LONDON & NEW YORK--(BUSINESS WIRE)--Fitch Ratings has reviewed documents relating to two potential amendments being executed in 15 structured finance (SF) transactions with derivative counterparty exposures to Bank of America or Merrill Lynch and related entities. The proposed amendments represent contractual remedies in response to the occurrence of a Moody's rating event with respect to derivatives embedded in specified SF transactions. Currently, Fitch's ratings on Bank of America Corp. (BAC) are 'A+/F1+' on Rating Watch Negative, which are sufficient to support 'AAAsf' ratings as a derivative counterparty under Fitch's counterparty criteria. Fitch has reviewed the relevant underlying documents on the transactions and concludes that the amendments, when officially executed, will remain consistent with Fitch's counterparty criteria and will not impact the ratings as long as Fitch's rating on BAC (and its related relevant entities) continues to remain consistent with Fitch's counterparty criteria.
The proposed remedies include explicit guarantees or executing a credit support annex. Fitch reviewed standard form documents relative to each proposed remedy and checked that the form documents were applied to the affected transactions. The following is a description of the proposed remedies within the context of Fitch's current counterparty criteria.
Solution 1: Execution of a Credit Support Annex
In the 5 transactions listed below, the swap counterparty will implement a credit support annex in order to be in a position to collateralise its obligations under derivative agreements with the respective securitisation transactions. In view of the swap counterparty's current rating, Fitch's counterparty criteria does not expect collateral be posted; therefore, Fitch's current ratings will not be affected by the implementation of the credit support annex.
According to its criteria, Fitch expects remedial action (including the posting of collateral) to be taken in the event the swap counterparty is downgraded below 'A' or 'F1' by Fitch. The provisions of the credit support annex are consistent with Fitch's criteria; however, Fitch notes that the rating triggers are defined in the existing swap schedules which have not been reviewed as part of this exercise. The materiality of any discrepancies between Fitch's criteria and the documented rating triggers will be reviewed in the event of a Fitch counterparty downgrade.
AMAC CDO Funding I
N-STAR Real Estate CDO VII
Preferred Term Securities XXI, Ltd.
Preferred Term Securities XXII, Ltd.
Preferred Term Securities XXIII, Ltd.
Solution 2: Procurement of a Guarantee from Merrill Lynch Derivative Products AG (MLDP)
In the 9 transactions listed below, the various swap counterparties will procure a guarantee from MLDP, which is not rated by Fitch, in relation to their obligations under derivative agreements with the securitisation transaction. Although MLDP is not rated, the agency notes that the underlying counterparty arrangements (i.e. excluding the MLDP guarantee) are currently consistent with its counterparty criteria, given the swap counterparty ratings, and that Fitch's current ratings will not be affected by the implementation of the guarantee. Fitch will continue to monitor the ratings of the swap counterparty going forward, as opposed to those of MLDP. Fitch expects additional remedial action will be taken in the event the swap counterparty is downgraded below 'A' or 'F1' by Fitch.
ALESCO Preferred Funding I, Ltd.
ALESCO Preferred Funding IX, Ltd
ALESCO Preferred Funding VI, Ltd
ALESCO Preferred Funding VIII, Ltd.
ALESCO Preferred Funding X, Ltd.
ALESCO Preferred Funding XI, Ltd
Ansonia CDO 2006-1
Merrill Auto Trust Securitization 2008-1
Taurus CMBS (UK) 2006-2
Lastly, Fitch has been notified by BAC on the Maxim High Grade CDO II Ltd. (Cayman Islands) that swap amendments as planned will not meet Fitch counterparty criteria. Given that Fitch's current ratings of the bonds are 'Dsf', Fitch's lowest possible rating, Fitch concludes that the ratings on the notes will not be negatively affected.
Additional information is available at 'www.fitchratings.com'.
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