Mar. 15, 2010 (Business Wire) -- Fitch Ratings has affirmed four and downgraded one class of notes issued by Capital Guardian ABS CDO I, Ltd./Inc. (Capital Guardian I). A detailed list of rating actions follows at the end of this release.
As of the January 2010 trustee report, the current balance of the portfolio is $84.8 million, of which $1.7 million consists of defaulted securities, as defined in the transaction's governing documents. Approximately 28.9% of the portfolio has been downgraded since Fitch's last rating action in April 2009, resulting in 38.9% of the portfolio with a Fitch derived rating below investment grade and 14.9% with a rating in the 'CCC' rating category or below, as compared to 33% and 9.1%, respectively, at last review.
This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Structured Finance Portfolio Credit Model (SF PCM) for projecting future default levels for the underlying portfolio. These default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs - Amended'.
Based on this analysis, the class A-1A, A-1B and class A-1C (together class A-1) notes' breakeven rates are generally consistent with the rating assigned below. As of the January 2010 distribution date, approximately 85.5% of the class A-1 notes' original balances have paid down. Given the negative outlook for the performance of the underlying assets, the Rating Outlook remains Negative.
Additionally, the class A-1 notes are assigned a Loss Severity (LS) rating of 'LS3'. The LS rating indicates a tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the base-case loss expectation for the collateral, as explained in 'Criteria for Structured Finance Loss Severity Ratings'. Currently, for the class A-1 notes this ratio falls in the range of 1.1 to 4.0. The LS rating should always be considered in conjunction with the probability of default for tranches.
Breakevens for the class B and class C notes are below SF PCM's 'CCC' default level, the lowest level of defaults projected by SF PCM. For these classes, Fitch compared the respective credit enhancement levels to 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. Presently the class B and class C notes' credit enhancement levels are significantly below the level of distressed assets. As a timely class, the class B notes are still receiving interest payments from principal proceeds, while the class C notes have been deferring interest since April 2005. Fitch believes that default is inevitable for both classes at or prior to maturity.
Capital Guardian I is a cash flow structured finance collateralized debt obligation (SF CDO) that closed on Feb. 28, 2002 and is managed by Capital Guardian Trust Company. The transaction exited its reinvestment period in April 2005. Capital Guardian I's portfolio is comprised of approximately 43.1% residential mortgage-backed securities (RMBS), 21.1% commercial mortgage-backed securities (CMBS), 19.4% commercial asset-backed securities (ABS), 10.3% corporate senior unsecured securities, and 6.1% of structured finance CDOs.
Fitch has affirmed and assigned LS ratings to the following classes as indicated:
--$7,994,248 class A-1A notes at 'A/LS3'; Outlook Negative;
--$21,802,494 class A-1B notes at 'A/LS3'; Outlook Negative;
--$7,165,753 class A-1C notes at 'A/LS3'; Outlook Negative;
--$15,748,296 class C notes at 'C'.
Fitch has downgraded the following class:
--$70,000,000 class B Notes to 'C' from 'CC'.
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);
--'Criteria for Structured Finance Loss Severity Ratings' (Feb. 17, 2009).
Additional information is available at 'www.fitchratings.com'.
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