Fitch Ratings has placed on Rating Watch Negative six classes of notes from Newcastle CDO VIII and two classes of notes from Newcastle CDO IX and has also withdrawn the ratings on three classes of notes from Newcastle CDO VIII and two classes of notes from Newcastle CDO IX. The rating actions are a combined result of the cancellation of these notes after a noteholder surrendered them to the co-issuers and the expectation of further commercial real estate declines.
The notes were surrendered and cancelled without consideration from the co-issuers. A complete list of ratings follows at the end of this press release.
Due to the cancellation of the notes, both transactions are now overcollateralized and the credit enhancement (CE) to the classes junior to those surrendered have improved given that there are less liabilities. Given the improvement in the CE to the junior notes, the overcollateralization (OC) tests now have greater cushion. As of the September 2009 trustee reports for both transactions, all OC tests were in compliance. As collateral deteriorates, any potential benefit from excess spread would be diminished because the cushions to the OC tests are greater than they would have been without the cancellation of the notes. Fitch will evaluate the extent to which the note cancellations affect the senior classes in its full ratings reviews.
The withdrawn notes were placed on Rating Watch Negative on May 1, 2009 pending Fitch's updated surveillance criteria for commercial real estate loan (CREL) collateralized debt obligations (CDOs), based upon Fitch's expectation of increasing delinquencies and declining U.S. commercial real estate (CRE) values. If the notes were not cancelled and remained outstanding, based upon preliminary application of the updated methodology, the withdrawn classes would have achieved ratings no higher than 'B'.
Newcastle CDO VIII is a $950 million revolving CRE CDO that closed on Nov. 16, 2006. Newcastle CDO IX is an $825 million revolving CRE CDO that closed on May 8, 2007. Both CDOs invest primarily in commercial mortgage whole loans/A-notes, B-notes, CRE mezzanine loans, and other CRE and asset-backed debt. The portfolios of both CDOs are selected and monitored by Newcastle Investment Corp. Newcastle CDO VIII has a five-year reinvestment period which ends in November 2011. Newcastle CDO IX also has a five-year reinvestment period which ends in May 2012.
Fitch has placed the following classes of Newcastle CDO VIII 1, Ltd. /Newcastle CDO VIII 2, Ltd. /Newcastle CDO VIII, LLC (collectively, Newcastle CDO VIII) on Rating Watch Negative:
--$33,869,009 class S notes 'AA-';
--$462,000,000 class I-A notes 'AA-'
--$60,000,000 class I-AR notes 'AA-'
--$38,000,000 class I-B notes 'A+';
--$42,750,000 class II notes 'A';
--$28,500,000 class III notes 'A-'.
In addition, the ratings for the following classes have been removed from Rating Watch Negative and withdrawn:
--$28,500,000 class IV 'BBB+';
--$12,312,500 class VI 'BBB-';
--$21,375,000 class VII 'BBB-'.
Fitch has placed the following classes of Newcastle CDO IX 1 Ltd. /Newcastle CDO IX, LLC (collectively, Newcastle CDO IX) on Rating Watch Negative:
--33,540,000 class S notes 'AAA';
--379,500,000 class A-1 notes 'AAA'.
In addition, the ratings for the following classes have been removed from Rating Watch Negative and withdrawn:
--$33,000,000 class C notes 'AA';
--$20,625,000 class D notes 'AA-'.
These rating actions reflect the application of Fitch's current criteria which are available at 'www.fitchratings.com' and specifically include the following report:
--'Global Structured Finance Rating Criteria' (Sept. 30, 2009).
Additional information is available at 'www.fitchratings.com'.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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, New York
Karen Trebach, +1-212-908-0215
Jenny
Story, +1-212-908-0302
Media Relations
Sandro Scenga,
+1-212-908-0278
sandro.scenga@fitchratings.com
