KEY RATING DRIVERS
The affirmations are due to the relatively stable performance and the credit quality of the remaining collateral. Despite the deleveraging of class C, the ratings and Negative Outlooks reflect concern over the CDO's ability to continue to make timely interest payments. Fitch's base case loss expectation, which incorporates prospective views regarding commercial real estate market values and cash flow declines, is 46%.
Since Fitch's last rating action, class C received
FMC 2005-1 is a commercial real estate (CRE) CDO managed by
Under Fitch's methodology, 100% of the portfolio is modeled to default in the base case stress scenario, defined as the 'B' stress. Modeled recoveries are approximately 53.7%.
The largest contributor to Fitch's base case loss expectation is a junior equity position in an REO asset (10.8%) that is a 1.3 million-square foot (sf) regional mall located in
The next largest contributor to Fitch's base case loss expectation is a first mortgage (17.4%) on a two-building office property comprising 230,650 sf, located in the
The third largest contributor to Fitch's base case loss expectation is an REO asset (7.8%) consisting of a 162-acre residential development site located in
This transaction was analyzed according to the 'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions', which applies stresses to property cash flows and debt service coverage ratio tests to project future default levels for the underlying portfolio. Recoveries are based on stressed cash flows and Fitch's long-term capitalization rates. The transaction was not cash flow modeled based on the limited available interest received from the assets, the majority of which are defaulted. Fitch used a deterministic approach to evaluate the impact of further interest payment defaults of the collateral.
The 'CCC' ratings for classes E and F are based on a deterministic analysis that considers Fitch's base case loss expectation for the pool and the current percentage of defaulted assets and Fitch Loans of Concern, factoring in anticipated recoveries relative to each class's credit enhancement.
All classes are subject to further downgrades should additional losses be realized. Negative outlooks reflect the high concentration of defaulted assets and the potential for missed interest payments.
Fitch affirms the following classes:
The class A-1, A-2 and B notes have paid in full. Fitch previously withdrew the ratings of classes G and H following the surrender and cancellation of those certificates.
Additional information is available at 'www.fitchratings.com'.
--'Global Structured Finance Rating Criteria' (
--'Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions' (
--'Global Rating Criteria for Structured Finance CDOs' (
Global Structured Finance Rating Criteria
Surveillance Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate Transactions
Global Rating Criteria for Structured Finance CDOs
Source: Fitch Ratings
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