Fitch Ratings takes the following rating actions on four Business Loan Express (BLX) transactions and assigns Rating Outlooks as indicated:
Business Loan Center SBA Loan-Backed Certificates 1998-1
--Class A downgraded to 'BB+' from 'AA'; Outlook Negative.
The Class A is removed from Rating Watch Negative.
Business Loan Express SBA loan-backed adjustable-rate notes, series 2001-2
--Class A affirmed at 'BBB'; Outlook Negative;
--Class M affirmed at 'B'; Outlook Negative.
The Class A is removed from Rating Watch Negative.
Business Loan Express SBA loan-backed adjustable-rate notes, series 2002-1
--Class A downgraded to 'A' from 'AA'; Outlook Negative;
--Class M downgraded to 'BB+' from 'BBB'; Outlook Negative.
Business Loan Express Business Loan Trust 2002-A
--Class A downgraded to 'A' from 'AAA'; Outlook Negative;
--Class B downgraded to 'BB+' from 'A'; Outlook Negative.
The negative rating actions reflect continued deterioration within the transactions. Specifically, the 1998-1, 2002-1, and 2002-A transactions have continued to experience high delinquency rates. As of the May 2010 reporting, total delinquencies were 41.20%, 29.49%, and 38.24% for 1998-1, 2002-1 and 2002-A, respectively. Furthermore, based on Fitch's analysis, detailed below, loss coverage was found to be limited due to the asset deterioration experienced across all three transactions. Additionally, in the 1998-1 and 2002-A series, the significantly high obligor concentrations within the pools may have a more pronounced negative impact on loss coverage should additional obligors default.
The affirmations for the 2001-2 series reflect relatively stable performance within the transaction. Although losses have increased since Fitch's last review, currently totaling 9.73%, the transaction has experienced a decline in delinquency roll rates. Based on Fitch's analysis, detailed below, credit support remains sufficient at current rating levels.
The Negative Outlook designation on the transactions reflects Fitch's continued concern for near-term potential asset deterioration which may ultimately impact the ratings on the outstanding notes. In particular, continued high delinquency roll rates within the transactions may result in an increase in net losses leading to a potential reduction in credit support available to the notes. Additionally, the transactions include large industry concentrations of hotels and shrimp vessels, which have seen adverse performance recently.
In reviewing the transactions, Fitch took into account analytical considerations outlined in Fitch's 'Global Structured Finance Rating Criteria', issued Sept. 30, 2009, including asset quality, credit enhancement, financial structure, legal structure, and originator and servicer quality.
Fitch's analysis incorporated a review of collateral characteristics, in particular, focusing on delinquent and defaulted loans within the pool. All loans over 60 days delinquent were deemed defaulted loans. The defaulted loans were applied loss and recovery expectations based on collateral type and historical recovery performance to establish an expected net loss assumption for the transaction. Fitch stressed the cashflows generated by the underlying assets by applying its expected net loss assumption. Furthermore, Fitch applied a loss multiplier to evaluate break-even cash flow runs to determine the level of expected cumulative losses the structure can withstand at a given rating level. The loss multiplier scale utilized is consistent with that of other commercial ABS transactions.
Additionally, to review possible concentration risks within the pool, Fitch evaluated the impact of the default of the largest performing obligors. Similar to the analysis detailed above, Fitch applied loss and recovery expectations to the performing obligors based on collateral type and historical recovery performance. The expected loss assumption was then compared to the credit support available to the outstanding notes given Fitch's expected losses on the currently defaulted loans. Consistent with the obligor approach detailed in 'Rating US Equipment Lease and Loan Securitizations', dated June 16, 2008, Fitch applied losses from the largest performing obligors commensurate with the individual rating category. The number of obligors ranges from 5-6 at 'AAA' to 1.5 at 'BB'.
Fitch will continue to closely monitor these transactions and may take additional rating action in the event of changes in performance and credit enhancement measures.
Applicable criteria available at 'www.fitchratings.com':
--'Global Structured Finance Rating Criteria' (Sept. 30, 2009)
Additional information is available at 'www.fitchratings.com'.
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