Fitch Takes Various Actions on Independence I CDO Ltd./Inc.

NEW YORK--()--Fitch Ratings has upgraded one and affirmed one class of notes issued by Independence I CDO, Ltd./Inc. (Independence I) as follows:

--$14,711,059 class A notes upgraded to 'Asf' from 'BBBsf', Outlook Stable;

--$50,000,000 class B notes affirmed at 'Dsf'.

This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Structured Finance Portfolio Credit Model (SF PCM) for projecting future default levels for the underlying portfolio. These default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. Fitch also considered additional qualitative factors into its analysis, as described below, to conclude the rating affirmations for the rated notes.

Since the last rating action in February 2012, the credit quality of the collateral has deteriorated with approximately 25.6% of the portfolio downgraded a weighted average of 4.8 notches. 83.7% of the portfolio has a Fitch derived rating below investment grade and 30.8% is considered to be defaulted by the trustee, compared to 77.2% and 20.9%, respectively, at last review.

KEY RATING DRIVERS:

The upgrade to the class A notes is due to the significant amortization offsetting the deterioration of the underlying collateral. Interest and principal collections have been diverted to redeem the class A notes due to the acceleration following an event of default. Since the last review, the notes have received approximately $20.5 million, or 58.2% of its previous balance, in principal repayment. The amount of interest collections diverted to pay down the notes has increased after the expiration of the transaction's interest rate swap in March 2012. Fitch maintains a Stable Outlook on the class to reflect the available cushion in the cash flow modeling results to mitigate potential further negative migration in the portfolio.

Due to the acceleration, the class B notes have not been receiving their interest on each quarterly distribution date. The class B notes are non-deferrable and are affirmed at 'Dsf'.

Independence I is a cash flow structured finance collateralized debt obligation (SF CDO) that closed on Dec. 18, 2000. The portfolio is monitored by Declaration Management & Research LLC and is composed of residential mortgage-backed securities (29.8%), commercial asset-backed securities (25.2%), commercial mortgage-backed securities (24.5%), SF CDOs (15.7%) and corporate CDOs (4.9%) from 1996 through 2003 vintage transactions.

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' (Jun.e 6, 2012);

--'Global Rating Criteria for Structured Finance CDOs' (Oct. 3, 2012);

--'Global Criteria for Cash Flow Analysis in CDOs' (Sep. 13, 2012);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (Jan. 29, 2013).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=690203

Global Criteria for Cash Flow Analysis in CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688518

Criteria for Interest Rate Stresses in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=695535

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Contacts

Fitch Ratings
Surveillance Analyst
Felix Chen, +1-212-908-9154
Analyst
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Alina Pak, CFA, +1-312-368-3184
Senior Director
or
Media Relations
Sandro Scenga, +1 212-908-0278 (New York)
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Surveillance Analyst
Felix Chen, +1-212-908-9154
Analyst
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Alina Pak, CFA, +1-312-368-3184
Senior Director
or
Media Relations
Sandro Scenga, +1 212-908-0278 (New York)
sandro.scenga@fitchratings.com