Fitch Takes Various Rating Actions on C-BASS CBO VIII, Ltd./Corp.

NEW YORK--()--Fitch Ratings has upgraded and revised Rating Outlooks on two classes and affirmed three classes of notes issued by C-BASS CBO VIII, Ltd./Corp. (C-BASS VIII) as follows:

--$19,797,513 class A-2 notes upgraded to 'Asf' from 'BBBsf, Outlook to Stable from Positive;

--$18,350,000 class B notes upgraded to 'BBsf' from 'Bsf', Outlook to Stable from Negative;

--$20,700,000 class C notes affirmed at 'Csf';

--$5,874,338 class D-1 notes affirmed at 'Csf';

--$2,423,164 class D-2 notes affirmed at 'Csf'.

This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Structured Finance Portfolio Credit Model (SF PCM) for projecting future default levels for the underlying portfolio. These default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. Fitch also considered additional qualitative factors into its analysis to conclude the rating actions for the rated notes.

Since Fitch's last rating action in November 2011, the credit quality of the collateral has deteriorated with approximately 31.4% downgraded a weighted average 2.7 notches and 0.2% upgraded 3 notches. Currently, 61.9% of the portfolio has a Fitch-derived rating below investment grade and 42.1% is rated in the 'CCC' category or lower, compared to 54.7% and 43.6%, respectively, at last rating action.

The class A-1 notes paid in full on the May 2, 2012 distribution date and the class A-2 notes began to amortize, receiving $6.8 million, or 25.6% of their original balance, over the past three payment dates. The class A-2 and class B notes are upgraded due to continued amortization increasing credit enhancement for both classes. Most cash flow model scenarios indicate the classes can pass higher rating stresses; however, the classes are upgraded only one category because the portfolio is becoming more concentrated and continues to experience negative migration, making both classes susceptible to adverse selection as the portfolio continues to pay down.

The Outlook is revised to Stable for the class A-2 and class B notes because there is cushion in the modeling results available to mitigate further deterioration in the portfolio.

Breakeven levels for the class C and class D notes are below SF PCM's 'CCC' default level, the lowest level of defaults projected by SF PCM. The class C notes are receiving partial interest payments each period and continue to accumulate deferred interest. The class D notes are expected to receive little if any future distributions due to insufficient interest collections and failing class C coverage tests. Both classes of notes are affirmed at 'Csf'.

C-BASS VIII is a cash structured finance (SF) collateralized debt obligation (CDO) that closed on Nov. 10, 2003 and is monitored by NIC Management LLC. As of the Oct. 26, 2012 trustee report, the portfolio is composed of residential mortgage-backed securities (59.3%), consumer and commercial asset-backed securities (27.2%), and SF CDOs (13.5%).

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)

--'Global Rating Criteria for Structured Finance CDOs' (Oct. 3, 2012)

--'Global Criteria for Cash Flow Analysis in CDOs' (Sept. 13, 2012)

--'Criteria for Interest Rate Stresses in Structured Finance Transactions' (March 20, 2012)

Applicable Criteria and Related Research:

Global Structured Finance Rating Criteria

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923

Global Rating Criteria for Structured Finance CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=690203

Criteria for Interest Rate Stresses in Structured Finance Transactions

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=673560

Global Criteria for Cash Flow Analysis in CDOs

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=688518

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