Fitch Affirms 5 Classes of Non-Profit Preferred Funding Trust I

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the ratings on five classes of certificates issued by Non-Profit Preferred Funding Trust I (NPPF I), revised the Rating Outlooks and maintained the Recovery Estimates (RE) as follows:

--$21,522,770 class A-1 senior certificates at 'BBBsf'; Outlook to Negative from Stable;

--$54,840,495 class A-2 delayed issuance senior certificates at 'BBBsf'; Outlook to Negative from Stable;

--$16,500,000 class B senior certificates at 'BBsf'; Outlook to Negative from Stable;

--$22,000,000 class C mezzanine certificates at 'CCCsf'; RE 20%;

--$14,000,000 class D subordinated certificates at 'CCsf'; RE 0%.

Fitch does not rate class E Junior certificates.

KEY RATING DRIVERS

The affirmations are attributed to improved credit enhancement (CE) available to the rated certificates as a result of the deleveraging of the capital structure from a combination of manager sales and repayment activity in the pool, offsetting the increased portfolio concentration.

Since Fitch's last rating action in March 2014, the NPPF I's portfolio balance has decreased by approximately $58 million, to $154 million, or 38% of the initial portfolio size, as per the March 2015 trustee report. In addition to approximately $31 million of proceeds from early redemptions and regularly scheduled amortizations, the manager instituted a sale of two defaulted securities that yielded an average recovery of 61%, or approximately $9 million in principal proceeds. Additionally, two performing assets from one obligor were sold at small premium at manager discretion. The proceeds were then used to amortize the class A certificates, which over the last two payment dates received approximately $54 million, or 41% of their collective balance at last review, in principal repayments, due to the amortization, sales, and excess spread diverted to cure the failing class D Coverage Test.

While this deleveraging has benefited all classes of certificates, as reflected by the improved CE levels across the capital structure, the remaining portfolio has become significantly more concentrated. Presently, the pool comprises debt of 17 obligors, of which 12 are considered by Fitch as performing, compared to 22 and 16, respectively, at last review. The cumulative exposure to defaulted securities now stands at 27.1%, compared to 26.5% at the last review. The higher exposure to the defaulted assets is the result of fewer obligors in the remaining portfolio.

Fitch discussed a range of recovery scenarios for the distressed obligors with the collateral manager. The certificates' passing ratings are sensitive to the magnitude and timing of the recoveries. Fitch revised Outlooks to Negative to reflect the possibility of a downgrade should realized recoveries fall at the low end of potential outcomes. Fitch does not assign Outlooks to classes rated 'CCCsf' and lower.

Fitch has maintained the previously assigned Recovery estimates (REs) on the class C and D certificates.

This review was conducted under the framework described in the report 'Global Rating Criteria for Corporate CDOs' using the Portfolio Credit Model (PCM) for projecting future default and recovery levels for the underlying portfolio. These default and recovery levels were then used in Fitch's cash flow model under various default timing and interest rate stress scenarios.

RATING SENSITIVITIES

In addition to the magnitude and timing of recoveries realized on defaulted names, ratings are sensitive to the pace of transaction deleveraging, credit quality migration in the underlying portfolio, and any additional defaults.

NPPF I is a Structured Tax-Exempt Pass-Through (STEP) program formed in November 2006 to issue $416.5 million of municipal market data (MMD) index-based senior, mezzanine, and junior certificates. The proceeds of the issuance were invested in a portfolio of municipal debt issued under the 501(c)(3) program. The initial portfolio was selected by Cohen Municipal Capital Management, LLC together with sub-advisors Nonprofit Capital LLC and Shattuck Hammond. In March 2009, Muni Capital Management, LLC took over the management responsibilities for this transaction by consolidating the team of Cohen Municipal Capital Management, LLC.

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

The information used to assess these ratings was sourced from the asset manager, periodic trustee reports, note valuation reports, and the public domain.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (Aug. 4, 2014);

--'Global Rating Criteria for Corporate CDOs' (Jul. 25, 2014);

--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (Dec. 19, 2014).

Applicable Criteria and Related Research:

Criteria for Interest Rate Stresses in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695535

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=981601

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.

Fitch Ratings
Primary Surveillance Analyst
Azadeh Sharif
Associate Director
+1-212-908-0874
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Alina Pak, CFA
Senior Director
+1-312-368-3184
or
Media Relations
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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