Fitch Affirms 4 Classes of Diversified Asset Securitization Holdings II, L.P./Corp.

NEW YORK--()--Fitch Ratings has affirmed four classes and revised the Outlook on two classes of notes issued by Diversified Asset Securitization Holdings II, L.P./Corp. (DASH II) as follows:

--$6,992,481 class A-1 notes at 'BBsf'; Outlook to Stable from Negative;

--$44,285,724 class A-1L notes at 'BBsf'; Outlook to Stable from Negative;

--$50,000,000 class A-2L notes at 'Csf';

--$37,000,000 class B-1 notes 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, as described below, to conclude the rating affirmations for the rated notes.

The affirmations for the class A-1 and A-1L notes are due to the relatively stable performance of the transaction, with continued note paydowns offsetting negative deterioration of the underlying collateral. Since the last review, the notes have amortized approximately $38.4 million, or 42.8% of its previous balance, increasing the amount of credit enhancement available to the classes. Excess spread has also been available to pay down these notes on the past four payment dates due to a failing class B overcollateralization (OC) ratio. The affirmations are in line with the breakeven levels from the cash flow model.

The Outlook Stable on the class A-1 and A-1L notes reflects Fitch's expectations of near-term rating stability for the notes.

Breakevens for the class A-2L and class B notes were below the SF PCM's 'CCC' default level, the lowest level of defaults projected by SF PCM. For these classes, Fitch compared the respective credit enhancement levels to expected losses from the distressed and defaulted assets in the portfolio (rated 'CCsf' or lower). This comparison indicates that default appears to remain inevitable for both classes of notes at or prior to maturity. Accordingly, these notes are affirmed at 'Csf'.

DASH II is a cash flow structured finance collateralized debt obligation that closed on Sept. 13, 2000. The portfolio is currently monitored by Western Asset Management Co., who became the substitute asset manager for Asset Allocation & Management, LLC in November 2002 and actively managed the portfolio until DASH II exited its reinvestment period in 2005. The portfolio is composed of 55.8% residential mortgage-backed securities, 29.7% commercial and consumer asset-backed securities, and 14.5% commercial mortgage-backed securities from 1995 through 2005 vintage transactions.

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);

--'Fitch's Interest Rate Stress Assumptions for Structured Finance' (Jan. 29, 2013).

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

Global Criteria for Cash Flow Analysis in CDOs

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

Fitch's Interest Rate Stress Assumptions for Structured Finance

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=700189

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