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NEW YORK--([ BUSINESS WIRE ])--Fitch Ratings has affirmed five classes of notes issued by Glacier Funding CDO II, Ltd. (Glacier Funding II) as follows:

--$67,447,203 class A-1 notes at 'CCCsf';

--$70,000,000 class A-2 notes at 'Dsf';

--$65,750,000 class B notes at 'Dsf';

--$22,488,647 class C notes at 'Csf';

--$6,019,117 class D 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 in its analysis, as described below, to conclude the rating affirmations for the rated notes.

Since the last review, the class A-1 notes have received approximately $17.4 million from both principal amortization and excess spread due to the failing class A/B Coverage Test. Approximately $1.3 million of excess spread was used to pay down the class A-1 notes over the past four distribution dates. However, these paydowns are offset by the continued deterioration of the underlying portfolio, with 16.2% of the portfolio downgraded a weighted average of 3.3 notches, and 1.2% upgraded a weighted average of 1.2 notches. The affirmation is further supported by cash flow modeling results, which indicate that the notes have passing ratings consistent with the results from last review.

The non-deferrable class A-2 and class B notes have not received their accrued interest since the acceleration of the transaction because proceeds have been diverted to redeem the class A-1 notes. These missed interest payments constitute a payment default; therefore these two classes are affirmed at 'Dsf'.

The class C and class D notes are not affected by the acceleration, but they remain significantly undercollateralized, indicating that default continues to appear inevitable at or prior to maturity.

Glacier Funding II is a structured finance collateralized debt obligation (SF CDO) that closed on Oct. 12, 2004 and is now monitored by Aventine Hill Capital, LLC., as a successor collateral manager. The portfolio is comprised of residential mortgage-backed securities (71.2%), commercial mortgage-backed securities (21.8%), structured finance collateralized debt obligations (3.8%), real estate investment trusts (1.7%), and consumer and commercial asset-backed securities (1.5%) from 2004 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.

The information used to assess these ratings was sourced from the asset manager, periodic servicer reports, note valuation reports, and the public domain.

Applicable Criteria and Related Research:

--'Global Structured Finance Rating Criteria' (June 6, 2012);

--'Global Rating Criteria for Structured Finance CDOs' (Oct. 6, 2011).

Applicable Criteria and Related Research:

Global Rating Criteria for Structured Finance CDOs

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=651560 ]

Global Structured Finance Rating Criteria

[ http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=679923 ]

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