Fitch Takes Various Rating Actions on 39 SF CDOs from 2000-2007 Vintages
NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 207 and downgraded four classes of notes from 39 structured finance collateralized debt obligations (SF CDOs) with exposure to various structured finance assets.
KEY RATING DRIVERS
The affirmation of 134 classes from 39 transactions at 'Csf' reflects the degree of each note's undercollateralization. Fitch's analysis of these classes indicates that even if a full par recovery on the distressed and defaulted collateral (rated 'CCsf' and lower) of each respective portfolio was realized, it is still unlikely for these notes to receive the full repayment of principal and accrued interest by their stated maturity dates. As such, the agency believes that the probability of default can be evaluated without factoring in potential further losses from the currently performing portion of the portfolios. In the absence of mitigating factors, default for these notes at or prior to maturity appears inevitable.
The 71 classes affirmed at 'Dsf' are non-deferrable classes which are expected to continue experiencing interest payment shortfalls.
The certificates issued by Blue Heron Funding V, Ltd. and Blue Heron Funding VII, Ltd. have been affirmed at 'AAAsf' with the Negative Rating Watch maintained. The principal of both certificates is protected by zero coupon bonds, maturing in January 2029 and April 2030, respectively. According to the documents of each transaction, no party other than the certificate holders have claim against these protection assets which were issued by the Resolution Funding Corporation (REFCO), a U.S. government sponsored agency.
The downgrade of the four non-deferrable classes - the class A-1, A-2, B, and C notes, issued by TORO ABS CDO II, Ltd. to 'Dsf', is the result of the interest payment default, which began on the August 2013 payment date. The accrued interest due on these four classes has not been paid due to the senior-ranking swap termination obligation. Fitch believes that even after the full repayment of this termination amount to the swap counterparty, additional interest shortfalls are likely given the volatility of proceeds from the underlying portfolio.
The transactions included in this review have limited sensitivity to further negative migration given the highly distressed rating levels of the outstanding notes. However, there is potential for non-deferrable classes to be downgraded to 'Dsf' should they experience any interest payment shortfalls.
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 Fitch's Structured Finance Portfolio Credit Model (SF PCM) or a cash flow model framework, as the impact of additional losses, structural features, and excess spread was determined to be minimal in the context of each note's rating.
The individual rating actions for each rated CDO are detailed in the report 'Fitch Takes Various Rating Actions on 39 SF CDOs from 2000-2007 Vintages', dated Feb. 21, 2014. It can be found on Fitch's website at 'www.fitchratings.com' by performing a title search or by using the link below. For further information and transaction research, please refer to 'www.fitchratings.com'.
Additional information is available at 'www.fitchratings.com'
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Global Rating Criteria for Structured Finance CDOs' (Sep. 12, 2013);
--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 13, 2013).
Applicable Criteria and Related Research: Fitch Takes Various Rating Actions on 39 SF CDOs from 2000-2007 Vintages
Counterparty Criteria for Structured Finance and Covered Bonds
Global Rating Criteria for Structured Finance CDOs