December 5, 2012 / 10:26 PM / 5 years ago

TEXT-Fitch takes rating actions on 13 U.S. REIT TRuPS CDOs

Dec 5 - Fitch Ratings has taken various rating actions on 130 classes from
13 U.S. collateralized debt obligations (CDOs) with exposure to trust preferred
securities (TruPS), senior and subordinated debt issued by real estate
investment trusts (REITs), homebuilders and specialty finance companies, as well
as commercial mortgage backed securities (CMBS) and commercial real estate loans
(CREL).

This review was conducted under the analytical framework described in the
reports 'Global Surveillance Criteria for Trust Preferred CDOs', 'Global Rating
Criteria for Structured Finance CDOs', and 'Global Rating Criteria for Corporate
CDOs'. All transactions were analyzed within the framework of Fitch Portfolio
Credit Model (PCM) and for each transaction, the PCM rating loss rates for
various rating stresses were compared to the notes' credit enhancement levels.
The transactions were not analyzed within a cash flow model framework, as the
impact of structural features and excess spread was determined to be minimal in
the context of these CDO ratings.

Fitch has upgraded the ratings on six classes and affirmed 124 classes of notes.
Upgrades to the six classes of notes issued by Attentus CDO I, Ltd., Attentus
CDO III, Ltd., Kodiak CDO I, Ltd., and Kodiak CDO II, Ltd. are due to the net
positive credit migration in the underlying portfolios and significant paydowns
to the senior most classes that led to the increased credit enhancement levels
for other classes in these CDOs. The deleveraging in these four transactions was
primarily driven by collateral redemptions and sales, and to a smaller extent,
excess spread. The PCM-based analysis indicates a higher passing rating for the
class A-1A in Attentus CDO III than its current rating of 'Asf'. This class is
affirmed due to the risks described below.

Due to a concentrated nature of the portfolios and exposure to the U.S.
residential and commercial real estate sectors, these transactions may
experience a high level of performance volatility. In addition, all transactions
continue to leak proceeds to pay their respective hedge counterparties a fixed
leg of out-of-the-money interest rate swaps.

A majority of the classes have been affirmed, generally at the distressed rating
level of 'CCsf' and lower. These rating actions reflect the fact that most
classes had been downgraded to a 'CCsf' and lower rating levels prior to today's
actions. Some transactions experienced net positive credit migration reflecting
stabilization in the REIT and homebuilders sectors. However, for the affirmed
classes this positive migration has not offset the level of distressed assets,
which averaged 27% across all of the 13 CDOs.

Seven out of the 13 transactions are in the Event of Default (EOD), including
six CDOs that defaulted due to interest shortfalls to non-deferrable classes.
All seven transactions have accelerated their maturity, whereby collection
proceeds have been diverted from paying interest to the non-senior classes.
Fitch has affirmed non-deferrable notes experiencing interest shortfalls at
'Dsf', as the shortfalls are expected to continue in the foreseeable future.

Please refer to the report titled 'Fitch Takes Various Rating Actions on 130
Classes from 13 U.S. REIT TruPS CDOs' for details on specific rating actions.


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.

The information used to assess these ratings was sourced from trustee reports,
collateral manager reporting Web sites and the public domain.

Applicable Criteria and Related Criteria:
--'Global Structured Finance Rating Criteria' (June 6, 2012);
--'Global Rating Criteria for Corporate CDOs' (Aug. 8, 2012);
--'Global Rating Criteria for Structured Finance CDOs' (Oct. 3, 2012);
--'Global Surveillance Criteria for Trust Preferred CDOs' (July 11, 2012).

Applicable Criteria and Related Research: Fitch Takes Various Rating Actions on
130 Classes from 13 U.S. REIT TruPS CDOs

Global Structured Finance Rating Criteria
Global Rating Criteria for Corporate CDOs
Global Rating Criteria for Structured Finance CDOs
Global Surveillance Criteria for Trust Preferred CDOs

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