OREANDA-NEWS. February 16, 2015. Fitch Ratings has affirmed six classes of notes issued by Baker Street CLO II Ltd./Corp. (Baker Street CLO II) as follows:

--\\$173,089,468 class A-1 notes at 'AAAsf'; Outlook Stable;
--\\$19,232,163 class A-2 notes at 'AAAsf'; Outlook Stable;
--\\$20,100,000 class B notes at 'AAsf'; Outlook Stable;
--\\$21,000,000 class C notes at 'BBBsf'; Outlook Stable;
--\\$15,900,000 class D notes at 'BBsf'; Outlook Stable;
--\\$11,402,275 class E notes at 'Bsf'; Outlook Stable.

Fitch does not rate the preference shares.

KEY RATING DRIVERS

The rating actions are based on the credit enhancement (CE) available to the rated notes and the stable performance of the underlying portfolio. Since Fitch's last review in February 2014, approximately \\$75 million of class A-1 and A-2 (collectively, class A) notes have paid down from proceeds received from portfolio amortization. As of the Jan. 8, 2015 trustee report, the transaction continues to pass its overcollateralization (OC) and interest coverage (IC) tests, and the current weighted average spread (WAS) is 3.23%, compared to a trigger of 2.65%.

Fitch's analysis is based on a performing portfolio balance of \\$253 million held across 88 borrowers and \\$20.3 million in principal collections. The weighted average rating factor of the performing portfolio has remained relatively stable at 'B+/B'. Fitch currently considers 4.7% of the assets to be rated 'CCC+' or below in the performing portfolio versus 8.4% at the last review, based upon Fitch's Issuer Default Rating (IDR) Equivalency Map. There are nine defaulted assets in the portfolio totaling approximately \\$14.5 million in par.

Fitch's cash flow analysis of the current portfolio, in addition to the sensitivity scenarios described below, indicates that the CE provided to each class of notes is sufficient to support the notes at or above their current rating levels. However, the current ratings appropriately reflect the risk profile of the notes and the portfolio. The class B notes remain subordinate to the class A notes and performance of the class C, D and E notes was commensurate to their respective rating categories under the sensitivity analysis. The Stable Outlooks reflect Fitch's expectations that the notes have sufficient levels of credit protection to withstand potential deterioration in the credit quality of the portfolio.

RATING SENSITIVITIES

The ratings of the notes may be sensitive to the following: asset defaults, portfolio migration (including assets being downgraded to 'CCC'), portions of the portfolio being placed on Rating Watch Negative or Outlook Negative, or OC or IC test breaches. Fitch's sensitivity scenarios included increased levels of defaults, decreased recoveries and reduced asset spreads in the portfolio.

This review was conducted under the framework described in the report 'Global Rating Criteria for Corporate CDOs' using the Portfolio Credit Model (PCM) for projecting future default and recovery levels for the underlying portfolio. The PCM outputs were used as inputs in Fitch's proprietary cash flow model, which was customized to reflect the specific structural features of Baker Street CLO II.

Baker Street CLO II is a cash flow collateralized loan obligation (CLO) that closed on Sept. 15, 2006 and is managed by Seix Investment Advisors (Seix), a wholly owned subsidiary of Ridgeworth Capital Management, Inc. (Ridgeworth). The transaction has exited its reinvestment period in October 2012, but the manager still has the ability to reinvest unscheduled principal proceeds and proceeds from credit risk sales, pursuant to the satisfaction of certain investment criteria. Among the criteria, such reinvestment cannot cause the weighted average maturity of the portfolio assets to be extended beyond the weighted average maturity of the portfolio assets prior to such reinvestment, and the weighted average life (WAL) of any purchased asset must be equal or less than the WAL of the asset being replaced. The calculated WAL of the performing portfolio is currently 2.5 years. Fitch expects reinvestment activity to continue to decrease in the future, as the WAL of the portfolio continues to decrease and investment options become limited.