Fitch Upgrades Six Classes of MACH ONE 2004-1, LLC

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded six and affirmed one class of MACH ONE 2004-1, LLC (MACH ONE) as a result of increased credit enhancement to the notes from principal paydowns. A complete list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Since the last rating action in October 2014, the class F and G notes have paid-in-full and the class H notes have received $8.9 million in paydowns. Over this period, none of the collateral has been downgraded and 36.5% has been upgraded. Currently, 64% of the portfolio has a Fitch derived rating below investment grade and 11.8% has a rating in the 'CCC' category and below, compared to 43.8% and 8.9%, respectively, at the last rating action. In addition, approximately 23% of the pool has a Fitch derived rating of 'AAA'. As of the Sept. 30, 2015 payment date, the class H through N notes are current on interest while the class O notes are experiencing interest shortfalls. Since issuance the transaction has experienced approximately $538 million in paydowns.

This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. Fitch also analyzed the structure's sensitivity to the assets that are distressed, experiencing interest shortfalls, and those with near-term maturities. Additionally, a deterministic analysis was performed where the recovery estimate on the distressed collateral was modeled in accordance with the principal waterfall. An asset by asset analysis was then performed for the remaining assets to determine the collateral coverage for the remaining liabilities. Based on the analysis, classes H through M pass at or above the assigned ratings. The ratings reflect these results as well as the risk of adverse selection as the portfolio continues to amortize.

For the class N notes, Fitch analyzed the class' sensitivity to the default of the distressed assets ('CCC' and below). Given the probability of default of the underlying assets and the expected recovery prospects upon default (with increasing credit enhancement due to paydown), the class N notes have been upgraded to 'CCCsf', indicating that default is possible. The class O notes have been affirmed at 'Dsf' due to incurred principal losses (approximately $2.6 million since the last rating action).

The Stable Outlook on the class H and K through M notes and Positive Outlook on class J reflects Fitch's expectation that the transaction will continue to delever and anticipated recoveries from the distressed collateral.

RATING SENSITIVITIES

In addition to the sensitivities discussed above, additional negative migration and defaults beyond those projected by SF PCM as well as increasing concentration of weaker credit quality assets could lead to downgrades for the more junior classes. The senior notes are expected to continue to amortize as 36% of the collateral are senior positions in their respective underlying transactions.

DUE DILIGENCE USAGE

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

Fitch has upgraded the following classes as indicated:

--$5,580,676 class H notes to 'AAAsf' from 'BBsf'; Outlook Stable;

--$17,689,000 class J notes to 'BBsf' from 'Bsf'; Outlook to Positive from Stable;

--$8,844,000 class K notes to 'BBsf' from 'Bsf'; Outlook Stable;

--$8,040,000 class L notes to 'Bsf' from 'CCCsf'; Outlook Stable;

--$8,844,000 class M notes to 'Bsf' from 'CCCsf'; Outlook Stable;

--$6,432,000 class N notes to 'CCCsf' from 'Csf'.

Fitch has affirmed the following class as indicated:

--$3,830,109 class O notes at 'Dsf'.

The class A-1 through G notes have all paid in full. Classes P-1 through P-6 are NR. The rating on class X was previously withdrawn.

MACH ONE is a static Re-REMIC backed by CMBS B-pieces that closed July 28, 2004. The transaction is collateralized by six assets from four obligors from the 1998 and 1999 vintages.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Global Surveillance Criteria for Structured Finance CDOs (pub. 13 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867800

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=992304

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=992304

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/20151014006621/en/

Fitch Ratings
Primary 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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