2008-07-18 19:00:07 -
- Fitch downgrades six classes and removes from Rating Watch Negative 12 classes of notes issued by Orion 2006-2, Ltd. and Orion 2006-2 LLC (collectively Orion 2006-2). The following rating actions are effective immediately:
--$900,000,000 Class A-1A Notes downgraded to 'CCC' from 'BB+' and removed from Rating Watch Negative;
--$40,000,000 Class A-1B Notes downgraded to 'CC' from 'BB'
and removed from Rating Watch Negative;
--$30,150,000 Class S Notes downgraded to 'CC' from 'BB' and removed from Rating Watch Negative;
--$195,000,000 Class A-2 Notes downgraded to 'CC' from 'CCC+' and removed from Rating Watch Negative;
--$87,500,000 Class B-1 Notes downgraded to 'CC' from 'CCC' and removed from Rating Watch Negative;
--$40,000,000 Class B-2 Notes downgraded to 'CC' from 'CCC-' and removed from Rating Watch Negative;
--$58,000,000 Class C-1 Notes remains at 'CC' and is removed from Rating Watch Negative;
--$31,000,000 Class C-2 Notes remains at 'CC' and is removed from Rating Watch Negative;
--$50,028,228 Class D-1 Notes remains at 'CC' and is removed from Rating Watch Negative;
--$13,000,000 Class D-2 Notes remains at 'CC' and is removed from Rating Watch Negative;
--$10,500,000 Class E Notes remains at 'CC' and is removed from Rating Watch Negative;
--$21,371,050 Class X Notes remains at 'CC' and is removed from Rating Watch Negative.
Orion 2006-2 is a hybrid structured finance (SF) collateralized debt obligation (CDO) that closed on December 7, 2006 and is managed by NIBC Credit Management, Inc. As of the trustee report dated June 10, 2008, 61.5% of the portfolio is comprised of 2005 and 2006 vintage U.S. subprime residential mortgage-backed securities (RMBS), 2.3% consists of 2005-2007 vintage U.S. SF CDOs and 35.4% is comprised of 2005 and 2006 vintage U.S. Alternative-A (Alt-A) RMBS.
Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically subprime RMBS, Alt-A RMBS, and SF CDOs with underlying exposure to subprime RMBS. Since November 21, 2007, approximately 52.4% of the portfolio has been downgraded to ratings of 'CCC+' and lower, increasing the overall portion of the portfolio rated 'CCC+' and lower to approximately 91.4%. The negative credit migration experienced since the last review on November 21, 2007 has resulted in the Weighted Average Rating Factor deteriorating to 60.10 from 8.15, breaching its covenant of 6.00, as of the June 10, 2008 trustee report.
The credit deterioration that has occurred to date is such that almost all of the credit support to all of the rated classes of notes is comprised of assets rated 'CCC+' and lower. Due to the current state of the portfolio, it is expected that the class A-1A notes may receive some future principal distributions, while no further principal distributions are expected for all of the other rated classes.
In December 2007, Orion 2006-2 went into acceleration as a remedy to the Event of Default that occurred in November 2007. Due to some conflicts between the priority of payments and subordination sections of the Indenture, Wells Fargo, the trustee has filed an Interpleader Complaint with the United States District Court to have the court interpret how interest and principal distributions should be made. Since the acceleration, all proceeds remaining after payments above and including A-1A interest as per the priority of distributions, have been held in escrow until a court decision is made. Upon resolution of this complaint, Fitch will reassess the ratings on all classes of Orion 2006-2.
The ratings of the class A-1A, A-1B, A-2, B-1, and B-2 notes address the timely receipt of scheduled interest payments and the ultimate receipt of principal as per the transaction's governing documents. The ratings on the class C-1, C-2, D-1, D-2, E, S and X notes address the ultimate receipt of interest payments and ultimate receipt of principal as per the transaction's governing documents. The ratings are based upon the capital structure of the transaction, the quality of the collateral, and the protections incorporated within the structure.
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.
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
Brian Vorderbrueggen, +1-212-908-9102 (New York)
Alina Pak, +1-312-368-3184 (Chicago)
Julian Dennison, +44 020 7682 7480 (Media Relations,
London)
Sandro Scenga, +1-212-908-0278 (Media Relations,
New York)
