OREANDA-NEWS. Fitch Ratings has upgraded eleven classes and affirmed 97 classes of notes from 26 structured finance CDOs with exposure to various structured finance assets that were securitized between 2000 and 2005.

KEY RATING DRIVERS

The upgrades in this review can be attributed to the deleveraging of the deals capital structure. Deals included in the review have also seen their underlying assets experience improvements in recovery estimates, specifically those assets from the RMBS sector.

While some of the upgraded notes in the review were passing at higher rating levels, Fitch did not upgrade to these levels due to either the low diversification of the portfolio, the possibility of an interest shortfall, or the high concentration of defaulted and distressed assets in the portfolio.

Since the last review Vermeer Funding, Ltd./Inc. and C-BASS CBO X, Ltd./Corp. sold a large number of distressed and defaulted assets. The sales proceeds received were used to amortize the notes, subsequently increasing the notes CE to a level in line with 'Bsf' ratings, according to Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis.

For transactions in which losses projected at the 'CCCsf' rating stress exceeded CE levels of the most senior class of notes, the CE levels were compared to the expected losses (EL) from distressed assets (assets rated 'CCsf' and lower). For classes of notes whose CE levels were higher than EL, the ratings were affirmed at 'CCsf'.

For 86 classes of notes, the EL from distressed assets already exceeded the notes' CE levels or the notes were undercollateralized. For these classes, default is inevitable and they were affirmed at 'Csf'.

Ten classes, affirmed at 'Dsf', are non-deferrable classes that continue experiencing interest payment shortfalls.

RATING SENSITIVITIES

Negative migration and defaults beyond those projected could lead to downgrades for the ten transactions analyzed under the SF PCM. The remaining 16 transactions have limited sensitivity to further negative migration given their highly distressed rating levels. However, there is potential for non-deferrable classes to be downgraded to 'Dsf' should they experience any interest payment shortfalls.

This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria' and 'Global Rating Criteria for Structured Finance CDOs'. None of the transactions have been analyzed within a cash flow model framework, as the effect of structural features and excess spread available to amortize the notes was determined to be minimal. The individual rating actions are detailed in the report Fitch Takes Various Rating Actions on 26 SF CDOs from 200-2005 Vintages', released and available at 'www.fitchratings.com' by performing a title search or by using the above link.