Fitch Affirms & Withdraws Marathon 2006-1 Ratings

NEW YORK--()--Fitch Ratings has affirmed two classes of Marathon Real Estate CDO 2006-1 (Marathon 2006-1). Fitch also withdraws these two classes' ratings due to lack of relevancy. A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Since the last rating action in November 2015, there has been significant pay down; classes A-1 through H have been paid in full.

The transaction is highly concentrated with only 12 assets remaining. Approximately 94.2% of the total collateral is whole loans or A-notes, while 5.8% is CUSIP collateral (REIT debt). The CDO has a significant percentage of defaulted assets (46% of the pool) and Fitch Loans of Concern (30.8%) remaining in the pool. Additionally, there are three interest rate swaps remaining in the transaction, which are senior in priority to the notes within the waterfall.

The affirmations at 'CCCsf' reflect Fitch's concern regarding the asset manager's ability to continue to manage the CDO such that principal and interest proceeds are available to make timely interest payments to senior class J given the possible diminishing amount of funds available from the assets and remaining swap payments. Principal recoveries to the rated classes are expected to be high given the senior position of the majority of the collateral.

This transaction was analyzed according to the 'Surveillance Criteria for U.S. CREL CDOs', which applies stresses to property cash flows and debt service coverage ratio (DSCR) tests to project future default levels for the underlying portfolio. Recoveries for the loan assets are based on stressed cash flows and Fitch's long-term capitalization rates. Cash flow modeling was not performed, as no material impact from the analysis was anticipated.

Fitch is withdrawing the ratings on this transaction due to the lack of relevancy to the agency's coverage combined with commercial reasons.

RATING SENSITIVITIES

Ratings sensitivities are not applicable as the ratings on the transaction are being withdrawn.

DUE DILIGENCE USAGE

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

Fitch affirms and withdraws the following classes:

--$56.3 million class J at 'CCCsf';

--$26.7 million class K at 'CCCsf'.

Classes A-1 through H have been paid in full. Fitch does not rate the preferred shares.

Additional information is available at www.fitchratings.com.

Applicable Criteria

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

Surveillance Criteria for U.S. CREL CDOs (pub. 17 Nov 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=873275

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1006256

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1006256

Endorsement Policy

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

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Contacts

Fitch Ratings
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com
or
Primary Analyst
Tiffany Pierce, +1-212-908-9107
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Karen Trebach, +1-212-908-0215
Senior Director

Contacts

Fitch Ratings
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com
or
Primary Analyst
Tiffany Pierce, +1-212-908-9107
Associate Director
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Karen Trebach, +1-212-908-0215
Senior Director