Fitch Ratings affirms Heller SBA Corp. pass-through adjustable-rate
certificates, series 1998-1 as follows:
--Class A at 'AAsf'; Outlook Negative;
--Class M-1 at 'Asf'; Outlook Negative;
--Class M-2 at 'BBBsf'; Outlook Negative;
--Class M-3 at 'BBsf'; Outlook Negative;
--Class B at 'Bsf'; Outlook Negative.
The affirmations reflect increasing credit enhancement and strong
obligor loss coverage, despite high levels of delinquencies. As of the
July 2012 reporting period, 29.28% of the pool is currently delinquent.
Cumulative net losses to date are 3.45%. Due to delinquency performance
and the resulting loss expectation on the delinquent loans, the
transaction continues to experience multiple compression under Fitch's
cash flow modeling analysis, detailed below. However, obligor
concentration coverage is significantly strong with coverage exceeding
the obligor thresholds for the current ratings, as detailed below.
The Negative Rating Outlooks are a result of the higher delinquency roll
rate the transaction continues to experience. As late-stage
delinquencies continue through the liquidation process, credit
enhancement may be materially affected if ultimate recoveries are lower
than expected. Furthermore, Fitch will continue to monitor the series as
the transaction amortizes to assess the impact of increasing obligor
concentrations. As obligor counts for the pools continue to decline and
tail risk increases, Fitch will review the transaction for potential
ratings action or withdrawals.
In reviewing the transactions, Fitch took into account analytical
considerations outlined in Fitch's 'Global Structured Finance Rating
Criteria', issued June 6, 2012, including asset quality, credit
enhancement, financial structure, legal structure, and originator and
Fitch's analysis incorporated a review of collateral characteristics, in
particular, focusing on delinquent and defaulted loans within the pool.
All loans over 60 days delinquent were deemed defaulted loans. The
defaulted loans were applied loss and recovery expectations based on
collateral type and historical recovery performance to establish an
expected net loss assumption for the transaction. Fitch stressed the
cash flows generated by the underlying assets by applying its expected
net loss assumption. Furthermore, Fitch applied a loss multiplier to
evaluate break-even cash flow runs to determine the level of expected
cumulative losses the structure can withstand at a given rating level.
The loss multiplier scale utilized is consistent with that of other
commercial ABS transactions.
Additionally, to review possible concentration risks within the pool,
Fitch evaluated the impact of the default of the largest performing
obligors. Similar to the analysis detailed above, Fitch applied loss and
recovery expectations to the performing obligors based on collateral
type and historical recovery performance. The expected loss assumption
was then compared to the credit support available to the outstanding
notes given Fitch's expected losses on the currently defaulted loans.
Consistent with the obligor approach detailed in 'Rating US Equipment
Lease and Loan Securitizations', dated Jan. 12, 2012, Fitch applied
losses from the largest performing obligors commensurate with the
individual rating category. The number of obligors ranges from 20 at
'AAA' to five at 'B'.
Fitch will continue to closely monitor these transactions and may take
additional rating action in the event of changes in performance and
credit enhancement measures.
Additional information is available at 'www.fitchratings.com'.
The ratings above were solicited by, or on behalf of, the issuer, and
therefore, Fitch has been compensated for the provision of the ratings.
Applicable Criteria and Related Research:
--'Global Structured Finance Rating Criteria' June 6, 2012.
Applicable Criteria and Related Research:
Global Structured Finance Rating Criteria
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