Fitch Ratings has upgraded four and affirmed nine classes issued by Crest CDO 2004-1 Ltd./Corp. (Crest 2004-1). A complete list of rating actions follows at the end of this press release.
KEY RATING DRIVERS
The upgrades and affirmations are a result of deleveraging of the transaction due to collateral paydowns. Since the last rating action in February 2014, approximately 41.18% of the collateral has been upgraded and 9.8% has been downgraded. Currently, 92.9% of the portfolio has a Fitch derived rating below investment grade and 55.64% has a rating in the 'CCC' category and below, compared to 96.5% and 66.1%, respectively, at the last rating action. Over this period, the class A notes have paid in full.
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 B and C notes' breakeven rates are generally consistent with the ratings assigned below.
For the class D through H notes, Fitch analyzed each class' sensitivity to the default of the distressed assets ('CCC' and below). Given the high probability of default of the underlying assets and the expected limited recovery prospects upon default, the class D notes have been affirmed at 'CCsf', indicating that default is probable. Class E through H notes have been affirmed at 'Csf', indicating that default is inevitable.
The rating of the preferred shares addresses the likelihood that investors will receive the ultimate return of the aggregate outstanding rated balance by the legal final maturity date. The assigned rating for the preferred shares indicates that default is inevitable, as they are undercollateralized.
RATING SENSITIVITIES
The Stable Outlook on the class B notes reflects Fitch's view that the transaction will continue to delever. Crest 2004-1 is a static collateralized debt obligation (CDO) that closed on Nov. 18, 2004. The current portfolio consists of 55 bonds from 25 obligors, of which 98.3% are commercial mortgage backed securities (CMBS) from the 1999 through 2004 vintages, and 1.7% are structured finance CDOs.
Fitch has upgraded the following classes:
--$25,903,238 Class B-1 Notes to 'Bsf' from 'CCCsf'; RO Stable;
--$4,998,883 Class B-2 Notes to 'Bsf' from 'CCCsf'; RO Stable;
--$2,767,552 Class C-1 Notes to 'CCCsf' from 'CCsf';
--$25,527,981 Class C-2 Notes to 'CCCsf' from 'CCsf'.
Fitch has affirmed the following classes:
--$21,017,380 Class D Notes at 'CCsf';
--$13,969,678 Class E-1 Notes at 'Csf';
--$16,329,877 Class E-2 Notes affirm at 'Csf';
--$7,001,788 Class F Notes at 'Csf';
--$2,334,223 Class G-1 Notes at 'Csf';
--$13,369,799 Class G-2 Notes at 'Csf';
--$9,026,343 Class H-1 Notes at 'Csf';
--$1,456,201 Class H-2 Notes at 'Csf';
--$96,412,500 Preferred Shares Notes (Principal Only) at 'Csf'.
Additional information is available at 'www.fitchratings.com'.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug 4, 2014);
--'Global Rating Criteria for Structured Finance CDOs' (July 16, 2014).
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=754389
Global Rating Criteria for Structured Finance CDOs
http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751136
Additional Disclosure
Solicitation Status
http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=977695
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.
