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