Fitch Eyes Sunrise CDO Notes

Two classes of notes issued by Sunrise CDO I Ltd. and Sunrise CDO I Inc. have been placed on Rating Watch Negative by Fitch Ratings.Class B (rated BBB) represents second-priority senior secured floating-rate notes, and class C (rated B-minus) represents third-priority secured floating-rate notes, Fitch said. Both classes of notes are due Jan. 29, 2037. The transaction is a collateralized debt obligation supported by asset-backed securities, residential and commercial mortgage-backed securities, CDOs, and corporate debt from the domestic and emerging markets. "According to its July 23, 2004 trustee report, 8.67% of the portfolio represented defaulted, deferred interest [pay-in-kind], or written-down securities per Sunrise's governing documents," Fitch said. "An additional 5.14% of the portfolio was rated CCC or below. The portfolio default and rating performance has increased the risk to the class B and C notes to a point where the risk may no longer be consistent with their respective ratings."