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Fitch Affirms ARCap 2004-1 Resecuritization, Inc.

NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has affirmed 10 classes issued by ARCap 2004-1 Resecuritization, Inc. (ARCap 2004-1). A complete list of rating actions follows at the end of this release.

Since Fitch's last rating action in October 2011, approximately 47.6% of the underlying collateral has been downgraded and 1.1% upgraded. Currently, 97.3% of the portfolio has a Fitch derived rating below investment grade and 67.7% has a rating in the 'CCC' category and below, compared to 97.1% and 56.5% at the last rating action. Over this time, the class A notes have received $8.3 million for a total of $19.9 million in principal paydowns since issuance.

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 CDOs'. Fitch also analyzed the structure's sensitivity to the assets that are distressed, experiencing interest shortfalls, and those with near-term maturities. Based on this analysis, the class A through C notes' breakeven rates are generally consistent with the ratings assigned below.

For the class D through K notes, Fitch analyzed the class' sensitivity to the default of the distressed assets ('CCC' and below). Given the high probability of default of these assets and expected limited recovery prospects upon default, the class D notes have been affirmed at 'CCCsf', indicating that default is possible. Similarly, the class E and F notes have been affirmed at 'CCsf', indicating that default is probable, and the class G though K have been affirmed at 'Csf', indicating that default is inevitable.

The Negative Outlook on the class A and B notes reflects the increasing obligor concentration and the potential for adverse selection as the portfolio continues to amortize. Fitch does not assign Outlooks to classes rated 'CCC' and below.

ARCAP 2004-1 is backed by 53 tranches from 14 commercial mortgage backed securities (CMBS) transactions and is considered a CMBS B-piece resecuritization (also referred to as first loss commercial real estate collateralized debt obligation [CRE CDO]/ReREMIC) as it includes the most junior bonds of CMBS transactions. The transaction closed April 19, 2004.

Fitch has affirmed the following classes as indicated:

--$37,156,821 class A notes at 'BBsf'; Outlook Negative;

--$30,600,000 class B notes at 'Bsf'; Outlook Negative;

--$26,500,000 class C notes at 'CCCsf'

--$8,500,000 class D notes at 'CCCsf'

--$30,700,000 class E notes at 'CCsf';

--$13,600,000 class F notes at 'CCsf;

--$36,000,000 class G notes at 'Csf';

--$13,000,000 class H notes at 'Csf';

--$31,500,000 class J notes at 'Csf';

--$20,500,000 class K notes at 'Csf'.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (June 6, 2012);

--'Global Rating Criteria for Structured Finance CDOs' (Oct. 3, 2012);

--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 13, 2012).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=690203

Global Criteria for Cash Flow Analysis in CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688518

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Fitch Ratings
Primary Surveillance Analyst
Matthew McGowan, +1-212-908-0733
Analyst
Fitch, Inc.
One State Street Plaza
New York, NY 10004
or
Committee Chairperson
Karen Trebach, +1-212-908-0215
Senior Director
or
Media Relations
Sandro Scenga, New York, +1-212-908-0278
sandro.scenga@fitchratings.com

Source: Fitch Ratings