NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed seven classes issued by N-Star Real Estate CDO I, Ltd (N-Star CDO). A complete list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The rating actions are a result of the de-leveraging of the capital structure offsetting the negative credit migration of the underlying collateral. Since Fitch's last rating action in January 2013, approximately 26.40% of the underlying collateral has been downgraded and 12.25% has been upgraded. Currently, approximately 80.94% of the collateral has a Fitch derived rating below investment grade and 43.30% has a rating in the 'CCC' category or below, compared to 49.32% and 23.32%, respectively, at the time of the last rating action. Over this period, the transaction has received $68.5 million in paydowns which has resulted in the full repayment of the class A-2 notes and $12.6 million in paydowns to the class B-1 notes.
Collateral experiencing interest shortfalls has decreased to 8.61% from 33.03% at the last rating action. Since last review, the transaction has continued to delever which has caused the credit enhancement for all classes to increase. However, significant obligor and concentration risk exists as the remaining collateral consists primarily of assets that are below investment grade.
This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. The default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under the various default timing and interest rate stress scenarios. Fitch also analyzed the structure's sensitivity to the assets that are distressed, experiencing interest shortfalls, and those with near-term maturities. Based on this analysis, the class B through D notes' breakeven rates are generally consistent with the ratings assigned below.
RATING SENSITIVITIES
The Stable Outlook on the class B notes reflects Fitch's view that the transaction will continue to delever.
The Negative Outlook on the class C through D notes reflects the increasing concentration risk and adverse selection potential with the remaining collateral.
N-Star CDO I is a cash flow collateralized debt obligation (CDO), which closed Aug. 21, 2003. The collateral is composed of 13 assets consisting of 57.35% commercial mortgage backed securities (CMBS), 12.25% real estate investment trusts (REIT), and 30.40% of structured finance CDOs (SF CDOs).
Fitch has affirmed the following classes and revised the Rating Outlooks as indicated:
--$2,352,815 class B-1 notes at 'Asf'; Outlook to Stable from Negative;
--$10,000,000 class B-2 notes at 'BBBsf'; Outlook to Stable from Negative;
--$5,041,948 class C-1A notes at 'BBsf'; Outlook Negative;
--$5,096,200 class C-1B notes at 'BBsf'; Outlook Negative;
--$24,420,540 class C-2 notes at 'Csf'';
--$10,198,058 Class D-1A notes at 'Csf';
--$4,123,976 Class D-1B notes at 'Csf'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Global Rating Criteria for Structured Finance CDOs' (Sept. 12, 2013).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
Global Rating Criteria for Structured Finance CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=718027
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=814140
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