Fitch Downgrades $6.9B & Affirms $2.6B On 15 REIT TruPS CDOs.CHICAGO Chicago, city, United States Chicago (shĭkä`gō, shĭkô`gō), city (1990 pop. 2,783,726), seat of Cook co., NE Ill., on Lake Michigan; inc. 1837. -- Fitch fitch: see polecat. has downgraded $6.9 billion of rated notes and preference shares across 15 collateralized debt obligations Collateralized Debt Obligation (CDO) A general inclusive term which covers Collateralized Bond Obligations, Collateralized Loan Obligations, and Collateralized Mortgage Obligations, (CDOs), due to exposure to trust preferred securities (TruPS) and senior and subordinated debt Subordinated Debt A loan (or security) that ranks below other loans (or securities) with regard to claims on assets or earnings. Also known as "junior security" or "subordinated loan". issued by real estate investment trusts (REITs), homebuilders and financial institutions specializing in mortgage lending. Downgraded CDO (Collaborative Data Objects) A programming interface from Microsoft for accessing MAPI-based e-mail, calendaring and scheduling servers. Originally called "OLE Messaging" and "Active Messaging," CDO wraps the Enhanced MAPI library into a COM object that provides the liabilities include $3 billion of previously senior 'AAA'-rated securities, $756 million of previously junior 'AAA'-rated securities and $1.1 billion of previously 'AA' category-rated securities. With the exception of $130.5 million of securities previously rated 'AA', all securities previously rated 'AAA' or 'AA' category remain investment grade. Fitch has also affirmed af·firm v. af·firmed, af·firm·ing, af·firms v.tr. 1. To declare positively or firmly; maintain to be true. 2. To support or uphold the validity of; confirm. v.intr. $2.6 billion of notes rated in the 'AAA' and 'AA' rating categories. Fitch's rating actions follow a formal sector review of CDOs characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. as being backed primarily by REIT REIT See: Real Estate Investment Trust REIT See real estate investment trust (REIT). TruPS (REIT TruPS CDOs) or REIT, bank and insurance TruPS (hybrid hybrid (hī`brĭd), term applied by plant and animal breeders to the offspring of a cross between two different subspecies or species, and by geneticists to the offspring of parents differing in any genetic characteristic (see genetics). TruPS CDOs). These actions follow those undertaken by Fitch in August and September September: see month. of this year, which reflected credit deterioration de·te·ri·o·ra·tion n. The process or condition of becoming worse. experienced up to that point in time with respect to underlying collateral collateral (kəlăt`ərəl), something of value given or pledged as security for payment of a loan. Collateral consists usually of financial instruments, such as stocks, bonds, and negotiable paper, rather than physical goods, although . With today's rating actions, Fitch has resolved the Rating Watch status of all affected tranches Tranches A piece, portion or slice of a deal or structured financing. This portion is one of several related securities that are offered at the same time but have different risks, rewards and/or maturities. "Tranche" is the French word for "slice". . Fitch originally placed the 15 transactions on Rating Watch Negative on Nov. 21. A complete list of rating actions is listed at the conclusion of this rating action commentary. Fitch's rating actions are a result of continued rapid deterioration in the credit quality and liquidity profiles of issuers underlying these CDOs, in particular, mortgage REITs Mortgage REIT An REIT that invests in loans secured by real estate which derive income from mortgage interest and fees. mortgage REIT and homebuilders. In certain cases, underlying issuers experienced a default or deferral deferral - Waiting for quiet on the Ethernet. on issued securities, a technical default due to breach of debt covenants, a distressed debt distressed debt Debt with low junk status and a market price substantially below par value, often pennies on the dollar. Investors sometimes buy distressed debt on the possibility that management can renegotiate loan agreements and keep the issuer out of exchange or the default of an underlying operating subsidiary An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. . Further impacting overall portfolio credit quality, certain underlying issuers have experienced multiple notch notch (noch) incisure; an indentation on the edge of a bone or other organ. aortic notch dicrotic n. cardiac notch 1. downgrades, as well as the assignment of Rating Watch Negative or Rating Outlook Negative. In certain cases, underlying ratings are 'CC' or lower, indicating that a default of some kind appears probable PROBABLE. That which has the appearance of truth; that which appears to be founded in reason. . Based on public and shadow ratings performed by Fitch, it is estimated that an average of 25.95% of the assets in the portfolios underlying the 15 CDOs are currently rated 'CCC+' or below, ranging between 4.28% and 50.43%. Fitch currently has a Negative Rating Outlook on the mortgage REIT sector, along with the majority of publicly rated homebuilders. The challenges facing the mortgage REIT and homebuilder sectors are expected to be even more pronounced with respect to the smaller-sized, shadow-rated entities which typically characterize REIT TruPS CDOs. Fitch believes the revised CDOs ratings more accurately reflect the credit risk to noteholders, following the recent period of underlying defaults and rating downgrades, as well as Fitch's expectation of further collateral deterioration as evidenced by the amount of underlying collateral currently on Rating Watch Negative or Rating Outlook Negative. Fitch's actions with respect to notes originally rated 'AAA' or 'AA' reflect the increased probability of default Probability of default (PD) is a parameter used in the calculation of economic capital or regulatory capital under Basel II for a banking institution. This is an attribute of bank's client. as opposed op·pose v. op·posed, op·pos·ing, op·pos·es v.tr. 1. To be in contention or conflict with: oppose the enemy force. 2. to an expectation of principal loss to noteholders. In the case of more junior classes, the rating actions are more pronounced, reflecting an increased expectation of potential principal loss to noteholders due to collateral defaults and deterioration. The combination of asset defaults and credit deterioration caused 12 of the 15 CDOs included in this review to breach overcollateralization Overcollateralization The posting of more collateral than is needed to obtain financing. Notes: This is often done in order to get a better debt rating from a credit rating agency. See also: Collateral, Overcapitalization (OC) or interest coverage (IC) triggers. The breach of such triggers serves to trap interest proceeds otherwise available to CDO equity holders and redirect re·di·rect tr.v. re·di·rect·ed, re·di·rect·ing, re·di·rects To change the direction or course of. n. A redirect examination. re such cash flows to pay down the rated liabilities, reducing overall leverage in the transaction. While Fitch views such structural mechanisms as an important protection available to the more senior classes of rated noteholders, it also speaks to the magnitude magnitude, in astronomy, measure of the brightness of a star or other celestial object. The stars cataloged by Ptolemy (2d cent. A.D.), all visible with the unaided eye, were ranked on a brightness scale such that the brightest stars were of 1st magnitude and the of the continued credit stress which these CDOs are currently experiencing. In addition to the 15 CDOs affected by these rating actions, one REIT TruPS CDOs - Taberna A taberna (the plural form is tabernae) is a single room shop covered by a barrel vault within great indoor markets of ancient Rome. Each taberna had a window above it to let light into a wooden attic for storage and has a wide doorway. Preferred Funding IX, Ltd. (Taberna IX) - is still in its ramp-up period. The transaction has experienced negative credit migration since close, although the asset manager has additional flexibility to add and/or and/or conj. Used to indicate that either or both of the items connected by it are involved. Usage Note: And/or is widely used in legal and business writing. remove collateral in an effort to stabilize stabilize See peg. the credit quality of the overall portfolio during the remainder of the ramp-up period. Fitch continues to engage in frequent dialogue with the asset manager and expects to formalize its view of the credit quality of the transaction once the asset manager has completed assembling the portfolio in its entirety The whole, in contradistinction to a moiety or part only. When land is conveyed to Husband and Wife, they do not take by moieties, but both are seised of the entirety. . Should the transaction fail to successfully complete its ramp-up period in a manner consistent with the parameters outlined in the transaction indenture An agreement declaring the benefits and obligations of two or more parties, often applicable in the context of Bankruptcy and bond trading. The term indenture primarily describes secured contracts and has several applications in U.S. law. , this could potentially lead to an event of default and an early wind-down of the transaction. Taberna IX has a target collateral par amount of $750 million and an expected ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale completion date of Jan. 29, 2008. The following commentary summarizes the key factors, on a CDO-specific basis, which support Fitch's rating actions on the 15 affected CDOs. In connection with this review, Fitch's REIT and homebuilder groups provided updated shadow ratings on the underlying issuers, in order to reflect their negative, yet evolving, credit profiles. In addition, Fitch's CDO group cash flow modeled each transaction, in order to determine the impact of downgrades and defaults in the context of transaction-specific cash flow waterfall waterfall, a sudden unsupported drop in a stream. It is formed when the stream course is interrupted as when a stream passes over a layer of harder rock—often igneous—to an area of softer and therefore more easily eroded rock; the edge of a cliff or mechanics mechanics, branch of physics concerned with motion and the forces that tend to cause it; it includes study of the mechanical properties of matter, such as density, elasticity, and viscosity. and available credit enhancement Credit Enhancement A method whereby a company attempts to improve its debt or credit worthiness. Notes: Credit enhancements take many different forms. An example of a credit enhancement would be conversion rights added on to a debt instrument in order to lower the issuing . Lower expectations with respect to potential recoveries on defaulted trust preferred securities added further conservatism to Fitch's analysis. Specifically, Fitch's recovery rate assumptions for trust preferred securities issued by REITs and homebuilders were lowered as follow: --to 0% from 5% at the 'AAA' rating stress; --to 2.5% from 10% at the 'AA' rating stress; --to 5% from 15% at the 'A' rating stress; --to 7.5% from 20% at the 'BBB' rating stress; --to 10% from 25% at the 'BB' rating stress, and; --to 12.5% from 25% at the 'B' rating stress. Assets currently rated 'CC' or lower were assumed to default with a 0% recovery under all stress scenarios. For the purposes of Fitch's CDO modeling and rating analysis, underlying assets on Rating Watch Negative were assumed to be downgraded by two sub-categories, while assets on Rating Outlook Negative were assumed to be downgraded by one sub-category. All references to underlying credit quality in the following commentary are based on a combination of publicly available ratings as well as Fitch shadow ratings. All references to defaulted assets in the following commentary are based on trustee-reported data and, in certain cases, include issuers which may not be in technical default or have not filed for bankruptcy bankruptcy, in law, settlement of the liabilities of a person or organization wholly or partially unable to meet financial obligations. The purposes are to distribute, through a court-appointed receiver, the bankrupt's assets equitably among creditors and, in most protection. Rather, such exposures may have breached transaction-specific ratings thresholds or debt covenants which result in the treatment of such securities as defaulted for the purposes of OC tests, payment priority and other portfolio metrics metrics Managed care A popular term for standards by which the quality of a product, service, or outcome of a particular form of Pt management is evaluated. See TQM. . Fitch recognizes that certain issuers defined as defaulted based on trustee-reported data remain solvent solvent, constituent of a solution that acts as a dissolving agent. In solutions of solids or gases in a liquid, the liquid is the solvent. In all other solutions (i.e. , albeit at speculative Speculative Securities that involve a high level of risk. speculative Of or relating to an asset or a group of assets with uncertain returns. The greater the degree of uncertainty the more speculative the asset. credit rating levels, and continue to meet debt service on trust preferred securities, subordinated debt and other obligations. The following rating actions are effective immediately (Rating Watch Negative status resolved for all affected classes). Attentus CDO I, Ltd/LLC (Attentus I): --$277,979,197 class A-1 downgraded to 'AA-' from 'AAA'; --$20,000,000 class A-2 downgraded to 'A' from 'AAA'; --$65,000,000 class B downgraded to 'BBB+' from 'AA'; --$10,000,000 class C-1 downgraded to 'BB+' from 'AA-'; --$35,000,000 class C-2A downgraded to 'B' from 'A-'; --$30,000,000 class C-2B downgraded to 'B' from 'A-'; --$20,000,000 class D downgraded to 'CC' from 'BBB-'; --$16,000,000 class E downgraded to 'C' from 'BB-'. Attentus I experienced three asset defaults since close representing approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. 9.68% of its portfolio. These defaults, along with additional negative credit migration, caused the failure of the class C, class D and class E OC tests. As of the last payment date, approximately $2 million of interest proceeds otherwise available to preferred shareholders were diverted di·vert v. di·vert·ed, di·vert·ing, di·verts v.tr. 1. To turn aside from a course or direction: Traffic was diverted around the scene of the accident. 2. to pay down the principal of the class A-1 notes due to the breach of the class D and E OC tests. Based on Fitch's public and shadow ratings, the average credit quality of Attentus I migrated to the 'B/B-' from the 'BB-/B+' range at close, causing a failure of the transaction's weighted average rating factor (WARF WARF Wisconsin Alumni Research Foundation WARF Wide Aperture Research Facility WARF Wartime Active Replacement Factors WARF weighted-average risk factor WARF Wartime Attrition and Replacement Factors WARF Whylie Animal Rescue Foundation ) covenant covenant (kŭv`ənənt), agreement entered into voluntarily by two or more parties to do or refrain from doing certain acts. In the Bible and in theology the covenant is the agreement or engagement of God with man as revealed in the . Currently, 28.18% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 16.45% of the portfolio has experienced negative rating migration since Fitch's last review in September 2007 and 20.62% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. Attentus CDO II, Ltd/LLC (Attentus II): --$233,413,552 class A-1 affirmed at 'AAA'; --$60,000,000 class A-2 downgraded to 'A+' from 'AAA'; --$55,000,000 class A-3A downgraded to 'A-' from 'AAA'; --$5,000,000 class A-3B downgraded to 'A-' from 'AAA'; --$20,000,000 class B downgraded to 'BBB' from 'AA'; --$32,000,000 class C downgraded to 'B+' from 'A'; --$29,000,000 class D downgraded to 'B-' from 'BBB+'; --$16,000,000 class E-1 downgraded to 'CCC' from 'BBB-'; --$2,000,000 class E-2 downgraded to 'CCC' from 'BBB-'; --$13,334,182 class F-1 downgraded to 'CC' from 'B+'; --$5,128,688 class F-2 downgraded to 'CC' from 'B+'; --$40,000,000 subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. downgraded to 'C' from 'CCC'. Attentus II experienced four asset defaults since close representing approximately 12.04% of its portfolio. These defaults, along with additional negative credit migration caused the failure of the class C, D, E and F OC tests. As of the last payment date, approximately $1.6 million of interest proceeds otherwise available to preferred shareholders were diverted to pay down the principal of the class A-1 notes due to the breach of the class E OC test. Based on Fitch's public and shadow ratings, the average credit quality of Attentus II migrated to the 'B+/B' range from the 'BB-/B+' range at close, causing a failure of the transaction's WARF covenant. Currently, 26.18% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 23.65% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. Fitch's rating on the class A-1 notes does not address the financial guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. insurance policy provided by Assured Guaranty Corp (IFS rated 'AAA' by Fitch). Attentus CDO III, Ltd. (Attentus III): --$150,000,000 class A-1A affirmed at 'AAA'; --$100,000,000 class A-1B affirmed at 'AAA' --$100,000,000 class A-2 downgraded to 'AA' from 'AAA'; --$34,000,000 class B downgraded to 'A-' from 'AA'; --$16,000,000 class C-1 downgraded to 'BB+' from 'A'; --$15,000,000 class C-2 downgraded to 'BB+' from 'A'; --$10,000,000 class D downgraded to 'BB' from 'A-'; --$15,000,000 class E-1 downgraded to 'CCC' from 'BBB'; --$7,000,000 class E-2 downgraded to 'CCC' from 'BBB'; --$24,000,000 class F downgraded to 'CC' from 'BB-'. Attentus III experienced three asset defaults since close representing approximately 7.15% of its portfolio. These defaults, along with additional negative credit migration, caused the failure of the class E and F OC tests. Based on Fitch's public and shadow ratings, the average credit quality of Attentus III migrated to the 'BB-/B+' range from the 'BB/BB-' range at close, causing a failure of the transaction's WARF covenant. Currently, 26.6% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 27.66% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. Fitch's rating on the class A-1B notes does not address the financial guaranty insurance policy provided by Assured Guaranty Corp (IFS rated 'AAA' by Fitch. Kodiak CDO I, Ltd./Inc. (Kodiak I): --$299,815,006 class A-1 downgraded to 'AA+' from 'AAA'; --$103,500,000 class A-2 downgraded to 'AA' from 'AAA'; --$83,000,000 class B downgraded to 'A' from 'AA'; --$30,000,000 class C downgraded to 'A-' from 'AA'; --$13,000,000 class D-1 downgraded to 'BBB-' from 'AA-'; --$5,000,000 class D-2 downgraded to 'BBB-' from 'AA-'; --$29,000,000 class D-3 downgraded to 'BBB-' from 'AA-'; --$5,000,000 class E-1 downgraded to 'BB' from 'A'; --$29,000,000 class E-2 downgraded to 'BB' from 'A'; --$7,000,000 class F downgraded to 'B' from 'BBB+'; --$50,000,000 class G downgraded to 'CCC' from 'BB'; --$27,000,000 class H downgraded to 'C' from 'B-'. Kodiak I experienced four asset defaults since close representing approximately 11.94% of its portfolio. These defaults caused the failure of the class D, E, F/G and H OC tests, as well was the class H IC test. As of the last payment date, approximately $3.7 million of interest proceeds otherwise available to preferred shareholders were diverted to pay down the principal of the class A-1 due to the breach of the class D OC test. Based on Fitch's public and shadow ratings, the average credit quality of Kodiak I remains in the 'B+/B' range, although there has been negative credit migration since Fitch's last review. The moderate deterioration in the portfolio WARF is due, in part, to credit risk sales and asset acquisitions undertaken by the asset manager during the ramp-up period. Currently, 23.43% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 23.70% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. Kodiak CDO II, Ltd./Inc. (Kodiak II): --$338,000,000 class A-1 affirmed at 'AAA'; --$53,000,000 class A-2 affirmed at 'AAA'; --$80,000,000 class A-3 downgraded to 'A+' from 'AAA'; --$81,000,000 class B-1 downgraded to 'A' from 'AA+'; --$5,000,000 class B-2 downgraded to 'A' from 'AA+'; --$38,000,000 class C-1 downgraded to 'BBB+' from 'AA-'; --$2,000,000 class C-2 downgraded to 'BBB+' from 'AA-'; --$36,000,000 class D downgraded to 'BB+' from 'A'; --$35,000,000 class E downgraded to 'B' from 'BBB'; --$35,000,000 class F downgraded to 'CCC' from 'BB'. Kodiak II experienced one asset default and contains a deferred interest security, in aggregate representing approximately 1.25% of its portfolio. The transaction is currently passing its covenanted WARF, as well as its OC and IC Tests. Based on Fitch's public and shadow ratings, the average credit quality of Kodiak II remains in the 'B+/B' range, although there has been negative credit migration since Fitch's last review. The stability of the portfolio WARF can be attributed, in part, to credit risk sales and asset acquisitions undertaken by the asset manager during the ramp-up period. Currently, 6.92% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 22.83% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. TABERNA Preferred Funding I, Ltd. (Taberna I): --$320,495,957 class A-1A downgraded to 'A+' from 'AAA'; --$13,504,043 class A-1B downgraded to 'A+' from 'AAA'; --$87,000,000 class A-2 downgraded to 'A' from 'AAA'; --$64,000,000 class B-1 downgraded to 'BBB+' from 'AA'; --$10,000,000 class B-2 downgraded to 'BBB+' from 'AA'; --$37,750,000 class C-1 downgraded to 'BB-' from 'A'; --$25,750,000 class C-2 downgraded to 'BB-' from 'A'; --$4,500,000 class C-3 downgraded to 'BB-' from 'A'; --$13,500,000 class D downgraded to 'B' from 'BBB+'; --$29,888,478 class E downgraded to 'CCC' from 'BBB'. Taberna I has not experienced any asset defaults, although Fitch is aware of one underlying obligor The individual who owes another person a certain debt or duty. The term obligor is often used interchangeably with debtor. obligor (ah-bluh-gore) n. whose primary operating subsidiary filed for bankruptcy protection in November November: see month. 2007. This exposure represents 3.77% of the portfolio. The transaction is currently passing all OC and IC tests. Based on Fitch's public and shadow ratings, the average credit quality of Taberna I has migrated to the 'B-/CCC+' range from the 'BB-/B+' range at close. Currently, 45.96% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 20.53% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. Taberna Preferred Funding II, Ltd. (Taberna II): --$379,205,399 class A-1A downgraded to 'BBB+' from 'AAA'; --$100,963,435 class A-1B downgraded to 'BBB+' from 'AAA'; --$9,480,135 class A-1C downgraded to 'BBB+' from 'AAA'; --$86,500,000 class A-2 downgraded to 'BBB' from 'AAA'; --$120,500,000 class B downgraded to 'BB' from 'AA'; --$73,750,000 class C-1 downgraded to 'B-' from 'BBB+'; --$26,000,000 class C-2 downgraded to 'B-' from 'BBB+'; --$15,000,000 class C-3 downgraded to 'B-' from 'BBB+'; --$31,823,490 class D downgraded to 'CCC' from 'BBB'; --$30,490,189 class E-1 downgraded to 'CC' from 'BB'; --$10,213,825 class E-2 notes downgraded to 'CC' from 'BB'; --$43,612,981 class F notes downgraded to 'C' from 'B'. Taberna II experienced three asset defaults representing approximately 8.54% of its portfolio. These defaults caused the failure of the class C, D, E and F OC tests. As of the last payment date, approximately $5.5 million of interest proceeds otherwise available to preferred shareholders were diverted to pay down the principal of the class A-1A, A-1B and A-1C notes, pro rata [Latin, Proportionately.] A phrase that describes a division made according to a certain rate, percentage, or share. In a Bankruptcy case, when the debtor is insolvent, creditors generally agree to accept a pro rata share of what is owed to them. due to the breach of the class A/B A/B Airborne A/B Afterburner (jet engines) A/B Air Blast A/B Answerback A/B Auto-brake A/B Air Bus A/B Afterburning and C OC tests. Based on Fitch's public and shadow ratings, the average credit quality of Taberna II migrated to the 'B-/CCC+' range from the 'B/B-' range at close. Currently, 44.7% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 15.7% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. Taberna Preferred Funding III, Ltd. (Taberna III): --$384,210,728 class A-1A downgraded to 'A+' from 'AAA'; --$9,641,424 class A-1C downgraded to 'A+' from 'AAA'; --$38,500,000 class A-2A downgraded to 'A' from 'AAA'; --$15,000,000 class A-2B downgraded to 'A-' from 'AAA'; --$91,250,000 class B-1 downgraded to 'BBB+' from 'AA'; --$7,500,000 class B-2 downgraded to 'BBB+' from 'AA'; --$36,500,000 class C-1 downgraded to 'BB' from 'A-'; --$52,000,000 class C-2 downgraded to 'BB' from 'A-'; --$43,750,000 class D downgraded to 'B-' from 'BBB-'; --$32,254,889 class E downgraded to 'CCC' from 'B+'. Taberna III experienced one asset default representing approximately 3.82% of its portfolio. These defaults caused the failure of the class D and E OC tests. As of the last payment date, approximately $3.4 million of available interest proceeds were used to redeem redeem v. to buy back, as when an owner who had mortgaged his/her real property pays off the debt. The term also refers to paying the amount due and all charges after a foreclosure (due to failure to make payments when due) has begun. the principal of the class A-1A and A-1C notes, pro rata due to the failure of the class D OC test. Based on Fitch's public and shadow ratings, the average credit quality of Taberna III migrated to the 'B/B-' range from the 'B+/B' range at close. Currently, 32.20% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 8.56% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. Taberna Preferred Funding IV, Ltd. (Taberna IV): --$309,460,687 class A-1 downgraded to 'AA+' from 'AAA'; --$50,000,000 class A-2 downgraded to 'AA-' from 'AAA'; --$20,000,000 class A-3 downgraded to 'A+' from 'AAA'; --$81,450,000 class B-1 downgraded to 'A' from 'AA'; --$7,000,000 class B-2 downgraded to 'A' from 'AA'; --$45,000,000 class C-1 downgraded to 'BB+' from 'A-'; --$20,000,000 class C-2 downgraded to 'BB+' from 'A-'; --$35,000,000 class C-3 downgraded to 'BB+' from 'A-'; --$21,000,000 class D-1 downgraded to 'B-' from 'BBB-'; --$13,000,000 class D-2 downgraded to 'B-' from 'BBB-'; --$24,375,000 class E downgraded to 'CCC' from 'B+'. Taberna IV experienced one asset default representing approximately 3.75% of its portfolio. These defaults caused the failure of the class E OC test. As of the last payment date, approximately $1.3 million of available interest proceeds were used to redeem the principal of the class A-1 notes due to the failure of the class E OC test. Based on Fitch's public and shadow ratings, the average credit quality of Taberna IV migrated to the 'B+/B' range from the 'BB-/B+' range at close. Currently, 26.2% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 15.31% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. Taberna Preferred Funding V, Ltd. (Taberna V): --$98,537,389 class A-1LA affirmed at 'AAA'; --$246,343,472 class A-1LAD Left anterior descending coronary artery (LAD) One of the heart's coronary artery branches from the left main coronary artery which supplies blood to the left ventricle. affirmed at 'AAA'; --$60,000,000 class A-1LB downgraded to 'AA+' from 'AAA'; --$90,000,000 class A-2L downgraded to 'A+' from 'AA'; --$50,000,000 class A-3L downgraded to 'B' from 'BBB'; --$35,000,000 class A-3FV downgraded to 'B' from 'BBB'; --$25,000,000 class A-3FX downgraded to 'B' from 'BBB'; --$41,330,261 class B-1L downgraded to 'CCC' from 'B+'; --$24,183,708 class B-2L downgraded to 'CC' from 'CCC+'; --$5,248,800 class B-2FX downgraded to 'CC' from 'CCC+'. Taberna V experienced three asset defaults representing approximately 10.8% of its portfolio. These defaults caused the failure of the class A-3, B-1L and B-2 OC tests. As of the last payment date, approximately $1.9 million of interest proceeds otherwise available to preferred shareholders were diverted to pay down the principal of the class A-1LA and A-1LAD, pro rata due to the breach of the class A-3 OC test. Based on Fitch's public and shadow ratings, the average credit quality of Taberna V migrated to the 'B/B-' range from the 'BB-/B+' range at close. Currently, 25.1% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 18.66% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. Taberna Preferred Funding VI, Ltd. (Taberna VI): --$49,490,200 class A-1A notes downgraded to 'AA' from 'AAA'; --$301,890,218 class A-1B notes downgraded to 'AA' from 'AAA'; --$90,000,000 class A-2 notes downgraded to 'A' from 'AAA'; --$18,000,000 class B notes downgraded to 'A-' from 'AA+'; --$97,000,000 class C notes downgraded to 'BBB+' from 'AA'; --$43,000,000 class D-1 notes downgraded to 'BB-' from 'A-'; --$10,000,000 class D-2 notes downgraded to 'BB-' from 'A-'; --$17,350,653 class E-1 notes downgraded to 'CCC' from 'BBB-'; --$17,354,535 class E-2 notes downgraded 'CCC' from 'BBB-'; --$15,373,858 class F-1 notes downgraded to 'CC' from 'B+'; --$10,251,050 class F-2 notes downgraded to 'CC' from 'B+'. Taberna VI experienced two asset defaults representing approximately 7.35% of its portfolio. These defaults caused the failure of the class D, E and F OC tests. As of the last payment date, approximately $2.3 million of available interest was used to redeem the principal on the class A-1A and A-1B notes, pro rata due to the failure of the class D OC test. Based on Fitch's public and shadow ratings, the average credit quality of Taberna VI migrated to the 'B+/B' range from the 'BB-/B+' range at close. Currently, 25.7% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 18.5% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. Taberna Preferred Funding VII, Ltd. (Taberna VII): --$347,316,358 class A-1LA affirmed at 'AAA'; --$120,000,000 class A-1LB affirmed at 'AAA'; --$25,000,000 class A-2LA downgraded to 'AA' from 'AA+'; --$50,000,000 class A-2LB downgraded to 'AA-' from 'AA'; --$57,000,000 class A-3L downgraded to 'BBB+' from 'A'; --$40,000,000 class B-1L downgraded to 'BB' from 'BBB'; --$30,766,675 class B-2L downgraded to 'CCC' from 'BB-'. Taberna VII experienced two asset defaults representing approximately 4.42% of its portfolio. These defaults caused the failure of the class B-1L and B-2L OC tests. As of the last payment date, approximately $2.7 million of available interest proceeds were used to redeem the principal of the class A-1LA notes due to the breach of the class B-1L OC test. Based on Fitch's public and shadow ratings, the average credit quality of Taberna VII has migrated to the 'B+/B' range from the 'BB-/B+' range at close, causing a failure of the transaction's WARF covenant. Currently, 18.23% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 22.5% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. Taberna Preferred Funding VIII, Ltd. (Taberna VIII) --$160,000,000 class A-1A affirmed at 'AAA'; --$215,000,000 class A-1B affirmed at 'AAA'; --$120,000,000 class A-2 affirmed at 'AAA'; --$75,000,000 class B notes downgraded to 'A' from 'AA'; --$40,000,000 class C notes downgraded to 'BBB+' from 'A'; --$22,000,000 class D notes downgraded to 'BB+' from 'A-'; --$37,000,000 class E notes downgraded to 'B+' from 'BBB'; --$43,000,000 class F notes downgraded to 'B' from 'BB'. Taberna VIII experienced a default with respect to the operating subsidiary of an underlying issuer of trust preferred securities. During the transaction's ramp-up period, however, the affected security was removed from the transaction at par and replaced with performing, eligible collateral. All OC and IC tests are currently passing. Based on Fitch's public and shadow ratings, the average credit quality is in the 'BB-/B+' range. Currently, 4.28% of the portfolio is publicly or shadow rated 'CCC+' or below. Approximately 23.37% of the underlying collateral is currently on Rating Watch Negative or Rating Outlook Negative. TRAPEZA CDO X, Ltd./ Inc. (Trapeza X): --$267,987,049 class A-1 downgraded to 'AA+' from 'AAA'; --$69,000,000 class A-2 downgraded to 'AA' from 'AAA'; --$31,000,000 class B downgraded to 'A+' from 'AA'; --$21,000,000 class C-1 downgraded to 'BBB-' from 'A-'; --$35,000,000 class C-2 downgraded to 'BBB-' from 'A-'; --$22,000,000 class D-1 downgraded to 'CCC' from 'BBB-'; --$22,000,000 class D-2 downgraded to 'CCC' from 'BBB-'; --$39,500,000 subordinate downgraded to 'CC' from 'B+'. Trapeza X experienced two asset defaults representing approximately 8% of its portfolio. These defaults caused the failure of the class C and D OC tests. Based on Fitch's public and shadow ratings, the average credit quality of Trapeza X migrated to the 'B/B-' range from the 'BB-/B+' range at close. Note that bank and insurance collateral is excluded from this measurement of portfolio credit quality, given that banks and insurance companies underlying the transaction are evaluated on a numerical numerical expressed in numbers, i.e. Arabic numerals of 0 to 9 inclusive. numerical nomenclature a numerical code is used to indicate the words, or other alphabetical signals, intended. score basis. Approximately 29.11% of the portfolio, representing REIT/homebuilder collateral, is currently on Rating Watch Negative or Rating Outlook Negative. At close, Trapeza X was comprised of 62.89% bank collateral, 5.35% insurance collateral and 31.76% REIT/homebuilder collateral. Trapeza CDO XI, Ltd. (Trapeza XI): --$281,000,000 class A-1 affirmed at 'AAA'; --$53,000,000 class A-2 downgraded to 'AA+' from 'AAA'; --$20,000,000 class A-3 downgraded to 'AA' from 'AAA'; --$25,000,000 class B downgraded to 'AA-' from 'AA'; --$33,000,000 class C downgraded to 'BBB+' from 'A'; --$22,500,000 class D-1 downgraded to 'BB+' from 'A-'; --$18,500,000 class D-2 downgraded to 'BB+' from 'A-'; --$13,000,000 class E-1 downgraded to 'B+' from 'BBB'; --$5,000,000 class E-2 downgraded to 'B+' from 'BBB'; --$10,000,000 class F downgraded to 'CCC' from 'BB'. Trapeza XI experienced two asset defaults representing approximately 6% of its portfolio. These defaults caused the failure of the class C, D, E and F OC tests. Based on Fitch's public and shadow ratings, the average credit quality of Trapeza XI migrated to the 'B/B-' range from the 'B+/B' range at close. Note that bank and insurance collateral is excluded from this measurement of portfolio credit quality, given that banks and insurance companies underlying the transaction are evaluated on a numerical score basis. Approximately 27.62% of the portfolio, representing REIT/homebuilder collateral, is currently on Rating Watch Negative or Rating Outlook Negative. At close, Trapeza XI was comprised of 60.51% bank collateral, 9.65% insurance collateral, 29.84% REIT/homebuilder collateral. Trapeza X and Trapeza XI differ from the other CDOs included in this review in that they combine trust preferred securities issued by regional banks and insurance companies, along with trust preferred securities and senior and subordinated debt issued by REITs and homebuilders. While regional banks and insurance companies are expected to exhibit positive correlation Noun 1. positive correlation - a correlation in which large values of one variable are associated with large values of the other and small with small; the correlation coefficient is between 0 and +1 direct correlation with REITs and homebuilders over the long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. , regional banks and insurance companies have yet to exhibit the same level of underperformance that REITs and homebuilders have in recent periods. This has served as a positive counterbalance to overall CDO portfolio performance, and tempered Fitch's rating actions on hybrid TruPS CDOs, relative to REIT TruPS CDOs. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.derivativefitch.com. Published ratings, criteria criteria (krītēr´ē  ),n. and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality Restrictions on the accessibility and dissemination of information. Confidentiality is one of the six fundamental components of information security (see Parkerian Hexad). , conflicts of interest, affiliate Affiliate Relationship between two companies when one company owns substantial interest, but less than a majority of the voting stock of another company, or when two companies are both subsidiaries of a third company. See: Subsidiaries, parent company. firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. Fitch means Fitch, Inc., Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. , Ltd. and their subsidiaries including Derivative derivative: see calculus. derivative In mathematics, a fundamental concept of differential calculus representing the instantaneous rate of change of a function. Fitch, Inc. and Derivative Fitch Ltd. and any successor 1. SuccessoR - A language for distributed computing derived from SR. ["SuccessoR: Refinements to SR", R.A. Olsson et al, TR 84-3, U Arizona 1984]. 2. successor - daughter or successors thereto there·to adv. 1. To that, this, or it. 2. Archaic In addition to that; furthermore. thereto Adverb Formal 1. to that or it 2. . |
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