The key rating factors for today's rating actions are highlighted below.
KEY RATING DRIVERS:
Credit Quality of Collateral: For most of the transactions, the credit quality of the collateral portfolios, as measured by a combination of Fitch's bank scores and ratings, remained stable or improved. As reported in the rating action report, in eight CDOs average credit quality has improved since last review. Four transactions experienced new defaults, with all of them deferring at last review.
Collateral Redemptions: Six CDOs received moderate level of redemptions that paid down the senior-most notes and increased credit enhancement (CE) levels for all rated notes. The magnitude of redemptions for each CDO is reported in the rating action report. Potential upgrades were weighed against the risk of adverse selection in the remaining portfolios and the likelihood of the remaining note balance to be outstanding for an extended period of time.
Excess Spread and CDO Structure: Excess spread continued to contribute to deleveraging of all but one CDO. Improving portfolio performance and deleveraging can lead to some coverage tests becoming compliant that, in turn, will cause redirection of excess spread to pay down cumulative deferred interest on mezzanine classes and diminished excess spread available to pay down senior classes in the future. Fitch estimates future levels of excess spread as described in the criteria 'Surveillance Criteria for TruPS CDOs,' dated
Resolution and Recovery of Defaults and Deferrals: The number of cures continued to trend upward, as Fitch reports in its quarterly
Changes in the rating drivers described above could lead to rating changes in the TruPS CDO notes.
To account for uncertainty around the pace of redemptions and cures and, consequently, magnitude of future excess spread, Fitch's rating analysis capped the levels of excess spread to the amounts projected only over the near-term future.
In addition, to address potential risks of adverse selection and increased portfolio concentration after likely redemptions by the issuers with asset size of
Additional information is available at 'www.fitchratings.com'.
The information used to assess these ratings was sourced from trustee reports, collateral manager reporting Web sites and the public domain.
Applicable Criteria and Related Criteria:
--'Surveillance Criteria for Trust Preferred CDOs' (
--'Global Rating Criteria for Corporate CDOs' (
--'Counterparty Criteria for Structured Finance and Covered Bonds' (
--'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions (
Surveillance Criteria for Trust Preferred CDOs
Global Rating Criteria for Corporate CDOs
Counterparty Criteria for Structured Finance and Covered Bonds
Criteria for Rating Caps and Limitations in Global Structured Finance Transactions
Source: Fitch Ratings
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