Mar. 18, 2010 (Business Wire) -- Fitch Ratings has downgraded three and affirmed two classes of notes issued by Streeterville ABS CDO, Ltd./Inc. (Streeterville) as a result of continued credit deterioration in the portfolio since Fitch's last rating action in February 2009. The details of the rating action follow at the end of this release.
As of the February 2010 trustee report, the current balance of the portfolio (including cash) is $611.7 million. Approximately 63% of the portfolio has been downgraded since the last review. Defaulted securities, as defined in the transaction's governing documents, now comprise 19% of the portfolio, compared to 5% at last review. The downgrades to the portfolio have left approximately 41.7% of the portfolio (including defaults) with a Fitch derived rating below investment grade and 33.5% with a rating in the 'CCC' rating category or lower, compared to 12.8% and 7.7%, respectively, at last review.
This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs'. Due to the magnitude of the collateral deterioration, Fitch believes that the likelihood of default for all classes of notes can be assessed without using the Structured Finance Portfolio Credit Model (SF PCM) and performing cash flow model analysis under the framework described in the 'Global Criteria for Cash Flow Analysis in CDOs - Amended' report.
Fitch compared the respective credit enhancement levels for each rated class of notes with the amount of underlying assets considered distressed (rated 'CCC' and lower). These assets have a high probability of default and low expected recoveries upon default. The class A-1 notes have a credit enhancement level of 18.7% compared to the 33.5% of the portfolio considered distressed. Therefore, the class A-1 notes as well as the class A-2 and B-1 and B-2 (together class B) notes have been downgraded to 'C' to indicate Fitch's belief that default is inevitable at or prior to maturity.
Although the class C-1 and C-2 (together class C) notes are still receiving interest distributions default is inevitable at or prior to maturity. Therefore, these notes have been affirmed at 'C'.
Streeterville is a cash flow structured finance (SF) collateralized debt obligation (CDO) that closed on Oct. 1, 2004. The portfolio is monitored by Vanderbilt Capital Advisors LLC. The portfolio is composed of residential mortgage-backed securities (RMBS) (83.3%), SF CDOs (14.4%), Other CDOs (1.7%) asset-backed securities (ABS) (0.3%), and commercial mortgage-backed securities (CMBS) (0.3%).
Fitch has downgraded or affirmed the following ratings as indicated:
--$497,035,286 class A-1 notes downgraded to 'C' from 'B';
--$50,000,000 class A-2 notes downgraded to 'C' from 'CCC';
--$30,000,000 class B-1 notes downgraded to 'C' from 'CC';
--$37,000,000 class B-2 notes downgraded to 'C' from 'CC';
--$5,445,575 class C-1 notes affirmed at 'C';
--$9,265,784 class C-2 notes affirmed at 'C'.
These rating actions reflect the application of Fitch's current criteria which are available at 'www.fitchratings.com' and specifically include the following reports:
--'Global Structured Finance Rating Criteria' (Sept. 30, 2009);
--'Global Rating Criteria for Structured Finance CDOs' (Dec. 16, 2008);
--'Global Criteria for Cash Flow Analysis in CDOs - Amended' (Nov. 9, 2009).
Additional information is available at www.fitchratings.com.
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