Fitch Ratings announced Wednesday they downgraded 113 distressed bonds in 73 U.S. RMBS transactions to “Dsf.”
The downgrades indicate the bonds incurred a principal write-down.
Of all the bonds downgraded, 88 classes were previously rated 'Csf', nine classes were rated 'CCsf', and 16 classes were rated 'CCCsf'.
All ratings below 'CCCsf' indicate a default is likely, according to Fitch.
The Recovery Estimates (REs) of the defaulted bonds were not revised as part of this review, Fitch said. In addition, the review focused only on the bonds which defaulted and did not include any other bonds in the affected transactions.
“Of the 113 classes affected by these downgrades, 70 are Prime, 21 are Alt-A, and 12 are Subprime,” Fitch said. “The remaining transaction types are various other sectors. Approximately 58 percent of the bonds have Res of 75 percent to 100 percent, which indicates that the bonds will recover 75 percent to 100 percent of the current outstanding balance, while 4 percent have an RE of 0 percent.
Fitch said all of the affected classes had incurred a principal write-down and are expected to endure additional losses in the future.
Fitch said while the bonds that have defaulted are not expected to recover any material amount of lost principal in the future, there is a limited possibility that this may happen.
“In this unlikely scenario, Fitch would further review the affected class,” they said.