Fitch Takes Various Actions on 13 U.S. REIT TruPS CDOs

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has taken the following rating actions on 129 classes from 13 collateralized debt obligations (CDOs) with exposure to trust preferred securities (TruPS), senior and subordinated debt issued by real estate investment trusts (REITs), homebuilders and specialty finance companies, as well as commercial mortgage backed securities (CMBS) and commercial real estate loans (CREL):

--Affirmed 122 classes;

--Upgraded seven classes;

Fitch is considering withdrawing the ratings on these transactions since they are not relevant to the agency's coverage. While Fitch believes that investors are no longer interested in the agency's coverage of these transactions, Fitch will allow investors the opportunity to request the continuing coverage. Investors are encouraged to contact the analysts indicated at the bottom of this rating action commentary within 30 calendar days from the publication date. At the end of that period, Fitch will evaluate any responses and will make a final determination with respect to the withdrawal.

KEY RATING DRIVERS

Upgrades to classes of notes in Taberna Preferred Funding VI and VII is due to the improvement in the credit quality of underlying collateral and the deleveraging of the senior classes in the capital structure as a result of collateral redemptions and sales, which in turn increased credit enhancement levels. The class A notes in Taberna Preferred Funding II were upgraded because the risk of interest shortfall has become more remote due to the expiration of the largest interest rate swap in August 2015, with the remaining interest rate swaps expiring in November. Additionally $ 1.1 million in the principal collection account is available to pay the interest on class A notes in the next payment.

Of the classes affirmed, 112 remain at the distressed rating level of 'CCsf' and lower. All CDOs received various levels of redemptions that paid down the senior-most notes and increased credit enhancement (CE) levels for rated liabilities but only some transactions experienced net positive credit migration. For the affirmed classes the overall increase in CE has not offset the level of distressed assets, which averaged 28.5% across all of the 13 CDOs. In addition, in three transactions significant out-of-the-money interest rate hedges continue to pose an interest shortfall risk for non-deferrable classes.

Eight out of the 13 transactions are in Event of Default (EOD), including seven CDOs that defaulted due to interest shortfalls to non-deferrable classes. All eight transactions have accelerated their maturity, whereby collection proceeds have been diverted from paying interest to the non-senior classes. In addition, in certain deals where interest collections were insufficient to pay timely interest payments, principal proceeds were used to cover interest expense. Fitch has affirmed non-deferrable notes experiencing interest shortfalls at 'Dsf', as the shortfalls are expected to continue in the foreseeable future.

RATING SENSITIVITIES

Significant paydowns and expiration of interest rate hedges, combined with stable or improving credit migration, can lead to limited upgrades for senior notes in some transactions. Conversely, negative migration and collateral redemptions from stronger credits causing adverse selection in underlying portfolios, will lead to downgrades.

DUE DILIGENCE USAGE

No third party due diligence was reviewed in relation to this rating action.

Additional information is available at www.fitchratings.com.

Fitch Takes Various Actions on 13 U.S. REIT TruPS CDOs

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=872658

Applicable Criteria

Counterparty Criteria for Structured Finance and Covered Bonds (pub. 14 May 2014)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Global Rating Criteria for CLOs and Corporate CDOs (pub. 30 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=868908

Global Structured Finance Rating Criteria (pub. 06 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867952

Global Surveillance Criteria for Structured Finance CDOs (pub. 13 Jul 2015)

https://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=867800

Additional Disclosures

Dodd-Frank Rating Information Disclosure Form

https://www.fitchratings.com/creditdesk/press_releases/content/ridf_frame.cfm?pr_id=992458

Solicitation Status

https://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=992458

Endorsement Policy

https://www.fitchratings.com/jsp/creditdesk/PolicyRegulation.faces?context=2&detail=31

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

View source version on businesswire.com: http://www.businesswire.com/news/home/20151016005943/en/

Fitch Ratings
Primary Analyst
Azadeh Sharif
Associate Director
+1-212-908-0874
Fitch Ratings, Inc.
33 Whitehall Street
New York, NY 10004
or
Committee Chairperson
Alina Pak
Senior Director
+1-312-368-3184
or
Media Relations:
Sandro Scenga, New York, +1 212-908-0278
Email: [email protected]

Source: Fitch Ratings

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