Fitch Affirms Four Classes of C-BASS CBO IX, Ltd./Corp
NEW YORK -- February 28, 2013
Fitch Ratings has affirmed four classes of notes issued by C-BASS CBO IX,
Ltd./Corp (C-BASS IX) as follows:
-- $17,828,900 class A-2 notes at 'CCCsf';
-- $10,000,000 class B notes at 'CCsf';
-- $12,000,000 class C notes at 'Csf';
-- $7,227,634 class D notes at 'Csf'.
This review was conducted under the framework described in the report 'Global
Rating Criteria for Structured Finance CDOs' using the Structured Finance
Portfolio Credit Model (SF PCM) for projecting future default levels for the
underlying portfolio. These default levels were then compared to the breakeven
levels generated by Fitch's cash flow model of the CDO under various default
timing and interest rate stress scenarios, as described in the report 'Global
Criteria for Cash Flow Analysis in CDOs'. Fitch also considered additional
qualitative factors in its analysis, as described below, to conclude the
rating affirmations for the rated notes.
KEY RATING DRIVERS
At the last payment date in January 2013, the class A-1 notes Paid-In-Full and
the class A- 2 notes received their first principal distribution. The
affirmation for the class A-2 notes is due to the amortization of the notes
increasing credit enhancement to offset any negative migration in the
underlying portfolio. The class has received approximately $2.2 million or
10.9% of its previous balance since the last review. The affirmation is in
line with the breakeven levels from the cash flow model.
Since Fitch's last rating action in March 2012, the credit quality of the
collateral has deteriorated with approximately 42.9% of the portfolio
downgraded a weighted average of 4.4 notches. Approximately 86.4% of the
portfolio has a Fitch-derived rating below investment grade and 64.2% rated in
the 'CCC' category or lower, compared to 71.1% and 52.7%, respectively, at
Breakeven levels for the class B, C, and D notes were below SF PCM's 'CCC'
default level, the lowest level of defaults projected by SF PCM. Therefore
Fitch compared the classes' credit enhancement level to the expected losses
from distressed and defaulted assets in the portfolio (rated 'CCsf' or lower).
Based on this comparison, the ratings for each of the classes are affirmed.
The transaction remains sensitive to further negative migration and increasing
concentration in assets of a weaker credit quality. Moreover, interest coming
off defaulted bonds which currently contributes to the A-2 notes' paydown may
not be sustainable at the same levels in the future.
C-BASS IX is a cash flow structured finance collateralized debt obligation (SF
CDO) that closed on March 23, 2004. The portfolio is currently monitored by
NIC Management LLC, an affiliate of Newcastle Investment Corp. and consists of
85% residential mortgage-backed securities, 12.9% commercial and consumer
asset-backed securities, and 2.1% SF CDOs from 2001 through 2004 vintage
Additional information is available at 'www.fitchratings.com'. The ratings
above were solicited by, or on behalf of, the issuer, and therefore, Fitch has
been compensated for the provision of the ratings.
The information used to assess these ratings was sourced from the issuer,
periodic trustee reports, note valuation reports, and the public domain.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (June 6, 2012)
--'Global Rating Criteria for Structured Finance CDOs' (Oct. 3, 2012)
--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 13, 2012)
--'Criteria for Interest Rate Stresses in Structured Finance Transactions'
(Jan. 25, 2013)
Applicable Criteria and Related Research
Criteria for Interest Rate Stresses in Structured Finance Transactions
Global Criteria for Cash Flow Analysis in CDOs
Global Rating Criteria for Structured Finance CDOs
Global Structured Finance Ratings Performance: First-Half 2004 Review
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Primary Surveillance Analyst
Cristina Feracota, +1-312-606-2300
70 W. Madison St.
Chicago, IL 60602
Alina Pak, CFA, +1-312-368-3184
Sandro Scenga, New York, +1 212-908-0278
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