NEW YORK - (Business Wire) Fitch Ratings has downgraded ratings on five classes and has removed from Rating Watch Negative three classes of notes issued by Ischus CDO I, Ltd. and Ischus CDO I, LLC (collectively Ischus I). The following rating actions are effective immediately:
--$130,575,079 Class A-1 Notes downgraded to 'A' from 'AAA';
--$47,000,000 Class A-2 Notes downgraded to 'BBB' from 'AAA';
--$39,000,000 Class B Notes downgraded to 'BB' from 'AA', removed from Rating Watch Negative;
--$11,142,617 Class C-1 Notes downgraded to 'B' from 'BBB', removed from Rating Watch Negative;
--$4,642,757 Class C-2 Notes downgraded to 'B' from 'BBB', removed from Rating Watch Negative.
Ischus I is a static cash flow structured finance (SF) collateralized debt obligation (CDO) that closed in December 2004. Currently, 67.6% of the $242 million portfolio is comprised of U.S. subprime RMBS, 11.9% consists of CDOs containing non-SF portfolios, 9.6% consists of commercial mortgage-backed securities, and the remaining 10.8% of the portfolio consists of prime and Alt-A RMBS assets, U.S. SF CDOs with underlying exposure to subprime RMBS, and asset-backed securities.
Fitch's rating action reflects the continued credit deterioration in U.S. subprime mortgage market. Since May 2006, approximately 48.4% of the portfolio has been downgraded with 4.4% of the portfolio currently on Rating Watch Negative. Additionally, 32.5% of the portfolio is now rated below investment grade, of which 4.0% of the portfolio is rated 'CCC+' or below. The negative credit migration experienced since the last review in May 2006 has resulted in the Weighted Average Rating Factor deteriorating to 'BBB-'/'BB+' from 'BBB', breaching its covenant of 'BBB'/'BBB-', as of the June 27, 2008 trustee report. Overcollateralization and interest coverage ratios continue to meet their corresponding covenants.
These rating actions incorporate Fitch's current view on default, correlation and recoveries for structured finance assets as outlined in the criteria report entitled 'Global Criteria for the Review of Structured Finance CDOs with Exposure to U.S. Subprime RMBS', dated Nov. 15, 2007 and available on the Fitch web site at www.fitchratings.com. Fitch is reviewing its SF CDO approach and will comment separately on any changes and potential rating impact at a later date. Fitch will continue to monitor and review this transaction for future rating adjustments. Additional transaction information and historical data are available on the Fitch Ratings web site at www.fitchratings.com.
The ratings of the class A-1, A-2 and B notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the class C-1 and C-2 notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
Fitch Ratings, New York
Kevin Kendra, +1-212-908-0760
Brian Vorderbrueggen, +1-212-908-9102
Media Relations:
Julian Dennison, +44 020 7682 7480, London
Sandro Scenga, +1-212-908-0278, New York
