2008-04-23 23:49:21 -
- Fitch Ratings has upgraded two classes and affirmed 12 classes of notes issued by CT CDO III Ltd./Corp. (CT CDO III) as follows:
--$48.5 million class A-1 notes affirmed at 'AAA';
--$147.2 million class A-2 notes affirmed at 'AAA';
--$29 million class B notes upgraded to 'AAA' from 'AA+';
--$13.7 million class C notes upgraded
to 'AA' from 'AA-';
--$5.1 million class D notes affirmed at 'A+';
--$6.8 million class E notes affirmed at 'A';
--$6.8 million class F notes affirmed at 'A-';
--$9.8 million class G notes affirmed at 'BBB';
--$11.5 million class H notes affirmed at 'BBB-';
--$6.8 million class J notes affirmed at 'BB';
--$3.8 million class K notes affirmed at 'BB-';
--$5.1 million class L notes affirmed at 'B+';
--$5.5 million class M notes affirmed at 'B';
--$4.3 million class N notes affirmed at 'B-'.
Classes O, X and the preferred shares class are not rated by Fitch.
The current credit enhancement to the rated classes in relation to the improved credit quality of the remaining collateral warrants the upgrades.
CT CDO III is a commercial real estate collateralized debt obligation (CRE CDO) that closed Aug. 4, 2005. The portfolio is a static transaction and primarily backed by commercial mortgage-backed securities (CMBS) B-pieces. CT Investment Co., LLC (rated 'CSS2-' as special servicer by Fitch) selected the initial collateral and serves as the collateral administrator. CT Investment Co., LLC.
CMBS B-piece resecuritizations (also referred to as first loss CRE CDOs/ReREMICs) are CRE CDOs and ReREMIC transactions that include the most junior bonds of commercial mortgage-backed securities (CMBS) transactions.
In reviewing CRE CDOs, Fitch has targeted expected losses in different rating stresses based on the quality of the underlying CMBS collateral. The overall expected losses reflect the single sector exposure, the concentrated nature of these portfolios, and the low expected recoveries upon bond default, especially for more junior and thinner classes of CMBS tranches. Additional ratings considerations include seasoning of underlying collateral, obligor diversity, actual bond performance and projected losses. The specific credit characteristics that are factored into Fitch's rating review are discussed below.
CT CDO III is collateralized by all or a portion of 21 classes of fixed-rate CMBS in 13 separate underlying transactions. All performance and collateral information is based on the March 2008 trustee report. The pool's obligor diversity is considered below average for CMBS B-piece resecuritizations, and the vintage distribution of the CMBS collateral ranges from 1996 to 1999 (an average of 10.1 years of seasoning). Approximately 13.3% of the collateral is one first loss bond, which is more susceptible to losses in the near term. The majority of the collateral is rated 'BBB-' or higher (78.1%), including 16.9% that is rated 'AAA'.
The CDO has paid down $5.3 million (1.6%) since last review. In addition, 21.4% of the underlying bonds have been upgraded an average of 4.7 notches since last review and no downgrades were experienced.
The collateral has realized $1.4 million in losses to date, which represents 0.4% of the original collateral. According to the current trustee report, $34.4 million of the underlying collateral is currently 60 days or more delinquent. Other than the first loss bond, most of the underlying classes have a significant amount of subordination and can therefore withstand future losses to the underlying loans.
The ratings of the class A and B notes address the likelihood that investors will receive full and timely payment of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings on classes C through H and J through N address the likelihood that investors will receive ultimate 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
Karen Trebach, 212-908-0215
John Olert, 212-908-0663
or
Media Relations:
Sandro Scenga, 212-908-0278
