Fitch Affirms All Classes of Trapeza CDO IX, Ltd./Inc.

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed the ratings on all seven classes of notes of Trapeza CDO IX, Ltd./Inc. (Trapeza IX). Fitch has revised the Rating Outlook to Negative from Stable on two of the classes. A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Although the notes can withstand higher rating stresses than their current ratings with regards to principal coverage, the ratings are limited by their ability to pay timely interest. The risk will be partially mitigated by the step down of the notional of the interest rate swap in July 2016, from $80 million to $50 million. However, interest shortfall risk will remain as one of the fixed rate assets, representing 2% of the portfolio, will reach its' maturity date in June 2017. To address the risk of interest shortfall, Fitch applied multiple scenarios that incorporated the lowest interest collection periods, maturity of the fixed asset in June 2017, and step down of the outsized interest rate swap. The ratings and Outlooks for all classes of notes reflect the range of results from the interest shortfall analysis.

Since Fitch's last rating action in August 2015, the portfolio has experienced a net positive credit migration, as measured by a combination of Fitch's bank scores and ratings. One new deferral representing 3.6% of the current portfolio balance has been reported since last review. There are no new cures since August 2015.

Trapeza IX's portfolio balance has decreased marginally by $7.2 million, or 2.9% of last review balance. Part of the proceeds received from the collateral sales and redemptions, covered a shortfall in interest payment to the non-deferrable classes, caused by the outsized interest rate swap and volatility of interest collections resulting from 12.2% of the collateral notional paying on a semi-annual basis. The recovery proceeds from the cancellation of one defaulted security in May 2016, will also act as an additional cushion to prevent an interest shortfall for the upcoming July 2016 payment period. During payment periods of higher interest collections in April and October, minimal amount of excess spread is used to pay down the senior-most notes and increased credit enhancement (CE) levels for rated liabilities due to the failing class B/C Coverage test.

RATING SENSITIVITIES

In addition to the risk of interest shortfall, ratings are sensitive to the pace of transaction deleveraging, credit quality migration in the underlying portfolio, frequency and success of additional discretionary sales, and any additional deferrals or defaults.

DUE DILIGENCE USAGE

No third party due diligence was reviewed in relation to this rating action.

Fitch has affirmed all classes and revised the Rating Outlooks as indicated:

--$103,403,859 class A-1 notes at 'BBsf'; Outlook to Negative from Stable;

--$27,000,000 class A-2 notes at 'Bsf'; Outlook to Negative from Stable;

--$23,000,000 class A-3 notes at 'CCCsf';

--$23,476,967 class B-1 notes at 'CCsf';

--$10,207,377 class B-2 notes at 'CCsf';

--$26,091,944 class B-3 notes at 'CCsf';

--$16,633,393 class C notes at 'Csf'.

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.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

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

Global Rating Criteria for CLOs and Corporate CDOs (pub. 09 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=882840

Global Structured Finance Rating Criteria (pub. 27 Jun 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883130

Surveillance Criteria for Trust Preferred CDOs (pub. 05 Apr 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=878874

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1008778

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1008778

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

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.

View source version on businesswire.com: http://www.businesswire.com/news/home/20160712006553/en/

Fitch Ratings
Primary Analyst
Todor Sapundzhiev
Analyst
+1-312-368-3198
Fitch Ratings, Inc.
70 West Madison St.
Chicago, IL 60602
or
Committee Chairperson
Alina Pak
Senior Director
+1-312-368-3184
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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