Fitch Takes Various Rating Actions on 20 CRE CDOs

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has downgraded four classes, upgraded 10 classes, and affirmed 148 classes from 20 commercial real estate collateralized debt obligations (CRE CDOs) with exposure to commercial mortgage backed securities (CMBS). Fitch has also withdrawn the ratings on one class from one transaction.

This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria' and 'Global Rating Criteria for Structured Finance CDOs'. None of the reviewed transactions have been analyzed within a cash flow model framework, as the impact of structural features and excess spread or, conversely, principal proceeds being used to pay CDO liabilities and hedge payments was determined to be minimal in the context of these CDO ratings as the rating are already distressed or the hedge has expired.

KEY RATING DRIVERS

The upgrade of class F in Anthracite CDO II, Ltd./Corp. is attributed to deleveraging of the capital structure. The notes have received $8.9 million, since the last rating action. The notes are now able to withstand losses consistent with an 'AAA' rating according to Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis. However, given the increasing concentration with only eight assets from eight obligors remaining and due to the concentration of distressed collateral, the upgrade has been limited to 'Asf'.

The upgrades of classes C-FL and C-FX in Anthracite CDO III, Ltd./Corp., are attributed to deleveraging of the capital structure. Since the last rating action classes B-FL and B-FX have paid in full and the transaction has received $12.9 million. The notes are now able to withstand losses consistent with a 'BBB' rating according to Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis.

The upgrades to class A in Anthracite 2004-HY1 Ltd./Corp. and classes B-1 and B-2 in Crest 2002-1, Ltd./Corp to 'Bsf' are attributed to deleveraging of the capital structure. The transactions have received $12.4 million and $20.2 million, respectively, since the last rating action. The notes are now able to withstand losses consistent with a 'B' rating or better according to Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis.

Fitch has upgraded class C from COMM 2004-RS1, Ltd. to 'CCCsf' as the credit profiles of the underlying transactions have improved, the capital structure continues to delever, and the class credit enhancement (CE) is now comparable to the 'CCC' rating loss rate (RLR) by SF PCM. Under this analysis, Fitch affirmed three additional classes at 'CCCsf'.

Additionally, Fitch has upgraded class B from Anthracite 2004-HY1 Ltd. / Corp. and classes D-FL and D-FX from Anthracite CDO III, Ltd./Corp. to 'CCsf', indicating that default is probable. These classes did not pass the 'CCC' RLR in SF PCM. However, the CE of the notes exceeds the percentage of collateral experiencing full interest shortfalls. Under this analysis, Fitch affirmed one additional class and did not downgrade any classes to 'CCsf'.

For transactions where the percentage of collateral experiencing full interest shortfalls significantly exceeds the CE level of the most senior class of notes, Fitch did not use SF PCM, as the probability of default for all classes of notes can be evaluated without factoring potential further losses.

Fitch affirmed 88 classes at 'Csf' because 1) the CE levels of the notes are below the percentage of collateral experiencing interest shortfalls or otherwise anticipated to take a loss on the transaction or 2) because the notes are undercollateralized. In general, the CE levels are also significantly below the percentage of the collateral with a Fitch derived rating of 'CC' and below.

Fitch affirmed 15 classes and downgraded two classes to 'Dsf' because they are non-deferrable classes that have experienced interest payment shortfalls. Fitch downgraded an additional two classes and affirmed 38 classes at 'Dsf' because the classes have experienced principal writedowns.

RATING SENSITIVITIES

Negative migration and defaults beyond those projected could lead to downgrades for the 10 transactions analyzed under the SF PCM. The remaining 10 transactions have limited sensitivity to further negative migration given their highly distressed rating levels. However, there is potential for classes to be downgraded to 'Dsf' if either they are non-deferrable classes that experience any interest payment shortfalls or are classes that experience principal writedowns.

This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria' and 'Global Rating Criteria for Structured Finance CDOs'. None of the transactions have been analyzed within a cash flow model framework, as the effect of structural features and excess spread available to amortize the notes were determined to be minimal. The individual rating actions are detailed in the report 'Fitch Takes Various Rating Actions on 20 CRE CDO's', released and available at 'www.fitchratings.com' by performing a title search or by using the above link.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (March 31, 2015);

--'Global Rating Criteria for Structured Finance CDOs' (July 16, 2014).

Applicable Criteria and Related Research: Fitch Takes Various Rating Actions on 20 CRE CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=865937

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=864268

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751136

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=984383

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
Martin Nunnally
Associate Director
+1 212-908-0871
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Mary MacNeill
Managing Director
+1 212-908-0785
or
Media Relations:
Sandro Scenga, +1 212-908-0278
[email protected]

Source: Fitch Ratings

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