NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed 57 and downgraded 7 classes of notes from 14 structured finance collateralized debt obligations (SF CDOs) with exposure to various structured finance assets.
KEY RATING DRIVERS
Thirteen classes, affirmed at 'Dsf', are non-deferrable classes which continue to experience interest payment shortfalls.
Forty-two classes rated 'Csf' have credit enhancement (CE) levels that are exceeded by the expected losses (EL) from the distressed collateral (rated 'CCsf' and lower) of each portfolio. For these classes, the probability of default was evaluated without factoring potential losses from the performing assets. In the absence of mitigating factors, default for these notes at or prior to maturity appears inevitable.
The certificates issued by Blue Heron Funding V, Ltd. are affirmed at 'AAAsf/Outlook Stable'. The principal of the certificates is protected by zero coupon bonds, maturing in January 2029. According to the transaction documents, no party other than the certificate holders have claim against the protection assets, which were issued by the Resolution Funding Corporation (REFCO), a U.S. government sponsored agency.
The class B notes issued by Pasadena CDO Ltd. have received approximately $9.1 million or 32.4% of their previous outstanding balance in principal amortizations. As a result, the CE available to these notes has increased and they are now able to pass the 'Asf' rating level according to the Structured Finance Portfolio Credit Model (SF PCM) analysis. However, the portfolio continues to become more concentrated with only 39 obligors remaining as per the October 2015 trustee report. The top 5 obligors now represent 47.3% of the portfolio. In order to address the concentration risks, a sensitivity scenario was performed where the top 5 obligors were downgraded 3 notches each. Under this scenario the class B notes are no longer able to withstand losses at the 'Asf' rating level; however, they continue to pass the 'BBBsf' rating stress. As such, the notes have been affirmed at 'BBBsf'. The revision of the Outlook to Positive reflects Fitch's view that the notes' CE will continue to increase.
The downgrades of the notes issued by Commodore CDO I, Ltd./Corp. and by Fort Sheridan ABS CDO, Ltd are attributed to the inability of the sales proceeds to cover the remaining balances of the outstanding notes. In both transactions, the entire portfolios have been sold by the managers. Since no assets remain in each portfolio, the notes will not to be paid in full at maturity. Therefore, in both transactions all classes have been downgraded to 'Dsf'. The defaulted ratings will be withdrawn within 11 months after today's actions.
Fitch is withdrawing its rating on the Oceanview A1B Custodial Receipts. The rating was based on the rating of the class A-1B notes of Oceanview CBO I, which was withdrawn on March 12, 2015.
Negative migration, defaults beyond those projected, and lower than expected recoveries could lead to downgrades for classes analysed under the SF PCM. Classes already rated 'Csf' have limited sensitivity to further negative migration given their highly distressed rating levels. 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 Surveillance Criteria for Structured Finance CDOs'. The individual rating actions are detailed in the report 'Fitch Takes Various Rating Actions on 14 SF CDOs from 2001 to 2007 Vintages', released and available at 'www.fitchratings.com' by performing a title search or by using the link.
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 sources of information used to assess these ratings were periodic trustee reports and the public domain.
Fitch Takes Various Rating Actions on 14 SF CDOs from 2001 to 2007 Vintages
Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)
Global Structured Finance Rating Criteria (pub. 06 Jul 2015)
Global Surveillance Criteria for Structured Finance CDOs (pub. 13 Jul 2015)
Dodd-Frank Rating Information Disclosure Form