Fitch Upgrades 2 Classes of C-BASS CBO V, Ltd./Corp

NEW YORK--(BUSINESS WIRE)--

Fitch Ratings has upgraded and assigned Rating Outlooks to two classes of notes issued by C-BASS CBO V, Ltd./Corp. (C-BASS V) as follows:

--$0 class C notes marked 'PIF';

--$2,903,961 class D-1 notes upgraded to 'Bsf' from 'CCCsf'; Outlook Stable;

--$2,782,963 class D-2 notes upgraded to 'Bsf' from 'CCCsf'; Outlook Stable.

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 into its analysis, as described below, to conclude the rating affirmations for the rated notes.

SENSITIVITY/RATING DRIVERS

Since the last review in 2012, the negative rating momentum in the underlying portfolio has somewhat abated, with 25.3% of the pool upgraded a weighted average of 4.3 notches and 14.2% downgraded a weighted average of 2.2 notches. Approximately 84.5% of the portfolio now has a Fitch derived rating below investment grade and 82.9% has a rating in the 'CCC' rating category or lower, compared to 57.7% and 48.9%, respectively, at previous review.

However, this additional deterioration has been successfully offset by the ongoing amortization of the capital structure, with $4.3 million of the class C notes' remaining balance paid in full on the June 22, 2012 payment date. Since then, the class D-1 and D-2 (together, class D) notes have also received all of their previously deferred interest amounts and approximately $11.8 million in payments towards reduction of their principal. Consequently, the credit enhancement (CE) levels available to the class D notes have increased meaningfully, providing cushion to thse notes to withstand potential further negative migration in the portfolio.

Although, the cash flow model indicates the class D notes pass rating levels higher than 'Bsf' in all scenarios, they rely on the performance of only five non-distressed assets and recoveries realized on the distressed assets, currently at 82.9% of the portfolio.

C-BASS V is a static structured finance collateralized debt obligation (SF CDO) that closed on Dec. 20, 2002. The initial portfolio was selected by C-BASS Investment Management LLC and as of Feb. 14, 2011 it is monitored by NIC Management LLC, an affiliate of Newcastle Investment Corp. As of the Dec. 24, 2012 Trustee report, the portfolio is comprised primarily of residential mortgage-backed securities (92.3%) from 1997 through 2002 vintage transactions and of one SF CDO (7.7%).

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 asset manager, periodic servicer 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' (March 20, 2012).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=690203

Global Criteria for Cash Flow Analysis in CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688518

Criteria for Interest Rate Stresses in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=673560

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