CHICAGO--(BUSINESS WIRE)--Fitch Ratings has affirmed the ratings of 67 and upgraded 13 classes of notes from eight Taberna Preferred Funding U.S. collateralized debt obligations (CDOs) with exposure to trust preferred securities (TruPS), senior and subordinated debt issued by real estate investment trusts (REITs), tranches of structured finance (SF) CDOs, homebuilders and specialty finance companies, as well as commercial mortgage backed securities (CMBS).
KEY RATING DRIVERS
In Taberna Preferred Funding IX, Ltd., the upgrade of the class A-1LAD notes follows the resumption of interest payments to the class after the trustee was seeking to confirm the correct interpretation of the payment provision of the indenture. Following the acceleration on Nov. 30, 2015, the trustee held in escrow the A-1LAD due interest for the February 2016 payment date. Upon the resolution of this matter, the class A-1LAD has been receiving interest pari passu with the class A-1LA notes including the interest held in escrow for the February 2016 payment date. Both the A-1LA and A-1LAD classes' current credit enhancement exceeds the losses projected at the 'CCCsf' rating stress under Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis. However, the notes' rating is capped at 'Csf' due to interest shortfall risk caused by an out-of-the-money outsized hedge set to expire after the May 2017 payment date.
The upgrades of the class A-1LA and A-1LAD notes in Taberna Preferred Funding V, Ltd./Inc., to 'CCsf' from 'Dsf' reflect Fitch's expectation that the notes will be receiving timely interest in the near term future following the expiration of the interest rate hedge.
The ratings of the senior notes in Taberna Preferred Funding II, Ltd./Inc., Taberna Preferred Funding III, Ltd./Inc., and Taberna Preferred Funding IV, Ltd./Inc., were capped by the outcome of the two additional sensitivity scenarios. In the first, the SF CDO and CMBS assets' weighted average lives were extended to half of their term to legal maturities. In the second, the ratings of obligors which made up greater than 5% of the performing portfolio were lowered by one rating category to account for potential performance volatility in concentrated portfolios.
The individual rating actions are detailed in the rating action report 'Fitch Takes Various Actions on Eight Taberna Preferred Funding U.S. REIT TruPS CDOs'.
Significant paydowns combined with stable or improving credit migration, can lead to limited upgrades for senior notes in some transactions. Conversely, negative migration, defaults beyond those projected and collateral redemptions from stronger credits causing adverse selection in underlying portfolios, will lead to downgrades.
This review was conducted under the framework described in the reports 'Global Surveillance Criteria for Structured Finance CDOs' and 'Global Rating Criteria for CLOs and Corporate CDOs'.
DUE DILIGENCE USAGE
No third party due diligence was reviewed in relation to this rating action.
Additional information is available at www.fitchratings.com.
Sources of Information:
The information used to assess these ratings was sourced from trustee reports, collateral manager reporting web sites and the public domain.
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)
Global Rating Criteria for CLOs and Corporate CDOs (pub. 09 Sep 2016)
Global Structured Finance Rating Criteria (pub. 27 Jun 2016)
Global Surveillance Criteria for Structured Finance CDOs (pub. 05 Jul 2016)
Fitch Takes Various Actions on Eight Taberna Preferred Funding U.S. REIT TruPS CDOs
Dodd-Frank Rating Information Disclosure Form
Copyright (c) 2016 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch's factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch's ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed.
The information in this report is provided "as is" without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers.
For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001.