateral has a Fitch derived rating of 'BBB-.' Over this period, the transaction has received $23.3 million in paydowns which has resulted in the full repayment of the class B-1, B-2, C-1A, C-1B, and resulted in $1.4 million in paydown to the class C-2 notes.

Collateral experiencing interest shortfalls has increased to 77.3% of the pool from 8.61% at the last rating action. The transaction has significant concentration with only nine obligors remaining.

This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the look-through analysis of the underlying portfolio. Fitch also analyzed the structure's sensitivity to the assets that are distressed, experiencing interest shortfalls, and those with near-term maturities. Additionally, a deterministic analysis was performed where the recovery estimate on the distressed collateral was modeled in accordance with the principal waterfall. An asset by asset analysis was then performed for the remaining assets to determine the collateral coverage for the remaining liabilities. Given the high probability of default of the underlying assets and the expected limited recovery prospects upon default, the class C and D notes have been affirmed at 'Csf', indicating that default is inevitable.

RATING SENSITIVITIES

Default is anticipated for the remaining classes given the increasing concentration risk and adverse selection potential with the remaining collateral. Fitch anticipates some recovery to the class C notes given that 18.2% of the remaining collateral is rated investment grade.

N-Star CDO I is a cash flow collateralized debt obligation (CDO), which closed Aug. 21, 2003. The remaining collateral is composed of nine assets consisting of 50.4% commercial mortgage backed securities (CMBS), 18.2% of a real estate investment trust (REIT), and 31.4% of structured finance CDOs (SF CDOs).

Fitch has affirmed the following classes as indicated:

--$23,032,441 class C-2 notes at 'Csf';

--$11,045,491 Class D-1A notes at 'Csf';

--$5,190,633 Class D-1B notes at 'Csf'.

Fitch does not rate the preference shares.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (August 4, 2014);

--'Global Rating Criteria for Structured Finance CDOs' (July 16, 2014).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751136

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=958135

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Contacts

Fitch Ratings
Primary Surveillance Analyst
Valerie Jayson
Associate Director
+1 312-368-3116
Fitch Ratings, Inc.
70 W Madison Street
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill
Managing Director
+1 212-908-0785
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Surveillance Analyst
Valerie Jayson
Associate Director
+1 312-368-3116
Fitch Ratings, Inc.
70 W Madison Street
Chicago, IL 60602
or
Committee Chairperson
Mary MacNeill
Managing Director
+1 212-908-0785
or
Media Relations:
Sandro Scenga, +1 212-908-0278
sandro.scenga@fitchratings.com