Standard & Poor's placed the ratings on 17 tranches from eight U.S. cash flow and hybrid ABS CDOs on CreditWatch with negative implications after the downgrade of 418 classes of U.S. RMBS transactions backed by closed-end second-lien mortgages.
Seven out of the eight CDO transactions on watch were issued in 2006; the other transaction was issued in 2003. Two of the eight CDOs are high-grade structured finance ABS CDOs, with primarily 'AAA' and 'AA' rated collateral, and six are mezzanine Structured Finance ABS CDOs, with collateral primarily rated 'A' and 'BBB.'
The exposures to the downgraded U.S. RMBS backed by closed-end second-lien collateral in the CDO transactions on watch ranged from 6.6% to 14.2% of the collateral assets.
An additional five CDOs with significant -- 3% or more -- exposure to the
U.S. RMBS backed by closed-end second-lien collateral downgraded already had tranche ratings on CreditWatch negative in connection with an ongoing review of CDOs with exposure to U.S. RMBS transactions backed by subprime first-lien mortgage collateral that were downgraded on July 12, 2007, S&P said. These CDOs did not have additional tranche ratings placed on CreditWatch negative.