NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded two and affirmed 12 classes issued by CT CDO III Ltd./Corp. (CT CDO III). A complete list of rating actions follows at the end of this release.
This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs'. The ratings are not based on the Portfolio Credit Model (PCM) given the high obligor concentration and seasoning of the portfolio. Instead, the projected recovery estimate on the distressed collateral was applied in accordance with the principal waterfall. Additionally, an asset by asset analysis was performed for the remaining assets to determine the collateral coverage for the remaining liabilities.
Since Fitch's last rating action in February 2010, the weighted average rating of the portfolio has remained the same at 'BB/BB-'. Currently, 29.1% has a Fitch derived rating below investment grade and 15.8% has a rating in the 'CCC' rating category or lower, compared to 28.7% and 15.9%, respectively, at last review. The class A-1 notes have paid down by $14.5 million since the last review. The portfolio has become increasingly concentrated with 13 obligors remaining.
The class A-1 notes have been affirmed and are assigned a Stable Outlook, since they are adequately supported by 'AAA' rated collateral. Classes A-2 through H have been affirmed at their current ratings given that their balances are covered by collateral with equal or better rated collateral. These classes have been assigned a Negative Outlook reflecting Fitch's expectation that underlying commercial mortgage backed security (CMBS) loans will continue to face refinance risk. The Loss Severity (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'. The LS rating should always be considered in conjunction with the probability of default for tranches. Fitch does not assign LS ratings or Outlooks to classes rated 'CCC' and below.
Fitch affirmed classes J through L at their current ratings given the limited amount of credit enhancement that would remain after liquidation of the distressed collateral. The total loss estimate for the distressed assets is expected to erode the class O notes and part of class N, and significantly reduce the credit enhancement for class M. As a result, the class M and N notes have been downgraded to 'Csf, indicating default is inevitable.
CT CDO III is a commercial real estate collateralized debt obligation (CRE CDO) that closed Aug. 4, 2005. The transaction is collateralized by 21 CMBS assets from 13 obligors from the 1996-1999 vintages.
Fitch has taken the following actions, including revising LS ratings and revising Outlooks for the following classes as indicated:
--$44,387,524 Class A-1 Notes affirmed at 'AAAsf/LS4'; Outlook to Stable from Negative;
--$147,169,000 Class A-2 Notes affirmed at 'Asf/LS3'; Outlook Negative;
--$29,007,000 Class B Notes affirmed at 'BBB+sf/LS4'; Outlook Negative;
--$13,650,000 Class C Notes affirmed at 'BBBsf'; Outlook Negative; to 'LS5' from 'LS4';
--$5,118,000 Class D Notes affirmed at 'BBB-sf/LS5'; Outlook Negative;
--$6,825,000 Class E Notes affirmed at 'BB+sf/LS5'; Outlook Negative;
--$6,825,000 Class F Notes affirmed at 'BB+sf/LS5'; Outlook Negative;
--$9,811,000 Class G Notes affirmed at 'BBsf/LS5'; Outlook Negative;
--$11,517,000 Class H Notes affirmed at 'Bsf/LS5' Outlook Negative;
--$6,825,000 Class J Notes affirmed at 'CCCsf';
--$3,839,000 Class K Notes affirmed at 'CCCsf';
--$5,118,000 Class L Notes affirmed at 'CCsf';
--$5,545,000 Class M Notes downgraded to 'Csf' from 'CCsf';
--$4,265,000 Class N Notes downgraded to 'Csf' from 'CCsf'.
Additional information is available at 'www.fitchratings.com'.
The information used to assess these ratings was sourced from note valuation reports, and the public domain.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Sept. 30, 2009);
--'Global Rating Criteria for Structured Finance CDOs' (Oct. 15, 2010);
--'Criteria for Structured Finance Loss Severity Ratings' (Feb. 17, 2009).
Applicable Criteria and Related Research:
Criteria for Structured Finance Loss Severity Ratings
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=426038
Global Rating Criteria for Structured Finance CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564895
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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 ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.