News Column

Fitch Downgrades Two Classes of Halcyon 2005-1, Ltd.

February 26, 2014



NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has downgraded two classes issued by Halcyon 2005-1, Ltd. (Halcyon 2005-1) as follows:

--EUR51,875,000 class A notes to 'Csf' from 'CCsf';

--EUR15,000,000 class B notes to 'Csf' from 'CCsf'.

KEY RATING DRIVERS

Since Fitch's last rating action in April 2013, 16.3% of the underlying collateral has been downgraded and 3.4% has been upgraded. The downgraded assets include one asset (3.6%) that has experienced principal losses which resulted in a partial writedown to the class C notes.

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. The degree of correlated default risk of the reference collateral is high given the single sector and vintage concentration. Based on this analysis and given the credit enhancement available to classes A and B, the credit characteristics of the bonds are consistent with a 'Csf' rating.

Halcyon 2005-1 is a static synthetic collateralized debt obligation (CDO) and closed on July 25, 2005. The note proceeds collateralize a credit default swap that references a $1.4 billion portfolio of 30 CMBS assets with FMS WERTMANAGEMENT (rated 'AAA/F1+'; Outlook Stable by Fitch) as the current swap counterparty. The swap originally provided protection on US$96 million of realized losses in the portfolio; the U.S. dollar losses are converted into euros at a fixed exchange rate of US$1.20 to EUR1 to the extent such losses are applied to the euro-denominated class A and class B notes. Currently, the proceeds of the notes are invested in short-term money market investments rated 'F1+' by Fitch. Fitch previously withdrew the ratings on the class C notes.

RATING SENSITIVITIES

Further deterioration of the underlying collateral could lead to further rating actions on the distressed notes.

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

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (May 24, 2013);

--'Global Rating Criteria for Structured Finance CDOs' (Sept. 12, 2013).

Applicable Criteria and Related Research:

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718027

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=821814

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

Analyst

+1-212-908-0733

Fitch Ratings, Inc.

One State Street Plaza

New York, NY 10004

or

Committee Chairperson

Karen Trebach

Senior Director

+1-212-908-0215

or

Media Relations:

Elizabeth Fogerty, +1-212-908-0526 (New York)

elizabeth.fogerty@fitchratings.com


Source: Fitch Ratings


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