OREANDA-NEWS. S&P Global Ratings today raised its ratings on the class A-1R, A-1T, and A-2 floating-rate notes from RAIT Preferred Funding II Ltd., a U. S. commercial real estate collateralized debt obligations (CRE-CDO) transaction. Concurrently, we affirmed our ratings on eight other classes from the same transaction. (See list.) Today's rating actions follow our review of the transaction's performance using data from the Sept. 11, 2016 trustee report.

The upgrades reflect the transaction's $205.35 million in collective paydowns to the class A-1R and A-1T (pari passu) notes since our August 2014 rating actions. Following paydowns, class A-1R and A-1T are at 25.07% of the original issuance, down from 75.46% during our last review. The lower balances of the senior notes improved the reported overcollateralization (O/C) ratios. For instance, as per the September 2016 monthly report, the class A/B O/C ratio is at 179.86%, up from 147.56% in the July 2014 trustee report, which we used for our previous rating actions.

Though most of the assets of the underlying collateral are whole loans, a significant portion of them have had modifications. Consequently, though cash flows indicate a higher rating for most of the tranches, our analysis considered the above and also the credit quality of the assets backing the notes.

The affirmations on the eight classes reflect our view that available credit support is consistent with the current rating levels.

Because the transaction previously experienced subordinate debt cancellation, our ratings relied, in part, on a criteria interpretation of our global CDO methodology that is applicable to such situations. This involves the application of an additional rating stress, which is designed to assess the potential creditworthiness without the support of interest or principal diversion mechanisms linked to the outstanding subordinated tranches.

We will continue to review whether, in our view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and will take rating actions as we deem necessary.