July 2, 2012 / 9:51 PM / 5 years ago

TEXT-Fitch cuts 1 class of Saturn Ventures I notes

July 2 - Fitch Ratings has taken the following rating actions on notes
issued by Saturn Ventures I, Inc. (Saturn I):

--$7,415,547 class A-1 notes affirmed at 'AAsf'; Outlook revised to Stable from
Negative;
--$44,611,659 class A-2 notes downgraded to 'CCCsf' from 'Bsf';
--$23,198,063 class A-3 notes affirmed at 'Csf';
--$20,888,248 class B notes affirmed at 'Csf'.

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

Since Fitch's last rating action in July 2012, the credit quality of the
collateral has deteriorated with approximately 29.2% of the portfolio downgraded
a weighted average of 6.7 notches. Approximately 52.4% of the portfolio has a
Fitch-derived rating below investment grade and 27.1% is rated in the 'CCC'
category or lower, compared to 41.6% and 23.8%, respectively, at last review.

The class A-1 notes have received approximately $30.8 million, or 80.6% of its
previous balance, since the last review. As evidenced by the increase in the
notes' credit enhancement level, these paydowns effectively offset the
deterioration in the portfolio. Although the current cash flow modeling results
indicate that the notes can pass at higher rating levels, Fitch has affirmed the
notes due to the potential further negative credit migration, with 15.9% of the
portfolio currently on Rating Watch Negative, and 9.6% have a Negative Outlook .
Additionally, the portfolio is concentrated, with only 35 assets outstanding,
and potential adverse selection remains a concern as the portfolio continues to
amortize.

The Stable Outlook on the class A-1 notes reflects the cushion above the class's
current rating in all default timing and interest rate scenarios in the cash
flow model results.

The class A-2 notes have also benefited from the deleveraging of the
transaction, although to a lesser extent. However, the notes are unable to pass
at their current rating level in the cash flow modeling results. The risk of an
interest shortfall from a potential Event of Default (EOD), which may be
triggered if the A-2 overcollateralization (OC) ratio falls below 102%, also
remains. As of the last Trustee report in May 2011, the A-2 OC ratio stood at
104.2%. If an EOD occurs and the transaction accelerates, the class A-2 notes
may be cut off from future distributions until the class A-1 notes are paid in
full.

Breakeven levels for the class A-3 and class B notes were below SF PCM's 'CCC'
default level, the lowest level of defaults projected by SF PCM. For these
classes, Fitch compared the respective credit enhancement levels to the expected
losses from the distressed and defaulted assets in the portfolio (rated 'CCsf'
or lower). This comparison indicates that default continues to appear inevitable
for these classes of notes at or prior to maturity.

Saturn I is a static structured finance collateralized debt obligation (SF CDO)
that closed in October 2003. The portfolio is monitored by Church Tavern
Advisors, LLC and the current portfolio is comprised of commercial
mortgage-backed securities (67.9%), residential mortgage-backed securities
(12.8%), SF CDOs (8.3%), real estate investment trusts (6.9%), consumer
asset-backed securities (4.2%) from 1998 through 2003 vintages.

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 issuer,
periodic trustee reports, note valuation reports, and the public domain.

Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' (Aug. 4, 2011);
--'Global Rating Criteria for Structured Finance CDOs' (Oct. 6, 2011);
--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 15, 2011);
--'Criteria for Interest Rate Stresses in Structured Finance Transactions'
(March 20, 2012).

Applicable Criteria and Related Research:
Criteria for Interest Rate Stresses in Structured Finance Transactions
Global Criteria for Cash Flow Analysis in CDOs
Global Rating Criteria for Structured Finance CDOs
Global Structured Finance Rating Criteria

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