NEW YORK--(BUSINESS WIRE)--Fitch Ratings has taken rating actions on two Business Loan Express (BLX) transactions as follows:
Business Loan Express SBA loan-backed adjustable-rate notes, series 2001-2
--Class A affirmed at CCsf, RE 75%;
--Class M downgraded to Csf from CCsf, RE 0%.
Business Loan Express SBA loan-backed adjustable-rate notes, series 2002-1
--Class A affirmed at 'BBBsf'; Outlook Negative;
--Class M affirmed at 'BBsf'; Outlook Negative.
KEY RATING DRIVERS
The downgrade for the Class M note in the 2001-2 series reflects the current undercollateralized position of the note. Since Fitch's last review, charged-off loans have resulted in a decline in available collateral compared to the outstanding note balance. The rating affirmation of the Class A note reflects a fully collateralized position despite continued delinquency performance within the transaction. As of the most current reporting period, total delinquencies for the transaction represented 18.31%, and cumulative net losses totaled 11.37%.
The rating affirmations for the 2002-1 notes reflect stable performance within the transaction. As of June 2013 reporting, total delinquencies represented 8.08%, and cumulative net losses totaled 6.68%. The Negative Outlook designation for the 2002-1 transaction reflects Fitch's continued concern for growing concentrations within the pool which may ultimately impact the ratings on the outstanding notes.
Fitch remains concerned with the historically high delinquency rates within the pools, particularly in 2001-2. The 2001-2 transaction continues to experience high delinquency roll rates which may lead to further reduction of credit support for the notes as losses realized. Furthermore, under Fitch's stress assumptions, recovery expectations are expected to be limited for the notes.
Fitch will continue to monitor the series 2001-2 and 2002-1 as the transactions continue to amortize. As obligor counts for the pools continue to decline and tail risk increases, Fitch will review the transactions for potential ratings action or withdrawals.
In reviewing the transactions, Fitch took into account analytical considerations outlined in Fitch's 'Global Structured Finance Rating Criteria', dated May 24, 2013, including asset quality, credit enhancement, financial structure, legal structure, and originator and servicer quality.
Fitch's analysis incorporated a review of collateral characteristics, in particular, focusing on delinquent and defaulted loans within the pool. All loans over 60 days delinquent were deemed defaulted loans. The defaulted loans were applied loss and recovery expectations based on collateral type and historical recovery performance to establish an expected net loss assumption for the transaction. Fitch stressed the cashflows generated by the underlying assets by applying its expected net loss assumption. Furthermore, Fitch applied a loss multiplier to evaluate break-even cash flow runs to determine the level of expected cumulative losses the structure can withstand at a given rating level. The loss multiplier scale utilized is consistent with that of other commercial ABS transactions.
Additionally, to review possible concentration risks within the pool, Fitch evaluated the impact of the default of the largest performing obligors. Similar to the analysis detailed above, Fitch applied loss and recovery expectations to the performing obligors based on collateral type and historical recovery performance. The expected loss assumption was then compared to the credit support available to the outstanding notes given Fitch's expected losses on the currently defaulted loans. Consistent with the obligor approach detailed in 'Rating U.S. Equipment Lease and Loan Securitizations', dated Dec. 28, 2012, Fitch applied losses from the largest performing obligors commensurate with the individual rating category. The number of obligors ranges from 20 at 'AAA' to five at 'B'.
Fitch will continue to closely monitor these transactions and may take additional rating action in the event of changes in performance and credit enhancement measures.
RATING SENSITIVITY
Unanticipated increases in frequency of defaults and loss severity could have an impact on loss coverage levels. Additional charge-offs could negatively impact ratings as it would further reduce the credit enhancement available to the notes, most notably for the Class A note in the 2001-2 series.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (May 24, 2013);
--'Structured Finance Recovery Estimates for Distressed Securities' (Nov. 18, 2011).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=708661
Structured Finance Recovery Estimates for Distressed Securities
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=656557
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=795083
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