OREANDA-NEWS. Fitch Ratings has affirmed the ratings on all four classes of notes of InCapS Funding II, Ltd./Corp. (InCaps II). A full list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Since Fitch's last rating action in August 2015, the transaction has performed stable with one new cure, representing 7% of the total portfolio, offset by a new deferring issuer comprising 6% of the total collateral. Fitch observed two partial redemptions totalling $261,181 over the past 12 months that marginally increased credit enhancement (CE) levels for the senior-most notes. Upgrades in either public ratings or Fitch's rating equivalent insurance scores, outpaced downgrades, but the average credit quality of the portfolio remained at 'BB'. There were no new defaults since the last review.

The underlying portfolio remains very concentrated with a total of 19 issuers, of which 17 are performing. All coverage tests continue to pass and the reverse turbo feature diverts 55% of additional interest proceeds to pay down the class C notes, with the remaining 45% paid to the income note holders. The additional CE from the excess spread analysis did not provide a meaningful uplift to the passing ratings given the haircuts applied to the baseline of excess spread levels for various rating stresses and the outsized interest rate swaps in these three CDOs.

In evaluating the notes, Fitch applied the analytical framework described in the 'Surveillance Criteria for Trust Preferred CDOs'. The ratings and outlooks for all classes of notes reflect the range of passing ratings and application of the analytical framework.

RATING SENSITIVITIES

Given the high degree of portfolio concentration in this transaction, ratings are sensitive to the pace of transaction deleveraging, credit quality migration in the underlying portfolio, and any additional deferrals or defaults.

For non-deferrable notes, Fitch performs analysis of notes' interest sensitivity to additional defaults and deferrals, as described in the criteria. The outcome of this analysis is considered in determining appropriate rating levels for non-deferrable notes.

DUE DILIGENCE USAGE

No third-party due diligence was reviewed in relation to this rating action.

Fitch has affirmed the following ratings:

--$47,566,726 class A-2 notes at 'Asf'; Outlook Stable;

--$47,500,000 class B-1 notes at 'CCCsf';

--$47,000,000 class B-2 notes at 'CCCsf';

--$9,557,263 class C notes at 'CCCsf'.