OREANDA-NEWS. February 22, 2016. Fitch Ratings has downgraded three classes of Taberna Preferred Funding IX, Ltd. (Taberna IX), as follows:

--\\$52,014,718 Class A-1LAD Notes to 'Dsf' from 'Csf';
--\\$116,330,701 Class A-1LB Notes to 'Dsf' from 'Csf';
--\\$25,232,862 Class A-2LA Notes to 'Dsf' from 'Csf'.

KEY RATING DRIVERS

The rating downgrades reflect the default in payment of interest to the Class A-1LAD, A-1LB, and A-2LA Notes.

Taberna IX entered an Event of Default on Nov. 10, 2015 due to a default in the payment of interest on the non-deferrable class A-1LB and A-2LA notes. The Event of Default triggered the acceleration of the transaction on Nov. 30, 2015. Due to the acceleration, the class A-1LB and class A-2LA notes will not receive principal or interest payments until the more senior classes are paid in full. Additionally, on the Feb. 5, 2016 payment date, the Class A-1LAD notes failed to receive timely interest distribution. Since the trustee is seeking direction and clarification regarding the payment to the Class A-1LAD notes, and until the situation is resolved, no distribution will be made to the Class A-1LAD notes.

There are multiple outstanding Hedge Agreements in Taberna IX that are out of the money and require a significant payment by the CDO to the Swap Counterparty each quarter.

The class A-1LA, A-2LB, A-3LA, A-3LB, B-1L, and B-2L notes were not included in this review. Fitch does not rate the preferred shares in this transaction.

Taberna IX is a trust preferred collateralized debt obligation (TruPS CDO), which closed on June 28, 2007. The portfolio is composed primarily of trust preferred securities issued by REITs and is managed by TP Management LLC, an affiliate of Fortress Investment Group LLC.

RATING SENSITIVITIES

Significant paydowns and expiration of interest rate hedges, combined with stable or improving credit migration, can lead to limited upgrades for senior notes.

DUE DILIGENCE USAGE

No third party due diligence was reviewed in relation to this rating action.