S&P slashes ratings on $5.7 billion of ABS CDOs

NEW YORK, Feb 14 (Reuters) - Standard & Poor's on Thursday cut its ratings on $5.7 billion of securities from 7 U.S. collateralized debt obligations, citing deterioration in underlying collateral and revised rating agency assumptions.

All of the transactions affected were "mezzanine" or lower-quality structured finance CDOs tied mostly to residential mortgage-backed securities.

Some of these securities fell from the agency's top "AAA" rating down to "CCC-plus," the seventh-lowest junk rating.

The affected CDOs are: AVANTI Funding 2006-1, Aventine Hill CDO I, Draco 2007-1, Ischus Synthetic ABS CDO 2006-2, Laguna Seca Funding I, Lexington Capital Funding II, and STATIC Residential CDO 2006-C.

"Today's CDO downgrades reflect a number of factors, including credit deterioration and recent negative rating actions on subprime U.S." residential mortgage-backed securities, S&P said in a release.

To date, S&P has downgraded or put on watch for a downgrade almost $344 billion of CDO securities, the agency said.

S&P said it will continue to "monitor the CDO transactions it rates and take rating actions" when appropriate. (Reporting by Neil Shah; Editing by James Dalgleish)