Fitch Ratings has downgraded 10 classes issued by G-Force 2005-RR LLC (G-Force 2005-RR) as a result of increased interest shortfalls and losses to the underlying commercial mortgage backed securities (CMBS). Five classes were affirmed due to adequate credit enhancement to their respective current ratings. A complete list of rating actions follows at the end of this press release.
Since Fitch's last rating action in January 2009, approximately 30.5% of the portfolio has been downgraded. Currently, 4.7% is on Rating Watch Negative. Approximately 54.5% of the portfolio has a Fitch derived rating below investment grade; 15.5% has a rating in the 'CCC' category and below. The CDO has experienced $8.2 million in losses to date, including $1.5 million since the last review. The A-1 notes have paid down $51.8 million since issuance.
This transaction was analyzed 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. The degree of correlated default risk of this collateral is high given the CMBS and vintage concentrations. The credit enhancement to the class A-1/A-2 and B through D notes is consistent with the 'BBB' and 'B' category rating loss rates generated by PCM, respectively. Similarly, the credit enhancement to classes E and F is consistent with the 'CCC' category rating loss rates.
Further, in its review, Fitch analyzed the structure's sensitivity to the default of the distressed collateral ('CCC' category and lower) and assets that are experiencing interest shortfalls (16.5% of the portfolio). Given the high probability of default of the underlying assets and the expected limited recovery prospects upon default, classes G through J have been downgraded to 'CC', indicating default is probable.
For classes K through N, Fitch assigned the ratings based on the classes' current or likely future interest-shortfalls that are unlikely to be recouped. As of the April 22, 2010 trustee report, class K received a partial interest payment and classes L through N are not receiving current interest. Fitch believes that for these classes default is inevitable because Fitch does not expect interest to be recovered on these classes. As such, classes K through N have been downgraded to 'C'.
The Negative Rating Outlook on the class A-1 through D notes reflects Fitch's expectation that underlying CMBS loans will continue to face refinance risk and maturity defaults. Fitch also assigned Loss Severity (LS) ratings to the notes. The LS ratings indicate each tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the expected loss for the collateral under the 'B' stress. The LS rating should always be considered in conjunction with probability of default indicated by a class' long-term credit rating.
G-FORCE 2005-RR is backed by 39 tranches from 14 CMBS transactions and is considered a CMBS B-piece resecuritization (also referred to as first loss CRE CDO/ReREMIC) as it includes the most junior bonds of CMBS transactions. The transaction closed Feb. 22, 2005.
Fitch has downgraded, assigned LS ratings and revised Outlooks for the following classes as indicated:
--$25,144,000 class C to 'B/LS5' from 'B+'; Outlook to Negative from Stable;
--$16,972,000 class E to 'CCC' from 'B-';
--$8,172,000 class F to 'CCC' from 'B-';
--$10,686,000 class G to 'CC' from 'B-';
--$14,457,000 class H to 'CC' from 'CCC';
--$6,286,000 class J to 'CC' from 'CCC';
--$5,658,000 class K to 'C' from 'CC';
--$7,543,000 class L to 'C' from 'CC';
--$4,400,000 class M to 'C' from 'CC';
--$5,029,000 class N to 'C' from 'CC'.
Fitch does not assign Outlooks to classes rated 'CCC' or lower. Prior to today's downgrades the Outlooks for classes E, F, and G were Stable.
In addition, Fitch has affirmed, assigned LS ratings, and revised Outlooks for the following classes as indicated:
--$438,976,397 class X * at 'BBB-'; Outlook to Negative from Stable;
--$45,237,732 class A-1 at 'BBB-/LS3'; Outlook to Negative from Stable;
--$219,954,000 class A-2 at 'BBB-/LS3'; Outlook to Negative from Stable;
--$40,230,000 class B at 'B+/LS5'; Outlook to Negative from Stable;
--$5,029,000 class D at 'B/LS5'; Outlook to Negative from 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 Structured Finance Rating Criteria' (Sept. 30, 2009);
--'Global Rating Criteria for Structured Finance CDOs' (Dec. 16, 2008);
--'Criteria for Structured Finance Loss Severity Ratings' (Feb. 17, 2009).
Additional information is available at 'www.fitchratings.com'.
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Fitch Ratings, New York
Karen Trebach, 212-908-0215
Kevin
Kendra, 212-908-0760
or
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212-908-0278
Email: sandro.scenga@fitchratings.com