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Fitch Affirms 1 Class and Downgrades 13 Classes of COMM 2004-RS1

0 Comments | Manufacturing Close – Up, Jul 28, 2010

Fitch Ratings has affirmed one class and downgraded 13 classes of COMM 2004-RS1 Ltd./Corp. (COMM 2004-RS1) due to negative credit migration on the underlying collateral.

A complete list of rating actions follows at the end of this release.

Since Fitch’s last rating action in January 2009, the credit quality of the portfolio has declined to a current weighted average Fitch derived rating of ‘BBB-/BB ‘, down from ‘A/A-’ at last review. The portfolio’s concentration is high with only 12 obligors, one of which, Marquee 2004-1, comprises 75.4 percent of the pool. Marquee 2004-1 is a repack of one mezzanine class of CMCMT 1998-C1, a commercial mortgage-backed securities (CMBS) resecuritization. The current weighted average Fitch derived rating of CMCMT 1998-C1 is ‘B- /CCC ‘, down from ‘B/B-’ at last review.

This transaction was analyzed under the framework described in the report ‘Global Rating Criteria for Structured Finance CDOs’ using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. Given the significant concentration of Marquee 2004-1 within the portfolio, Fitch assigned shadow ratings to the Marquee 2004-1 classes based on an analysis of the CMCMT 1998-C1 portfolio using the PCM. Based on this analysis, the credit characteristics of classes A through G are generally consistent with the ratings assigned below.

Classes H through N do not pass at the ‘CCC’ stress, which is PCM’s lowest stress scenario. Therefore, these classes have been downgraded to ‘CC’ indicating that default is probable. The credit enhancement to these classes is minimal, thus any future portfolio losses could cause these classes to default.

The Negative Rating Outlooks on classes A through C reflect Fitch’s expectation that underlying CMBS loans will continue to face refinance risk at maturity. Fitch also assigned Loss Severity (LS) ratings to the notes. The LS ratings indicate each tranche’s potential loss severity given default, as evidenced by the ratio of tranche size to the expected loss for the collateral under the ‘B’ stress
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