Fitch Ratings Downgrades Two Classes of Phoenix CDO II.CHICAGO -- 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. affirms two classes of notes and downgrades two classes of notes issued by Phoenix 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 II, Ltd. ('Phoenix II'). The following rating actions are effective immediately: --$193,120,345 class A notes affirmed at 'AAA'; --$39,000,000 class B notes affirmed at 'BBB'; --$23,260,486 class C-1 notes downgraded to 'C' from 'CCC', remain at 'DR5'; --$14,474,366 class C-2 notes downgraded to 'C' from 'CCC', remain at 'DR5'. Phoenix II is a collateralized debt obligation Collateralized Debt Obligation (CDO) A general inclusive term which covers Collateralized Bond Obligations, Collateralized Loan Obligations, and Collateralized Mortgage Obligations, (CDO), which closed May 16, 2000, and is managed by Phoenix Investment Partners, Ltd. Phoenix II is composed of a diversified portfolio of asset-backed securities Asset-backed security A security that is collateralized by loans, leases, receivables, or installment contracts on personal property, not real estate. asset-backed security A debt security collateralized by specific assets. (ABS), residential mortgage-backed securities Residential mortgage-backed securities (RMBS) are a type of bond commonly issued in American security markets. They are a type of Mortgage-backed security which are backed by mortgages on residential rather than commercial real estate. (RMBS RMBS Residential Mortgage-Backed Securities RMBS Rambus, Inc. (NASDAQ stock symbol) RMBS Russian Mortgage-Backed Securities ) and commercial mortgage-backed securities Commercial mortgage-backed securities (CMBS) are a type of bond commonly issued in American security markets. They are a type of Mortgage-backed security which are backed by mortgages on commercial rather than residential real estate. (CMBS CMBS See: Commercial Mortgage Backed Securities ). Included in this review, Fitch discussed the current state of the portfolio with the asset manager and their portfolio management strategy going forward. In addition, Fitch conducted cash flow modeling utilizing various default timing and interest rate scenarios to measure the breakeven breakeven 1. The level of output or sales necessary to cover fixed expenses. Companies in industries that have high fixed costs and, consequently, high breakevens, such as automobile and steel manufacturing, are likely to exhibit large fluctuations default rates relative to the minimum cumulative default rates for the rated liabilities. In June 2003, the aggregate principal balance of the collateral debt securities dropped below the aggregate balance of the rated notes, resulting in an event of default. In December 2003, the majority holders of the senior class voted to accelerate the maturity of the transaction, which diverts all interest and principal cash flows to pay down the class A notes. As a result, the class B notes have accrued approximately $3.2 million of defaulted interest payments as of the March 1, 2006, payment date and will continue to accrue defaulted interest until the class A notes are paid in full. Although the class B note holders may not receive interest or principal distributions for several years, Fitch expects the class B investors to receive the ultimate payment of interest and principal under 'BBB' stress scenarios by the legal final maturity date. Phoenix II continues to delever. Approximately 38.7% of the original class A balance has been redeemed since closing, as well as approximately 10.0% since the last rating action on July 27, 2005. Although Phoenix II is currently failing its overcollateralization (OC) tests, they remain stable since last review. However, due to the defaulted interest on the class B notes and the deferred interest on the class C notes, the class B and class C IC continue to decline. Additionally, the creditworthiness Creditworthiness The condition in which the risk of default on a debt obligation by that entity is deemed low. Creditworthiness Eligibility of an individual or firm to borrow money. of the collateral has remained relatively stable as the weighted average rating remains in the 'BBB-' rating category. The downgrades on the class C-1 and C-2 notes reflect Fitch's opinion that the undiscounted principal received by these notes will be substantially less than the current balance of the notes. The distressed recovery rating of 'DR5' is maintained and reflects an ultimate recovery from all cash flows in the range of 10% to 30%. The deferred interest on the class C notes is being paid in kind and currently totals approximately $3.2 million for the class C-1 notes and $3.9 million for the class C-2 notes as of the May 28, 2006 trustee report. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional deal information and historical data are available on the Fitch Ratings web site at www.fitchratings.com. For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Sept. 13, 2004, available on Fitch's web site at www.fitchratings.com. Fitch's Distressed Recovery (DR) ratings, introduced in April 2006 across all sectors of structured finance, are designed to estimate recoveries on a forward-looking basis while taking into account the time value of money. For more information on Distressed Recovery ratings, see the full report ('Structured Finance Distressed Recovery Ratings'), which is available on the Fitch Ratings web site at www.fitchratings.com. 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.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate 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. |
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