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

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has upgraded three and affirmed three classes 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

The upgrades are due to increased credit enhancement from principal paydown. Since the last rating action in October 2015, the class H notes have paid-in-full and the class J notes have received $8.6 million in paydowns. Over this period, none of the collateral has been downgraded or upgraded. Currently, 83.5% of the portfolio has a Fitch derived rating below investment grade and 14.9% has a rating in the 'CCC' category and below, compared to 64% and 11.8%, respectively, at the last rating action. In addition, approximately 6.6% of the pool has a Fitch derived rating of 'AAA'. As of the Aug. 30, 2016 payment date, the class J through O notes are current on interest. Since issuance the transaction has experienced approximately $552 million in paydowns.

This transaction was analyzed under the framework described in the report 'Global Surveillance Criteria for Structured Finance CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. However, while the PCM output was used as a reference point, due to the concentration of the pool a look-through analysis of the underlying obligors was the final determining factor in the rating recommendations (see 'Global Surveillance Criteria for Structured Finance CDOs': Obligor Concentrations). The look-through analysis included a review of each asset to determine the collateral coverage for the remaining liabilities. Based on the analysis, classes J 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, the class N notes have been affirmed at '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 issuance).

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

RATING SENSITIVITIES

In addition to the sensitivities discussed above, additional negative migration and defaults beyond those projected by SF PCM and the look-through analysis 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 31% of the collateral are senior positions in their respective underlying transactions. Further upgrades may be limited due to concentration of the underlying collateral.

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

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

Fitch has upgraded the following classes and revised Rating Outlooks as indicated:

--$9,135,000 Class J Notes upgrade to 'Asf' from 'BBsf'; Outlook to Stable from Positive;

--$8,040,000 Class L Notes upgrade to 'BBsf' from 'Bsf'; Outlook Stable;

--$8,844,000 Class M Notes affirm to 'BBsf' from 'Bsf'; Outlook Stable.

Fitch has affirmed the following classes:

--$8,844,000 Class K Notes at 'BBsf'; Outlook Stable;

--$6,432,000 Class N Notes at 'CCCsf';

--$3,809,334 Class O Notes at 'Dsf'.

The class A-1 through H 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 five assets from four obligors from the 1998 and 1999 vintages.

Additional information is available at www.fitchratings.com.

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 01 Sep 2016)

https://www.fitchratings.com/site/re/886006

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (pub. 16 Jun 2016)

https://www.fitchratings.com/site/re/882401

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

https://www.fitchratings.com/site/re/883130

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

https://www.fitchratings.com/site/re/883201

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=1011722

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=1011722

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/20160915005806/en/

Fitch Ratings, Inc.
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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