Fitch Ratings downgraded 78 tranches (69 public ratings and nine private ratings) and affirmed 18 tranches (all public) from 38 European structured finance CDOs.
Fitch has also assigned recovery ratings to the notes. All of the affected transactions were previously downgraded to 'B' and below in 2008 resulting from actual and expected deterioration in portfolio credit quality, primarily related to U.S. Alt-A and subprime RMBS.
Fitch said that its decision reflects the continued deterioration in portfolio credit quality, particularly in relation to defaulted assets and assets rated 'CCC' or below.
The rating agency analyzed the current available credit enhancement for each tranche in relation to asset buckets rated 'C', 'CC' and 'CCC'.
In most cases the existing 'C' buckets would exceed the available credit enhancement of the notes, and hence have resulted in the majority of actions being downgrades to the 'C' rating category.
In most cases, Fitch has also assigned Recovery Ratings of 'RR6', reflecting the expectation that the tranches may continue to receive interest payments for a limited time before credit events in the portfolios are called and settled, at which time it is likely that as most tranches are comparatively thin, the balance of the notes would be completely written down.