Fitch Ratings has taken various rating actions on the following Atherton Franchise Loan Funding, LLC:
Series 1997-A
--Class B affirmed at 'CCC/RR1';
--Class C downgraded to 'D/RR3' from 'C/RR1'.
Series 1998-A
--Class C upgraded to 'BBB' from 'BB', Outlook Stable;
--Class D affirmed at 'B', Outlook Stable;
--Class E affirmed at 'CCC/RR1';
--Class F downgraded to 'D/RR2 from 'C/RR1'.
Series 1999-A
--Class A-2 affirmed at 'A', Outlook Positive;
--Class B affirmed at 'BBB', Outlook Stable;
--Class C affirmed at 'CCC/RR1';
--Class D downgraded to 'D/RR4' from 'C/RR2';
--Class E affirmed at 'D/RR6';
--Class F affirmed at 'D/RR6'.
The upgrade of the class C note in the 1998-A transaction reflects the significant credit support available to the note over the short expected remaining life. In its analysis, detailed below, Fitch found the class C notes were able to pass stress scenarios consistent with the respective upgraded rating category.
The affirmations on the remaining notes reflect the notes' ability to pass stress-case scenarios consistent with the current rating levels. Additionally, recovery prospects for certain distressed notes have changed, leading to a revision of the Recovery Ratings. For additional detail, please refer to Fitch's 'Criteria for Structured Finance Recovery Ratings', dated Aug. 17, 2009.
The 'D' assignment to the class D and Class F notes in the 1998-A and 1999-A transactions, respectively, is a reflection of the principal writedowns incurred on the notes.
The Positive Outlook designation on the class A-2 note in series 1999-A reflects Fitch's expectations for performance to improve resulting in potential positive rating actions. The Stable Outlook designation for all applicable notes reflects Fitch's view that ratings are not expected to change within the next 12 months, based on current performance.
In reviewing the transaction, Fitch took into account analytical considerations outlined in Fitch's 'Global Structured Finance Rating Criteria', dated Sept. 30, 2009, including asset quality, credit enhancement, financial structure, legal structure, and originator and servicer quality.
Fitch's analysis first incorporated anticipated losses on currently defaulted collateral given Fitch's recovery expectations. Fitch's recovery expectations are based on historical collateral-specific recoveries experienced in the franchise asset backed securities (ABS) sector since 1994. The resulting anticipated collateral losses were then applied to the transaction structure, enabling Fitch to assess the impact of the expected losses on the securities and available credit enhancement.
Next, to assess the structure's ability to withstand additional loan defaults, Fitch assumed additional borrowers would default based on their current fixed charged coverage ratios (FCCRs). Under specific scenarios for each rating category, borrowers with an FCCR below a defined level were assumed to default and realize a loss in the near future. If a class was able to withstand the assumed defaults without incurring a loss, it was considered to have passed that particular scenario. These FCCR 'hurdles' for the respective scenarios ranged from 1.0 times (x) for the 'B' case to 2.0x for the 'AAA' case. FCCR default levels were based on an analysis of historical franchise loan obligor FCCR data from 2005-2009 and particularly focused on the level of borrower deterioration that occurred in the most recent economic downturn.
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 1.5 at 'BB' up to 5-6 at 'AAA'.
Fitch will continue to closely monitor this transaction and may take additional rating action in the event of changes in performance and credit enhancement measures.
Applicable criteria available at www.fitchratings.com:
--'Criteria for Structured Finance Recovery Ratings' (Aug. 17, 2009).
--'Global Structured Finance Rating Criteria' (Sept. 30, 2009).
Additional information is available at www.fitchratings.com.
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Contacts:
Fitch Ratings, Chicago
Juveria Mozaffar, +1-312-606-2335
Bradley
Sohl, +1-312-368-3127
or
Cindy Stoller, +1-212-908-0526
(Media
Relations, New York)
cindy.stoller@fitchratings.com