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Fitch Affirms 3 & Lowers 4 Classes of E*TRADE ABS CDO I.

NEW YORK -- Fitch Ratings affirms three and downgrades four classes of notes issued by E*TRADE ABS CDO I, Ltd. (E*Trade I) as follows:

--$12,551,909 class A-1 notes affirmed at 'AAA';

--$50,000,000 class A-2 notes affirmed at 'AAA';

--$25,000,000 class B notes affirmed at 'BBB';

--$9,321,800 class C-1 notes downgraded to 'CC' from 'CCC';

--$3,384,239 class C-2 notes downgraded to 'CC' from 'CCC';

--$12,500,000 preference shares downgraded to 'C' from 'CC';

--$4,971,863 composite securities downgraded to 'C' from 'CC'.

E*TRADE I is a static cash flow collateralized debt obligation (CDO) which closed Sept. 26, 2002 and is managed by E*TRADE Global Asset Management, Inc., rated 'CAM2' by Fitch for managing structured finance CDOs. E*TRADE I's collateral is composed of a diversified portfolio of asset-backed securities (ABS), residential mortgage-backed securities (RMBS), commercial mortgage-backed securities (CMBS), and CDOs. Fitch reviewed the credit quality of the individual assets comprising the portfolio and conducted cash flow modeling of various default timing and interest rate stress scenarios to measure the breakeven default rates going forward relative to the minimum cumulative default rates required for the rated liabilities.

Since the last rating action in April 2005, significant principal inflows deleveraged the structure. The class A-1 notes paid down an additional $78 million with total redemptions equaling approximately 92% of the original balance. The principal reduction resulted in stronger credit enhancement levels for the class A-2 and B notes; however, the reduced credit quality of the portfolio somewhat offset this improvement.

The downgrade of the class C notes is due to the low projected ultimate principal recovery for these notes. Continued deterioration of the manufactured housing (MFH) assets has and is likely to continue to result in reduced principal coverage levels for the class C notes. The decline can be seen by the reduction in the class C overcollateralization ratio to 95.3% as of the Jan. 31, 2006 trustee report from 100.8% as of March 31, 2005. In addition, the portfolio credit quality deteriorated over the same period with the weighted average rating factor going to 26 ('BBB-/BB+') from 23 ('BBB-/BB+'). However, due to passing class A/B coverage tests, the class C noteholders are receiving current interest distributions and will continue to do so if future defaults are minimal.

The rating of the preference shares reflects the likelihood that there will not be future distributions to this class. The composite securities, originally composed of 30% class C-1 notes and 70% preference shares, are likely limited to interest distributions from the class C-1 portion of the note.

The ratings on the classes A-1 and A-2 notes (together, the class A notes) and B notes address the timely payment of interest and ultimate payment of principal, whereas the ratings on the class C notes address the ultimate payment of interest and principal. The rating on the preference shares addresses the ultimate payment of the initial preference share rated balance and the ultimate receipt of payments that result in a yield on the preference share rated balance equivalent to 2% per annum. The rating on the composite securities addresses the ultimate payment of the initial composite securities rated balance and the ultimate receipt of payments that result in a yield on the composite securities rated balance equivalent to 4.66% per annum.

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 For more information on the Fitch VECTOR Model, see 'Global Rating Criteria for Collateralised Debt Obligations,' dated Sept. 13, 2004, also available at

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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 are also available from the 'Code of Conduct' section of this site.
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Publication:Business Wire
Date:Mar 7, 2006
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