Daily News: August 31, 2012

Fitch Ups Outlook on Three Classes of NewStar Notes

Fitch Ratings said it has affirmed six classes of notes issued by NewStar Commercial Loan Trust 2007-1 and revised the rating outlooks on three classes. The full list of ratings actions follows:

  • $318,104,654 class A-1 notes at AAAsf; outlook stable;

  • $62,389,693 class A-2 notes at AAAsf; outlook stable;

  • $24,000,000 class B notes at AAsf; outlook stable;

  • $58,500,000 class C notes at Asf; outlook to stable from negative;

  • $27,000,000 class D notes at BBB+sf; outlook to stable from negative;

  • $29,100,000 class E notes at BBsf; outlook to stable from negative.

    Fitch said the affirmations are based on the stable performance of the transaction since Fitch’s last rating action in September 2011. Credit enhancement levels have increased slightly for all classes in the transaction. According to the current loan tape, the portfolio has no charged-off loans, compared to 3.6% at last review. The portfolio credit quality has remained generally unchanged from the last review, with a weighted average rating factor (WARF) of B/B-.

    The notes of NewStar 2007-1 benefit from the credit enhancement in the form of collateral coverage, note subordination, and the application of excess spread via the additional principal amount (APA). For every dollar that is charged off of the performing portfolio, the APA feature directs the excess interest proceeds otherwise available to the certificate holders to pay down the senior-most notes in an amount equal to the charged-off amount. The APA completely paid off on the February 2010 payment date, and as a result, the certificate holders resumed receiving excess interest proceeds on the August 2010 payment date.

    In addition, Fitch considers approximately 16.1% of the total commitments of the July 2012 portfolio in the CCC category or below, compared to 15.9% in the last review. However, approximately 3.8% were considered at CCC due to the lack of rating information. The transaction is still in its reinvestment period, which is scheduled to end in May 2013.

    Fitch has revised the outlooks on the class C, D and E notes to reflect its expectation that the performance of the portfolio and the outstanding liabilities will remain stable in the near term.