Fitch Affirms Two Classes in Taberna Europe II

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CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed two classes of notes issued by Taberna Europe CDO II, P.L.C. (Taberna II) as follows:

--EUR455,172,400 class A1 notes at 'CCCsf';

--EUR95,000,000 class A2 notes affirmed at 'CCsf'.

This review was conducted primarily under the framework described in 'Global Rating Criteria for Structured Finance CDOs' and 'Global Rating Criteria for Corporate CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio, as well as the 'Global Surveillance Criteria for Trust Preferred CDOs'. The 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 to conclude the rating actions for the rated notes. The following commentary summarizes the key rating factors of Fitch's rating actions. All references to underlying credit quality in the commentary are based on a combination of publicly available ratings and Fitch's credit opinions.

Of the total EUR726 million portfolio, 53.3% of the total portfolio is publicly rated by Fitch or other rating agencies, while Fitch's corporate analysts provide a credit opinion on 46.7%. Since Fitch's last rating action in December 2010, the credit quality of the portfolio collateral has improved modestly, with approximately 14.2% of the portfolio downgraded a weighted average of 2.4 notches, with approximately 15.8% of the portfolio upgraded a weighted average 1.9 notches. Currently, 69.3% of the portfolio has a Fitch derived rating below investment grade with 32.3% of the portfolio rated in the 'CCC' category or below, compared to 66.8% and 34.9%, respectively, at the last review.

The rating affirmations are based upon portfolio amortization, combined with relatively stable portfolio performance over the last year. Additionally, the cash flow model produces a range of breakeven results that are consistent with the current ratings.

The remaining portfolio is fairly concentrated with 37 assets from 37 obligors, which indicate the notes are susceptible to potential future negative migration in the portfolio. As a result, available excess spread currently available to support the notes will likely diminish.

The class A1 and A2 notes are timely classes currently receiving its periodic interest payments. The class A1 notes additionally benefit from paydowns from portfolio amortization due to their seniority in the capital structure. Outlooks are not typically assigned to notes rated in the 'CCCsf' categories or below.

Taberna II is a real estate collateralized debt obligation (CDO) that closed on Sept. 13, 2007. The portfolio is currently managed by TP Management LLC, an affiliate of Fortress Investment Group LLC. As of the latest trustee report from November 2011, the portfolio is comprised of real estate investment trusts (68.9%), banking & finance (18.4%), real estate (4.8%), commercial mortgage-backed securities (4.4%), and retail (3.4%) primarily from European and North American real estate companies.

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 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 Rating Criteria for Corporate CDOs' (Aug. 10, 2011);

--'Global Surveillance Criteria for Trust Preferred CDOs' (July 12, 2011);

--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 15, 2011);

--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (March 21, 2011).

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=646569

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651560

Global Rating Criteria for Corporate CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=641789

Global Surveillance Criteria for Trust Preferred CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=643950

Global Criteria for Cash Flow Analysis in CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=650717

Criteria for Interest Rate Stresses in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=605426

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

Fitch RatingsPrimary Surveillance AnalystJohann Juan, +1-312-368-3339DirectorFitch, Inc.70 W. Madison StreetChicago, IL 60602orCommittee ChairpersonAlina Pak, CFA, +1-312-368-3184Senior DirectororMedia Relations:Sandro Scenga, New York, +1-212-908-0278[email protected]

Source: Fitch Ratings

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