OREANDA-NEWS. Fitch Ratings has affirmed eight and upgraded seven tranches from six structured finance collateralized debt obligations (SF CDOs) with exposure to various structured finance assets.

KEY RATING DRIVERS

Six classes affirmed at 'Csf' have credit enhancement (CE) levels that are exceeded by the expected losses from the distressed collateral (rated 'CCsf' and lower) of each portfolio. For these classes, the probability of default was evaluated without factoring potential losses from the performing assets. In the absence of mitigating factors, default for these notes at or prior to maturity continues to appear inevitable.

Two classes have been affirmed at 'CCCsf'. The class' current CE exceeds the losses projected at the 'CCCsf' rating stress under Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis, but fall below the losses projected at the 'Bsf' rating stress.

The upgrades are attributed to significant deleveraging which has resulted in increased CE.

For the upgraded transactions, Fitch performed two additional sensitivity scenarios. In the first, the assets weighted average lives were extended to half of their term to their legal maturities. In the second, the ratings of obligors which made up greater than 5% of the portfolio were lowered by one rating category to account for potential performance volatility of a concentrated portfolio. The results of the sensitivity analysis support the upgrades. The Stable Outlooks reflect Fitch's view that the transactions will continue to delever and that there is sufficient CE to offset potential deterioration of the underlying collateral going forward.

RATING SENSITIVITIES

Negative migration, defaults beyond those projected, and lower than expected recoveries could lead to downgrades for classes analysed under the SF PCM. Classes already rated 'Csf' have limited sensitivity to further negative migration given their highly distressed rating levels. However, there is potential for non-deferrable classes to be downgraded to 'Dsf' should they experience any interest payment shortfalls.

This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria' and 'Global Surveillance Criteria for Structured Finance CDOs'. None of the transactions have been analysed under a cash flow model framework, as the effect of structural features and excess spread available to amortize the notes were determined to be minimal. The individual rating actions are detailed in the report 'Fitch Takes Various Rating Actions on 6 SF CDOs from 2002-2004 Vintages', released and available at 'www. fitchratings. com' by performing a title search or by using the link.

DUE DILIGENCE USAGE

No third-party due diligence was reviewed in relation to this rating action.