Correction: Fitch Takes Various Rating Actions on 20 CRE CDOs

NEW YORK--()--(This is a correction of a release published April 27, 2016. It includes Fitch's 'Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds', which was omitted from the original release.)

Fitch Ratings has downgraded 3 classes, upgraded 11 classes, and affirmed 158 classes from 20 commercial real estate collateralized debt obligations (CRE CDOs) with exposure to commercial mortgage backed securities (CMBS). Fitch has withdrawn the ratings on 15 distressed classes within one transaction. Each of the withdrawn classes has experienced principal writedowns.

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 reviewed transactions have been analyzed within a cash flow model framework, as the impact of structural features and excess spread, or conversely, principal proceeds being used to pay CDO liabilities and hedge payments, was determined to be minimal in the context of these CDO ratings or the hedge has expired.

KEY RATING DRIVERS

The upgrade to class A-J in MSCI 2005-RR6 is attributed to deleveraging of the capital structure and collateral upgrades. The notes have received $24.7 million and 54.4% of the collateral has been upgraded, since the last rating action. The notes are now able to withstand losses consistent with a 'AAA' rating according to Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis.

The upgrade to class B in G-FORCE 2005-RR LLC is attributed to deleveraging of the capital structure and collateral upgrades. The notes have received $10.5 million and 40.3% of the collateral has been upgraded, since the last rating action. The notes are now able to withstand losses at a higher rating stress according to Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis compared to Fitch's previous review.

The upgrades to classes C-FL and C-FX in Anthracite CDO III Ltd. / Corp. and class C in Crest G-Star 2001-1, LP to 'Asf' are attributed to deleveraging of the capital structure and collateral upgrades. The transactions have received $7.6 million (52.4% upgraded) and $9.7 million (62.5% upgraded), respectively, since the last rating action. The notes are now able to withstand losses at a higher rating stress according to Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis compared to Fitch's previous rating action.

The upgrades to class A in Anthracite 2004-HY1 Ltd./Corp. and class D in TIAA Real Estate CDO 2003-1 to 'BBsf' are attributed to deleveraging of the capital structure and collateral upgrades. The transactions have received $4.4 million (44.3% upgraded) and $2.3 million (54.9% upgraded), respectively, since the last rating action. The notes are now able to withstand losses at a higher rating stress according to Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis compared to Fitch's previous review. However, given the increasing pool concentration and concentration of distressed collateral the upgrades have been limited to 'BBsf'.

The affirmation of class B-2 in COMM 2004-RS1, Ltd. is attributed to deleveraging of the capital structure. The class has received $6.8 million since the last rating action. The notes are now able to withstand losses at a higher rating stress according to Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis compared to Fitch's previous review. However, given the increasing concentration with only seven assets from seven obligors remaining and due to the concentration of distressed collateral the upgrade has been limited to 'Bsf'.

Four classes have been upgraded to 'CCCsf' as the credit profiles of the underlying transactions have improved, the capital structures continue to delever, class credit enhancement (CE) is now comparable to the 'CCC' rating loss rate (RLR) by SF PCM, and/or the credit enhancement to the notes exceeds the percentage of collateral with interest shortfalls. In some instances where notes do not pass the CCC PCM RLR hurdle, Fitch anticipates high recoveries for several underlying collateral assets despite distressed ratings due to a look-through analysis of the underlying loan collateral and/or based on Fitch's Recovery Rating, when available. Under this analysis, three additional classes have been affirmed at 'CCCsf'.

Additionally, one class has been affirmed at 'CCsf', indicating that default is probable. This class did not pass the 'CCC' RLR in SF PCM. However, the CE of the notes exceeds the percentage of collateral experiencing full interest shortfalls.

For transactions where the percentage of collateral experiencing full interest shortfalls significantly exceeds the CE level of the most senior class of notes, Fitch did not use SF PCM, as the probability of default for all classes of notes can be evaluated without factoring potential further losses.

Fitch affirmed 88 classes at 'Csf' because 1) the CE levels of the notes are below the percentage of collateral experiencing interest shortfalls or otherwise anticipated to take a loss on the transaction or 2) because the notes are undercollateralized. In general, the CE levels are also significantly below the percentage of the collateral with a Fitch derived rating of 'CC' and below.

Fitch affirmed 16 classes at 'Dsf' because they are non-deferrable classes that have experienced interest payment shortfalls. Fitch downgraded an additional three classes and affirmed 49 classes at 'Dsf' because the classes have experienced principal writedowns.

RATING SENSITIVITIES

Negative migration and defaults beyond those projected could lead to downgrades for the 10 transactions analyzed under the SF PCM. Upgrades to these transactions are possible if recoveries exceed expectations. The remaining 10 transactions have limited sensitivity to further negative migration given their highly distressed rating levels. However, there is potential for classes to be downgraded to 'Dsf' if either they are non-deferrable classes that experience any interest payment shortfalls or are classes that experience principal writedowns.

The individual rating actions are detailed in the report 'Fitch Takes Various Rating Actions on 20 CRE CDO's', released and available at 'www.fitchratings.com' by performing a title search or by using the above link.

DUE DILIGENCE USAGE

No third party due diligence was provided or reviewed in relation to this rating action.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 28 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781

Exposure Draft: Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878412

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Global Surveillance Criteria for Structured Finance CDOs (pub. 13 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867800

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1005558

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1005558

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https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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Contacts

Fitch Ratings
Primary Analyst
Martin Nunnally
Associate Director
+1-212-908-0871
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Analyst
Martin Nunnally
Associate Director
+1-212-908-0871
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1-212-908-0785
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: sandro.scenga@fitchratings.com