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Fitch Downgrades 2 Classes of Pegasus 2007-1

January 29, 2014

NEW YORK --(BUSINESS WIRE)-- Fitch Ratings has downgraded two classes issued by Pegasus 2007-1 Ltd. (Pegasus 2007-1) due to negative credit migration of the commercial mortgage backed securities (CMBS). A complete list of rating actions follows at the end of this press release. KEY RATING DRIVERS 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 reference portfolio. The degree of correlated default risk of this reference collateral is high given the single sector and vintage concentration. Based on this analysis and the credit enhancement available to class A-1 and A-2, the credit characteristics of the bonds are consistent with a 'CCCsf' rating. Approximately 14.3% of the portfolio has been downgraded an average of 4.8 notches and the weighted average rating factor (WARF) has declined to 'BBB/BBB-' from ' BBB+/BBB' since the last rating review. Currently, 14.3% is rated below investment grade, with the lowest rated asset in the reference portfolio carrying a Fitch-derived rating of 'CCC' category. RATING SENSITIVITIES Further deterioration of the reference portfolio could lead to further downgrades for the class A-1 and A-2 notes. Pegasus 2007-1, issued in April 2007 , is a synthetic securitization referencing a portfolio of 28 $100 million class A-M CMBS bonds. The transaction is designed to provide credit protection for realized losses on the reference portfolio through a credit default swap between the issuer and the swap counterparty, FMS Wertmanagement (FMSW) rated 'AAA/F1+' with a Stable Outlook by Fitch. An amount equal to $20,000,000 minus the aggregate amount of any actual principal writedowns is available as subordination with respect to each reference obligation. Until the writedowns related to a reference obligation exceed $20,000,000 the issuer will not be required to pay any cash settlements upon the trigger of a credit event. To date, there have been no principal writedowns. Fitch has downgraded the following classes: -- $112,000,000 class A-1 notes to 'CCCsf' from 'Bsf'; -- $1,400,000 class A-2 notes to 'CCCsf' from 'Bsf'. Additional information is available at ' www.fitchratings.com '. Applicable Criteria and Related Research : --'Global Rating Criteria for Structured Finance CDOs' ( Sept. 12, 2013 ); --'Global Structured Finance Rating Criteria' ( May 24, 2013 ). Applicable Criteria and Related Research : Global Structured Finance Rating Criteria http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661 Global Rating Criteria for Structured Finance CDOs http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718027 Additional Disclosure Solicitation Status http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=818155 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 Matthew McGowan , +1-212-908-0733 Analyst Fitch Ratings, Inc. One State Street Plaza New York, NY 10004 or Committee Chairperson Mary MacNeill , +1-212-908-0785 Managing Director or Media Relations Sandro Scenga , +1 212-908-0278 sandro.scenga@fitchratings.com Source: Fitch Ratings


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