NEW YORK--(BUSINESS WIRE)--Fitch Ratings has downgraded two and affirmed 13 classes issued by ARCAP 2006-RR7 Resecuritization, Inc. (ARCAP 2006-RR7) as a result of negative credit migration and additional losses on the underlying collateral. A complete list of rating actions follows at the end of this press release.
Since Fitch's last rating action in March 2011, approximately 25.5% of the collateral has been downgraded. Currently, 97.9% of the portfolio has a Fitch derived rating below investment grade and 94.5% has a rating in the 'CCC' category and below, compared to 95.6% and 94.3%, respectively, at the last rating action. Over this period, the transaction has experienced $77.5 million in principal losses.
This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria' and 'Global Rating Criteria for Structured Finance CDOs'. However, given the portfolio's distressed nature, Fitch believes that the probability of default for all classes of notes can be evaluated without factoring in potential further losses from the non-defaulted portion of the portfolio. Therefore, this transaction was not modeled using the Structured Finance Portfolio Credit Model (SF PCM).
For the class A through N notes, Fitch analyzed each class' sensitivity to the default of the distressed assets ('CCC' and below). Given the high probability of default of the underlying assets and the expected limited recovery prospects upon default, the class A notes have been downgraded and the class B through N notes affirmed at 'Csf', indicating that default is inevitable.
Since issuance, the transaction has experienced $234.9 million in principal losses. These losses have caused a writedown of 98.8% of the class O note balance. Thus, the class O notes have been affirmed at 'Dsf'.
Fitch does not assign outlooks to classes rated 'CCC' and below.
ARCAP 2006-RR7 is backed by 33 tranches from 21 transactions and is considered a CMBS B-piece resecuritization (also referred to as first loss commercial real estate collateralized debt obligation (CRE CDO)/ReREMIC) as it includes the most junior bonds of CMBS transactions. The transaction closed May 2, 2006.
Fitch has downgraded the following classes as indicated:
--$68,000,000 class A-D notes to 'Csf' from 'CCsf';
--$47,126,000 class A notes to 'Csf' from 'CCsf.
Fitch has affirmed the following classes as indicated:
--$94,019,000 class B notes at 'Csf';
--$52,766,000 class C notes at 'Csf';
--$21,107,000 class D notes at 'Csf';
--$22,066,000 class E notes at 'Csf';
--$34,538,000 class F notes at 'Csf';
--$28,781,000 class G notes at 'Csf';
--$40,294,000 class H notes at 'Csf';
--$56,604,000 class J notes at 'Csf';
--$14,391,000 class K notes at 'Csf';
--$14,390,000 class L notes at 'Csf';
--$24,944,000 class M notes at 'Csf';
--$13,432,000 class N notes at 'Csf';
--$179,205 class O notes at 'Dsf'.
Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2011);
--'Global Rating Criteria for Structured Finance CDOs' (Oct. 6, 2011).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646569
Global Rating Criteria for Structured Finance CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651560
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