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T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, September 11, 2011, Vol. 15, No. 252
Headlines
ACAS BUSINESS: Moody's Upgrades Ratings of Four SME CLO Notes
ACLC FRANCHISE: Moody's Raises Rating of Franchise Loan to 'Ba2'
ADVANTA BUSINESS: Moody's Upgrades Class B Notes Rating to 'Caa2'
AMERICREDIT AUTOMOBILE: Fitch To Put 'BBsf' Rating on Cl. E Notes
AMERICREDIT AUTOMOBILE: S&P Gives 'BB+' Rating on Class E Notes
ANSONIA CDO: Moody's Affirms Cl. A-FL Notes Rating at 'Caa3'
ARCAP 2005-1: S&P Lowers Rating on Class B Certificates to 'D'
ARLO IX: S&P Raises Rating on Class PS 2007 From 'B+' to 'BB-'
ASHFORD CDO: Moody's Raises Rating of Class A-1LB Notes to 'Ba2'
ATRIUM COMPANIES: Moody's Lowers Corporate Family Rating to 'Caa1'
BAKER STREET: S&P Puts 'CCC-' Rating on Class E on Watch Positive
BANC OF AMERICA: Moody's Affirms Class K Notes Rating at 'Ba1'
BEAR STEARNS: Moody's Affirms Rating of Cl. G BSCMS 1998-C1 at Ba2
BEAR STEARNS: Moody's Affirms Rating of Cl. H BSCMS 1999-C1 at B2
BEAR STEARNS: Moody's Downgrades Rating of Class Notes H to 'B1'
BLACKROCK SENIOR: Moody's Raises Rating of Class D Notes to 'Ba2'
CARLYLE HIGH: Moody's Upgrades Class D Notes Rating to 'Ba1'
CARLYLE HIGH: Moody's Upgrades Rating of Class D Notes to 'Ba2'
CARLYLE MCLAREN: Moody's Raises Rating of Class B-1L Notes to Ba1
CHELSEA PARK: Moody's Upgrades Ratings of Five Classes of Notes
CLEAR LAKE: Moody's Upgrades Ratings of Five Classes of Notes
CLYDESDALE CLO: Moodys' Raises Rating of Class D Notes to 'Ba2'
CLYDESDALE CLO: Moody's Upgrades Ratings of Seven Classes of Notes
COMM 2001-J2: Moody's Lowers Rating of Class G Notes to 'B2'
COMM 2006-C8: Moody's Affirms Rating of Class B at 'B2'
CREDIT SUISSE: S&P Lowers Ratings on 5 Classes of Certs. to 'D'
CSMC 2010-UD1: Moody's Affirms Class B-B Notes Rating at 'Ba1'
CWCAPITAL COBALT: S&P Lowers Ratings on 5 Classes to 'CCC-'
DBUBS 2011: Moody's Assigns 'Ba2' Definitive Rating to Cl. E Notes
DEUTSCHE BANK: Fitch Puts Low-B Rating on Two Note Classes
DRYDEN XVI: Moody's Upgrades Ratings of Five Classes of CLO Notes
DRYDEN XVIII: Moody's Raises Ratings of Class B Notes to 'Ba2'
DUANE STREET: Moody's Upgrades Rating of Class D Notes to 'Ba1'
EDUCATION LOANS: S&P Keeps 'BB' Rating on Class B on Watch Neg
FIRST UNION: S&P Lowers Ratings on 2 Classes of Certs. to 'D'
FORE CLO: Moody's Upgrades Ratings of Four Classes of Notes
GATEWAY CLO: Moody's Upgrades Class B Notes Rating to 'Ba3'
GE CAPITAL: Moody's Upgrades Rating of Class H to 'Caa1'
GOLUB CAPITAL: S&P Gives 'B' Rating on Class F Deferrable Notes
GS MORTGAGE: Fitch Affirms Junk Rating on Sixteen Certificates
GSMPS MORTGAGE: Moody's Downgrades $72-Mil. of FHA-VA RMBS
GSMPS MORTGAGE: Moody's Downgrades Cl. B1 Notes Rating to 'B2'
GSMPS PASS-THROUGH: Moody's Lowers Cl. B-1 Notes Rating to 'Ba3'
GUGGENHEIM STRUCTURED: Moody's Affirms Cl. A-1 Notes Rating at Ba3
GUGGENHEIM STRUCTURED: Moody's Ups Ratings of Cl. B Notes to Ba2
HARCH CLO: Moody's Upgrades Class D Notes Rating to 'Ba1'
JP MORGAN: Fitch Affirms Junk Rating on Sixteen Note Classes
JP MORGAN: Fitch Junks Rating on Three Note Classes
KEYSTONE OWNER: Moody's Upgrades Rating of M-1 Notes to 'Ba1'
KINGSLAND II: Moody's Upgrades Class C Notes Rating to 'Ba2'
KINGSLAND IV: Moody's Upgrades Rating of Class D Notes to 'Ba2'
KKR FINANCIAL: Moody's Upgrades Class F Notes Rating to 'Ba2'
KNOWLEDGEFUNDING OHIO: Fitch Junks Ratings on Two Note Classes
LANDMARK VII: Moody's Raises Ratings of Five Classes of CLO Notes
LATITUDE CLO: Moody's Upgrades Ratings of Class C Notes to 'Ba3'
LCM VI: Moody's Upgrades Ratings of Class E Notes to 'Ba2'
LIGHTPOINT CLO: Moody's Ups $19MM Class D Notes to 'B1'
LIGHTPOINT CLO: Moody's Ups $25MM Class D Notes Rating to 'Ba2'
LIME STREET: Moody's Raises Rating of Class D Notes to 'Ba2'
LVII RESECURITIZATION: S&P Cuts Ratings on 2 Note Classes to 'CCC'
MADISON PARK: Moody's Upgrades Rating of Class C Notes to 'Ba1'
MARIAH RE: S&P Lowers Rating on Series 2010-1 Notes to 'CCC+'
MARLBOROUGH STREET: Moody's Raises Rating of Class D Notes to Ba1
MERRILL LYNCH: Moody's Affirms Rating of Class D Notes at 'B2'
MOMENTUM CAPITAL: Moody's Raises Rating of Class D Notes to 'Ba1'
MORGAN STANLEY: DBRS Confirms Class C Rating at 'BB'
MORGAN STANLEY: Moody's Affirms Rating of Class J Notes at 'Ba1'
MORGAN STANLEY: Moody's Upgrades Rating of Class D Notes to 'Ba2'
MOUNTAIN VIEW: Moody's Upgrades Class D Notes Rating to 'Ba1'
MOUNTAIN VIEW: Moody's Upgrades Rating of Class D Notes to 'Ba1'
MT. WILSON: Moody's Upgrades Class D Notes Rating to 'Ba2'
NAAC REPERFORMING: Moody's Downgrades Class M Notes Rating to Ba3
NACM CLO: Moody's Upgrades Class D Notes Rating to 'Ba3'
NEWCASTLE CDO: Moody's Affirms Class I-B Notes Rating at 'B3'
NEWTON CDO: S&P Raises Ratings on 2 Classes of Notes to 'BB+'
NOB HILL: Moody's Upgrades Ratings of Six Classes of Notes
OAK HILL: Moody's Upgrades Rating of Class C Notes to 'Ba1'
OCTAGON INVESTMENT: Moody's Upgrades Ratings of $41MM of CLO Notes
PHOENIX CLO: Moody's Upgrades Ratings of Seven Classes of Notes
PROSPECT PARK: Moody's Upgrades Ratings of 3 Classes of CLO Notes
RAMPART CLO: Moody's Upgrades Ratings of Four Classes of Notes
ROSEDALE CLO: Moody's Upgrades Ratings of Five Classes of Notes
SANTANDER DRIVE: Moody's Assigns (P)Ba2 Rating to Class E Notes
SANTANDER DRIVE: S&P Gives 'BB' Rating on Class E Auto Notes
SASCO 2007-BHC1: S&P Lowers Rating on Class A-1 From 'CCC+' to 'D'
SASCO FHA/VA: Moody's Lowers Rating of Series 1999-RF1 to 'B2'
SASCO REVERSE: Moody's Lowers Rating of $808 MM Mortgage Bonds
SATURN CLO: Moody's Upgrades Ratings of Six Classes of Notes
SATURN VENTURES: Moody's Affirms Rating of Class B Notes at 'C'
SCHOONER TRUST: DBRS Confirms Class G Rating at 'BB'
SHINNECOCK CLO: Moody's Upgrades Ratings of Five Classes of Notes
SIERRA TIMESHARE: S&P Assigns 'BB' Rating on Class C Notes
SILVERADO CLO: Moody's Raises Rating of Class C Notes to 'Ba1'
SPRINGLEAF MORTGAGE: S&P Gives 'B' Rating on Class B-2 Notes
STONE TOWER: Moody's Raises Class C Notes Rating to 'Ba1'
STONE TOWER: Moody's Upgrades Class D Notes Rating to 'Ba3'
STONE TOWER: Moody's Upgrades Rating of Class C-2 Notes to 'Ba1'
STRUCTURED ASSET: Moody's Downgrades Rating of Cl. 3-A1 to 'B3'
SYMPHONY CLO: Moody's Raises Rating of Class C Notes to 'Ba2'
SYMPHONY CLO: Moody's Upgrades Rating of Class D Notes to 'Ba2'
UNION PLANTERS: Moody's Lowers Ratings of $9.4-Mil. of FHA-VA RMBS
US EDUCATION: Fitch Affirms 'Bsf' Ratings on Four Note Classes
VENTURA V: Moody's Upgrades Ratings of Class C Notes to 'Ba3'
VENTURE VII: Moody's Raises Rating of Class D Notes to 'Ba1'
VERITAS CLO: Moody's Upgrades Rating of Class D Notes to 'Ba1'
WACHOVIA BANK: Fitch Junks Rating on Nine Note Classes
WACHOVIA BANK: Modeled Losses Cue Fitch to Downgrade Ratings
WAMU COMMERCIAL: S&P Lowers Rating on Class O Certificates to 'D'
WASATCH CLO: Moody's Upgrades Ratings of 8 Classes of CLO Notes
WHITEHORSE III: Moody's Upgrades Class A-3L Notes Rating to 'Ba1'
ZAIS INVESTMENT: Moody's Raises Ratings of Class A-1 Notes to Ba1
* S&P Lowers Ratings on 11 Classes of Certificates to 'D'
* S&P Lowers Ratings on 19 Classes of Certificates to 'D'
* S&P Lowers Ratings on Three Classes of Certificates to 'D'
*********
ACAS BUSINESS: Moody's Upgrades Ratings of Four SME CLO Notes
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by ACAS Business Loan Trust 2006-1:
US$291,000,000 Class A Floating Rate Asset Backed Notes Due 2019
(current outstanding balance of $76,630,812.35), Upgraded to Aaa
(sf); previously on July 9, 2010 Downgraded to A3 (sf);
US$37,000,000 Class B Floating Rate Deferrable Asset Backed Notes
Due 2019, Upgraded to Aa3 (sf); previously on July 9, 2010
Downgraded to Ba1 (sf);
US$72,500,000 Class C Floating Rate Deferrable Asset Backed Notes
Due 2019, Upgraded to Ba1 (sf); previously on July 9, 2010
Downgraded to B3 (sf);
US$35,500,000 Class D Floating Rate Deferrable Asset Backed Notes
Due 2019, Upgraded to B1 (sf); previously on July 9, 2010
Downgraded to Caa3 (sf).
RATINGS RATIONALE
According to Moody's, the rating action taken on the notes is
primarily a result of the substantial delevering of the Class A
Notes, which have been paid down 63% or $130.3 million since the
rating action in July 2010. The rating action also applies Moody's
revised CLO assumptions described in "Moody's Approach to Rating
Collateralized Loan Obligations" published in June 2011, whose
primary changes to the modeling assumptions include (1) a removal
of the temporary 30% default probability macro stress implemented
in February 2009 as well as (2) increased BET liability stress
factors and increased recovery rate assumptions.
The action also reflects consideration of credit improvement of
the underlying portfolio since the rating action in July 2010.
Based on the August 2011 servicer report, the weighted average
rating factor is 4326 compared to 4715 in May 2010. Additionally,
the par collateralization shortfall in the deal, as reflected in
the Additional Principal Amount, has decreased since the last
rating action. The Additional Principal Amount is the excess of
the aggregate outstanding principal balance of the liabilities
over the sum of (1) the aggregate outstanding loan balance of the
assets plus (2) principal collections on deposit. This amount
decreases as diversion of excess interest and proceeds from sales
of the defaulted assets are used to amortize the Notes. Since last
May, the Additional Principal Amount of the transaction has
decreased from $57.5 million to $41 million.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the servicer's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $244.6 million, a
weighted average default probability of 35.63% (implying a WARF of
5788), a weighted average recovery rate upon default of 25.21%,
and a diversity score of 16. The default and recovery properties
of the collateral pool are incorporated in cash flow model
analysis where they are subject to stresses as a function of the
target rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
ACAS Business Loan Trust 2006-1, issued in July 2006, is a
collateralized loan obligation backed primarily by a portfolio of
non-senior secured middle-market loans
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011. In addition, due to the low
diversity of the collateral pool, CDOROM 2.8 was used to simulate
a default distribution that was then applied as an input in the
cash flow model. Moody's also supplemented its modeling with
individual scenario analysis to assess the ratings impact of jump-
to-default by certain large obligors.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Delevering: The main source of uncertainty in this transaction
is whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to
high prepayment levels in the loan market and/or collateral
sales by the manager, which may have significant impact on the
notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties.
3) Exposure to credit estimates: The deal is exposed to a large
number of securities whose default probabilities are assessed
through credit estimates. In the event that Moody's is not
provided the necessary information to update the credit
estimates in a timely fashion, the transaction may be impacted
by any default probability stresses Moody's may assume in lieu
of updated credit estimates. Moody's also conducted stress
tests to assess the collateral pool's concentration risk in
obligors bearing a credit estimate that constitute more than 3%
of the collateral pool.
4) Lack of portfolio granularity: The performance of the portfolio
depends to a large extent on the credit conditions of a few
large obligors that are rated Caa1 or lower, especially when
they experience jump to default. Due to the deal's low
diversity score and lack of granularity, Moody's supplemented
its typical Binomial Expansion Technique analysis with a
simulated default distribution using Moody's CDOROM(TM)
software and individual scenario analysis.
ACLC FRANCHISE: Moody's Raises Rating of Franchise Loan to 'Ba2'
----------------------------------------------------------------
Moody's Investors Service has upgraded the Class A-3 certificate
from AMRESCO Commercial Finance Inc.'s 1998-A franchise loan
securitization. The certificate is backed by franchise loans made
to fast-food restaurants, and quick service convenience stores.
The complete rating action is as follows:
Issuer: ACLC Franchise Loan Receivables Trust 1998-A
A-3, Upgraded to Ba2 (sf); previously on May 18, 2004 Downgraded
to B2 (sf)
RATINGS RATIONALE
The rating action was prompted by the high level of credit
enhancement available to protect noteholders from collateral
losses relative to the current rating. As of the August 25th
payment date, credit enhancement for the Class A-3 certificate is
provided by a 46% subordination of the Class B certificate. Cash
flows from the underlying pool have been steady for the past
several years, and continued steady cash flows will allow for the
existing credit enhancement to increase over time as a percentage
of the outstanding pool balance. The new rating reflects the
underlying concentration and default risks in the transaction as
well as our view on future performance of the collateral
properties.
Methodology
In order to estimate losses on the collateral pool, Moody's
calculates the expected loss given default of the obligors that
have become nonperforming, and also estimates future losses on
performing portion of the pool, all as a percentage of the
outstanding pool. In evaluating the nonperforming loans, key
factors include collateral valuations and expected recovery rates,
volatility around those recovery rates, historical obligor
performance, time until recovery or liquidation on defaulted
obligors, concessions due to restructuring which may negatively
impact the overall cash flow of the trust and/or the collateral,
and future industry expectations. Net losses are then evaluated
against the available credit enhancement provided by
overcollateralization, subordination, and excess spread.
Sufficiency of coverage is considered in light of remaining
borrower concentrations and concepts, remaining bond maturities,
and economic outlook.
ADVANTA BUSINESS: Moody's Upgrades Class B Notes Rating to 'Caa2'
-----------------------------------------------------------------
Moody's Investors Service has upgraded four classes of
AdvantaSeries Class B notes issued out of the Advanta Business
Card Master Trust to Caa2(sf) from Ca(sf). These notes are backed
by an approximately $790 million revolving pool of unsecured
credit card receivables that were marketed to small business
owners and business professionals.
RATIONALE
The decision to upgrade the Class B notes is driven primarily by a
material improvement in the delinquency rate, a harbinger of
future losses, while other performance metrics remain stable. For
example, the total delinquency rate has fallen from a peak of
15.3% in October 2010 to 9.9% in July 2011. This improvement in
the delinquency rate is expected to cause charge-offs to fall in
upcoming months. Falling charge-offs, all else being equal, will
reduce the losses that Class B noteholders will suffer. Moody's is
therefore reducing Moody's loss estimate for the Class B Notes to
around 10%, down from Moody's current 35% loss estimate. Following
the August distribution date, Class B noteholders have been repaid
40.6% of the original note balance, while at the same time
suffering a write-down of 2.6%.
In light of the recent Trust performance, Moody's has adjusted
Moody's charge-off rate range of expectations to 15%-25%, down
from the previous range of 35%-45%. The current Principal Payment
Rate (PPR) and Yield ranges remain unchanged at 2.5%-4.5% and 17%-
22%, respectively. Performance for the three metrics has been
generally inside Moody's ranges of expectations for the last year.
Moody's performance expectations for a given variable indicate
Moody's forward-looking view of the likely range of performance
over the medium term. From time to time, Moody's may, if
warranted, change these expectations. Performance that falls
outside the given range may indicate that the collateral's credit
quality is stronger or weaker than Moody's had anticipated when
the related securities were rated. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
The complete rating actions are:
Issuer: Advanta Business Card Master Trust, AdvantaSeries
$57,139,073 Class B(2005-B1) Asset Backed Notes, upgraded to
Caa2(sf) from Ca(sf); previously on May 15, 2009 downgraded to
Ca(sf) from B3(sf)
$71,423,841 Class B(2006-B2) Asset Backed Notes, upgraded to
Caa2(sf) from Ca(sf); previously on May 15, 2009 downgraded to
Ca(sf) from B3(sf)
$57,139,073 Class B(2007-B1) Asset Backed Notes, upgraded to
Caa2(sf) from Ca(sf); previously on May 15, 2009 downgraded to
Ca(sf) from B3(sf)
$57,139,073 Class B(2007-B2) Asset Backed Notes, upgraded to
Caa2(sf) from Ca(sf); previously on May 15, 2009 downgraded to
Ca(sf) from B3(sf)
METHODOLOGY
The principal methodology used in rating these transactions was
"Moody's Approach To Rating Credit Card Receivables-Backed
Securities", published in April 2007.
AMERICREDIT AUTOMOBILE: Fitch To Put 'BBsf' Rating on Cl. E Notes
-----------------------------------------------------------------
Fitch Ratings expects to rate AmeriCredit Automobile Receivables
Trust, series 2011-4.
Fitch's stress and rating sensitivity analysis are discussed in
the presale report titled AmeriCredit Automobile Receivables Trust
2011-4', dated Sept. 6, 2011, which is available on Fitch's web
site.
Fitch expects to assign the following ratings:
-- $148,800,000 class A-1 notes 'F1+sf';
-- $261,000,000 class A-2 notes 'AAAsf'; Outlook Stable;
-- $157,201,000 class A-3 notes 'AAAsf'; Outlook Stable;
-- $61,539,000 class B notes 'AAsf'; Outlook Stable;
-- $76,393,000 class C notes 'Asf'; Outlook Stable;
-- $75,120,000 class D notes 'BBBsf'; Outlook Stable;
-- $19,947,000 class E notes 'BBsf'; Outlook Stable.
AMERICREDIT AUTOMOBILE: S&P Gives 'BB+' Rating on Class E Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to AmeriCredit Automobile Receivables Trust 2011-4's
$800 million automobile receivables-backed notes series 2011-4.
The note issuance is an asset-backed securities transaction backed
by subprime auto loan receivables.
The preliminary ratings are based on information as of Sept. 6,
2011. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
The availability of approximately 44.3%, 39.3%, 32.4%, 26.2%,
and 23.1% credit support for the class A, B, C, D, and E notes
(based on stressed cash-flow scenarios, including excess
spread), which provides coverage of more than 3.50x, 3.00x,
2.55x, 1.75x, and 1.60x our 11.75%-12.25% expected cumulative
net loss range for the class A, B, C, D, and E notes. These
credit support levels are commensurate with the assigned
preliminary 'AAA (sf)', 'AA (sf)', 'A+ (sf)', 'BBB (sf)', and
'BB+ (sf)' ratings on the class A, B, C, D, and E notes (for
more information, see the Expected Loss and Cash Flow Modeling
sections).
"Our expectation that under a moderate, or 'BBB', stress
scenario, our ratings on the class A, B, and C notes will
remain within one rating category of the preliminary ratings
(all else being equal) during the first year. This is within
the one-category tolerance for 'AAA (sf)' and 'AA (sf)' rated
securities and within the two-category tolerance for 'A (sf)'
rated securities, as outlined in our credit stability criteria
(see 'Methodology: Credit Stability Criteria,' published
May 3, 2010). In addition, under this moderate stress
scenario, we expect that our ratings on the class D and E
notes will remain within the two-category tolerance for 'BBB
(sf)' and 'BB (sf)' rated securities over the first year. (The
rating stability criteria doesn't specify the tolerance for
ratings with pluses, only the rating category.)," S&P stated.
The credit enhancement in the form of subordination,
overcollateralization, a reserve account, and excess spread
(for more information, see the Credit Enhancement Summary
table).
The timely interest and ultimate principal payments made under
the stressed cash-flow modeling scenarios, which are
consistent with the assigned preliminary ratings.
The collateral characteristics of the securitized pool of
subprime auto loans.
"General Motors Financial Co. Inc.'s (GM Financial, formerly
known as AmeriCredit Corp.; B+/Stable/--) extensive
securitization performance history going back to 1994. On
March 30, 2011, Standard & Poor's Ratings Services raised its
long-term counterparty credit rating on GM Financial to 'B+'
from 'B' and removed the ratings from CreditWatch positive,
where we placed them on Oct. 8, 2010," S&P related.
The transaction's payment and legal structures.
Preliminary Ratings Assigned
AmeriCredit Automobile Receivables Trust 2011-4
Class Rating Type Interest Amount
rate(i) (mil. $)
A-1 A-1+ (sf) Senior Fixed 148.800
A-2 AAA (sf) Senior Fixed 261.000
A-3 AAA (sf) Senior Fixed 157.201
B AA (sf) Subordinate Fixed 61.539
C A+ (sf) Subordinate Fixed 76.393
D BBB (sf) Subordinate Fixed 75.120
E(ii) BB+ (sf) Subordinate Fixed 19.947
(i)The actual coupons of these tranches will be determined on the
pricing date. (ii)Class E will be privately placed and is not
included in the public offering amount.
ANSONIA CDO: Moody's Affirms Cl. A-FL Notes Rating at 'Caa3'
------------------------------------------------------------
Moody's has affirmed all classes of Notes issued by Ansonia CDO
2006-1, Ltd. The affirmation is a result of the key transaction
parameters performing within levels commensurate with the existing
ratings levels. The rating action is the result of Moody's on-
going surveillance of commercial real estate collateralized debt
obligation (CRE CDO) transactions.
Cl. A-FL, Affirmed at Caa3 (sf); previously on Oct 13, 2010
Downgraded to Caa3 (sf)
Cl. A-FX, Affirmed at Caa3 (sf); previously on Oct 13, 2010
Downgraded to Caa3 (sf)
Cl. B, Affirmed at C (sf); previously on Feb 2, 2010 Downgraded to
C (sf)
Cl. C, Affirmed at C (sf); previously on Feb 2, 2010 Downgraded to
C (sf)
Cl. D, Affirmed at C (sf); previously on Feb 2, 2010 Downgraded to
C (sf)
Cl. E, Affirmed at C (sf); previously on Feb 2, 2010 Downgraded to
C (sf)
Cl. F, Affirmed at C (sf); previously on Feb 2, 2010 Downgraded to
C (sf)
Cl. G, Affirmed at C (sf); previously on Feb 2, 2010 Downgraded to
C (sf)
Cl. H, Affirmed at C (sf); previously on Feb 2, 2010 Downgraded to
C (sf)
RATINGS RATIONALE
Ansonia CDO 2006-1, Ltd. is a static cash CRE CDO transaction
backed by a portfolio of commercial mortgage backed securities
(CMBS) (91.9% of the collateral pool balance), real estate
investment trust (REIT) debt (6.8%), and CRE CDO debt (1.3%). As
of the August 24, 2011 Trustee report, the aggregate Note balance
of the transaction, including Preferred Shares, excluding the
balances of the Defaulted Interest and Deferred Interest , has
decreased to $764.9 million from $806.7 million at issuance, with
the paydown directed to the Class A-FL and A-FX Notes. The paydown
was mainly due to payments of interest in respect of Credit
Impaired Securities being classified as Principal Proceeds per the
Indenture dated as of November 14, 2006.
There are only five assets with par balance of $27.5 million (4.7%
of the current collateral pool balance) that are considered
Performing as of the August 24, 2011 Trustee report. The remaining
95.3% of the collateral are classified as Credit Impaired
Securities, Imminently Credit Impaired Securities, or Non-
Performing Securities. As of August 24, 2011, total collateral par
amount has decreased to 584.8 million from $806.7 million at
issuance. The reduction of the collateral par amount was mainly
due to realized losses to the transaction from CMBS collateral.
On May 5, 2009, non-payment of full interest on certain classes of
Notes caused an Event of Default (EOD). As of the August 24, 2011
Trustee report, the EOD is continuing and a declaration of
acceleration of Maturity has not been made. While the risk of
collateral liquidation is still a possibility, the acceleration of
Maturity has not been declared thereby reducing the risk of much
higher loss severities from such liquidation under the current
stressed environment, as outlined in Moody's performance
expectations described below.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has completed updated credit estimates for the non-Moody's
rated collateral. The bottom-dollar WARF is a measure of the
default probability within a collateral pool. Moody's modeled a
bottom-dollar WARF of 8,189 compared to 7,647 at last review. The
distribution of current ratings and credit estimates is as
follows: Aaa-Aa3 (0.2% compared to 0.0% at last review), A1-A3
(0.6% compared to 0.7% at last review), Baa1-Baa3 (5.9% compared
to 5.0% at last review), Ba1-Ba3 (2.3% compared to 4.7% at last
review), B1-B3 (8.6% compared to 11.1% at last review), and Caa1-C
(82.4% compared to 78.5% at last review).
WAL acts to adjust the probability of default of the collateral
assets in the pool for time. Moody's modeled to a WAL of 5.6 years
compared to 6.3 years at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed 3.7%
WARR, compared to 3.9% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 100%, the same as at last review.
Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO
rating models, which was released on January 24, 2011.
The cash flow model, CDOEdge(R) v3.2.1.0, was used to analyze the
cash flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
3.7% to 2% or up to 7.8% would result in average rating movement
on the rated tranches of 0 to 1 notches downward or no changes to
the current ratings, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption uncertainty
are the current sluggish macroeconomic environment and performance
in the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are
continuing to show signs of recovery through the first half of
2011, while recovery in the non-core office and retail sectors are
tied to pace of recovery of the broader economy. Core office
markets are showing signs of recovery through lending and leasing
activity. The availability of debt capital continues to improve
with terms returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The principal methodology used in these ratings was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Other methodologies used in these ratings were "Moody's Approach
to Rating Commercial Real Estate CDOs" published in July 2011.
ARCAP 2005-1: S&P Lowers Rating on Class B Certificates to 'D'
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on four
classes from ARCap 2005-1 Resecuritization Trust (ARCap 2005-1).
"At the same time, we affirmed our ratings on seven additional
classes from the same transaction," S&P said.
"The downgrades and affirmations primarily reflect our analysis of
the interest shortfalls affecting the transaction. Class C and all
of the classes subordinate to it did not receive full interest
according to the Aug. 23, 2011 remittance report. We downgraded
the nondeferrable class B to 'D (sf)' from 'B- (sf)' because it
experienced interest shortfalls according to the July 2011
remittance report. The affirmations also considered ARCap 2005-1's
underlying CMBS collateral, as well as the transaction structure,"
S&P related.
According to the Aug. 23, 2011, remittance report, remaining
deferred interest to the transaction total $47.0 million, which
affected class C and all of the classes subordinate to it. The
interest shortfalls primarily resulted from shortfalls on the
underlying CMBS collateral. The interest shortfalls resulted
from interest shortfalls on 14 of the underlying CMBS transactions
primarily due to the master servicer's recovery of prior advances,
appraisal subordinate entitlement reductions (ASERs), servicers'
nonrecoverability determinations for advances, and special
servicing fees. It is our understanding that interest shortfalls
also resulted from the allocation of interest proceeds accrued
from defaulted collateral securities to principal proceeds.
According to the transaction's August remittance report, the trust
allocated $261,836 of interest proceeds from defaulted collateral
as principal proceeds.
According to the Aug. 23, 2011, trustee report, ARCap 2005-1 is
collateralized by 89 CMBS classes ($390.5 million, 100%) from 15
distinct transactions issued between 1999 and 2005.
Standard & Poor's analyzed ARCap 2005-1 according to its current
criteria.
"Our analysis is consistent with the lowered and affirmed
ratings," S&P said.
Ratings Lowered
ARCap 2005-1 Resecuritization Trust
Collateralized debt obligation certificates
Rating
Class To From
B D (sf) B- (sf)
C CCC- (sf) CCC+ (sf)
D CCC- (sf) CCC (sf)
E CCC- (sf) CCC (sf)
Ratings Affirmed
ARCap 2005-1 Resecuritization Trust
Collateralized debt obligation certificates
Rating
A B+ (sf)
F CCC- (sf)
G CCC- (sf)
H CCC- (sf)
J CCC- (sf)
K CCC- (sf)
L CCC- (sf)
ARLO IX: S&P Raises Rating on Class PS 2007 From 'B+' to 'BB-'
--------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on 17
tranches from 14 corporate-backed synthetic collateralized debt
obligation (CDO) transactions and removed them from CreditWatch
with positive implications. "At the same time, we lowered our
ratings on two tranches from two corporate-backed synthetic CDO
transactions and left them on CreditWatch negative and lowered our
ratings on two tranches from one synthetic CDO transaction backed
by commercial mortgage-backed securities (CMBS). In addition, we
affirmed our ratings on two tranches from two corporate-backed
synthetic CDOs and removed them from CreditWatch with
negative implications," S&P related.
"We raised our ratings on synthetic CDOs that experienced a
combination of upward rating migration in their underlying
reference portfolios, seasoning of the underlying reference names,
and an increase in the synthetic rated overcollateralization
(SROC) ratios above 100% at higher rating levels as of the August
review and at our projection of the SROC ratios in 90 days
assuming no credit migration. The downgrades were on synthetic
CDOs that experienced negative rating migration in their
underlying reference portfolios. The affirmations reflect our
opinion that sufficient credit support is available to the classes
at the current rating levels," S&P stated.
Rating and CreditWatch Actions
ARLO IX Ltd.
PASCAL SERIES 2007
Rating
Class To From
PS 2007 BB- (sf) B+ (sf)/Watch Pos
Athenee CDO PLC
$50 mil tranche A Hunter Valley CDO II floating-rate notes due 30
June 2014
series 2007-15
Rating
Class To From
Tranche A BB+ (sf) BB (sf)/Watch Pos
Cloverie PLC
EUR100 mil Floating Rate Credit Linked Notes Series 2007-44
Rating
Class To From
Notes CCC+ (sf) CCC+ (sf)/Watch Neg
Cloverie PLC
EUR50 mil Floating Rate Credit Linked Notes Series 2007-43
Rating
Class To From
Notes CCC+ (sf) CCC+ (sf)/Watch Neg
Corsair (Jersey) No. 4 Ltd.
Series 10
Rating
Class To From
Notes BB- (sf) B+ (sf)/Watch Pos
Credit Linked Notes Ltd. 2006-1
Rating
Class To From
Notes B- (sf)/Watch Neg B (sf)/Watch Neg
Credit-Linked Trust Certificates
2005-I
Rating
Class To From
2005-I-G AA- (sf) A (sf)/Watch Pos
2005-I-H A+ (sf) A- (sf)/Watch Pos
Greylock Synthetic CDO 2006
Series 1
Rating
Class To From
A1-$LMS BBB+ (sf) BBB- (sf)/Watch Pos
A3-$LMS BB (sf) BB- (sf)/Watch Pos
Greylock Synthetic CDO 2006
Series 3
Rating
Class To From
A1-EURLMS BBB+ (sf) BBB- (sf)/Watch Pos
Morgan Stanley ACES SPC
Series 2006-27
Rating
Class To From
Class A B+ (sf) B (sf)/Watch Pos
Morgan Stanley ACES SPC
Series 2007-36
Rating
Class To From
I BBB- (sf) BB+ (sf)/Watch Pos
Morgan Stanley ACES SPC
Series 2008-2
Rating
Class To From
Notes BBB- (sf) BB+ (sf)/Watch Pos
Morgan Stanley Managed ACES SPC
JPY1.5 bil Morgan Stanley Managed Aces SPC (Aviva) Series 2007-16
Rating
Class To From
IIB B+ (sf) B (sf)/Watch Pos
Omega Capital Investments PLC
EUR274 mil, JPY20 mil, US$160 mil Palladium CDO I Secured Floating
Rate Notes
Series 19
Rating
Class To From
A-1E B (sf) CCC+ (sf)/Watch Pos
A-1U B (sf) CCC+ (sf)/Watch Pos
Pegasus 2007-1 Ltd.
Rating
Class To From
A1 BB- (sf) BB (sf)/Watch Neg
A2 BB- (sf) BB (sf)/Watch Neg
REPACS Trust Series: Warwick
Rating
Class To From
B Debt Uts BB+ (sf) BB (sf)/Watch Pos
REVE SPC
EUR35 mil, $20 mil Reve SPC Dryden XVII Notes Series 2007-2
Rating
Class To From
A Seg 8 B- (sf) CCC+ (sf)/Watch Pos
STARTS (Cayman) Ltd.
Series 2007-9
Rating
Class To From
Notes BB (sf) BB- (sf)/Watch Pos
STEERS Credit Linked Trust Bespoke Credit Tranche Series 2005-6
Rating
Class To From
Trust Cert B (sf)/Watch Neg B+ (sf)/Watch Neg
ASHFORD CDO: Moody's Raises Rating of Class A-1LB Notes to 'Ba2'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of five classes
of notes issued by Ashford CDO I Ltd. The notes affected by the
rating action are:
Class A-1LA Notes (current balance of $108,744,625), Upgraded to
Baa3 (sf) and Remains On Review for Possible Upgrade; previously
on June 24, 2011 Ba2 (sf) Placed Under Review for Possible Upgrade
Class A-1LB Notes, Upgraded to Ba2 (sf) and Remains On Review for
Possible Upgrade; previously on June 24, 2011 Caa1 (sf) Placed
Under Review for Possible Upgrade
Class A-2L Notes, Upgraded to B1 (sf) and Remains On Review for
Possible Upgrade; previously on June 24, 2011 Caa3 (sf) Placed
Under Review for Possible Upgrade
Class A-3L Notes, Upgraded to B3 (sf) and Remains On Review for
Possible Upgrade; previously on June 24, 2011 Ca (sf) Placed Under
Review for Possible Upgrade
Class B-1L Notes, Upgraded to Caa3 (sf) and Remains On Review for
Possible Upgrade; previously on June 24, 2011 C (sf) Placed Under
Review for Possible Upgrade
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes result
primarily from improvement in the credit quality of the portfolio.
Following an announcement by Moody's on June 22nd that nearly all
CLO tranches currently rated Aa1 (sf) and below were placed on
review for possible upgrade ("Moody's places 4,220 tranches from
611 U.S. and 171 European CLO transactions on review for
upgrade"), 98 tranches of U.S. and European Structured Finance
(SF) CDOs with material exposure to CLOs were also placed on
review for possible upgrade ("Moody's places 98 tranches from 19
U.S. and 3 European SF CDO transactions with exposure to CLOs on
review for upgrade"). The rating action on the notes reflects CLO
tranche upgrades that have taken place thus far, as well as a two
notch adjustment for CLO tranches which remain on review for
possible upgrade. According to Moody's, 62% of the collateral has
been upgraded since June 22nd, and 33% remains on review.
As of the latest trustee report in August 2011, the Class A
overcollateralization ratio has improved to 115.23% versus July
2010 levels of 97.99%. Currently the B OC test is failing,
resulting in both the diversion of interest proceeds to payment of
the principal on the Class A notes and deferred interest payments
to the Class B Notes.
Ashford CDO I Ltd. is a collateralized debt obligation backed
primarily by a portfolio CLO tranches originated between 2004 and
2007.
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Moody's applied the Monte Carlo simulation framework within
CDOROMv2.8 to model the loss distribution for SF CDOs. Within this
framework, defaults are generated so that they occur with the
frequency indicated by the adjusted default probability pool (the
default probability associated with the current rating multiplied
by the Resecuritization Stress) for each credit in the reference.
Specifically, correlated defaults are simulated using a normal (or
"Gaussian") copula model that applies the asset correlation
framework. Recovery rates for defaulted credits are generated by
applying within the simulation the distributional assumptions,
including correlation between recovery values. Together, the
simulated defaults and recoveries across each of the Monte Carlo
scenarios define the loss distribution for the reference pool.
Once the loss distribution for the collateral has been calculated,
each collateral loss scenario derived through the CDOROM loss
distribution is associated with the interest and principal
received by the rated liability classes via the CDOEdge cash-flow
model. The cash flow model takes into account the following:
collateral cash flows, the transaction covenants, the priority of
payments (waterfall) for interest and principal proceeds received
from portfolio assets, reinvestment assumptions, the timing of
defaults, interest-rate scenarios and foreign exchange risk (if
present). The Expected Loss (EL) for each tranche is the weighted
average of losses to each tranche across all the scenarios, where
the weight is the likelihood of the scenario occurring. Moody's
defines the loss as the shortfall in the present value of cash
flows to the tranche relative to the present value of the promised
cash flows. The present values are calculated using the promised
tranche coupon rate as the discount rate. For floating rate
tranches, the discount rate is based on the promised spread over
Libor and the assumed Libor scenario.
Moody's rating action factors in a number of sensitivity analyses
and stress scenarios, discussed below. Results are shown in terms
of the number of notches' difference versus the current model
output, where a positive difference corresponds to lower expected
loss, assuming that all other factors are held equal:
Moody's Watchlisted bucket notched up by 3 rating notches:
Class A1a: +1
Class A1b: +1
Class A2: +1
Class A3: +1
Class B1: +1
Moody's Watchlisted bucket notched up by 1 rating notches:
Class A1a: 0
Class A1b: 0
Class A2: 0
Class A3: -1
Class B1: -1
ATRIUM COMPANIES: Moody's Lowers Corporate Family Rating to 'Caa1'
------------------------------------------------------------------
Moody's Investors Service downgraded Atrium Companies, Inc.'s
Corporate Family Rating and Probability of Default Rating to Caa1
from B3, and its Senior Secured term Loan to Caa1 from B3.
Atrium's ratings remain under review for further downgrade.
These ratings/assessments were affected by this action:
Corporate Family Rating downgraded to Caa1 from B3;
Probability of Default Rating downgraded to Caa1 from B3; and,
$180 million Sr. Sec. Term Loan due 2016 downgraded to Caa1 (LGD3,
46%) from B3 (LGD3, 45%).
RATINGS RATIONALE
The rating downgrades result from ongoing compression in operating
margins, resulting in weakening credit metrics and an uncertain
liquidity profile, characterized in part by tight covenant
compliance. The new home construction sector, a significant source
of revenues for Atrium, continues to struggle amid uncertainties
regarding the timing of a full recovery. In addition to the woes
facing the housing market, remodeling activity, another key
revenue driver, is facing its own problems. Due to ongoing
pressures in the company's end markets and higher than anticipated
labor and other administrative costs, Atrium's operating
performance is falling below previous expectations. As a result,
key credit metrics will likely be below those previously
identified that would exert downward pressure on the rating. Those
metrics were Debt-to-EBITDA sustained above 6.0 times or EBITA-to-
interest expense below 1.0 times (after incorporating Moody's
standard adjustments). Additionally, Atrium's liquidity profile is
weak as covenant compliance is less assured, especially as its
maximum senior leverage ratio tightens at 4Q11, limiting revolver
availability and hindering financial flexibility as it contends
with ongoing end market pressures.
Our review will focus on: (1) assessing Atrium's ability to
improve its liquidity profile through covenant relief, (2) its
earnings and cash flow outlook, and (3) its longer term solvency.
Improving the company's liquidity profile with unfettered access
to the revolving credit facility could limit further ratings
downgrades. We will also look at any adjustments to the company's
capital structure, which could negatively impact the company's
probability of default rating as well.
The principal methodology used in rating Atrium Companies, Inc.
was the Global Manufacturing Industry Methodology published in
December 2007. Other methodologies used include Loss Given Default
for Speculative-Grade Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
Atrium Companies, Inc., located in Dallas, TX, is the largest
manufacturer of residential vinyl and aluminum windows in North
America. Golden Gate Capital and Kenner & Company, Inc., through
their respective affiliates, are the primary owners of Atrium.
Revenues for the twelve months through June 30, 2011 totaled
approximately $520 million.
BAKER STREET: S&P Puts 'CCC-' Rating on Class E on Watch Positive
-----------------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on 89
tranches from 24 U.S. collateralized debt obligation (CDO)
transactions on CreditWatch with positive implications. "At the
same time, we placed our ratings on 21 tranches from seven U.S.
CDO transactions on CreditWatch with negative implications," S&P
related.
The tranches with ratings placed on CreditWatch positive are
from CDO transactions backed by securities issued by corporate
obligors. These tranches had an original issuance amount of
$5.085 billion.
Most of the CreditWatch positive placements affect collateralized
loan obligations (CLOs) and reflect the continued improvement in
the credit quality of the obligors whose loans collateralize the
rated notes. These improvements mainly reflect an increase in
upgrades to the speculative-grade obligors whose loans
collateralize the rated notes and a steep reduction in default
rates. Based on a recent Standard & Poor's Leveraged Commentary &
Data (LCD) report, there were no institutional loan defaults among
S&P/LSTA Index issuers in July, the second month in a row with no
defaults. The lagging 12-month institutional loan default rate is
at a 42-month low of 0.77% by principal amount. Loan default rates
now stand far inside their historical averages of 3.41% by number.
"We placed our ratings on CreditWatch positive to reflect these
improvements, as well as our view that these tranches may be able
to support higher ratings," S&P related.
"We placed our ratings on 21 tranches from seven transactions on
CreditWatch with negative implications due to deterioration in the
credit quality of each transaction's portfolio. Three of these
transactions are mezzanine structured finance (SF) CDO of asset-
backed securities (ABS), which are collateralized in large part by
mezzanine tranches of U.S. residential mortgage-backed securities
(RMBS) and other SF securities; two are high-grade structured
finance (SF) CDO of asset-backed securities (ABS), which are
collateralized in large part by high-grade tranches of U.S.
residential mortgage-backed securities (RMBS) and other SF
securities; one is a cashflow CDO of CDO, which was collateralized
primarily by notes from other CDOs; and one is a hybrid CDO
backed by commercial mortgage-backed securities (CMBS).
CreditWatch negative placements reflect the deterioration in the
credit quality of the securities held by these transactions. The
tranches with ratings placed on CreditWatch negative had an
original issuance amount of $2.613 billion," S&P stated.
"We will resolve the CreditWatch placements after we complete a
comprehensive cash flow analysis and committee review for each of
the affected transactions. We expect to resolve these CreditWatch
placements within 90 days. We will continue to monitor the CDO
transactions we rate and take rating actions, including
CreditWatch placements, as we deem appropriate," S&P added.
Ratings Placed on CreditWatch Positive
Baker Street CLO II Ltd.
Rating
Class To From
C BBB+ (sf)/Watch Pos BBB+ (sf)
D B+ (sf)/Watch Pos B+ (sf)
E CCC- (sf)/Watch Pos CCC- (sf)
Ballyrock CLO 2006-1 Ltd.
Rating
Class To From
B A+ (sf)/Watch Pos A+ (sf)
C BBB+ (sf)/Watch Pos BBB+ (sf)
D B+ (sf)/Watch Pos B+ (sf)
E CCC- (sf)/Watch Pos CCC- (sf)
Ballyrock CLO 2006-2 Ltd.
Rating
Class To From
A AA (sf)/Watch Pos AA (sf)
B A+ (sf)/Watch Pos A+ (sf)
C BBB+ (sf)/Watch Pos BBB+ (sf)
D BB+ (sf)/Watch Pos BB+ (sf)
E CCC+ (sf)/Watch Pos CCC+ (sf)
Bushnell Loan Fund II Ltd.
Rating
Class To From
B AA+ (sf)/Watch Pos AA+ (sf)
Callidus Debt Partners CLO Fund III Ltd.
Rating
Class To From
D BBB- (sf)/Watch Pos BBB- (sf)
E B+ (sf)/Watch Pos B+ (sf)
Clydesdale CLO 2003 Ltd.
Rating
Class To From
C BB+ (sf)/Watch Pos BB+ (sf)
Clydesdale Strategic CLO I Ltd.
Rating
Class To From
A-2 A+ (sf)/Watch Pos A+ (sf)
B BBB+ (sf)/Watch Pos BBB+ (sf)
C-1 B+ (sf)/Watch Pos B+ (sf)
C-2 B+ (sf)/Watch Pos B+ (sf)
D CCC- (sf)/Watch Pos CCC- (sf)
Cumberland II CLO Ltd.
Rating
Class To From
B BBB+ (sf)/Watch Pos BBB+ (sf)
C BB+ (sf)/Watch Pos BB+ (sf)
Denali Capital CLO IV Ltd.
Rating
Class To From
A AA+ (sf)/Watch Pos AA+ (sf)
B AA- (sf)/Watch Pos AA- (sf)
C BB+ (sf)/Watch Pos BB+ (sf)
D BB+ (sf)/Watch Pos BB+ (sf)
First 2004-II CLO Ltd.
Rating
Class To From
B A (sf)/Watch Pos A (sf)
C BB+ (sf)/Watch Pos BB+ (sf)
Four Corners CLO 2005-1 Ltd.
Rating
Class To From
A-1 AA+ (sf)/Watch Pos AA+ (sf)
A-2 AA+ (sf)/Watch Pos AA+ (sf)
A-3 AA+ (sf)/Watch Pos AA+ (sf)
GoldenTree Loan Opportunities V Ltd.
Rating
Class To From
B A+ (sf)/Watch Pos A+ (sf)
C BBB+ (sf)/Watch Pos BBB+ (sf)
D BBB- (sf)/Watch Pos BBB- (sf)
E B+ (sf)/Watch Pos B+ (sf)
GSC Capital Corp Loan Funding 2005-1
Rating
Class To From
B AA+ (sf)/Watch Pos AA+ (sf)
C AA (sf)/Watch Pos AA (sf)
D A (sf)/Watch Pos A (sf)
E BB+ (sf)/Watch Pos BB+ (sf)
F CCC- (sf)/Watch Pos CCC- (sf)
Gulf Stream-Compass CLO 2003-1 Ltd.
Rating
Class To From
B AA+ (sf)/Watch Pos AA+ (sf)
C A+ (sf)/Watch Pos A+ (sf)
D BB (sf)/Watch Pos BB (sf)
E CCC- (sf)/Watch Pos CCC- (sf)
Integral Funding Ltd.
Rating
Class To From
A-3 AA- (sf)/Watch Pos AA- (sf)
B BBB+ (sf)/Watch Pos BBB+ (sf)
C B+ (sf)/Watch Pos B+ (sf)
D CCC- (sf)/Watch Pos CCC- (sf)
Katonah III Inc.
Rating
Class To From
B-1 AA- (sf)/Watch Pos AA- (sf)
B-2 AA- (sf)/Watch Pos AA- (sf)
C-1 BBB+ (sf)/Watch Pos BBB+ (sf)
C-2 BBB+ (sf)/Watch Pos BBB+ (sf)
D-1 BB- (sf)/Watch Pos BB- (sf)
D-2 BB- (sf)/Watch Pos BB- (sf)
Katonah IX CLO Ltd.
Rating
Class To From
A-1L AA (sf)/Watch Pos AA (sf)
A-1LV AA (sf)/Watch Pos AA (sf)
A-2L A+ (sf)/Watch Pos A+ (sf)
A-3L BBB- (sf)/Watch Pos BBB- (sf)
B-1L BB (sf)/Watch Pos BB (sf)
B-2L CCC- (sf)/Watch Pos CCC- (sf)
LCM I L.P.
Rating
Class To From
B AA+ (sf)/Watch Pos AA+ (sf)
C AA (sf)/Watch Pos AA (sf)
Monument Park CDO Ltd.
Rating
Class To From
A-1 AA- (sf)/Watch Pos AA- (sf)
A-2 AA- (sf)/Watch Pos AA- (sf)
B BBB (sf)/Watch Pos BBB (sf)
OFSI Fund III Ltd.
Rating
Class To From
A-1 AA (sf)/Watch Pos AA (sf)
A-2 AA (sf)/Watch Pos AA (sf)
B A+ (sf)/Watch Pos A+ (sf)
C BBB (sf)/Watch Pos BBB (sf)
D B+ (sf)/Watch Pos B+ (sf)
E-1 CCC- (sf)/Watch Pos CCC- (sf)
E-2 CCC- (sf)/Watch Pos CCC- (sf)
Rockwall CDO II Ltd.
Rating
Class To From
A-1La BBB+ (sf)/Watch Pos BBB+ (sf)
A-1Lb BB+ (sf)/Watch Pos BB+ (sf)
A-2L BB- (sf)/Watch Pos BB- (sf)
A-3L B+ (sf)/Watch Pos B+ (sf)
T2 Income Fund CLO I Ltd.
Rating
Class To From
B AA (sf)/Watch Pos AA (sf)
C A (sf)/Watch Pos A (sf)
D BBB (sf)/Watch Pos BBB (sf)
E BB (sf)/Watch Pos BB (sf)
Tricadia CDO 2003-1 Ltd.
Rating
Class To From
A-1LA BBB+ (sf)/Watch Pos BBB+ (sf)
A-1LB BBB- (sf)/Watch Pos BBB- (sf)
A-2L BBB- (sf)/Watch Pos BBB- (sf)
A-3L B+ (sf)/Watch Pos B+ (sf)
A-4L B- (sf)/Watch Pos B- (sf)
Veritas CLO I Ltd.
Rating
Class To From
C A- (sf)/Watch Pos A- (sf)
D BB+ (sf)/Watch Pos BB+ (sf)
E CCC+ (sf)/Watch Pos CCC+ (sf)
Ratings Placed on CreditWatch Negative
Capital Guardian ABS CDO I Ltd.
Rating
Class To From
A-1A A- (sf)/Watch Neg A- (sf)
A-1B A- (sf)/Watch Neg A- (sf)
A-1C A- (sf)/Watch Neg A- (sf)
CWCapital COBALT III Synthetic CDO Ltd.
Rating
Class To From
A CCC+ (sf)/Watch Neg CCC+ (sf)
C CCC- (sf)/Watch Neg CCC- (sf)
D CCC- (sf)/Watch Neg CCC- (sf)
Independence III CDO Ltd.
Rating
Class To From
A-1 B (sf)/Watch Neg B (sf)
Ischus CDO I Ltd.
Rating
Class To From
A-1 B- (sf)/Watch Neg B- (sf)
Kirkwood CDO 2004-1 Ltd.
Rating
Class To From
A BB+ (sf)/Watch Neg BB+ (sf)
B CCC+ (sf)/Watch Neg CCC+ (sf)
Porter Square CDO I Ltd.
Rating
Class To From
B B- (sf)/Watch Neg B- (sf)
Putnam Structured Product CDO 2002-1 Ltd.
Rating
Class To From
A-1LT-d A (sf)/Watch Neg A (sf)
A-1LT-e A (sf)/Watch Neg A (sf)
A-1LT-i A (sf)/Watch Neg A (sf)
A-1LT-j A (sf)/Watch Neg A (sf)
A-1MM-f A/A-1 (sf)/Watch Neg A/A-1 (sf)
A-1MM-g A/A-1 (sf)/Watch Neg A/A-1 (sf)
A-1MM-h A/A-1 (sf)/Watch Neg A/A-1 (sf)
A-1MT-b A (sf)/Watch Neg A (sf)
A-1MT-c A (sf)/Watch Neg A (sf)
A-2 BB+ (sf)/Watch Neg BB+ (sf)
BANC OF AMERICA: Moody's Affirms Class K Notes Rating at 'Ba1'
--------------------------------------------------------------
Moody's Investors Service upgraded the ratings of three classes,
affirmed five classes and downgraded one class of Banc of America
Commercial Mortgage Inc., Commercial Mortgage Pass-Through
Certificates, Series 2001-PB1:
Cl. E, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. F, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. G, Upgraded to Aaa (sf); previously on Jul 3, 2008 Upgraded to
Aa2 (sf)
Cl. H, Upgraded to A1 (sf); previously on Jul 3, 2008 Upgraded to
A2 (sf)
Cl. J, Upgraded to A3 (sf); previously on Jul 3, 2008 Upgraded to
Baa1 (sf)
Cl. K, Affirmed at Ba1 (sf); previously on Nov 6, 2001 Definitive
Rating Assigned Ba1 (sf)
Cl. L, Affirmed at Ba2 (sf); previously on Nov 6, 2001 Definitive
Rating Assigned Ba2 (sf)
Cl. M, Downgraded to B2 (sf); previously on Nov 6, 2001 Definitive
Rating Assigned Ba3 (sf)
Cl. XC, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
RATINGS RATIONALE
The upgrades are due to increased subordination from loan payoffs
and amortization. The pool has paid down 80% since last review.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed DSCR and the Herfindahl
Index (Herf), remaining within acceptable ranges. Based on our
current base expected loss, the credit enhancement levels for the
affirmed classes are sufficient to maintain their current ratings.
The downgrade is due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced loans.
Moody's rating action reflects a cumulative base expected loss of
24.1% of the current balance. At last review the base expected
loss was 3.3% on a $667.9 million pool balance. Moody's stressed
scenario loss is 28.3% of the current balance. Depending on the
timing of loan payoffs and the severity and timing of losses from
specially serviced loans, the credit enhancement level for
investment grade classes could decline below the current levels.
If future performance materially declines, the expected level of
credit enhancement and the priority in the cash flow waterfall may
be insufficient for the current ratings of these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption uncertainty
are the current sluggish macroeconomic environment and performance
in the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are
continuing to show signs of recovery through the first half of
2011, while recovery in the non-core office and retail sectors are
tied to pace of recovery of the broader economy. Core office
markets are showing signs of recovery through lending and leasing
activity. The availability of debt capital continues to improve
with terms returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit off
a very weak base. Multifamily has also begun to rebound reflecting
an improved supply/demand relationship. The availability of debt
capital is improving with terms returning towards market norms.
Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2010 and 2011;
we expect overall a sluggish recovery in most of the world's
largest economies, returning to trend growth rate with elevated
fiscal deficits and persistent unemployment levels.
The primary methodology used in this rating was "Moody's Approach
to Rating U.S. CMBS Conduit Transactions" published in September
2000. Moody's also considered another methodology, "Moody's
Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000.
Moody's review incorporated the use of the Excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in our analysis. Based on the model
pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the
remaining conduit classes are either interpolated between these
two data points or determined based on a multiple or ratio of
either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit estimates is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
underlying rating of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar credit estimates in
the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 15 compared to 38 at Moody's prior review.
In cases where the Herf falls below 20, Moody's employs the large
loan/single borrower methodology. This methodology uses the excel-
based Large Loan Model v 8.0. The large loan model derives credit
enhancement levels based on an aggregation of adjusted loan level
proceeds derived from Moody's loan level LTV ratios. Major
adjustments to determining proceeds include leverage, loan
structure, property type, and sponsorship. These aggregated
proceeds are then further adjusted for any pooling benefits
associated with loan level diversity, other concentrations and
correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated January 13, 2011.
DEAL PERFORMANCE
As of the August 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 86% to
$134.3 million from $938.3 million at securitization. The
Certificates are collateralized by 28 mortgage loans ranging in
size from less than 1% to 14% of the pool, with the top ten loans
representing 70% of the pool. One loan, representing 3% of the
pool, has defeased and is collateralized with U.S. Government
securities. The pool faces significant near term refinance risk
as loans representing 92% of the pool either have matured or will
mature within the next six months.
Six loans, representing 16% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of our
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Five loans have been liquidated from the pool since
securitization, resulting in an aggregate $7.7 million loss (29%
loss severity on average). Currently 16 loans, representing 76% of
the pool, are in special servicing. Specially serviced loans
represented 4% of the pool at last review. The largest specially
serviced loan is the Nokia Office Building Loan ($18.9 million --
14.1% of the pool), which is secured by a 135,000 square foot
office/R&D facility located in San Diego, California. The loan was
transferred to special servicing in June 2011 for maturity
default. The building was built-to-suit for Nokia Mobile Phones,
Inc. and its lease expired in August 2010. The tenant has since
vacated the premises and a broker is actively marketing the space.
The second largest loan in special servicing is the Village Plaza
Loan ($14.5 million -- 10.8% of the pool), which is secured by a
12-story, 275,000 square foot office/retail mixed-use complex
located in Dearborn, Michigan. The loan was transferred to special
servicing in June 2011 for maturity default. Oakwood Healthcare,
representing 40% of the net rentable area (NRA), gave notice in
February 2011 that it will vacate the premises when its lease
expires in November 2011.
The remaining 14 specially serviced loans are secured by a mix of
property types. The master servicer has recognized an aggregate
$11.7 million appraisal reduction for seven of the specially
serviced loans. Moody's has estimated an aggregate $29.4 million
loss (37% expected loss on average) for the specially serviced
loans.
Moody's was provided with full year 2009 and full year 2010
operating results for 97% and 100% of the non-defeased performing
pool, respectively. Excluding specially serviced loans, Moody's
weighted average LTV is 80%, essentially the same as at last
review. Moody's net cash flow reflects a weighted average haircut
of 10% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.7%.
Excluding specially serviced loans, Moody's actual and stressed
DSCRs are 1.48X and 1.74X, respectively, compared to 1.31X and
1.46X at last full review. Moody's actual DSCR is based on Moody's
net cash flow (NCF) and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The top three performing conduit loans represent 13% of the pool
balance. The largest loan is the FINSA Industrial Portfolio Loan
($8.4 million -- 6.3% of the pool), which is secured by three
distribution facilities totaling 414,000 square feet. The property
is located in the Texas Rio Grande Valley. As of March 2011, the
property's combined occupancy was 74% compared to 100% in 2009.
The Penske Automotive Group (Moody's senior unsecured rating of
B2; stable outlook) leases 50% of the NRA through December 2012;
Panasonic Corporation (Moody's senior unsecured rating of A2;
stable outlook) leases 24% of the NRA through March 2014. The loan
matures at the end of August 2011. The Borrower has indicated that
it intends to pay off the loan at maturity. Moody's LTV and
stressed DSCR are 104% and 1.02X,respectively, compared to 106%
and 1.0X at last review.
The second largest loan is the Hart Marx Building Loan
($5.5 million -- 4.1% of the pool), which is secured by a
390,000 square foot industrial property located in Des Plaines,
IL. The property is 100% leased to Hart, Schafner and Marx through
2016. The loan matured in June 2011; however, the Borrower was
able to get an extension until September. Moody's LTV and stressed
DSCR are 46% and 2.2X, compared to 48% and 2.1X at last review.
The third largest loan is the Coleman Center Loan ($3.1 million --
2.3% of the pool), which is secured by a 65,000 square foot mixed-
use/retail complex located in San Marcos, California. Coleman
College, the largest tenant, leases 20% of the NRA through January
2013. As of August 2011, the center was 89% leased compared to 92%
in December 2010. Moody's LTV and stressed DSCR are 53% and 2.2X,
essentially the same as at last review.
BEAR STEARNS: Moody's Affirms Rating of Cl. G BSCMS 1998-C1 at Ba2
------------------------------------------------------------------
Moody's Investors Service (Moody's) affirmed the ratings of eight
classes of Bear Stearns Commercial Mortgage Securities Inc.,
Commercial Mortgage Pass-Through Certificates, Series 1998-C1:
Cl. B, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. E, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. G, Affirmed at Ba2 (sf); previously on Jun 29, 1998 Assigned
Ba2 (sf)
Cl. H, Affirmed at B1 (sf); previously on May 25, 2006 Downgraded
to B1 (sf)
Cl. I, Affirmed at C (sf); previously on May 25, 2006 Downgraded
to C (sf)
Cl. X, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
RATINGS RATIONALE
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on our current base expected loss, the
credit enhancement levels for the affirmed classes are sufficient
to maintain the existing ratings.
Moody's rating action reflects a cumulative base expected loss of
1.0% of the current balance compared to 2.0% at last review.
Moody's stressed scenario loss is 2.9% of the current balance.
Moody's provides a current list of base and stress scenario losses
for conduit and fusion CMBS transactions on moodys.com at
http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time to
time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and performance in the commercial real
estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation
rebounds. The hotel and multifamily sectors are continuing to show
signs of recovery through the first half of 2011, while recovery
in the non-core office and retail sectors are tied to pace of
recovery of the broader economy. Core office markets are showing
signs of recovery through lending and leasing activity. The
availability of debt capital continues to improve with terms
returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The primary methodology used in this rating was "CMBS: Moody's
Approach to Rating U.S. Conduit Transactions" published in
September 2000. The other methodology used in this rating was
"CMBS: Moody's Approach to Rating Large Loan/Single Borrower
Transactions" published in July 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in our analysis. Based on the model
pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the
remaining conduit classes are either interpolated between these
two data points or determined based on a multiple or ratio of
either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade underlying ratings is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
underlying rating of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar underlying ratings
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 6 compared to 9 at last review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.1 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated February 3, 2011.
DEAL PERFORMANCE
As of the August 16, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 80% to $142.9
million from $714.7 million at securitization. The Certificates
are collateralized by 28 mortgage loans ranging in size from less
than 1% to 14% of the pool, with the top ten loans representing
39% of the pool. Thirteen loans, representing 58% of the pool,
have defeased and are collateralized by U.S. Government
securities. Defeasance at last review represented 29% of the pool.
There are no loans in the pool with investment grade credit
estimates.
One loan, representing 1% of the pool, is on the master servicer's
watchlist. The watchlist includes loans which meet certain
portfolio review guidelines established as part of the CRE Finance
Council (CREFC) monthly reporting package. As part of our ongoing
monitoring of a transaction, Moody's reviews the watchlist to
assess which loans have material issues that could impact
performance.
Fourteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $20.6 million (49% loss severity
overall). These losses have resulted in 100% loss for Classes J
through K and a 55% principal loss for Class K. There are no loans
currently in special servicing.
Moody's has assumed a high default probability for the one poorly
performing loan representing 1% of the pool and has estimated a
$226,805 loss (15% expected loss based on a 30% probability
default) from this troubled loan.
Moody's was provided with full-year 2010 and partial year 2011
operating results for 100% and 98% of the pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 54% compared to 50% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 11%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.4%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.77X and 2.13X, respectively, compared to
2.57X and 2.27X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The top three performing loans represent 24% of the pool balance.
The largest loan is the Mission Marketplace Loan ($19.4 million --
13.6% of the pool), which is secured by a 344,100 square foot (SF)
retail center located in Oceanside, California. Major tenants
include Kmart, Mission Market Cinema and Henry Markets. Financial
performance has been stable since last review. The property was
90% leased as of June 2011 compared to 87% at last review. Moody's
LTV and stressed DSCR are 70% and 1.40X, respectively, compared to
71% and 1.37X at last review.
The second largest loan is the Rio Entertainment Center Loan
($9.7 million -- 6.8% of the pool), which is secured by a 198,057
SF retail center located in Gaithersburg, Maryland. Major tenants
include Loews Theaters and Sports & Health Company. Financial
performance has been stable since last review. The property was
94% leased as of June 2011. Moody's LTV and stressed DSCR are 36%
and 2.88X, respectively, compared to 37% and 2.77X at last review.
The third largest loan is the Plaza Del Sol Mobile Home Park Loan
($5.7 million -- 4.0% of the pool), which is secured by a 681-unit
multifamily complex located in Tucson, Arizona. The property was
96% leased as of March 2011. Performance has been stable. Moody's
LTV and stressed DSCR are 54% and 1.90X, respectively, compared to
62% and 1.65X at last review.
BEAR STEARNS: Moody's Affirms Rating of Cl. H BSCMS 1999-C1 at B2
-----------------------------------------------------------------
Moody's Investors Service (Moody's) upgraded the ratings of two
classes and affirmed seven classes of Bear Stearns Commercial
Mortgage Securities Inc., Commercial Mortgage Pass-Through
Certificates, Series 1999-C1:
Cl. B, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. E, Upgraded to Aa1 (sf); previously on Dec 2, 2010 Upgraded to
Aa3 (sf)
Cl. G, Upgraded to Ba1 (sf); previously on Feb 9, 2005 Downgraded
to Ba3 (sf)
Cl. H, Affirmed at B2 (sf); previously on Feb 9, 2005 Downgraded
to B2 (sf)
Cl. I, Affirmed at Ca (sf); previously on Dec 2, 2010 Downgraded
to Ca (sf)
Cl. J, Affirmed at C (sf); previously on Feb 9, 2005 Downgraded to
C (sf)
Cl. X, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
RATINGS RATIONALE
The upgrades are due to overall improved pool financial
performance and increased credit support due to loan payoffs and
amortization. The affirmations are due to key parameters,
including Moody's loan to value (LTV) ratio, Moody's stressed debt
service coverage ratio (DSCR) and the Herfindahl Index (Herf),
remaining within acceptable ranges. Based on our current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
2.2% of the current balance. At last review, Moody's cumulative
base expected loss was 5.1%. Moody's stressed scenario loss is
4.7% of the current balance. Moody's provides a current list of
base and stress scenario losses for conduit and fusion CMBS
transactions on moodys.com at:
http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and varying performance in the
commercial real estate property markets. However, Moody's expects
to see increasing or stabilizing property values, higher
transaction volumes, a slowing in the pace of loan delinquencies
and greater liquidity for commercial real estate in 2011 The hotel
and multifamily sectors are continuing to show signs of recovery,
while recovery in the office and retail sectors will be tied to
recovery of the broader economy. The availability of debt capital
continues to improve with terms returning toward market norms.
Moody's central global macroeconomic scenario reflects an overall
sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The primary methodology used in this rating was "Moody's Approach
to Rating U.S. CMBS Conduit Transactions" published in September
2000. Moody's also considered "Moody's Approach to Rating CMBS
Large Loan/Single Borrower Transactions" published in July 2000.
Please see the Credit Policy page on www.moodys.com for a copy of
these methodologies.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in our analysis. Based on the model
pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the
remaining conduit classes are either interpolated between these
two data points or determined based on a multiple or ratio of
either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit estimates is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit estimate of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the credit estimate level, is
incorporated for loans with similar credit estimates in the same
transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 18 compared to 20 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.1 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated December 2, 2010.
DEAL PERFORMANCE
As of the August 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 82% to
$85.2 million from $478 million at securitization. The
Certificates are collateralized by 29 mortgage loans ranging
in size from less than 1% to 9% of the pool, with the top ten
non-defeased loans representing 55% of the pool. Seven loans,
representing 15% of the pool, have defeased and are secured by
U.S. Government securities.
Four loans, representing 18% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of our
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Six loans have been liquidated from the pool, resulting in a
realized loss of $7 million (37% loss severity). Currently the
Hyde Park Office Condominiums Loan ($5 million -- 6% of the pool),
is the only specially serviced loan. This loan is secured by a
63,000 square foot (SF) office park located in Doylestown,
Pennsylvania, which is located 30 miles north of Philadelphia The
loan was transferred to special servicing in February 2011 due to
imminent default. The property's performance has been hurt by
increased vacancy as well as declining rents. As of December 2010,
the property was 56% occupied. The loan remains current but the
borrower has indicated that it will be unable to continue funding
debt service shortfalls. A discounted pay off has been agreed upon
in principle and is expected to close within the next 90 days.
Moody's expected loss on this loan is 14%.
Moody's was provided with full year 2010 operating results for 92%
of the pool. Excluding the specially serviced loan, Moody's
weighted average LTV is 52% compared to 46% at Moody's prior
review. Moody's net cash flow reflects a weighted average haircut
of 13.5% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.0%.
Excluding the special serviced loan, Moody's actual and stressed
DSCRs are 2.17X and 2.83X, respectively, compared to 3.97X and
3.57X at last review. Moody's actual DSCR is based on Moody's net
cash flow (NCF) and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The top three conduit loans represent 21% of the pool. The largest
loan is the Hamilton Station Apartments Loan ($7.4 million -- 8.8%
of the pool), which is secured by a 284-unit apartment complex
located in Columbus, Georgia. Performance has been stable with the
property 96% leased as of December 2010 compared to 97% as of
December 2009. Despite the drop in occupancy, performance has
improved since last review.. Moody's LTV and stressed DSCR are 54%
and 1.91X, respectively, compared to 57% and 1.81X at last review.
The second largest loan is the Eden Center Loan ($5.7 million --
6.7% of the pool), which is secured by a 207,000 square foot
retail center located in Falls Church, Virginia. The City's
Economic Development commission considers it the number one
Tourist Destination in the City. The center is home to over 100
shops, restaurants and businesses catering to the extensive Asian
American, especially the Vietnamese-American, population. An
unusually high percentage of the businesses in the mall are
restaurants, specifically Vietnamese restaurants, specializing in
various levels of formality and in various aspects of Vietnamese
cuisine. The property's financial performance has declined since
last review due to a major tenant, National Wholesale Liquidators
(37% NRA), filing for bankruptcy and vacating the property. As of
June 2011, the property has been leased back up to 98%, compared
to 62% in September 2009, and 100% in December 2009. The loan has
amortized 7% since last review, and 47% over the life of the loan.
Moody's LTV and stressed DSCR are 17% and >4.0X, respectively,
compared to 15% and >4.0X at last review.
The third largest conduit loan is The Lakes Apartment Complex
($5.0 million -- 5.9% of the pool), which is secured by a 172-unit
apartment complex located in Columbus, Georgia. The property was
93% leased as of December 2010 compared to 99% as of December
2009. Despite the drop in occupancy, performance has improved
since last review. Moody's LTV and stressed DSCR are 47% and
2.09X, respectively, compared to 49% and 2.03X at last review
BEAR STEARNS: Moody's Downgrades Rating of Class Notes H to 'B1'
----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of three classes
and affirmed 14 classes of Bear Stearns Commercial Mortgage
Securities Trust 2004-TOP 14, Commercial Mortgage Pass-Through
Certificates, Series 2004-TOP14:
Cl. A-3, Affirmed at Aaa (sf); previously on May 10, 2004
Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on May 10, 2004
Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aa1 (sf); previously on Jan 28, 2011 Upgraded
to Aa1 (sf)
Cl. C, Affirmed at Aa3 (sf); previously on May 10, 2004 Definitive
Rating Assigned Aa3 (sf)
Cl. D, Affirmed at A2 (sf); previously on Nov 12, 2009 Confirmed
at A2 (sf)
Cl. E, Affirmed at A3 (sf); previously on Nov 12, 2009 Confirmed
at A3 (sf)
Cl. F, Affirmed at Baa1 (sf); previously on Nov 12, 2009 Confirmed
at Baa1 (sf)
Cl. G, Affirmed at Baa3 (sf); previously on Nov 12, 2009
Downgraded to Baa3 (sf)
Cl. H, Downgraded to B1 (sf); previously on Nov 12, 2009
Downgraded to Ba2 (sf)
Cl. J, Downgraded to B2 (sf); previously on Nov 12, 2009
Downgraded to B1 (sf)
Cl. K, Downgraded to B3 (sf); previously on Nov 12, 2009
Downgraded to B2 (sf)
Cl. L, Affirmed at Caa1 (sf); previously on Jan 28, 2011
Downgraded to Caa1 (sf)
Cl. M, Affirmed at Caa2 (sf); previously on Jan 28, 2011
Downgraded to Caa2 (sf)
Cl. N, Affirmed at Caa3 (sf); previously on Jan 28, 2011
Downgraded to Caa3 (sf)
Cl. O, Affirmed at Ca (sf); previously on Jan 28, 2011 Downgraded
to Ca (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on May 10, 2004
Definitive Rating Assigned Aaa (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on May 10, 2004
Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans and concerns about refinance risk.
Sixty-nine loans, representing 78% of the pool, mature within the
next 36 months. Four of these loans, representing 15% of the pool,
mature within the next 24 months and have a Moody's stressed debt
service coverage ratio (DSCR) below 1.00X.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on our current base expected loss, the
credit enhancement levels for the affirmed classes are sufficient
to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
4.1% of the current balance. At last review, Moody's cumulative
base expected loss was 3.0%. Moody's stressed scenario loss is
10.5% of the current balance. Moody's provides a current list of
base and stress scenario losses for conduit and fusion CMBS
transactions on moodys.com at
http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and performance in the commercial real
estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation
rebounds. The hotel and multifamily sectors are continuing to show
signs of recovery through the first half of 2011, while recovery
in the non-core office and retail sectors are tied to pace of
recovery of the broader economy. Core office markets are showing
signs of recovery through lending and leasing activity. The
availability of debt capital continues to improve with terms
returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The primary methodology used in this rating was "Moody's Approach
to Rating Fusion U.S. CMBS Transactions" published in April 2005.
Please see the Credit Policy page on www.moodys.com for a copy of
this methodology.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in our analysis. Based on the model
pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the
remaining conduit classes are either interpolated between these
two data points or determined based on a multiple or ratio of
either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit estimates is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
underlying rating of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar credit estimates in
the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated January 28, 2011.
DEAL PERFORMANCE
As of the August 12, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 33% to $596.9
million from $894.5 million at securitization. The Certificates
are collateralized by 96 mortgage loans ranging in size from less
than 1% to 11% of the pool, with the top ten loans representing
36% of the pool. The pool contains two loans with investment grade
credit estimates that represent 4% of the pool. Seven loans,
representing 13% of the pool, have defeased and are collateralized
with U.S. Government securities.
Fourteen loans, representing 18% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of our
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Three loans have been liquidated from the pool, resulting in an
aggregate realized loss of $3.2 million (3% loss severity
overall). The only loan in special servicing is the U.S. Bank
Tower Loan ($64.7 million - 11% of the pool). The loan represents
a pari passu interest in a $260 million first mortgage loan. The
loan is secured by a 1.4 million square foot (SF) office tower and
accompanying parking garage located in downtown Los Angeles,
California. The loan sponsor is Maguire Properties. The loan was
transferred into special servicing due to imminent default. The
property was 58% leased as of December 2010, essentially the same
as at last review. Even with the substantial decline in cash flow
from the dramatic rise in vacancy, the property still generates
cash flow in excess of debt service. However, given the softness
in the Los Angeles office market, it is anticipated that new
tenants will be paying lower rents than those currently in place.
The loan remains current and is interest-only for the entire term.
Moody's LTV and stressed DSCR are 135% and 0.74X, respectively,
the same at last review.
Moody's has assumed a high default probability for eight poorly
performing loans representing 8% of the pool and has estimated a
$7.5 million aggregate loss (15% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full and partial year 2010 and partial
year 2011 operating results for 92% and 24% of the pool's non-
defeased loans, respectively. Excluding troubled loans, Moody's
weighted average LTV is 85%, the same at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 12%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.3%.
Excluding troubled loans, Moody's actual and stressed DSCRs are
1.68X and 1.39X, respectively, compared to 1.71X and 1.37X at last
review. Moody's actual DSCR is based on Moody's net cash flow
(NCF) and the loan's actual debt service. Moody's stressed DSCR is
based on Moody's NCF and a 9.25% stressed rate applied to the loan
balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 30 compared to 31 at Moody's prior review.
The largest loan with a credit estimate is the 12 E 22nd Street
Loan ($12.1 million -- 2.0% of the pool), which is secured by an
89-unit apartment building located in New York City. The property
was 99% leased as of December 2010 compared to 98% as of December
2009. Moody's credit estimate and stressed DSCR are Aa1 and 1.76X,
respectively, compared to Aa1 and 1.85X at last review.
The second largest loan with a credit estimate is the Lincoln
Tower Cooperative Loan ($11.6 million -- 1.9% of the pool), which
is secured by a 387-unit residential co-op located in the Upper
West Side submarket of New York City. Moody's credit estimate and
stressed DSCR are Aaa and 4.51X, respectively, compared to Aaa and
4.49X at last review.
The top three performing conduit loans represent 13% of the pool.
The largest loan is the 840 Memorial Drive Loan ($38.3 million --
6.4% of the pool), which is secured by a 129,000 SF biotech
lab/office building located in Cambridge, Massachusetts. The
property was 70% leased as of March 2011 compared to 73% as of
December 2009. Moody's LTV and stressed DSCR are 127% and 0.81X,
respectively, compared to 125% and 0.82X at last review.
The second largest loan is the 1401 & 1501 Nolan Ryan Expressway
Loan ($19.6 million -- 3.3% of the pool), which is secured by a
three-story Class A office building and a single story R&D
facility, totaling 234,000 SF, located in Arlington, Texas. The
property is 100% leased to the Siemens Dematic Postal Automation
L.P (SDPA), a member of the Siemens AG family, through January
2014. The loan matures in February 2014. Moody's analysis reflects
a downward adjustment to the property's net operating income due
to concerns about single tenant occpancy. Moody's LTV and stressed
DSCR are 80% and 1.21X, respectively, compared to 82% and 1.19X at
last review.
The third largest loan is the Greenville Place Apartments Loan
($18.7 million -- 3.1% of the pool), which is secured by a 519-
unit apartment property located in Greenville, Delaware. The
property was 85% leased as of March 2011 compared to 81% as of
February 2009. Moody's LTV and stressed DSCR are 83% and 1.20X,
respectively, compared to 91% and 1.10X, at last review.
BLACKROCK SENIOR: Moody's Raises Rating of Class D Notes to 'Ba2'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by BlackRock Senior Income Series IV:
US$85,000,000 Class A Senior Notes Due 2019 (current rated balance
of $383,580,036.97), Upgraded to Aa1 (sf), previously on June 22,
2011 Aa2 (sf) placed under review for possible upgrade;
US$14,500,000 Class B Senior Notes Due 2019, Upgraded to Aa3 (sf),
previously on June 22, 2011 A2 (sf) placed under review for
possible upgrade;
US$35,000,000 Class C Deferrable Mezzanine Notes Due 2019,
Upgraded to Baa2 (sf), previously on June 22, 2011 Ba1 (sf) placed
under review for possible upgrade;
US$25,500,000 Class D Deferrable Mezzanine Notes Due 2019,
Upgraded to Ba2 (sf), previously on June 22, 2011 B2 (sf) placed
under review for possible upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of an increase in the
overcollateralization ratios since the last rating action in July
2009. The Class A/B and Class C/D Overcollateralization Tests are
reported at 121.0% and 105.0%, respectively, versus May 2009
levels of 118.0% and 102.5%, respectively. All related
overcollateralization tests are currently in compliance.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $481 million,
defaulted par of $851,587, a weighted average default probability
of 24% (implying a WARF of 2827), a weighted average recovery rate
upon default of 50%, and a diversity score of 70. The default and
recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Blackrock Senior Income Series IV, issued on January 26, 2007, is
a collateralized loan obligation backed primarily by a portfolio
of senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other Collateral Quality Metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor and diversity score. However, as part of the base
case, Moody's considered spread levels higher than the covenant
levels and WARF levels lower than covenant levels. This is due
to the large difference between the reported and covenant
levels.
CARLYLE HIGH: Moody's Upgrades Class D Notes Rating to 'Ba1'
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Carlyle High Yield Partners X, Ltd.:
US$128,500,000 Class A-1 Senior Secured Floating Rate Notes due
2022 (current outstanding balance of $126,468,888), Upgraded to
Aaa (sf); previously on June 22, 2011 A1 (sf) Placed Under Review
for Possible Upgrade;
US$155,000,000 Class A-2-A Senior Secured Floating Rate Notes due
2022 (current outstanding balance of $152,273,411), Upgraded to
Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed Under Review
for Possible Upgrade;
US$17,500,000 Class A-2-B Senior Secured Floating Rate Notes due
2022, Upgraded to Aa1 (sf); previously on June 22, 2011 A2 (sf)
Placed Under Review for Possible Upgrade;
US$16,000,000 Class B Senior Secured Floating Rate Notes due 2022,
Upgraded to Aa3 (sf); previously on June 22, 2011 Baa1 (sf) Placed
Under Review for Possible Upgrade;
US$21,000,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2022, Upgraded to A3 (sf); previously on June 22, 2011
Ba1 (sf) Placed Under Review for Possible Upgrade;
US$16,000,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2022, Upgraded to Ba1 (sf); previously on June 22, 2011
B1 (sf) Placed Under Review for Possible Upgrade;
US$12,000,000 Class E Secured Deferrable Floating Rate Notes due
2022, Upgraded to Ba3 (sf); previously on June 22, 2011 Caa2 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Moody's notes that the deal has benefited from an improvement in
the credit quality of the underlying portfolio. Based on the
latest trustee report dated August 8, 2011, the weighted average
rating factor is currently 2478 compared to 2669 in the April 2010
report.
The overcollateralization ratios of the rated notes have also
improved since the rating action in May 2010. The Class A/B, Class
C, Class D and Class E overcollateralization ratios are reported
at 120.868%, 113.251%, 108.063% and 104.473%, respectively, versus
April 2010 levels of 119.156%, 111.647%, 106.532% and 102.993%,
respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $375.1 million,
defaulted par of $5.3 million, a weighted average default
probability of 20.68% (implying a WARF of 2587), a weighted
average recovery rate upon default of 48.95%, and a diversity
score of 55. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Carlyle High Yield Partners X, Ltd., issued in April 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
CARLYLE HIGH: Moody's Upgrades Rating of Class D Notes to 'Ba2'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Carlyle High Yield Partners VIII, Ltd.
US$189,000,000 Class A-1 Senior Secured Floating Rate Notes Due
2021, Upgraded to Aaa (sf), previously on June 22, 2011 Aa2 (sf)
Placed Under Review for Possible Upgrade;
US$19,000,000 Class A-2-B Senior Secured Floating Rate Notes Due
2021, Upgraded to Aa1 (sf), previously on June 22, 2011 Aa3 (sf)
Placed Under Review for Possible Upgrade;
US$34,000,000 Class B Senior Secured Floating Rate Notes Due 2021,
Upgraded to A1 (sf),previously on June 22, 2011 Baa1 (sf) Placed
Under Review for Possible Upgrade;
US$28,750,000 Class C Senior Secured Deferrable Floating Rate
Notes Due 2021, Upgraded to Baa2 (sf), previously on June 22, 2011
Ba1 (sf) Placed Under Review for Possible Upgrade;
US$34,250,000 Class D Secured Deferrable Floating Rate Notes Due
2021; Upgraded to Ba2 (sf), previously on June 22, 2011 B2 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $500 million,
defaulted par of $5 million, a weighted average default
probability of 21% (implying a WARF of 2750), a weighted average
recovery rate upon default of 48%, and a diversity score of 60.
The default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Carlyle High Yield Partners VIII, Ltd., issued in May 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are described
below:
Collateral quality metrics: The deal is allowed to reinvest and
the manager has the ability to deteriorate the collateral quality
metrics' existing cushions against the covenant levels. Moody's
analyzed the impact of assuming the worse of reported and
covenanted values for weighted average rating factor, weighted
average spread, weighted average coupon, and diversity score.
However, as part of the base case, Moody's considered spread
levels higher than the covenant levels due to the large difference
between the reported and covenant levels.
CARLYLE MCLAREN: Moody's Raises Rating of Class B-1L Notes to Ba1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Carlyle McLaren CLO, Ltd.:
US$333,000,000 Class A-1L Floating Rate Notes Due February 27,
2021 (current outstanding balance of $330,584,063), Upgraded to
Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed Under Review
for Possible Upgrade;
US$60,000,000 Class A-1LV Floating Rate Revolving Notes Due
February 27, 2021 (current outstanding balance of $59,564,697),
Upgraded to Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed
Under Review for Possible Upgrade;
US$40,000,000 Class A-2L Floating Rate Notes Due February 27,
2021, Upgraded to Aa3 (sf); previously on June 22, 2011 A2 (sf)
Placed Under Review for Possible Upgrade;
US$28,000,000 Class A-3L Floating Rate Notes Due February 27,
2021, Upgraded to Baa1 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$22,000,000 Class B-1L Deferrable Floating Rate Notes Due
February 27, 2021, Upgraded to Ba1 (sf); previously on June 22,
2011 B1 (sf) Placed Under Review for Possible Upgrade;
US$20,000,000 Class B-2L Floating Rate Notes Due February 27, 2021
(current outstanding balance of $19,025,772), Upgraded to Ba3
(sf); previously on June 22, 2011 Caa3 (sf) Placed Under Review
for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $506.2 million,
defaulted par of $4.4 million, a weighted average default
probability of 21.12% (implying a WARF of 2600), a weighted
average recovery rate upon default of 49.62%, and a diversity
score of 65. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Carlyle McLaren CLO, Ltd., issued in July 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average coupon, weighted average spread
and diversity score.
CHELSEA PARK: Moody's Upgrades Ratings of Five Classes of Notes
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Chelsea Park CLO, Ltd.:
US$344,250,000 Class A Senior Secured Floating Rate Notes due
2020, Upgraded to Aaa (sf); previously on June 22, 2011 Aa2 (sf)
Placed Under Review for Possible Upgrade;
US$24,525,000 Class B Senior Secured Floating Rate Notes due 2020,
Upgraded to Aa1(sf); previously on June 22, 2011 A2 (sf) Placed
Under Review for Possible Upgrade;
US$19,800,000 Class C Senior Secured Deferrable Floating Rate
Notes dues 2020, Upgraded to A2 (sf); previously on June 22, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade;
US$12,150,000 Class D Senior Secured Deferrable Floating Rate
Notes dues 2020, Upgraded to Baa1 (sf); previously on June 22,
2011 Ba2 (sf) Placed Under Review for Possible Upgrade;
US$12,375,000 Class E Secured Deferrable Floating Rate Notes dues
2020, Upgraded to Baa3 (sf); previously on June 22, 2011 B2 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in July 2009.
Based on the August 2011 trustee report, the weighted average
rating factor is currently 2427 compared to 2657 in August 2009.
Additionally, the Class A/B, Class C, Class D, and Class E
overcollateralization ratios are reported at 128.08%, 121.55%,
117.87%, and 114.34%, respectively, versus August 2009 levels of
126.42%, 119.98%, 116.34%, and 112.86%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $472 million, a
weighted average default probability of 18.5% (implying a WARF of
2573), a weighted average recovery rate upon default of 49.8%, and
a diversity score of 70. The default and recovery properties of
the collateral pool are incorporated in cash flow model analysis
where they are subject to stresses as a function of the target
rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Chelsea Park CLO, Ltd., issued in July of 2008, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
A source of additional performance uncertainties is collateral
quality metrics: The deal is allowed to reinvest and the manager
has the ability to deteriorate the collateral quality metrics'
existing cushions against the covenant levels. Moody's analyzed
the impact of assuming the worse of reported and covenanted values
for weighted average rating factor, weighted average spread,
weighted average coupon, and diversity score. However, as part of
the base case, Moody's considered spread levels higher than the
covenant levels due to the large difference between the reported
and covenant levels.
CLEAR LAKE: Moody's Upgrades Ratings of Five Classes of Notes
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Clear Lake CLO, Ltd.:
US$343,000,000 Class A-1 Floating Rate Senior Notes Due 2020
(current outstanding balance of $341,730,185), Upgraded to Aaa
(sf); previously on June 22, 2011 Aa1 (sf) Placed Under Review for
Possible Upgrade;
US$21,500,000 Class A-2 Floating Rate Senior Notes Due 2020,
Upgraded to Aa1 (sf); previously on June 22, 2011 A2 (sf) Placed
Under Review for Possible Upgrade;
US$27,000,000 Class B Floating Rate Deferrable Senior Subordinate
Notes Due 2020, Upgraded to A2 (sf); previously on June 22, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade;
US$20,000,000 Class C Floating Rate Deferrable Senior Subordinate
Notes Due 2020, Upgraded to Ba1 (sf); previously on June 22, 2011
Ba3 (sf) Placed Under Review for Possible Upgrade;
US$15,500,000 Class D Floating Rate Deferrable Subordinate Notes
Due 2020 (current outstanding balance of $14,747,398), Upgraded to
Ba2 (sf); previously on June 22, 2011 B3 (sf) Placed Under Review
for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in August
2009. In particular, as of the trustee report dated August 2011,
the weighted average rating factor is currently 2586 compared to
2837 in the August 2009 report. The Class A, Class B, Class C, and
Class D overcollateralization ratios are reported at 121.90%,
113.47%, 107.94%, and 104.19%, respectively, versus August 2009
levels of 117.91%, 109.78%, 104.45%, and 100.83%, respectively,
and all related overcollateralization tests are currently in
compliance.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate,
may be different from the trustee's reported numbers. In its
base case, Moody's analyzed the underlying collateral pool to
have a performing par balance, including principal proceeds,
of $443 million, no defaulted par, a weighted average default
probability of 21.8% (implying a WARF of 2668), a weighted
average recovery rate upon default of 49.1%, and a diversity
score of 72.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends, and collateral manager
latitude for trading the collateral are also factors.
Clear Lake CLO, Ltd., issued in January 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations", published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2016 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1. Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2. Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming worse
of reported and covenanted values for weighted average rating
factor. As part of the base case, Moody's considered weighted
average coupon, weighted average spread, and diversity levels
higher than the covenant levels due to the large difference
between the reported and covenant levels.
CLYDESDALE CLO: Moodys' Raises Rating of Class D Notes to 'Ba2'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Clydesdale CLO 2006, Ltd.:
US$333,000,000 Class A-1 Floating Rate Notes Due 2018, Upgraded to
Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed Under Review
for Possible Upgrade;
US$25,000,000 Class A-2 Floating Rate Notes Due 2018, Upgraded to
Aa3 (sf); previously on June 22, 2011 A2 (sf) Placed Under Review
for Possible Upgrade;
US$25,000,000 Class B Deferrable Floating Rate Notes Due 2018,
Upgraded to A3 (sf); previously on June 22, 2011 Baa3 (sf) Placed
Under Review for Possible Upgrade;
US$18,000,000 Class C Deferrable Floating Rate Notes Due 2018,
Upgraded to Baa3 (sf); previously on June 22, 2011 Ba3 (sf) Placed
Under Review for Possible Upgrade;
US$15,000,000 Class D Deferrable Floating Rate Notes Due 2018,
Upgraded to Ba2 (sf); previously on June 22, 2011 Caa1 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in September
2009. In particular, as of the trustee report dated August 2011,
the weighted average rating factor is currently 2582 compared to
2778 in the August 2009 report. The Class A, Class B, Class C, and
Class D overcollateralization ratios are reported at 121.20%,
113.29%, 108.21%, and 104.30%, respectively, versus August 2009
levels of 118.89%, 111.13%, 106.14%, and 102.31%, respectively,
and all related overcollateralization tests are currently in
compliance.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate,
may be different from the trustee's reported numbers. In its
base case, Moody's analyzed the underlying collateral pool to
have a performing par balance, including principal proceeds, of
$433 million, defaulted par of $5.8 million, a weighted average
default probability of 21.8% (implying a WARF of 2699), a weighted
average recovery rate upon default of 49.5%, and a diversity score
of 70. These default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends, and collateral manager
latitude for trading the collateral are also factors.
Clydesdale CLO 2006, Ltd., issued in December 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations", published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2016 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1. Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2. Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming worse
of reported and covenanted values for weighted average rating
factor, weighted average coupon, and diversity score. As part
of the base case, Moody's considered weighted average spread
levels higher than the covenant levels due to the large
difference between the reported and covenant levels.
CLYDESDALE CLO: Moody's Upgrades Ratings of Seven Classes of Notes
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Clydesdale CLO 2005, Ltd.:
US$186,500,000 Class A-1 Floating Rate Notes Due 2017 (current
outstanding balance of $186,205,538), Upgraded to Aaa (sf);
previously on June 22, 2011 Aa2 (sf) Placed Under Review for
Possible Upgrade;
US$100,000,000 Class A-2 Delayed Draw Floating Rate Notes Due 2017
(current outstanding balance of $99,842,111), Upgraded to Aaa
(sf); previously on June 22, 2011 Aa2 (sf) Placed Under Review for
Possible Upgrade;
US$8,500,000 Class A-3b Floating Rate Notes Due 2017, Upgraded to
Aaa (sf); previously on June 22, 2011 Aa3 (sf) Placed Under Review
for Possible Upgrade;
US$30,000,000 Class A-4 Floating Rate Notes Due 2017, Upgraded to
Aa2 (sf); previously on June 22, 2011 A3 (sf) Placed Under Review
for Possible Upgrade;
US$28,000,000 Class B Deferrable Floating Rate Notes Due 2017,
Upgraded to A3 (sf); previously on June 22, 2011 Ba1 (sf) Placed
Under Review for Possible Upgrade;
US$19,500,000 Class C Deferrable Floating Rate Notes Due 2017,
Upgraded to Ba1 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade;
US$12,000,000 Class D Deferrable Floating Rate Notes Due 2017,
Upgraded to B1 (sf); previously on June 22, 2011 Caa3 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in July 2009.
In particular, as of the trustee report dated August 2011, the
weighted average rating factor is currently 2552 compared to 2699
in the June 2009 report. The Class A, Class B, Class C, and Class
D overcollateralization ratios are reported at 120.66%, 112.75%,
107.83%, and 105.01%, respectively, versus June 2009 levels of
117.56%, 109.86%, 105.06%, and 102.32%, respectively, and all
related overcollateralization tests are currently in compliance.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par balance, including principal proceeds, of $480
million, defaulted par of $9.6 million, a weighted average default
probability of 19.3% (implying a WARF of 2691), a weighted average
recovery rate upon default of 49.2%, and a diversity score of 73.
Moody's generally analyzes deals in their reinvestment period by
assuming the worse of reported and covenanted values for all
collateral quality tests. However, in this case given the limited
time remaining in the deal's reinvestment period, Moody's analysis
reflects the benefit of assuming a higher likelihood that the
collateral pool characteristics will continue to maintain a
positive "cushion" relative to the covenant requirements, as seen
in the actual collateral quality measurements. The default and
recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends, and collateral manager
latitude for trading the collateral are also factors.
Clydesdale CLO 2005, Ltd., issued in December 2005, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations", published in
June 2011. Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2016 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation
risk on those assets. Moody's assumes an asset's terminal value
upon liquidation at maturity to be equal to the lower of an
assumed liquidation value (depending on the extent to which the
asset's maturity lags that of the liabilities) and the asset's
current market value.
3) Collateral quality metrics: The deal is allowed to reinvest and
the manager has the ability to deteriorate the collateral
quality metrics' existing cushions against the covenant levels.
Moody's analyzed the impact of assuming worse of reported and
covenanted values for weighted average rating factor and
weighted average coupon. As part of the base case, Moody's
considered weighted average spread and diversity score levels
higher than the covenant levels due to the large difference
between the reported and covenant levels.
COMM 2001-J2: Moody's Lowers Rating of Class G Notes to 'B2'
------------------------------------------------------------
Moody's Investors Service (Moody's) downgraded nine classes and
affirmed four classes of COMM 2001-J2 Commercial Pass-Through
Certificates:
Cl. X, Affirmed at Aaa (sf); previously on Aug 2, 2011 Confirmed
at Aaa (sf)
Cl. XC, Affirmed at Aaa (sf); previously on Aug 2, 2011 Confirmed
at Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on Aug 2, 2011 Confirmed
at Aaa (sf)
Cl. A-2F, Affirmed at Aaa (sf); previously on Aug 2, 2011
Confirmed at Aaa (sf)
Cl. B, Downgraded to Aa2 (sf); previously on Aug 25, 2011 Aaa (sf)
Placed Under Review for Possible Downgrade
Cl. C, Downgraded to Aa3 (sf); previously on Aug 25, 2011 Aaa (sf)
Placed Under Review for Possible Downgrade
Cl. D, Downgraded to A3 (sf); previously on Aug 25, 2011 Aaa (sf)
Placed Under Review for Possible Downgrade
Cl. E, Downgraded to Baa2 (sf); previously on Jul 15, 2011 Aa2
(sf) Placed Under Review for Possible Downgrade
Cl. E-CS, Downgraded to Baa2 (sf); previously on Jul 15, 2011 Aa2
(sf) Placed Under Review for Possible Downgrade
Cl. E-IO, Downgraded to Baa2 (sf); previously on Jul 15, 2011 Aa2
(sf) Placed Under Review for Possible Downgrade
Cl. F, Downgraded to Baa3 (sf); previously on Jul 15, 2011 Aa3
(sf) Placed Under Review for Possible Downgrade
Cl. G, Downgraded to B2 (sf); previously on Jul 15, 2011 Baa2 (sf)
Placed Under Review for Possible Downgrade
Cl. H, Downgraded to Ca (sf); previously on Aug 25, 2011 Caa1 (sf)
Placed Under Review for Possible Downgrade
RATING RATIONALE
The downgrades were due to higher expected losses for the pool
that will result from future workout fees for the two remaining
loans in the pool that were both previously modified in special
servicing and are now Corrected Mortgage Loans. The affirmations
were due to key parameters, including Moody's loan to value (LTV)
ratio remaining within an acceptable range. The ratings are based
on the Moody's expected loss approach.
On July 15, 2011 Moody's placed five classes, Classes E, E-CS, E-
IO, F, and G, on review for possible downgrade due to an increase
in interest shortfalls as a result of a $986,000 workout fee
related to the River Town Crossings Loan, a General Growth
Property (GGP) mall which was modified pursuant to GGP's
bankruptcy and reorganization plan. The loan paid off on June 1,
2011. An additional three classes, Classes B, C and D were put on
review for possible downgrade on August 25, 2011 due to the
expectation of future interest shortfalls. Currently, cumulative
interest shortfalls total $1.8 million as of the August 16, 2011
remittance report and affect Classes E through H. Workout fees are
expected to continue to accrue monthly based on 1% of the
principal and interest payments on the two loans, the Willowbrook
Mall Loan and the AT&T Building Loan. Additional workout fees will
be payable when each of the two loans pay off, based on 1% of the
outstanding principal balances at the time of pay off. The two
loans have a current combined outstanding loan balance of $348.4
million. The timing of future interest shortfalls depends on when
the Willowbrook Mall Loan pays off. Both the Willowbrook Mall Loan
and the fully-defeased AT&T Loan mature in 2016. The AT&T Loan
cannot be prepaid until three months prior to maturity while the
Willowbrook Mall Loan is currently open for prepayment. This
action concludes Moody's review.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time to
time, Moody's may, if warranted change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the
previous review. Even so, deviation from the expected range will
not necessarily result in a rating action. There may be mitigating
or offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses. This action concludes Moody's review of this
transaction.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption uncertainty
are the current sluggish macroeconomic environment and performance
in the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are
continuing to show signs of recovery through the first half of
2011, while recovery in the non-core office and retail sectors are
tied to pace of recovery of the broader economy. Core office
markets are showing signs of recovery through lending and leasing
activity. The availability of debt capital continues to improve
with terms returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The principal methodology used in this rating was "Moody's
Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.1. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior review is
summarized in a press release dated December 2, 2010. Please see
the ratings tab on the issuer / entity page on moodys.com for the
last rating action and the ratings history.
DEAL AND PERFORMANCE SUMMARY
As of the August 16, 2011 distribution date, the deal's aggregate
certificate balance has decreased by 77% to $348.4 million from
$1.5 billion at securitization. The Certificates are
collateralized by two mortgage loans. The largest loan in the
pool, AT&T Building Loan ($197 million -- 56% of the pool) is
fully defeased and is secured by US Government securities.
The second loan is the Willowbrook Mall Loan ($152 million -- 44%
of the pool), which is secured by approximately 500,000 square
feet of mall shop space in a 1.5 million square foot super-
regional mall located in Wayne, New Jersey. Willowbrook Mall,
considered one of the top malls in the region, is anchored by
Macy's, Bloomingdales, Lord & Taylor and Sears. As of December
2010 the in-line space was approximately 95% leased. Comparable
in-line sales for calendar year 2010 were $630 per square foot
with an occupancy cost of approximately 14%. The loan sponsor is
an affiliate of GGP. GGP emerged from bankruptcy protection in
November 2010. As part of GGP's bankruptcy plan, the loan's
maturity date was extended to June 30, 2016 from July1, 2011.
Moody's LTV is 43.8% and stressed DSCR is 2.03X. Moody's credit
estimate is Aaa, compared to Aa1 at last review.
Neither loan in the trust is on the servicer's watchlist. The
watchlist includes loans which meet certain portfolio review
guidelines established as part of the CRE Finance Council (CREFC;
formerly the Commercial Mortgage Securities Association) monthly
reporting package. As part of our ongoing monitoring of a
transaction, Moody's reviews the watchlist to assess which loans
have material issues that could impact performance. Neither loan
is in special servicing.
COMM 2006-C8: Moody's Affirms Rating of Class B at 'B2'
-------------------------------------------------------
Moody's Investors Service (Moody's) affirmed the ratings of 18
classes of COMM Commercial Mortgage Pass-Through Certificates,
Series 2006-C8:
Cl. A-2B, Affirmed at Aaa (sf); previously on Dec 22, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on Dec 22, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on Dec 22, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on Dec 17, 2010
Confirmed at Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on Dec 17, 2010
Confirmed at Aaa (sf)
Cl. XP, Affirmed at Aaa (sf); previously on Dec 22, 2006
Definitive Rating Assigned Aaa (sf)
Cl. XS, Affirmed at Aaa (sf); previously on Dec 22, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-M, Affirmed at Aa3 (sf); previously on Dec 17, 2010
Downgraded to Aa3 (sf)
Cl. A-J, Affirmed at Ba3 (sf); previously on Dec 17, 2010
Downgraded to Ba3 (sf)
Cl. B, Affirmed at B2 (sf); previously on Dec 17, 2010 Downgraded
to B2 (sf)
Cl. C, Affirmed at B3 (sf); previously on Dec 17, 2010 Downgraded
to B3 (sf)
Cl. D, Affirmed at Caa1 (sf); previously on Dec 17, 2010
Downgraded to Caa1 (sf)
Cl. E, Affirmed at Caa2 (sf); previously on Dec 17, 2010
Downgraded to Caa2 (sf)
Cl. F, Affirmed at Caa3 (sf); previously on Dec 17, 2010
Downgraded to Caa3 (sf)
Cl. G, Affirmed at Ca (sf); previously on Dec 17, 2010 Downgraded
to Ca (sf)
Cl. H, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded
to C (sf)
Cl. J, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded
to C (sf)
Cl. K, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded
to C (sf)
RATINGS RATIONALE
The affirmations are due to key rating parameters, including
Moody's loan to value (LTV) ratio, Moody's stressed debt service
coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining
within acceptable ranges. Based on our current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
8.7% of the current balance compared to 10.3% at last review.
Moody's stressed scenario loss is 22.1% of the current balance.
Moody's provides a current list of base and stress scenario losses
for conduit and fusion CMBS transactions on moodys.com at
http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and performance in the commercial real
estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation
rebounds. The hotel and multifamily sectors are continuing to show
signs of recovery through the first half of 2011, while recovery
in the non-core office and retail sectors are tied to pace of
recovery of the broader economy. Core office markets are showing
signs of recovery through lending and leasing activity. The
availability of debt capital continues to improve with terms
returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The primary methodology used in this rating was "Moody's Approach
to Rating Fusion U.S. CMBS Transactions" published on April 2005.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.6 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in our analysis. Based on the model
pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the
remaining conduit classes are either interpolated between these
two data points or determined based on a multiple or ratio of
either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit estimates is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit estimate of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the credit estimate level, is
incorporated for loans with similar credit estimates in the same
transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 39 compared to 43 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated December 17, 2010.
DEAL PERFORMANCE
As of the August 10, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 10% to $3.38
billion from $3.77 billion at securitization. The Certificates are
collateralized by 159 mortgage loans ranging in size from less
than 1% to 10% of the pool, with the top ten loans representing
35% of the pool. One loan, representing 7% of the pool, has
defeased and is collateralized with U.S. Government securities.
The pool includes one loan, representing 3% of the pool, with an
investment grade credit estimate.
Forty-one loans, representing 32% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of our
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Fourteen loans have been liquidated from the pool since
securitization, resulting in a $94.6 million loss (47% loss
severity on average). Additionally, two loan modifications,
including a principal forgiveness, have increased the cumulative
realized bond losses to $133.9 million. At last review the pool
had experienced an aggregate $68.9 million realized loss.
Twenty-one loans, representing 11% of the pool, are currently in
special servicing. The largest specially serviced loan is the
Morgan Resort Portfolio Loan ($73.3 million -- 2.2% of the pool)
which is secured by 9,712 mobile home sites in 12 separate mobile
home parks across nine states. This loan was transferred to
special servicing in November 2009 and was recently modified to
include an A and B note. The second largest specially serviced
loan is the Empirian Chesapeake Loan ($63 million -- 1.9% of the
pool), which is secured by a 374-unit multi-family property
located in Chesapeake, Virginia. The loan was transferred to
special servicing in January 2010 due to imminent default and
became REO in April 2011. The master servicer has recognized an
appraisal reduction of $19.9 million for this loan.
The remaining specially serviced loans are secured by a mix of
property types. The master servicer has recognized an aggregate
$124.7 million appraisal reduction for 15 of the specially
serviced loans. Moody's has estimated an aggregate $117.6 million
loss (32% expected loss on average) for all of the specially
serviced loans.
Moody's has assumed a high default probability for 19 poorly
performing loans representing 16% of the pool and has estimated a
$83.1 million loss (15% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2010 operating results for 87%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 119%, the same as at Moody's prior
full review. Moody's net cash flow reflects a weighted average
haircut of 11% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.3%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.22X and 0.88X, respectively, compared to
1.33X and 0.90X at last full review. Moody's actual DSCR is based
on Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The loan with a credit estimate is the First City Tower
Loan ($93 million -- 2.7% of the pool), which is secured by a
1.3 million square foot (SF) office building located in downtown
Houston, Texas. The building's major tenant is Vinson & Elkins
which leases 29% of the property's office space through 2021. The
property was 94% leased as of June 2011 compared to 93% at last
review. Performance has been stable. Moody's current credit
estimate and stressed DSCR are A3 and 1.78X, respectively,
compared to A3 and 1.74X at last review.
The top three performing conduit loans represent 18% of
the pool balance. The largest loan is the Mall of America
Loan ($345 million -- 10.2% of the pool), which represents a
45.7% pari-passu interest in a first mortgage loan totaling
$755 million. The loan is secured by the borrower's interest in a
2.8 million SF enclosed super-regional shopping mall/entertainment
complex located in Bloomington, Minnesota. The mall is anchored by
Macy's, Bloomingdales, Nordstrom and Sears and a variety of
entertainment venues. Performance has been stable. Moody's LTV and
stressed DSCR are 89% and 0.94X, respectively, the same as last
review.
The second largest loan is the EZ Storage Portfolio Loan
($150.0 million -- 4.4% of the pool), which represents a 50.0%
pari-passu interest in a $300 million first mortgage loan. The
loan is secured by 48 self storage properties located in six
states. Approximately 50% of the properties are located in the
Detroit, Michigan metro area. The portfolio's performance has been
weak but stable since last review. Moody's LTV and stressed DSCR
are 175% and 0.59X, respectively, compared to 174% and 0.59X at
last review.
The third largest loan is the JQH Hotel Portfolio Loan
($119.6 million -- 3.5% of the pool), which is secured by five
hotels located in five states (VA, TX, AR, MI, and KS). As of
December 2010, the portfolio's weighted average occupancy and
RevPar were 70% and $82.39, respectively. Performance has improved
slightly since last review due to higher revenues. Moody's LTV and
stressed DSCR are 124% and 0.96X, respectively, compared to 134%
and 0.89X at last review.
CREDIT SUISSE: S&P Lowers Ratings on 5 Classes of Certs. to 'D'
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 19
classes of commercial mortgage pass-through certificates from
three U.S. commercial mortgage-backed securities (CMBS)
transactions due to interest shortfalls.
"The downgrades reflect current and potential interest shortfalls.
We lowered our ratings on 14 of these classes to 'D (sf)' because
we expect the accumulated interest shortfalls to remain
outstanding for the foreseeable future. The classes that we
downgraded to 'D (sf)' have had accumulated interest shortfalls
outstanding between one and 11 months," S&P related. The recurring
interest shortfalls for the certificates are primarily due to one
or more of these factors:
Appraisal subordinate entitlement reduction (ASER) amounts in
effect for specially serviced loans;
The lack of servicer advancing for loans where the servicer
has made nonrecoverable advance declarations; and
Special servicing fees.
Standard & Poor's analysis primarily considered the ASER amounts
based on appraisal reduction amounts (ARAs) calculated using
recent Member of the Appraisal Institute (MAI) appraisals. "We
also considered servicer nonrecoverable advance declarations and
special servicing fees that are likely, in our view, to cause
recurring interest shortfalls," S&P related.
The servicer implements ARAs and resulting ASER amounts in
accordance with each transaction's terms. Typically, these terms
call for the automatic implementation of an ARA equal to 25% of
the stated principal balance of a loan when a loan is 60 days past
due and an appraisal or other valuation is not available within a
specified timeframe. "We primarily considered ASER amounts based
on ARAs calculated from MAI appraisals when deciding which classes
from the affected transactions to downgrade to 'D (sf)' because
ARAs based on a principal balance haircut are highly subject to
change, or even reversal, once the special servicer obtains the
MAI appraisals," S&P stated.
Servicer nonrecoverable advance declarations can prompt shortfalls
due to a lack of debt service advancing, the recovery of
previously made advances deemed nonrecoverable, or the failure to
advance trust expenses when nonrecoverable declarations have been
determined. Trust expenses may include, but are not limited to,
property operating expenses, property taxes, insurance payments,
and legal expenses.
"We detail the 19 downgraded classes from the three U.S. CMBS
transactions," S&P related.
Credit Suisse Commercial Mortgage Trust Series 2006-C3
"We lowered our ratings on the class H, J, K, L, and M
certificates from Credit Suisse Commercial Mortgage Trust Series
2006-C3 to 'D (sf)' to reflect accumulated interest shortfalls
outstanding between one and 10 months, resulting primarily from
ASER amounts related to 12 ($90.7 million, 4.9%) of the 17 ($180.5
million, 9.8%) loans that are currently with the special servicer,
C-III Asset Management LLC (C-III), as well as special servicing
fees. As of the Aug. 17, 2011, trustee remittance report, ARAs
totaling $48.0 million were in effect for 12 loans, and the total
reported monthly ASER amount on these loans (net of ASER recovery
this period of $11,713) were $241,151. The reported monthly
interest shortfalls totaled $271,291 and have affected all of the
classes subordinate to and including class H," S&P related.
GMAC Commercial Mortgage Securities Inc. Series 2002-C3
"We lowered our ratings on the class H, J, K, L, M, N, O-1, and O-
2 certificates from GMAC Commercial Mortgage Securities Inc.'s
series 2002-C3. We lowered our ratings on classes K, L, M, N, O-1,
and O-2 to 'D (sf)' to reflect accumulated interest shortfalls
outstanding between five and 11 months, resulting primarily from
ASER amounts related to one ($7.6 million, 1.4%) of the five
($36.3 million, 6.5%) assets that are currently with the special
servicer, CWCapital Asset Management LLC (CWCapital), as well as
special servicing fees and interest not advanced ($21,502) on the
Wakefield Forest Apartments real estate owned asset. We lowered
the rating on class J due to the potential for this class to
continue experiencing interest shortfall relating to the specially
serviced assets. Class J has had accumulated interest shortfalls
outstanding for five months. We downgraded class H due to reduced
liquidity support available to this class as a result of the
continued interest shortfalls. As of the Aug. 10, 2011, trustee
remittance report, an ARA of $4.7 million was in effect for one
asset and the total reported monthly ASER amount on this asset was
$25,556. The total monthly interest shortfall reported this month
was $136,726 and had affected all of the classes subordinate to
and including class K," S&P noted.
GMAC Commercial Mortgage Securities Inc. Series 2004-C3
"We lowered our ratings on the class A-J, B, C, D, E, and F
certificates from GMAC Commercial Mortgage Securities Inc.'s
series 2004-C3. We lowered our ratings to 'D (sf)' on the class D,
E, and F certificates to reflect accumulated interest shortfalls
outstanding between three and six months, resulting primarily from
ASER amounts related to six ($71.6 million, 8.2%) of the 10 assets
($167.2 million, 19.3%) that are currently with the special
servicer, CWCapital, as well as special servicing fees and
interest not advanced. We downgraded classes A-J, B, and C due to
reduced liquidity support available to these classes resulting
from the recurring interest shortfalls. As of the Aug. 10, 2011,
trustee remittance report, ARAs totaling $28.7 million were in
effect for six assets and the total reported monthly ASER
amount on these assets was $134,651. The master servicer, Berkadia
Commercial Mortgage LLC (Berkadia), made a nonrecoverability
determination on three other specially serviced assets.
Consequently, Berkadia did not advance interest totaling $199,600
on these three specially serviced assets according to the
August 2011 trustee remittance report. The reported monthly
interest shortfalls totaled $374,665 and have affected all of the
classes subordinate to and including class D," S&P related.
Ratings Lowered
Credit Suisse Commercial Mortgage Trust Series 2006-C3
Commercial mortgage pass-through certificates series 2006-C3
Credit Reported
Rating enhancement Interest Shortfalls ($)
Class To From (%) Current Accumulated
H D (sf) CCC- (sf) 2.66 40,609 40,609
J D (sf) CCC- (sf) 2.26 34,107 34,107
K D (sf) CCC- (sf) 1.87 34,107 34,107
L D (sf) CCC- (sf) 1.48 34,107 34,107
M D (sf) CCC- (sf) 1.22 22,737 33,646
GMAC Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates series 2002-C3
Credit Reported
Rating enhancement Interest Shortfalls ($)
Class To From (%) Current Accumulated
H BB+ (sf) BBB+ (sf) 8.91 0 0
J CCC- (sf) BB+ (sf) 5.61 (385) 106,502
K D (sf) B+ (sf) 4.05 38,264 191,319
L D (sf) CCC+ (sf) 3.00 25,511 127,553
M D (sf) CCC- (sf) 2.14 21,258 130,765
N D (sf) CCC- (sf) 1.44 17,006 129,347
O-1 D (sf) CCC- (sf) 0.96 11,909 130,996
O-2 D (sf) CCC- (sf) 0.75 5,097 56,066
GMAC Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates series 2004-C3
Credit Reported
Rating enhancement Interest Shortfalls ($)
Class To From (%) Current Accumulated
A-J BBB- (sf) A+ (sf) 15.13 0 0
B B- (sf) BBB+ (sf) 11.53 0 0
C CCC- (sf) BBB (sf) 9.91 0 0
D D (sf) B+ (sf) 7.57 84,320 201,088
E D (sf) CCC- (sf) 6.13 53,610 160,677
F D (sf) CCC- (sf) 4.33 68,812 243,226
CSMC 2010-UD1: Moody's Affirms Class B-B Notes Rating at 'Ba1'
--------------------------------------------------------------
Moody's has affirmed the ratings of six classes of Notes issued
by CSMC 2010-UD1. The affirmation is due to key transaction
parameters performing within levels commensurate with the existing
ratings levels. The rating action is the result of Moody's on-
going surveillance of commercial real estate collateralized debt
obligation (CRE CDO) transactions.
Moody's rating action is:
Cl. A, Affirmed at Aaa (sf); previously on Oct 28, 2010 Assigned
Aaa (sf)
Cl. A-A, Affirmed at Aaa (sf); previously on Oct 28, 2010 Assigned
Aaa (sf)
Cl. A-B, Affirmed at Aa1 (sf); previously on Oct 28, 2010 Assigned
Aa1 (sf)
Cl. B, Affirmed at Baa3 (sf); previously on Oct 28, 2010 Assigned
Baa3 (sf)
Cl. B-A, Affirmed at A2 (sf); previously on Oct 28, 2010 Assigned
A2 (sf)
Cl. B-B, Affirmed at Ba1 (sf); previously on Oct 28, 2010 Assigned
Ba1 (sf)
RATINGS RATIONALE
CSMC 2010-UD1 is a static cash CRE CDO transaction backed by a
portfolio of 8 super senior commercial mortgage backed securities
(CMBS) certificates from 7 separate transactions (100.0% of the
pool balance). The CMBS collateral are from pools securitized in
2007 (85%) and 2008 (15%). The five largest CMBS exposures are
CWCI 2007-C3 (30.2%), CSMC 2007-C3 (27.0%), CMLT 2008-LS1 (10.5%),
CSMC 2007-C4 (9.9%) and MSC 2007-IQ14 (9.9%). As of the August 18,
2011 Trustee report, the aggregate Note balance of the transaction
is $275.9 million, the same as at issuance.
Class A-A and Class A-B are exchangeable REMIC certificates that
can be exchanged for Class A exchangeable certificates and vice-
versa. Class B-A and Class B-B are exchangeable REMIC certificates
that can be exchanged for Class B exchangeable certificates and
vice-versa.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
We have completed updated credit estimates for the non-Moody's
rated collateral. The bottom-dollar WARF is a measure of the
default probability within a collateral pool. Moody's modeled a
bottom-dollar WARF of 23 compared to 22 at issuance. The
distribution of current ratings and credit estimates is as
follows: Aaa-Aa3 (100.0% compared to 96.0% at issuance), and A1-A3
(0.0% compared to 4.0% at issuance).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 5.6 years compared
to 6.5 at issuance.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR of
68.9% compared to 74.9% at issuance.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 70.9% compared to 71.2% at issuance.
Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO
rating models, which was released on January 24, 2011.
The cash flow model, CDOEdge(R) v3.2.1.0, was used to analyze the
cash flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
68.9% to 58.9% or up to 78.9% would result in average rating
movement on the rated tranches of 0 to 1 notches downward and 0 to
2 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption uncertainty
are the current sluggish macroeconomic environment and performance
in the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are
continuing to show signs of recovery through the first half of
2011, while recovery in the non-core office and retail sectors are
tied to pace of recovery of the broader economy. Core office
markets are showing signs of recovery through lending and leasing
activity. The availability of debt capital continues to improve
with terms returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The principal methodology used in this rating is "Moody's Approach
to Rating SF CDOs" published in November 2010.
Other methodology used in this rating is "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
CWCAPITAL COBALT: S&P Lowers Ratings on 5 Classes to 'CCC-'
-----------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on six
classes from CWCapital Cobalt II Ltd. (Cobalt II), a commercial
real estate collateralized debt obligation (CRE CDO) transaction.
"At the same time, we affirmed our ratings on eight other classes
from the same transaction," S&P related.
"The rating actions follow our analysis of the transaction
including the reported impaired assets ($139.0 million, 22.6%) in
the transaction's collateral pool. The rating actions also reflect
our analysis of the transaction following our rating actions on
commercial mortgage-backed securities (CMBS) that serve as
collateral in Cobalt II. Standard & Poor's has downgraded 15
securities from 13 transactions totaling $139.4 million (22.6%
of the total asset balance)," S&P said.
The transaction's current asset pool includes:
40 CMBS tranches ($458.9 million, 74.4% of the collateral
pool);
10 whole loans and senior-interest loans ($135.4 million,
22.0%);
Four CDO tranches ($18.6 million, 3.0%); and
One subordinate interest loan ($3.6 million, 0.6%).
The July 19, 2011, trustee report noted 11 defaulted loans in the
collateral pool ($91.2 million, 22.6%), as well as 22 defaulted
securities ($150.5 million, 24.4%). "Standard & Poor's estimated
asset-specific recovery rates for the loan assets, which ranged
from 0.0% to 90%, with a weighted average recovery rate of 65.6%.
We based the recovery rates on information from the collateral
manager, special servicer, and third-party data providers," S&P
related. Some of the defaulted loan assets include:
The Crown Plaza Colorado whole loan ($28.8 million, 4.7%);
The East Tennessee Apartments whole loan ($21.1 million,
3.4%);
The Comfort Inn Brooklyn whole loan ($17.6 million, 2.8%);
The Aguilar Apartments first mortgage loan ($15.8 million,
2.6%);
The Indianapolis Industrial whole loan ($14.1 million, 2.3%);
and
The Pala Mesa Resort Hotel whole loan ($13.9 million, 2.3%).
S&P's analysis of Cobalt II also reflected exposure to the
following CMBS tranches that Standard & Poor's has downgraded:
Wachovia Bank Commercial Mortgage Trust 2006-C28 (classes K,
L, and M; $19.8 million, 3.2%);
GS Mortgage Securities Trust 2007-GG10 (class G;
$15.0 million, 2.4%); and
Wachovia Bank Commercial Mortgage Trust 2007-C30 (class J;
$10.0 million, 1.6%).
According to the July 2011 trustee report, the transaction is
failing all five of its overcollateralization tests and passing
all of its interest coverage tests.
"Standard & Poor's analyzed the transaction and its underlying
collateral assets according to our current criteria. Our analysis
is consistent with the lowered and affirmed ratings," S&P stated.
Ratings Lowered
CWCapital Cobalt II Ltd.
Collateralized debt obligations
Rating
Class To From
C B- (sf) BB- (sf)
D CCC- (sf) B+ (sf)
E CCC- (sf) B+ (sf)
F CCC- (sf) B (sf)
G CCC- (sf) B- (sf)
H CCC- (sf) CCC+ (sf)
Ratings Affirmed
CWCapital Cobalt II Ltd.
Collateralized debt obligations
Class Rating
A-1A A (sf)
A-1AR A (sf)
A-1B BBB (sf)
A-2A AA (sf)
A-2B BBB (sf)
B BB+ (sf)
J CCC- (sf)
K CCC- (sf)
DBUBS 2011: Moody's Assigns 'Ba2' Definitive Rating to Cl. E Notes
------------------------------------------------------------------
Moody's Investors Service has assigned ratings to twelve classes
of CMBS securities, issued by DBUBS Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2011-C3.
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-M, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned Aa2 (sf)
Cl. C, Definitive Rating Assigned A2 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba2 (sf)
Cl. F, Definitive Rating Assigned B2 (sf)
Cl. X-A, Definitive Rating Assigned Aaa (sf)
Cl. X-B, Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The Certificates are collateralized by 43 fixed rate loans secured
by 64 properties. The ratings are based on the collateral and the
structure of the transaction.
Moody's CMBS ratings methodology combines both commercial real
estate and structured finance analysis. Based on commercial real
estate analysis, Moody's determines the credit quality of each
mortgage loan and calculates an expected loss on a loan specific
basis. Under structured finance, the credit enhancement for each
certificate typically depends on the expected frequency, severity,
and timing of future losses. Moody's also considers a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors:
1) Moody's assessment of the probability of default, which is
largely driven by each loan's DSCR, and 2) Moody's assessment of
the severity of loss upon a default, which is largely driven by
each loan's LTV ratio.
The Moody's Actual DSCR of 1.61X is higher than the 2007
conduit/fusion transaction average of 1.31X. The Moody's Stressed
DSCR of 1.20X is higher than the 2007 conduit/fusion transaction
average of 0.92X.
Moody's Trust LTV ratio of 92.1% is lower than the 2007
conduit/fusion transaction average of 110.6%. Moody's Total LTV
ratio (inclusive of subordinated debt) of 103.1% is also
considered when analyzing various stress scenarios for the rated
debt.
Moody's also considers both loan level diversity and property
level diversity when selecting a ratings approach.
With respect to loan level diversity, the pool's loan level
(includes cross collateralized and cross defaulted loans)
Herfindahl Index is 18.8. The transaction's loan level diversity
is lower than the band of Herfindahl scores found in most multi-
borrower transactions issued since 2009. With respect to property
level diversity, the pool's property level Herfindahl Index is
23.0. The transaction's property diversity profile is lower than
the indices calculated in most multi-borrower transactions issued
since 2009.
Moody's also grades properties on a scale of 1 to 5 (best to
worst) and considers those grades when assessing the likelihood of
debt payment. The factors considered include property age, quality
of construction, location, market, and tenancy. The pool's
weighted average property quality grade is 1.95, which is better
than the indices calculated in most multi-borrower transactions
since 2009.
The principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions" published in
April 2005.
Moody's analysis employs the excel-based CMBS Conduit Model v2.50
which derives credit enhancement levels based on an aggregation of
adjusted loan level proceeds derived from Moody's loan level DSCR
and LTV ratios. Major adjustments to determining proceeds include
loan structure, property type, sponsorship and diversity.
The V Score for this transaction is assessed as Low/Medium, the
same as the V score assigned to the U.S. Conduit and CMBS sector.
This reflects typical volatility with respect to the critical
assumptions used in the rating process as well as an average
disclosure of securitization collateral and ongoing performance.
Moody's V Scores provide a relative assessment of the quality of
available credit information and the potential variability around
the various inputs to a rating determination. The V Score ranks
transactions by the potential for significant rating changes owing
to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling, and the transaction governance that
underlie the ratings. V Scores apply to the entire transaction
(rather than individual tranches).
Moody's Parameter Sensitivities: If Moody's value of the
collateral used in determining the initial rating were decreased
by 5%, 17%, or 29%, the model-indicated rating for the currently
rated Super Senior Aaa classes and the rated Aaa A-M class would
be Aaa, Aaa, and Aa1 and Aa1, Aa2, and A1. Parameter Sensitivities
are not intended to measure how the rating of the security might
migrate over time; rather they are designed to provide a
quantitative calculation of how the initial rating might change if
key input parameters used in the initial rating process differed.
The analysis assumes that the deal has not aged. Parameter
Sensitivities only reflect the ratings impact of each scenario
from a quantitative/model-indicated standpoint. Qualitative
factors are also taken into consideration in the ratings process,
so the actual ratings that would be assigned in each case could
vary from the information presented in the Parameter Sensitivity
analysis.
These ratings: (a) are based solely on information in the public
domain and/or information communicated to Moody's by the issuer at
the date it was prepared and such information has not been
independently verified by Moody's; (b) must be construed solely as
a statement of opinion and not a statement of fact or an offer,
invitation, inducement or recommendation to purchase, sell or hold
any securities or otherwise act in relation to the issuer or any
other entity or in connection with any other matter. Moody's does
not guarantee or make any representation or warranty as to the
correctness of any information, rating or communication relating
to the issuer. Moody's shall not be liable in contract, tort,
statutory duty or otherwise to the issuer or any other third party
for any loss, injury or cost caused to the issuer or any other
third party, in whole or in part, including by any negligence (but
excluding fraud, dishonesty and/or willful misconduct or any other
type of liability that by law cannot be excluded) on the part of,
or any contingency beyond the control of, Moody's, or any of its
employees or agents, including any losses arising from or in
connection with the procurement, compilation, analysis,
interpretation, communication, dissemination, or delivery of any
information or rating relating to the issuer.
DEUTSCHE BANK: Fitch Puts Low-B Rating on Two Note Classes
----------------------------------------------------------
Fitch Ratings has assigned the following ratings to Deutsche Bank
Securities DBUBS 2011-LC3 commercial mortgage pass-through
certificates:
-- $97,779,000 class A-1 'AAAsf'; Outlook Stable;
-- $671,771,000 class A-2 'AAAsf'; Outlook Stable;
-- $97,268,000 class A-3 'AAAsf'; Outlook Stable;
-- $112,102,000 class A-4 'AAAsf'; Outlook Stable;
-- $1,106,529,000* class X-A 'AAAsf'; Outlook Stable;
-- $127,609,000 class A-M 'AAAsf'; Outlook Stable;
-- $75,167,000 class B 'AAsf'; Outlook Stable;
-- $54,190,000 class C 'Asf'; Outlook Stable;
-- $73,419,000 class D 'BBB-sf'; Outlook Stable;
-- $19,229,000 class E 'BBsf'; Outlook Stable;
-- $19,229,000 class F 'Bsf'; Outlook Stable;
-- $140,100,000 class PM-1 'AAAsf'; Outlook Stable;
-- $194,940,366* class PM-X 'AAAsf'; Outlook Stable;
-- $32,900,000 class PM-2 'AAsf'; Outlook Stable;
-- $28,900,000 class PM-3 'Asf'; Outlook Stable;
-- $26,500,000 class PM-4 'BBBsf'; Outlook Stable;
-- $20,877,553 class PM-5 'BBB-sf'; Outlook Stable.
*Notional amount and interest only.
Fitch does not rate the $291,928,485 interest-only class X-B, or
the $50,694,485 class G.
Since publication of the presale, the principal balance of the
portfolio is unchanged; however, Class A2-FX and A2-FL have been
combined into one class, A2 with an amount of $671,771,000.
Additionally, the interest-only class PM-X notional balance has
changed to $194,940,386 and is rated 'AAAsf' by Fitch. The
notional balance of class PM-X is now the aggregate of the pooled
senior trust component of the Providence Place Mall Mortgage Loan
and the Class PM-1 certificates. Class PM-6 was also removed from
the capital structure.
This transaction straddled the publication of the updated
criteria, 'Criteria for Analyzing Multiborrower U.S. Commercial
Mortgage Transactions' dated Aug. 12, 2011, therefore the previous
criteria 'Rating Criteria for Fitch's U.S. CMBS Multiborrower
Rating Model' dated Jan. 4, 2008 is also relevant.
DRYDEN XVI: Moody's Upgrades Ratings of Five Classes of CLO Notes
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Dryden XVI-Leveraged Loan CDO 2006:
US$375,000,000 Class A-1 Senior Secured Floating Rate Notes Due
October 20, 2020 (current outstanding balance of $358,219,141.24),
Upgraded to Aaa (sf); previously on June 22, 2011 Aa2 (sf) Placed
Under Review for Possible Upgrade;
US$20,000,000 Class A-2 Senior Secured Floating Rate Notes Due
October 20, 2020, Upgraded to Aa1 (sf); previously on June 22,
2011 A2 (sf) Placed Under Review for Possible Upgrade;
US$32,500,000 Class B Mezzanine Secured Deferrable Floating Rate
Notes Due October 20, 2020, Upgraded to Baa1 (sf); previously on
June 22, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade;
US$16,250,000 Class C Mezzanine Secured Deferrable Floating Rate
Notes Due October 20, 2020, Upgraded to Ba1 (sf); previously on
June 22, 2011 Ba3 (sf) Placed Under Review for Possible Upgrade;
US$17,500,000 Class D Mezzanine Secured Deferrable Floating Rate
Notes Due October 20, 2020, Upgraded to Ba2 (sf); previously on
June 22, 2011 Caa2 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $470 million, a
weighted average default probability of 21.74% (implying a WARF of
2645), a weighted average recovery rate upon default of 48.96%,
and a diversity score of 72. The default and recovery properties
of the collateral pool are incorporated in cash flow model
analysis where they are subject to stresses as a function of the
target rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Dryden XVI-Leveraged Loan CDO 2006, issued in December 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread and diversity levels higher than the
covenant levels due to the large difference between the
reported and covenant levels.
DRYDEN XVIII: Moody's Raises Ratings of Class B Notes to 'Ba2'
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Dryden XVIII Leveraged Loan 2007 Limited:
US$14,000,000 Class B Secured Deferrable Floating Rate Notes due
2019, Upgraded to Ba2 (sf); previously on June 22, 2011 Caa1 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $416 million,
defaulted par of $3 million, a weighted average default
probability of 21.66% (implying a WARF of 2639), a weighted
average recovery rate upon default of 49.23%, and a diversity
score of 63. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Dryden XVIII Leveraged Loan 2007 Limited, issued in October 2007,
is a collateralized loan obligation backed primarily by a
portfolio of senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread, coupon, and diversity levels higher
than the covenant levels due to the large difference between
the reported and covenant levels.
DUANE STREET: Moody's Upgrades Rating of Class D Notes to 'Ba1'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Duane Street CLO IV, Ltd.
US$412,500,000 Class A-1T Senior Floating Rate Notes Due 2021
(current balance of $400,797,139.73), Upgraded to Aa1 (sf),
previously on June 22, 2011 A1 (sf) Placed Under Review for
Possible Upgrade;
US$150,000,000 Class A-1R Senior Revolving Floating Rate Notes Due
2021 (current balance of $145,744,414.44) , Upgraded to Aa1 (sf),
previously on June 22, 2011 A1 (sf) Placed Under Review for
Possible Upgrade;
US$37,500,000 Class B Floating Rate Notes Due 2021; Upgraded to A1
(sf), previously on June 22, 2011 Baa1 (sf) Placed Under Review
for Possible Upgrade;
US$40,000,000 Class C Deferrable Mezzanine Floating Rate Notes Due
2021, Upgraded to Baa1 (sf), previously on June 22, 2011 Ba1 (sf)
Placed Under Review for Possible Upgrade;
US$35,000,000 Class D Deferrable Mezzanine Floating Rate Notes Due
2021, Upgraded to Ba1 (sf), previously on June 22, 2011 B2 (sf)
Placed Under Review for Possible Upgrade;
US$20,000,000 Class E Deferrable Mezzanine Floating Rate Notes Due
2021, Upgraded to Ba3 (sf), previously on June 22, 2011 Caa3 (sf)
Placed Under Review for Possible Upgrade;
US$10,000,000 Class F Combination Notes Due 2021 (current rated
balance of 8,295,701.36), Upgraded to Baa3 (sf); previously on
June 22, 2011 B1 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $726 million,
defaulted par of $2 million, a weighted average default
probability of 23% (implying a WARF of 2805), a weighted average
recovery rate upon default of 49%, and a diversity score of 61.
The default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Duane Street CLO IV, Ltd., issued in August 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
A secondary methodology used was "Using the Structured Note
Methodology to Rate CDO Combo-Notes" published in February 2004.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's also considered spread and diversity levels higher than
the covenant levels due to the large difference between the
reported and covenant levels.
EDUCATION LOANS: S&P Keeps 'BB' Rating on Class B on Watch Neg
-------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on 239
classes from 178 U.S. asset-backed securities (ABS) transactions
backed by Federal Family Education Loan Program (FFELP) student
loans and removed them from CreditWatch, where S&P placed them
with negative implications on July 15, 2011, following the
placement of the U.S. sovereign ratings on CreditWatch negative.
The complete rating list is available for free at:
http://bankrupt.com/misc/S&P_830_ABS_ratinglist.pdf
"Following the Aug. 5, 2011, lowering of the long-term credit
rating on the U.S. to 'AA+' from 'AAA' and the removal of the
long-term and short-term ratings from CreditWatch Negative (see
'United States of America Long-Term Rating Lowered To 'AA+' On
Political Risks And Rising Debt Burden; Outlook Negative,'
published on Aug. 5, 2011), we reviewed the transactions on the
referenced ratings list," S&P related. The student loan
transactions S&P analyzed for this review include these defining
characteristics:
"Senior bonds that are rated 'AAA' and currently maintain
senior parity ratios greater than or equal to 140% (or if we
expect the transaction to achieve a senior parity ratio of
140% within the next nine months)," S&P related.
Senior bonds that are rated no higher than the 'AA+' rating of
the United States whose ratings were not placed on CreditWatch
negative for performance or counterparty-related issues before
July 15, 2011.
Mezzanine and subordinate bonds that are rated no higher than
'AA' whose ratings were not placed on CreditWatch negative for
performance or counterparty-related issues before July 15,
2011.
Senior 'AAA' Bonds (Senior Parity of at Least 140%)
"The 'AAA' ratings on the senior bonds that are being affirmed and
removed from CreditWatch negative reflect our opinion that the
bonds would be able to withstand a 'AAA' default level of 40%
without giving credit to the seasoning of the underlying assets or
the U.S. government guarantee. While actual 'AAA' default levels
vary among the transactions, the 40% default level
condition equals or exceeds the original 'AAA' stress case for
these transactions. The transactions on the referenced ratings
list either have parity ratios of 140% or have parity ratios that
we believe are likely to reach 140% in the short term (which we
have estimated at nine months), given the specific parity growth
trends of the three affected transactions. Our ratings on the
senior bonds that have parity ratios lower than 140% remain on
CreditWatch negative while we further refine our 'AAA' assumptions
for FFELP transactions in the absence of an 'AAA' sovereign rating
of the U.S.," S&P related
Senior Bonds (Rated no Higher Than 'AA+') and Mezzanine
and Subordinate Bonds (Rated no Higher Than 'AA')
"Our ratings on transactions in each of these segments were placed
on CreditWatch negative or had their CreditWatch updated on July
15, 2011, to reflect the bonds' exposure to U.S. sovereign credit
risk. At that time, selective default ('SD') was one potential
outcome for the U.S. sovereign rating. As this is no longer a
potential outcome and we removed the U.S. sovereign rating from
CreditWatch, we affirmed our ratings on all senior bonds that are
rated no higher than the 'AA+' rating on the U.S. and were not
placed on CreditWatch negative for performance or counterparty-
related issues before July 15, 2011, as well as our ratings on all
mezzanine and subordinate bonds that are rated no higher than 'AA'
and were not placed on CreditWatch negative for performance or
counterparty-related issues before July 15, 2011," S&P related.
"Our ratings on 1,035 classes from 295 FFELP student loan
transactions, rated 'AAA' and 'AA+', remain on CreditWatch
negative due to U.S. sovereign exposure and in some cases
counterparty related issues," S&P stated.
"We will continue to review the FFELP student loan-backed ABS
transactions with senior parity levels of less than 140% with
ratings that remain on CreditWatch negative due to U.S. sovereign
credit risk exposure, and take rating actions as we deem
appropriate. Pending completion of our review, we expect that we
will lower some of our 984 'AAA' ratings to 'AA+'," S&P related.
Fifty-one 'AA+ (sf)' ratings on mezzanine/subordinate bonds remain
on CreditWatch negative. "If we downgrade the 'AAA' senior bonds
within transactions that contain 'AA+' rated mezzanine/sub-bonds,
there is the potential that we would also lower the 'AA+'
mezzanine/sub-bond ratings to reflect the bonds' subordinate
position in the capital structure," S&P said.
FIRST UNION: S&P Lowers Ratings on 2 Classes of Certs. to 'D'
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on seven
classes of commercial mortgage pass-through certificates from two
U.S. commercial mortgage-backed securities (CMBS) transactions due
to interest shortfalls. The two transactions are PNC Mortgage
Acceptance Corp.'s series 2001-C1 and First Union National Bank
Commercial Mortgage Trust's series 2001-C3.
"The downgrades reflect current and potential interest shortfalls.
We lowered our ratings on three classes to 'D (sf)' because we
expect the accumulated interest shortfalls to remain outstanding
for the foreseeable future. The three classes that we downgraded
to 'D (sf)' have had accumulated interest shortfalls outstanding
between three and 14 months," S&P related. The recurring interest
shortfalls for the certificates are primarily due to one or more
of these factors:
Appraisal subordinate entitlement reduction (ASER) amounts in
effect for specially serviced loans;
The lack of servicer advancing for loans where the servicer
has made nonrecoverable advance declarations;
Special servicing fees; and
Interest rate reductions or deferrals resulting from loan
modifications.
Standard & Poor's analysis primarily considered the ASER amounts
based on appraisal reduction amounts (ARAs) calculated using
recent Member of the Appraisal Institute (MAI) appraisals. "We
also considered servicer nonrecoverable advance declarations and
special servicing fees that are likely, in our view, to cause
recurring interest shortfalls," S&P related.
The servicer implements ARAs and resulting ASER amounts according
to each transaction's terms. Typically, these terms call for the
automatic implementation of an ARA equal to 25% of the stated
principal balance of a loan when it is 60 days past due and an
appraisal, or other valuation, is not available within a specified
timeframe. "We primarily considered ASER amounts based on ARAs
calculated from MAI appraisals when deciding which classes from
the affected transactions to downgrade to 'D (sf)'. This is
because ARAs based on a principal balance haircut are highly
subject to change, or even reversal, once the special servicer
obtains the MAI appraisals," S&P related.
Servicer nonrecoverable advance declarations can prompt shortfalls
due to a lack of debt service advancing, the recovery of
previously made advances deemed nonrecoverable, or the failure to
advance trust expenses when nonrecoverable declarations have been
determined. Trust expenses may include, but are not limited to,
property operating expenses, property taxes, insurance payments,
and legal expenses.
"We detail the seven downgraded classes from the two U.S. CMBS
transactions," S&P related.
First Union National Bank Commercial
Mortgage Trust Series 2001-C3
"We lowered our ratings on the class L, M, N, and O certificates
from First Union National Bank Commercial Mortgage Trust's series
2001-C3. We lowered our ratings on the class N and O certificates
to 'D (sf)' due to accumulated interest shortfalls outstanding for
three and 13 consecutive months, respectively. These interest
shortfalls resulted primarily from ASER amounts related to two
($14.7 million, 26.8%) of the nine assets ($38.3 million, 69.9%)
that are currently with the special servicer, LNR Partners LLC
(LNR), as well as interest not advanced ($24,631) on the Midway
Office Park real estate owned (REO) asset. According to LNR, six
loans ($19.9 million, 36.2%) that were transferred to the special
servicer between May through July 2011 due to maturity default
have current payment status. We lowered our ratings on classes L
and M due to reduced liquidity support available to these classes,
which make them susceptible to future interest shortfalls relating
to the specially serviced assets. In addition, class M has
experienced one month of interest shortfalls as reported in the
August remittance period. As of the Aug. 15, 2011, trustee
remittance report, ARAs totaling $4.6 million were in effect for
two assets and the total reported monthly ASER amount was $35,449.
The reported monthly interest shortfalls totaled $69,457 and have
affected all of the classes subordinate to and including class M,"
S&P noted.
PNC Mortgage Acceptance Corp. Series 2001-C1
"We lowered our ratings on the class J, K, and L certificates from
PNC Mortgage Acceptance Corp.'s series 2001-C1. We lowered our
rating on the class L certificate to 'D (sf)' due to interest
shortfalls outstanding for 14 consecutive months. These interest
shortfalls resulted primarily from ASER amounts related to three
($31.3 million, 22.9%) of the 12 assets ($106.2 million, 77.5%)
that are currently with the special servicer, Midland Loan
Services Inc. (Midland), as well as special servicing fees.
According to Midland, 11 ($94.1 million, 68.7%) of the 12 assets
were initially transferred to the special servicer due to maturity
default. We lowered our ratings on classes J and K due to reduced
liquidity support available to these classes following recurring
interest shortfalls and the potential for these classes to
experience interest shortfalls relating to the specially serviced
assets. Additionally, class K has had accumulated interest
shortfalls outstanding for six months. As of the Aug. 12, 2011,
trustee remittance report, ARAs totaling $6.1 million were in
effect for three assets and the total reported monthly ASER amount
was $9,274. The reported monthly interest shortfalls were
curtailed this period by payback of ASERs from a liquidated asset
($31,347) and totaled $5,413. The interest shortfalls have
affected all of the classes subordinate to and including class L,"
according to S&P.
Ratings Lowered
First Union National Bank Commercial Mortgage Trust
Commercial Mortgage Pass-Through Certificates Series 2001-C3
Credit Reported interest
Rating enhancement shortfalls ($)
Class To From (%) Current Accumulated
L CCC (sf) B- (sf) 29.82 0 0
M CCC- (sf) CCC+ (sf) 22.35 6,467 6,467
N D (sf) CCC (sf) 11.13 31,503 42,182
O D (sf) CCC- (sf) 3.66 20,999 192,668
PNC Mortgage Acceptance Corp.
Commercial Mortgage Pass-Through Certificates Series 2001-C1
Credit Reported interest
Rating enhancement shortfalls ($)
Class To From (%) Current Accumulated
J CCC (sf) B (sf) 10.79 0 0
K CCC- (sf) B- (sf) 6.77 (57,536) 33,917
L D (sf) CCC- (sf) 0.33 43,419 509,720
FORE CLO: Moody's Upgrades Ratings of Four Classes of Notes
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Fore CLO Ltd. 2007-1:
US$38,500,000 Class A-2 Senior Notes Due 2019, Upgraded to Aa1
(sf); previously on June 22, 2011 A1 (sf) Placed Under Review for
Possible Upgrade;
US$14,500,000 Class B Senior Notes Due 2019, Upgraded to Aa3 (sf);
previously on June 22, 2011 A2 (sf) Placed Under Review for
Possible Upgrade;
US$31,000,000 Class C Deferrable Mezzanine Notes Due 2019,
Upgraded to A3 (sf); previously on June 22, 2011 Ba1 (sf) Placed
Under Review for Possible Upgrade;
US$29,500,000 Class D Deferrable Mezzanine Notes Due 2019,
Upgraded to Ba2 (sf); previously on June 22, 2011 B2 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $481 million, no
defaulted par, a weighted average default probability of 19.83%
(implying a WARF of 2543), a weighted average recovery rate upon
default of 52%, and a diversity score of 50. The default and
recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Fore CLO Ltd. 2007-1, issued in June 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered a WARF level lower than the covenant level
and a spread level higher than the covenant level due to the
large difference between the reported and covenant levels.
GATEWAY CLO: Moody's Upgrades Class B Notes Rating to 'Ba3'
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Gateway CLO Limited:
US$15,000,000 Class B Secured Deferrable Floating Rate Notes due
2021, Upgraded to Ba3 (sf) , Previously on June 22, 2011 Caa2 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $475 million,
defaulted par of $2 million, a weighted average default
probability of 20% (implying a WARF of 2713), a weighted average
recovery rate upon default of 50%, and a diversity score of 66.
The default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Gateway CLO Limited, issued in October 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other Collateral Quality Metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor and diversity score. However, as part of the base
case, Moody's considered spread levels and diversity higher
than the covenant levels due to the large difference between
the reported and covenant levels.
GE CAPITAL: Moody's Upgrades Rating of Class H to 'Caa1'
--------------------------------------------------------
Moody's Investors Service (Moody's) upgraded the ratings of four
classes and affirmed the ratings of seven classes of GE Capital
Commercial Mortgage Corporation, Commercial Mortgage Pass-Through
Certificates, Series 2001-1:
Cl. C, Affirmed at Aaa (sf); previously on Jul 29, 2010 Confirmed
at Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Jan 13, 2011 Upgraded
to Aaa (sf)
Cl. E, Upgraded to Aaa (sf); previously on Jan 13, 2011 Upgraded
to Aa3 (sf)
Cl. F, Upgraded to Aa3 (sf); previously on Jul 29, 2010 Downgraded
to Baa1 (sf)
Cl. G, Upgraded to Baa2 (sf); previously on Jul 29, 2010
Downgraded to Ba3 (sf)
Cl. H, Upgraded to Caa1 (sf); previously on Jan 13, 2011
Downgraded to Caa3 (sf)
Cl. I, Affirmed at C (sf); previously on Jan 13, 2011 Downgraded
to C (sf)
Cl. J, Affirmed at C (sf); previously on Jan 13, 2011 Downgraded
to C (sf)
Cl. K, Affirmed at C (sf); previously on Jul 29, 2010 Downgraded
to C (sf)
Cl. L, Affirmed at C (sf); previously on Jul 29, 2010 Downgraded
to C (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on Jul 17, 2001
Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The upgrades are due to the significant increase in credit
subordination due to loan payoffs and lower realized and
anticipated losses from troubled loans. Since the prior review,
the pool has paid down by 76%.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on our current base expected loss, the
credit enhancement levels for the affirmed classes are sufficient
to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
22.5% of the current balance. At last review, Moody's cumulative
base expected loss was 10.1%. Moody's base expected loss is a
function of the total anticipated losses for the loans remaining
in the pool. The increase of Moody's base expected loss reflects
the significant pay down experienced since last review amid a lack
of liquidations or workouts of many of the pool's troubled loans.
Moody's stressed scenario loss is 27.0% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and performance in the commercial real
estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation
rebounds. The hotel and multifamily sectors are continuing to show
signs of recovery through the first half of 2011, while recovery
in the non-core office and retail sectors are tied to pace of
recovery of the broader economy. Core office markets are showing
signs of recovery through lending and leasing activity. The
availability of debt capital continues to improve with terms
returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The primary methodology used in this rating was "CMBS: Moody's
Approach to Conduit Transactions" published on September 15, 2000.
The other methodology used in this rating was "CMBS: Moody's
Approach to Rating Large Loan/Single Borrower Transactions"
published on July 7, 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in our analysis. Based on the model
pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the
remaining conduit classes are either interpolated between these
two data points or determined based on a multiple or ratio of
either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit estimates is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit estimate of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the credit estimate level, is
incorporated for loans with similar credit estimates in the same
transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 14 compared to 30 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.1 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated January 13, 2011. Please see
the ratings tab on the issuer / entity page on moodys.com for the
last rating action and the ratings history.
DEAL PERFORMANCE
As of the August 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 87% to $142.1
million from $1.13 billion at securitization. The Certificates are
collateralized by 23 mortgage loans ranging in size from less than
1% to 11% of the pool, with the top ten loans representing 71% of
the pool. The pool does not contain any defeased loans or loans
with investment grade credit estimates.
Two loans, representing 5% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of our
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Thirteen loans have been liquidated from the pool, resulting in
a realized loss of $31.6 million (38% loss severity). Currently
16 loans, representing 74% of the pool, are in special servicing.
The largest specially serviced loan is the Hawthorn Suites Loan
($15.2 million -- 10.7% of the pool), which is secured by a 280
room extended stay hotel located in Atlanta, Georgia. The loan was
transferred to special servicing in April 2009. A moisture and
mold issue at the property forced 43 rooms to be put out of
service for most of 2010. Remediation costs were funded from the
property's cash flow and the rooms were back in service by the end
of 2010. The property is currently being marketed for sale.
The remaining 15 specially serviced loans are secured by a mix of
property types. Moody's estimates an aggregate $29.3 million loss
for the specially serviced loans (41% expected loss on average).
Moody's has assumed a high default probability for three poorly
performing loans representing 11% of the pool and has estimated an
aggregate $1.7 million loss (11% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2010 operating results for
100% of the pool's performing loans. Excluding loans for which
Moody's anticipates a loss, Moody's weighted average LTV is 88%
compared to 72% at Moody's prior review. Moody's net cash flow
reflects a weighted average haircut of 16% to the most recently
available net operating income. Moody's value reflects a weighted
average capitalization rate of 10.1%.
Excluding loans for which Moody's anticipates a loss, Moody's
actual and stressed DSCRs are 1.09X and 1.29X, respectively,
compared to 1.40X and 1.55X at last review. Moody's actual DSCR is
based on Moody's net cash flow (NCF) and the loan's actual debt
service. Moody's stressed DSCR is based on Moody's NCF and a 9.25%
stressed rate applied to the loan balance.
The top three performing loans represent 23% of the pool. The
largest loan is the Juncos Plaza Loan ($14.5 million -- 10.2% of
the pool), which is secured by a 213,327 square foot (SF) retail
center located in Juncos, Puerto Rico. The loan was transferred to
special servicing in May 2011 due to a maturity default. Property
performance has deteriorated slightly as occupancy declined to 75%
in early 2011, compared to 82% at the prior review but the
property is still generating sufficient cash flow to cover debt
service and the loan is current. Moody's does not currently
anticipate that the loan will generate a loss to the trust.
Moody's LTV and stressed DSCR are 101% and 1.05X, respectively,
compared to 79% and 1.33X at last review.
The second largest loan is the Canyon Creek Plaza Loan ($9.3
million -- 6.5% of the pool), which is secured by a 61,049 SF
mixed use building located in San Jose, California. The loan
transferred to special servicing in February 2011 due to upcoming
loan maturity. The property was 90% leased as of September 2010
compared to 100% in December 2009. Moody's does not currently
anticipate that the loan woll generate a loss to the trust.
Moody's LTV and stressed DSCR are 85% and 1.28X, respectively,
compared to 78% and 1.39X at last review.
The third largest loan is the Roswell Corners Shopping Center Loan
($9.1 million -- 6.4% of the pool), which is secured by a 136,752
SF retail center located in suburban Atlanta. The property is
shadow anchored by Target. Major tenants at the collateral are TJ
Maxx (22% of the net rentable area (NRA); lease expiration --
4/30/2015) and Staples (18% of the NRA; lease expiration --
2/28/2015). As of December 2010, the property was 100% leased, the
same as at the prior review and an increase from 92% at
securitization. Property performance has been stable. Moody's LTV
and stressed DSCR are 57% and 1.80X, respectively, compared to 63%
and 1.64X at last review.
GOLUB CAPITAL: S&P Gives 'B' Rating on Class F Deferrable Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Golub Capital Partners CLO 10 Ltd./Go lub Capital
Partners CLO 10 LLC's $281.25 million floating-rate notes.
The note issuance is a collateralized loan obligation (CLO)
securitization backed by a revolving pool consisting primarily of
broadly syndicated senior-secured loans.
The preliminary ratings are based on information as of Sept. 6,
2011. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
The credit enhancement provided to the preliminary rated notes
through the subordination of cash flows that are payable to
the subordinated notes.
The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting excess spread) and cash flow structure, which
can withstand the default rate projected by Standard & Poor's
CDO Evaluator model, as assessed by Standard & Poor's using
the assumptions and methods outlined in its corporate
collateralized debt obligation (CDO) criteria, (see 'Update To
Global Methodologies And Assumptions For Corporate Cash Flow
And Synthetic CDOs,' published Sept. 17, 2009).
The transaction's legal structure, which is expected to be
bankruptcy remote.
The diversified collateral portfolio, which consists primarily
of broadly syndicated speculative-grade senior secured term
loans.
The collateral manager's experienced management team.
"Our projections regarding the timely interest and ultimate
principal payments on the preliminary rated notes, which we
assessed using our cash flow analysis and assumptions
commensurate with the assigned preliminary ratings under
various interest-rate scenarios, including LIBOR ranging from
0.47% to 13.84%," S&P related.
The transaction's overcollateralization and interest coverage
tests, a failure of which will lead to the diversion of
interest and principal proceeds to reduce the balance of the
rated notes outstanding.
The transaction's reinvestment overcollateralization test, a
failure of which will lead to the reclassification of excess
interest proceeds that are available prior to paying uncapped
administrative expenses and fees, collateral manager incentive
fees, and subordinated note payments to principal proceeds for
the purchase of additional collateral assets during the
reinvestment period.
Preliminary Ratings Assigned
Golub Capital Partners CLO 10 Ltd./Golub Capital Partners CLO 10
LLC
Class Rating Amount
(mil. $)
A AAA (sf) 197.00
B AA (sf) 12.50
C (deferrable) A (sf) 31.75
D (deferrable) BBB (sf) 16.00
E (deferrable) BB (sf) 15.00
F (deferrable) B (sf) 9.00
Subordinated notes NR 24.88
NR -- Not rated.
GS MORTGAGE: Fitch Affirms Junk Rating on Sixteen Certificates
--------------------------------------------------------------
Fitch Ratings has affirmed all classes of GS Mortgage Securities
Trust series 2007-GG10, commercial mortgage pass through
certificates, due to stable performance since Fitch's last review.
The affirmations reflect stable Fitch expected losses for the
pool. Fitch modeled losses of 17.1% of the remaining pool. Fitch
has designated 81 loans (55.5% of the pool balance) as Fitch Loans
of Concern, which includes 35 specially serviced loans (25%).
Fitch expects classes D through S may be fully depleted from
losses associated with the specially serviced assets.
As of the August 2011 distribution date, the pool's aggregate
principal balance has been paid down by approximately 3.5% to
$7.3 billion from $7.56 billion at issuance. Interest shortfalls
are affecting classes H through S.
The largest contributor to losses, the Two California Plaza loan
(6.4%), is secured by a 1,329,810 square foot (sf) office property
located in downtown Los Angeles, CA. Maguire Properties is the
loan sponsor. At issuance, the loan was underwritten to a
stabilized cash flow based on the expectation that below market
leases expiring during the term of the loan would be re-signed at
higher rates, providing for potential upside in future cash flows.
One of the largest tenants at the property filed bankruptcy and
vacated its space in mid-2009. The largest tenant downsized its
space in 2010 leaving the property approximately 80% occupied. A s
of September 2010, the property was 83.6% occupied. The loan
transferred to the special servicer in December 2010. The special
servicer is dual tracking a modification and foreclosure. The
servicer-reported September 2010 debt service coverage ratio
(DSCR) was 0.89 times (x) compared to 1.2x underwritten at
issuance.
The second largest contributor to loss is the 119 West 40th Street
loan (2.2%), which is secured by a 22-story, 333,901 sf office
building located in Midtown Manhattan, New York. At issuance, the
loan was underwritten to a stabilized cash flow based on the
expectation that below market leases expiring during the loan term
and the yet to be completed building upgrades would provide upside
in future cash flows.
The loan transferred to the special servicer in June 2009 for
imminent default after the debt service reserves posted at
issuance were depleted and the property had failed to achieve
positive cash flow. Cost overruns associated with building
renovations have resulted in uncompleted construction at the
property, including the main lobby, and have caused tenants to
withhold rents. A receiver is in place and working to complete
the unfinished construction so that the property can be marketed
for sale. A recent appraisal indicates losses.
The third largest contributor to losses is the Shorenstein
Portland Portfolio (9.6%). The largest loan in the pool is
secured by a portfolio of 46 office buildings encompassing
3,882,036 sf located throughout greater Portland, OR. As of YE
2010, the portfolio was 80% occupied, which is consistent with YE
2009 occupancy. This figure marks a 14% decrease from
underwriting. The decline in occupancy has begun to affect
operating income with YE 2010 NOI 7% lower than YE 2009. The
borrower is projecting additional occupancy and revenue declines
for 2011 due to a soft leasing market and lower prevailing rental
rates.
Fitch affirms the following classes:
-- $697.4 million class A-2 at 'AAAsf'; Outlook Stable;
-- $246.6 million class A-3 at 'AAAsf'; Outlook Stable;
-- $72 million class A-AB at 'AAAsf'; Outlook Stable;
-- $3,661 million class A-4 at 'AAAsf'; Outlook Negative;
-- $485 million class A-1A at 'AAAsf'; Outlook Stable;
-- $756.3 million class A-M at 'BBsf'; Outlook Negative;
-- $519.9 million class A-J at 'CCCsf/RR1';
-- $75.6 million class B at 'CCCsf/RR1';
-- $94.5 million class C at 'CCCsf/RR1';
-- $56.7 million class D at 'CCsf/RR3';
-- $56.7 million class E at 'CCsf/RR5';
-- $75.6 million class F at 'CCsf/RR6';
-- $75.6 million class G at 'CCsf/RR6';
-- $104 million class H at 'CCsf/RR6';
-- $94.5 million class J at 'Csf/RR6';
-- $75.6 million class K at 'Csf/RR6';
-- $37.8 million class L at 'Csf/RR6';
-- $18.9 million class M at 'Csf/RR6';
-- $28.4 million class N at 'Csf/RR6';
-- $18.9 million class O at 'Csf/RR6';
-- $18.9 million class P at 'Csf/RR6';
-- $18.9 million class Q at 'Csf/RR6'.
Class A-1 has paid in full. Fitch does not rate the $12.8 million
class S. Fitch withdrew the ratings of the interest only class X.
GSMPS MORTGAGE: Moody's Downgrades $72-Mil. of FHA-VA RMBS
----------------------------------------------------------
Moody's Investors Service has downgraded the ratings of nine
tranches from two deals issued by GSMPS Mortgage Loan Trust. The
collateral backing these transactions consists primarily of first-
lien, fixed, and adjustable rate, mortgage loans insured by the
Federal Housing Administration (FHA) an agency of the U.S.
Department of Urban Development (HUD) or guaranteed by the
Veterans Administration (VA).
Complete rating actions are:
Issuer: GSMPS Mortgage Loan Trust 2002-1
Cl. A-1, Downgraded to A3 (sf); previously on Aug 2, 2011
Confirmed at Aaa (sf)
Cl. B1, Downgraded to Baa2 (sf); previously on Jul 27, 2011 Aa2
(sf) Placed Under Review for Possible Downgrade
Cl. B2, Downgraded to Ba3 (sf); previously on Jul 27, 2011 A3 (sf)
Placed Under Review for Possible Downgrade
Cl. B3, Downgraded to Ca (sf); previously on Jul 27, 2011 Ba2 (sf)
Placed Under Review for Possible Downgrade
Cl. B4, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Issuer: GSMPS Mortgage Loan Trust 2003-1
Cl. B1, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa1
(sf) Placed Under Review for Possible Downgrade
Cl. B2, Downgraded to Caa2 (sf); previously on Jul 27, 2011 Ba2
(sf) Placed Under Review for Possible Downgrade
Cl. B3, Downgraded to C (sf); previously on Jul 27, 2011 Caa1 (sf)
Placed Under Review for Possible Downgrade
Cl. B4, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
RATINGS RATIONALE
The actions are a result of Moody's updated loss projections for
the RMBS FHA-VA portfolio. The updated projections account for
higher potential pool losses due to self-curtailment of claims by
servicers whereby they pass expenses deemed reasonable to the
trusts instead of submitting them to HUD, and continued weaknesses
in the macro economy and the housing market.
A FHA guarantee covers 100% of a loan's outstanding principal and
a large portion of its outstanding interest and foreclosure-
related expenses in the event that the loan defaults. A VA
guarantee covers only a portion of the principal based on the
lesser of either the sum of the current loan amount, accrued and
unpaid interest, and foreclosure expenses, or the original loan
amount. HUD usually pays claims on defaulted FHA loans when
servicers submit the claims, but can impose significant penalties
on servicers if it finds irregularities in the claim process later
during the servicer audits. This can prompt servicers to push more
expenses to the trust that they deem reasonably incurred than
submit them to HUD and face significant penalty. The rating
actions consider the portion of a defaulted loan normally not
covered by the FHA or VA guarantee and other servicer expenses
they deemed reasonably incurred and passed on to the trust.
FHA/VA borrowers, in Moody's-rated transactions, are typically low
income borrowers with poor credit history who have been affected
by the weak economy and housing market. Moody's expects
delinquencies to remain high for this sector at 40%, 35%, and 30%
for the 2004, 2005, and 2006 vintages, respectively as house
prices continue to decline and unemployment rates remain high.
FHA/VA RMBS transactions have had very low losses to date (less
than 1%) despite high delinquency levels due to the FHA and VA
guarantees. However, Moody's expects this trend to change due to
the higher level of self-curtailments by the servicers.
Moody's final rating actions are based on current levels of credit
enhancement, collateral performance and updated pool-level loss
expectations. Moody's took into account credit enhancement
provided by seniority, and other structural features within the
senior note waterfalls.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment levels remain
high, and weakness persists in the housing market. Moody's now
projects house price index to reach a bottom in the first quarter
of 2012, with a 2% remaining decline between the first quarter of
2011 and 2012, and unemployment rate to start declining by fourth
quarter of 2011.
The principal methodology used in these ratings is described in
the Monitoring and Performance Review section in "Moody's Approach
to Rating US Residential Mortgage-Backed Securities" published in
December 2008. Other methodology used in this rating was "FHA VA
US RMBS Surveillance Methodology" published in July 2011.
GSMPS MORTGAGE: Moody's Downgrades Cl. B1 Notes Rating to 'B2'
--------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 59
tranches issued by GSMPS Mortgage Loan Trust. The collateral
consists of fixed and adjustable-rate mortgage loans insured by
the Federal Housing Administration (FHA) an agency of the U.S.
Department of Urban Development (HUD) or guaranteed by the
Veterans Administration (VA).
Complete rating actions are:
Issuer: GSMPS Mortgage Loan Trust 2004-4
Cl. 1AF, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A2
(sf) Placed Under Review for Possible Downgrade
Cl. 1AS, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A2
(sf) Placed Under Review for Possible Downgrade
Cl. 1A2, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A2
(sf) Placed Under Review for Possible Downgrade
Cl. 1A3, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A2
(sf) Placed Under Review for Possible Downgrade
Cl. 1A4, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A2
(sf) Placed Under Review for Possible Downgrade
Cl. 2A1, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A2
(sf) Placed Under Review for Possible Downgrade
Cl. AX, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A2
(sf) Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to B2 (sf); previously on Jul 27, 2011 Ba1 (sf)
Placed Under Review for Possible Downgrade
Cl. B2, Downgraded to C (sf); previously on Jul 27, 2011 B1 (sf)
Placed Under Review for Possible Downgrade
Cl. B3, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Cl. B4, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Issuer: GSMPS Mortgage Loan Trust 2005-RP1
Cl. 1AF, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa3
(sf) Placed Under Review for Possible Downgrade
Cl. 1AS, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa3
(sf) Placed Under Review for Possible Downgrade
Cl. 1A4, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa3
(sf) Placed Under Review for Possible Downgrade
Cl. 1A2, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa3
(sf) Placed Under Review for Possible Downgrade
Cl. 1A3, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa3
(sf) Placed Under Review for Possible Downgrade
Cl. 2A1, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa3
(sf) Placed Under Review for Possible Downgrade
Cl. AX, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa3
(sf) Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to Ca (sf); previously on Jul 27, 2011 B2 (sf)
Placed Under Review for Possible Downgrade
Cl. B2, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Cl. B3, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Issuer: GSMPS Mortgage Loan Trust 2005-RP2
Cl. 1AF, Downgraded to B1 (sf); previously on Jul 27, 2011 Baa1
(sf) Placed Under Review for Possible Downgrade
Cl. 1AS, Downgraded to B1 (sf); previously on Jul 27, 2011 Baa1
(sf) Placed Under Review for Possible Downgrade
Cl. 1A2, Downgraded to B1 (sf); previously on Jul 27, 2011 Baa1
(sf) Placed Under Review for Possible Downgrade
Cl. 1A3, Downgraded to B1 (sf); previously on Jul 27, 2011 Baa1
(sf) Placed Under Review for Possible Downgrade
Cl. 1A4, Downgraded to B1 (sf); previously on Jul 27, 2011 Baa1
(sf) Placed Under Review for Possible Downgrade
Cl. 2A1, Downgraded to B1 (sf); previously on Jul 27, 2011 Baa1
(sf) Placed Under Review for Possible Downgrade
Cl. AX, Downgraded to B1 (sf); previously on Jul 27, 2011 Baa1
(sf) Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to Ca (sf); previously on Jul 27, 2011 Ba2 (sf)
Placed Under Review for Possible Downgrade
Cl. B2, Downgraded to C (sf); previously on Jul 27, 2011 B1 (sf)
Placed Under Review for Possible Downgrade
Cl. B3, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Cl. B4, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Issuer: GSMPS Mortgage Loan Trust 2005-RP3
Cl. 1AF, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa2
(sf) Placed Under Review for Possible Downgrade
Cl. 1AS, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa2
(sf) Placed Under Review for Possible Downgrade
Cl. 1A2, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa2
(sf) Placed Under Review for Possible Downgrade
Cl. 1A3, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa2
(sf) Placed Under Review for Possible Downgrade
Cl. 1A4, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa2
(sf) Placed Under Review for Possible Downgrade
Cl. 2A1, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa2
(sf) Placed Under Review for Possible Downgrade
Cl. AX, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa2
(sf) Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to Caa2 (sf); previously on Jul 27, 2011 Ba2
(sf) Placed Under Review for Possible Downgrade
Cl. B2, Downgraded to C (sf); previously on Jul 27, 2011 B1 (sf)
Placed Under Review for Possible Downgrade
Cl. B3, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Cl. B4, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Issuer: GSMPS Mortgage Loan Trust 2006-RP1
Cl. 1AF1, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. 1AF2, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. 1AS, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. 1A2, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. 1A3, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. 1A4, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. 2A1, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. AX, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3 (sf)
Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to C (sf); previously on Jul 27, 2011 B2 (sf)
Placed Under Review for Possible Downgrade
Cl. B2, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Cl. B3, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Cl. B4, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Issuer: GSMPS Mortgage Loan Trust 2006-RP2
Cl. B1, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Cl. B2, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Cl. B3, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Cl. B4, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
RATINGS RATIONALE
The actions are a result of Moody's updated loss projection for
the RMBS FHA-VA portfolio. The updated projection accounts for
higher potential pool losses due to self-curtailment of claims by
servicers whereby they pass expenses as deemed reasonable to the
trusts instead of submitting them to HUD, and continued weaknesses
in the macro economy and the housing market.
A FHA guarantee covers 100% of a loan's outstanding principal and
a large portion of its outstanding interest and foreclosure-
related expenses in the event that the loan defaults. A VA
guarantee covers only a portion of the principal based on the
lesser of either the sum of the current loan amount, accrued and
unpaid interest, and foreclosure expenses, or the original loan
amount. HUD usually pays claims on defaulted FHA loans when
servicers submit the claims, but can impose significant penalties
on servicers if it finds irregularities in the claim process later
during the servicer audits. This can prompt servicers to push more
expenses to the trust that they deem reasonably incurred than
submit them to HUD and face significant penalty. The rating
actions consider the portion of a defaulted loan normally not
covered by the FHA or VA guarantee and other servicer expenses
they deemed reasonably incurred and passed on to the trust.
FHA/VA borrowers, in Moody's-rated transactions, are typically low
income borrowers with poor credit history who have been affected
by the weak economy and housing market. Moody's expects
delinquencies to remain high for this sector at 40%, 35%, and 30%
for the 2004, 2005, and 2006 vintages, respectively as house
prices continue to decline and unemployment rates remain high.
FHA/VA RMBS transactions have had very low losses to date (less
than 1%) despite high delinquency levels due to the FHA and VA
guarantees. However, Moody's expects this trend to change due to
the higher level of self-curtailments by the servicers.
Moody's final rating actions are based on current levels of credit
enhancement, collateral performance and updated pool-level loss
expectations. Moody's took into account credit enhancement
provided by seniority, and other structural features within the
senior note waterfalls.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment levels remain
high, and weakness persists in the housing market. Moody's now
projects the house price index to reach a bottom in the first
quarter of 2012, with a 2% remaining decline between the first
quarter of 2011 and 2012, and the unemployment rate to start
declining by fourth quarter of 2011.
The principal methodology used in these ratings is described in
the Monitoring and Performance Review section in "Moody's Approach
to Rating US Residential Mortgage-Backed Securities" published in
December 2008. Other methodology used in this rating was "FHA VA
US RMBS Surveillance Methodology" published in July 2011.
GSMPS PASS-THROUGH: Moody's Lowers Cl. B-1 Notes Rating to 'Ba3'
----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of three
bonds issued by GSMPS Pass-Through Trust 2004-2R.
RATINGS RATIONALE
The actions are a result of the bonds not having sufficient credit
enhancement to maintain the current ratings when compared to the
revised loss expectation on the pools of mortgages backing the
underlying certificates.
The principal methodology used in these ratings is described in
the "Surveillance Approach for Resecuritized transactions" section
in "Moody's Approach to Rating US Resecuritized Residential
Mortgage-Backed Securities" published in February 2011.
The resecuritization is backed by 37 outstanding classes (the
"Underlying Certificates") issued by GSMPS Trust between 1998 and
2003. The underlying certificates are backed primarily by FHA/VA
loans.
Moody's ratings on the resecuritization notes are based on:
1. The updated expected loss on the pools of loans backing the
underlying certificates and the updated ratings on the
underlying certificates,
2. The credit enhancement available to the underlying
certificates, and
3. The structure of the resecuritization transaction.
The principal methodology used in determining the underlying
ratings is described in the Monitoring and Performance Review
section in "Moody's Approach to Rating US Residential Mortgage-
Backed Securities" published in December 2008. For other
methodologies used for estimating losses on FHA/VA pools, please
refer to the methodology publication "FHA-VA US RMBS Surveillance
Methodology" published in July 2011. Please see the Credit Policy
page on www.moodys.com for a copy of these methodologies.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment levels remain
high, and weakness persists in the housing market.
Complete rating actions are:
Issuer: GSMPS Pass-Through Trust 2004-2R
Cl. A, Downgraded to Baa3 (sf); previously on Nov 12, 2009
Downgraded to A1 (sf)
Cl. B-1, Downgraded to Ba3 (sf); previously on Nov 12, 2009
Downgraded to Ba1 (sf)
Cl. B-2, Downgraded to Caa3 (sf); previously on Nov 12, 2009
Downgraded to Caa1 (sf)
GUGGENHEIM STRUCTURED: Moody's Affirms Cl. A-1 Notes Rating at Ba3
------------------------------------------------------------------
Moody's has affirmed the ratings of twelve classes of Notes issued
by Guggenheim Structured Real Estate Funding 2006-4 due to key
transaction parameters performing within levels commensurate with
the existing ratings levels on all outstanding classes of notes.
The rating action is the result of Moody's on-going surveillance
of commercial real estate collateralized debt obligation (CRE CDO)
transactions.
Moody's rating action is:
Cl. S, Affirmed at Aaa (sf); previously on Apr 9, 2009 Confirmed
at Aaa (sf)
Cl. A-1, Affirmed at Ba3 (sf); previously on Sep 16, 2010
Downgraded to Ba3 (sf)
Cl. A-2, Affirmed at Caa3 (sf); previously on Sep 16, 2010
Downgraded to Caa3 (sf)
Cl. B, Affirmed at Ca (sf); previously on Sep 16, 2010 Downgraded
to Ca (sf)
Cl. C, Affirmed at C (sf); previously on Sep 16, 2010 Downgraded
to C (sf)
Cl. D, Affirmed at C (sf); previously on Sep 16, 2010 Downgraded
to C (sf)
Cl. E, Affirmed at C (sf); previously on Sep 16, 2010 Downgraded
to C (sf)
Cl. F, Affirmed at C (sf); previously on Sep 16, 2010 Downgraded
to C (sf)
Cl. G, Affirmed at C (sf); previously on Sep 16, 2010 Downgraded
to C (sf)
Cl. H, Affirmed at C (sf); previously on Sep 16, 2010 Downgraded
to C (sf)
Cl. J, Affirmed at C (sf); previously on Sep 16, 2010 Downgraded
to C (sf)
Cl. K, Affirmed at C (sf); previously on Sep 16, 2010 Downgraded
to C (sf)
RATINGS RATIONALE
Guggenheim Structured Real Estate Funding 2006-4 is a revolving
cash CRE CDO transaction (reinvestment period will end February
2012). However, due to failures in overcollateralization tests,
the transaction has been applying all principal proceeds to pay
down the senior notes. This transaction is backed by a portfolio
of commercial mortgage backed securities (CMBS) (22.9% of the pool
balance), commercial real estate CDOs (17.6%), Asset Backed
Securities (10.3%), A-Notes and whole loans (15.9% of the pool
balance), B-Notes (21.3%) and mezzanine loans (12.0%). As of the
August 18, 2011 Trustee report, the aggregate Note balance of
the transaction, including preferred shares, has decreased to
$319.2 million from $506.0 million at issuance. Since our last
review in September 2010 $41.6 MM of collateral amortization and
redirection of interest proceeds to the Class A Notes. The
transaction is currently failing the Class A/B, C/D/E and F/G/H
par value tests.
There are twelve assets with a par balance of $146.7 million
(50.3% of the current pool balance) that are considered Impaired
Securities as of the August 18, 2011 Trustee report. Four of these
assets (17.9% of the impaired balance) are CMBS, four assets are
commercial real estate CDOs (34.6%), one asset is an A-Note
(24.9%), one asset is a C-Note (1.0%), one asset is a D-Note
(10.8%), and one asset is an E-Note (10.8%). Impaired Securities
that are not CMBS or commercial real estate CDOs are defined as
assets which are 60 or more days delinquent in their debt service
payment. While there have been no realized losses to the impaired
assets to date, Moody's does expect significant losses to occur
once they are realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has completed updated credit estimates for the non-Moody's
rated collateral. The bottom-dollar WARF is a measure of the
default probability within a collateral pool. Moody's modeled a
bottom-dollar WARF of 6,242 compared to 6,281 at last review. The
distribution of current ratings and credit estimates is as
follows: Aaa-Aa3 (0.3% compared to 0.2% at last review), A1-A3
(0.2% compared to 0.2% at last review), Baa1-Baa3 (0.0% compared
to 0.0% at last review), Ba1-Ba3 (0.0% compared to 1.6% at last
review), B1-B3 (23.9% compared to 13.1% at last review), and Caa1-
C (75.6% compared to 84.8% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 1.5 years compared
to 1.9 at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR of
11.5% compared to 12.3% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 99.9% compared to 18.9% at last review.
The increase in MAC is due to more collateral in the bottom end of
the Caa1 to C ratings range.
Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO
rating models, which was released on January 24, 2011.
The cash flow model, CDOEdge(R) v3.2.1.0, was used to analyze the
cash flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
11.5% to 6.5% or up to 21.5% would result in average rating
movement on the rated tranches of 1 to 4 notches downward and 1 to
3 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption uncertainty
are the current sluggish macroeconomic environment and performance
in the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are
continuing to show signs of recovery through the first half of
2011, while recovery in the non-core office and retail sectors are
tied to pace of recovery of the broader economy. Core office
markets are showing signs of recovery through lending and leasing
activity. The availability of debt capital continues to improve
with terms returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Other methodology used in this rating was "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
GUGGENHEIM STRUCTURED: Moody's Ups Ratings of Cl. B Notes to Ba2
----------------------------------------------------------------
Moody's has upgraded the ratings of four and affirmed the ratings
of two classes of Notes issued by Guggenheim Structured Real
Estate Funding 2005-2 primarily due to $66.8 million in full
amortization of collateral since Moody's last review in September
2010. Additionally, the underlying collateral performance has been
relatively stable as evidenced by the Moody's weighted average
rating factor (WARF) and recovery rate (WARR). The affirmations
are due to key transaction parameters performing within levels
commensurate with the existing ratings levels on those classes of
notes. The rating action is the result of Moody's on-going
surveillance of commercial real estate collateralized debt
obligation (CRE CDO) transactions.
Cl. A Notes, Upgraded to Aa3 (sf); previously on Sep 2, 2010
Downgraded to Baa3 (sf)
Cl. B Notes, Upgraded to Ba2 (sf); previously on Sep 2, 2010
Downgraded to B2 (sf)
Cl. C Notes, Upgraded to B3 (sf); previously on Sep 2, 2010
Downgraded to Caa2 (sf)
Cl. D Notes, Upgraded to Caa3 (sf); previously on Sep 2, 2010
Downgraded to C (sf)
Cl. E Notes, Affirmed at C (sf); previously on Sep 2, 2010
Downgraded to C (sf)
Cl. F Notes, Affirmed at C (sf); previously on Sep 2, 2010
Downgraded to C (sf)
RATINGS RATIONALE
Guggenheim Structured Real Estate Funding 2005-2 is currently a
static cash CRE CDO transaction (the reinvestment period ended
August 2010) backed by a portfolio of commercial mortgage backed
securities (CMBS) (25.0% of the pool balance), A-Notes and whole
loans (24.2% of the pool balance), B-Notes (24.0%) and mezzanine
loans (12.8%). As of the August 18, 2011 Trustee report, the
aggregate Note balance of the transaction, including preferred
shares, has decreased to $186.7 million from $305.8 million at
issuance, with the paydown directed to the Class A Notes, as a
result of amortization of the underlying collateral as well as
failing the Class D and E par value tests.
There are four assets with a par balance of $65.5 million (35.3%
of the current pool balance) that are considered Impaired
Securities as of the August 18, 2011 Trustee report. One of these
assets (23.2% of the impaired balance) is an A-Note, one asset is
CMBS (39.7%), one asset is a B-Note (21.3%) and one asset is a C-
Note (15.8%). Impaired Securities that are not CMBS are defined as
assets which are 60 or more days delinquent in their debt service
payment. However, the B-Note has been modified and is current.
While there have been no realized losses to the three remaining
impaired assets to date, Moody's does expect significant losses to
occur once they are realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has completed updated credit estimates for the non-Moody's
rated collateral. The bottom-dollar WARF is a measure of the
default probability within a collateral pool. Moody's modeled a
bottom-dollar WARF of 6,007 compared to 6,054 at last review. The
distribution of current ratings and credit estimates is as
follows: Aaa-Aa3 (3.7% compared to 4.4% at last review), A1-A3
(0.0% compared to 3.9% at last review), Baa1-Baa3 (11.2% compared
to 4.4% at last review), Ba1-Ba3 (4.8% compared to 6.1% at last
review), B1-B3 (0.0% compared to 0.0% at last review), and Caa1-C
(80.2% compared to 81.1% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 1.0 years compared
to 1.6 at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR of
20.2% compared to 21.8% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 12.3% compared to 13.8% at last review.
Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO
rating models, which was released on January 24, 2011.
The cash flow model, CDOEdge(R) v3.2.1.0, was used to analyze the
cash flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
20.2% to 10.2% or up to 30.2% would result in average rating
movement on the rated tranches of 1 to 5 notches downward and 1 to
3 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption uncertainty
are the current sluggish macroeconomic environment and performance
in the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are
continuing to show signs of recovery through the first half of
2011, while recovery in the non-core office and retail sectors are
tied to pace of recovery of the broader economy. Core office
markets are showing signs of recovery through lending and leasing
activity. The availability of debt capital continues to improve
with terms returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Other methodology used in this rating was "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
HARCH CLO: Moody's Upgrades Class D Notes Rating to 'Ba1'
---------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Harch CLO III Limited:
US$43,500,000 Class A-2 Floating Rate Notes, Due 2020, Upgraded to
Aaa (sf); previously on June 22, 2011 Aa3 (sf) Placed Under Review
for Possible Upgrade;
US$26,000,000 Class B Floating Rate Notes, Due 2020, Upgraded to
Aa3 (sf); previously on June 22, 2011 A2 (sf) Placed Under Review
for Possible Upgrade;
US$20,000,000 Class C Deferrable Floating Rate Notes, Due 2020,
Upgraded to Baa1 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$19,000,000 Class D Deferrable Floating Rate Notes, Due 2020,
Upgraded to Ba1 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade;
US$15,000,000 Class E Deferrable Floating Rate Notes, Due 2020,
Upgraded to Ba3 (sf); previously on June 22, 2011 Caa2 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Moody's notes that its analysis takes into account (1) the current
constraints around reinvesting due to the failure to meet certain
reinvestment criteria and (2) the possibility that the deal will
be allowed to reinvest in additional collateral obligations if the
restrictions on reinvesting were removed. Currently, the deal does
not have the ability to reinvest and as a result, cash has been
accumulating in the deal since September 2009. As of the August
2011 trustee report, the principal collections account balance is
$169,400,100.22. Due to the unique constraints around the deal's
reinvestment capability, Moody's analyzed and weighted two
alternative scenarios for this transaction. In the first case (the
"static case"), Moody's assumed that the current outstanding
principal collections along with future amortizations are held in
a reserve account until the end of the reinvestment period. After
the end of the reinvestment period, the cash is released from the
reserve account for application in accordance with the priority of
payments. Moody's also analyzed a second scenario where
reinvesting is permitted. Due to the uncertainty in the
composition of the new asset pool in the reinvesting case, we
modeled covenant levels for weighted average rating factor,
weighted average spread, and diversity that, in Moody's view, is
likely to be achieved when the current Grid Test is applied. The
weighted average life is modeled to be extended by one year from
the current weighted average life. In determining the appropriate
point in the Grid Test to model, Moody's choses a combination of
WARF, WAS, and Diversity that is in line with the present and
historical metrics of the current portfolio. The deal is required
to satisfy its collateral quality tests or maintain and improve
current actual levels if the collateral quality tests are
breached. In the reinvesting case, Moody's expects that the
additional collateral obligations purchased with principal
collections will have a credit risk profile which is no worse than
the portfolio parameters of the current pool.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In both the
static and reinvesting case, Moody's analyzed the underlying
collateral pool to have a performing par and principal proceeds
balance of $376.6 million (principal proceeds of $169 million are
assumed to be held in a reserve account until the end of the
reinvestment period in the static case, and are assumed to be used
to reinvest in additional collateral in the reinvesting case), a
defaulted par balance of $1.24 million, and a weighted average
recovery rate upon default of 48.83%. In the static case, Moody's
assumes a weighted average default probability of 20.31% (implying
a WARF of 2933 and a WAL of 4.2 years) and a diversity score of
43. In the reinvesting case Moody's assumes a weighted average
default probability of 21.79% (implying a WARF of 2820 and a WAL
of 5.1 years) and a diversity score of 60. The default and
recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Harch CLO III Limited, issued on April 17, 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
A source of additional performance uncertainties is currently, a
substantial proportion of the portfolio is held in cash due to
high prepayment levels in the loan market and the static nature of
the deal. In its reinvesting case analysis, Moody's assumed that
the cash would be reinvested primarily in senior secured loans.
The deal may also be impacted by the timing and pace of any
potential reinvesting in the future.
JP MORGAN: Fitch Affirms Junk Rating on Sixteen Note Classes
------------------------------------------------------------
Fitch Ratings has affirmed all classes of J.P. Morgan Chase
Mortgage Securities Trust, series 2008-C2, as modeled losses are
generally in line with losses from the previous review.
As of the August 2011 remittance period, there are five loans
(22.4%) in special servicing. Of these loans, the largest two,
The Promenade Shops at Dos Lagos (11.2%) and The Westin Portfolio
(9.8%) represent approximately 13.8% of Fitch's expected losses.
The transaction has realized losses of 1.3% to date.
Fitch modeled losses for the transaction are 19.8%, which include
losses associated with specially serviced and performing loans.
Fitch believes that the modeled losses may be mitigated somewhat
by the recovery prospects of the two largest specially serviced
loans, which the servicers are in the process of stabilizing.
This being the case, Fitch's ratings heavily relied on comparing
the pool's estimated base case loss expectation relative to
estimated credit enhancement remaining after liquidation of the
largest loss-producing assets, which were adjusted to Fitch value.
The pool's aggregate principal balance has decreased 4% to $1.12
billion from $1.17 billion at issuance. Cumulative interest
shortfalls in the amount of $21.6 million are currently affecting
classes A-J through T. Fitch has designated 27 loans (48%) as
Fitch Loans of Concern, which includes the five specially serviced
loans (22%).
The largest specially serviced loan, The Promenade Shops
at Dos Lagos, is comprised of a 345,847 square foot (sf)
lifestyle/entertainment retail center built in 2006/2007. The
loan transferred to special servicing in October 2008 for monetary
default after the borrower indicated the property was
significantly impacted by the downturn in the economy. The
special servicer has foreclosed on the property and continues to
work to stabilize the tenant base and increase foot traffic in an
effort to maximize value. As of August 2011, the special servicer
indicated that tenant retention has been better than anticipated
and the asset is 86% leased.
Recent valuations of the property are significantly lower than
origination and have fluctuated over the past 24 months, after
bottoming out in 2010. A recent appraisal obtained by the special
servicer as of January 2011 improved from 2010, largely due to the
subject's market stabilizing, as well as the new property
manager's business plan, which has focused on retaining core
tenants at the center and growing a future complimentary tenant
base around these established tenants. The business plan also
continues to focus on the state-of-the-art 15-screen theater that
is collateral to the loan. The manager continues to lobby with
large Hollywood production companies in an effort to bring a
greater number of first-run releases to the center.
The next largest contributor to expected losses is the Westin
Portfolio, which is comprised of the 487-room Westin La Polama in
Tucson, AZ, with a 27-hole Jack Nicklaus golf course and spa, and
the 412-room oceanfront Westin Hilton Head, in Hilton Head, SC.
The loan transferred to special servicing in October 2008 due to
monetary default. The properties were significantly impacted by
the recession and its impact on business and leisure travel. In
2010, special servicing responsibilities were transferred from
Midland Loan Services to LNR Partners, Inc.
The borrower filed for bankruptcy in November 2010. Recent
property valuations obtained by the special servicer as of April
2011 showed a decline in value from 2010. Both properties are
scheduled to receive renovations, which Fitch expects will help
maintain their respective positions within the market and may
improve future performance.
Fitch affirms the following classes and revises the Rating
Outlooks as indicated:
-- $60.7 million class A-2 at 'AAAsf'; Outlook Stable;
-- $105.5 million class A-3 at 'AAAsf'; Outlook Stable;
-- $54.5 million class A-SB at 'AAAsf'; Outlook Stable;
-- $354.6 billion class A-4 at 'AAAsf'; Outlook Stable;
-- $145 million class A-FL at 'AAAsf'; Outlook Stable;
-- $64 million class A-1A at 'AAAsf'; Outlook Stable;
-- $116.5 million class AM at 'BBsf'; Outlook to Negative from
Stable;
-- $61.2 million class AJ at 'CCCsf/RR1';
-- $14.6 million class B at 'CCCsf/RR1';
-- $14.6 million class C at 'CCCsf/RR6';
-- $10.2 million class D at 'CCsf/RR6';
-- $10.2 million class E at 'CCsf/RR6';
-- $13.1 million class F at 'CCsf/RR6';
-- $11.7 million class G at 'CCsf/RR6';
-- $16 million class H at 'CCsf/RR6';
-- $14.6 million class J at 'CCsf/RR6';
-- $14.6 million class K at 'CCsf/RR6;
-- $8.7 million class L at 'Csf/RR6';
-- $4.4 million class M at 'Csf/RR6';
-- $5.8 million class N at 'Csf/RR6';
-- $4.4 million class P at 'Csf/RR6';
-- $2.9 million class Q at 'Csf/RR6'; and
-- $4.4 million class T at 'Csf/RR6'.
Class A-1 has paid in full.
JP MORGAN: Fitch Junks Rating on Three Note Classes
---------------------------------------------------
Fitch Ratings has downgraded three classes of J.P. Morgan Chase
Commercial Mortgage Securities Corp., series 2005-CIBC12 (JPMCC
2005-CIBC12).
The downgrades reflect Fitch modeled losses of 5.77% of the
remaining pool. Fitch has designated 42 loans (21.3%) as Fitch
Loans of Concern, which includes 19 specially-serviced loans
(10%). Fitch expects classes G through NR to be fully depleted
and class F to be impacted significantly from losses associated
with the specially serviced assets.
As of the August 2011 distribution date, the pool's aggregate
principal balance has reduced by 25.9% to $1.66 billion from
$2.22 billion at issuance. In addition, four loans (2.4%) have
been fully defeased. Interest shortfalls totaling $9,300,380 are
currently affecting classes F through NR.
The largest contributor to modeled losses is a specially serviced
loan (.79%) secured by a 575,276 square feet (sf) industrial
complex located in South Plainfield, NJ. The loan transferred to
special servicing in May 2009 due to monetary default. A receiver
was appointed in January 2010 and negotiated a 10 year lease
extension with a major tenant occupying 62.4% of the property.
The special servicer is currently negotiating with the borrower to
cure the default.
The second largest contributor to modeled losses is a specially
serviced loan (.75%) secured by a 147,178 sf retail anchored
center located in Oak Park, MI. The loan transferred to special
servicing in December 2009 due to monetary default. The grocer
anchor which occupied 37.5% of the property was recently replaced
with Farm Fresh Market. A receiver was appointed in May 2010 and
is currently reviewing potential offers to purchase the property.
The third largest contributor to modeled losses is a loan
(2.52%) secured by 685,585 sf of an 813,165 sf regional mall in
Steubenville, OH, approximately 35 miles west of Pittsburgh, PA.
Major tenants at the center include Wal-Mart, Sears, J.C. Penney,
and Dick's Sporting Goods. The mall has experienced a steady
decline in performance over the last few years, mainly due to an
increase in vacancy and the negative effects that the recession
had on the subject's local market. The debt service coverage
ratio (DSCR) declined in 2010, with year-end figures of 1.01 times
(x), compared with 1.02x at year-end 2009 and 1.62x at
securitization.
Fitch has downgraded the following classes and has assigned or
revised Recovery Ratings (RR) as indicated:
-- $27.1 million class E to 'CCCsf/RR2' from 'Bsf';
-- $24.4 million class F to 'Csf/RR4' from 'CCCsf/RR1';
-- $24.4 million class G to 'Csf/RR6' from 'CCCsf/RR1'.
In addition, Fitch has affirmed the following classes as
indicated:
-- $51.3 million class A-3A1 at 'AAAsf', Outlook Stable;
-- $122.9 million class A-3A2 at 'AAAsf', Outlook Stable;
-- $121.6 million class A-3B at 'AAAsf', Outlook Stable;
-- $649.3 million class A-4 at 'AAAsf', Outlook Stable;
-- $95.5 million class A-SB at 'AAAsf', Outlook Stable;
-- $216.7 million class A-M at 'AAAsf', Outlook Stable;
-- $162.5 million class A-J at 'Asf', Outlook Stable;
-- $43.3 million class B to 'BBB-sf', Outlook Stable;
-- $19 million class C to 'BBsf', Outlook Stable;
-- $32.5 million class D to 'Bsf', Outlook Negative;
-- $50 million class UHP at 'B-sf', Outlook Stable from
Negative.
Class H, J, K, L, M, N, and P remain at 'Dsf/RR6'. Class NR,
which is not rated by Fitch has been reduced to zero from
27.1 million at issuance due to realized losses.
Fitch has previously withdrawn the ratings on the interest-only
classes X-1 and X-2.
KEYSTONE OWNER: Moody's Upgrades Rating of M-1 Notes to 'Ba1'
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of five
tranches and confirmed the rating of one tranche from two second
lien RMBS deals issued by Keystone Owner Trust 1998-P1 and United
National Home Loan Owner Trust 1999-1. The collateral backing
these deals primarily consists of seasoned high loan-to-value
closed-end second lien mortgages.
RATINGS RATIONALE
The principal methodology used in these ratings was "Moody's
Approach to Rating US Residential Mortgage-Backed Securities"
published in December 2008. Other methodology used in these
ratings was "Second Lien RMBS Loss Projection Methodology: April
2010" published in April 2010.
Moody's rating actions are based on current levels of credit
enhancement, collateral performance, and updated pool-level loss
expectations. Moody's took into account credit enhancement
provided by seniority, and other structural features. The actions
also consider the resolution of litigation involving the trusts,
subordination of litigation damages to note-holders payments, the
resumption of principal and interest payments to Keystone National
Home Loan Owner Trust 1998-P1 note-holders; United National Home
Loan Owner Trust 1999-1 note-holders received scheduled payments
throughout the litigation, and the commencement of normal
reporting. However, Keystone note-holders will not receive
interest on interest, which was a factor in Moody's assigned
ratings.
The RMBS trusts were defendants in a class-action lawsuit in the
state of Arkansas, which claims that certain Arkansas mortgage
loans held by the trusts violated state usury laws. A final
settlement was reached in January 2011 and the trusts agreed to
pay damages only from principal and interest otherwise
distributable to certificate and residual-holders. Keystone
National Home Loan Owner Trust 1998-P1 note-holders received
principal and interest previously suspended by the trustee and
going forward funds will be available to pay note-holders in both
deals since they have priority over amounts payable toward the
settlement. The trustee has continued normal reporting for both of
these deals, enabling us to monitor the transactions.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment levels remain
high, and weakness persists in the housing market. Moody's now
projects house price index to reach a bottom in the first quarter
of 2012, with a 2% remaining decline between the first quarter of
2011 and 2012, and unemployment rate to start declining by fourth
quarter of 2011.
Complete rating actions are:
Issuer: Keystone Owner Trust 1998-P1
A-5, Upgraded to Baa3 (sf); previously on Jul 29, 2011 Caa1 (sf)
Placed Under Review Direction Uncertain
M-1, Upgraded to Ba1 (sf); previously on Jul 29, 2011 Caa1 (sf)
Placed Under Review Direction Uncertain
B, Upgraded to Ba1 (sf); previously on Jul 29, 2011 Caa1 (sf)
Placed Under Review Direction Uncertain
Issuer: United National Home Loan Owner Trust 1999-1
A, Upgraded to Baa1 (sf); previously on Jul 29, 2011 Ba1 (sf)
Placed Under Review Direction Uncertain
M-1, Upgraded to Baa2 (sf); previously on Jul 29, 2011 Ba1 (sf)
Placed Under Review Direction Uncertain
M-2, Confirmed at Ba1 (sf); previously on Jul 29, 2011 Ba1 (sf)
Placed Under Review Direction Uncertain
KINGSLAND II: Moody's Upgrades Class C Notes Rating to 'Ba2'
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Kingsland II, Ltd:
US$50,000,000 Class A-1a Senior Secured Revolving Floating Rate
Notes (current balance of $49,732,228), Upgraded to Aa1 (sf);
previously on June 22, 2011 Aa3 (sf) Placed Under Review for
Possible Upgrade;
US$205,150,000 Class A-1b Senior Secured Floating Rate Notes
(current balance of $204,051,332), Upgraded to Aa1 (sf);
previously on June 22, 2011 Aa3 (sf) Placed Under Review for
Possible Upgrade;
US$62,000,000 Class A-1c Senior Secured Floating Rate Notes
(current balance of $61,667,963), Upgraded to Aa1 (sf); previously
on June 22, 2011 A1 (sf) Placed Under Review for Possible Upgrade;
US$8,000,000 Class A-2 Senior Secured Floating Rate Notes,
Upgraded to Aa3 (sf); previously on June 22, 2011 A3 (sf) Placed
Under Review for Possible Upgrade;
US$29,200,000 Class B Senior Secured Deferrable Floating Rate
Notes, Upgraded to Baa1 (sf); previously on June 22, 2011 Ba1 (sf)
Placed Under Review for Possible Upgrade;
US$27,525,000 Class C Senior Secured Deferrable Floating Rate
Notes, Upgraded to Ba2 (sf); previously on June 22, 2011 Caa1 (sf)
Placed Under Review for Possible Upgrade;
US$6,000,000 Class D Secured Deferrable Floating Rate Notes,
Upgraded to B1 (sf); previously on June 22, 2011 Caa3 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The ratings on the Class A-1a and A-1b Notes reflect the actual
underlying ratings of the Notes. This underlying ratings are based
solely on the intrinsic credit quality of the Notes in the absence
of the guarantee from Assured Guaranty, whose insurance financial
strength rating is currently Aa3. The above actions are a result
of, and are consistent with, Moody's modified approach to rating
structured finance securities wrapped by financial guarantors as
described in the press release dated November 10, 2008, titled
"Moody's modifies approach to rating structured finance securities
wrapped by financial guarantors."
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $405.6 million,
defaulted par of $5.1 million, a weighted average default
probability of 22.74% (implying a WARF of 2817), a weighted
average recovery rate upon default of 47.6%, and a diversity score
of 55. The default and recovery properties of the collateral pool
are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Kingsland II, Ltd., issued in April 2006, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread and diversity levels higher than the
covenant levels due to the large difference between the
reported and covenant levels.
KINGSLAND IV: Moody's Upgrades Rating of Class D Notes to 'Ba2'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Kingsland IV, Ltd.:
US$308,100,000 Class A-1 Senior Secured Floating Rate Notes Due
2021 (current balance of $304,300,554), Upgraded to Aa1 (sf);
previously on June 22, 2011 Aa3 (sf) Placed Under Review for
Possible Upgrade;
US$60,000,000 Class A-1R Senior Secured Revolving Floating Rate
Notes Due 2021 (current balance of $59,260,088), Upgraded to Aa1
(sf); previously on June 22, 2011 Aa3 (sf) Placed Under Review for
Possible Upgrade;
US$22,900,000 Class B Senior Secured Floating Rate Notes Due 2021,
Upgraded to A1 (sf); previously on June 22, 2011 Baa1 (sf) Placed
Under Review for Possible Upgrade;
US$25,000,000 Class C Senior Secured Deferrable Floating Rate
Notes Due 2021, Upgraded to Baa2 (sf); previously on June 22, 2011
Ba1 (sf) Placed Under Review for Possible Upgrade;
US$18,000,000 Class D Senior Secured Deferrable Floating Rate
Notes Due 2021, Upgraded to Ba2 (sf); previously on June 22, 2011
B2 (sf) Placed Under Review for Possible Upgrade;
US$14,900,000 Class E Secured Deferrable Floating Rate Notes Due
2021, Upgraded to B1 (sf); previously on June 22, 2011 Caa3 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $463.4 million,
defaulted par of $3.9 million, a weighted average default
probability of 20.21% (implying a WARF of 2565), a weighted
average recovery rate upon default of 47.37%, and a diversity
score of 59. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Kingsland IV, Ltd., issued in February 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011. Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread and diversity levels higher than the
covenant levels due to the large difference between the
reported and covenant levels.
KKR FINANCIAL: Moody's Upgrades Class F Notes Rating to 'Ba2'
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by KKR Financial CLO 2007-1, Ltd.:
US$220,250,000 Class B Senior Secured Floating Rate Notes Due
2021, Upgraded to Aaa (sf); previously on June 22, 2011 Aa2 (sf)
Placed Under Review for Possible Upgrade;
US$299,250,000 Class C Deferrable Mezzanine Secured Floating Rate
Notes Due 2021, Upgraded to Aa2 (sf); previously on June 22, 2011
A2 (sf) Placed Under Review for Possible Upgrade;
US$340,500,000 Class D Deferrable Mezzanine Secured Floating Rate
Notes Due 2021, Upgraded to A3 (sf); previously on June 22, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade;
US$134,000,000 Class E Deferrable Mezzanine Secured Floating Rate
Notes Due 2021, Upgraded to Baa3 (sf); previously on June 22, 2011
B1 (sf) Placed Under Review for Possible Upgrade;
US$61,750,000 Class F Deferrable Mezzanine Secured Floating Rate
Notes Due 2021, Upgraded to Ba2 (sf); previously on June 22, 2011
B3 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $3.3 billion,
defaulted par balance of $51.2 million, a weighted average default
probability of 31.12% (implying a WARF of 3832), a weighted
average recovery rate upon default of 43.75%, and a diversity
score of 37. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
KKR Financial CLO 2007-1, Ltd., issued in May of 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered weighted average rating factor lower than
the covenant level and spread and diversity levels higher than
the covenant levels due to the large difference between the
reported and covenant levels.
4) Concentration risk: The portfolio includes a material
concentration in CLO securities that are issued by affiliates
of the collateral manager, which Moody's views as potentially
exposing the notes to additional correlation risk.
Additionally, the transaction has large single obligor
exposures to debt relating to recent vintages of buyouts and
other highly leveraged financial transactions, which Moody's
views to be particularly vulnerable to credit deterioration.
5) Interest rate swap: The deal has a large pay-fixed receive-
floating interest rate swap that is currently out of the money.
Payments to hedge counterparties may consume a large portion of
the interest proceeds.
KNOWLEDGEFUNDING OHIO: Fitch Junks Ratings on Two Note Classes
--------------------------------------------------------------
Fitch Ratings has downgraded the senior and subordinate student
loan notes issued by KnowledgeFunding Ohio, Inc.- 2005 Indenture
of Trust to 'BB' from 'AAA' and to 'CCC' from 'BB' respectively.
The Rating Outlook is Negative for the senior notes and Stable for
the subordinated notes.
Fitch's downgrade of the notes is triggered by an increase in the
bond coupon, which will diminish excess spread going forward. The
high bond coupon results from a higher multiple being applied to
the maximum auction rate after the notes were downgraded by
another rating agency in August 2011. The maximum auction rate
has been in effect since the failure of the auction rate
securities market. The recent downgrade of the trust by another
rating agency has activated the 265% maximum rate multiple, as
opposed to the previous 175% multiple. This higher multiple will
result in higher bond interest payments which will compress excess
spread going forward.
With the higher multiple in effect, the transaction's interest
rate risk has been amplified. Upward movements in interest rate
will likely result in negative excess spread. When Fitch's
standard interest rate stresses are applied, the transaction is
not able to maintain parity, despite the relatively high parity
ratio today (112.05%) for the senior notes.
Fitch's downgrade of the senior notes to 'BB' reflects
consideration given to two factors: the current market value of
collateral, which if sold today, would likely enable full
repayment of the senior notes; and the potential buildup of parity
in the next two years due to an expected low interest rate
environment. However, the Negative Outlook indicates
vulnerability of the transaction and further downgrade risk if the
interest rate moves unfavorably and parity erodes.
The potential for lower excess spread over the longer term affects
the subordinate notes which are presently under-collateralized at
97.17%. Fitch's downgrade to 'CCC' indicates that although
interest payments are being made timely, ultimate principal
default is a real possibility.
Fitch used its 'Global Structured Finance Rating Criteria,' 'U.S.
FFELP Student Loan ABS Rating Criteria', and 'Rating U.S. Federal
Family Education Loan Program Student Loan ABS' to review the
ratings.
Fitch has taken the following rating actions:
KnowledgeFunding Ohio, Inc.- 2005 Indenture of Trust:
-- Class 2005 A-1 downgraded to 'BB' from 'AAA'; Outlook revised
to Negative from Stable;
-- Class 2005 A-2 downgraded to 'BB' from 'AAA'; Outlook revised
to Negative from Stable;
-- Class 2005 A-3 downgraded to 'BB' from 'AAA'; Outlook revised
to Negative from Stable;
-- Class 2005 C-1 downgraded to 'CCC' from 'BB'; Outlook Stable;
-- Class 2006 A-1 downgraded to 'BB' from 'AAA'; Outlook revised
to Negative from Stable;
-- Class 2006 A-2 downgraded to 'BB' from 'AAA'; Outlook revised
to Negative from Stable;
-- Class 2006 A-3 downgraded to 'BB' from 'AAA'; Outlook revised
to Negative from Stable;
-- Class 2006 C-1 downgraded to 'CCC' from 'BB'; Outlook Stable.
LANDMARK VII: Moody's Raises Ratings of Five Classes of CLO Notes
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Landmark VII CDO, Ltd.:
US$229,500,000 Class A-1L Floating Rate Notes Due 2018 (current
balance of $225,464,613), Upgraded to Aaa (sf); previously on
June 22, 2011 Aa2 (sf) Placed Under Review for Possible Upgrade;
US$20,500,000 Class A-2L Floating Rate Notes Due 2018, Upgraded to
Aa2 (sf); previously on June 22, 2011 A2 (sf) Placed Under Review
for Possible Upgrade;
US$23,000,000 Class A-3L Floating Rate Notes Due 2018, Upgraded to
A3 (sf); previously on June 22, 2011 Baa3 (sf) Placed Under Review
for Possible Upgrade;
US$14,000,000 Class B-1L Floating Rate Notes Due 2018, Upgraded to
Ba1 (sf); previously on June 22, 2011 Ba3 (sf) Placed Under Review
for Possible Upgrade;
US$14,000,000 Class B-2L Floating Rate Notes Due 2018, Upgraded to
B1 (sf); previously on June 22, 2011 Caa2 (sf) Placed Under Review
for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in the publication "Moody's Approach to Rating
Collateralized Loan Obligations" published in June 2011. The
primary changes to the modeling assumptions include (1) a removal
of the temporary 30% default probability macro stress implemented
in February 2009 as well as (2) increased BET liability stress
factors and increased recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio since the rating action in March 2011.
Based on the August 2011 trustee report, the weighted average
rating factor is currently 2765 compared to 2914 in February 2011.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $303 million, a
defaulted par of $13.6 million, a weighted average default
probability of 21.5% (implying a WARF of 2970), a weighted average
recovery rate upon default of 49.3%, and a diversity score of 75.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Landmark VII CDO, Ltd., issued in April 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1. Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2. Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3. Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread and diversity levels higher than the
covenant levels due to the large difference between the
reported and covenant levels.
LATITUDE CLO: Moody's Upgrades Ratings of Class C Notes to 'Ba3'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Latitude CLO I Ltd.:
US$45,000,000 Class A-2 Notes, Upgraded to Aa1 (sf); previously on
June 22, 2011 A1 (sf) Placed Under Review for Potential Upgrade;
US$23,000,000 Class B-1 Notes, Upgraded to Baa2 (sf); previously
on June 22, 2011 Ba1 (sf) Placed Under Review for Potential
Upgrade;
US$2,000,000 Class B-2 Notes, Upgraded to Baa2 (sf); previously on
June 22, 2011 Ba1 (sf) Placed Under Review for Potential Upgrade;
US$13,300,000 Class C Notes, Upgraded to Ba3 (sf); previously on
June 22, 2011 B3 (sf) Placed Under Review for Potential Upgrade;
US$9,500,000 Class D Notes, Upgraded to Caa1 (sf); previously on
June 22, 2011 Caa3 (sf) Placed Under Review for Potential Upgrade;
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $241.2 million,
defaulted par of $18.97 million, a weighted average default
probability of 19.34% (implying a WARF of 2848), a weighted
average recovery rate upon default of 49.33%, and a diversity
score of 68. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Latitude CLO I Ltd., issued in December 2005, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation
risk on those assets. Moody's assumes an asset's terminal value
upon liquidation at maturity to be equal to the lower of an
assumed liquidation value (depending on the extent to which the
asset's maturity lags that of the liabilities) and the asset's
current market value.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score.
LCM VI: Moody's Upgrades Ratings of Class E Notes to 'Ba2'
----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by LCM VI Ltd.:
US$17,500,000 Class B Second Priority Floating Rate Notes Due
2019, Upgraded to Aa1 (sf); previously on June 22, 2011 A1 (sf)
Placed Under Review for Possible Upgrade;
US$32,500,000 Class C Third Priority Deferrable Floating Rate
Notes Due 2019, Upgraded to A3 (sf); previously on June 22, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade;
US$15,500,000 Class D Fourth Priority Deferrable Floating Rate
Notes Due 2019, Upgraded to Baa3 (sf); previously on June 22, 2011
Ba3 (sf) Placed Under Review for Possible Upgrade;
US$17,000,000 Class E Fifth Priority Deferrable Floating Rate
Notes Due 2019, Upgraded to Ba2 (sf); previously on June 22, 2011
Caa1 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Moody's also notes that Moody's adjusted WARF has declined since
the rating action in September 2009 due to a decrease in the
percentage of securities with ratings on "Review for Possible
Downgrade" or with a "Negative Outlook."
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $483.1 million, a
weighted average default probability of 19.47% (implying a WARF of
2507), a weighted average recovery rate upon default of 52.22%,
and a diversity score of 66. The default and recovery properties
of the collateral pool are incorporated in cash flow model
analysis where they are subject to stresses as a function of the
target rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
LCM VI Ltd., issued in May 2007, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread and diversity score.
However, as part of the base case, Moody's considered spread
levels higher than the covenant levels and weighted average
rating factor lower than the covenant levels due to the large
difference between the reported and covenant levels.
LIGHTPOINT CLO: Moody's Ups $19MM Class D Notes to 'B1'
-------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Lightpoint CLO V, Ltd.:
US$450,000,000 Class A-1 Floating Rate Notes Due 2019, Upgraded to
Aaa (sf); previously on June 22, 2011 Aa2 (sf) Placed Under Review
for Possible Upgrade;
US$30,000,000 Class A-2 Floating Rate Notes Due 2019, Upgraded to
Aa3 (sf); previously on June 22, 2011 A3 (sf) Placed Under Review
for Possible Upgrade;
US$34,500,000 Class B Deferrable Floating Rate Notes Due 2019,
Upgraded to Baa1 (sf); previously on June 22, 2011 Ba1 (sf) Placed
Under Review for Possible Upgrade;
US$20,500,000 Class C Floating Rate Notes Due 2019, Upgraded to
Ba1 (sf); previously on June 22, 2011 B1 (sf) Placed Under Review
for Possible Upgrade;
US$19,000,000 Class D Floating Rate Notes Due 2019, Upgraded to B1
(sf); previously on June 22, 2011 Caa3 (sf) Placed Under Review
for Possible Upgrade;
US$5,000,000 Class J Blended Securities Notes Due 2019 (current
Rated Balance of $1,760,520.76), Upgraded to Ba2 (sf); previously
on June 22, 2011 Caa3 (sf) Placed Under Review for Possible
Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in the publication "Moody's Approach to Rating
Collateralized Loan Obligations" published in June 2011. The
primary changes to the modeling assumptions include (1) a removal
of the temporary 30% default probability macro stress implemented
in February 2009 as well as (2) increased BET liability stress
factors and increased recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in September
2009. Based on the August 2011 trustee report, the weighted
average rating factor is currently 2281 compared to 2559 in August
2009. The overcollateralization ratios of the rated notes have
also improved since the rating action in September 2009. The Class
A, Class B, Class C, and Class D overcollateralization ratios are
reported at 120.1%, 112.0% , 107.7%, and 104.0% respectively,
versus August 2009 levels of 116.8%, 108.9%, 104.8%, and 101.2%,
respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $576 million, no
defaulted par, a weighted average default probability of 19.9%
(implying a WARF of 2588), a weighted average recovery rate upon
default of 48.6%, and a diversity score of 70. These default and
recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Lightpoint CLO V, Ltd., issued in August 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Other methodology used in this rating was "Rating CDO Repacks: An
Application of The Structured Note Methodology" published in
February 2004.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1. Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2. Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
LIGHTPOINT CLO: Moody's Ups $25MM Class D Notes Rating to 'Ba2'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Lightpoint CLO VIII, Ltd.:
US$74,750,000 Class A-1-B Floating Rate Notes Due 2018, Upgraded
to Aa1 (sf); previously on June 22, 2011 Aa3 (sf) Placed Under
Review for Possible Upgrade;
US$18,750,000 Class B Floating Rate Notes Due 2018, Upgraded to
Aa3 (sf); previously on June 22, 2011 A2 (sf) Placed Under Review
for Possible Upgrade;
US$24,500,000 Class C Floating Rate Deferrable Notes Due 2018,
Upgraded to Baa1 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$25,000,000 Class D Floating Rate Deferrable Notes Due 2018,
Upgraded to Ba2 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade;
US$19,250,000 Class E Floating Rate Deferrable Notes Due 2018,
Upgraded to B1 (sf); previously on June 22, 2011 Caa2 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in September
2009. Based on the latest trustee report dated August 7, 2011, the
weighted average rating factor is currently 2335 compared to 2650
in August 2009. The overcollateralization ratios of the rated
notes have also improved. The Class A/B, Class C, Class D and
Class E overcollateralization ratios are reported at 123.12%,
115.89%, 109.33% and 104.77%, respectively, versus August 2009
levels of 119.22%, 112.22%, 105.87% and 101.45%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $483.2 million,
no defaulted par, a weighted average default probability of 21.51%
(implying a WARF of 2688), a weighted average recovery rate upon
default of 49.16%, and a diversity score of 65. The default and
recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Lightpoint CLO VIII, Ltd., issued in August 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
LIME STREET: Moody's Raises Rating of Class D Notes to 'Ba2'
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Lime Street CLO, Ltd.:
US$290,000,000 Class A Senior Floating Rate Notes Due 2021,
Upgraded to Aa1 (sf); previously on June 22, 2011 Aa3 (sf) Placed
Under Review for Possible Upgrade;
US$30,000,000 Class B Senior Floating Rate Notes Due 2021,
Upgraded to A2 (sf); previously on June 22, 2011 Baa1 (sf) Placed
Under Review for Possible Upgrade;
US$22,000,000 Class C Deferrable Floating Rate Notes Due 2021,
Upgraded to Baa2 (sf); previously on June 22, 2011 Ba1 (sf) Placed
Under Review for Possible Upgrade;
US$15,000,000 Class D Deferrable Floating Rate Notes Due 2021,
Upgraded to Ba2 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade;
US$12,600,000 Class E Deferrable Floating Rate Notes Due 2021,
Upgraded to B1 (sf); previously on June 22, 2011 Caa3 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $389 million, no
defaulted par, a weighted average default probability of 24.05%
(implying a WARF of 2970), a weighted average recovery rate upon
default of 48.21%, and a diversity score of 50. The default and
recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Lime Street CLO, Ltd., issued in August 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average coupon, and diversity score.
However, as part of the base case, Moody's considered weighted
average rating factor level lower than the covenant level and
spread level higher than the covenant level due to the large
difference between the reported and covenant levels.
LVII RESECURITIZATION: S&P Cuts Ratings on 2 Note Classes to 'CCC'
------------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on seven
classes from LVII Resecuritization Trust 2009-1's resecuritization
notes and certificates series 2009-1, a residential mortgage-
backed securities (RMBS) resecuritized real estate mortgage
investment conduit (re-REMIC) transaction. "At the same time, we
affirmed our ratings on two other classes from the same
transaction," S&P related.
"The downgrades reflect our assessment that projected credit
support for the affected classes is insufficient to maintain the
previous ratings. The affirmations reflect our assessment that
projected credit support is sufficient at the current rating
levels," S&P stated.
"Our ratings on the re-REMIC classes are intended to address the
timely payment of interest and principal. We reviewed the interest
and principal amounts due on the underlying securities, which are
then passed through to the applicable re-REMIC classes. We applied
our loss projections, incorporating, where applicable, our
recently revised loss assumptions to the underlying collateral
to identify the principal and interest amounts that could be
passed through from the underlying securities under our rating
scenario stresses. We stressed our loss projections at various
rating categories to assess whether the re-REMIC classes could
withstand the stressed losses associated with their ratings while
receiving timely payment of interest and principal consistent
with our criteria," S&P stated.
"In applying our loss projections we incorporated, where
applicable, our revised loss assumptions as outlined in 'Revised
Lifetime Loss Projections For Prime, Subprime, And Alt-A U.S. RMBS
Issued In 2005-2007,' published on March 25, 2011, into our
review. Such updates pertain to the 2005 to 2007 vintage prime,
subprime, and Alternative-A (Alt-A) transactions, some of which
are associated with the re-REMICs we reviewed (see tables 1 and
2)," S&P related.
Table 1
Lifetime Loss Projections For Prime And Subprime RMBS
(Percent of original balance)
Prime RMBS Subprime RMBS
Aggregate Aggregate
Vintage Updated Prior Updated Prior
2005 5.5 4.00 18.25 15.40
2006 9.25 6.60 38.25 35.00
2007 11.75 9.75 48.50 43.20
Table 2
Lifetime Loss Projections For Alternative-A RMBS
(Percent of original balance)
Fixed/
Aggregate long-reset
Vintage Updated Prior Updated Prior
2005 13.75 11.25 12.75 9.60
2006 29.50 26.25 25.25 25.00
2007 36.00 31.25 31.75 26.25
Short-reset
hybrid Option ARM
Vintage Updated Prior Updated Prior
2005 13.25 14.75 15.50 13.25
2006 30.00 30.50 34.75 26.75
2007 41.00 40.75 43.50 37.50
"As a result of this review, we lowered our ratings on certain
classes because we determined there were principal and/or interest
shortfalls from the underlying securities that would impair the
re-REMIC classes at the applicable rating stresses. The
affirmations reflect our assessment of the likelihood that the re-
REMIC classes will receive timely interest and the ultimate
payment of principal under the applicable stressed assumptions,"
S&P stated.
The underlying collateral for this transaction consists of classes
of securities issued in 2003 to 2007 that are backed primarily by
first-lien, fixed-rate, and adjustable-rate mortgages secured by
one- to four-family residential properties.
Ratings Lowered
LVII Resecuritization Trust 2009-1
Resecuritization notes and certificates series 2009-1
Rating
Class CUSIP To From
M-2 502449AH4 A (sf) AA (sf)
M-3 502449AJ0 BBB+ (sf) AA- (sf)
M-4 502449AK7 BBB (sf) A+ (sf)
M-5 502449AL5 BB (sf) A (sf)
M-6 502449AM3 B (sf) A- (sf)
M-7 502449AN1 CCC (sf) BBB+ (sf)
M-8 502449AP6 CCC (sf) BBB (sf)
Ratings Affirmed
LVII Resecuritization Trust 2009-1
Resecuritization notes and certificates series 2009-1
Class CUSIP
A-2 502449AB7 AAA (sf)
M-1 502449AG6 AA+ (sf)
MADISON PARK: Moody's Upgrades Rating of Class C Notes to 'Ba1'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Madison Park Funding III, Ltd:
US$381,500,000 Class A-1 Floating Rate Notes Due 2020, Upgraded to
Aaa (sf); previously on June 22, 2011 Aa3 (sf) Placed Under Review
for Possible Upgrade;
US$100,000,000 Class A-2a Floating Rate Notes Due 2020, Upgraded
to Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed Under
Review for Possible Upgrade;
US$11,000,000 Class A-2b Floating Rate Notes Due 2020, Upgraded to
Aa1 (sf); previously on June 22, 2011 A1 (sf) Placed Under Review
for Possible Upgrade;
US$33,000,000 Class A-3 Floating Rate Notes Due 2020, Upgraded to
Aa3 (sf); previously on June 22, 2011 A3 (sf) Placed Under Review
for Possible Upgrade;
US$40,000,000 Class B Deferrable Floating Rate Notes Due 2020,
Upgraded to Baa1 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$24,500,000 Class C Deferrable Floating Rate Notes Due 2020,
Upgraded to Ba1 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade;
US$22,000,000 Class D Deferrable Floating Rate Notes Due 2020,
Upgraded to Ba2 (sf); previously on June 22, 2011 Caa2 (sf) Placed
Under Review for Possible Upgrade;
US$6,000,000 Class Q Notes Due 2020 (current rated balance of
$4,427,622), Upgraded to Baa3 (sf); previously on June 22, 2011 B1
(sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of an increase in the
transaction's overcollateralization ratios since the rating action
in May 2010. Based on the latest trustee report dated August 10,
2011, the Class A, Class B, Class C, and Class D
overcollateralization ratios are reported at 128.92%, 119.80%,
114.83% and 110.70%, respectively, versus May 2010 levels of
124.17%, 115.39%, 110.59% and 106.62%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $680.1 million,
defaulted par of $4.4 million, a weighted average default
probability of 22.76% (implying a WARF of 2816), a weighted
average recovery rate upon default of 47.80%, and a diversity
score of 80. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Madison Park Funding III Ltd., issued in 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
A secondary methodology used was "Using the Structured Note
Methodology to Rate CDO Combo-Notes" published in February 2004.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
MARIAH RE: S&P Lowers Rating on Series 2010-1 Notes to 'CCC+'
-------------------------------------------------------------
On June 27, 2011, Standard & Poor's Ratings Services lowered its
rating on Mariah Re Ltd.'s Series 2010-1 notes to 'CCC+(sf)' from
'B(sf)' and revised the CreditWatch status to developing. "At the
time, we indicated that any further rating action on the notes
would depend on the occurrence and magnitude of subsequent covered
events," S&P related.
"Since then, we have received information for covered events
through the end of July. Total covered losses through this period,
which comprises events through Catastrophe Series Number 57, is
$697.46 million. This amount is consistent with our expectation
when we initially rated the notes 'B(sf)'. Given the initial
attachment level of $825 million, Mariah Re can incur an
additional $127.54 million of covered losses before there is a
reduction in the outstanding principal balance," S&P related.
"We are waiting for the results for Catastrophe Series Number 58
and updates from Property Claims Services on previously reported
events. We anticipate receiving these updates at the end of
September and will update the CreditWatch status of the rating
shortly thereafter. Until then, we are keeping the rating on
CreditWatch developing," S&P noted.
MARLBOROUGH STREET: Moody's Raises Rating of Class D Notes to Ba1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Marlborough Street CLO, Ltd.
US$93,000,000 Class A-1 Senior Secured Floating Rate Notes due
2019 (current outstanding balance of $90,460,123.21), Upgraded to
Aaa (sf); previously on June 22, 2011 Aa3 (sf) Placed Under Review
for Possible Upgrade;
US$14,000,000 Class A-2B Senior Secured Floating Rate Notes due
2019, Upgraded to Aa1 (sf); previously on June 22, 2011 A1 (sf)
Placed Under Review for Possible Upgrade;
US$13,000,000 Class B Senior Secured Floating Rate Notes due 2019,
Upgraded to Aa3 (sf); previously on June 22, 2011 A3 (sf) Placed
Under Review for Possible Upgrade;
US$15,000,000 Class C Secured Deferrable Floating Rate Notes due
2019, Upgraded to A3 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$15,000,000 Class D Secured Deferrable Floating Rate Notes due
2019, Upgraded to Ba1 (sf); previously on June 22, 2011 Ba3 (sf)
Placed Under Review for Possible Upgrade;
US$9,000,000 Class E Secured Deferrable Floating Rate Notes due
2019, Upgraded to B1 (sf); previously on June 22, 2011 Caa3 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in the publication "Moody's Approach to Rating
Collateralized Loan Obligations" published in June 2011. The
primary changes to the modeling assumptions include (1) a removal
of the temporary 30% default probability macro stress implemented
in February 2009 as well as (2) increased BET liability stress
factors and increased recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $291 million, a
weighted average default probability of 22.4% (implying a WARF of
2802), a weighted average recovery rate upon default of 51.8%, and
a diversity score of 65. These default and recovery properties of
the collateral pool are incorporated in cash flow model analysis
where they are subject to stresses as a function of the target
rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Marlborough Street CLO, Ltd, issued in April 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011. Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1. Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2. Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
MERRILL LYNCH: Moody's Affirms Rating of Class D Notes at 'B2'
--------------------------------------------------------------
Moody's Investors Service (Moody's) affirmed the ratings of eight
classes of Merrill Lynch Financial Assets Inc., Commercial
Mortgage Pass-Through Certificates, 2001-Canada 5:
Cl. A-2, Affirmed at Aaa (sf); previously on May 18, 2001
Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Sep 2, 2010 Confirmed
at Aaa (sf)
Cl. C, Affirmed at A1 (sf); previously on Jan 13, 2011 Confirmed
at A1 (sf)
Cl. D, Affirmed at B2 (sf); previously on Jan 13, 2011 Downgraded
to B2 (sf)
Cl. E, Affirmed at Caa1 (sf); previously on Jan 13, 2011
Downgraded to Caa1 (sf)
Cl. F, Affirmed at C (sf); previously on Sep 2, 2010 Downgraded to
C (sf)
Cl. G, Affirmed at C (sf); previously on Jul 8, 2010 Downgraded to
C (sf)
Cl. X, Affirmed at Aaa (sf); previously on May 18, 2001 Definitive
Rating Assigned Aaa (sf)
RATINGS RATIONALE
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio and Moody's stressed debt service coverage
ratio (DSCR), remaining within acceptable ranges. Based on our
current base expected loss, the credit enhancement levels for the
affirmed classes are sufficient to maintain the existing ratings.
Moody's rating action reflects a cumulative base expected loss of
10.8% of the current balance compared to 4.6% at last review. The
current cumulative base expected loss represents a higher
percentage of the pool than at last review due to significant pay
downs since last review, even though the dollar amount of expected
loss is less. Moody's stressed scenario loss is 13.5% of the
current balance. Depending on the timing of loan payoffs and the
severity and timing of losses from specially serviced loans, the
credit enhancement level for investment grade classes could
decline below the current levels. If future performance materially
declines, the expected level of credit enhancement and the
priority in the cash flow waterfall may be insufficient for the
current ratings of these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and performance in the commercial real
estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation
rebounds. The hotel and multifamily sectors are continuing to show
signs of recovery through the first half of 2011, while recovery
in the non-core office and retail sectors are tied to pace of
recovery of the broader economy. Core office markets are showing
signs of recovery through lending and leasing activity. The
availability of debt capital continues to improve with terms
returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The primary methodology used in this rating was "Moody's Approach
to Rating Canadian CMBS" published in May 2000. The other
methodologies used in this rating were "Moody's Approach to Rating
CMBS Large Loan/Single Borrower Transactions" published in July
2000 and "Moody's Approach to Rating Conduit Transactions"
published in September 2000. Please see the Credit Policy page on
www.moodys.com for a copy of these methodologies.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in our analysis. Based on the model
pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the
remaining conduit classes are either interpolated between these
two data points or determined based on a multiple or ratio of
either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade underlying ratings is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
underlying rating of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar underlying ratings
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 4 compared to 13 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.1 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated January 12, 2011.
As of the August 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 84% to
$39.5 million from $248.7 million at securitization. The
Certificates are collateralized by eight mortgage loans ranging
in size from 2% to 43% of the pool. There are no loans with credit
estimates or loans that have defeased.
One loan, representing 17% of the pool is on the master servicer's
watchlist. The watchlist includes loans which meet certain
portfolio review guidelines established as part of the CRE Finance
Council (CREFC) monthly reporting package. As part of our ongoing
monitoring of a transaction, Moody's reviews the watchlist to
assess which loans have material issues that could impact
performance.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $8.7 million. The disposition of these
loans, which were secured by hotel properties located in Niagara
Falls, Canada, resulted in a 100% loss severity. One loan,
representing 16% of the pool, is currently in special servicing.
This loan is the Skeena Mall Loan ($6.3 million -- 16% of the
pool), which is secured by a retail center located in Terrace,
British Columbia. The loan was transferred to special servicing in
February 2009 due to delinquency and is currently in special
servicing due to maturity default. The property was 51% leased as
of June 2010 which is the same as at last review. The servicer has
recognized an appraisal reduction of $3.3 million for this loan.
Moody's has estimated an aggregate $3.8 million loss (62% expected
loss on average) for this specially serviced loan.
Based on the most recent remittance statement, Classes F through
NR have experienced cumulative interest shortfalls totaling
$840,926. Moody's anticipates that the pool will continue to
experience interest shortfalls caused by the specially serviced
loan. Interest shortfalls are caused by special servicing fees,
including workout and liquidation fees, appraisal subordinate
entitlement reductions (ASERs) and extraordinary trust expenses.
Moody's was provided with full year 2010 operating results for 78%
of the pool. Excluding the specially serviced loan, Moody's
weighted average LTV is 52% compared to 50% at Moody's prior
review. Moody's net cash flow reflects a weighted average haircut
of 11.6% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.6%.
Excluding the specially serviced loan, Moody's actual and stressed
DSCRs are 1.72X and 2.16X, respectively, compared to 1.81X and
2.28X at last review. Moody's actual DSCR is based on Moody's net
cash flow (NCF) and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The top three performing conduit loans represent 68% of the
pool balance. The largest loan is the York Mills Gardens Loan
($17.0 million -- 43.1% of the pool), which is secured by a 90,000
square foot (SF) retail center located in Toronto, Ontario. The
largest tenants at the center are Longo's, Shopper's Drug Mart and
Roger's Video. The property was 97% leased as of December 2010,
the same as the last review. The loan has amortized 20% since
securitization. Moody's LTV and stressed DSCR are 58% and 1.67X,
respectively, compared to 60% and 1.63X at last review.
The second largest loan is the Plaza Group-Landsdowne Place Loan
($6.7 million -- 16.9% of the pool), which is secured by a 200,000
SF retail center located in Saint John, New Brunswick. As of
February 2011, the property was 68% leased. The loan is currently
on the watchlist due to low occupancy. The loan has amortized 20%
since securitization. Moody's LTV and stressed DSCR are 57% and
1.91X, respectively, compared to 49% and 2.21X at the last review.
The third largest loan is the 4500 Sheppard Avenue Loan
($3.3 million -- 8.3% of the pool), which is secured by a 143,000
SF industrial property located in Scarborough, Ontario. As of May
2011 the property was 94% leased. The loan has amortized 22% since
securitization. Moody's LTV and stressed DSCR are 36% and 2.49X,
respectively, compared to 33% and 3.29X at the last review.
MOMENTUM CAPITAL: Moody's Raises Rating of Class D Notes to 'Ba1'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Momentum Capital Fund, Ltd.:
US$52,400,000 Class A-2 Floating Rate Notes Due 2021, Upgraded to
Aaa (sf); previously on June 22, 2011 Aa2 (sf) Placed Under Review
for Possible Upgrade;
US$22,500,000 Class B Floating Rate Notes Due 2021, Upgraded to
Aa3 (sf); previously on June 22, 2011 A3 (sf) Placed Under Review
for Possible Upgrade;
US$15,950,000 Class C Deferrable Floating Rate Notes Due 2021,
Upgraded to A3 (sf); previously on June 22, 2011 Ba1 (sf) Placed
Under Review for Possible Upgrade;
US$11,250,000 Class D Deferrable Floating Rate Notes Due 2021,
Upgraded to Ba1 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade;
US$9,150,000 Class E Deferrable Floating Rate Notes Due 2021,
Upgraded to Ba3 (sf); previously on June 22, 2011 Caa2 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $328.7 million, a
weighted average default probability of 22% (implying a WARF of
2652), a weighted average recovery rate upon default of 51.94%,
and a diversity score of 58. The default and recovery properties
of the collateral pool are incorporated in cash flow model
analysis where they are subject to stresses as a function of the
target rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Momentum Capital Fund, Ltd., issued in September 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, and diversity score.
However, as part of the base case, Moody's considered spread
levels higher than the covenant levels due to the large
difference between the reported and covenant levels.
MORGAN STANLEY: DBRS Confirms Class C Rating at 'BB'
----------------------------------------------------
DBRS has confirmed these classes of Morgan Stanley Capital I
Trust, Series 2007-IQ16:
Classes A-1, A-2, A-3, A-4, A-1A, A-M, A-MFL, A-MA, X-1 and X-2 at
AAA (sf)
Classes A-J, A-JFL and A-JA at BBB (sf)
Class B at BBB (low) (sf)
Class C at BB (high) (sf)
Class D at BB (sf)
Class E at B (high) (sf)
Class F at B (sf)
Class G at B (low) (sf)
Classes H and J at CCC (sf)
Classes L, M and N at C (sf)
The trends on the above ratings are Stable, resulting in a trend
change for Classes A-M, A-MFL and A-MA. DBRS does not currently
project a loss scenario which would impact repayment to these
classes.
DBRS has also downgraded Class K to C (sf) from CCC (sf).
The downgrade of Class K is a result of increased projected losses
following the liquidation of seven loans, the transfer of five
loans to special servicing, and the continued performance decline
for some loans in special servicing since December 2010. Three
loans, Marriott Columbia (Prospectus ID#9, 1.64% of the current
pool balance), Ashtabula Mall (Prospectus ID#10, 1.58% of the
current pool balance) and Crowne Plaza - Addison (Prospectus
ID#12, 1.45% of the current pool balance) remain the primary loans
of concern.
The majority of the anticipated losses are associated with the
Marriott Columbia loan. The property is a 300-key full-service
hotel located in downtown Columbia, South Carolina and has a
current loan-per-key of $137,666. The loan is more than 90-days
delinquent and was transferred to the special servicer in May
2010, when the borrower issued a statement regarding its inability
to remit loan payments due to severe cash flow deficits. The
YE2010 DSCR was 0.18x, with an occupancy of 62%. This represents
no change over YE2009 however; the financials did indicate an 84%
cash flow decline since issuance. The asset is considered to be
well-maintained, in good condition and benefits from its central
location in downtown Columbia. A July 2010 appraisal suggests a
property value of $20.5 million, down from an issuance appraised
value of $67.6 million, indicating a significant potential loss
with this loan is likely.
The Ashtabula Mall loan transferred to special servicing in
September 2010 and is more than 90-days delinquent. The loan is
secured by a 650,000 sf enclosed mall in Ohio, 60 miles northeast
of Cleveland. The anchor tenants are Kmart, Sears and JC Penney.
At issuance, there was a Dillard's, represented 10% of the
property's NRA, but the tenant vacated shortly following
securitization. Dillard's continues to pay rent on its lease,
which expires in February 2014. Tenant departures have left the
property's physical occupancy low at 43%, according to a January
2011 servicer's site inspection. The YE2010 reported NCF
represents a 25% improvement over YE2009, but a 47% decline since
issuance. The servicer is pursuing foreclosure.
The third largest loan in special servicing is the Crowne Plaza -
Addison loan. The subject is a 429-key full-service hotel in
Addison, Texas and has a current loan-per-key of $85,410. The
loan was transferred to the special servicing in February 2010 due
to imminent default and is paid through May 2010. The property
experiences a significant measure of competition from similar
lodging properties in the immediate area. A fire broke out at the
hotel in October 2010 and approximately 120 rooms were removed
from service, placing further stress on revenue. According to the
special servicer, cleanup and restoration have been completed, and
a receiver was appointed in November 2010. A May 2011 appraisal
indicates a property value of $19.1 million, down from an
appraised value of $53.7 million at issuance.
The transaction has 45 months of seasoning and since issuance,
13 loans have been removed from the pool. Eleven of these
loans contribute to a cumulative realized loss of approximately
$18 million. This loss has reduced the unrated Class S by 62%.
The transaction is heavily concentrated in loans secured by retail
and hotel properties, which combined represent 48.2% of the
current pool balance.
As of the August 2011 remittance, there are 19 loans, including
two of the original top ten, in special servicing, representing
8.28% of the current pool balance. Sixty-six loans, including
three of the original top ten, remain on the servicer's watchlist,
representing 26.2% of the current pool balance. The WADSCR for
the top fifteen loans is 1.05x, and the WADSCR and WALTV for the
entire pool is 1.23x and 80.5%, respectively. In comparison, the
WADSCR and WALTV for the pool at issuance was 1.26x and 68.2%,
respectively.
The top five loans in the pool, representing 24.7% of the pool are
exhibiting satisfactory performance, with minimal cash flow change
and a WADSCR of 1.12x.
At issuance, DBRS shadow-rated six loans, representing 4.66% of
the current pool balance, investment-grade. DBRS confirmed that
the performance of these loans remains consistent with investment-
grade loan characteristics.
MORGAN STANLEY: Moody's Affirms Rating of Class J Notes at 'Ba1'
----------------------------------------------------------------
Moody's Investors Service (Moody's) affirmed the ratings of 17
classes of Morgan Stanley Capital I Trust 2004-TOP13, Commercial
Mortgage Pass-Through Certificates, Series 2004-TOP13:
Cl. A-3, Affirmed at Aaa (sf); previously on Feb 6, 2004 Assigned
Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on Feb 6, 2004 Assigned
Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Jan 13, 2011 Upgraded
to Aaa (sf)
Cl. C, Affirmed at Aa1 (sf); previously on Jan 13, 2011 Upgraded
to Aa1 (sf)
Cl. D, Affirmed at A1 (sf); previously on Jan 13, 2011 Upgraded to
A1 (sf)
Cl. E, Affirmed at A3 (sf); previously on Nov 12, 2009 Confirmed
at A3 (sf)
Cl. F, Affirmed at Baa1 (sf); previously on Nov 12, 2009 Confirmed
at Baa1 (sf)
Cl. G, Affirmed at Baa2 (sf); previously on Nov 12, 2009 Confirmed
at Baa2 (sf)
Cl. H, Affirmed at Baa3 (sf); previously on Nov 12, 2009 Confirmed
at Baa3 (sf)
Cl. J, Affirmed at Ba1 (sf); previously on Nov 12, 2009 Confirmed
at Ba1 (sf)
Cl. K, Affirmed at Ba2 (sf); previously on Nov 12, 2009 Confirmed
at Ba2 (sf)
Cl. L, Affirmed at B1 (sf); previously on Nov 12, 2009 Downgraded
to B1 (sf)
Cl. M, Affirmed at Caa1 (sf); previously on Jan 13, 2011
Downgraded to Caa1 (sf)
Cl. N, Affirmed at Ca (sf); previously on Jan 13, 2011 Downgraded
to Ca (sf)
Cl. O, Affirmed at C (sf); previously on Jan 13, 2011 Downgraded
to C (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on Feb 6, 2004 Assigned
Aaa (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on Feb 6, 2004 Assigned
Aaa (sf)
RATINGS RATIONALE
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on our current base expected loss, the
credit enhancement levels for the affirmed classes are sufficient
to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
3.5% of the current balance. At last review, Moody's cumulative
base expected loss was 3.4%. Moody's stressed scenario loss is
8.7% of the current balance. Depending on the timing of loan
payoffs and the severity and timing of losses from specially
serviced loans, the credit enhancement level for investment grade
classes could decline below the current levels. If future
performance materially declines, the expected level of credit
enhancement and the priority in the cash flow waterfall may be
insufficient for the current ratings of these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and performance in the commercial real
estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation
rebounds. The hotel and multifamily sectors are continuing to show
signs of recovery through the first half of 2011, while recovery
in the non-core office and retail sectors are tied to pace of
recovery of the broader economy. Core office markets are showing
signs of recovery through lending and leasing activity. The
availability of debt capital continues to improve with terms
returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The primary methodology used in this rating was "Moody's Approach
to Rating U.S. CMBS Fusion Transactions" published in April 2005.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in our analysis. Based on the model
pooled credit enhancement levels at Aa2 (sf) and B2 (sf), the
remaining conduit classes are either interpolated between these
two data points or determined based on a multiple or ratio of
either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit estimates is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
underlying rating of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar credit estimates in
the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated January 13, 2011.
DEAL PERFORMANCE
As of the August 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 34% to
$803.7 million from $1.2 billion at securitization. The
Certificates are collateralized by 150 mortgage loans ranging
in size from less than 1% to 11% of the pool, with the top ten
loans representing 40% of the pool. The pool contains four loans
with investment grade credit estimates that represent 14% of the
pool. Twelve loans, representing 9% of the pool, have defeased
and are collateralized with U.S. Government securities.
Twenty-eight loans, representing 19% of the pool, are on the
master servicer's watchlist. The watchlist includes loans which
meet certain portfolio review guidelines established as part of
the CRE Finance Council (CREFC) monthly reporting package. As part
of our ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
Three loans have been liquidated from the pool, resulting in an
aggregate realized loss of $788.9 thousand (11% loss severity
overall). Four loans, representing 9% of the pool, are currently
in special servicing. The largest loan in special servicing is the
U.S. Bank Tower Loan ($65.0 million -- 8.1% of the pool), which
represents a pari passu interest in a $260 million first mortgage
loan. The loan is secured by a 1.4 million square foot (SF) office
tower and accompanying parking garage located in downtown Los
Angeles, California. The loan sponsor is Maguire Properties. The
loan was transferred into special servicing due to imminent
default. The property was 58% leased as of December 2010,
essentially the same as at last review. Even with the substantial
decline in cash flow from the dramatic rise in vacancy, the
property still generates cash flow in excess of debt service.
However, given the softness in the Los Angeles office market, it
is anticipated that new tenants will be paying lower rents than
those currently in place. The loan remains current and is
interest-only for the entire term. Moody's LTV and stressed DSCR
are 135% and 0.74X, respectively, the same at last review. The
master servicer has recognized a $1.7 million appraisal reduction
for one of the specially serviced loans. Moody's has estimated an
aggregate $4.0 million loss (43.7% expected loss on average) for
the specially serviced loans.
Moody's has assumed a high default probability for 12 poorly
performing loans representing 8% of the pool and has estimated a
$9.5 million aggregate loss (15% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full and partial year 2010 and partial
year 2011 operating results for 90% and 30% of the pool's non-
defeased loans, respectively. Excluding specially serviced and
troubled loans, Moody's weighted average LTV is 75% compared to
74% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 10% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.92X and 1.74X, respectively, compared to
1.97X and 1.74X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 28 compared to 29 at Moody's prior review.
The largest loan with a credit estimate is the GIC Office
Portfolio Loan ($87.1 million -- 10.8% of the pool), which
represents a pari passu interest in a $677.6 million first
mortgage loan. The loan is secured by a portfolio of 12 office
properties located in seven states and totaling 6.4 million SF.
The largest geographic concentrations are Illinois (39%),
Pennsylvania (17%) and California (12%). The portfolio was 87%
leased as of December 2010 compared to 90% as of December 2009.
Property performance has declined due to decreased rental income.
The property is also encumbered by a $121.1 million B Note held
outside the trust. The loan had a 60-month interest only period
and is amortizing on a 360-month schedule maturing in January
2014. Moody's current credit estimate and stressed DSCR are Baa3
and 1.44X, respectively, essentially the same as at last review.
The second loan with a credit estimate is the Gallup Headquarters
Loan ($22.5 million -- 2.8% of the pool), which is secured by a
296,000 SF office building located in Omaha, Nebraska. The
property is 100% leased to Gallup, Inc., under a triple net lease
that expires in October 2018. The lease expiration is coterminous
with the loan maturity and the loan is fully amortizing.
Performance has improved since securitization due to rental
escalations and amortization. Moody's credit estimate and stressed
DSCR are Aa3 and 2.19X, respectively, compared to Aa3 and 2.08X at
last review.
The third loan with a credit estimate is the Hudson Mall Loan
($14.9 million -- 1.9% of the pool), which is secured by a 362,000
SF retail center located in Jersey City, New Jersey. The property
was 91% leased as of March 2011 compared to 93% as of September
2010. Moody's credit estimate and stressed DSCR are A3 and 1.81X,
respectively, essentially the same as at last review.
The fourth loan with a credit estimate is the Renaissance Manor
Loan ($10.9 million -- 1.4% of the pool), which is secured by a
184-unit multifamily complex located in North Brunswick, New
Jersey. The property was 97% leased as of December 2010 compared
to 93% as of December 2009. Moody's credit estimate and stressed
DSCR are Baa2 and 1.50X, respectively, compared to Baa2 and 1.54X
at last review.
The top three performing conduit loans represent 12% of the pool.
The largest loan is the Lakeland Square Mall Loan ($52.3 million -
- 6.5% of the pool), which is secured by an 393,000 SF regional
mall located in Lakeland, Florida. The center is anchored by JC
Penney, Dillard's, Macy's, Sears and Burlington Coat Factory. As
of March 2011, the inline space was 82% leased compared to 80% as
of December 2010. The loan sponsors are General Growth Properties,
Inc. and NYS Common Retirement Fund. Moody's LTV and stressed DSCR
are 109% and 0.91X, respectively, compared to 98% and 1.03X at
last review.
The second largest loan is the Galleria Plaza Shopping Center Loan
($25.7 million -- 3.2% of the pool), which is secured by a 168,000
SF shopping center located in Dallas, Texas. The center was 100%
leased as of March 2011 compared to 67% as of December 2009.
Moody's LTV and stressed DSCR are 88% and 1.17X, respectively,
compared to 81% and 1.27X at last review.
The third largest loan is the 1101 15th Street, NW Loan
($18.7 million -- 2.3% of the pool), which is secured by a 164,000
SF office building located in Washington, DC. The property was 72%
leased as of December 2010 compared to 74% as of December 2009.
Moody's LTV and stressed DSCR are 77% and 1.26X, respectively,
compared to 70% and 1.39X at last review.
MORGAN STANLEY: Moody's Upgrades Rating of Class D Notes to 'Ba2'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Morgan Stanley Investment Management Croton, Ltd.:
US$175,000,000 Class A-1 Senior Term Notes Due 2018 (current
outstanding balance of $170,019,583.22), Upgraded to Aaa (sf);
previously on June 22, 2011 Aa1 (sf) Placed Under Review for
Possible Upgrade;
US$50,000,000 Class A-2 Senior Delayed Draw Notes Due 2018
(current outstanding balance of $48,577,023.77), Upgraded to Aaa
(sf); previously on June 22, 2011 Aa1 (sf) Placed Under Review for
Possible Upgrade;
US$4,000,000 Class B Senior Fixed Rate Notes Due 2018, Upgraded to
Aa2 (sf); previously on June 22, 2011 A2 (sf) Placed Under Review
for Possible Upgrade;
US$14,000,000 Class B Senior Floating Rate Notes Due 2018,
Upgraded to Aa2 (sf); previously on June 22, 2011 A2 (sf) Placed
Under Review for Possible Upgrade;
US$16,000,000 Class C Deferrable Mezzanine Floating Rate Notes Due
2018, Upgraded to Baa2 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$14,500,000 Class D Deferrable Mezzanine Floating Rate Notes Due
2018, Upgraded to Ba2 (sf); previously on June 22, 2011 B3 (sf)
Placed Under Review for Possible Upgrade.
Additionally Moody's confirmed the rating of the following notes:
US$4,000,000 Class E Deferrable Mezzanine Floating Rate Notes Due
2018, Confirmed at Caa3 (sf); previously on June 22, 2011 Caa3
(sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in the publication "Moody's Approach to Rating
Collateralized Loan Obligations" published in June 2011. The
primary changes to the modeling assumptions include (1) a removal
of the temporary 30% default probability macro stress implemented
in February 2009 as well as (2) increased BET liability stress
factors and increased recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $281 million,
defaulted par of $2 million, a weighted average default
probability of 18.2% (implying a WARF of 2551), a weighted average
recovery rate upon default of 48.8%, and a diversity score of 75.
Moody's generally analyzes deals in their reinvestment period by
assuming the worse of reported and covenanted values for all
collateral quality tests. However, in this case given the limited
time remaining in the deal's reinvestment period, Moody's analysis
reflects the benefit of assuming a higher likelihood that the
collateral pool characteristics will continue to maintain a
positive "cushion" relative to certain covenant requirements, as
seen in the actual collateral quality measurements. These default
and recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Morgan Stanley Investment Management Croton, Ltd., issued in
December 2005, is a collateralized loan obligation backed
primarily by a portfolio of senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1. Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2. Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation
risk on those assets. Moody's assumes an asset's terminal value
upon liquidation at maturity to be equal to the lower of an
assumed liquidation value (depending on the extent to which the
asset's maturity lags that of the liabilities) and the asset's
current market value.
MOUNTAIN VIEW: Moody's Upgrades Class D Notes Rating to 'Ba1'
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Mountain View CLO II Ltd.:
US$217,000,000 Class A-1 Floating Rate Notes Due January 2021,
Upgraded to Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed
Under Review for Possible Upgrade;
US$118,000,000 Class A-2 Delayed Draw Floating Rate Notes Due
January 2021, Upgraded to Aaa (sf); previously on June 22, 2011
Aa1 (sf) Placed Under Review for Possible Upgrade;
US$7,000,000 Class A-3 Delayed Draw Floating Rate Notes Due
January 2021, Upgraded to Aaa (sf); previously on June 22, 2011
Aa1 (sf) Placed Under Review for Possible Upgrade;
US$26,000,000 Class B Floating Rate Notes Due January 2021,
Upgraded to A1 (sf); previously on June 22, 2011 A2 (sf) Placed
Under Review for Possible Upgrade;
US$24,100,000 Class C Floating Rate Deferrable Notes Due January
2021, Upgraded to Baa1 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$19,700,000 Class D Floating Rate Deferrable Notes Due January
2021, Upgraded to Ba1 (sf); previously on June 22, 2011 Ba3 (sf)
Placed Under Review for Possible Upgrade;
US$14,700,000 Class E Floating Rate Deferrable Notes Due January
2021, Upgraded to B1 (sf); previously on June 22, 2011 Caa2 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in September
2009. Based on the July 2011 trustee report, the weighted average
rating factor is currently 2396 compared to 2673 in July 2009. The
Class A/B, Class C, Class D and Class E overcollateralization
ratios are reported at 121.31%, 113.86%, 108.41% and 104.68%,
respectively, versus July 2009 levels of 117.88%, 110.63%, 105.34%
and 101.71%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $446.19 million,
defaulted par of $3.4 million, a weighted average default
probability of 21.02% (implying a WARF of 2727), a weighted
average recovery rate upon default of 49.78%, and a diversity
score of 62. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Mountain View CLO II Ltd., issued in December 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
MOUNTAIN VIEW: Moody's Upgrades Rating of Class D Notes to 'Ba1'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Mountain View CLO III Ltd.:
US$75,000,000 Class A-2 Floating Rate Notes, Due April, 2021,
Upgraded to Aa1 (sf); previously on June 22, 2011 A1 (sf) Placed
on Review for Possible Upgrade;
US$25,000,000 Class B Floating Rate Notes, Due April, 2021,
Upgraded to Aa3 (sf); previously on June 22, 2011 Baa1 (sf) Placed
on Review for Possible Upgrade;
US$31,000,000 Class C Floating Rate Deferrable Notes, Due April,
2021, Upgraded to A3 (sf); previously on June 22, 2011 Ba1 (sf)
Placed on Review for Possible Upgrade;
US$24,000,000 Class D Floating Rate Deferrable Notes, Due April,
2021, Upgraded to Ba1 (sf); previously on June 22, 2011 B2 (sf)
Placed on Review for Possible Upgrade;
US$14,000,000 Class E Floating Rate Deferrable Notes, Due April,
2021, Upgraded to Ba3 (sf); previously on June 22, 2011 Caa3 (sf)
Placed on Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $489.6 million,
defaulted par of $4.22 million, a weighted average default
probability of 21.6% (implying a WARF of 2799), a weighted average
recovery rate upon default of 49.3%, and a diversity score of 60.
The default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Mountain View CLO III Ltd., issued in May 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
MT. WILSON: Moody's Upgrades Class D Notes Rating to 'Ba2'
----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Mt. Wilson CLO, Ltd.:
US$227,600,000 Class A Floating Rate Senior Secured Notes due 2018
(current outstanding balance of $221,558,514), Upgraded to Aa1
(sf); previously on June 22, 2011 Aa3 (sf) Placed Under Review for
Possible Upgrade;
US$8,900,000 Class B Floating Rate Senior Secured Notes due 2018,
Upgraded to Aa3 (sf); previously on June 22, 2011 A3 (sf) Placed
Under Review for Possible Upgrade;
US$22,000,000 Class C Floating Rate Deferrable Interest Notes due
2018, Upgraded to Baa1 (sf); previously on June 22, 2011 Ba2 (sf)
Placed Under Review for Possible Upgrade;
US$16,900,000 Class D Floating Rate Deferrable Interest Notes due
2018, Upgraded to Ba2 (sf); previously on June 22, 2011 Caa2 (sf)
Placed Under Review for Possible Upgrade;
US$6,900,000 Class E Floating Rate Deferrable Interest Notes due
2018, Upgraded to Ba3 (sf); previously on June 22, 2011 Caa3 (sf)
Placed Under Review for Possible Upgrade,
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $288.8 million,
defaulted par of $2.9 million, a weighted average default
probability of 23.73% (implying a WARF of 2905), a weighted
average recovery rate upon default of 50.23%, and a diversity
score of 60. Moody's generally analyzes deals in their
reinvestment period by assuming the worse of reported and
covenanted values for all collateral quality tests. However, in
this case given the limited time remaining in the deal's
reinvestment period, Moody's analysis reflects the benefit of
assuming a higher likelihood that the collateral pool
characteristics will continue to maintain a positive "cushion"
relative to certain covenant requirements, as seen in the actual
collateral quality measurements. The default and recovery
properties of the collateral pool are incorporated in cash flow
model analysis where they are subject to stresses as a function of
the target rating of each CLO liability being reviewed. The
default probability is derived from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Mt. Wilson CLO, Ltd., issued in May 31, 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread/coupon/diversity levels higher than
the covenant levels due to the large difference between the
reported and covenant levels.
NAAC REPERFORMING: Moody's Downgrades Class M Notes Rating to Ba3
-----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 16
tranches issued by NAAC Reperforming Loan Remic Trust. The
collateral consists of fixed and adjustable-rate mortgage loans
insured by the Federal Housing Administration (FHA) an agency of
the U.S. Department of Urban Development (HUD) or guaranteed by
the Veterans Administration (VA).
Complete rating actions are:
Issuer: NAAC Reperforming Loan Remic Trust 2004-R3
Cl. A1, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A1
(sf) Placed Under Review for Possible Downgrade
Cl. AF, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A1
(sf) Placed Under Review for Possible Downgrade
Cl. PT, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A1
(sf) Placed Under Review for Possible Downgrade
Cl. AS, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A1
(sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to Ba3 (sf); previously on Jul 27, 2011 Baa1
(sf) Placed Under Review for Possible Downgrade
Cl. B-1, Downgraded to Caa3 (sf); previously on Jul 27, 2011 Ba1
(sf) Placed Under Review for Possible Downgrade
Cl. B-2, Downgraded to C (sf); previously on Jul 27, 2011 B1 (sf)
Placed Under Review for Possible Downgrade
Cl. B-3, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Issuer: NAAC Reperforming Loan Remic Trust Certificates, Series
2004-R2
Cl. A1, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A1
(sf) Placed Under Review for Possible Downgrade
Cl. A2, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A1
(sf) Placed Under Review for Possible Downgrade
Cl. A3, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A1
(sf) Placed Under Review for Possible Downgrade
Cl. PT, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A1
(sf) Placed Under Review for Possible Downgrade
Cl. M, Downgraded to B1 (sf); previously on Jul 27, 2011 Baa2 (sf)
Placed Under Review for Possible Downgrade
Cl. B-1, Downgraded to Ca (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. B-2, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
Cl. B-3, Downgraded to C (sf); previously on Jul 24, 2009
Downgraded to Ca (sf)
RATINGS RATIONALE
The actions are a result of Moody's updated loss projection for
the RMBS FHA-VA portfolio. The updated projection accounts for
higher potential pool losses due to self-curtailment of claims by
servicers whereby they pass expenses as deemed reasonable to the
trusts instead of submitting them to HUD, and continued weaknesses
in the macro economy and the housing market.
A FHA guarantee covers 100% of a loan's outstanding principal and
a large portion of its outstanding interest and foreclosure-
related expenses in the event that the loan defaults. A VA
guarantee covers only a portion of the principal based on the
lesser of either the sum of the current loan amount, accrued and
unpaid interest, and foreclosure expenses, or the original loan
amount. HUD usually pays claims on defaulted FHA loans when
servicers submit the claims, but can impose significant penalties
on servicers if it finds irregularities in the claim process later
during the servicer audits. This can prompt servicers to push more
expenses to the trust that they deem reasonably incurred than
submit them to HUD and face significant penalty. The rating
actions consider the portion of a defaulted loan normally not
covered by the FHA or VA guarantee and other servicer expenses
they deemed reasonably incurred and passed on to the trust.
FHA/VA borrowers, in Moody's-rated transactions, are typically low
income borrowers with poor credit history who have been affected
by the weak economy and housing market. Moody's expects
delinquencies to remain high for this sector at 40%, 35%, and 30%
for the 2004, 2005, and 2006 vintages, respectively as house
prices continue to decline and unemployment rates remain high.
FHA/VA RMBS transactions have had very low losses to date (less
than 1%) despite high delinquency levels due to the FHA and VA
guarantees. However, Moody's expects this trend to change due to
the higher level of self-curtailments by the servicers.
Moody's final rating actions are based on current levels of credit
enhancement, collateral performance and updated pool-level loss
expectations. Moody's took into account credit enhancement
provided by seniority, and other structural features within the
senior note waterfalls.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment levels remain
high, and weakness persists in the housing market. Moody's now
projects house price index to reach a bottom in the first quarter
of 2012, with a 2% remaining decline between the first quarter of
2011 and 2012, and unemployment rate to start declining by fourth
quarter of 2011.
The principal methodology used in these ratings is described in
the Monitoring and Performance Review section in "Moody's Approach
to Rating US Residential Mortgage-Backed Securities" published in
December 2008. Other methodology used in this rating was "FHA VA
US RMBS Surveillance Methodology" published in July 2011.
NACM CLO: Moody's Upgrades Class D Notes Rating to 'Ba3'
--------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by NACM CLO I:
US$224,000,000 Class A-1 Floating Rate Notes Due 2019, Upgraded to
Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed Under Review
for Possible Upgrade;
US$15,500,000 Class A-2 Floating Rate Notes Due 2019, Upgraded to
Aa2 (sf); previously on June 22, 2011 A1 (sf) Placed Under Review
for Possible Upgrade;
US$16,500,000 Class B Deferrable Floating Rate Notes Due 2019,
Upgraded to A3 (sf); previously on June 22, 2011 Baa3 (sf) Placed
Under Review for Possible Upgrade;
US$11,000,000 Class C Floating Rate Notes Due 2019, Upgraded to
Baa3 (sf); previously on June 22, 2011 B1 (sf) Placed Under Review
for Possible Upgrade;
US$9,500,000 Class D Floating Rate Notes Due 2019, Upgraded to Ba3
(sf); previously on June 22, 2011 Caa3 (sf) Placed Under Review
for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in September
2009. Based on the August 2011 trustee report, the weighted
average rating factor is currently 2309 compared to 2407 in
September 2009. Additionally, the Class A, Class B, Class C, and
Class D overcollateralization ratios are reported at 121.93%,
114.07%, 109.37%, and 105.62%, respectively, versus September 2009
levels of 119.62%, 111.91%, 107.30% and 103.61%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $291 million,
defaulted par balance of $3 million, a weighted average default
probability of 17.63% (implying a WARF of 2425), a weighted
average recovery rate upon default of 51%, and a diversity score
of 55. The default and recovery properties of the collateral pool
are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
NACM CLO I, issued in June of 2006, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
A sources of additional performance uncertainties is collateral
quality metrics: The deal is allowed to reinvest and the manager
has the ability to deteriorate the collateral quality metrics'
existing cushions against the covenant levels. Moody's analyzed
the impact of assuming the worse of reported and covenanted values
for weighted average rating factor, weighted average spread,
weighted average coupon, and diversity score. However, as part of
the base case, Moody's considered spread levels higher than the
covenant levels due to the large difference between the reported
and covenant levels.
NEWCASTLE CDO: Moody's Affirms Class I-B Notes Rating at 'B3'
-------------------------------------------------------------
Moody's has affirmed the ratings of 12 classes of Notes issued by
Newcastle CDO VIII 1, Limited and Newcastle CDO VIII 2, Limited
due to key transaction parameters performing within levels
commensurate with the existing ratings levels. The rating action
is the result of Moody's on-going surveillance of commercial real
estate collateralized debt obligation (CRE CDO) transactions.
Moody's rating action is:
Cl. S, Affirmed at Baa2 (sf); previously on Sep 22, 2010
Downgraded to Baa2 (sf)
Cl. I-A, Affirmed at Baa2 (sf); previously on Sep 22, 2010
Downgraded to Baa2 (sf)
Cl. I-B, Affirmed at B3 (sf); previously on Sep 22, 2010
Downgraded to B3 (sf)
Cl. I-AR, Affirmed at Baa2 (sf); previously on Sep 22, 2010
Downgraded to Baa2 (sf)
Cl. II, Affirmed at Caa1 (sf); previously on Sep 22, 2010
Downgraded to Caa1 (sf)
Cl. III, Affirmed at Caa3 (sf); previously on Sep 22, 2010
Downgraded to Caa3 (sf)
Cl. V, Affirmed at Ca (sf); previously on Sep 22, 2010 Downgraded
to Ca (sf)
Cl. VIII, Affirmed at C (sf); previously on Sep 22, 2010
Downgraded to C (sf)
Cl. IX-FL, Affirmed at C (sf); previously on Sep 22, 2010
Downgraded to C (sf)
Cl. IX-FX, Affirmed at C (sf); previously on Sep 22, 2010
Downgraded to C (sf)
Cl. X, Affirmed at C (sf); previously on Sep 22, 2010 Downgraded
to C (sf)
Cl. XII, Affirmed at C (sf); previously on Sep 22, 2010 Downgraded
to C (sf)
RATINGS RATIONALE
Newcastle CDO VIII 1, Limited and Newcastle CDO VIII 2, Limited
is a static cash CRE CDO transaction backed by a portfolio of
commercial mortgage backed securities (CMBS) (17.1% of the pool
balance), collateralized debt obligations (CDOs) (19.6%), asset
backed securities (ABS) (9.0%), rake bonds (0.9%), A-Notes and
whole loans (11.1%), B-Notes (5.7%), and mezzanine loans (36.7%).
As of the August 18, 2011 Trustee report, the aggregate Note
balance of the transaction, including preferred shares,
$903.7 million from $983.9 million at issuance, due to full
or partial cancellations to Class IV, VI, VII, X and XI Notes.
There are 5 assets with a par balance of $56.5 million (6.3% of
the current pool balance) that are considered Defaulted Securities
as of the August 18, 2011 Trustee report. One of these assets
(37.7% of the defaulted balance) is a mezzanine loan. There have
been no realized losses to the deal to date, and Moody's does not
expect significant losses from these Defaulted Securities to occur
once they are realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has completed updated credit estimates for the non-Moody's
rated collateral. The bottom-dollar WARF is a measure of the
default probability within a collateral pool. Moody's modeled a
bottom-dollar WARF of 4632 compared to 5130 at last review. The
distribution of current ratings and credit estimates is as
follows: Aaa-Aa3 (1.9% compared to 4.3% at last review), A1-A3
(1.7% compared to 7.8% at last review), Baa1-Baa3 (14.7% compared
to 7.3% at last review), Ba1-Ba3 (3.5% compared to 5.5% at last
review), B1-B3 (25.4% compared to 17.7% at last review), and Caa1-
C (52.8% compared to 57.2% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 3.5 years compared
to 4.3 years at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR of
18%, same at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 8.3% compared to 5.9% at last review.
Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO
rating models, which was released on January 24, 2011.
The cash flow model, CDOEdge(R) v3.2.1.0, was used to analyze the
cash flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
18% to 13% or up to 23% would result in average rating movement on
the rated tranches of 0 to 2 notches downward and 0 to 1 notch
upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption uncertainty
are the current sluggish macroeconomic environment and performance
in the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are
continuing to show signs of recovery through the first half of
2011, while recovery in the non-core office and retail sectors are
tied to pace of recovery of the broader economy. Core office
markets are showing signs of recovery through lending and leasing
activity. The availability of debt capital continues to improve
with terms returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Other methodology used in this rating was "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
NEWTON CDO: S&P Raises Ratings on 2 Classes of Notes to 'BB+'
-------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A-1 and A-2 notes from Newton CDO Ltd. and removed them from
CreditWatch with positive implications. "At the same time, we
affirmed our rating on the B notes," S&P related.
Newton CDO Ltd is a collateralized bond obligation (CBO)
transaction managed by Babson Capital Management LLC.
"The upgrades reflect the improved performance we have observed in
the deal since our last rating action in August 2010. According to
the April 11, 2011, trustee report, the transaction held $6.0
million in defaulted assets, compared with $15.7 million in
defaulted assets as of the June 10, 2010, trustee report," S&P
stated.
"We affirmed our 'AA+ (sf)' rating on the class B notes, which are
backed by an Israeli sovereign bond with a guarantee from the U.S.
through the Agency for International Development," S&P related.
"Standard & Poor's will continue to review whether, in our view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as we deem necessary," S&P stated.
Rating and CreditWatch Actions
Newton CDO Ltd.
Rating
Class To From
A-1 BB+ (sf) BB- (sf)/Watch Pos
A-2 BB+ (sf) BB- (sf)/Watch Pos
Ratings Affimed
Newton CDO Ltd.
Class Rating
B AA+ (sf)
NOB HILL: Moody's Upgrades Ratings of Six Classes of Notes
----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Nob Hill CLO II, Limited:
US$263,700,000 Class A-1 Floating Rate Notes Due 2022 (current
balance of $252,422,601), Upgraded to Aaa (sf); previously on June
22, 2011 Aa2 (sf) Placed Under Review for Possible Upgrade;
US$29,300,000 Class A-2 Floating Rate Notes Due 2022, Upgraded to
Aa2 (sf); previously on June 22, 2011 A2 (sf) Placed Under Review
for Possible Upgrade;
US$22,000,000 Class B Floating Rate Notes Due 2022, Upgraded to A2
(sf); previously on June 22, 2011 Baa2 (sf) Placed Under Review
for Possible Upgrade;
US$20,000,000 Class C Deferrable Floating Rate Notes Due 2022
Upgraded to Baa2 (sf); previously on June 22, 2011 Ba2 (sf) Placed
Under Review for Possible Upgrade;
US$17,000,000 Class D Deferrable Floating Rate Notes Due 2022,
Upgraded to Ba2 (sf); previously on June 22, 2011 B3 (sf) Placed
Under Review for Possible Upgrade;
US$17,000,000 Class E Deferrable Floating Rate Notes Due 2022
(current balance of $15,097,663), Upgraded to B1 (sf); previously
on June 22, 2011 Caa3 (sf) Placed Under Review for Possible
Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $373 million,
defaulted par balance of $12.7 million, a weighted average default
probability of 25.87% (implying a WARF of 3262), a weighted
average recovery rate upon default of 49.65%, and a diversity
score of 55. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Nob Hill CLO II, Limited, issued in June of 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Collateral quality metrics: The deal is allowed to reinvest and
the manager has the ability to deteriorate the collateral
quality metrics' existing cushions against the covenant levels.
Moody's analyzed the impact of assuming the worse of reported
and covenanted values for weighted average rating factor,
weighted average spread, weighted average coupon, and diversity
score. However, as part of the base case, Moody's considered
spread levels higher than the covenant levels due to the large
difference between the reported and covenant levels.
OAK HILL: Moody's Upgrades Rating of Class C Notes to 'Ba1'
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Oak Hill Credit Partners V, Limited:
US$400,500,000 Class A-1 Senior Secured Floating Rate Notes Due
April 2021, Upgraded to Aaa (sf); previously on June 22, 2011 Aa1
(sf) Placed Under Review for Possible Upgrade;
US$29,500,000 Class A-2 Senior Secured Floating Rate Notes Due
April 2021, Upgraded to Aa2 (sf); previously on June 22, 2011 A2
(sf) Placed Under Review for Possible Upgrade;
US$31,500,000 Class B Senior Secured Deferrable Floating Rate
Notes Due April 2021, Upgraded to A2 (sf); previously on June 22,
2011 Ba1 (sf) Placed Under Review for Possible Upgrade;
US$36,250,000 Class C Secured Deferrable Floating Rate Notes Due
April 2021, Upgraded to Ba1 (sf); previously on June 22, 2011 B2
(sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in August
2009. Based on the August 2011 trustee report, the weighted
average rating factor is currently 2408 compared to 2662 in August
2009. Additionally, the Class A, Class B, and Class C
overcollateralization ratios are reported at 131.75%, 122.75%, and
113.81%, respectively, versus August 2009 levels of 127.71%,
118.99%, and 110.33%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $566.5 million,
no defaulted par, a weighted average default probability of 23.47%
(implying a WARF of 2884), a weighted average recovery rate upon
default of 50.5%, and a diversity score of 47. The default and
recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Oak Hill Credit Partners V, Limited, issued in September of 2007,
is a collateralized loan obligation backed primarily by a
portfolio of senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other Collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread and diversity levels higher than the
covenant levels due to the large difference between the
reported and covenant levels.
OCTAGON INVESTMENT: Moody's Upgrades Ratings of $41MM of CLO Notes
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Octagon Investment Partners IX, Ltd.:
US$20,000,000 Class B Senior Secured Deferrable Floating Rate
Notes due 2020, Upgraded to A2 (sf); previously on June 22, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade;
US$21,200,000 Class C Secured Deferrable Floating Rate Notes due
2020, Upgraded to Ba1 (sf); previously on June 22, 2011 Ba3 (sf)
Placed Under Review for Possible Upgrade.
In addition, Moody's has confirmed the rating of the following
notes:
US$14,000,000 Class A-2 Senior Secured Floating Rate Notes due
2020, Confirmed at Aa3 (sf); previously on June 22, 2011 Aa3 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $381 million, no
defaulted par, a weighted average default probability of 20.59%
(implying a WARF of 2450), a weighted average recovery rate upon
default of 48.0%, and a diversity score of 65. The default and
recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Octagon Investment Partners IX, Ltd., issued in May 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011. Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread level higher and WARF level lower
than the covenant levels due to the large difference between
the reported and covenant levels.
PHOENIX CLO: Moody's Upgrades Ratings of Seven Classes of Notes
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Phoenix CLO II, Ltd.:
US$499,600,000 Class A Senior Secured Floating Rate Notes Due
April 25, 2019 (current outstanding balance of $481,537,896),
Upgraded to Aaa (sf); previously on June 22, 2011 Aa2 (sf) Placed
Under Review for Possible Upgrade;
US$65,300,000 Class B Second Priority Deferrable Floating Rate
Notes Due April 25, 2019, Upgraded to Baa1 (sf); previously on
June 22, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade;
US$16,000,000 Class C-1 Third Priority Deferrable Floating Rate
Notes Due April 25, 2019, Upgraded to Ba1 (sf); previously on
June 22, 2011 Ba3 (sf) Placed Under Review for Possible Upgrade;
US$5,500,000 Class C-2 Third Priority Deferrable Fixed Rate Notes
Due April 25, 2019, Upgraded to Ba1 (sf); previously on June 22,
2011 Ba3 (sf) Placed Under Review for Possible Upgrade;
US$24,100,000 Class D-1 Fourth Priority Deferrable Floating Rate
Notes Due April 25, 2019 (current outstanding balance of
$22,050,327), Upgraded to Ba3 (sf); previously on June 22, 2011
Caa2 (sf) Placed Under Review for Possible Upgrade;
US$1,500,000 Class D-2 Fourth Priority Deferrable Fixed Rate Notes
Due April 25, 2019 (current outstanding balance of $1,372,428),
Upgraded to Ba3 (sf); previously on June 22, 2011 Caa2 (sf) Placed
Under Review for Possible Upgrade;
US$1,700,000 Class 3 Combination Notes Due April 25, 2019 (current
Rated Balance of $1,361,439), Upgraded to A3 (sf); previously on
June 22, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $610 million,
defaulted par of $15 million, a weighted average default
probability of 19.81% (implying a WARF of 2645), a weighted
average recovery rate upon default of 49.77%, and a diversity
score of 64. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Phoenix CLO II, Ltd., issued in March 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Another methodology used in this rating was "Using the Structured
Note Methodology to Rate CDO Combo-Notes" published in February
2004.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, and diversity score.
However, as part of the base case, Moody's considered a
diversity level higher than the covenant level due to the large
difference between the reported and covenant level.
PROSPECT PARK: Moody's Upgrades Ratings of 3 Classes of CLO Notes
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Prospect Park CDO Ltd.:
US$373M Class A Senior Secured Floating Rate Notes, Upgraded to
Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed Under Review
for Possible Upgrade;
US$40M Class B Second Priority Deferrable Floating Rate Notes,
Upgraded to A2 (sf); previously on June 22, 2011 Baa3 (sf) Placed
Under Review for Possible Upgrade;
US$22M Class C Third Priority Deferrable Floating Rate Notes,
Upgraded to Baa3 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. Today's actions reflect key
changes to the modeling assumptions, which incorporate (1) a
removal of the temporary 30% default probability macro stress
implemented in February 2009 as well as (2) increased BET
liability stress factors and increased recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $475.5 million,
defaulted par of $2 million, a weighted average default
probability of 22.8% (implying a WARF of 2820), a weighted average
recovery rate upon default of 48.8%, and a diversity score of 65.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Prospect Park CDO Ltd., issued in June 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior, 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average coupon, and diversity score.
However, as part of the base case, Moody's considered spread
levels higher than the covenant levels due to the large
difference between the reported and covenant levels.
RAMPART CLO: Moody's Upgrades Ratings of Four Classes of Notes
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Rampart CLO 2006-I Ltd.:
US$20,000,000 Class A-2 Floating Rate Senior Notes Due 2021,
Upgraded to Aa2 (sf); previously on June 22, 2011 Aa3 (sf) Placed
Under Review for Possible Upgrade;
US$28,000,000 Class B Deferrable Floating Rate Senior Notes Due
2021, Upgraded to A2 (sf); previously on June 22, 2011 Baa2 (sf)
Placed Under Review for Possible Upgrade;
US$36,000,000 Class C Deferrable Floating Rate Senior Subordinate
Notes Due 2021, Upgraded to Ba1 (sf); previously on June 22, 2011
Ba3 (sf) Placed Under Review for Possible Upgrade;
US$15,000,000 Class D Deferrable Floating Rate Subordinate Notes
Due 2021, Upgraded to Ba2 (sf); previously on June 22, 2011 B2
(sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. Today's actions reflect key
changes to the modeling assumptions, which incorporate (1) a
removal of the temporary 30% default probability macro stress
implemented in February 2009 as well as (2) increased BET
liability stress factors and increased recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $594 million,
defaulted par of $2 million, a weighted average default
probability of 18.6% (implying a WARF of 2460), a weighted average
recovery rate upon default of 48.2%, and a diversity score of 75.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Rampart CLO 2006-I Ltd., issued in December 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior, 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for the average rating
factor and diversity score. However, as part of the base case,
Moody's considered spread and coupon levels higher than the
covenant levels due to the large difference between the
reported and covenant levels.
ROSEDALE CLO: Moody's Upgrades Ratings of Five Classes of Notes
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Rosedale CLO II Ltd.:
US$218,000,000 Class A First Priority Senior Secured Floating Rate
Term Notes due 2022 (current outstanding balance of
$213,727,336.41), Upgraded to Aaa (sf); previously on June 22,
2011 Aa3 (sf) Placed Under Review for Possible Upgrade;
US$26,000,000 Class B Second Priority Senior Secured Floating Rate
Notes due 2022, Upgraded to Aa3 (sf); previously on June 22, 2011
Baa1 (sf) Placed Under Review for Possible Upgrade;
US$15,000,000 Class C Third Priority Senior Secured Deferrable
Floating Rate Notes due 2022, Upgraded to A3 (sf); previously on
June 22, 2011 Ba1 (sf) Placed Under Review for Possible Upgrade;
US$13,400,000 Class D Fourth Priority Mezzanine Deferrable
Floating Rate Notes due 2022, Upgraded to Ba1 (sf); previously on
June 22, 2011 Caa1 (sf) Placed Under Review for Possible Upgrade;
US$12,500,000 Class E Fifth Priority Mezzanine Deferrable Floating
Rate Notes due 2022, Upgraded to B2 (sf); previously on June 22,
2011 Caa3 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $288.7 million,
defaulted par of $3.9 million, a weighted average default
probability of 21.0% (implying a WARF of 2802), a weighted average
recovery rate upon default of 49.65%, and a diversity score of 60.
The default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Rosedale CLO II Ltd., issued in May 2007, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
SANTANDER DRIVE: Moody's Assigns (P)Ba2 Rating to Class E Notes
---------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to the
notes to be issued by Santander Drive Auto Receivables Trust 2011-
3 (SDART 2011-3). This is the third public senior/subordinated
transaction of the year for Santander Consumer USA Inc. (SC USA).
The complete rating actions are:
Issuer: Santander Drive Auto Receivables Trust 2011-3
Cl. A-1, Assigned (P)P-1 (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa1 (sf)
Cl. C, Assigned (P)A1 (sf)
Cl. D, Assigned (P)Baa2 (sf)
Cl. E, Assigned (P)Ba2 (sf)
RATINGS RATIONAL
Moody's said the ratings are based on the quality of the
underlying auto loans and their expected performance, the strength
of the structure, the availability of excess spread over the life
of the transaction, and the experience and expertise of SC USA as
servicer.
The principal methodology used in rating the transaction is
"Moody's Approach to Rating U.S. Auto Loan-Backed Securities,"
published in May 2011.
Moody's median cumulative net loss expectation for the SDART 2011-
3 pool is 11.75% and total credit enhancement required to achieve
Aaa rating (i.e. Aaa proxy) is 43.0%. The loss expectation was
based on an analysis of SC USA's portfolio vintage performance as
well as performance of past securitizations, and current
expectations for future economic conditions.
The Assumption Volatility Score for this transaction is Low/Medium
versus a Medium for the sector. This is driven by the a Low/Medium
assessment for Governance due to the presence of a highly rated
parent, Banco Santander (Aa2 negative outlook/P-1), in addition to
the size and strength of SC USA's servicing platform.
Moody's V Scores provide a relative assessment of the quality of
available credit information and the potential variability around
the various inputs to a rating determination. The V Score ranks
transactions by the potential for significant rating changes owing
to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling and the transaction governance that
underlie the ratings. V Scores apply to the entire transaction
(rather than individual tranches).
Moody's Parameter Sensitivities: If the net loss used in
determining the initial rating were changed to 20%, 25% or 35.0%,
the initial model output for the Class A notes might change from
Aaa to Aa1, Aa2, and A2, respectively; Class B notes might change
from Aa1 to A1, Baa3, and below B3, respectively; Class C notes
might change from A1 to Baa3, B1, and below B3, respectively;
Class D notes might change from Baa2 to B3, below B3, and below
B3, respectively; and Class E notes might change from Ba2 to below
B3 in all three scenarios.
Parameter Sensitivities are not intended to measure how the rating
of the security might migrate over time, rather they are designed
to provide a quantitative calculation of how the initial rating
might change if key input parameters used in the initial rating
process differed. The analysis assumes that the deal has not aged.
Parameter Sensitivities only reflect the ratings impact of each
scenario from a quantitative/model-indicated standpoint.
Qualitative factors are also taken into consideration in the
ratings process, so the actual ratings that would be assigned in
each case could vary from the information presented in the
Parameter Sensitivity analysis.
SANTANDER DRIVE: S&P Gives 'BB' Rating on Class E Auto Notes
------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Santander Drive Auto Receivables Trust 2011-3's
$774.6 million automobile receivables-backed notes.
The note issuance is an asset-backed securities transaction backed
by subprime auto loan receivables.
The preliminary ratings are based on information as of Sept. 6,
2011. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
The availability of 47.23%, 40.51%, 31.43%, 24.68%, and 21.01%
of credit support for the class A, B, C, D, and E notes based
on stress cash flow scenarios (including excess spread), which
provide coverage of approximately 3.5x, 3.0x, 2.3x, 1.75x, and
1.5x S&P's 12.50%-13.50% expected cumulative net loss.
The timely interest and principal payments made under stress
cash flow modeling scenarios appropriate to the assigned
preliminary ratings.
"Our expectation that under a moderate ('BBB') stress
scenario, all else being equal, our ratings on the class A and
B notes will remain within one rating category of the assigned
ratings, and our ratings on the class C, D, and E notes will
remain within two rating categories of the assigned ratings,
which is consistent with our credit stability criteria (see
'Methodology: Credit Stability Criteria,' published May 3,
2010)," S&P stated.
The originator/servicer's history in the subprime/specialty
auto finance business.
"Our analysis of six years of static pool data on Santander
Consumer USA Inc.'s lending programs," S&P stated.
The transaction's payment/credit enhancement structure and
legal structure.
Preliminary Ratings Assigned
Santander Drive Auto Receivables Trust 2011-3
Class Rating Type Interest Amount
rate(i) (mil. $)(i)
A-1 A-1+ (sf) Senior Fixed 180.900
A-2 AAA (sf) Senior Fixed 245.100
A-3 AAA (sf) Senior Fixed 74.000
B AA (sf) Subordinate Fixed 77.870
C A (sf) Subordinate Fixed 98.360
D BBB (sf) Subordinate Fixed 73.770
E BB (sf) Subordinate Fixed 24.590
(i)The interest rates and actual sizes of these tranches will be
determined on the pricing date.
SASCO 2007-BHC1: S&P Lowers Rating on Class A-1 From 'CCC+' to 'D'
------------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on class A-1
from SASCO 2007-BHC1 Trust, a U.S. resecuritized real estate
mortgage investment conduit (re-REMIC) transaction, to 'D (sf)'
from 'CCC+ (sf)'.
"The downgrade primarily reflects our analysis of the transaction
following interest shortfalls to class A-1. The interest
shortfalls to the class are the result of interest shortfalls on
the underlying commercial mortgage-backed securities (CMBS)
collateral," S&P related.
As of the Aug. 22, 2011, remittance report, the aggregate
accumulated interest shortfall to the transaction totaled $10.4
million. Class A-1 had $293,279 in interest shortfalls during this
period, up from $82,729.82 in the July report. The interest
shortfalls primarily reflect the master servicer's recovery of
prior advances, appraisal subordinate entitlement reductions
(ASERs), servicers' nonrecoverability determinations for advances,
and special servicing fees. "We had previously lowered our ratings
on classes A-2 through S to 'D (sf)' due to accumulated interest
shortfalls or principal losses," S&P related.
According to the Aug. 22, 2011, trustee report, SASCO 2007-BHCI
Trust is collateralized by 87 CMBS certificates ($485.7 million,
100%) from 41 distinct transactions issued between 2004 and 2006.
SASCO 2007-BHCI Trust has exposure to CMBS certificates that
Standard & Poor's downgraded from these transactions:
LB-UBS Commercial Mortgage Trust 2006-C7 (classes G, H, J, and
K; $25 million, 5.2%);
COMM 2006-C7 (classes F, G, and H; $15.6 million, 3.2%);
Banc of America Commercial Mortgage Inc.'s series 2006-2
(classes G and H; $14 million, 2.9%); and
Greenwich Capital Commercial Funding Corp.'s series 2005-GG5
(classes F and H; $14 million, 2.9%).
"Standard & Poor's analyzed SASCO 2007-BHC1 and its underlying
collateral according to our current criteria. Our analysis is
consistent with the lowered rating," S&P added.
SASCO FHA/VA: Moody's Lowers Rating of Series 1999-RF1 to 'B2'
--------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 27
tranches from seven deals issued by Structured Asset Securities
Corp. The collateral backing these transactions consists primarily
of first-lien, fixed, and adjustable rate, mortgage loans insured
by the Federal Housing Administration (FHA) an agency of the U.S.
Department of Urban Development (HUD) or guaranteed by the
Veterans Administration (VA).
Complete rating actions are:
Issuer: SASCO FHA/VA, Series 1999-RF1
A, Downgraded to B2 (sf); previously on Jul 27, 2011 Ba3 (sf)
Placed Under Review for Possible Downgrade
Issuer: Structured Asset Securities Corp 2005-RF1
Cl. A, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Cl. AIO, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Issuer: Structured Asset Securities Corp 2006-RF3
Cl. B1-I, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B2-I, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Issuer: Structured Asset Securities Corp 2006-RF4
Cl. 2-A1, Downgraded to B2 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B2, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B3, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B4, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Issuer: Structured Asset Securities Corp. 2005-RF3
Cl. 1-A, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Cl. 1-AIO, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Cl. 2-A, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Issuer: Structured Asset Securities Corp. 2005-RF5
Cl. 1-A, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. 1-AIO, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. 2-A, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Caa3 (sf)
Cl. B2, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B3, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B4, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. 1-X, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to B3 (sf)
Issuer: Structured Asset Securities Corp. 2005-RF6
Cl. A, Downgraded to B3 (sf); previously on Jul 27, 2011 B1 (sf)
Placed Under Review for Possible Downgrade
Cl. AIO, Downgraded to B3 (sf); previously on Jul 27, 2011 B1 (sf)
Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B2, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B3, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B4, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
RATINGS RATIONALE
The actions are a result of Moody's updated loss projection for
the RMBS FHA-VA portfolio. The updated projection accounts for
higher potential pool losses due to self-curtailment of claims by
servicers whereby they pass expenses as deemed reasonable to the
trusts instead of submitting them to HUD, and continued weaknesses
in the macro economy and the housing market.
A FHA guarantee covers 100% of a loan's outstanding principal and
a large portion of its outstanding interest and foreclosure-
related expenses in the event that the loan defaults. A VA
guarantee covers only a portion of the principal based on the
lesser of either the sum of the current loan amount, accrued and
unpaid interest, and foreclosure expenses, or the original loan
amount. HUD usually pays claims on defaulted FHA loans when
servicers submit the claims, but can impose significant penalties
on servicers if it finds irregularities in the claim process later
during the servicer audits. This can prompt servicers to push more
expenses to the trust that they deem reasonably incurred than
submit them to HUD and face significant penalty. The rating
actions consider the portion of a defaulted loan normally not
covered by the FHA or VA guarantee and other servicer expenses
they deemed reasonably incurred and passed on to the trust.
FHA/VA borrowers, in Moody's-rated transactions, are typically low
income borrowers with poor credit history who have been affected
by the weak economy and housing market. Moody's expects
delinquencies to remain high for this sector at 40%, 35%, and 30%
for the 2004, 2005, and 2006 vintages, respectively as house
prices continue to decline and unemployment rates remain high.
FHA/VA RMBS transactions have had very low losses to date (less
than 1%) despite high delinquency levels due to the FHA and VA
guarantees. However, Moody's expects this trend to change due to
the higher level of self-curtailments by the servicers.
Moody's final rating actions are based on current levels of credit
enhancement, collateral performance and updated pool-level loss
expectations. Moody's took into account credit enhancement
provided by seniority, and other structural features within the
senior note waterfalls.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment levels remain
high, and weakness persists in the housing market. Moody's now
projects house price index to reach a bottom in the first quarter
of 2012, with a 2% remaining decline between the first quarter of
2011 and 2012, and unemployment rate to start declining by fourth
quarter of 2011.
The principal methodology used in these ratings is described in
the Monitoring and Performance Review section in "Moody's Approach
to Rating US Residential Mortgage-Backed Securities" published in
December 2008. Other methodologies used were "FHA VA US RMBS
Surveillance Methodology" published in July 2011, and "2005 --
2008 US RMBS Surveillance Methodology" published in July 2011.
SASCO REVERSE: Moody's Lowers Rating of $808 MM Mortgage Bonds
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Moody's Investors Service has downgraded the ratings of six bonds
from three reverse mortgage deals issued by Structured Assets
Securitization Corporation (SASCO) from 2005 to 2007. The
collateral backing these transactions consists primarily of first
lien, non-recourse and uninsured reverse mortgage loans.
RATINGS RATIONALE
The downgrade actions were primarily driven by the continued
weaknesses in the housing market, the demographics and age profile
of the borrowers, and the low levels of credit enhancement
available relative to projected losses.
The properties backing the transactions are concentrated in
California where house prices have declined by over 40% since
2006. Moody's further expects house prices to decline another 5%
from current levels until early 2012, with a slow recovery
thereafter.
The repayments to the bonds are primarily dependent on the
proceeds from the sale of the homes. Given the age profile of
these borrowers, Moody's expects a large percentage of maturities
to occur over the next five years, when the housing market is
weak. As a result, cash-flows to the bonds are expected to be
negatively impacted, resulting in increased potential for losses
to the bonds.
METHODOLOGY:
A reverse mortgage allows senior homeowners (typically 62 years of
age or older) to borrow against the equity in their homes. With a
reverse mortgage, the lender makes payments to the borrowers in
exchange for the equity in the home. The payments, interest that
accrues on the payments, any additional draws by the borrower on
his/her available line of credit, and any fees or other advanced
items are added together to determine the loan balance at any
given time.
Repayment of a reverse mortgage depends solely on receipts from
the property when the loan matures. A maturity event is triggered
either by a mortality event when the borrower(s) dies or by a
mobility event when the borrower(s) permanently moves out of the
property. There is no recourse to any other assets of the borrower
or to the borrower's estate for shortfalls.
The main drivers of credit risk for reverse mortgages therefore
are property values, interest rate, and maturity rate, i.e., the
rate at which the maturity event will occur. Cash flows available
to investors depend on two fundamental factors, the timing of
repayment which is triggered by a "maturity event" and the net
liquidation proceeds from the sale of the property .
Moody's assumptions on these key drivers are:
* Home prices will decline by 5% from 2Q 2011 levels until 2Q 2012
and then increase at an annual rate of 3.5% in the base case (B2
rating level). For higher rating levels these assumptions were
stressed. For the Baa case, Moody's assumed home prices to
further decline by 15% from 2Q 2011 levels until 2Q 2012 and
then increase at an annual rate of 2.5%. In the Aaa scenario,
Moody's assumed home prices to further decline by 30% from the
2Q 2011 levels until 2Q 2012 with no increase thereafter.
* For interest rates, the assumption is for the 6 month LIBOR to
remain flat at 0.5% till the end of 2011, increase to 1% by 3Q
2013, and then increase to 4% by 1Q 2015 and stabilize
thereafter. In the Baa rating level, Moody's assumed libor rates
to remain flat at 0.5% till end of 2011, increase to 1% by 1Q
2013 and then at a faster pace till it reaches 4.75% in 3Q 2014
with a long term average of 4.25%. In the Aaa rating level,
Moody's assumed that libor rate would increase from the current
rate of 0.5% to 7% by 3Q 2013 and stabilize thereafter.
* Moody's mortality rate assumption, i.e. the rate at which
mortality event occurs, is based on "Annuity 2000 mortality
tables" available in the Transactions of Society of Actuaries
1995-96 Reports . These tables provide mortality rates by age
separately for males and females. Moody's mobility rate
assumption, i.e. rate at which mobility event occurs, is based
on US Census Bureau, 2007 results . A monthly maturity rate is
calculated to derive the portion of the loan that will be pay
down each month based on the mobility and mortality rates for
each borrower. These assumptions do not change by rating levels
as they have very low correlation with different economic
scenarios.
* Moody's draw rate assumption, i.e. the rate at which the
borrowers will draw on their available line of credit is based
on the actual amount drawn over available line of credit for the
past two years and is kept constant for different rating levels.
In order to derive the ratings, Moody's first defined economic
scenarios for the six rating levels (B2, Ba2, Baa2, A2, Aa2 and
Aaa) as noted above and then projected cashflows for each rating
level for the life of the deal. Monthly loan balances were
calculated based on the projected accrued interest and amounts
drawn. Moody's then applied the monthly maturity rate to determine
the portion of the loan that will be paid down each month. The net
monthly cash flow proceeds from each loan available to pay down
the bonds was then calculated as the minimum of the outstanding
loan balance and the projected property value net of liquidation
costs. These proceeds were then applied to the bonds per the deal
structure, accounting for the reserve fund available to absorb
losses.
The ratings are sensitive to the assumptions on the key credit
risk drivers. A delay in repayment will increase accrued interest,
but may not negatively affect the deal if the repayment occurs
during a period of increasing house prices as additional
liquidation proceeds may offset the higher amount of accrued
interest. Similarly, an early repayment that will result in less
accrued interest may negatively affect the deal if the repayment
coincides with a period of severe house price decline.
The primary source of assumption uncertainty is the current
macroeconomic environment with a weak outlook on the housing
market.
Complete rating actions are:
Issuer: SASCO Reverse Mortgage Securities, Series 2005-RM1
Cl. A-1, Downgraded to Ba3 (sf); previously on Dec 17, 2010 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. A-IO, Downgraded to Aa1 (sf); previously on Dec 17, 2010 Aaa
(sf) Placed Under Review for Possible Downgrade
Issuer: SASCO Reverse Mortgage Securities, Series 2006-RM1
Cl. A-1, Downgraded to Ba1 (sf); previously on Dec 17, 2010 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. A-IO, Downgraded to Aa1 (sf); previously on Dec 17, 2010 Aaa
(sf) Placed Under Review for Possible Downgrade
Issuer: SASCO Reverse Mortgage Securities, Series 2007-RM1
Cl. A1, Downgraded to Baa2 (sf); previously on Dec 17, 2010 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. IO, Downgraded to Aa2 (sf); previously on Dec 17, 2010 Aaa
(sf) Placed Under Review for Possible Downgrade
SATURN CLO: Moody's Upgrades Ratings of Six Classes of Notes
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Saturn CLO, Ltd.:
US$135,500,000 Class A-1 Senior Secured Floating Rate Notes due
2022 (current outstanding balance of $133,279,903), Upgraded to
Aaa (sf); previously on June 22, 2011 Aa2 (sf) Placed Under Review
for Possible Upgrade;
US$24,000,000 Class A-1-J Senior Secured Floating Rate Notes due
2022, Upgraded to Aa1 (sf); previously on June 22, 2011 Aa3 (sf)
Placed Under Review for Possible Upgrade;
US$27,500,000 Class A-2 Senior Secured Floating Rate Notes due
2022, Upgraded to Aa3 (sf); previously on June 22, 2011 A3 (sf)
Placed Under Review for Possible Upgrade;
US$25,000,000 Class B Secured Deferrable Floating Rate Notes due
2022, Upgraded to A3 (sf); previously on June 22, 2011 Ba1 (sf)
Placed Under Review for Possible Upgrade;
US$20,000,000 Class C Secured Deferrable Floating Rate Notes due
2022, Upgraded to Ba1 (sf); previously on June 22, 2011 B1 (sf)
Placed Under Review for Possible Upgrade;
US$20,000,000 Class D Secured Deferrable Floating Rate Notes due
2022, Upgraded to Ba3 (sf); previously on June 22, 2011 Caa3 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. Today's actions reflect key
changes to the modeling assumptions, which incorporate (1) a
removal of the temporary 30% default probability macro stress
implemented in February 2009 as well as (2) increased BET
liability stress factors and increased recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $472 million,
defaulted par of $0, a weighted average default probability of
24.3% (implying a WARF of 3015), a weighted average recovery rate
upon default of 50.1%, and a diversity score of 75. These default
and recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Saturn CLO, Ltd., issued in May 2007, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior, 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor. However, as part of the base case, Moody's
considered spread and diversity levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
SATURN VENTURES: Moody's Affirms Rating of Class B Notes at 'C'
---------------------------------------------------------------
Moody's has upgraded the ratings of one class and affirmed the
ratings of three classes of Notes issued by Saturn Ventures I,
Ltd. due to increased cash flow caused by a reduction in the swap
notional balance and lower fixed leg coupon that the transaction
pays to the swap counterparty, stable deal performance and
increased amortization since last review. The affirmations are due
to the key transaction parameters performing within levels
commensurate with the existing ratings levels. The rating action
is the result of Moody's on-going surveillance of commercial real
estate collateralized debt obligation (CRE CDO) transactions.
Class A-1 Floating Rate Senior Notes, Affirmed at Aaa (sf);
previously on Oct 27, 2010 Upgraded to Aaa (sf)
Class A-2 Floating Rate Senior Notes, Upgraded to Baa3 (sf);
previously on Oct 27, 2010 Upgraded to Ba3 (sf)
Class A-3 Floating Rate Senior Notes, Affirmed at Ca (sf);
previously on Aug 6, 2009 Downgraded to Ca (sf)
Class B Floating Rate Subordinate Notes, Affirmed at C (sf);
previously on Mar 6, 2009 Downgraded to C (sf)
RATINGS RATIONALE
Saturn Ventures I, Ltd. is a static cash CRE CDO transaction
backed by a portfolio of commercial mortgage backed securities
(CMBS) (62.9% of the pool balance), residential mortgage backed
securities (RMBS) (17.9%), collateralized debt obligations (CDO)
(12.0%), real estate investment trust (REIT) debt (4.5%) and asset
backed securities (ABS) credit cards (2.7%). As of the July 27,
2011 Note Valuation report, the aggregate Note balance of the
transaction, including preferred shares, has decreased to
$146.8 million from $400.0 million at issuance, with majority
of the paydown directed to the Class A-1 Notes, as a result of
amortization of the underlying collateral and failing the
principal coverage tests. The deal was structured such that prior
to the payment date in November 2008, 5.0% of the principal
proceeds were used to paydown Class A-2, Class A-3, and Class
B pari-passu. The deal is currently under-collateralized by
$36.3 million due to realized losses on the underlying collateral.
There are fifteen assets with a par balance of $18.4 million
(16.6% of the current pool balance) that are considered Defaulted
Securities as of theJuly 27, 2011 Note Valuation report. Thirteen
of these assets (65.9% of the defaulted balance) are RMBS and two
are CDO (34.1%). Moody's expects significant losses to occur on
the Defaulted Securities once they are realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has completed updated credit estimates for the non-Moody's
rated collateral. The bottom-dollar WARF is a measure of the
default probability within a collateral pool. Moody's modeled a
bottom-dollar WARF of 2,203 compared to 1,499 at last review. The
distribution of current ratings and credit estimates is as
follows: Aaa-Aa3 (28.4% compared to 28.3% at last review), A1-A3
(7.4% compared to 14.0% at last review), Baa1-Baa3 (25.2% compared
to 29.4% at last review), Ba1-Ba3 (7.7% compared to 5.8% at last
review), B1-B3 (12.4% compared to 7.8% at last review), and Caa1-C
(18.9% compared to 14.7% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 1.5 years compared
to 2.0 at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR of
24.8% compared to 28.2% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 1.7% compared to 11.7% at last review.
Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO
rating models, which was released on January 24, 2011.
The cash flow model, CDOEdge(R) v3.2.1.0, was used to analyze the
cash flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
24.8% to 14.8% or up to 34.8% would result in average model
results on the rated tranches of 0 to 1 notch downward and 0 to 2
notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption uncertainty
are the current sluggish macroeconomic environment and performance
in the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are
continuing to show signs of recovery through the first half of
2011, while recovery in the non-core office and retail sectors are
tied to pace of recovery of the broader economy. Core office
markets are showing signs of recovery through lending and leasing
activity. The availability of debt capital continues to improve
with terms returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Other methodology used in this rating was "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
SCHOONER TRUST: DBRS Confirms Class G Rating at 'BB'
----------------------------------------------------
DBRS has confirmed these ratings of 16 Classes of Schooner Trust
Commercial Mortgage Pass-Through Certificates, Series 2005-4:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class XP-1 at AAA (sf)
-- Class XP-2 at AAA (sf)
-- Class XC-1 at AAA (sf)
-- Class XC-2 at AAA (sf)
-- Class B at AA (sf)
-- Class C to A (high) (sf)
-- Class D to BBB (high) (sf)
-- Class E to BBB (sf)
-- Class F at BBB (low) (sf)
-- Class G to BB (high) (sf)
-- Class H at BB (low) (sf)
-- Class J at B (high) (sf)
-- Class K at B (sf)
-- Class L at B (low) (sf)
All trends are Stable.
The ratings confirmations reflect the increased credit enhancement
to the bonds from a collateral reduction of approximately 31%
since issuance. Sixteen loans have paid out of the pool since
issuance. The weighted-average debt service coverage ratio is
1.66x.
At issuance, DBRS shadow-rated seven loans, currently representing
22.58% of the transaction, as investment-grade. DBRS has
confirmed that the performance of these individual loans remain
consistent with investment-grade loan characteristics.
There are currently three loans, representing 13.18% of the
transaction, on the servicer's watchlist. These loans remain
current but are reporting performance issues and have been placed
on the servicer's watchlist. Two of these loans are highlighted
below.
The Southland Mall loan (10.27% of the current pool balance) is
secured by a shopping centre in Regina, Saskatchewan. It was
placed on the servicer's watchlist because the former anchor
tenant, Wal-Mart, who occupied 33% of the NRA, vacated in 2010.
Wal-Mart did continue to pay rent until the expiration of its
lease in January 2011. The property is 62% occupied, as of March
2011, down from 95% at YE2010. The servicer has reported that the
borrower has been in discussions to lease the former Wal-Mart
space but nothing has materialized to date. The YE2010 OSAR
reported the DSCR to be 1.60x, but the DSCR is likely to decrease
as the expiration of the Wal-Mart lease is recognized. Despite
the vacancy concern, the loan has remained current since Wal-
Mart's departure, and has strong sponsorship in RioCan REIT (rated
BBB (high) by DBRS) who provides a full-recourse guaranty.
The Newport Centre III loan (2.24% of the current pool balance) is
secured by an office property in downtown Winnipeg. It was added
to the servicer's watchlist due to a low occupancy rate, which
fell to 68% in May 2010. Based on the January 2011 rent roll,
three new tenants have signed leases at the property, and the
occupancy rate has improved to 80%. The YE2010 DSCR was low at
0.94x, but that figure is likely to rise in 2011 with the
improvement in the occupancy rate.
In addition to the three loans on the servicer's watchlist, DBRS
has added one loan, Dundeal Properties, (3.75% of the current pool
balance) to the DBRS HotList because of a low YE2010 NCF. The NCF
has declined 45% since issuance due to the bankruptcy of the
previous tenant who occupied both of the flex industrial
properties that serve as collateral for the loan. As a result,
the YE2010 DSCR was 0.76x, a decline from 1.49x at YE2009. The
borrower has signed two tenants, representing 60% of the NRA,
according to a March 2011 rent roll. Since that time however, one
of the tenant's, who occupied 15% of the NRA, lease has expired.
DBRS is waiting an update from the servicer regarding the status
of the tenant. DBRS will continue to monitor the loan closely.
DBRS has removed Milliken Crossing Shopping Centre (6.06% of the
current pool balance) from the DBRS HotList. The loan was placed
on the HotList in October 2010 due to a YE2009 NCF that was 21%
below the issuer's underwritten NCF. The YE2010 NCF improved 15%
over the previous year and the property's occupancy rate improved
slightly to 95%. These marked improvements, along with the fact
that there is ample time for this loan to continue its improved
performance before its 2015 maturity date, have resulted in it
being removed from the DBRS HotList.
DBRS continues to monitor this transaction on a monthly basis in
the Monthly CMBS Surveillance Report, which can provide more
detailed information on the individual loans in the pool.
SHINNECOCK CLO: Moody's Upgrades Ratings of Five Classes of Notes
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Shinnecock CLO 2006-1, Ltd.:
$22,000,000 Class A-2 Senior Floating Rate Notes Due 2018,
Upgraded to Aa1 (sf); previously on June 22, 2011 Aa3 (sf) Placed
Under Review for Possible Upgrade;
$24,000,000 Class B Senior Floating Rate Notes Due 2018, Upgraded
to A1 (sf); previously on June 22, 2011 A3 (sf) Placed Under
Review for Possible Upgrade;
$14,000,000 Class C Deferrable Mezzanine Floating Rate Notes Due
2018, Upgraded to Baa2 (sf); previously on June 22, 2011 Ba1 (sf)
Placed Under Review for Possible Upgrade;
$12,000,000 Class D Deferrable Mezzanine Floating Rate Notes Due
2018, Upgraded to Ba2 (sf); previously on June 22, 2011 B1 (sf)
Placed Under Review for Possible Upgrade;
$7,500,000 Class E Deferrable Junior Floating Rate Notes Due 2018,
Upgraded to Ba3 (sf); previously on June 22, 2011 Caa2 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $285 million,
defaulted par of $6 million, a weighted average default
probability of 20.31% (implying a WARF of 2771), a weighted
average recovery rate upon default of 48.75%, and a diversity
score of 60. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Shinnecock CLO 2006-1, Ltd., issued in September 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average coupon and diversity score.
However, as part of the base case, Moody's considered a spread
level higher than the covenant level due to the large
difference between the reported and covenant levels.
SIERRA TIMESHARE: S&P Assigns 'BB' Rating on Class C Notes
----------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to Sierra
Timeshare 2011-2 Receivables Funding LLC's $300 million vacation
timeshare loan-backed notes.
The note issuance is a securitization of vacation ownership
interval (timeshare) loans.
"The ratings reflect our opinion of the credit enhancement
available in the form of subordination, overcollateralization, a
reserve account, and available excess spread. Our ratings also
reflect our view of Wyndham Consumer Finance Inc.'s servicing
ability and experience in the timeshare market," S&P added.
Ratings Assigned
Sierra Timeshare 2011-2 Receivables Funding LLC
Class Rating Amount (mil. $)
A A (sf) 202.17
B BBB (sf) 66.85
C BB (sf) 30.98
SILVERADO CLO: Moody's Raises Rating of Class C Notes to 'Ba1'
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Silverado CLO 2006-II Limited:
US$15,000,000 Class A-1-J Senior Secured Floating Rate Notes due
2020, Upgraded to Aa1 (sf); Previously on June 22, 2011 Aa2 (sf)
Placed Under Review for Possible Upgrade;
US$16,000,000 Class A-2 Senior Secured Floating Rate Notes due
2020, Upgraded to Aa3 (sf); Previously on June 22, 2011 A1 (sf)
Placed Under Review for Possible Upgrade;
US$20,750,000 Class B Senior Secured Deferrable Floating Rate
Notes due 2020, Upgraded to A3 (sf); Previously on June 22, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade;
US$17,500,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2020, Upgraded to Ba1 (sf); Previously on June 22, 2011
B1 (sf) Placed Under Review for Possible Upgrade;
US$12,250,000 Class D Secured Deferrable Floating Rate Notes due
2020, Upgraded to B1 (sf); Previously on June 22, 2011 Caa2 (sf)
Placed Under Review for Possible Upgrade;
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The actions reflect key
changes to the modeling assumptions, which incorporate (1) a
removal of the temporary 30% default probability macro stress
implemented in February 2009 as well as (2) increased BET
liability stress factors and increased recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $338.4 million,
defaulted par of $1.6 million, a weighted average default
probability of 21.4% (implying a WARF of 2750), a weighted average
recovery rate upon default of 49.8%, and a diversity score of 55.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Silverado CLO 2006-II Limited, issued in October 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior, 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average coupon, and diversity score.
However, as part of the base case, Moody's considered spread
levels higher than the covenant levels due to the large
difference between the reported and covenant levels.
SPRINGLEAF MORTGAGE: S&P Gives 'B' Rating on Class B-2 Notes
------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to
Springleaf Mortgage Loan Trust 2011-1's $496.86 million mortgage-
backed notes.
The note issuance is a residential mortgage-backed securities
(RMBS) transaction of mostly seasoned subprime first-lien, fixed-
rate, residential mortgage loans secured by single-family
residences, manufactured housing, land, and packages of multiple
real properties.
Rationale
The ratings reflect S&P's view of:
"The likelihood that the credit enhancement of 41.15%, 32.8%,
26.45%, 21.1%, 16.55%, and 12.35% will be able to withstand
our 'AAA', 'AA', 'A', 'BBB', 'BB', and 'B' stress scenarios
for this portfolio, which is secured by residential mortgage
loans. The credit enhancement consists of subordination, an
interest shortfall reserve fund, and overcollateralization,"
S&P related.
"The risks and mitigating factors we see based on the results
of Standard & Poor's mortgage originator and conduit reviews,
third-party due-diligence review, and our review of the
representations and warranties with respect to the mortgage
assets. Although the mortgage loans are seasoned, we performed
a full mortgage originator review of Springleaf Finance Corp.
(Springleaf), which included a review of its acquisition
program, pursuant to which we assigned a 'Middle Tier'
ranking. While there are multiple originators, we performed
our review only on Springleaf because it originated more than
90% of the collateral through its branches and subsidiaries.
We also discussed Springleaf's acquisition strategy for the
portion that was acquired," S&P related.
"The significance to our ratings of the timing of losses, the
foreclosed properties' recovery value, and our default
assumptions," S&P stated.
S&P has identified these factors that it believes strengthen the
series 2011-1 transaction:
The borrowers' willingness and ability to make timely mortgage
payments as evidenced by the payment history of more than 98%
of the pool being current under the Office of Thrift
Supervision methodology as of one month after the cut-off date
and 100% of the pool being current 24 months prior to that
time.
The transaction's ability to withstand losses to the senior
notes assuming an adjusted loan-to-value (LTV) based on
updated Federal Housing Finance Agency market value data,
updated appraisal valuations, and a further 45% market value
decline in a 'AAA' stress scenario.
The wide geographic diversification of the collateral.
The low historical loss experience of similar collateral
originated or acquired by Springleaf relative to average
seasoned subprime collateral. "We believe the collateral
characteristics that have the most influence on default risk
are less prevalent in the series 2011-1 transaction than in
collateral from subprime transactions of similar vintages,"
S&P stated.
The master servicer's and sub-servicer's servicing rankings of
STRONG and ABOVE AVERAGE as assigned by Standard & Poor's.
The average loan seasoning of five years.
More than 85% of the pool meets Standard & Poor's definition
of "full documentation" underwriting versus less than 60% and
23% for comparable subprime and Alternative-A vintages.
Reimbursements for certain capitalized servicing advances are
made from principal collections only, thereby reducing the
risk of potential interest shortfalls.
Certain issuer expenses deducted from the interest remittance
amount are capped at $250,000 annually, which S&P factored
into its analysis.
S&P has identified these factors that it believes weaken the
series 2011-1 transaction:
Certain risk characteristics of the pool of loans: 81% are
cash-out refinance, the weighted average FICO score was
approximately 650 as of May 31, 2011, and 39.50% with loan
balances less than $100,000.
16% of the pool comprises multiparcel packages, land, or
manufactured housing.
The transaction's excess spread is not expected to cover
losses and maintain or replenish overcollateralization,
whereas many outstanding U.S. RMBS nonprime transactions use
excess spread to cover losses and to build or maintain
overcollateralization and contain overcollateralization
targets and floors prior to releasing to the residual holders.
Outstanding advances that are reimbursed to the servicer from
the issuer's interest remittance amounts, which are senior in
the payment waterfall, may potentially cause interest
shortfalls to the series 2011-1 rated notes. However, an
interest reserve fund for the rated notes may partially
mitigate such risk.
"We also note significant differences in valuation methodology for
the present pool, which resulted in adjusted LTV ratios of
approximately 83% used in our analysis versus 96% disclosed by the
sponsor in the operative documents. Although either LTV ratio
still compares favorably to subprime collateral of similar
vintages, the difference is attributable to our decision to not
utilize results from automated valuation models in lieu of
original full appraisals adjusted for observed market value
declines, due to reliability concerns," S&P stated.
Ratings Assigned
Springleaf Mortgage Loan Trust 2011-1
Class Rating Amount (mil. $)
A-1 AAA (sf) 242.716
A-2 AAA (sf) 49.686
M-1 AA (sf) 41.488
M-2 A (sf) 31.551
M-3 BBB (sf) 26.582
B-1 BB (sf) 22.607
B-2 B (sf) 20.868
C NR 61.363
R NR N/A
NR -- Not rated. N/A -- Not applicable.
STONE TOWER: Moody's Raises Class C Notes Rating to 'Ba1'
---------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Stone Tower CLO VII Ltd.:
US$34,000,000 Class A-3 Floating Rate Notes Due August 30, 2021,
Upgraded to Aa3 (sf); previously on June 22, 2011 A1 (sf) Placed
Under Review for Possible Upgrade;
US$28,000,000 Class B Deferrable Floating Rate Notes Due
August 30, 2021, Upgraded to A3 (sf); previously on June 22, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade;
US$27,000,000 Class C Deferrable Floating Rate Notes Due
August 30, 2021, Upgraded to Ba1 (sf); previously on June 22, 2011
Ba3 (sf) Placed Under Review for Possible Upgrade.
In addition, Moody's Investors Service confirmed the rating of
these notes:
US$45,000,000 Class A-2 Floating Rate Notes Due August 30, 2021,
Confirmed at Aa1 (sf); previously on June 22, 2011 Aa1 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Moody's notes that the deal has benefited from an improvement in
the credit quality of the underlying portfolio. Moody's adjusted
WARF has declined since the rating action in October 2009 due to a
decrease in the percentage of securities with ratings on "Review
for Possible Downgrade" or with a "Negative Outlook."
The overcollateralization ratios of the rated notes have also
improved since the rating action in October 2009. The Class A,
Class B and Class C overcollateralization ratios are reported at
118.2997%, 111.8428% and 106.2506%, respectively, versus September
2009 levels of 116.5684%, 110.2060% and 104.6957%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $573.8 million,
defaulted par of $0.3 million, a weighted average default
probability of 20.61% (implying a WARF of 2488), a weighted
average recovery rate upon default of 48.20%, and a diversity
score of 70. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Stone Tower CLO VII Ltd., issued in August 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread and coupon levels higher than the
covenant levels due to the large difference between the
reported and covenant levels.
STONE TOWER: Moody's Upgrades Class D Notes Rating to 'Ba3'
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Stone Tower CLO VI Ltd.:
US$61,000,000 Class A-2b Floating Rate Notes Due April 17, 2021,
Upgraded to Aa1 (sf); previously on June 22, 2011 Aa2 (sf) Placed
Under Review for Possible Upgrade;
US$56,000,000 Class A-3 Floating Rate Notes Due April 17, 2021,
Upgraded to Aa3 (sf); previously on June 22, 2011 A2 (sf) Placed
Under Review for Possible Upgrade;
US$47,000,000 Class B Deferrable Floating Rate Notes Due April 17,
2021, Upgraded to A3 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$37,000,000 Class C Floating Rate Notes Due April 17, 2021,
Upgraded to Baa3 (sf); previously on June 22, 2011 Ba3 (sf) Placed
Under Review for Possible Upgrade;
US$31,000,000 Class D Floating Rate Notes Due April 17, 2021,
Upgraded to Ba3 (sf); previously on June 22, 2011 Caa2 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Moody's also notes that the deal has benefited from improvement in
the credit quality of the underlying portfolio since the rating
action in September 2009. Moody's adjusted WARF has declined since
the rating action in September 2009 due to a decrease in the
percentage of securities with ratings on "Review for Possible
Downgrade" or with a "Negative Outlook."
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $966.2 million,
defaulted par of $1.6 million, a weighted average default
probability of 20.31% (implying a WARF of 2495), a weighted
average recovery rate upon default of 48.76%, and a diversity
score of 70. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Stone Tower CLO VI Ltd., issued in March 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011. Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread and coupon levels higher than the
covenant levels due to the large difference between the
reported and covenant levels.
STONE TOWER: Moody's Upgrades Rating of Class C-2 Notes to 'Ba1'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Stone Tower CLO IV Ltd.:
US$567,000,000 Class A-1 Floating Rate Notes Due March 16, 2018,
Upgraded to Aaa (sf); previously on June 22, 2011 Aa2 (sf) Placed
Under Review for Possible Upgrade;
US$42,500,000 Class A-2 Floating Rate Notes Due March 16, 2018,
Upgraded to Aa3 (sf); previously on June 22, 2011 A3 (sf) Placed
Under Review for Possible Upgrade;
US$33,500,000 Class B Deferrable Floating Rate Notes Due March 16,
2018, Upgraded to A3 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$29,000,000 Class C-1 Floating Rate Notes Due March 16, 2018,
Upgraded to Ba1 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade;
US$2,000,000 Class C-2 Fixed Rate Notes Due March 16, 2018,
Upgraded to Ba1 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade;
US$16,000,000 Class D Floating Rate Notes Due March 16, 2018,
Upgraded to B1 (sf); previously on June 22, 2011 Caa3 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of improvement in the
credit quality of the underlying portfolio since the rating action
in September 2009. Moody's adjusted WARF has declined since the
rating action in September 2009 due to a decrease in the
percentage of securities with ratings on "Review for Possible
Downgrade" or with a "Negative Outlook."
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $719.5 million,
defaulted par of $3.6 million, a weighted average default
probability of 17.78% (implying a WARF of 2480), a weighted
average recovery rate upon default of 49.00%, and a diversity
score of 71. Moody's generally analyzes deals in their
reinvestment period by assuming the worse of reported and
covenanted values for all collateral quality tests. However, in
this case given the limited time remaining in the deal's
reinvestment period, Moody's analysis reflects the benefit of
assuming a higher likelihood that the collateral pool
characteristics will continue to maintain a positive "cushion"
relative to certain covenant requirements, as seen in the actual
collateral quality measurements. The default and recovery
properties of the collateral pool are incorporated in cash flow
model analysis where they are subject to stresses as a function of
the target rating of each CLO liability being reviewed. The
default probability is derived from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Stone Tower CLO IV Ltd., issued in March 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
A source of additional performance uncertainties is collateral
quality metrics: The deal is allowed to reinvest and the manager
has the ability to deteriorate the collateral quality metrics'
existing cushions against the covenant levels. Moody's analyzed
the impact of assuming the worse of reported and covenanted values
for weighted average rating factor, weighted average spread,
weighted average coupon, and diversity score. However, as part of
the base case, Moody's considered spread, coupon, and diversity
levels higher than the covenant levels due to the large difference
between the reported and covenant levels.
STRUCTURED ASSET: Moody's Downgrades Rating of Cl. 3-A1 to 'B3'
---------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of eight
tranches from one RMBS transaction, backed by Alt-A loans, issued
by Structured Asset Securities Corp. 2006-RF3.
RATINGS RATIONALE
The collateral backing these tranches consists primarily of first-
lien, Alt-A residential mortgage loans. The actions are a result
of the recent performance review of this transaction and reflect
Moody's updated loss expectations on the Alt-A pools.
The principal methodology used in these ratings is described in
the Monitoring and Performance Review section in "Moody's Approach
to Rating US Residential Mortgage-Backed Securities" published in
December 2008. Another methodology used was "2005 -- 2008 US RMBS
Surveillance Methodology" published in July 2011, which accounts
for the updated performance and outlook.
Moody's final rating actions are based on current ratings, level
of credit enhancement, collateral performance and updated pool-
level loss expectations relative to current level of credit
enhancement. Moody's took into account credit enhancement provided
by seniority, cross-collateralization, time tranching, and other
structural features within the senior note waterfalls.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment levels remain
high, and weakness persists in the housing market. Moody's now
projects the house price index to reach a bottom in the first
quarter of 2012, with a 2% remaining decline between the first
quarter of 2011 and 2012, and the unemployment rate to start
declining by fourth quarter of 2011.
Complete rating actions are:
Issuer: Structured Asset Securities Corp 2006-RF3
Cl. 3-A1, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Cl. 3-A2, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Cl. 3-AP, Downgraded to Caa1 (sf); previously on Jul 27, 2011 B1
(sf) Placed Under Review for Possible Downgrade
Cl. 3-AX, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Cl. 4-A, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Cl. B1-II, Downgraded to Ca (sf); previously on Jul 28, 2009
Downgraded to Caa1 (sf)
Cl. B2-II, Downgraded to C (sf); previously on Jul 27, 2011 Caa3
(sf) Placed Under Review for Possible Downgrade
Cl. B3-II, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
SYMPHONY CLO: Moody's Raises Rating of Class C Notes to 'Ba2'
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Symphony CLO I, Ltd.
US$60,000,000 Class A-1A Senior Revolving Notes Due 2019, Upgraded
to Aa1 (sf); previously on June 22, 2011 Aa2 (sf) Placed Under
Review for Possible Upgrade;
US$250,000,000 Class A-1B Senior Notes Due 2019, Upgraded to Aa1
(sf); previously on June 22, 2011 Aa2 (sf) Placed Under Review for
Possible Upgrade;
US$15,000,000 Class A-2 Senior Notes Due 2019, Upgraded to Aa3
(sf); previously on June 22, 2011 A2 (sf) Placed Under Review for
Possible Upgrade;
US$22,000,000 Class B Deferrable Mezzanine Notes Due 2019,
Upgraded to Baa1 (sf); previously on June 22, 2011 Ba1 (sf) Placed
Under Review for Possible Upgrade;
US$21,000,000 Class C Deferrable Mezzanine Notes Due 2019,
Upgraded to Ba2 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade;
US$13,500,000 Class D Deferrable Mezzanine Notes Due 2019,
Upgraded to B1 (sf); previously on June 22, 2011 Caa2 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $409.5 million,
defaulted par of $1.3 million, a weighted average default
probability of 22.93% (implying a WARF of 3059), a weighted
average recovery rate upon default of 49.27%, and a diversity
score of 55. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Symphony CLO I, Ltd., issued in January 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
SYMPHONY CLO: Moody's Upgrades Rating of Class D Notes to 'Ba2'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Symphony CLO III, Ltd.:
US$204,300,000 Class A-1a Senior Notes Due 2019, Upgraded to Aaa
(sf); Previously on June 22, 2011 Aa1 (sf) Placed Under Review for
Possible Upgrade;
US$22,700,000 Class A-1b Senior Notes Due 2019, Upgraded to Aa1
(sf); Previously on June 22, 2011 A1 (sf) Placed Under Review for
Possible Upgrade;
US$1,000,000 Class A-2b Senior Notes Due 2019, Upgraded to Aa2
(sf); Previously on June 22, 2011 A1 (sf) Placed Under Review for
Possible Upgrade;
US$24,000,000 Class B Senior Notes Due 2019, Upgraded to A2 (sf);
Previously on June 22, 2011 Baa1 (sf) Placed Under Review for
Possible Upgrade;
US$22,500,000 Class C Deferrable Mezzanine Notes Due 2019,
Upgraded to Baa2 (sf); Previously on June 22, 2011 Ba1 (sf) Placed
Under Review for Possible Upgrade;
US$18,000,000 Class D Deferrable Mezzanine Notes Due 2019,
Upgraded to Ba2 (sf); Previously on June 22, 2011 B3 (sf) Placed
Under Review for Possible Upgrade;
US$11,500,000 Class E Deferrable Junior Notes Due 2019, Upgraded
to B1 (sf); Previously on June 22, 2011 Caa3 (sf) Placed Under
Review for Possible Upgrade.
In addition, Moody's confirmed the rating of the following notes:
US$75,000,000 Class A-2a Senior Revolving Notes Due 2019 Notes,
Confirmed at Aa1 (sf); previously on June 22, 2011 Aa1 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The actions reflect key
changes to the modeling assumptions, which incorporate (1) a
removal of the temporary 30% default probability macro stress
implemented in February 2009 as well as (2) increased BET
liability stress factors and increased recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $409 million,
defaulted par of $1 million, a weighted average default
probability of 23.4% (implying a WARF of 3022), a weighted average
recovery rate upon default of 47.9%, and a diversity score of 64.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Symphony CLO III, Ltd., issued in March 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior, 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation
risk on those assets. Moody's assumes an asset's terminal value
upon liquidation at maturity to be equal to the lower of an
assumed liquidation value (depending on the extent to which the
asset's maturity lags that of the liabilities) and the asset's
current market value.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor and diversity score. However, as part of the base
case, Moody's considered spread and coupon levels higher than
the covenant levels due to the large difference between the
reported and covenant levels.
UNION PLANTERS: Moody's Lowers Ratings of $9.4-Mil. of FHA-VA RMBS
------------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of eight
tranches issued by Union Planters Mortgage Finance Corp 2000-1.
The collateral consists of fixed-rate mortgage loans insured by
the Federal Housing Administration (FHA) an agency of the U.S.
Department of Urban Development (HUD) or guaranteed by the
Veterans Administration (VA).
Complete rating actions are:
Issuer: Union Planters Mortgage Finance Corp., Series 2000-1
Cl. A-1, Downgraded to A2 (sf); previously on Aug 2, 2011
Confirmed at Aaa (sf)
Cl. X-1, Downgraded to A2 (sf); previously on Aug 2, 2011
Confirmed at Aaa (sf)
Cl. PO, Downgraded to A2 (sf); previously on Aug 2, 2011 Confirmed
at Aaa (sf)
Cl. B-1, Downgraded to Baa2 (sf); previously on Jul 27, 2011 Aa2
(sf) Placed Under Review for Possible Downgrade
Cl. B-2, Downgraded to Baa3 (sf); previously on Jul 27, 2011 A2
(sf) Placed Under Review for Possible Downgrade
Cl. B-3, Downgraded to Ba2 (sf); previously on Jul 27, 2011 Baa2
(sf) Placed Under Review for Possible Downgrade
Cl. B-4, Downgraded to B2 (sf); previously on Jul 27, 2011 Ba2
(sf) Placed Under Review for Possible Downgrade
Cl. B-5, Downgraded to Ca (sf); previously on Jul 27, 2011 B2 (sf)
Placed Under Review for Possible Downgrade
RATINGS RATIONALE
The actions are a result of Moody's updated loss projection for
the RMBS FHA-VA portfolio. The updated projection accounts for
higher potential pool losses due to self-curtailment of claims by
servicers whereby they pass expenses as deemed reasonable to the
trusts instead of submitting them to HUD, and continued weaknesses
in the macro economy and the housing market.
A FHA guarantee covers 100% of a loan's outstanding principal and
a large portion of its outstanding interest and foreclosure-
related expenses in the event that the loan defaults. A VA
guarantee covers only a portion of the principal based on the
lesser of either the sum of the current loan amount, accrued and
unpaid interest, and foreclosure expenses, or the original loan
amount. HUD usually pays claims on defaulted FHA loans when
servicers submit the claims, but can impose significant penalties
on servicers if it finds irregularities in the claim process later
during the servicer audits. This can prompt servicers to push more
expenses to the trust that they deem reasonably incurred than
submit them to HUD and face significant penalty. The rating
actions consider the portion of a defaulted loan normally not
covered by the FHA or VA guarantee and other servicer expenses
they deemed reasonably incurred and passed on to the trust.
FHA/VA borrowers, in Moody's-rated transactions, are typically low
income borrowers with poor credit history who have been affected
by the weak economy and housing market. Moody's expects
delinquencies to remain high for this sector at 40%, 35%, and 30%
for the 2004, 2005, and 2006 vintages, respectively as house
prices continue to decline and unemployment rates remain high.
FHA/VA RMBS transactions have had very low losses to date (less
than 1%) despite high delinquency levels due to the FHA and VA
guarantees. However, Moody's expects this trend to change due to
the higher level of self-curtailments by the servicers.
Moody's final rating actions are based on current levels of credit
enhancement, collateral performance and updated pool-level loss
expectations. Moody's took into account credit enhancement
provided by seniority, and other structural features within the
senior note waterfalls.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment levels remain
high, and weakness persists in the housing market. Moody's now
projects house price index to reach a bottom in the first quarter
of 2012, with a 2% remaining decline between the first quarter of
2011 and 2012, and unemployment rate to start declining by fourth
quarter of 2011.
The principal methodology used in these ratings is described in
the Monitoring and Performance Review section in "Moody's Approach
to Rating US Residential Mortgage-Backed Securities" published in
December 2008. Other methodology used in this rating was "FHA VA
US RMBS Surveillance Methodology" published in July 2011.
US EDUCATION: Fitch Affirms 'Bsf' Ratings on Four Note Classes
--------------------------------------------------------------
Fitch Ratings has affirmed the senior and subordinate student loan
notes issued by U.S. Education Loan Trust IV, LLC -- March 1, 2006
Indenture of Trust at 'AAAsf' and 'Bsf.' The Rating Outlook is
Stable.
Fitch used its 'Global Structured Finance Rating Criteria,' 'U.S.
FFELP Student Loan ABS Rating Criteria', and 'Rating U.S. Federal
Family Education Loan Program Student Loan ABS' to review the
ratings.
Fitch affirms the ratings on the senior and subordinate notes
based on
the sufficient level of credit enhancement to cover the applicable
risk factor stresses. Credit enhancement for the senior and
subordinate notes consists of overcollateralization and projected
minimum excess spread, while the senior notes also benefit from
subordination provided by the class B notes.
Fitch has taken the following rating actions:
U.S. Education Loan Trust IV, LLC - March 1, 2006 Indenture of
Trust:
-- Class 2006-1 A-2 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-1 A-3 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-1 A-4 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-1 A-5 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-1 A-6 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-1 A-7 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-1 A-8 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-2 A-1 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-2 A-2 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-2 A-3 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-2 A-4 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-2 A-5 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-2 A-6 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-2 A-7 affirmed at 'AAAsf', Outlook Stable;
-- Class 2007-1 A-2 affirmed at 'AAAsf', Outlook Stable;
-- Class 2007-1 A-3 affirmed at 'AAAsf', Outlook Stable;
-- Class 2007-1 A-4 affirmed at 'AAAsf', Outlook Stable;
-- Class 2006-1 B-1 affirmed at 'Bsf', Outlook Stable;
-- Class 2006-1 B-2 affirmed at 'Bsf', Outlook Stable;
-- Class 2006-2 B-1 affirmed at 'Bsf', Outlook Stable;
-- Class 2007-1 B-1 affirmed at 'Bsf', Outlook Stable.
VENTURA V: Moody's Upgrades Ratings of Class C Notes to 'Ba3'
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Venture V CDO Limited:
US$27,500,000 Class A-2 Floating Rate Notes Due 2018, Upgraded to
Aa3 (sf); previously on June 22, 2011 A1 (sf) Placed Under Review
for Possible Upgrade;
US$20,500,000 Class B Deferrable Floating Rate Notes Due 2018,
Upgraded to A3 (sf); previously on June 22, 2011 Baa3 (sf) Placed
Under Review for Possible Upgrade;
US$13,500,000 Class C Floating Rate Notes Due 2018, Upgraded to
Ba1 (sf); previously on June 22, 2011 Ba3 (sf) Placed Under Review
for Possible Upgrade;
US$11,500,000 Class D Floating Rate Notes Due 2018, Upgraded to B1
(sf); previously on June 22, 2011 Caa3 (sf) Placed Under Review
for Possible Upgrade;
US$25,000,000 Class J Blended Securities Due 2018 (current
rated balance of $13,879,933), Upgraded to A2 (sf); previously on
June 22, 2011 Baa1 (sf) Placed Under Review for Possible Upgrade;
US$5,000,000 Class K Blended Securities Due 2018 (current
rated balance of $1,006,945), Upgraded to Ba2 (sf); previously
on June 22, 2011 Caa1 (sf) Placed Under Review for Possible
Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of an increase in the
transaction's overcollateralization ratios since the rating
action in September 2009. Based on the latest trustee report
dated August 5, 2011, the Class A, Class B, Class C, and Class
D overcollateralization ratios are reported at 118.27%, 111.20%,
106.99%, and 103.64%, respectively, versus August 2009 levels of
115.24%, 108.35%, 104.25%, and 100.99%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $379.6 million,
defaulted par of $10.6 million, a weighted average default
probability of 20.11% (implying a WARF of 2696), a weighted
average recovery rate upon default of 47.93%, and a diversity
score of 93. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Venture V CDO Limited, issued on December 22, 2005, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
A secondary methodology used was "Using the Structured Note
Methodology to Rate CDO Combo-Notes" published in February 2004.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread/coupon levels higher than the
covenant levels due to the large difference between the
reported and covenant levels.
VENTURE VII: Moody's Raises Rating of Class D Notes to 'Ba1'
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Venture VII CDO Limited:
US$53,125,000 Class A-1B Senior Secured Floating Rate Notes due
2022, Upgraded to Aa1 (sf); previously on June 22, 2011 Aa3 (sf)
Placed Under Review for Possible Upgrade;
US$49,775,000 Class A-2 Senior Secured Floating Rate Notes due
2022, Upgraded to Aa1 (sf); previously on June 22, 2011 Aa2 (sf)
Placed Under Review for Possible Upgrade;
US$31,250,000 Class B Senior Secured Floating Rate Notes due 2022,
Upgraded to A1 (sf); previously on June 22, 2011 A2 (sf) Placed
Under Review for Possible Upgrade;
US$32,350,000 Class C Secured Deferrable Floating Rate Notes due
2022, Upgraded to Baa2 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$23,700,000 Class D Secured Deferrable Floating Rate Notes due
2022, Upgraded to Ba1 (sf); previously on June 22, 2011 Ba3 (sf)
Placed Under Review for Possible Upgrade;
US$11,400,000 Class E Secured Deferrable Floating Rate Notes due
2022, Upgraded to Ba2 (sf); previously on June 22, 2011 B3 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in August
2009. Based on the July 2011 trustee report, the weighted average
rating factor, excluding the effect of the rating factor modifier,
is currently 2634 compared to 2837 in July 2009. In addition, the
Class A/B, Class C, Class D and Class E overcollateralization
ratios are reported at 117.61%, 111.71%, 107.75% and 105.94%,
respectively, versus June 2009 levels of 112.88%, 107.22%, 103.43%
and 101.69%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $716 million,
defaulted par of $13.6 million, a weighted average default
probability of 23.89% (implying a WARF of 2953), a weighted
average recovery rate upon default of 48.63%, and a diversity
score of 98. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Venture VII CDO Limited, issued in December 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
VERITAS CLO: Moody's Upgrades Rating of Class D Notes to 'Ba1'
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Veritas CLO II, Ltd.:
US$196,600,000 Class A-1T First Priority Senior Secured Floating
Rate Notes Due 2021 (current outstanding balance of $187,576,086),
Upgraded to Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed
Under Review for Possible Upgrade;
US$30,000,000 Class A-1R First Priority Senior Secured Revolving
Notes Due 2021 (current outstanding balance of $28,623,024),
Upgraded to Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed
Under Review for Possible Upgrade;
US$25,200,000 Class A-2 Second Priority Senior Secured Floating
Rate Notes Due July 11, 2021, Upgraded to Aaa (sf); previously on
June 22, 2011 A1 (sf) Placed Under Review for Possible Upgrade;
US$15,200,000 Class B Third Priority Senior Secured Floating Rate
Notes Due July 11, 2021, Upgraded to Aa2 (sf); previously on
June 22, 2011 A3 (sf) Placed Under Review for Possible Upgrade;
US$20,600,000 Class C Fourth Priority Mezzanine Secured Floating
Rate Deferrable Interest Notes Due July 11, 2021, Upgraded to A3
(sf); previously on June 22, 2011 Ba1 (sf) Placed Under Review for
Possible Upgrade;
US$10,500,000 Class D Fifth Priority Mezzanine Secured Floating
Rate Deferrable Interest Notes Due July 11, 2021, Upgraded to Ba1
(sf); previously on June 22, 2011 Ba3 (sf) Placed Under Review for
Possible Upgrade; and
US$9,500,000 Class E Sixth Priority Mezzanine Secured Floating
Rate Deferrable Interest Notes Due July 11, 2021, Upgraded to Ba3
(sf); previously on June 22, 2011 Caa3 (sf) Placed Under Review
for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $311.3 million,
defaulted par of $3.3 million, a weighted average default
probability of 19.2% (implying a WARF of 2682), a weighted average
recovery rate upon default of 49.3%, and a diversity score of 68.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Veritas CLO II, Ltd., issued in June 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
A source of additional performance uncertainties is collateral
quality metrics: The deal is allowed to reinvest and the manager
has the ability to deteriorate the collateral quality metrics'
existing cushions against the covenant levels. Moody's analyzed
the impact of assuming the worse of reported and covenanted values
for weighted average rating factor, weighted average spread, and
diversity score. However, as part of the base case, Moody's
considered spread and diversity levels higher than the covenant
level and weighted average rating factor lower than the covenant
level due to the large difference between the reported and
covenant levels.
WACHOVIA BANK: Fitch Junks Rating on Nine Note Classes
------------------------------------------------------
Fitch Ratings has downgraded Wachovia Bank Commercial Mortgage
Trust, 2005-C22 commercial mortgage pass-through certificates.
The downgrades are due to greater certainty on the timing of Fitch
expected losses attributed to specially serviced loans. Fitch
modeled losses of 12.05% of the remaining pool. Fitch expects
losses associated with specially serviced loans to deplete classes
G through Q and impair class F. Interest shortfalls are affecting
classes F through Q with cumulative unpaid interest totaling
$9.2 million.
As of the August 2011 distribution date, the pool's aggregate
principal balance has been paid down by approximately 7.1% to
$2.35 billion from $2.53 billion at issuance. Fitch has
designated 25 loans (23.8%) as Fitch Loans of Concern, which
includes 15 specially serviced loans (16.5%).
The largest contributor to modeled losses (6.2%) is secured by the
Westin Casuarina Hotel and Spa, an 826-room full-service hotel
located a quarter of a mile east of the Las Vegas Strip. The
property was constructed in 1977 and underwent an extensive
repositioning and a $90 million renovation in 2002, when it was
reopened under the Westin flag. The loan was transferred to
special servicing in March 2010 for imminent default due to
declining property performance as a result of decreased tourism
and travel in the Las Vegas market. The special servicer is
pursuing foreclosure.
The second largest contributor to modeled losses (1.9%) is secured
by an 87% leased 508,976 square foot (sf) regional mall located in
Lake Wales, FL. The loan was transferred to special servicing in
April 2009 due the bankruptcy of the borrower, General Growth
Properties (GGP). As part of its restructuring, GGP has
identified this property as one that may they did not wish to
retain and have transferred title of the property to the special
servicer via deed in lieu of foreclosure. The asset became real
estate owned (REO) on Nov. 1, 2010 and the special servicer
continues to work to stabilize the asset.
The third largest contributor to modeled losses (1.8%) is secured
by a 207,809 sf class A office located within San Francisco's
South Of Market District. Master servicer reported year-end (YE)
2010 debt service coverage ratio (DSCR) was 2.79 times (X) and
occupancy as of June 30, 2011 was 98.7%. However 80.4% of the
property leases are scheduled to expire within the next 12 months
and it has been confirmed that six tenants (occupying 67.5% of the
property), including the two largest tenants, have vacated or will
vacate. The losses from the rental income will significantly
reduce the cash flow of the property. The borrower is actively
marketing the vacant space and the loan remains current.
Fitch has downgraded the following classes and revised the
Outlooks and Recovery Ratings (RR) as indicated:
-- $152 million class A-J to 'BBsf' from 'BBB-sf'; Outlook to
Stable from Negative;
-- $31.7 million class C to 'Bsf' from 'BBsf'; Outlook Negative;
-- $25.3 million class D to 'CCCsf/RR1' from 'Bsf';
-- $47.5 million class E to 'CCCsf/RR2' from 'B-';
-- $31.7 million class F to 'CCsf/RR2' from 'CCCsf/RR1';
-- $28.5 million class G to 'CCsf/RR6' from 'CCCsf/RR3';
-- $28.5 million class H to 'Csf/RR6' from 'CCsf/RR6';
-- $34.8 million class J to 'Csf/RR6' from 'CCsf/RR6';
-- $15.8 million class K to 'Csf/RR6' from 'CCsf/RR6';
-- $12.7 million class L to 'Csf/RR6' from 'CCsf/RR6';
-- $12.7 million class M to 'Csf/RR6' from 'CC/RR6'.
Fitch has affirmed the following classes as indicated:
-- $14 million class A-2 at 'AAAsf'; Outlook Stable;
-- $164.6 million class A-3 at 'AAAsf'; Outlook Stable;
-- $132.3 million class A-PB at 'AAAsf'; Outlook Stable;
-- $941 million class A-4 at 'AAAsf'; Outlook Stable;
-- $64.1 million class A-1A at 'AAAsf'; Outlook Stable.
-- $253.4 million class A-M at 'AAAsf'; Outlook Stable;
-- $22.2 million class B at 'BBsf'; Outlook Negative;
-- $6.3 million class N at 'Csf/RR6';
-- $6.3 million class O at 'Csf/RR6';
-- $9.5 million class P at 'Csf/RR6'.
The $18.7 million class Q is not rated by Fitch. Class A-1 has
paid in full. Fitch has withdrawn the ratings on the interest-
only class IO.
WACHOVIA BANK: Modeled Losses Cue Fitch to Downgrade Ratings
------------------------------------------------------------
Fitch Ratings downgrades four classes of Wachovia Bank Commercial
Mortgage Trust, series 2005-C17 commercial mortgage pass-through
certificates.
The downgrades are the result of Fitch modeled losses of 4.56% of
the outstanding pool, of which 2.14% are from specially serviced
loans.
As of the August 2011 distribution date, the pool's certificate
balance has paid down 15.3% to $2.3 billion from $2.35 billion.
Fitch has identified 50 (22.4%) Fitch Loans of Concern, of which
eight (8.8%) are specially serviced.
The largest contributor to Fitch expected losses is a loan (0.92%)
collateralized by a 175,209 square foot (sf) suburban office
building located in Phoenix, AZ. The loan went into maturity
default in February 2009 and was subsequently foreclosed upon in
September 2010. CBRE was engaged to manage and market the
property for sale. The most recent reported occupancy is 32% as
July 2011.
The second largest contributor to Fitch expected losses is a loan
(1.2%) collateralized by a 169,334 (sf) anchored retail center
located in Las Vegas, NV. The largest tenant is Food 4 Less
(35.8%), a grocery chain owned by Kroger. The loan was
transferred to special servicer in March 2010 due to monetary
default and the special servicer took title to the property via
foreclosure in January 2011. The special servicer is working to
stabilize the property and has renewed several leases and is
marketing the vacant space.
The third largest contributor to Fitch expected losses is a loan
(.57%) collateralized by a 361,152 (sf) anchored retail center
located in Marshalltown, IA. Anchor tenants include Menards
(21.4%), JC Penny (13%) and Younkers (10.7%). The loan was
transferred to special servicer in August 2010 due to monetary
default. Special servicer is currently pursuing foreclosure and,
as of June 2011, reports the occupancy rate is 78%.
Fitch downgrades the following classes and revises Outlooks as
indicated:
-- $30.6 million class G to 'Bsf' from 'BBsf'; Outlook to Stable
from Negative;
-- $37.4 million class H to 'CCCsf/RR1' from 'B-sf';
-- $13.6 million class L to 'CCsf/RR1' from 'CCCsf/RR1';
-- $6.8 million class M to 'Csf/RR2' from 'CCsf/RR4'.
Fitch affirms the following classes and revises Outlooks as
indicated:
-- $375.2 million class A-1A at 'AAAsf'; Outlook Stable;
-- $288.7 million class A-2 at 'AAAsf'; Outlook Stable;
-- $82 million class A-3 at 'AAAsf'; Outlook Stable;
-- $224.3 million class A-PB at 'AAAsf'; Outlook Stable;
-- $1 billion class A-4 at 'AAAsf'; Outlook Stable;
-- $187.2 million class A-J at 'AAAsf'; Outlook Stable;
-- $74.8 million class B at 'Asf'; Outlook Stable;
-- $23.8 million class C at 'Asf'; Outlook Stable
-- $47.6 million class D at 'BBBsf'; Outlook Stable;
-- $27.2 million class E at 'BBsf'; Outlook Stable;
-- $27.2 million class F at 'BBsf'; Outlook to Stable from
Negative;
-- $6.8 million class J at 'CCCsf/RR1';
-- $10.2 million class K at 'CCCsf/RR1';
-- $6.8 million class N at 'Csf/RR6';
-- $6.8 million class O at 'Csf/RR6'.
Fitch does not rate class P.
Class A-1 has paid in full.
WAMU COMMERCIAL: S&P Lowers Rating on Class O Certificates to 'D'
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on the class
O commercial mortgage pass-through certificates from WaMu
Commercial Mortgage Securities Trust 2007-SL3, a U.S. commercial
mortgage-backed securities (CMBS) transaction, to 'D (sf)' from
'CCC- (sf)'.
The downgrade to 'D (sf)' follows principal losses that were
detailed in the Aug. 23, 2011, trustee remittance report. "We
attribute the aggregate principal losses totaling $4.1 million
primarily to three assets with an aggregate beginning scheduled
principal balance of $10.9 million that were liquidated in
August at a weighted average loss severity of 38.1%. Consequently,
the class O certificates reported a 30.2% loss to the original
principal balance of $3.2 million. In addition, class P (not
rated) experienced a 100% loss to its beginning principal balance
of $3.2 million," S&P added.
WASATCH CLO: Moody's Upgrades Ratings of 8 Classes of CLO Notes
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Wasatch CLO Ltd.:
US$60,000,000 Class A-1a Senior Secured Floating Rate Notes due
2022 (current outstanding balance of $59,235,976), Upgraded to Aa1
(sf); previously on June 22, 2011 A1 (sf) Placed Under Review for
Possible Upgrade;
US$429,000,000 Class A-1b Senior Secured Floating Rate Notes due
2022 (current outstanding balance of $423,537,229), Upgraded to
Aa1 (sf); previously on June 22, 2011 A1 (sf) Placed Under Review
for Possible Upgrade;
US$24,500,000 Class A-2 Senior Secured Floating Rate Notes due
2022, Upgraded to A1 (sf); previously on June 22, 2011 Baa1 (sf)
Placed Under Review for Possible Upgrade;
US$42,500,000 Class B Senior Secured Deferrable Floating Rate
Notes due 2022, Upgraded to Baa1 (sf); previously on June 22, 2011
Ba2 (sf) Placed Under Review for Possible Upgrade;
US$29,000,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2022, Upgraded to Ba2 (sf); previously on June 22, 2011
B3 (sf) Placed Under Review for Possible Upgrade;
US$13,000,000 Class D Secured Deferrable Floating Rate Notes due
2022, Upgraded to Ba3 (sf); previously on June 22, 2011 Caa3 (sf)
Placed Under Review for Possible Upgrade;
US$7,400,000 Type I Composite Notes due 2022 (current rated
balance of $4,055,447), Upgraded to Baa3 (sf); previously on
June 22, 2011 B1 (sf) Placed Under Review for Possible Upgrade;
US$10,000,000 Type III Composite Notes due 2022 (current rated
balance of $4,567,096), Upgraded to Baa3 (sf); previously on
June 22, 2011 B1 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $622 million,
defaulted par of $9 million, a weighted average default
probability of 24.17% (implying a WARF of 2891), a weighted
average recovery rate upon default of 48.10%, and a diversity
score of 70. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Wasatch CLO Ltd., issued in November 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Another methodology used in this rating was "Using the Structured
Note Methodology to Rate CDO Combo-Notes" published in February
2004.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average coupon and diversity score.
However, as part of the base case, Moody's considered a spread
level higher than the covenant level due to the large
difference between the reported and covenant levels.
WHITEHORSE III: Moody's Upgrades Class A-3L Notes Rating to 'Ba1'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Whitehorse III Ltd.:
US$254,000,000 Class A-1L Notes, Upgraded to Aaa (sf); previously
on June 22, 2011 Aa1 (sf) Placed Under Review for Possible
Upgrade;
US$30,000,000 Class A-2L Notes (Current Outstanding Balance of
$18,500,000), Upgraded to Aa2 (sf); previously on June 22, 2011 A2
(sf) Placed Under Review for Possible Upgrade;
US$19,000,000 Class A-3L Notes, Upgraded to A3 (sf); previously on
June 22, 2011 Ba1 (sf) Placed Under Review for Possible Upgrade;
US$12,000,000 Class B-1L Notes, Upgraded to Baa3 (sf); previously
on June 22, 2011 B1 (sf) Placed Under Review for Possible Upgrade;
US$12,000,000 Class B-2L Notes (Current Outstanding Balance of
$10,332,877), Upgraded to Ba2 (sf); previously on June 22, 2011 B3
(sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The actions reflect key
changes to the modeling assumptions, which incorporate (1) a
removal of the temporary 30% default probability macro stress
implemented in February 2009 as well as (2) increased BET
liability stress factors and increased recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $333.5 million,
defaulted par of $3.0 million, a weighted average default
probability of 18.0% (implying a WARF of 2550), a weighted average
recovery rate upon default of 48.8%, and a diversity score of 55.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Whitehorse III Ltd, issued in February 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior, 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation
risk on those assets. Moody's assumes an asset's terminal value
upon liquidation at maturity to be equal to the lower of an
assumed liquidation value (depending on the extent to which the
asset's maturity lags that of the liabilities) and the asset's
current market value.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor and diversity score. However, as part of the base
case, Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
ZAIS INVESTMENT: Moody's Raises Ratings of Class A-1 Notes to Ba1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of two classes
of notes issued by ZAIS Investment Grade Limited II. The notes
affected by the rating action are:
Class A-1 Floating Rate Notes due 2015, Upgraded to Ba1 (sf);
previously on June 24, 2011 Caa2 (sf) Placed Under Review for
Possible Upgrade;
Class A-2 Floating Rate Notes due 2015, Upgraded to Ba1 (sf);
previously on June 24, 2011 Caa2 (sf) Placed Under Review for
Possible Upgrade.
Additionally, Moody's has confirmed the following ratings:
Class B-1 Floating Rate Notes due 2015, Confirmed at Ca (sf);
previously on June 24, 2011 Ca (sf) Placed Under Review for
Possible Upgrade;
Class B-2 Fixed Rate Notes due 2015, Confirmed at Ca (sf);
previously on June 24, 2011 Ca (sf) Placed Under Review for
Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes result
from improvement in the credit quality of the portfolio, which
consists primarily of structured finance securities, as well as
the ongoing delevering of the notes.
Following an announcement by Moody's on June 22nd that nearly all
CLO tranches currently rated Aa1 (sf) and below were placed on
review for possible upgrade ("Moody's places 4,220 tranches from
611 U.S. and 171 European CLO transactions on review for
upgrade"), 98 tranches of U.S. and European Structured Finance
(SF) CDOs with material exposure to CLOs were also placed on
review for possible upgrade ("Moody's places 98 tranches from 19
U.S. and 3 European SF CDO transactions with exposure to CLOs on
review for upgrade"). The rating action on the notes reflects CLO
tranche upgrades that have taken place thus far, as well as a two
notch adjustment for CLO tranches which remain on review for
possible upgrade. According to Moody's, 15.23% of the collateral
has been upgraded since June 22nd.
As of the latest trustee report in July 2011, the Class A
overcollateralization ratio improved to 157.3% versus a July 2009
level of 149.3%. Currently the B OC test is failing resulting in
the diversion of interest proceeds to payment of the principal on
the Class A-1 and A-2 notes.
ZAIS Investment Grade Limited II is a collateralized debt
obligation backed primarily by a portfolio of collateralized loan
obligations (CLO).
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Moody's applied the Monte Carlo simulation framework within
CDOROMv2.8 to model the loss distribution for SF CDOs. Within this
framework, defaults are generated so that they occur with the
frequency indicated by the adjusted default probability pool (the
default probability associated with the current rating multiplied
by the Resecuritization Stress) for each credit in the reference.
Specifically, correlated defaults are simulated using a normal (or
"Gaussian") copula model that applies the asset correlation
framework. Recovery rates for defaulted credits are generated by
applying within the simulation the distributional assumptions,
including correlation between recovery values. Together, the
simulated defaults and recoveries across each of the Monte Carlo
scenarios define the loss distribution for the reference pool.
Once the loss distribution for the collateral has been calculated,
each collateral loss scenario derived through the CDOROM loss
distribution is associated with the interest and principal
received by the rated liability classes via the CDOEdge cash-flow
model . The cash flow model takes into account the following:
collateral cash flows, the transaction covenants, the priority of
payments (waterfall) for interest and principal proceeds received
from portfolio assets, reinvestment assumptions, the timing of
defaults, interest-rate scenarios and foreign exchange risk (if
present). The Expected Loss (EL) for each tranche is the weighted
average of losses to each tranche across all the scenarios, where
the weight is the likelihood of the scenario occurring. Moody's
defines the loss as the shortfall in the present value of cash
flows to the tranche relative to the present value of the promised
cash flows. The present values are calculated using the promised
tranche coupon rate as the discount rate. For floating rate
tranches, the discount rate is based on the promised spread over
Libor and the assumed Libor scenario.
* S&P Lowers Ratings on 11 Classes of Certificates to 'D'
---------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 19
classes of commercial mortgage pass-through certificates from four
U.S. commercial mortgage-backed securities (CMBS) transactions due
to interest shortfalls.
"The downgrades reflect current and potential interest shortfalls.
We lowered our ratings on 11 of these classes to 'D (sf)' because
we expect the accumulated interest shortfalls to remain
outstanding for the foreseeable future. The classes that we
downgraded to 'D (sf)' have had accumulated interest shortfalls
outstanding between two and 12 months," S&P related. The recurring
interest shortfalls for the certificates are primarily due to one
or more of these factors:
Appraisal subordinate entitlement reduction (ASER) amounts in
effect for specially serviced loans;
The lack of servicer advancing for loans where the servicer
has made nonrecoverable advance declarations;
Special servicing fees; and
Interest rate reductions or deferrals resulting from loan
modifications.
Standard & Poor's analysis primarily considered the ASER amounts
based on appraisal reduction amounts (ARAs) calculated using
recent Member of the Appraisal Institute (MAI) appraisals. "We
also considered servicer nonrecoverable advance declarations and
special servicing fees that are likely, in our view, to cause
recurring interest shortfalls," S&P related.
The servicer implements ARAs and resulting ASER amounts in
accordance with each transaction's terms. Typically, these terms
call for the automatic implementation of an ARA equal to 25% of
the stated principal balance of a loan when a loan is 60 days past
due and an appraisal or other valuation is not available within a
specified timeframe. "We primarily considered ASER amounts based
on ARAs calculated from MAI appraisals when deciding which classes
from the affected transactions to downgrade to 'D (sf)' because
ARAs based on a principal balance haircut are highly subject to
change, or even reversal, once the special servicer obtains the
MAI appraisals," S&P related.
Servicer nonrecoverable advance declarations can prompt shortfalls
due to a lack of debt service advancing, the recovery of
previously made advances deemed nonrecoverable, or the failure to
advance trust expenses when nonrecoverable declarations have been
determined. Trust expenses may include, but are not limited to,
property operating expenses, property taxes, insurance payments,
and legal expenses.
"We detail the 19 downgraded classes from the four U.S. CMBS
transactions," S&P stated.
COMM 2004-LNB4
"We lowered our ratings on the class B, C, D, and E certificates
from COMM 2004-LNB4. We lowered our ratings to 'D (sf)' on the
class D and E certificates to reflect accumulated interest
shortfalls outstanding between two and five months, resulting
primarily from ASER amounts related to three ($53.7 million, 6.6%)
of the seven assets ($129.9 million, 15.9%) that are currently
with the special servicer, CWCapital Asset Management LLC
(CWCapital), as well as special servicing fees and nonrecoverable
determinations on three specially serviced assets. We lowered our
ratings on classes B and C due to reduced liquidity support
available to these classes and the potential for these classes to
experience interest shortfalls in the future relating to the
specially serviced assets. Classes B and C have had accumulated
interest shortfalls outstanding for two months. As of the Aug. 15,
2011, trustee remittance report, ARAs totaling $20.4 million were
in effect for three assets and the total reported monthly ASER
amount on these assets was $99,697. The master servicer, Berkadia
Commercial Mortgage LLC (Berkadia), made a nonrecoverability
determination on three other specially serviced assets.
Consequently, Berkadia did not advance interest totaling $239,650
on these three specially serviced assets according to the August
2011 trustee remittance report. The reported monthly interest
shortfalls totaled $373,174 and have affected all of the classes
subordinate to and including class C," according to S&P.
LB Commercial Mortgage Trust 2007-C3
"We lowered our ratings on the class B, C, D, E, F, G, H, and J
certificates from LB Commercial Mortgage Trust 2007-C3. We lowered
our ratings on classes C, D, E, F, G, H, and J to 'D (sf)' to
reflect accumulated interest shortfalls outstanding between seven
and 12 months, resulting primarily from ASER amounts related to 38
($513.5 million, 16.5%) of the 42 ($974.9 million, 31.4%) assets
that are currently with the special servicers, CWCapital, Midland
Loan Services, and LNR Partners LLC, as well as special servicing
fees, interest not advanced ($12,491), and interest rate
modifications ($573,676) on three loans. We lowered the rating on
class B because of reduced liquidity support available to this
class, resulting from the continued interest shortfalls. Class B
has had accumulated interest shortfalls outstanding for one month.
As of the Aug. 17, 2011, trustee remittance report, ARAs totaling
$201.5 million were in effect for 38 assets and the total reported
monthly ASER amount on these assets was $771,054. The reported
monthly interest shortfalls totaled $1,672,399 and have affected
all of the classes subordinate to and including class B," S&P
said.
Nomura Asset Securities Corp. Series 1998-D6
"We lowered our rating on the class B-4 certificate from Nomura
Asset Securities Corp.'s series 1998-D6 to 'D (sf)' to reflect
accumulated interest shortfalls outstanding for seven months,
resulting primarily from nonrecoverability determination totaling
$39,748 on two assets ($6.0 million, 0.6%) that are currently with
the special servicer, CWCapital, as well as special servicing
fees. As of the Aug. 17, 2011, trustee remittance report, the
reported monthly interest shortfalls totaled $106,134 and have
affected all of the classes subordinate to and including class B-
4," S&P said.
Wachovia Bank Commercial Mortgage Trust Series 2003-C9
"We lowered our ratings on the class G, H, J, K, L, and M
certificates from Wachovia Bank Commercial Mortgage Trust's series
2003-C9. We lowered our rating on class M to 'D (sf)' to reflect
accumulated interest shortfalls outstanding for eight months,
resulting primarily from ASER amounts related to one ($3.9
million, 0.5%) of the two ($11.4 million, 1.6%) loans that are
currently with the special servicer, CWCapital, as well as special
servicing fees and interest reduction due to rate modification
($34,664). We downgraded classes G, H, J, K, and L due to reduced
liquidity support available to these classes, resulting from the
continued interest shortfalls. As of the Aug. 17, 2011, trustee
remittance report, an ARA of $1.6 million was in effect for one
loan and the total reported monthly ASER amount on the loan was
$6,872. The reported monthly interest shortfalls totaled $43,970
and have affected all of the classes subordinate to and including
class N," S&P added.
Ratings Lowered
COMM 2004-LNB4
Commercial mortgage pass-through certificates
Credit Reported
Rating enhancement Interest Shortfalls ($)
Class To From (%) Current Accumulated
B CCC+ (sf) BBB- (sf) 12.17 (52,328) 47,864
C CCC- (sf) BB (sf) 10.86 44,180 88,360
D D (sf) B- (sf) 8.05 95,991 191,981
E D (sf) CCC- (sf) 6.74 45,681 160,885
LB Commercial Mortgage Trust 2007-C3
Commercial mortgage pass-through certificates
Credit Reported
Rating enhancement Interest Shortfalls ($)
Class To From (%) Current Accumulated
B CCC (sf) B- (sf) 10.15 92,427 92,427
C D (sf) B- (sf) 9.11 165,471 460,743
D D (sf) B- (sf) 8.19 144,783 995,728
E D (sf) CCC+ (sf) 7.41 124,106 853,521
F D (sf) CCC (sf) 6.50 144,788 995,763
G D (sf) CCC- (sf) 5.20 206,836 1,551,312
H D (sf) CCC- (sf) 4.03 186,153 1,627,898
J D (sf) CCC- (sf) 3.12 144,788 1,706,317
Nomura Asset Securities Corp.
Commercial mortgage pass-through certificates series 1998-D6
Credit Reported
Rating enhancement Interest Shortfalls ($)
Class To From (%) Current Accumulated
B-4 D (sf) CCC- (sf) 1.08 47,074 485,954
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2003-C9
Credit Reported
Rating enhancement Interest Shortfalls ($)
Class To From (%) Current Accumulated
G BB+ (sf) BBB (sf) 6.75 0 0
H B+ (sf) BB+ (sf) 4.57 0 0
J CCC+ (sf) BB (sf) 3.38 0 0
K CCC (sf) BB- (sf) 2.59 0 0
L CCC- (sf) B+ (sf) 1.99 0 0
M D (sf) CCC+ (sf) 1.40 (917) 5,534
* S&P Lowers Ratings on 19 Classes of Certificates to 'D'
---------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 26
classes of commercial mortgage pass-through certificates from four
LB-UBS U.S. commercial mortgage-backed securities
(CMBS) transactions due to interest shortfalls.
The downgrades reflect current and potential interest shortfalls.
"We lowered our ratings on 19 of these classes to 'D (sf)' because
we expect the accumulated interest shortfalls to remain
outstanding for the foreseeable future. All 19 classes that we
downgraded to 'D (sf)' have had accumulated interest shortfalls
outstanding for four or more months. The recurring interest
shortfalls for the respective certificates are primarily due to
appraisal subordinate entitlement reduction (ASER) amounts in
effect for specially serviced assets, and special servicing fees,"
S&P related.
Standard & Poor's analysis primarily considered the ASER amounts
based on appraisal reduction amounts (ARAs) calculated using
recent Member of the Appraisal Institute (MAI) appraisals. "We
also considered special servicing fees that are likely, in our
view, to cause recurring interest shortfalls," S&P stated.
The servicer implements ARAs and resulting ASER amounts in
accordance with each transaction's terms. Typically, these terms
call for the automatic implementation of an ARA equal to 25% of
the stated principal balance of a loan when a loan is 60 days past
due and an appraisal or other valuation is not available within a
specified timeframe. "We primarily considered ASER amounts based
on ARAs calculated from MAI appraisals when deciding which classes
from the affected transactions to downgrade to 'D (sf)' because
ARAs based on a principal balance haircut are highly subject to
change, or even reversal, once the special servicer obtains the
MAI appraisals," S&P related.
"We detail the 26 downgraded classes from the four LB-UBS U.S.
CMBS transactions," S&P said.
LB-UBS Commercial Mortgage Trust 2003-C8
"We lowered our ratings on the class M, N, P, Q, and S
certificates from LB-UBS Commercial Mortgage Trust 2003-C8. We
lowered our ratings to 'D (sf)' on the class P, Q, and S
certificates to reflect accumulated interest shortfalls
outstanding for six months, resulting from ASER amounts related to
the five assets ($47.4 million, 5.7%) that are currently with the
special servicer, LNR Partners LLC (LNR), as well as special
servicing fees. We lowered our ratings on classes M and N due to
reduced liquidity support available to these classes and the
potential for these classes to experience interest shortfalls in
the future relating to the specially serviced assets. As of the
Aug. 17, 2011, trustee remittance report, ARAs totaling $16.7
million were in effect for the five assets, and the total reported
monthly ASER amount on these assets was $138,926. The reported
monthly interest shortfalls, including an ASER recovery of $70,065
due to the prepayment of three assets this period, totaled
$79,023, and have affected all of the classes subordinate to and
including class N," S&P stated.
LB-UBS Commercial Mortgage Trust 2004-C1
"We lowered our ratings on the class G, H, J, K, L, M, N, and P
certificates from LB-UBS Commercial Mortgage Trust 2004-C1. We
lowered our ratings on classes J, K, L, M, N, and P to 'D (sf)' to
reflect accumulated interest shortfalls outstanding between four
and 10 months, resulting from ASER amounts related to the four
($67.5 million, 6.7%) assets that are currently with the special
servicer, CWCapital Asset Management LLC, as well as special
servicing fees. We lowered our ratings on classes G and H due to
reduced liquidity support available to these classes and the
potential for these classes to experience interest shortfalls in
the future relating to the specially serviced assets. As of the
Aug. 17, 2011, trustee remittance report, ARAs totaling $38.5
million were in effect for the four assets and the total reported
monthly ASER amount on these assets was $212,489. The reported
monthly interest shortfalls totaled $226,715 and have affected all
of the classes subordinate to and including class J," S&P related.
LB-UBS Commercial Mortgage Trust 2004-C2
"We lowered our ratings on the class H, J, K, L, M, N, P, and Q
certificates from LB-UBS Commercial Mortgage Trust 2004-C2. We
lowered our ratings on classes K, L, M, N, P, and Q to 'D (sf)' to
reflect accumulated interest shortfalls outstanding for seven
months, resulting from ASER amounts related to five ($35.2
million, 4.6%) of the nine ($53.1 million, 6.9%) assets that
are currently with the special servicer, LNR, as well as special
servicing fees. We lowered our ratings on classes H and J due to
reduced liquidity support available to these classes and the
potential for these classes to experience interest shortfalls in
the future relating to the specially serviced assets. As of the
Aug. 17, 2011, trustee remittance report, ARAs totaling $13.6
million were in effect for five assets and the total reported
monthly ASER amount on these assets was $57,389. The reported
monthly interest shortfalls totaled $68,735 and have affected all
of the classes subordinate to and including class L," S&P said.
LB-UBS Commercial Mortgage Trust 2007-C7
"We lowered our ratings on the class E, F, G, H, and J
certificates from LB-UBS Commercial Mortgage Trust 2007-C7. We
lowered our ratings on classes F, G, H and J to 'D (sf)' to
reflect accumulated interest shortfalls outstanding between seven
and 11 months, resulting from ASER amounts related to eight
($531.6 million, 17.0%) of the nine ($648.3 million, 20.7%) assets
that are currently with the special servicer, LNR, as well as
special servicing fees. We lowered our rating on class E due to
reduced liquidity support available to this class and the
potential for this class to experience interest shortfalls in the
future relating to the specially serviced assets (the class has
accumulated interest shortfalls outstanding for four months). As
of the Aug. 17, 2011, trustee remittance report, ARAs totaling
$174.6 million were in effect for eight assets and the total
reported monthly ASER amount on these assets was $988,752. The
reported monthly interest shortfalls, which reflect an ASER
recovery of $148,494 on the liquidation of a specially serviced
asset from this period, totaled $942,550 and have affected all of
the classes subordinate to and including class F," S&P noted.
Ratings Lowered
LB-UBS Commercial Mortgage Trust 2003-C8
Commercial mortgage pass-through certificates
Credit Reported
Rating enhancement Interest shortfalls ($)
Class To From (%) Current Accumulated
M B+ (sf) BB (sf) 3.38 (31,461) 0
N CCC+ (sf) BB- (sf) 2.75 15,490 94,710
P D (sf) B+ (sf) 1.91 31,456 157,702
Q D (sf) B (sf) 1.49 15,733 94,395
S D (sf) CCC- (sf) 1.07 15,728 94,368
LB-UBS Commercial Mortgage Trust 2004-C1
Commercial mortgage pass-through certificates
Credit Reported
Rating enhancement Interest shortfalls ($)
Class To From (%) Current Accumulated
G BB+ (sf) BBB (sf) 8.14 0 0
H CCC+ (sf) BB (sf) 6.21 0 0
J D (sf) B (sf) 4.80 17,284 42,773
K D (sf) CCC (sf) 3.21 76,244 299,870
L D (sf) CCC- (sf) 2.51 29,182 116,730
M D (sf) CCC- (sf) 1.98 21,885 94,862
N D (sf) CCC- (sf) 1.63 14,591 100,543
P D (sf) CCC- (sf) 0.93 29,182 291,824
LB-UBS Commercial Mortgage Trust 2004-C2
Commercial mortgage pass-through certificates
Credit Reported
Rating enhancement Interest shortfalls ($)
Class To From (%) Current Accumulated
H BB (sf) BBB (sf) 5.69 0 0
J B- (sf) BB (sf) 4.29 0 0
K D (sf) B (sf) 2.70 (13,333) 131,166
L D (sf) CCC (sf) 2.10 18,192 127,344
M D (sf) CCC- (sf) 1.50 18,196 127,371
N D (sf) CCC- (sf) 1.10 12,132 84,923
P D (sf) CCC- (sf) 0.70 12,128 84,896
Q D (sf) CCC- (sf) 0.31 12,132 84,923
LB-UBS Commercial Mortgage Trust 2007-C7
Commercial mortgage pass-through certificates
Credit Reported
Rating enhancement Interest shortfalls ($)
Class To From (%) Current Accumulated
E CCC (sf) B (sf) 6.74 (73,493) 145,044
F D (sf) B (sf) 6.23 85,341 584,926
G D (sf) CCC+ (sf) 5.22 170,683 1,172,741
H D (sf) CCC- (sf) 4.33 149,351 1,403,878
J D (sf) CCC- (sf) 3.57 128,015 1,379,213
* S&P Lowers Ratings on Three Classes of Certificates to 'D'
------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings to 'D (sf)'
on three classes of mortgage pass-through certificates from three
U.S. residential mortgage-backed securities (RMBS) transactions
issued between 2004 and 2006. "We removed one of these ratings
from CreditWatch with negative implications. In addition, we
placed our ratings on eight additional classes from two of the
transactions on CreditWatch negative," S&P related.
"The lowered ratings reflect our assessment of the impact that
principal write-downs had on the affected classes during recent
remittance periods. Prior to the rating actions, these classes had
'B (sf)', 'B- (sf)', or 'CC (sf)' ratings. We placed our ratings
on certain classes on CreditWatch negative if they were within a
loan group that included a class that defaulted from a 'B-' rating
or higher," S&P stated.
All of the defaulted classes were from transactions backed by
first-lien high loan-to-value (LTV), small balance commercial, and
risk transfer loan collateral. A combination of subordination,
excess spread, and overcollateralization provide credit
enhancement for these transactions.
"We expect to resolve the CreditWatch placements after we complete
our review of the related transactions. Standard & Poor's will
continue to monitor its ratings on securities that experience
principal write-downs, and it will adjust its ratings as it
considers appropriate in accordance with its criteria," S&P
related.
Ratings Lowered
Bayview Commercial Asset Trust 2004-2
Series 2004-2
Rating
Class CUSIP To From
B-2 07324SAV4 D (sf) B (sf)/Watch Neg
RAMP Series 2005-RZ3 Trust
Series 2005-RZ3
Rating
Class CUSIP To From
M-6 76112BA75 D (sf) B- (sf)
SMART HOME Reinsurance 2006-1 Ltd.
Series 2006-1
Rating
Class CUSIP To From
M-7 83170GAL8 D (sf) CC (sf)
Ratings Placed On CreditWatch
Bayview Commercial Asset Trust 2004-2
Series 2004-2
Rating
Class CUSIP To From
IO 07324SAQ5 AAA (sf)/Watch Neg AAA (sf)
RAMP Series 2005-RZ3 Trust
Series 2005-RZ3
Rating
Class CUSIP To From
A-2 76112BZY9 AAA (sf)/Watch Neg AAA (sf)
A-3 76112BZZ6 AAA (sf)/Watch Neg AAA (sf)
M-1 76112BA26 AA+ (sf)/Watch Neg AA+ (sf)
M-2 76112BA34 AA+ (sf)/Watch Neg AA+ (sf)
M-3 76112BA42 BBB (sf)/Watch Neg BBB (sf)
M-4 76112BA59 BB (sf)/Watch Neg BB (sf)
M-5 76112BA67 BB- (sf)/Watch Neg BB- (sf)
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers"
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com/
On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
The Sunday TCR delivers securitization rating news from the week
then-ending.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors" Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland,
USA. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine
Tumanda, Howard C. Tolentino, Joseph Medel C. Martirez, Denise
Marie Varquez, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R.
Villacampa, Sheryl Joy P. Olano, Carlo Fernandez, Christopher G.
Patalinghug, and Peter A. Chapman, Editors.
Copyright 2011. All rights reserved. ISSN: 1520-9474.
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*** End of Transmission ***