Fitch has taken various actions on five classes of notes issued by Inman Square Funding I, Ltd. and Inman Square Funding, I Inc. (Inman Square I). These rating actions are the result of Fitch's review process and are effective immediately:
--$17,432,029 Class I rated 'AA' remain on Rating Watch Negative;
--$7,000,000 Class II-Fixed downgraded to 'BB' from 'BBB+', and remain on Rating Watch Negative;
--$30,000,000 Class II-Floating Notes downgraded to 'BB' from 'BBB+', and remain on Rating Watch Negative;
--$18,282,150 Class III downgraded to 'CCC' from 'BBB-', and removed from Rating Watch Negative;
--$3,417,466 Class IV-Fixed Notes downgraded to 'C' from 'BB+', and removed from Rating Watch Negative;
--$12,787,734 Class IV-Floating Notes downgraded to 'C' from 'BB+', and removed from Rating Watch Negative.
Fitch's rating actions reflect the credit deterioration within the portfolio and underlying exposure to Alternative-A (Alt-A) residential mortgage-backed securities (RMBS). As Fitch is reviewing its structured finance (SF) collateralized debt obligation (CDO) approach, the classes that remain on Rating Watch Negative will have their watch status resolved upon the completion of the SF CDO criteria.
Inman Square I is a CDO, which closed on Oct. 20, 2004 and is managed by TCW Asset Management Company (TCW). The transaction's revolving period ended in October 2006. Presently, 17.3% of the portfolio is comprised of 2005 and 2006 vintage U.S. subprime RMBS, 2.3% is comprised of 2005 and 2006 vintage U.S. Alt-A RMBS, and 5.5% consists of pre-2005 vintage U.S. SF CDOs. Additionally, 11.8% of the portfolio is comprised of prime RMBS and a small percentage of the portfolio consists of commercial asset-backed securities and non-SF CDOs.
Since the last rating action in November 2007, 63.2% of the portfolio has been downgraded with an additional 6.3% of theportfolio currently on Rating Watch Negative. Approximately 86.7% of the portfolio is now rated below investment grade, of which 46.6% is rated 'CCC+' or below. As per the latest trustee report dated July 14, 2008, securities deemed to be in default constituted 43.0%, or $66.3 million, of the portfolio total. The negative credit migration experienced since the last review has resulted in the Weighted Average Rating Factor deteriorating to 'BB/B+' as of the last trustee report from 'BB+/BB-'during the last review, breaching its covenant of 'BB/BB-'.
The collateral deterioration has caused each of the overcollateralization (OC) ratios and all but one the interest coverage (IC) ratios to fall below their respective trigger levels. As of the latest trustee report, the Class I/II OC ratio, the Class III OC ratio and the Class IV OC ratio were 131.2%, 97.9% and 79.9%, respectively, versus triggers of 138.9%, 128.9%, and 119.0%, respectively. The Class I/II IC ratio, the Class III IC ratio and the Class IV IC ratio were 172.2%, 111.1% and 83.5%, respectively, versus triggers of 135.0%, 120.6%, and 115.0%, respectively.
At present, the transaction continues to make scheduled quarterly interest distributions to the class I and II notes, subsequent to which all other interest and principal proceeds are used to redeem class I principal in an attempt to bring coverage test levels into compliance. The class III and IV notes are currently not receiving any interest or principal payments, however, Fitch expects the class III notes to potentially receive some interest and principal payments in the future. The class IV notes are not expected to receive any future payments and have little prospect of any principal recovery.
The ratings on the class I and the class II notes address the likelihood that investors will receive full and timely payments of interest, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings on the class III and the class IV notes address the likelihood that investors will receive ultimate and compensating interest payments, as per the governing documents, as well as the stated balance of principal by the legal final maturity date. The ratings are based upon the capital structure of the transaction, the quality of the collateral, and the protections incorporated within the structure.
Fitch will continue to monitor and review this transaction for future rating adjustments. Additional transaction information and historical data are available on the Fitch Ratings web site at www.fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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.
Contacts:
Kevin Kendra, 212-908-0760
Brian
Vorderbrueggen, 212-908-9102
or
Media Relations:
Sandro
Scenga, 212-908-0278
