OREANDA-NEWS. Fitch Ratings has upgraded Ivory CDO Limited's most senior notes and affirmed the rest, as follows:

EUR10.2m Class A1 (ISIN XS0309311909): upgraded to 'BBsf' from 'B+sf'; Outlook Stable

EUR6m Class A2 (ISIN XS0309350477): affirmed at 'B-sf'; Outlook Stable

EUR12m Class B (ISIN XS0309352093): affirmed at 'CCsf'

EUR12.9m Class C (ISIN XS0309353653): affirmed at 'CCsf'

EUR13.7m Class D (ISIN XS0309357050): affirmed at 'Csf'

EUR3.2m Class E (ISIN XS0309358298): affirmed at 'Csf'

Ivory CDO Limited is a managed cash arbitrage securitisation of mezzanine asset-backed securities, primarily RMBS, CMBS and CDOs.

KEY RATING DRIVERS

The upgrade on the most senior notes reflects improved credit enhancement (CE) outweighing the negative credit quality migration in the portfolio over the past 12 months. The class A1 notes were redeemed by EUR12.1m during this period, resulting in CE increasing to 80.2% from 66%. The affirmation on the remaining tranches reflects the portfolio's low credit quality and increased portfolio concentration despite the transaction's deleveraging.

Fitch estimates 66.4% of the portfolio are in the 'CCCsf' category or below, up from 54.6% a year ago. There are two additional defaulted assets, which increased the current defaults to EUR9.6m from EUR7m during the same period. The top 10 obligors' concentration increased to 62.5% from 53% after four assets were full repaid. The portfolio's exposure to the RMBS sector has increased to 43.2% from 39.2% as RMBS assets amortise more slowly than other asset sectors.

All overcollateralisation tests were breached since 2009 and the transaction has been capturing excess spread to repay the class A1 notes. The class A1 notes have amortised by EUR735,000 using excess spread since September 2015. The weighted average spread has increased to 1.75% from 1.63% over the past 12 months. The portfolio's reported weighted average life is 0.4 years, compared with Fitch's estimates of 7.6 years.

RATING SENSITIVITIES

A stress test extending the expected maturity date of the portfolio assets to the assets' legal final maturity date showed potential negative rating action on the most senior notes.

USE OF THIRD-PARTY DUE DILIGENCE PURSUANT TO RULE 17G-10

Form ABS Due Diligence-15E was not provided to, or reviewed by, Fitch in relation to this rating action.

DATA ADEQUACY

Fitch has checked the consistency and plausibility of the information it has received about the performance of the asset pool and the transaction. There were no findings that affected the rating analysis. Fitch has not reviewed the results of any third party assessment of the asset portfolio information or conducted a review of origination files as part of its ongoing monitoring.

The majority of the underlying assets have ratings from Fitch and other Nationally Recognised Statistical Rating Organisations. Fitch has relied on the practices of the relevant groups within Fitch and other rating agencies to assess the asset portfolio information.

Overall, Fitch's assessment of the information relied upon for the agency's rating analysis according to its applicable rating methodologies indicates that it is adequately reliable.

SOURCES OF INFORMATION

The information below was used in the analysis.

-Loan-by-loan data provided by Wells Fargo as at 2 August 2016

-Transaction reporting provided by Wells Fargo as at 2 August 2016