NEW YORK--(BUSINESS WIRE)-- Fitch Ratings has downgraded two and affirmed 10 classes of Anthracite CDO III Ltd./Corp. (Anthracite CDO III). A complete list of rating actions follows at the end of this release.
Since the last rating action in November 2011, approximately 14.5% of the collateral has been downgraded while 2.6% has been upgraded. Currently, 61% of the portfolio has a Fitch derived rating below investment grade and 36.2% has a rating in the 'CCC' category and below, compared to 58.1% and 32.6%, respectively, at the last rating action. Over this period, the class A notes have received $13.2 million principal paydowns.
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 H 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 'CCsf', indicating that default is probable. Similarly, the class E notes have been downgraded and the class F through H notes affirmed at 'Csf', indicating that default is inevitable.
The Evolving Outlook on the class A notes is driven by the near term risk of interest shortfalls due to the significant hedge payment which is senior to the interest on the notes; should the interest continue to pay timely the class may be upgraded in the future as it further delevers. The risk of interest shortfalls is mitigated by the expectation that the hedge payment will likely decrease as the hedge notional is scheduled to step down over the next few payment dates. The Stable Outlook on the class B notes reflects the cushion in the passing ratings and the expectation that the transaction will continue to delever.
Anthracite CDO III is a collateralized debt obligation (CDO) that closed on March 30, 2004. Currently, the portfolio is composed of 62 securities from 34 issuers of which 73.9% are commercial mortgage backed securities (CMBS), 18% CMBS rake bonds or credit tenant leases (CTL) classified as commercial real estate loans (CREL), and 8.1% real estate investment trusts (REITs).
Fitch has taken the following actions as indicated below:
--$109,727,717 class A notes affirmed at 'BBsf'; Outlook to Evolving from Positive;
--$27,000,000 class B-FL notes affirmed at 'Bsf'; Outlook Stable;
--$14,384,000 class B-FX notes affirmed at 'Bsf'; Outlook Stable;
--$24,727,000 class C-FL notes affirmed at 'CCCsf';
--$2,500,000 class C-FX notes affirmed at 'CCCsf';
--$14,222,649 class D-FL notes affirmed at 'CCsf';
--$10,786,825 class D-FX notes affirmed at 'CCsf';
--$10,988,037 class E-FL notes downgraded to 'Csf' from 'CCsf';
--$29,089,072 class E-FX notes downgraded to 'Csf' from 'CCsf';
--$25,378,299 class F notes affirmed at 'Csf';
--$8,067,861 class G notes affirmed at 'Csf';
--$14,753,960 class H notes affirmed 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
Global Rating Criteria for Structured Finance CDOs
Global Criteria for Cash Flow Analysis in CDOs
Primary Surveillance Analyst
Matthew McGowan, +1 212-908-0733
One State Street Plaza
New York, NY 10004
Mary MacNeill, +1 212-908-0785
Sandro Scenga, +1 212-908-0278
Source: Fitch Ratings