TEXT-Fitch downgrades Sterlingmax I MBS Ltd
Nov 23 - Fitch Ratings has downgraded Sterlingmax I MBS Ltd.'s class A2 notes as follows: Class A2 (XS0177867503): downgraded to 'Bsf' from 'BBsf', Outlook Negative Class B (XS0177868063): affirmed at 'CCCsf' The downgrade of the class A2 notes reflects the deterioration in the quality of the portfolio, which has not been sufficiently offset by the increase in credit enhancement (CE) for these notes. The bucket of assets rated 'CCCsf' or below has increased to 31.2% from 24.9% in last review (in January 2011), while the CE has increased to 43.5% from 38.5% due to the deleveraging of the pool. The affirmation of the class B notes reflects the sufficient credit protection to withstand a 'CCCsf' rating stress. The transaction experienced an event of default (EoD) in November 2010 when the Class B notes suffered an interest shortfall. This situation is continuing and another interest shortfall on class B notes occurred on the last payment date, 20 November 2012. In the event of an EoD, the documentation allows the class A2 bondholders (the controlling class) to request the trustee for acceleration of the deal. The transaction continues to operate, however the class A2 bondholders have the option to call the deal and enforce its liquidation, exposing the transaction to market risk. In Fitch's opinion, the transaction is also exposed to extension risk due to the underlying assets' maturities being different to the expected maturity date. This risk has been incorporated into the analysis. The Negative Outlook on the class A2 notes reflects Fitch's view about the future performance of the portfolio. Additional information is available on 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. Source 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 3 October 2012 and 'Counterparty Criteria for Structured Finance Transactions', dated 30 May 2012; are available at www.fitchratings.com. Applicable Criteria and Related Research: Global Structured Finance Rating Criteria Global Rating Criteria for Corporate CDOs Counterparty Criteria for Structured Finance Transactions
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