Fitch Affirms 5 Classes from Antares Funding, LP/Corp.
NEW YORK-(Business Wire)-September 29, 2009 - Fitch Ratings has affirmed the rating on five classes of notes from Antares Funding, LP/Corp. (Antares), a CDO managed by GE Asset Management. A complete list of rating actions follows at the end of this release.
The affirmations of the class C, D and E notes reflect the offsetting effects of structural and portfolio changes in the transaction. Class C notes are currently the most senior notes since the transaction concluded its reinvestment period, and principal amortization has redeemed the notes in order of priority. The class C notes began receiving principal distributions on the distribution date on Sept. 14, 2009. While the credit enhancement to the class C notes has improved since the last rating review on June 11, 2008, portfolio credit deterioration and defaults have offset the effect. The credit enhancement of class D and E notes have also benefited from portfolio amortization but are more vulnerable to the lower quality assets. Finally, principal proceeds have been used to make up a class D interest shortfall, resulting in a reduction of principal proceeds of approximately $1.4 million on a cumulative basis.
The portfolio has experienced some negative credit migration since the last rating review. Credit deterioration in the portfolio is particularly evidenced by the recent increase in defaulted obligors, which were reported at 7.6% of the current collateral balance as of the latest monthly report, dated Sept. 1, 2009. Underlying obligors considered 'CCC+' or below represented about 34.7% of the portfolio, which exceeds the limit of 10%. Over 7.3% of the collateral portfolio are long-dated securities, which presents market risk to the transaction, since they must be liquidated on or prior to the stated maturity of the transaction. Fitch has factored this risk in the cash flow model analysis.
In its review, Fitch analyzed the structure's sensitivity to potential softness in U.S. corporate recoveries. To accomplish this, Fitch reduced its average recovery rate assumptions for each asset type by 30% in one sensitivity scenario and by 50% in a second sensitivity scenario. The class C notes were less sensitive to lower recovery rates and have therefore been assigned Stable Outlooks.
The Loss Severity (LS) ratings indicate each tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the base-case loss expectation for the collateral. The LS rating should always be considered in conjunction with the probability of default indicated by a class' long-term credit rating. For more information on LS ratings, refer to Fitch's criteria report entitled 'Criteria for Structured Finance Loss Severity Ratings', dated Feb. 17, 2009 and available on Fitch's web site at 'www.fitchratings.com'.
The ratings of the classes C and D notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The rating of the class E notes addresses the likelihood that investors will receive the stated balance of principal by the legal final maturity date. To date, the class E notes have received 77.7% of their original stated balance.
Antares is a cash flow collateralized debt obligation (CDO) that closed on Dec. 14, 1999. The transaction's substitution period ended on Dec. 4, 2009, and the notes are scheduled to mature on Dec. 14, 2011. The portfolio is composed of 71.5% loans and 28.5% bonds as of the Sept. 1, 2009 trustee report. The three largest industries are Industrial and Manufacturing at 11.1%, Healthcare at 11.1% and Consumer Products at 9.7%.
Fitch has taken the following rating action:
—$25,984,495 class C-1 notes affirmed at 'BBB'; Outlook Stable; assigned 'LS3';
—$13,676,060 class C-2 notes affirmed at 'BBB'; Outlook Stable; assigned 'LS3';
—$23,911,911 class D-1 notes affirmed at 'CC/RR3' (revised from 'CC/DR3);
—$14,065,830 class D-2 notes affirmed at 'CC/RR3' (revised from 'CC/DR3');
—$9,372,583 class E notes affirmed at 'C/RR6' (revised from 'CC/DR6').
These rating actions reflect the application of Fitch's current criteria which are available at 'www.fitchratings.com' and specifically include the following reports:
—'Global Rating Criteria for Corporate CDOs' (April 30, 2008);
—'Global Criteria for Cash Flow Analysis in Corporate CDOs' (April 30, 2008);
—'Criteria for Structured Finance Loss Severity Ratings' (Feb. 17, 2009).
Fitch will continue to monitor and review this transaction for future rating adjustments. Additional transaction information and historical data are also available at 'www.fitchratings.com'.
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.
ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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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