OREANDA-NEWS. March 25, 2016. Fitch Ratings has affirmed 60, downgraded one, and upgraded seven tranches from 12 structured finance collateralized debt obligations (SF CDOs) with exposure to various structured finance assets.

KEY RATING DRIVERS
Fifty-two classes affirmed at 'Csf' have credit enhancement (CE) levels that are exceeded by the expected losses (EL) from the distressed collateral (rated 'CCsf' and lower) of each portfolio. For these classes, the probability of default was evaluated without factoring potential losses from the performing assets. In the absence of mitigating factors, default for these notes at or prior to maturity continues to appear inevitable.

One class has been affirmed at 'CCsf' as default remains probable. The class' current CE levels exceed the EL; however, their CE is lower than the losses projected at the 'CCCsf' rating stress under Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis.

The upgrade of the class B notes issued by Putnam Structured Product CDO 2001-1, Ltd. is attributed to the principal paydown of these notes, as well as the coverage of the notes' balance by highly rated collateral. Since the last review, the class B notes received approximately \\$16 million from principal redemptions and excess spread. According to the SF PCM analysis, the class is now able to withstand losses at the 'AAAsf' rating stress. Furthermore, the current notes' balance of \\$7.9 million is supported by approximately \\$44.9 million of collateral, of which close to \\$6.3 million is 'AAA' rated government backed agency debt. The principal collections are expected to remain in line with the average principal collections since the last review and the notes to be paid in full within the next year. Fitch believes the notes' short expected life, steady amortization, and high coverage are in line with an 'AAAsf' rating. The Stable Outlook reflects Fitch's expectation of a sufficient cushion available to protect the notes against any portfolio deterioration until the notes are fully paid down.

The upgrades of the class A-1A and A-1B (together, class A-1) notes issued by Palisades CDO, Ltd. to 'AAAsf' from 'Asf' are attributed to significant deleveraging of the transaction's capital structure. The combined balance of both notes is now fully supported by the cash available in the principal collection account. Fitch expects the class A-1 notes to be paid in full on the next payment date in May 2016. The Stable Outlook reflects Fitch's expectation of a stable performance until the notes are fully paid down.

The upgrade of the class C-1 and class C-2 (together, class C) notes issued by Putnam Structured Product CDO 2001-1, Ltd. to 'Bsf' from 'CCsf' are attributed to significant deleveraging of the transaction's capital structure, which has resulted in increased CE available to the notes. According to the SF PCM analysis, the class C notes are now able to withstand losses at the 'Bsf' rating stress. The Stable Outlook reflects Fitch's view that the transaction will continue to delever and that there is sufficient CE to offset potential deterioration of the underlying collateral going forward.

The upgrade of the class A-2 notes issued by RFC CDO II Ltd. to 'CCsf' from 'Csf' is attributed to the class' increased CE due to principal paydowns of these notes. Since the last review, the class A-1 notes paid in full and the class A-2 notes became the senior most class in the capital structure and have deleveraged by approximately \\$5.5 million. The CE available to these notes now exceeds the EL; however, is lower than the losses projected at the 'CCCsf' rating stress under Fitch's SF PCM analysis.

The upgrade of the class A-2 notes of Glacier Funding CDO II, Ltd. to 'Csf' from 'Dsf' is attributed to the notes' renewed receipt of interest. The class A-2 notes had not been receiving their timely interest since the transaction accelerated in July 2011. The full redemption of the senior class A-1 notes in November 2014 has allowed the class A-2 notes to receive timely interest on the past five payment periods and the notes are projected to receive timely interest going forward.

The downgrade to 'Dsf' from 'Csf' of the class B notes of E*Trade ABS CDO IV, Ltd. is attributed to the notes failure to receive timely interest payment on March 7, 2016 due to insufficient interest and principal proceeds.

Seven classes, affirmed at 'Dsf', are non-deferrable classes that continue to experience interest payment shortfalls.

RATING SENSITIVITIES
Negative migration, defaults beyond those projected, and lower than expected recoveries could lead to downgrades for classes analyzed under the SF PCM. Classes already rated 'Csf' 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 Surveillance Criteria for Structured Finance CDOs'. None of the transactions have been analysed under a cash flow model framework, as the effect of structural features and excess spread available to amortize the notes were determined to be minimal. The individual rating actions are detailed in the report 'Fitch Takes Various Rating Actions on 12 SF CDOs from 2001-2005 Vintages', released and available at 'www.fitchratings.com' by performing a title search or by using the link.

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