February 22, 2013 / 9:46 PM / 4 years ago

TEXT-Fitch downgrades 2 classes of Pegasus 2007-1

Feb 22 - Fitch Ratings has downgraded two classes issued by Pegasus 2007-1
Ltd. (Pegasus 2007-1) due to negative credit migration of the commercial
mortgage backed securities (CMBS). A complete list of rating actions follows at
the end of this press release.

SENSITIVITY/RATING DRIVERS
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 reference portfolio.
The degree of correlated default risk of this reference collateral is high given
the single sector and vintage concentration. Based on this analysis and the
credit enhancement available to class A-1 and A-2, the credit characteristics of
the bonds are consistent with a 'Bsf' rating. Approximately 32.1% of the
portfolio has been downgraded an average of four notches and 10.7% upgraded a
weighted average of two notches. The weighted average rating factor (WARF) has
declined to 'BBB+/BBB' from 'A/A-' at the last rating action. Currently, 85.7%
is rated investment grade, with four assets in the reference portfolio carrying
a Fitch derived rating in the 'BB' category.

The Negative Outlook on the notes reflects the concentration and the potential
for further negative migration in the reference portfolio which consists of CMBS
bonds from the 2006 vintage.

Pegasus 2007-1, issued in April 2007, is a synthetic securitization referencing
a portfolio of 28 $100 million class A-M CMBS bonds. The transaction is designed
to provide credit protection for realized losses on the reference portfolio
through a credit default swap between the issuer and the swap counterparty,
DEPFA BANK PLC. (DEPFA) rated 'BBB+/F2' with a Negative Outlook by Fitch. An
amount equal to $20,000,000 minus the aggregate amount of any actual principal
writedowns is available as subordination with respect to each reference
obligation. Until the writedowns related to a reference obligation exceed
$20,000,000 the issuer will not be required to pay any cash settlements upon the
trigger of a credit event. To date, there have been no principal writedowns.

Fitch has downgraded the following classes:

--$112,000,000 class A-1 notes to 'Bsf' from 'BBsf'; Outlook Negative;
--$1,400,000 class A-2 notes to 'Bsf' from 'BBsf'; Outlook Negative.

Additional information is available at '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.

Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'Global Rating Criteria for Structured Finance CDOs' (Oct. 3, 2012).

Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
Global Rating Criteria for Structured Finance CDOs

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