Fitch Affirms Mercury CDO 2004-1, Ltd.

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed seven classes of notes issued by Mercury CDO 2004-1, Ltd. as follows:

--$34,676,304 Class A-1NV notes at 'CCCsf';

--$11,560 Class A-1VA notes at 'CCCsf';

--$38,156,652 Class A-1VB notes at 'CCCsf';

--$25,000,000 Class A-2A notes at 'Csf';

--$31,050,000 Class A-2B notes at 'Csf';

--$38,880,000 Class B notes at 'Csf';

--$17,227,486 Class C notes at 'Csf'.

Fitch does not rate the preference shares.

KEY RATING DRIVERS

The A-1NV, A-1VA, and A-1VB classes have been affirmed at 'CCCsf'. The classes' current credit enhancement (CE) levels exceed the losses projected at the 'CCCsf' rating stress under Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis, but fall below the losses projected at the 'Bsf' rating stress.

The A-2A, A-2B, B, and C classes have been affirmed at 'Csf'. These classes have credit enhancement (CE) levels that are exceeded by the expected losses 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 continues to appear inevitable.

RATING SENSITIVITIES

Negative migration, defaults beyond those projected, an extension of the weighted average life for the underlying assets, 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. Continuing amortization accompanied by better than expected cash flows from distressed assets could lead to an upgrade.

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 transaction was not analysed through the cash flow model framework, as the effect of structural features and excess spread available to amortize the notes were determined to be minimal.

Mercury 2004-1 is a collateralized debt obligation (CDO) that closed Nov. 3, 2004 and is managed by Dock Street Capital Management, LLC. Mercury exited its substitution period in March 2007 and currently has a static portfolio composed of 84% residential mortgage-backed securities (RMBS) and 16% CDOs.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO SEC RULE 17G-10

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.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 18 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884963

Counterparty Criteria for Structured Finance and Covered Bonds: Derivative Addendum (pub. 18 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=884964

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

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

Global Surveillance Criteria for Structured Finance CDOs (pub. 05 Jul 2016)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=883201

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1010449

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1010449

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/20160816006284/en/

Fitch Ratings
Primary Surveillance Analyst
Emmett O'Brien, +1-212-908-0648
Analyst
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Alina Pak, CFA, +1-312-368-3184
Senior Director
or
Media Relations, New York
Sandro Scenga, +1-212-908-0278
[email protected]

Source: Fitch Ratings

---

Serious News for Serious Traders! Try StreetInsider.com Premium Free!

---

You May Also Be Interested In

• SpaceX completes record $60 billion acquisition of AI coding platform Cursor
• Nerdy Inc. to execute 1-for-15 reverse stock split on Aug. 19
• XTEND positions itself for U.S. drone tariff market shift