Fitch Ratings has downgraded eight classes of notes issued by STACK Ltd, Series 2005-1 (STACK 2005-1). The details of the rating action follow at the end of this press release.
These rating actions are the result of severe credit deterioration among 2003 and 2004 vintage residential mortgage-backed securitizations (RMBS) experienced since Fitch's last rating action in January 2009. Approximately 84.4% of the portfolio has been downgraded since the last review, with about 76% of the portfolio downgraded since June 1, 2009. The main drivers for the downgrades in the underlying RMBS during the summer were the continued deterioration of home prices and employment rates causing an increase in delinquencies despite significant seasoning in the loans.
The downgrades to the portfolio have left approximately 99.5% of the portfolio with a Fitch derived rating below investment grade and 84.8% with a rating in the 'CCC' rating category or lower, compared to 66.5% and 22.1%, respectively, in January 2009. The percentage of the portfolio that has experienced a credit event has increased to 30.5% according to the Aug. 31, 2009 trustee report, from 13.3%.
Since the last rating action, the class A2 notes have become the senior most tranche in the capital structure and have begun to amortize. However, the amount of credit deterioration in the portfolio greatly outweighs the increase in credit enhancement from amortization of the capital structure.
The class A2 notes are downgraded to 'CC' to reflect Fitch's opinion that, based on the percentage of declared credit events and the performance expectations for the remainder of the portfolio, there is a high probability the notes will default at or prior to maturity. The classes B, C and D notes are downgraded to 'C', indicating Fitch's belief that default is inevitable at or prior to maturity.
STACK 2005-1 is a synthetic collateralized debt obligation (CDO) that closed on March 24, 2005 and is managed by TCW Asset Management Co. The portfolio is composed entirely of subprime RMBS, with 94.5% of these assets originated in 2003 and 2004.
Fitch has downgraded the following:
STACK Ltd, Series 2005-1
--$109,396,137 series A2-USD notes to 'CC' from 'AA';
--Eur5,380,138 series A2-EUR notes to 'CC' from 'AA';
--$74,000,000 series B-USD notes to 'C' from 'BBB';
--Eur6,000,000 series B-EUR notes to 'C' from 'BBB';
--$33,000,000 series C-USD notes to 'C' from 'B';
--JPY1,000,000,000 series C-JPY notes to 'C' from 'B';
--$31,000,000 series D-USD notes to 'C' from 'CC';
--JPY500,000,000 series D-JPY notes to 'C' from 'CC'.
These rating actions reflect the application of Fitch's current criteria which are available at 'www.fitchratings.com' and specifically include the following reports:
--'Global Rating Criteria for Structured Finance CDOs' (Dec. 16, 2008);
--'Counterparty Risk in Structured Finance Transactions: Hedge Criteria' (Aug. 1, 2007).
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Contacts:
Fitch Ratings
Alina Pak, 312-368-3184, Chicago
Kevin Kendra,
212-908-0760, New York
Brian Vorderbrueggen, 212-908-9102, New York
or
Media
Relations:
Sandro Scenga, 212-908-0278, New York
Email: sandro.scenga@fitchratings.com
