Fitch Ratings downgrades four classes of notes issued by C-BASS CBO XII, LTD (C-BASS XII). A detailed list of ratings follows at the end of this press release.
These rating actions are the result of severe credit deterioration among 2004 vintage residential mortgage-backed securitizations since Fitch's last rating action in February 2009. Approximately 71% of the portfolio has been downgraded since the last review, with about 36.2% of the portfolio downgraded since June 1, 2009. The main drivers for the downgrades in the underlying residential mortgage-backed securitizations 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 credit deterioration has resulted in a portfolio with an average rating of 'B-' compared to 'BB+' at the last review. In addition, approximately 24.7% of the portfolio is defaulted per the transaction's governing documents and 58% of the portfolio has a Fitch derived rating below investment grade, compared to 3% and 15%, respectively, in February 2009.
The significant credit deterioration has caused all overcollateralization (OC) tests to fail, resulting in interest proceeds being diverted to redeem the class A notes in order to cure the failing A/B OC test. The class A and B notes will be reliant on the performance of assets rated 'CCC' and below for full principal repayment. Due to the placement of the A/B OC test the class C and D notes are not receiving interest payments and are not expected to receive future distributions.
In Fitch's opinion, based on the percentage of defaulted assets and the performance expectations for the remainder of the portfolio, the class A notes are downgraded to 'CCC' to reflect the possibility of the notes defaulting at or prior to maturity. The class B notes are downgraded to 'CC' to show there is a high probability of default at or prior to maturity. The classes C and D notes are downgraded to 'C', indicating Fitch's belief that default is inevitable at or prior to maturity.
C-BASS XII is a cashflow collateralized debt obligation (CDO) that closed on Dec. 16, 2004 and is managed by C-BASS Investment Management. The portfolio is composed of 88.4% residential mortgage-backed securities (RMBS), 6.5% structured finance CDOs, 3.4% asset-backed securities and 1.7% commercial mortgage backed securities, with 93.2% of these assets originated in 2004.
Fitch has downgraded the following:
C-BASS CBO XII, LTD
--$157,078,373 class A notes to 'CCC' from 'A+', Outlook Stable;
--$14,000,000 class B notes to 'CC' from 'A', Outlook Stable;
--$24,000,000 class C notes to 'C' from 'BB+', Outlook Stable;
--$7,690,430 class D notes to 'C' from 'B+', Outlook Stable.
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, +1-312-368-3184 (Chicago)
Kevin
Kendra, +1-212-908-0760 (New York)
Brian Vorderbrueggen,
+1-212-908-9102 (New York)
or
Sandro Scenga, +1-212-908-0278
(Media
Relations, New York)
sandro.scenga@fitchratings.com
