Fitch Ratings has downgraded 10 classes issued by Crest Exeter Street Solar 2004-1, Ltd./Corp (Crest Exeter 2004-1) as a result of significant negative credit migration of the underlying collateral. A complete list of rating actions follows at the end of this release.
Since Fitch's last rating action in June 2010, approximately 23% of the portfolio has been downgraded, and 6.8% is currently on Rating Watch Negative. Approximately 36.9% has a Fitch derived rating below investment grade and 8.6% has a rating in the 'CCC' category or lower, compared to 24.4% and 3.4%, respectively, at last review. As of the Oct. 29, 2010 trustee report, defaulted securities, as defined in the transaction's governing documents, now comprise 5.2% of the portfolio, compared to 3.4% at last review. One defaulted security is the Rouse Co. bond (3.6%); Rouse Co.'s parent company, GGP, has recently emerged from bankruptcy. Additionally, 5.9% of non-defaulted collateral is currently experiencing interest shortfalls.
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 default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under the various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in Corporate CDOs'. Based on this analysis, each class of notes' breakeven rates are generally consistent with the ratings assigned below.
The Negative Rating Outlook on the class A through D notes reflects Fitch's expectation that underlying CMBS loans will continue to face refinance risk. The Loss Severity (LS) rating indicates a tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the base-case loss expectation for the collateral, as explained in 'Criteria for Structured Finance Loss Severity Ratings'. The LS rating should always be considered in conjunction with the probability of default for tranches. Fitch does not assign LS ratings or Outlooks to classes rated 'CCC' and below.
Crest Exeter 2004-1 is a cash flow commercial real estate collateralized debt obligation (CRE CDO) which closed on April 29, 2004. The collateral is composed of 61.9% commercial mortgage backed securities (CMBS), 23.7% real estate investment trusts (REITs), 12% commercial real estate loans (CREL), and 2.4% Sf CDOs.
Fitch has downgraded the following classes:
--$136,930,729 Class A-1 to 'Asf/LS1' from 'AAsf/LS1'; Outlook Negative;
--$34,071,966 Class A-2 to 'Asf/LS1' from 'AAsf/LS1'; Outlook Negative;
--$8,377,070 Class B-1 to 'BBBsf/LS4' from 'Asf/LS3'; Outlook Negative;
--$9,214,777 Class B-2 to 'BBBsf/LS4' from 'Asf/LS3'; Outlook Negative;
--$1,675,414 Class C-1 to 'BBsf//LS4' from 'BBBsf/LS3'; Outlook Negative;
--$13,759,337 Class C-2 to 'BBsf/LS4' from 'BBBsf/LS3'; Outlook Negative;
--$5,026,242 Class D-1 to 'Bsf/LS4' from 'BBsf/LS3'; Outlook Negative;
--$11,371,872 Class D-2 to 'Bsf/LS4' from 'BBsf/LS3'; Outlook Negative;
--$3,769,681 Class E-1 to 'CCCsf' from 'Bsf/LS4';
--$5,445,095 Class E-2 to 'CCCsf' from 'Bsf/LS4'.
Additional information is available at 'www.fitchratings.com'.
The information used to assess these ratings was sourced from note valuation reports, and the public domain.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 24, 2010);
--'Global Rating Criteria for Structured Finance CDOs' (Oct. 15, 2010);
--'Global Criteria for Cash Flow Analysis in CDOs (Sept. 17, 2010);
--'Criteria for Structured Finance Loss Severity Ratings' (Feb. 17, 2009).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=547326
Global Rating Criteria for Structured Finance CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=564895
Global Criteria for Cash Flow Analysis in CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=557485
Criteria for Structured Finance Loss Severity Ratings
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=426038
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