Fitch Upgrades Stanton MBS I Plc's Class A-2 Notes
OREANDA-NEWS. Fitch Ratings has upgraded Stanton MBS I Plc's class A-2 notes and affirmed the remaining notes, as follows:
Class A-2: upgraded to 'BBBsf' from 'BB+sf'; Outlook Stable
Class B: affirmed at 'BBsf'; Outlook Stable
Class C: affirmed at 'Bsf'; Outlook Stable
Class D: affirmed at 'CCCsf'
Stanton MBS I is a securitisation of European structured finance assets, mainly mezzanine RMBS and CMBS assets of sub-investment grade quality. The portfolio is actively managed by Cambridge Place Investment Management LLP.
KEY RATING DRIVERS
Prepayments Drive Deleveraging
The upgrade of the class A-2 notes reflects an increase in credit enhancement over the last 12 months. The transaction has deleveraged significantly, distributing EUR24.1m of principal proceeds to noteholders on the last four payment dates. The deleveraging was largely driven by prepayments in the UK RMBS sector.
Portfolio Credit Quality Deteriorates
The credit quality of the remaining portfolio has deteriorated slightly. The reported weighted average rating factor stands at 21.93, up from 16.80 in May 2015. There have been no defaults in the portfolio over the last 12 months.
Long Expected Life
Fitch based its analysis on a time-to-repayment assumption for the portfolio. The agency made the following bullet repayment assumptions for assets that are not CMBS and are not currently amortising: 25 years from closing for RMBS assets and ten years from closing for corporate CDO assets. For non-CMBS assets that are currently amortising Fitch used an average repayment date assuming linear amortisation between the analysis date and the expected final payment date derived earlier. CMBS assets, as well as those assets where the above calculation yielded an expected repayment date prior to the analysis date, were assumed to repay on their legal final maturity date.
Fitch's overall weighted average life assumption for the portfolio is 13.3 years.
RATING SENSITIVITIES
A 25% increase in the asset default probability would lead to a downgrade of up to two notches for the rated notes.
A 25% reduction in expected recovery rates would lead to a downgrade of up to one notch for the rated notes.
DUE DILIGENCE USAGE
No third party due diligence was provided or reviewed in relation to this rating action.
DATA ADEQUACY
Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that were material to this analysis.
The majority of the underlying assets have ratings or credit opinions from Fitch and/or other Nationally Recognised Statistical Rating Organisations and/or European Securities and Markets Authority registered rating agencies. Fitch has relied on the practices of the relevant Fitch groups and/or other rating agencies to assess the asset portfolio information.
Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.
SOURCES OF INFORMATION
The information below was used in the analysis.
-Loan-by-loan data provided by the collateral administrator as at 31 May 2016
-Transaction reporting provided by the collateral administrator as at 31 May 2016
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