Fitch Ratings downgrades the notes issued by Dunhill ABS CDO, Ltd. (Dunhill). 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 2004 vintage residential mortgage-backed securitizations (RMBS) since Fitch's last rating action. Approximately 64% of the portfolio has been downgraded since the last review, with about 43.3% 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 negative credit migration has left approximately 45.7% of the entire portfolio considered defaulted per the transaction's governing documents. In addition, 67.5% of the portfolio has a Fitch derived rating below investment grade including the 51.8% of the portfolio rated in the 'CCC' rating category and below.
The deterioration has caused all overcollateralization and interest coverage tests to fail by significant margins. As a result of the failing coverage tests, principal proceeds are being used to redeem the class A-1 notes. On the most recent payment date in July 2009, some principal proceeds were used to pay class A-2 and B interest prior to curing the failing coverage test, further eroding par coverage to the notes.
The class A-1 notes will likely be reliant on the full return of par on the performing portfolio, 40% of which is considered below investment grade, plus some recovery on the already defaulted assets in order to receive a full return of principal. All junior classes are reliant on the recoveries from defaulted assets for any principal return. The majority of the defaulted assets are subprime RMBS and have little to no expected recovery.
In Fitch's opinion it is probable that the class A-1NV, A-1VA and A-1VB (Class A-1) notes will default and inevitable that all other classes will default at their maturity.
Dunhill is a collateralized debt obligation (CDO) that closed on Dec. 16, 2004 and is managed by Vanderbilt Capital Advisors LLC. Dunhill's reinvestment period ended in April 2007. Dunhill has a portfolio comprised primarily of (82%) subprime RMBS bonds, (11%) prime RMBS, (5%) structured finance (SF) CDOs and (2%) other structured finance assets.
Fitch has taken the following rating actions:
Dunhill ABS CDO, Ltd.
--$130,539,007 class A-1NV notes downgraded to 'CC' from 'A-';
--$99,679 class A-1VA notes downgraded to 'CC' from 'A-';
--$7,974,324 class A-1VB notes downgraded to 'CC' from 'A-';
--$57,500,000 class A-2 notes downgraded to 'C' from 'BB';
--$55,000,000 class B notes downgraded to 'C' from 'CCC';
--$19,106,647 class C notes affirmed at 'C'.
These rating actions reflect the application of Fitch's current criteria which are available on Fitch's web site 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
