OREANDA-NEWS. September 21, 2015.  Fitch Ratings has upgraded Ivory CDO Limited as follows:

EUR22.3m Class A1 (ISIN XS0309311909): upgraded to 'B+sf' from 'Bsf'; Outlook Stable
EUR6m Class A2 (ISIN XS0309350477): upgraded to 'B-sf' from 'CCCsf'; Outlook Stable
EUR12m Class B (ISIN XS0309352093): affirmed at 'CCsf'
EUR12.9m Class C (ISIN XS0309353653): affirmed at 'CCsf'
EUR13.7m Class D (ISIN XS0309357050): affirmed at 'Csf'
EUR3.2m Class E (ISIN XS0309358298): affirmed at 'Csf'

Ivory CDO Limited is a managed cash arbitrage securitisation of mezzanine asset-backed securities, primarily RMBS, CMBS and CDOs.

KEY RATING DRIVERS
The upgrades reflect the improved credit enhancement (CE) and stable asset performance over the last 12 months. The class A1 notes were redeemed by EUR13.1m during this period, resulting in CE increasing to 66% from 54.4%. The affirmation on the subordinated tranches reflects the portfolio's poor quality and increased portfolio concentration.

Within the portfolio of total 32 assets from 28 obligors, most are in distress. Fitch estimates 54.6% of the portfolio are in the 'CCCsf' category or below, up from 51.2% a year ago. There are no additional defaults or assets being written down over the past year, with total defaults remaining at EUR7m.

The portfolio's exposure to the RMBS sector has increased to 39.2% from 31.4% as RMBS assets amortise more slowly than other asset sectors. Four assets have been fully repaid over the past 12 months, increasing the portfolio's concentration risk. Exposure to countries with a Country Ceiling below 'AAA' fell to 42.4% from 44%, which is primarily composed of Italy, Portugal and Spain.

All overcollateralisation tests were breached since 2009 and the transaction has been capturing excess spread to repay the class A1 notes. The class A1 notes have amortised by EUR870,000 using excess spread since September 2014. The weighted average spread has increased to 1.63% from 1.51% over the past 12 months. The interest coverage tests are passing, albeit with increasing volatility. The portfolio's reported weighted average life is 0.7 years, compared with Fitch's estimates of 10.5 years. This is because Fitch assumed a weighted average maturity of 16 and 27 years from closing for amortising and non-amortising RMBS loans respectively.

RATING SENSITIVITIES
A stress test extending the expected maturity date of the portfolio assets to the assets' legal final maturity date has indicated potential negative rating action on the most senior 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 pools and the transactions. There were no findings that were material to this analysis.

Fitch did not undertake a review of the information provided about the underlying asset pools ahead of the transaction's initial closing. The subsequent performance of the transactions over the years is consistent with the agency's expectations given the operating environment and Fitch is therefore satisfied that the asset pool information relied upon for its initial rating analysis was adequately reliable.

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 Wells Fargo as at 1 September 2015
-Transaction reporting provided by Wells Fargo as at 1 September 2015