2009-11-11 20:33:01 -
Fitch Ratings has downgraded 11 classes and removed 13 classes issued by Abacus 2006-13 from Rating Watch Negative as a result of significant negative credit migration within the reference portfolio and within the eligible investment account. A complete list of rating actions follows at the end of this press release.
As of the Sept. 21, 2009 trustee report, 20.9% of the
eligible investments are rated below investment grade and 12.1% have a rating in the 'CCC' category. According to the transaction documents, a collateral default constitutes an Optional Early Termination/Event of Default resulting in a Mandatory Redemption. Given the credit ratings of the eligible investments, a collateral default is a real possibility.
If a Mandatory Redemption occurs, Goldman Sachs International (GSI), as the put counterparty, would no longer be required to purchase the eligible investments at 100% of par, resulting in the eligible investments being subject to collateral market value risk. Upon any required liquidation of the below investment grade collateral in the eligible account, Fitch expects low recoveries. Additionally under a Mandatory Redemption, the issuer may owe various termination payments to counterparties under swap and other agreements associated with the transaction. As a result, Fitch anticipates significant losses in the event of a Mandatory Redemption.
Classes marked paid in full (PIF) have been fully redeemed under the Optional Redemption provision. The provision allows the issuer to redeem the notes using principal proceeds from the eligible investment account.
The notes may be redeemed without regard to sequential order. Principal proceeds may also be used to reinvest under the eligible investment criteria. Use of the proceeds are under the sole discretion of the issuer (Goldman Sachs).
Since Fitch's last rating action in January 2009, approximately 45.4% of the reference portfolio has been downgraded, and 48.3% was placed on Rating Watch Negative. Approximately 78.2% of the portfolio has a Fitch-derived rating below investment grade and 5.4% has a rating in the 'CCC' rating category or lower, compared to 2.5% and 0%, respectively, at last review. The reference portfolio is composed of 79 commercial mortgage backed securities (CMBS), of which 58.4% are from the 2005 and 2006 vintages, with the balance from the 2004 vintage and prior (41.7%).
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 underlying portfolio. Based on this analysis, the credit enhancement available to each of classes B through F is generally consistent with the PCM rating loss rate for the 'CCC' rating category. The rating assigned to the class A notes is dependent on the rating of the lowest rated eligible investment ('CCC'), reflecting the risk of an Event of Default and subsequent liquidation of the collateral.
Due to the significant collateral deterioration, all PCM rating loss rates exceed the credit enhancement available to class G and below. For these classes, Fitch compared the respective credit enhancement levels to the amount of underlying assets with a Fitch-derived rating of 'CCC', Given the high probability of default of these assets, the expected low recoveries upon default, and the rating cap implied by the lowest rated asset in the eligible investment account, these classes have been assigned a 'CCC' rating.
Abacus 2006-13 is a static synthetic collateralized debt obligation (CDO) transaction issued in September 2006 that references a US$795 million CMBS portfolio. The transaction is designed to provide credit protection for realized losses on the reference portfolio through a credit default swap (CDS) between the issuer and the swap counterparty, Goldman Sachs Capital Markets, L.P. (GSCM), which is rated 'A+/F1+' with a Stable Outlook by Fitch.
Proceeds from the securities are invested in a pool of eligible investments, which are protected through the collateral put agreement between the issuer and the put counterparty, GSI. The payment obligations of the put counterparty are guaranteed by GSI, the swap counterparty guarantor, under all conditions except for a Mandatory Redemption. A Mandatory Redemption can occur in an Event of Default or termination event.
Fitch has downgraded the following classes and removed them from Rating Watch Negative.
--$159,000,000 class A to 'CCC from 'BBB-';
--$44,718,750 class B to 'CCC' from 'BB+';
--$10,931,250 class C to 'CCC' from 'BB+';
--$11,925,000 class D to 'CCC' from 'BB';
--$11,925,000 class E to 'CCC' from 'BB';
--$8,000,000 class F to 'CCC' from 'BB-';
--$2,950,000 class G to 'CCC' from 'BB-';
--$4,000,000 class H to 'CCC' from 'B+';
--$2,943,750 class K to 'CCC' from 'B';
--$9,937,500 class L to 'CCC' from 'B-';
--$4,950,000 class M to 'CCC' from 'B-'.
In addition, classes J and N have paid in full (PIF).
These rating actions reflect the application of Fitch's current criteria which are available at ' www.fitchratings.com :
' and specifically include the following reports.
--'Global Structured Finance Rating Criteria' (Sept. 30, 2009);
--'Global Rating Criteria for Synthetic CDOs' (March 9, 2009);
--'Global Rating Criteria for Structured Finance CDOs' (Dec. 16, 2008).
Additional information is available at www.fitchratings.com :
.
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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 YorkKaren Trebach, +1-212-908-0215Jenny
Story, +1-212-908-0302Media Relations, New YorkSandro
Scenga, +1-212-908-0278
sandro.scenga@fitchratings.com : mailto:sandro.scenga@fitchratings.com
