Fitch Affirms 9 Classes of LNR CDO 2003-1, Ltd.

CHICAGO--()--Fitch Ratings has affirmed nine classes issued by LNR CDO 2003-1, Ltd. (LNR 2003-1). A complete list of rating actions follows at the end of this press release.

KEY RATING DRIVERS:

Since the last rating action in January 2014, approximately 27.2% of the collateral has been downgraded and 22.7% has been upgraded. Currently, 89.3% of the portfolio has a Fitch-derived rating below investment grade with 72.9% of the portfolio having a rating in the 'CCC' category and below, compared to 87.4% and 68.7%, respectively, at the last rating action. Over this period, the transaction has received $64.5 million in paydowns which has resulted in the full repayment of the class C notes and $45.7 million in paydowns to the class D notes.

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. While the class D notes' ratings pass above its current ratings within the cash flow model, the ratings below reflect the passing rates as well as the concern of potential interest shortfalls and concentration risk as the portfolio continues to amortize.

For the class E through J 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 E notes have been affirmed at 'CCCsf', indicating that default is possible. Similarly, the classes F through J notes have been affirmed at 'Csf', indicating that default is inevitable.

RATING SENSITIVITIES

The Stable Outlook on the class D notes reflects Fitch's view that the transaction will continue to delever and the notes will be paid in full. LNR 2003-1 is a static collateralized debt obligation (CDO) that closed on July 2, 2003. The portfolio consists of 56 bonds from 23 obligors, all of which are CMBS from 1999 through 2003 vintage transactions.

Fitch has affirmed the following classes and Outlooks as indicated:

--$4,944.61 Class D-FL notes at 'Bsf'; Outlook Stable;

--$40,314.39 Class D-FX notes at 'Bsf'; Outlook Stable;

--$48,000,000 class E-FL notes at 'CCCsf';

--$41,626,000 class E-FX notes at 'CCCsf';

--$6,000,000 class F-FL notes at 'Csf';

--$44,724,000 class F-FX notes at 'Csf';

--$12,204,000 class G notes at 'Csf';

--$30,511,000 class H notes at 'Csf';

--$43,478,000 class J notes at 'Csf'.

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=969895

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Contacts

Fitch Ratings
Primary Surveillance Analyst:
Daniel Anderson, +1-312-606-2305
Associate Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson:
Mary McNeil, +1-212-908-0785
Managing Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Surveillance Analyst:
Daniel Anderson, +1-312-606-2305
Associate Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Committee Chairperson:
Mary McNeil, +1-212-908-0785
Managing Director
or
Sandro Scenga, +1-212-908-0278
Media Relations, New York
sandro.scenga@fitchratings.com