Fitch Places 28 Tranches in 8 REIT TruPS CDOs on Rating Watch Negative

NEW YORK-(Business Wire)-September 16, 2009 - Fitch Ratings has placed 28 classes in eight collateralized debt obligations (CDOs) backed primarily by trust preferred securities (TruPS) and subordinated debt issued by real estate investment trusts (REITs), homebuilders, and specialty finance companies (collectively REIT TruPS CDOs) on Rating Watch Negative.

Fitch's rating actions are the result of a combination of deterioration of principal and interest coverage for some transactions and negative portfolio credit migration in other transactions. Principal coverage has deteriorated primarily through defaults while debt exchanges and defaults were responsible for interest coverage deterioration. Three of the eight REIT TruPS CDOs placed on Rating Watch are currently failing senior overcollateralization (OC) or interest coverage (IC) tests.

Negative credit migration has resulted from rating downgrades, defaults and deferrals. For the eight CDOs with notes placed on Rating Watch today, on average 9.8% of their portfolios has been downgraded since January 2009.

Between January and July 2009, Fitch has observed 22 unique issuers restructure or exchange their debt across these eight Fitch-rated REIT TruPS CDOs. On average, nearly 17.3% of the portfolios have undergone an exchange, which have resulted in an average increase in portfolio notional of $4.1 million. At the same time, the weighted average coupon (WAC) for these portfolios decreased from an average of 6.5% to 4.9% while the weighted average spreads (WAS) decreased from an average of 2.5% to 2.3%. Issuers that participated in the exchanges have shadow ratings centered in the 'CCC' category.

Resolution of the current Rating Watch Negative status will consider the potential implications of observed defaults, expectations for further debt exchanges undertaken by the asset manager and additional ratings downgrades.

Fitch has taken the following actions:

Attentus CDO I, Ltd.

— U.S.$237,211,012 class A-1 first priority senior secured floating rate notes due May 2036, 'BB' placed on Rating Watch Negative;

— U.S.$20,000,000 class A-2 second priority senior secured floating rate notes due May 2036, 'B' placed on Rating Watch Negative.

Attentus CDO III, Ltd.

— U.S.$124,960,315 class A-1A first priority delayed draw senior secured floating rate notes due 2042, 'A' placed on Rating Watch Negative;

— U.S.$100,000,000 class A-2 third priority senior secured floating rate notes due 2042, 'BB' placed on Rating Watch Negative;

— U.S.$34,335,562 class B fourth priority deferrable secured floating rate notes due 2042, 'B' placed on Rating Watch Negative.

Kodiak CDO I, Ltd./Corp

— U.S.$276,106,781 class A-1 first priority senior secured floating rate notes due 2039, 'BBB' placed on Rating Watch Negative;

— U.S.$103,500,000 class A-2 second priority senior secured floating rate notes due 2039, 'BB' placed on Rating Watch Negative;

— U.S.$83,000,000 class B third priority senior secured floating rate notes due 2039, 'B' placed on Rating Watch Negative.

Kodiak CDO II, Ltd./Corp

— U.S.$323,564,830 class A-1 senior secured floating rate notes due 2042, 'BBB' placed on Rating Watch Negative;

— U.S.$53,000,000 class A-2 senior secured floating rate notes due 2042, 'BB+' placed on Rating Watch Negative;

— U.S.$80,000,000 class A-3 senior secured floating rate notes due 2042, 'BB' placed on Rating Watch Negative;

— U.S.$81,000,000 class B-1 senior secured floating rate notes due 2039, 'B' placed on Rating Watch Negative;

— U.S.$5,000,000 class B-2 senior secured fixed/floating rate notes due 2042, 'B' placed on Rating Watch Negative.

TABERNA PREFERRED FUNDING I, LTD

— U.S.$303,296,877 class A-1A first priority senior secured floating rate notes due 2035, 'BB' placed on Rating Watch Negative;

— U.S.$12,779,363 class A-1B first priority senior secured floating rate notes due 2035, 'BB' placed on Rating Watch Negative.

TABERNA PREFERRED FUNDING V, LTD

— U.S.$92,080,228 class A-1LA floating rate notes due August 2036, 'BB+' placed on Rating Watch Negative;

— U.S.$230,200,567 class A-1LAD delayed draw floating rate notes due August 2036 , 'BB+' placed on Rating Watch Negative;

— U.S.$60,000,000 class A-1LB floating rate notes due August 2036, 'B' placed on Rating Watch Negative.

TABERNA PREFERRED FUNDING VIII, LTD

— U.S.$154,228,747 class A-1A first priority delayed draw senior secured floating rate notes due 2037, 'BBB' placed on Rating Watch Negative;

— U.S.$207,244,881 class A-1B first priority senior secured floating rate notes due 2037, 'BBB' placed on Rating Watch Negative;

— U.S.$120,000,000 class A-2 second priority senior secured floating rate notes due 2037, 'BB' placed on Rating Watch Negative;

— U.S.$75,000,000 class B deferrable third priority secured floating rate notes due 2037, 'B' placed on Rating Watch Negative;

— U.S.$40,000,000 class C deferrable fourth priority secured floating rate notes due 2037, 'B-' placed on Rating Watch Negative.

TABERNA PREFERRED FUNDING IX, LTD

— U.S.$267,969,723 class A-1LA first priority delayed draw floating rate notes due 2038, 'BBB' placed on Rating Watch Negative;

— U.S.$97,443,536 class A-1LAD first priority floating rate notes due 2038, 'BBB' placed on Rating Watch Negative;

— U.S.$116,000,000 class A-1LB second priority floating rate notes due 2038, 'BB' placed on Rating Watch Negative

— U.S.$25,000,000 class A-2LA third priority floating rate notes due 2038, 'B+' placed on Rating Watch Negative;

— U.S.$53,325,440 class A-2LB deferrable fourth priority floating rate notes due 2038, 'B' placed on Rating Watch Negative.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 'www.fitchratings.com'. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

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