Fitch Affirms 14 Classes of Crest CDO 2004-1 Ltd./Corp.

NEW YORK--()--Fitch Ratings has affirmed 14 classes issued by Crest CDO 2004-1 Ltd./Corp. (Crest 2004-1). A complete list of rating actions follows at the end of this press release.

KEY RATING DRIVERS:

The affirmations are a result of deleveraging of the transaction due to collateral paydowns. Since the last rating action in March 2013, approximately 10.1% of the collateral has been downgraded and 4.6% has been upgraded. Currently, 96.5% of the portfolio has a Fitch derived rating below investment grade and 66.1% has a rating in the 'CCC' category and below, compared to 87.8% and 55.3%, respectively, at the last rating action. Over this period, the class A notes have received $39.9 million in paydowns.

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, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. 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 A and B notes' breakeven rates are generally consistent with the ratings assigned below.

For the class C through H 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 C and D notes have been affirmed at 'CCsf', indicating that default is probable. Class E through H notes have been affirmed at 'Csf', indicating that default is inevitable.

The rating of the preferred shares addresses the likelihood that investors will receive the ultimate return of the aggregate outstanding rated balance by the legal final maturity date. The assigned rating for the preferred shares indicates that default is inevitable, as they are undercollateralized.

RATING SENSITIVITIES

The Stable Outlook on the class A notes reflects Fitch's view that the transaction will continue to delever. Crest 2004-1 is a static collateralized debt obligation (CDO) that closed on Nov. 18, 2004. The current portfolio consists of 77 bonds from 34 obligors, of which 96.1% are commercial mortgage backed securities (CMBS) from the 1999 through 2004 vintages, and 3.9% are structured finance CDOs.

Fitch has affirmed the following actions:

--$56,774,759 class A notes at 'BBsf'; Outlook Stable;
--$44,000,000 class B-1 notes at 'CCCsf';
--$8,491,250 class B-2 notes at 'CCCsf';
--$2,797,651 class C-1 notes at 'CCsf';
--$26,706,057 class C-2 notes at 'CCsf';
--$19,972,693 class D notes at 'CCsf';
--$13,761,435 class E-1 notes at 'Csf';
--$15,445,318 class E-2 notes at 'Csf';
--$6,876,553 class F notes at 'Csf';
--$2,257,636 class G-1 Notes at 'Csf';
--$12,473,467 class G-2 notes at 'Csf';
--$8,675,975 class H-1 notes at 'Csf';
--$1,354,125 class H-2 notes at 'Csf';
--$96,412,500 preferred shares notes (principal only) at 'Csf'.

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=820041
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Contacts

Fitch Ratings
Primary Surveillance Analyst:
Matthew McGowan, +1-212-908-0733
Analyst
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com

Contacts

Fitch Ratings
Primary Surveillance Analyst:
Matthew McGowan, +1-212-908-0733
Analyst
Fitch Ratings, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson:
Mary MacNeill, +1-212-908-0785
Managing Director
or
Media Relations:
Sandro Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com