Fitch Downgrades 1 Class of Northwestern Investment Management Company CBO I Fund Ltd./Corp.

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posted: 11 DAYS 18 HOURS AGO

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Fitch Ratings has downgraded one and affirmed two classes of notes issued by Northwestern Investment Management Company CBO I Fund Ltd./Corp. (Northwestern CBO I). A detailed list of rating actions follows at the end of this press release.

This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria', 'Global Rating Criteria for Corporate CDOs', and 'Criteria for Structured Finance Recovery Ratings'.

The class A notes of Northwestern CBO I are insured for interest and principal by Financial Security Assurance Inc (FSA). On Oct. 12, 2009, Fitch downgraded the rating of FSA to 'AA' from 'AA+', removed the rating from Rating Watch Negative, and assigned a Negative Rating Outlook. Therefore, the rating of the class A notes of Northwestern CBO I is also downgraded to 'AA', removed from Rating Watch Negative, and assigned a Negative Outlook.

Northwestern CBO I is a collateralized debt obligation (CDO) that closed Dec. 15, 1999 and is managed by Mason Street Advisors (formerly known as Northwestern Investment Management Company). The proceeds of the issuance were invested in a static portfolio consisting primarily of high yield corporate bonds. Due to poor collateral performance, the class A overcollateralization test has been failing since 2002. As a result, the classes B-1 and B-2 notes have not received any distributions since this time.

As of the Oct. 26, 2009 trustee report, more than 55% of the remaining portfolio assets of $31.4 million are considered defaulted. Given the limited recovery prospects of these defaulted names, Fitch expects insufficient proceeds will be available to meet all of the issuer's obligations. Fitch projects that all future interest and principal proceeds will be directed toward the class A notes after paying certain fees and expenses. The class A notes would likely suffer a principal impairment at maturity without the insurance policy provided by FSA. No future distributions are expected on the classes B-1 and B-2 notes.

Fitch has taken the following rating actions on the following classes of notes issued by Northwestern CBO I:

--$24,439,433 class A notes downgraded to 'AA' from 'AA+'; removed from Rating Watch Negative and assigned Negative Outlook;

--$15,000,000 class B-1 notes affirmed at 'C/RR6';

--$11,000,000 class B-2 notes affirmed at 'C/RR6'.

These rating actions reflect the application of Fitch's current criteria, which are available at ' www.fitchratings.com' and specifically include the following reports:

--'Global Structured Finance Rating Criteria' (Sept. 30, 2009);

--'Global Rating Criteria for Corporate CDOs' (April 30, 2008);

--'Criteria for Structured Finance Recovery Ratings' (Aug. 17, 2009).

Additional information is available at ' www.fitchratings.com'.

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