Nov 12 - Fitch Ratings has downgraded and affirmed Cavendish Square Funding
plc's (Cavendish Square) notes as follows:
Class A1 (XS0241540763): downgraded to 'BBBsf' from 'A-sf'; Outlook Negative
Class A2 (XS0241541571): downgraded to 'BBsf' from 'BB+sf' ; Outlook Negative
Class B (XS0241542033): downgraded to 'Bsf' from 'B+sf'; Outlook Negative
Class C (XS0241543353): affirmed at 'B-sf'; Outlook Negative
The downgrades of the class A1 to B notes reflect the deteriorated portfolio
performance which has not been offset by the increase in credit enhancement
levels due to the transaction's deleveraging.
The revolving credit facility has been paid in full and the class A1 balance has
been reduced by EUR23.8m since the last review in November 2011. The pay downs
were mostly due to some underlying transactions being called, largely Dutch RMBS
and ABS; however,other amortisations of the mainly RMBS and ABS assets has taken
place as well. While the manager can reinvest unscheduled proceeds, no assets
have been bought or sold during the period.
Since the last review, the 'CCCsf' and below bucket has increased to 13% from
7%. The cumulative defaults are almost unchanged but there have been five
defaults during the past year bringing the total to EUR25.7m. In addition, the
portfolio has considerable exposure to peripheral countries which currently
stands at 42%. The pool is also concentrated at sector level with RMBS assets
representing 70% of the outstanding balance. All over-collateralisation (OC) and
interest coverage (IC) tests are passing. However, the class C OC test did fail
since the last review and its current cushion is tight.
Fitch believes that a material risk for the transaction is that the portfolio
assets' maturity may extend beyond their reported weighted-average expected
life. The Negative Outlooks on the notes reflect the extension risk of the
portfolio assets as well as the notes vulnerability to further portfolio
The affirmation of Class C notes reflects the notes' level of credit enhancement
relative to the portfolio's credit quality.
Lead Surveillance Analyst
+44 20 3530 1471
Fitch Ratings Limited
30 North Colonnade
London E14 5GN
+44 20 3530 1561
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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 6 October 2011
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 Structured Finance CDOs
Counterparty Criteria for Structured Finance Transactions
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FITCH TAKES VARIOUS RATING ACTIONS ON CAVENDISH SQUARE