Fitch Takes Various Rating Actions on Six TruPS CDOs

Fitch Ratings has affirmed 28 tranches and upgraded five tranches from six Trust Preferred (TruPS) Collateralized Debt Obligations (CDOs) backed by insurance collaterals. In addition, Fitch has maintained or assigned Stable Outlooks to 17 tranches and assigned Negative Outlooks on two tranches.

The rating action report, titled 'Fitch Takes Various Rating Actions on Six TruPS CDOs', dated Sept. 18, 2014, details the individual rating actions and portfolio characteristics for each rated CDO. It can be found on Fitch's website at www.fitchratings.com' by performing a title search or by using the link below. For further information and transaction research, please refer to 'www.fitchratings.com'.

KEY RATING DRIVERS:

Credit Quality of Collateral: The credit quality of the collateral portfolios have been relatively stable with the average credit quality remained at 'BB-/BB' for this year's review. This is supported by relatively stable performance, with only one new deferral held in three CDOs and no new defaults over a 12-month period ending August 2014. Further reflecting the relatively stable credit performance of the underlying portfolios, senior coverage tests in all of the six CDOs continue to pass.

Collateral Redemptions: All CDOs except for I-Preferred Term Securities I, received meaningful levels of redemptions that paid down the most senior notes and increased credit enhancement (CE) levels for other rated notes. Potential upgrades were weighed against the risk of adverse selection in the remaining portfolios and the likelihood of the remaining balance to be outstanding for an extended period of time.

Excess Spread and CDO Structure: Excess spread continued to contribute to deleveraging of all CDOs except in Insurer Collateralized Obligation Notes (ICONS). The optimal principal distribution amount (OPDA) feature continued to redirect a portion of interest proceeds to pay down the most senior notes in three transactions. However, across these deals, the additional CE from the excess spread did not provide a meaningful uplift to the passing ratings given the haircuts applied to the baseline of excess spread levels for various rating stresses and the outsized interest rate swaps in most of the CDOs.

Resolution and Recovery of Defaults and Deferrals: No cures have occurred in these CDOs.

Fitch has assigned Negative Outlook to the non-deferrable classes in ICONS due to risk of interest shortfall caused by an outsized interest rate swap and 34% of the portfolio notional represented by semiannual pay assets creating a possibility for interest shortfalls for non-deferrable classes in periods with lowest interest collections.

RATING SENSITIVITIES

Changes in the rating drivers described above could lead to rating changes in the TruPS CDO notes. To address potential risks of adverse selection and increased portfolio concentration Fitch applied a sensitivity scenario, as described in the criteria.

To account for uncertainty around the pace of redemptions and cures and, consequently, magnitude of future excess spread, Fitch's rating analysis capped the levels of excess spread to the amounts projected only over the near term.

For non-deferrable notes, Fitch performs analysis of notes' interest sensitivity to additional defaults and deferrals, as described in the criteria. Ratings for non-deferrable notes are capped at the rating stress level corresponding to the magnitude of additional defaults and deferrals that could trigger a missed interest payment.

Additional information is available at 'www.fitchratings.com'.

The information used to assess these ratings was sourced from trustee reports, collateral manager reporting Web sites and the public domain.

Applicable Criteria and Related Research:

--'Surveillance Criteria for Trust Preferred CDOs' (April 21, 2014);

--'Global Rating Criteria for Corporate CDOs' (July 25, 2014);

--'Counterparty Criteria for Structured Finance and Covered Bonds' (May 14, 2014);

--'Criteria for Rating Caps and Limitations in Global Structured Finance Transactions' (May 28, 2014);

--'Global Rating Criteria for Structured Finance CDOs' (July 16, 2014).

Applicable Criteria and Related Research: Fitch Takes Various Rating Actions on Six TruPS CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=779088

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=751136

Criteria for Rating Caps and Limitations in Global Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=748781

Counterparty Criteria for Structured Finance and Covered Bonds

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=744158

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=753057

Surveillance Criteria for Trust Preferred CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=745339

Additional Disclosure

Solicitation Status

http://www.fitchratings.com/gws/en/disclosure/solicitation?pr_id=875954

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