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Fitch Downgrades $378.3MM from Coronado CDO, Ltd.; 4 Classes Remain on Watch Negative
NEW YORK-(Business Wire)-May 6, 2008 - Fitch downgrades six classes of notes issued by Coronado CDO, Ltd. (Coronado). Four classes of notes remain on Rating Watch Negative. The following rating actions are effective immediately:
—$277,331,614 class A-1 notes downgraded to 'AA' from 'AAA'; removed from Rating Watch Negative;
—$3,678,138 class A-2 notes downgraded to 'AA' from 'AAA'; removed from Rating Watch Negative;
—$62,000,000 class B-1 notes downgraded to 'BB' from 'AA'; remains on Rating Watch Negative;
—$15,000,000 class B-2 notes downgraded to 'BB' from 'AA'; remains on Rating Watch Negative;
—$6,750,000 class C-1 notes downgraded to 'B' from 'BBB'; remains on Rating Watch Negative;
—$13,500,000 class C-2 notes downgraded to 'B' from 'BBB'; remains on Rating Watch Negative.
Coronado is a collateralized debt obligation (CDO) that closed on Sept. 4, 2003 and is managed by Western Asset Management Company. Coronado's reinvestment period ended in March 2007. Coronado has a portfolio comprised primarily of subprime residential mortgage-backed securities (RMBS) bonds (42.7%), asset-backed securities (ABS) (16.1%), commercial mortgage-backed securities (CMBS) (15.4%), prime RMBS (11.1%), Alternative-A (Alt-A) RMBS (5.1%), CDOs (3.8%) and other structured finance assets. Subprime RMBS bonds of the 2005, 2006, and 2007 vintages account for approximately 7.8%, 12.8%, and 1.9% of the portfolio, respectively. Alt-A RMBS of the 2005, 2006 and 2007 vintages total approximately 4.5% of the portfolio.
Fitch's rating actions reflect the significant collateral deterioration within the portfolio, specifically with regards to subprime RMBS and Alt-A RMBS. Since Fitch's last review in May 2007, approximately 21.1% of the portfolio has been downgraded with 3.2% of the portfolio currently on Rating Watch Negative. Approximately 16.7% of the portfolio is currently rated below investment grade.
The classes A-1 and A-2 notes are insured via an unconditional, irrevocable financial guarantee from MBIA Insurance Corporation (Insurer Financial Strength rated 'AA', Rating Outlook Negative by Fitch). The rating of the classes A-1 and A-2 notes reflect the current rating of MBIA Insurance Corporation as guarantor of the notes.
The Rating Watch Negative reflects the continued credit deterioration in subprime RMBS, as well as growing concerns with the performance of Alt-A RMBS. Additionally, Fitch is reviewing its structured finance CDO approach and will comment separately on any changes and potential rating impact at a later date.
The ratings of the classes A-1, A-2, B-1, and B-2 notes address the likelihood that investors will receive full and timely payments of interest, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings of the classes C-1 and C-2 notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the transaction's governing documents, as well as the stated balance of principal by the legal final maturity date.
Fitch will continue to monitor and review this transaction for future rating adjustments. Additional transaction information and historical data are available on the Fitch Ratings web site 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.
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