OREANDA-NEWS. Fitch Ratings has downgraded all classes, revised the Rating Outlooks on three classes, and maintained the Recovery Estimates (RE) for two classes of certificates of Non-Profit Preferred Funding Trust I (NPPF I). A detailed list of rating actions follows at the end of this release.

KEY RATING DRIVERS

Since Fitch's last rating action in March 2015, the portfolio has experienced a net negative credit migration, with downgrades in either the public ratings or Fitch's point-in-time credit opinions, outpacing upgrades. The average credit quality has deteriorated to 'B-' from 'B+/B' at last review.

NPPF I's portfolio balance has decreased by approximately $4.8 million to $148.9 million, or 37% of the initial portfolio size, as per the February 2016 trustee report, compared to Fitch's last rating action. Regularly scheduled amortizations accounted for $2.3 million of the total principal amortization, while the remaining $2.5 million of paydowns yielded from a partial recovery (36%) of one defaulted security. The proceeds were then used to amortize the class A certificates, which over the last payment date received approximately $5.2 million, or 7% of their collective balance at last review, in principal repayments, due to the amortization and excess spread diverted to cure the failing class D Coverage Test.

Presently, the pool comprises debt of 16 obligors, of which 13 are considered by Fitch as performing, compared to 15 and 12, respectively, at last review. Only 16% of the portfolio is carrying investment grade public rating or credit opinion-equivalent of investment grade. The cumulative exposure to defaulted securities now stands at 20.3%, compared to 27.1% at last review. The lower exposure to defaulted assets is the result of one obligor that fully recovered from default.

In evaluating the notes, Fitch applied the analytical framework described in the report 'Global Rating Criteria for CLOs and Corporate CDOs' using corporate PCM for projecting future default levels and performing a cash flow modelling analysis for the notes to measure the breakeven levels under the various default timing and interest rate stress scenarios. Fitch adjusted the assumptions for correlation and recovery estimates from the 'Global Rating Criteria for CLOs and Corporate CDOs' to account for the high intra-state correlation in the portfolio. For the defeased assets, Fitch used the first call date as their expected maturity date.

The ratings and outlooks for all classes of certificates reflect the range of breakeven results from the cash flow model. Fitch does not assign Outlooks to classes rated 'CCCsf' and lower. Fitch has maintained the previously assigned Recovery estimates (REs) on the class C and D certificates reflecting minimal change in recovery expectations from defaulted assets.

NPPF I is a Structured Tax-Exempt Pass-Through (STEP) program formed in November 2006 to issue $416.5 million of municipal market data (MMD) index-based senior, mezzanine, and junior certificates. The proceeds of the issuance were invested in a portfolio of municipal debt issued under the 501(c)(3) program. The initial portfolio was selected by Cohen Municipal Capital Management, LLC together with sub-advisors Nonprofit Capital LLC and Shattuck Hammond. In March 2009, Muni Capital Management, LLC took over the management responsibilities for this transaction by consolidating the team of Cohen Municipal Capital Management, LLC.

RATING SENSITIVITIES
Given the high degree of portfolio concentration in this transaction, the risk of adverse selection could negatively impact the ratings. Any significant collateral quality deterioration could lead to further downgrades of the ratings for the certificates.

DUE DILIGENCE USAGE
No third-party due diligence was provided or reviewed in relation to this rating action.

Fitch has downgraded all classes and revised the Rating Outlooks as indicated:

--$20,044,974 class A-1 senior certificates to 'BBsf' from 'BBBsf'; Outlook to Stable from Negative;
--$51,075,038 class A-2 delayed issuance senior certificates to 'BBsf' from 'BBBsf'; Outlook to Stable from Negative;
--$16,500,000 class B senior certificates to 'Bsf' from 'BBsf'; Outlook to Stable from Negative;
--$22,000,000 class C mezzanine certificates to 'CCsf' from 'CCCsf'; RE 20%;
--$14,000,000 class D subordinated certificates to 'Csf' from 'CCsf'; RE 0%.

Fitch does not rate class E junior certificates.