Fitch Rates Northwall Funding CDO I, Ltd./Inc.
--$180,000,000 class A-1 first priority senior secured floating-rate notes due December 2041 'AAA';
--$46,500,000 class A-2 second priority senior secured floating-rate notes due December 2041 'AAA';
--$40,500,000 class B third priority senior secured floating-rate notes due December 2041 'AA';
--$18,000,000 class C fourth priority mezzanine secured fixed-rate notes due December 2041 'BBB'.
The ratings of the classes A-1, A-2, and B notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. The rating of the class C notes addresses the likelihood that investors will receive ultimate interest and deferred interest payments, as per the governing documents, as well as the aggregate outstanding amount of principal by the stated maturity date. Periodic payments on the notes will be paid quarterly starting in September 2005.
The ratings are based upon the capital structure of the transaction, the credit quality of the collateral, approximately 90% of which will be purchased at close and the overcollateralization (OC) and interest coverage (IC) tests provided for within the indenture. The collateral portfolio will be managed by Terwin Money Management LLC (Terwin). The transaction has a substitution period for two years beginning after the first quarterly distribution date. Proceeds from the sale of defaulted or written-down securities and prepayments will be used to redeem the notes. During the substitution period, Terwin's trading activities are limited to a maximum 10% discretionary trading bucket during any 12-month period, as defined in the governing documents. Principal collections due to sales proceeds during the substitution period can be used to buy additional collateral, within covenanted limitations, but after the substitution period must be used to pay down the most senior liabilities.
Interest and principal payments are made on a sequential basis, paid first to the class A-1 notes.
The proceeds of the notes will be used to purchase a portfolio of subprime residential mortgage-backed securities (RMBS), prime RMBS, and collateralized debt obligations (CDOs). The collateral has a maximum Fitch weighted average rating factor (WARF) of 6.00 ('BBB/BBB-'). Northwall has the ability to solicit auction bids for the entire portfolio of securities, whereby sales proceeds are used to pay down the notes sequentially.
The issuer and co-issuer are special-purpose companies incorporated under the laws of the Cayman Islands and Delaware, respectively. Terwin is a wholly owned subsidiary of Terwin Asset Management LLC, which is a member of The Winter Group family of businesses. Northwall is the fifth cash flow ABS CDO managed by Terwin.
The placement agent for this transaction is Merrill Lynch, Pierce, Fenner & Smith Incorporated. For additional information on structural and others features of Northwall, please see the Fitch presale report, "Northwall Funding CDO I, Ltd./Inc.," which is available on Fitch's subscription-based Web site, www.fitchresearch.com.