Fitch Ratings has downgraded four and affirmed two classes of notes issued by Acacia CDO 8, Ltd./Corp. (Acacia 8) as a result of continued credit deterioration in the portfolio since Fitch''s last rating action in February 2009. Approximately 77.3% of the portfolio has been downgraded since the last review. The details of the rating action follow at the end of this press release.
The downgrades to the portfolio have left approximately 90.2% of the portfolio (including defaults) with a Fitch derived rating below investment grade and 75.9% with a rating in the ''CCC'' rating category or lower, compared to 68.9% and 34.7%, respectively at last review. Defaulted securities, as defined in the transaction''s governing documents, now comprise 58.6% of the portfolio, compared to 9.7% at last review. The current balance of the portfolio is $217.5 million including $127.4 million defaulted securities.
While the classes A-1, A-2, and B notes are still receiving timely interest distributions, Fitch believes that default is inevitable for these classes. The transaction entered an Event of Default on June 22, 2009 when the class A/B overcollateralization test fell below 100%. Noteholders had not given direction to accelerate the notes at the time of this review.
This review was conducted 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. Due to the significant collateral deterioration, credit enhancement levels available to all classes of notes are exceeded by the ''CCC'' rating loss rate, the lowest rating level loss projected by PCM. Fitch compared the respective credit enhancement levels to the amount of underlying assets considered distressed (rated ''CCC'' and lower). Given the high probability of default of these assets and the expected low recoveries upon default, classes A-1, A-2, B, and C were downgraded to ''C'' and classes D and E were affirmed at ''C'' rating.
Acacia 8 is a structured finance collateralized debt obligation (SF CDO) that closed on July 14, 2005 and is monitored by Redwood Asset Management. The portfolio is composed of RMBS (76.7%), CDOs (1.9%), and commercial mortgage-backed securities (21.4%).
Fitch has taken various actions on the following classes of Acacia CDO 8, Ltd./Corp. as indicated:
--$131,066,144 class A-1 notes downgraded to ''C'' from ''BBB-'';
--$15,000,000 class A-2 notes downgraded to ''C'' from ''BB'';
--$22,000,000 class B notes downgraded to ''C'' from ''B'';
--$20,504,067 class C notes downgraded to ''C'' from ''CC'';
--$10,414,507 class D notes affirmed at ''C'';
--$10,572,477 class E notes affirmed at ''C''.
Fitch does not assign Rating Outlooks to classes rated ''CCC'' or lower. The Rating Outlooks for classes A-1, A-2, and B were Negative prior to today''s downgrades.
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 Structured Finance Rating Criteria'' (Sept. 30, 2009);
--''Global Rating Criteria for Structured Finance CDOs'' (Dec. 16, 2008).
Additional information is available at www.fitchratings.com.
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Fitch Ratings
Alina Pak, 312-368-3184, Chicago
Kevin Kendra,
212-908-0760, New York
or
Media Relations:
Sandro Scenga,
212-908-0278, New York
Email: sandro.scenga@fitchratings.com
