Powered by Business Wire
Search Results for Topix.net

Fitch Downgrades Heller SBA Loan Trust, Series 1998-1

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has downgraded Heller SBA Corp. pass-through adjustable-rate certificates, series 1998-1 as follows:

--Class A downgraded to 'BBBsf' from 'AAsf'; Outlook Negative;

--Class M-1 downgraded to 'BB+sf' from 'Asf'; Outlook Negative;

--Class M-2 downgraded to 'BBsf' from 'BBBsf'; Outlook Negative;

--Class M-3 downgraded to 'Bsf' form 'BBsf'; Outlook Negative;

--Class B downgraded to 'CCCsf' from 'Bsf'; RE 100%.

KEY RATING DRIVERS

The downgrades reflect the high concentration of non-performing loans which have been delinquent for several years. Given the delinquent status of these loans, Fitch expects limited recovery proceeds from these late stage delinquencies. While the spread account has increased as a percentage, its dollar balance has declined over the last year. As a result of these two factors, the transaction effectively is under collateralizes as the current outstanding note balance exceeds the aggregate of the current performing collateral balance and the spread account. The current characteristics of the transaction are not consistent with high investment grade ratings. As such, all outstanding classes have been downgraded to the levels detailed above. The Negative Outlook reflects the continued exposure to the significant non-performing collateral.

RATING METHODOLOGY

In reviewing the transactions, Fitch took into account analytical considerations outlined in Fitch's 'Global Structured Finance Rating Criteria', issued May 20, 2014, including asset quality, CE, financial structure, legal structure, and originator and servicer quality.

Fitch's analysis incorporated a review of collateral characteristics, in particular, focusing on delinquent and defaulted loans within the pool. All loans over 30 days delinquent were deemed defaulted loans. The defaulted loans were applied loss and recovery expectations based on collateral type and historical recovery performance to establish an expected net loss assumption for the transaction. Due to the severely delinquent status of the delinquent loans and an additional haircut was applied to the recovery expectations. Fitch stressed the cashflow generated by the underlying assets by applying its expected net loss assumption. Furthermore, Fitch applied a loss multiplier to evaluate break-even cash flow runs to determine the level of expected cumulative losses the structure can withstand at a given rating level. The loss multiplier scale utilized is consistent with Fitch's 'Criteria for Rating U.S. Equipment Lease and Loan ABS', dated Dec. 19, 2013.

Additionally, Fitch's analysis focused on concentration risks within the pool, by evaluating the impact of the default of the largest performing obligors. The obligor concentration analysis is consistent with the previously mentioned equipment criteria. The analysis compares expected loss coverage relative to the default of a certain number of the largest obligors. The required net obligor coverage varies by rating category. The required number of obligors covered ranges from 20 at 'AAA' to five at 'B'. Fitch applied loss and recovery expectations based on collateral type and historical recovery performance to the largest performing obligors commensurate with the individual rating category. The expected loss assumption was then compared to the modeled loss coverage available to the outstanding notes given Fitch's expected losses on the currently delinquent loans. Fitch also applied the 'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' dated May 28, 2014 in determining the ratings.

While the stresses loss approach was the primary driver, its results were compared to the obligor concentration approach and qualitative factors such the results of these approaches compared to prior reviews, recent performance, and available CE. The rating actions taken were ultimately the result of a combination of these factors. Fitch will continue to closely monitor these transactions and may take additional rating action in the event of changes in performance and CE measures.

RATING SENSITIVITY

While assumed recoveries on the non-performing collateral are low, Fitch believes it to be appropriate given the length of time the loans have been nonperforming. If recoveries are similar in size and timing than assumed, stable ratings are likely for the classes. However, if recoveries are worse, have a longer lag, or if the transaction has any more meaningful delinquencies, then negative rating actions are likely.

Additional information is available at 'www.fitchratings.com'.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 20, 2014);

--'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' (May 28, 2014);

--'Criteria for Rating U.S. Equipment Lease and Loan ABS' (Dec. 19, 2013).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748821

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions

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

Criteria for Rating U.S. Equipment Lease and Loan ABS

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=726362

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=836518

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

Contacts

Fitch Ratings, Inc.
Primary Analyst
Thomas Kaiser, CPA, +1-312-368-3338
Associate Director
Fitch Ratings, Inc.
70 W. Madison Street
Chicago, IL 60602
or
Secondary Analyst
Du Trieu, +1-312-368-2091
Senior Director
or
Committee Chairperson
Bradley Sohl, +1-212-908-0792
Senior Director
or
Media Relations
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com