Oct 1 () - Fitch Ratings has downgraded Euromax III MBS Ltd (Euromax III) class A-1 notes and affirmed the class A-2 and B notes, as follows:
Class A-1 (XS0158773324): downgraded to 'B-sf' from 'Bsf'; Outlook Negative
Class A-2 (XS0158774991): affirmed at 'CCCsf'
Class B (XS0158775022): affirmed at 'CCsf'
The downgrade of the class A-1 notes reflects the deterioration in the underlying portfolio's credit quality. The portfolio comprises 28 assets, of which ten are rated 'CCCsf' and below and account for 35% of the portfolio, compared to 30% as of the last review in October 2011. Assets rated 'CCsf' and below stand at 23% of the portfolio compared to 19% as of the last review. There is a substantial exposure to subprime RMBS (18%), and also CMBS (28%).
The class A-1 notes have amortised to 36% of their original size. If the notes remain outstanding after December 2014, there will be a step-up in the margin paid on the notes resulting in a decrease in the amount of excess spread the transaction can generate. This will erode potential support provided by excess spread diversion in the interest waterfall on breach of coverage tests. There has been no breach of the overcollateralisation (OC) test since the transaction's closing. However, it may potentially be breached after 2014, due to the potential increase in the OC test's haircuts caused by the increase in the long-dated assets in the portfolio.
The agency affirmed the class A-2 and B notes as their credit enhancement levels are commensurate with the portfolio's credit quality.
Additional information is available at
. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.
Sources of information: The information used to assess these ratings was sourced from periodic investor reports and the trustee.
Applicable criteria, 'Global Structured Finance Rating Criteria', dated 6 June 2012, 'Global Rating Criteria for Structured Finance CDOs', dated 6 October 2011 and 'Counterparty Criteria for Structured Finance Transactions', dated 30 May 2012; are available at
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Global Rating Criteria for Structured Finance CDOs
Counterparty Criteria for Structured Finance Transactions
(New York Ratings Team)