NEW YORK (Standard & Poor's) Sept. 13, 2007--Standard & Poor's Ratings
Services today lowered its ratings on 46 tranches from nine U.S. trust
preferred CDO transactions collateralized in part by debt issued by mortgage
real estate investment trusts (REITs). Concurrently, we removed from
CreditWatch the 39 CDO ratings that had been on CreditWatch negative before
the downgrades. In addition, we affirmed our ratings on five tranches from two
trust preferred CDO transactions and removed them from CreditWatch negative,
and we left our ratings on two tranches on CreditWatch negative without
lowering them (see list). The 46 downgraded CDO tranches represent an issuance
amount of $936.875 million.
The CDO downgrades primarily reflect the weakening credit quality of the
mortgage REIT assets held within these CDO collateral pools. Because of recent
conditions in the mortgage markets, many mortgage originators and purchasers,
including REITs, have faced challenges in obtaining funding to finance their
ongoing operations.
Trust preferred securities (TruPS) and the trust preferred CDOs that contain
them in their collateral pools can generally be grouped into three categories:
-- Bank TruPS, issued by small- to mid-size bank holding companies;
-- Insurance TruPS, issued by small- to mid-size insurance companies; and
-- REIT TruPS, issued by equity or mortgage REITs.
Today's rating actions affect only REIT trust preferred CDO transactions. Of
the 92 trust preferred CDO transactions rated by Standard & Poor's in the U.S,
14 are REIT trust preferred CDO transactions. Overall, Standard & Poor's rates
approximately 1,690 active U.S. cash flow and hybrid CDO transactions and
approximately 1,640 U.S. non-excess-spread synthetic CDO transactions.
SUMMARY OF RMBS-RELATED CDO RATING ACTIONS TO DATE
In connection with its review of CDO transactions that have exposure to U.S.
residential mortgage-backed securities (RMBS) and other securities that have
experienced negative rating actions since July 2007, Standard & Poor's has, to
date, lowered its ratings on 121 tranches from 27 cash flow and hybrid CDO
transactions (including the CDO tranches listed below). Additionally, 117
tranche ratings from 40 cash flow and hybrid CDO transactions are currently on
CreditWatch with negative implications. In all, the affected cash flow and
hybrid CDO tranches represent a total of $8.21 billion in issuance.
Aside from these rating actions on cash flow and hybrid CDO transactions,
Standard & Poor's has lowered its ratings on 99 classes from 87
non-excess-spread synthetic CDOs and has placed its ratings on an additional
18 classes from seven actively managed non-excess-spread synthetic CDOs on
CreditWatch with negative implications. The affected synthetic CDO tranches
represent a total of $2.57 billion in issuance.
In all, the $10.96 billion in affected U.S. CDO notes represents less than 1%
of the total balance of Standard & Poor's rated U.S. CDO notes outstanding. To
obtain a list of the tranches with ratings currently on CreditWatch due to
exposure to downgraded RMBS, along with a cumulative listing of tranches with
ratings lowered to date, please e-mail RMBS@standardandpoors.com.
RATINGS LOWERED
Rating
Transaction Class To From
Attentus CDO II C A- A
Kodiak CDO I E-1 A- A
Kodiak CDO I E-2 A- A
Kodiak CDO I F BBB BBB+
TABERNA Preferred Funding II I comb BBB- BBB
TABERNA Preferred Funding III C-1 A- A
TABERNA Preferred Funding III C-2 A- A
RATINGS LOWERED AND REMOVED FROM CREDITWATCH NEGATIVE
Rating
Transaction Class To From
Attentus CDO I C2A BBB- A/Watch Neg
Attentus CDO I C2B BBB- A/Watch Neg
Attentus CDO I D BB BBB/Watch Neg
Attentus CDO I E B- BB/Watch Neg
Attentus CDO II D BBB- A-/Watch Neg
Attentus CDO II E-1 BB- BBB/Watch Neg
Attentus CDO II E-2 BB- BBB/Watch Neg
Attentus CDO II F-1 CCC+ BB/Watch Neg
Attentus CDO II F-2 CCC+ BB/Watch Neg
Attentus CDO III E-1 BBB- BBB/Watch Neg
Attentus CDO III E-2 BBB- BBB/Watch Neg
Attentus CDO III F B+ BB/Watch Neg
Kodiak CDO I G B+ BBB/Watch Neg
Kodiak CDO I H CCC BB+/Watch Neg
TABERNA Preferred Funding II D BBB+ A-/Watch Neg
TABERNA Preferred Funding II E-1 BB+ BBB/Watch Neg
TABERNA Preferred Funding II E-2 BB+ BBB/Watch Neg
TABERNA Preferred Funding II F B- BB+/Watch Neg
TABERNA Preferred Funding III D BBB- BBB/Watch Neg
TABERNA Preferred Funding III E B+ BB+/Watch Neg
TABERNA Preferred Funding IV C-1 BBB+ A/Watch Neg
TABERNA Preferred Funding IV C-2 BBB+ A/Watch Neg
TABERNA Preferred Funding IV C-3 BBB+ A/Watch Neg
TABERNA Preferred Funding IV D-1 BB+ BBB/Watch Neg
TABERNA Preferred Funding IV D-2 BB+ BBB/Watch Neg
TABERNA Preferred Funding IV E B BB+/Watch Neg
Taberna Preferred Funding V A-3L BBB A/Watch Neg
Taberna Preferred Funding V A-3FV BBB A/Watch Neg
Taberna Preferred Funding V A-3FX BBB A/Watch Neg
Taberna Preferred Funding V B-1L B BBB/Watch Neg
Taberna Preferred Funding V B-2L CCC- BB/Watch Neg
Taberna Preferred Funding V B-2FX CCC- BB/Watch Neg
Taberna Preferred Funding VI D-1 A- A/Watch Neg
Taberna Preferred Funding VI D-2 A- A/Watch Neg
Taberna Preferred Funding VI E-1 BBB- BBB/Watch Neg
Taberna Preferred Funding VI E-2 BBB- BBB/Watch Neg
Taberna Preferred Funding VI F-1 B BB+/Watch Neg
Taberna Preferred Funding VI F-2 B BB+/Watch Neg
Taberna Preferred Funding VI Combo nts BBB- BBB/Watch Neg
RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH NEGATIVE
Rating
Transaction Class To From
Attentus CDO III C-1 A A/Watch Neg
Attentus CDO III C-2 A A/Watch Neg
Attentus CDO III D A- A-/Watch Neg
Taberna Preferred Funding VII A-3L A A/Watch Neg
Taberna Preferred Funding VII C-1 combo BBB BBB/Watch Neg
RATINGS REMAINING ON CREDITWATCH NEGATIVE
Transaction Class Rating
Taberna Preferred Funding VII B-1L BBB/Watch Neg
Taberna Preferred Funding VII B-2L BB/Watch Neg
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