/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/120916.mbx 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 16, 2012, Vol. 16, No. 258 Headlines AAMES MORTGAGE: Moody's Lifts Rating on One RMBS Tranche to 'Caa3' ABCLO 2007-1: S&P Hikes Rating on Class D Notes to 'B+'; Off Watch AIRCRAFT FINANCE: S&P Lowers Rating on Class A-1 Notes to 'CCC' ATRIUM IV: S&P Raises Ratings on 2 Note Classes to 'BB' AVALON CAPITAL 3: S&P Affirms 'BB+' Rating on Class D Def Notes BABSON CLO 2012-I: S&P Affirms 'BB' Rating on Class D Notes BAMLL COMMERCIAL: Moody's Assigns (P)Ba3 Ratings to 2 Cert Classes BEAR STEARNS 2005-AQ2: Moody's Lifts Rating on 1 Tranche to 'Caa3' BEAR STEARNS 2007-TOP28: Expected Losses Cue Fitch to Cut Ratings BRAZOS STUDENT: Fitch Holds Rating on S. B-1 Debentures at 'BBsf' CAPLEASE CDO 205-1: Moody's Affirms 'Caa1' Rating on Class E Notes CHASE MORTGAGE 2005-S1: Moody's Cuts 1 RMBS Tranche Rating to 'C' CIFC FUNDING 206-1: Moody's Lifts Rating on Cl. B-2L Notes to Ba2 CPS AUTO 2012-C: Moody's Assigns '(P)B1' Rating to Class E Notes CPS AUTO 2012-C: S&P Rates $5.8-Mil. Class E Fixed Notes 'B+' CUMBERLAND II: S&P Raises Rating on Class C Notes From 'BB+' DORAL CLO II: S&P Rates $21 Million Class D Deferrable Notes 'BB' ENCORE CREDIT: Moody's Lifts Rating on One RMBS Tranche to 'Caa3' EXETER AUTOMOBILE 2012-2: S&P Gives 'BB' Rating on Class D Notes FAIRWAY LOAN: Moody's Raises Rating on Class B-2L Notes to 'Ba2' FRASER SULLIVAN VII: S&P Affirms 'BB' Rating on Class D Notes FREMONT HOME: Moody's Confirms 'Ca' Rating on One RMBS Tranche GSAA HOME 2007-H1: Moody's Cuts Rating on 2 RMBS Tranches to 'Ca' HEWETT'S ISLAND II: S&P Raises Rating on Class C Notes From 'BB+' HIGHBRIDGE LOAN 2012-1: S&P Rates Class E Deferrable Notes 'B' ING IM 2012-1: S&P Affirms 'B' Rating on Class E Deferrable Notes ITIGROUP COMMERCIAL: Moody's Rates Class F Certificates '(P)B2' JASPER CLO: Moody's Raises Rating on Class 1 Notes From 'Ba1' LAND O'LAKES: Moody's Reviews Ba1 Securities Rating for Downgrade LANDMARK VI: S&P Raises Rating on Class E Notes to 'B'; Off Watch LIBERTY CLO: Moody's Raises Rating on Class C Notes to 'B2' MAGNETITE VI: S&P Rates $18 Million Class E Deferrable Notes 'BB' MAREA CLO: Moody's Assigns '(P)Ba3' Rating to $18MM Class E Notes MAREA CLO: S&P Rates $18-Mil. Class E Deferrable Notes 'BB' MARQUETTE PARK: S&P Affirms 'B+' Rating on Class D Notes MORGAN STANLEY 2007-HE3: Moody's Cuts Rating on A-2a Tranche to Ca MORGAN STANLEY 2007-HQ13: Fitch Affirms 'D' Rating on $2.9MM Notes NELNET STUDENT: Moody's Cuts Rating on Sub. Note Classes to 'Ba2' NEWCASTLE IX1: Moody's Raises Rating on Class H Notes to 'Caa2' NUCO2 FUNDING: Fitch Affirms 'BB' Rating on $75 Million Notes OWNIT MORTGAGE 2006-C5: Moody's Cuts 1 RMBS Tranche Rating to Ca PARK PLACE: Moody's Raises Ratings on Two Tranches to 'Caa3' PHH MORTGAGE 28-CIM1: Moody's Cuts Rating on One Tranche to 'Caa2' SECURITIZED ASSET: Moody's Cuts Rating on Two Tranches to 'Ca' SHACKLETON I: S&P Rates $20-Mil. Class E Deferrable Notes 'BB' * Moody's Says Canadian High-Yield Bonds Offer Better Protection * S&P Withdraws Ratings on 43 Classes From 31 CMBS Transactions * S&P Keeps 'D' Ratings on 93 Classes From Green Tree ABS Deals * S&P Keeps 'D' Ratings on 46 Classes From 24 Oakwood ABS Deals ********* AAMES MORTGAGE: Moody's Lifts Rating on One RMBS Tranche to 'Caa3' ------------------------------------------------------------------ Moody's Investors Service has upgraded the ratings of four tranches and confirmed the rating of one tranche from two deals issued by Aames trusts. The collateral backing the transactions are subprime residential mortgages. Complete rating actions are as follows: Issuer: Aames Mortgage Investment Trust 2005-2 Cl. M3, Upgraded to Ba1 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade Cl. M4, Upgraded to Caa2 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Issuer: Aames Mortgage Investment Trust 2005-4 Cl. M1, Confirmed at A3 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Upgrade Cl. M2, Upgraded to B1 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Upgrade Cl. M3, Upgraded to Caa3 (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades in the rating action are a result of improving performance and/or structural features resulting in lower expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R)(SFW), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297213 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 ABCLO 2007-1: S&P Hikes Rating on Class D Notes to 'B+'; Off Watch ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class A-1b, A-2, B, C, and D notes from ABCLO 2007-1 Ltd., a U.S. collateralized loan obligation (CLO) managed by AllianceBernstein L.P. "Simultaneously, we affirmed our rating on the class A-1a notes, and we removed our ratings on all classes of notes from CreditWatch, where we placed them with positive implications on June 18, 2012," S&P said. "The upgrades reflect improving credit support, primarily due to a marginal increase in collateral available to support the rated notes, and an improvement in the credit quality of the underlying assets since our February 2011 rating actions. The rating affirmation reflects sufficient credit enhancement at the current rating level," S&P said. "According to the Aug. 6, 2012, trustee report, the transaction held zero defaulted assets, down from $1.40 million noted in the Jan. 7, 2011, trustee report, which we used for our February 2011 rating actions," S&P said. "Similarly, the amount of 'CCC' rated collateral held in the transaction's underlying portfolio declined during this period. According to the August 2012 trustee report, the transaction held $11.68 million in 'CCC' rated collateral, down from $14.09 million noted in the January 2011 trustee report," S&P said. "Also, the collateral balance--designated by a combination of principal proceeds and total par value of the collateral pool-- backing the rated liabilities has increased $4.11 million since January 2011," S&P said. "Additional improvements in the transaction over the same time period include an increase in the class A, B, C, and D overcollateralization (O/C) ratio tests and a 0.44% increase in the weighted average spread," S&P said. "Standard & Poor's notes that the transaction is currently passing its diversion test -- which is the class D O/C ratio measured at a higher level (than the class D O/C test) in the interest section of the waterfall. The transaction is structured such that if it fails this test, the lesser of 60.00% of the available interest proceeds and the amount necessary to cure the test either will be added to the principal collection account or used to pay down the class D notes. During the reinvestment period, which is scheduled to end July 2013, the transaction will deposit this amount into the principal collection account as principal proceeds. The collateral manager may reinvest this amount into additional collateral. After the reinvestment period, the transaction will use this amount to pay the principal on the class D notes. The transaction has not failed this test since the February 2011 rating actions. According to the August 2012 trustee report, the diversion test result was 104.84%, compared with a required minimum of 101.90%," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS ABCLO 2007-1 Ltd. Rating Class To From A-1a AA+ (sf) AA+ (sf)/Watch Pos A-1b AA+ (sf) AA (sf)/Watch Pos A-2 AA (sf) AA- (sf)/Watch Pos B A (sf) BBB+ (sf)/Watch Pos C BBB- (sf) BB+ (sf)/Watch Pos D B+ (sf) CCC+ (sf)/Watch Pos AIRCRAFT FINANCE: S&P Lowers Rating on Class A-1 Notes to 'CCC' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on Aircraft Finance Trust's (AFT's) class A-1 notes to 'CCC (sf)' from 'B- (sf)' and affirmed its 'B- (sf)' rating on the class A-2 notes from the same transaction. The notes are collateralized primarily by the lease revenue and sales proceeds from a portfolio of commercial aircraft. "The downgrade on the class A-1 notes reflects our view regarding the reported ongoing value declines in aircraft collateral, the rise in the class A-1 notes' loan-to-value ratio, and the aircraft collateral's reduced ability to generate lease revenue," S&P said. "The affirmation on the class A-2 notes reflects our view regarding the class A-2 notes' probability of full payment based on the effect of the principal allocation mechanism between classes A-1 and A-2," S&P said. "Per the Aug. 15, 2012, payment date report, the collateral backing AFT's notes consisted of 25 aircraft: 11 Boeing 737-300, five Airbus 320-200, four Boeing 737-400, three Boeing 767-300ER, one Airbus 310-300, and one McDonnell Douglas-83. The aircraft are predominantly old vintage, less fuel-efficient models, which have unfavorable leasing prospect. Four planes are off-lease and the remaining 21 planes are leased to 16 lessees in 14 countries. The top five lessees, as measured by the aircraft's appraised value, represent approximately 50% of the collateral. As of the Dec. 31, 2011, appraisal (the lower of mean and medium of appraised half- life base value from three appraisers), the aircraft collateral totaled $312 million," S&P said. "Since our last rating action on April 13, 2010, we had rated both the class A-1 and A-2 notes at the same level ('B-(sf)') because we believed that the class A-2 notes did not have a higher likelihood than the class A-1 notes of being paid in full by the May 15, 2024, legal maturity date. However, our view has changed as the class A-1 and A-2 notes have further amortized down in the last two years," S&P said. "As of the Aug. 15, 2012, payment date, the class A-1 notes had a principal balance of $388.4 million (down from $500 million in April 2010) and the class A-2 notes had a principal balance of $0.79 million (down from $41.7 million in March 2010). Currently, the principal allocation between the class A-1 and A-2 notes is based on the extended pool factors defined in the transaction documents. The targeted principal payment amount on the class A-1 and A-2 notes, is calculated as the difference between the class' outstanding principal balance, the product of the class' extended pool factor, and the class' original principal balance. The extended pool factor is 71.76% for the class A-1 notes and zero for the class A-2 notes in August 2012. The targeted principal payment amount on the class A-2 notes equals its outstanding balance as a result of its zero extended pool factor. If the collection account in a future payment period has available cash amount (from lease rental and sales proceeds) that is equal to or greater than the sum of the class A-1 and A-2 notes' targeted principal payment amounts in this period, the class A-2 notes would be paid in full while the class A-1 notes would still be outstanding. Therefore we believe that the class A-2 notes have a relatively higher probability of being paid in full compared with the class A-1 notes. Given the class A-1 notes' high loan-to- value ratio (124%) and its significant outstanding amount, we view the probability that the class A-1 notes will be re-paid in full is very low," S&P said. The first collection account, which supports the class A-1 and A-2 notes' interest payments, was fully replenished in the amount of $25 million on the Aug. 15, 2012, payment date. Standard & Poor's will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 ' included in this credit rating report are available at: http://standardandpoorsdisclosure-17g7.com RATING LOWERED Aircraft Finance Trust Rating Class To From A-1 CCC (sf) B- (sf) RATING AFFIRMED Aircraft Finance Trust Class Rating A-2 B- (sf) ATRIUM IV: S&P Raises Ratings on 2 Note Classes to 'BB' ------------------------------------------------------- Standard & Poor's Ratings Services raised and removed from CreditWatch with positive implications its ratings on the class A- 1a, A-1b, A-2, A-3, B, C, D-1, and D-2 notes from Atrium IV, a collateralized loan obligation (CLO) transaction managed by CSFB Alternative Capital Inc. "The rating actions follow our performance review of the transaction and primarily reflect $141.6 million in paydowns on the class A-1a, A-1b, and A-2 notes, to 70% of their original balances. The paydowns have led to a significant increase (6% on average) in overcollateralization (O/C) available to support the notes since our February 2011 rating actions, when we raised our ratings on all classes of notes," S&P said. "In addition, the amount of defaulted obligations held in the transaction's underlying portfolio declined during this period. As of July 2012, the transaction held $13.4 million in defaulted assets, down from $16.5 million in defaulted assets in the Dec. 2010, trustee report, which we referenced for our February 2011 rating actions. We also have observed that assets with ratings in the 'CCC' range have decreased to $33.2 million, down from $50.2 million as of December 2010. Another positive factor in our analysis includes the increase of the weighted-average spread as the asset profile changes as a result of amortization," S&P said. "We will continue to review our ratings on the notes and assess whether, in our view, the ratings remain consistent with the credit enhancement available to support them and take rating actions as we deem necessary," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Atrium IV Rating Class To From A-1a AAA (sf) AA+/Watch Pos (sf) A-1b AAA (sf) AA+/Watch Pos (sf) A-2 AAA (sf) AA+/Watch Pos (sf) A-3 AA+ (sf) AA-/Watch Pos (sf) B A+ (sf) BBB+/Watch Pos (sf) C BBB- (sf) BB+/Watch Pos (sf) D-1 BB (sf) B+/Watch Pos (sf) D-2 BB (sf) B+/Watch Pos (sf) AVALON CAPITAL 3: S&P Affirms 'BB+' Rating on Class D Def Notes --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2 Var Fu, B, and C Def notes from Avalon Capital Ltd. 3, a U.S. collateralized loan obligation (CLO) transaction managed by INVESCO Senior Secured Management Inc. "At the same time, we affirmed our rating on the class D Def notes. Concurrently, we removed each of the five ratings from CreditWatch with positive implications, where we placed them on June 18, 2012," S&P said. "The upgrades mainly reflect paydowns to the class A-1 and A-2 Var Fu notes, which are paid pro-rata. Subsequently, the credit enhancement available to support the notes improved since February 2011, when we upgraded all of the notes. Since that time, the transaction has paid down the class A-1 and A-2 Var Fu notes by a total of approximately $177.4 million, reducing their outstanding note balances to 58.70% of their original balances at issuance," S&P said. S&P said the upgrades reflect an improvement in the overcollateralization (O/C) available to support the notes, primarily due to the. The trustee reported the following O/C ratios in the August 2012 monthly report: The class A/B O/C ratio was 131.16%, compared with a reported ratio of 121.86% in January 2011; The class C O/C ratio was 116.56%, compared with a reported ratio of 112.37% in January 2011; and The class D O/C ratio was 106.91%, compared with a reported ratio of 105.69% in January 2011. "We affirmed our rating on the class D Def notes to reflect the credit support available at the current rating level," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Avalon Capital Ltd. 3 Rating Class To From A-1 AAA (sf) AA+ (sf)/Watch Pos A-2 Var Fu AAA (sf) AA+ (sf)/Watch Pos B AA+ (sf) AA (sf)/Watch Pos C Def A- (sf) BBB+ (sf)/Watch Pos D Def BB+ (sf) BB+ (sf)/Watch Pos TRANSACTION INFORMATION Issuer: Avalon Capital Ltd. 3 Coissuer: Avalon Capital LLC 3 Collateral manager: INVESCO Senior Secured Management Inc. Underwriter: Lehman Brothers Inc. Trustee: The Bank of New York Mellon Transaction type: Cash flow CDO BABSON CLO 2012-I: S&P Affirms 'BB' Rating on Class D Notes ----------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Babson CLO Ltd. 2012-I/Babson CLO 2012-I LLC's $321.70 million floating- rate notes following the transaction's effective date as of July 10, 2012. "Most U.S. cash flow collateralized debt obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The 'effective date' for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral, or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request the rating agencies that have issued ratings upon closing to affirm the ratings issued on the closing date after reviewing the effective date portfolio (typically referred to as an 'effective date rating affirmation')," S&P said. "An effective date rating affirmation reflects our opinion that the portfolio collateral purchased by the issuer, as reported to us by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that we assigned on the transaction's closing date. The effective date reports provide a summary of certain information that we used in our analysis and the results of our review based on the information presented to us," S&P said. "We believe the transaction may see some benefit from allowing a window of time after the closing date for the collateral manager to acquire the remaining assets for a CLO transaction. This window of time is typically referred to as a 'ramp-up period.' Because some CLO transactions may acquire most of their assets from the new issue leveraged loan market, the ramp-up period may give collateral managers the flexibility to acquire a more diverse portfolio of assets," S&P said. "For a CLO that has not purchased its full target level of portfolio collateral by the closing date, our ratings on the closing date and prior to our effective date review are generally based on the application of our criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to us by the collateral manager, and may also reflect our assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased," S&P said. "When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee," S&P said. "In our published effective date report, we discuss our analysis of the information provided by the transaction's trustee and collateral manager in support of their request for effective date rating affirmation. In most instances, we intend to publish an effective date report each time we issue an effective date rating affirmation on a publicly rated U.S. cash flow CLO," S&P said. "On an ongoing basis after we issue an effective date rating affirmation, we will periodically review whether, in our view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as we deem necessary," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS AFFIRMED Babson CLO Ltd. 2012-I/Babson CLO 2012-I LLC Class Rating Amount (mil. $) A-1 AAA (sf) 233.50 A-2 AA (sf) 27.20 B (deferrable) A (sf) 31.00 C (deferrable) BBB (sf) 18.00 D (deferrable) BB (sf) 12.00 BAMLL COMMERCIAL: Moody's Assigns (P)Ba3 Ratings to 2 Cert Classes ------------------------------------------------------------------ Moody's Investors Service has assigned provisional ratings to eight classes of CMBS securities, issued by BAMLL Commercial Mortgage Securities Trust 2012-CLRN, Commercial Mortgage Pass- Through Certificates, Series 2012-CLRN. Class A Certificate, Assigned (P)Aaa (sf) Class X-1A* Certificate, Assigned (P)Aaa (sf) Class B Certificate, Assigned (P)Aa2 (sf) Class C Certificate, Assigned (P)A2 (sf) Class D Certificate, Assigned (P)Baa1 (sf) Class E Certificate, Assigned (P)Baa3 (sf) Class F Certificate, Assigned (P)Ba3 (sf) Class X-2A* Certificate, Assigned (P)Ba3 (sf) *Interest Only Classes RATINGS RATIONALE The Certificates are collateralized by a single loan backed by first lien commercial mortgage related to 47 extended stay hotel properties. The ratings are based on the collateral and the structure of the transaction. Moody's rating approach for securities backed by a single loan compares the credit risk inherent in the underlying properties with the credit protection offered by the structure. The structure's credit enhancement is quantified by the maximum deterioration in property value that the securities are able to withstand under various stress scenarios without causing an increase in the expected loss for various rating levels. In assigning single borrower ratings Moody's also considers a range of qualitative issues as well as the transaction's structural and legal aspects. The credit risk of the loan is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by the DSCR, and 2) Moody's assessment of the severity of loss in the event of default, which is largely driven by the LTV of the underlying loan. Moody's Trust LTV Ratio is 75.3%, and has been assigned a bottom dollar credit assessment of Ba3 by Moody's. Moody's Total LTV ratio (inclusive of mezzanine financing) of 112.3% is also considered when analyzing various stress scenarios for the rated debt. The Moody's Trust Stressed DSCR at a 9.25% constant is 1.54X and the Moody's Total Stressed DSCR (inclusive of mezzanine financing) is 1.03X. The loan is solely collateralized by extended-stay hotel properties that are cross-collateralized and cross-defaulted. In assessing the benefit due to "crossing" for this transaction, Moody's examined underlying diversity that resulted from asset pooling. Moody's considered the Herfindahl score of the portfolio by allocated loan amounts, as well as the diversity of property locations. The properties underlying the loan are geographically diverse and benefit from a Herfindahl score of 26. However, significant correlations exist due to pooling within a single property type. Lodging properties are more correlated than properties of other commercial real estate sectors. Moody's expect the underlying property performance to be more correlated than most single borrower, multi-property transactions previously rated by Moody's. The 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 Structured Finance Interest-Only Securities" published in February 2012. Moody's analysis employs the excel-based Large Loan Model v.8.4 which derives credit enhancement level based on an adjusted loan level proceeds derived from Moody's loan level LTV ratio. Major adjustments to determining proceeds include leverage, loan structure, property type, sponsorship and diversity. Moody's analysis also uses the CMBS IO calculator version 1.0 which references the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. The V Score for this transaction is assessed as Medium, the same as the V score assigned to the U.S. Single Borrower 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 believes that strong organizational documents at the SPE level serve as a significant deterrent against SPE bankruptcy filings, although certain provisions within these documents have not been tested in court. 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%, 15%, or 25%, the model-indicated rating for the currently rated Aaa classes would be Aa1, Aa2, or A1, respectively. 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. BEAR STEARNS 2005-AQ2: Moody's Lifts Rating on 1 Tranche to 'Caa3' ------------------------------------------------------------------ Moody's Investors Service has downgraded the ratings on one tranche, upgraded the ratings on two tranches and confirmed the ratings on 14 tranches from nine subprime RMBS transactions issued by Bear Stearns. Issuer: Bear Stearns Asset Backed Securities I Trust 2005-AQ2 Cl. A-3, Confirmed at Ba2 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade Issuer: Bear Stearns Asset Backed Securities I Trust 2005-EC1 Cl. M-1, Upgraded to Ba2 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Upgraded to Caa3 (sf); previously on May 30, 2012 Ca (sf) Placed Under Review for Possible Upgrade Issuer: Bear Stearns Asset Backed Securities I Trust 2005-HE12 Cl. I-A-2, Confirmed at A2 (sf); previously on May 30, 2012 A2 (sf) Placed Under Review for Possible Upgrade Cl. I-A-3, Confirmed at Baa2 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade Cl. M-1, Confirmed at B3 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Confirmed at C (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Issuer: Bear Stearns Asset Backed Securities I Trust 2005-HE3 Cl. M-2, Confirmed at Caa1 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Issuer: Bear Stearns Asset Backed Securities I Trust 2005-HE5 Cl. M-1, Confirmed at A1 (sf); previously on May 30, 2012 A1 (sf) Placed Under Review for Possible Upgrade Issuer: Bear Stearns Asset Backed Securities I Trust 2006-HE1 Cl. I-A-2, Confirmed at A3 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Upgrade Cl. I-A-3, Confirmed at Baa3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. II-A-2, Confirmed at A3 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Upgrade Cl. II-A-3, Confirmed at Baa2 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade Issuer: Bear Stearns Asset Backed Securities I Trust 2006-HE2 Cl. II-A, Confirmed at Ba3 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade Issuer: Bear Stearns Asset Backed Securities I Trust 2007-HE5 Cl. I-A-1, Downgraded to Ba1 (sf); previously on May 21, 2010 Downgraded to Baa2 (sf) Cl. III-A, Confirmed at Caa2 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Issuer: Bear Stearns Structured Products Trust 2007-EMX1 Cl. A-2, Confirmed at Ba3 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade RATINGS RATIONALE The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades/downgrades in the rating action are a result of improving/deteriorating performance and/or structural features resulting in lower/higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current views on loan modifications. As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R) (SFW), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above methodology only applies to pools with at least 40 loans and a pool factor of greater than 5%. Moody's may withdraw its rating when the pool factor drops below 5% and the number of loans in the pool declines to 40 loans or lower unless specific structural features allow for a monitoring of the transaction (such as a credit enhancement floor). The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions . A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297038 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 BEAR STEARNS 2007-TOP28: Expected Losses Cue Fitch to Cut Ratings ----------------------------------------------------------------- Fitch Ratings has downgraded eight classes of Bear Stearns Commercial Mortgage Securities Trust's commercial mortgage pass- through certificates, series 2007-TOP28. The downgrades reflect an increase in Fitch expected losses. Fitch modeled losses of 5.96% of the original pool balance (including losses incurred to date). There are currently eight specially serviced loans (3%). Fitch affirmed the A-M class at 'AAA'. The Negative Outlooks reflect the high Fitch loan-to-values (LTVs) on several of the larger loans in the pool. As of the August 2012 distribution date, the pool's aggregate principal balance has been reduced by 8.53% (including 0.73% of realized losses) to $1.61 billion from $1.76 billion at issuance. No loans are defeased. Interest shortfalls are affecting classes K and P. The largest contributor to modeled losses is a loan (2.8%) backed by a 384,898-square foot (sf) retail property located in Biddeford, ME. Lowe's is the largest tenant (43%) and went dark in October 2011. The tenant is continuing to pay rent under the lease, which expires in October 2026. The borrower is currently facilitating the final stages of negotiations for a sub-lease with another tenant. The second-largest contributor to modeled losses (1.5%) is a 223,761-sf retail property located in Independence, MO. Occupancy has decreased from 92% at origination to 70% as of December 2011. The decrease in performance is attributable to the vacancies caused by Stein Mart and Linen 'N Things. At issuance, these tenants accounted for 31% of net rentable area (NRA). Thomasville Home Furnishings (5.3% of NRA) has gone dark but is still paying rent. Bed, Bath & Beyond and Buy Buy Baby (combined 27.4% of NRA) both opened for business at the property in September 2011. Fitch downgrades the following classes: -- $114.5 million class A-J to 'BBBsf' from 'Asf'; Outlook Stable; -- $30.8 million class B to 'BBsf' from 'BBB-sf'; Outlook Stable; -- $15.4 million class H to 'CCsf' from 'CCCsf'; RE 0%; -- $2.2 million class J to 'CCsf' from 'CCCsf'; RE 0%; -- $2.2 million class K to 'CCsf' from 'CCCsf'; RE 0%; -- $2.2 million class L to 'Csf' from 'CCCsf'; RE 0%; -- $4.4 million class M to 'Csf' from 'CCsf'; RE 0%; -- $4.4 million class N to 'Csf' from 'CCsf'; RE 0%. In addition, Fitch affirms the following classes: -- $25 million class A-2 at 'AAAsf'; Outlook Stable; -- $79.8 million class A-3 at 'AAAsf'; Outlook Stable; -- $76.4 million class A-AB at 'AAAsf'; Outlook Stable; -- $841.7 million class A-4 at 'AAAsf'; Outlook Stable; -- $125.4 million class A-1A at 'AAAsf'; Outlook Stable; -- $176.1 million class A-M at 'AAAsf'; Outlook Stable; -- $15.4 million class C at 'BBsf'; Outlook to Negative from Stable; -- $28.6 million class D at 'Bsf'; Outlook to Negative from Stable; -- $22 million class E at 'CCCsf'; RE 35%; -- $17.6 million class F at 'CCCsf'; RE 0%; -- $19.8 million class G at 'CCCsf'; RE 0%; -- $2.2 million class O at 'Csf'; RE 0%. Class A-1 has paid in full. Fitch does not rate class P. The ratings on classes X-1 and X-2 were previously withdrawn. BRAZOS STUDENT: Fitch Holds Rating on S. B-1 Debentures at 'BBsf' ----------------------------------------------------------------- Fitch Ratings affirms the 'AAAsf' ratings on the senior notes and the 'BBsf' ratings on the subordinate notes issued by Brazos Student Finance Corp. - 2003 Indenture Trust. The Negative Outlook is maintained on the senior notes and the Outlook on the subordinate notes is revised to Stable from Positive. The affirmations of the senior and subordinate notes are based on sufficient level of enhancement in the trust, consisting of any combination of subordination, overcollateralization, and projected minimum excess spread to cover the applicable risk factor stresses. The collateral consists of approximately 81.3% FFELP loans and 18.7% private student loans. The Negative Outlook on the senior notes is tied to the outlook on the U.S. sovereign rating. The revision to a Stable Outlook on the subordinate notes is primarily due to the trust's ability to continue to generate positive excess spread to build total parity up to its cash release level of 103%. Over the past year, total parity has increased from 101.70% to 102.29%. For the portion of each trust that is backed by private student loans, Fitch conducted a review of the collateral performance that involved the calculation of loss coverage multiples based on the most recent data. A projected net loss amount was compared to available credit enhancement to determine the loss multiples. Fitch used proxy historical vintage loss data to form a loss timing curve. After giving credit for seasoning of loans in repayment, Fitch applied the current cumulative gross loss level to this loss timing curve to derive the expected gross losses over the remaining life for each trust. A recovery rate was applied, which was determined to be appropriate based on the latest data provided by the issuer. In addition, Fitch assumed excess spread to be the lesser of the current annualized excess spread; the average historical excess spread; and the most recent 12-month average excess spread, and applied that same rate over the remaining life. Fitch has taken the following rating actions: Brazos Student Finance Corp. Amended and Restated 2003 Indenture Trust -- Series 2003 A-3 affirmed at 'AAAsf'; Outlook Negative; -- Series 2003 A-4 affirmed at 'AAAsf'; Outlook Negative; -- Series 2003 B-1 affirmed at 'BBsf'; Outlook to Stable from Positive. CAPLEASE CDO 205-1: Moody's Affirms 'Caa1' Rating on Class E Notes ------------------------------------------------------------------ Moody's Investors Service has affirmed the ratings of all classes of Notes issued by CapLease CDO 2005-1, Ltd. The affirmations are 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 and collateralized loan obligation (CRE CDO CLO) transactions. Moody's rating action is as follows: Cl. A, Affirmed at Aa2 (sf); previously on Dec 1, 2010 Downgraded to Aa2 (sf) Cl. B, Affirmed at Baa1 (sf); previously on Dec 1, 2010 Downgraded to Baa1 (sf) Cl. C, Affirmed at Ba2 (sf); previously on Oct 19, 2011 Downgraded to Ba2 (sf) Cl. D, Affirmed at B3 (sf); previously on Oct 19, 2011 Downgraded to B3 (sf) Cl. E, Affirmed at Caa1 (sf); previously on Oct 19, 2011 Downgraded to Caa1 (sf) RATINGS RATIONALE CapLease CDO 2005-1, Ltd. is a static (the reinvestment period ended in October 2009) cash CRE CDO transaction backed by a portfolio of credit tenant lease (CTL) loans/ corporate credit notes (CCN) (77.0%) and commercial mortgage backed securities (CMBS) (23.0%). As of the July 30, 2012 payment date, the aggregate Note balance of the transaction, including Preferred Shares, has decreased to $163.5 million from $300.0 million at issuance, with the most of paydown directed to the Class A Notes, as a result of principal repayment of collateral. Currently, the transaction is over-collateralized by $2.6 million and passing all par value tests. There is one CMBS asset with par balance of $4.0 million (2.4% of the current pool balance) that is considered defaulted security as of the July 30, 2012 payment date, the same as at last review. Moody's does expect significant loss to occur from the defaulted security once it 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 updated credit assessments 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 1,730 compared to 1,627 at last review. The current distribution of Moody's rated collateral and assessments for non- Moody's rated collateral is as follows: Aaa-Aa3 (10.8% compared to 9.8% at last review), A1-A3 (5.6% compared to 9.7% at last review), Baa1-Baa3 (52.1% compared to 47.7% at last review), Ba1- Ba3 (5.9% compared to 8.1% at last review), B1-B3 (3.6% compared to 9.6% at last review), and Caa1-Ca/C (22.0% compared to 15.1% 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 7.3 years, compared to 7.8 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 35.3% WARR, compared to 36.2% 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 6.2%, compared to 9.5% at last review. Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO rating models, which was released on March 22, 2012. The cash flow model, CDOEdge(R) v3.2.1.2, 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. In general, the rated Notes are particularly sensitive to rating changes within the collateral pool. Holding all other key parameters static, changing all collaterals' ratings or credit assessments by one notch downward or by one notch upward, would result in modeled rating movement on the rated notes of 1 to 4 notches downward and 0 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. The methodologies used in this rating were "Moody's Approach to Rating SF CDOs" published in May 2012, and "Moody's Approach to Rating Commercial Real Estate CDOs" published in July 2011. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies. CHASE MORTGAGE 2005-S1: Moody's Cuts 1 RMBS Tranche Rating to 'C' ----------------------------------------------------------------- Moody's Investors Service has downgraded 65 tranches and upgraded three tranches from six RMBS transactions issued by Chase Mortgage Finance Trust. The collateral backing these deals primarily consists of first-lien, fixed and adjustable-rate prime Jumbo residential mortgages. The actions impact approximately $1.2 billion of RMBS issued from 2005 to 2007. Complete rating actions are as follows: Issuer: Chase Mortgage Finance Trust Series 2007-A1 Cl. 1-A1, Downgraded to A1 (sf); previously on May 30, 2012 Aa1 (sf) Placed Under Review for Possible Downgrade Cl. 1-A2, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at B3 (sf) Cl. 1-A3, Downgraded to Ba1 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. 1-A4, Downgraded to Caa2 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Downgrade Cl. 1-A5, Downgraded to B2 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. 2-A1, Downgraded to Ba1 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A2, Downgraded to Caa2 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Downgrade Cl. 2-A3, Downgraded to B2 (sf); previously on Jul 15, 2011 Downgraded to Ba2 (sf) Cl. 3-A1, Downgraded to B2 (sf); previously on May 26, 2010 Confirmed at B1 (sf) Cl. 4-A1, Downgraded to B2 (sf); previously on Jul 15, 2011 Downgraded to B1 (sf) Cl. 5-A1, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. 7-A1, Downgraded to B2 (sf); previously on Jul 15, 2011 Downgraded to B1 (sf) Cl. 8-A1, Downgraded to Baa2 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. 8-A2, Downgraded to Caa3 (sf); previously on May 26, 2010 Upgraded to Caa2 (sf) Cl. 9-A1, Downgraded to Ba3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 9-A2, Downgraded to Ca (sf); previously on Jul 15, 2011 Downgraded to Caa3 (sf) Cl. 13-A1, Downgraded to Caa1 (sf); previously on May 26, 2010 Confirmed at B3 (sf) Issuer: Chase Mortgage Finance Trust Series 2007-S1 Cl. A-1, Downgraded to Caa1 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Downgrade Cl. A-2, Downgraded to Caa1 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Cl. A-3, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa1 (sf) Cl. A-4, Downgraded to Caa1 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Downgrade Cl. A-10, Downgraded to Caa2 (sf); previously on May 26, 2010 Confirmed at B3 (sf) Cl. A-13, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to B3 (sf) Cl. A-X, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B2 (sf) Cl. A-P, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to Caa1 (sf) Issuer: Chase Mortgage Finance Trust, Series 2005-S1 Cl. 1-A1, Downgraded to B3 (sf); previously on May 26, 2010 Downgraded to Ba3 (sf) Cl. 1-A2, Downgraded to Ca (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Cl. 1-A3, Downgraded to Ba3 (sf); previously on May 26, 2010 Downgraded to Ba2 (sf) Cl. 1-A4, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. A-P, Downgraded to B2 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Downgrade Cl. 1-A5, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to Ba3 (sf) Cl. 1-A7, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to Ba3 (sf) Cl. 1-A9, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to Ba3 (sf) Cl. 1-A10, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to Ba2 (sf) Cl. 1-A11, Downgraded to B3 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. 1-A12, Downgraded to C (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Cl. 1-A18, Downgraded to Ca (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Cl. I-A13, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. I-A14, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. I-A15, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. I-AX, Downgraded to B1 (sf); previously on Feb 22, 2012 Downgraded to Ba3 (sf) Cl. 2-A1, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to Ba2 (sf) Cl. 2-A2, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to Ba2 (sf) Cl. 2-A3, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to Ba2 (sf) Cl. 1-A8, Upgraded to A1 (sf); previously on May 30, 2012 Baa1 (sf) Placed Under Review for Possible Upgrade Issuer: Chase Mortgage Finance Trust, Series 2005-S2 Cl. A-1, Downgraded to B3 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. A-3, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. A-4, Downgraded to B3 (sf); previously on May 26, 2010 Downgraded to B2 (sf) Cl. A-6, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. A-7, Downgraded to B3 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. A-8, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B2 (sf) Cl. A-9, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B2 (sf) Cl. A-10, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. A-11, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. A-12, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. A-15, Downgraded to B3 (sf); previously on May 26, 2010 Downgraded to B2 (sf) Cl. A-16, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B2 (sf) Cl. A-17, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. A-26, Downgraded to B3 (sf); previously on May 26, 2010 Downgraded to B2 (sf) Cl. A-27, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B2 (sf) Cl. A-28, Downgraded to B2 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. A-29, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B3 (sf) Cl. A-P, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B1 (sf) Cl. A-5, Upgraded to Baa1 (sf); previously on May 30, 2012 Ba2 (sf) Placed Under Review for Possible Upgrade Issuer: Chase Mortgage Finance Trust, Series 2005-S3 Cl. A-P, Downgraded to Caa1 (sf); previously on May 26, 2010 Downgraded to B2 (sf) Cl. A-7, Upgraded to B1 (sf); previously on May 26, 2010 Downgraded to B3 (sf) Issuer: Chase Mortgage Finance Trust, Series 2006-A1 Cl. 2-A1, Downgraded to Caa2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Downgrade Cl. 4-A1, Downgraded to Caa2 (sf); previously on May 26, 2010 Downgraded to B3 (sf) RATINGS RATIONALE The actions are a result of the recent performance of Prime jumbo pools originated on or after 2005 and reflect Moody's updated loss expectations on these pools. The rating action consists of a number of downgrades. The downgrades are a result of deteriorating performance and structural features resulting in higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications and 2) small pool volatility Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on prime jumbo pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For prime jumbo pools, Moody's first applies a baseline delinquency rate of 3.5% for 2005, 6.5% for 2006 and 7.5% for 2007. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2005 pool with 75 loans, the adjusted rate of new delinquency is 3.54%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.20 to 2.0 for current delinquencies that range from less than 2.5% to greater than 50% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. When assigning the final ratings to bonds, in addition to the approach described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://moodys.com/viewresearchdoc.aspx?docid=PBS_SF296992 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF196023 CIFC FUNDING 206-1: Moody's Lifts Rating on Cl. B-2L Notes to Ba2 ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by CIFC Funding 2006-1, Ltd.: U.S.$100,000,000 Class A-1LR Variable Funding Notes Due October 20, 2020, Upgraded to Aaa (sf); previously on October 24, 2011 Upgraded to Aa1 (sf); U.S.$293,000,000 Class A-1L Floating Rate Notes Due October 20, 2020, Upgraded to Aaa (sf); previously on October 24, 2011 Upgraded to Aa1 (sf); U.S.$26,500,000 Class A-2L Floating Rate Notes Due October 20, 2020, Upgraded to Aa1 (sf); previously on October 24, 2011 Upgraded to A1 (sf); U.S.$30,500,000 Class A-3L Floating Rate Notes Due October 20, 2020, Upgraded to A2 (sf); previously on October 24, 2011 Upgraded to Baa2 (sf); U.S.$20,000,000 Class B-1L Floating Rate Notes Due October 20, 2020, Upgraded to Baa3 (sf); previously on October 24, 2011 Upgraded to Ba1 (sf); U.S.$23,000,000 Class B-2L Floating Rate Notes Due October 20, 2020 (current outstanding balance of $21,966,922), Upgraded to Ba2 (sf); previously on October 24, 2011 Upgraded to Ba3 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes reflect the benefit of the short period of time remaining before the end of the deal's reinvestment period in October 2012. In consideration of the reinvestment restrictions applicable during the amortization period, and therefore limited ability to effect significant changes to the current collateral pool, Moody's analyzed the deal assuming a higher likelihood that the collateral pool characteristics will continue to maintain a positive buffer relative to certain covenant requirements. In particular, the deal is assumed to benefit from lower WARF and higher spread and diversity levels compared to the levels assumed at the last rating action in October 2011. Moody's also notes that the transaction's reported overcollateralization ratios are stable since the last rating action. 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 $517.7 million, defaulted par of $5.0 million, a weighted average default probability of 20.93% (implying a WARF of 3040), a weighted average recovery rate upon default of 50.04%, and a diversity score of 83. 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. CIFC Funding 2006-1, Ltd., issued in August 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans with small exposure to loans of middle market issuers. 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 a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (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 Adjusted WARF -- 20% (2432) Class A-1LR: 0 Class A-1L: 0 Class A-2L: +1 Class A-3L: +2 Class B-1L: +2 Class B-2L: +1 Moody's Adjusted WARF + 20% (3648) Class A-1LR: 0 Class A-1L: 0 Class A-2L: -2 Class A-3L: -2 Class B-1L: -1 Class B-2L: -1 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 upcoming speculative-grade debt maturities 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 described below: 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will commence and at what pace. Deleveraging 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. 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. 3) Exposure to credit estimates: The deal is exposed to a small 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. CPS AUTO 2012-C: Moody's Assigns '(P)B1' Rating to Class E Notes ---------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to the notes to be issued by CPS Auto Receivables Trust 2012-C. This is the third senior/subordinated transaction of the year for Consumer Portfolio Services, Inc. (CPS). The complete rating actions are as follows: Issuer: CPS Auto Receivables Trust 2012-C Class A Notes, rated (P) A2 (sf); Class B Notes, rated (P) A2 (sf); Class C Notes, rated (P) Baa2(sf); Class D Notes, rated (P) Ba2 (sf); Class E Notes, rated (P) B1 (sf); RATINGS RATIONALE 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, the experience and expertise of CPS as servicer, and the backup servicing arrangement with Aa3-rated Wells Fargo Bank, N.A. The principal methodology used in this rating was "Moody's Approach to Rating U.S. Auto Loan-Backed Securities," published in May 2011. Moody's median cumulative net loss expectation for the underlying pool is 13.5%. The loss expectation was based on an analysis of CPS' 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 Medium/High versus a Medium for the sector. This is driven by the Medium/High assessment for Governance due to the unrated sponsor/servicer. 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 23%, 27% or 30%, the initial model output for the Class A notes might change from A2 to A3, Baa3, and Ba3, respectively. If the net loss used in determining the initial rating were changed to 18.5%, 19% or 23%, the initial model output for the Class B notes might change from A2 to Ba1, Ba2, and B3, respectively. If the net loss used in determining the initial rating were changed to 14.5%, 16%, or 18%, the initial model output for the Class C notes might change from Baa2 to Ba1, Ba2, and B2, respectively. If the net loss used in determining the initial rating were changed to 14%,16% or 17%, the initial model output for the Class D notes might change from Ba2 to B1, B3 and determining the initial rating were changed to 14.5%,16% or 18%, the initial model output for the Class E notes might change from B1 to 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. CPS AUTO 2012-C: S&P Rates $5.8-Mil. Class E Fixed Notes 'B+' ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to CPS Auto Receivables Trust 2012-C's $147.0 million asset-backed notes. The note issuance is an asset-backed securitization backed by subprime auto loan receivables. "The preliminary ratings are based on information as of Sept. 10, 2012. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings," S&P said. The preliminary ratings reflects S&P's view of: -- The availability of approximately 39.6%, 34.4%, 27.1%, 20.9%, and 20.5% of credit support for the Class A, B, C, D, and E notes based on stressed cash flow scenarios (including excess spread). "These credit support levels provide coverage of 3.0x, 2.3x, 1.75x, 1.5x, and 1.15x our 12.50-13.00% expected cumulative net loss (CNL) range for the Class A, B, C, D ,and E notes," S&P said. -- The expectation that, under a moderate stress scenario of 1.75x our expected net loss level, the ratings on the Class A notes will not decline by more than one rating category during the first year, and the ratings on the Class B and C notes will not decline by more than two categories during the first year, all else being equal. This is consistent with S&P's credit stability criteria, which outlines the outer bound of credit deterioration equal to a one-category downgrade within the first year for 'AA (sf)' rated securities as well as a two-category downgrade within the first year for 'A (sf)', 'BBB (sf)', and 'BB (sf)' rated securities. -- The credit enhancement underlying each of the preliminary rated notes, which is in the form of subordination, overcollateralization, a reserve account, and excess spread for the Class A, B, C, D and E notes. -- The timely interest and principal payments made to the preliminary rated notes under our stressed cash flow modeling scenarios, which we believe are appropriate for the assigned preliminary ratings. -- The collateral characteristics of the subprime automobile loans securitized in this transaction. -- The transaction's payment and credit enhancement structures, which include performance triggers. -- The transaction's legal structure. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 ' included in this credit rating report are available at: http://standardandpoorsdisclosure-17g7.com PRELIMINARY RATINGS ASSIGNED CPS Auto Receivables Trust 2012-C Class Rating Type Interest Amount rate (Mil. $) A AA- (sf) Senior Fixed 11.720 B A (sf) Subordinate Fixed 13.230 C BBB (sf) Subordinate Fixed 8.820 D BB (sf) Subordinate Fixed 7.350 E B+ (sf) Subordinate Fixed 5.880 CUMBERLAND II: S&P Raises Rating on Class C Notes From 'BB+' ------------------------------------------------------------ Standard & Poor's Ratings Services raised and removed from CreditWatch positive its ratings on three classes of notes from Cumberland II CLO Ltd., a collateralized loan obligation (CLO) transaction managed by Commercial Industrial Finance Corp. "The actions on the three classes of notes reflect the paydowns to the class A notes and the increase in the overcollateralization (O/C) levels since the last rating action in November 2011. Since the October 2011 trustee report, the transaction has exited its reinvestment period and the class A note has paid down $130.71 million to 52% of its original balance while the class A O/C ratio has increased to 148.81% from 125.53%. The balance of defaulted assets has decreased to $2.67 million from $4.07 million in October 2011, while the balance of 'CCC' rated assets decreased to $15.88 million from $20.15 million," S&P said. "We will continue to review our ratings on the notes and assess whether, in our view, the ratings remain consistent with the credit enhancement available," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING ACTIONS Cumberland II CLO Ltd Class Rating To From A AAA (sf) AA+ (sf)/Watch Pos B AA- (sf) A- (sf)/Watch Pos C BBB+ (sf) BB+ (sf)/Watch Pos DORAL CLO II: S&P Rates $21 Million Class D Deferrable Notes 'BB' ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Doral CLO II Ltd./Doral CLO II Inc.'s $368.50 million floating-rate notes following the transaction's effective date as of July 26, 2012. "Most U.S. cash flow collateralized debt obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The 'effective date' for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral, or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request the rating agencies that have issued ratings upon closing to affirm the ratings issued on the closing date after reviewing the effective date portfolio (typically referred to as an 'effective date rating affirmation')," S&P said. "An effective date rating affirmation reflects our opinion that the portfolio collateral purchased by the issuer, as reported to us by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that we assigned on the transaction's closing date. The effective date reports provide a summary of certain information that we used in our analysis and the results of our review based on the information presented to us," S&P said. "We believe the transaction may see some benefit from allowing a window of time after the closing date for the collateral manager to acquire the remaining assets for a CLO transaction. This window of time is typically referred to as a 'ramp-up period.' Because some CLO transactions may acquire most of their assets from the new issue leveraged loan market, the ramp-up period may give collateral managers the flexibility to acquire a more diverse portfolio of assets," S&P said. "For a CLO that has not purchased its full target level of portfolio collateral by the closing date, our ratings on the closing date and prior to our effective date review are generally based on the application of our criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to us by the collateral manager, and may also reflect our assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased," S&P said. "When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee," S&P said. "In our published effective date report, we discuss our analysis of the information provided by the transaction's trustee and collateral manager in support of their request for effective date rating affirmation. In most instances, we intend to publish an effective date report each time we issue an effective date rating affirmation on a publicly rated U.S. cash flow CLO," S&P said. "On an ongoing basis after we issue an effective date rating affirmation, we will periodically review whether, in our view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as we deem necessary," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS AFFIRMED Doral CLO II Ltd./Doral CLO II Inc. Class Rating Amount (mil. $) A-1 AAA (sf) 269.50 A-2 AA (sf) 27.00 B (deferrable) A (sf) 34.50 C (deferrable) BBB (sf) 16.50 D (deferrable) BB (sf) 21.00 Subordinated notes NR 47.96 NR-Not rated. ENCORE CREDIT: Moody's Lifts Rating on One RMBS Tranche to 'Caa3' ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of two tranches and confirmed the ratings of two tranches from two deals issued by Encore trusts. The collateral backing the transactions are subprime residential mortgages. Complete rating actions are as follows: Issuer: Encore Credit Receivables Trust 2005-1 Cl. M-1, Confirmed at Baa2 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Confirmed at B1 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Upgrade Issuer: Encore Credit Receivables Trust 2005-2 Cl. M-2, Upgraded to B2 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Upgrade Cl. M-3, Upgraded to Caa3 (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades in the rating action are a result of improving performance and/or structural features resulting in lower expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R)(SFW), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297212 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 EXETER AUTOMOBILE 2012-2: S&P Gives 'BB' Rating on Class D Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Exeter Automobile Receivables Trust 2012-2's $300 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. 10, 2012. 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 45.2%, 38.1%, 29.3%, and 23.2% credit support for the class A, B, C, and D notes based on stressed cash flow scenarios (including excess spread), which provide coverage of more than 2.8x, 2.3x, 1.75x, and 1.4x S&P's 14.50%-15.50% expected cumulative net loss. - The timely interest and principal payments made to the preliminary rated notes by the assumed legal final maturity dates under stressed cash flow modeling scenarios that S&P believes is appropriate for the assigned preliminary ratings. - S&P's expectation that under a moderate ('BBB') stress scenario, all else being equal, our ratings on the class A and B notes would remain within one rating category of its preliminary 'AA (sf)' and 'A (sf)' ratings during the first year; and its ratings on the class C and D notes would remain within two rating categories of our preliminary 'BBB (sf)' and 'BB (sf)' ratings, respectively. These potential rating movements are consistent with S&P's credit stability criteria, which outline the outer bound of credit deterioration as a one-category downgrade within the first year for 'AA' rated securities and a two-category downgrade within the first year for 'A' through 'BB' rated securities under the moderate stress conditions. - The servicer's experienced management team, which has an average of more than 16 years' experience in the auto finance industry. - S&P's analysis of four-and-a-half years of static pool data on Exeter Finance Corp.'s (Exeter's) lending programs. - The fact that Exeter is not yet profitable, has a relatively short performance history (4.5 years) compared to its peers, and has been growing its portfolio very rapidly. - The transaction's payment/credit enhancement and legal structures. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. The Standard & Poor's 17g-7 ' included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com/954.pdf PRELIMINARY RATINGS ASSIGNED Exeter Automobile Receivables Trust 2012-2 Class Rating Type Interest Amount rate (mil. $)(i) A AA (sf) Senior Fixed 215.00 B A (sf) Subordinate Fixed 36.00 C BBB (sf) Subordinate Fixed 31.00 D BB (sf) Subordinate Fixed 18.00 (i) The interest rates and actual sizes of these tranches will be determined on the pricing date. FAIRWAY LOAN: Moody's Raises Rating on Class B-2L Notes to 'Ba2' ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by Fairway Loan Funding Company: U.S.$52,000,000 Class A-2L Notes Due October 17, 2018, Upgraded to Aa1 (sf); previously on August 26, 2011 Upgraded to A1 (sf); U.S.$49,000,000 Class A-3L Notes Due October 17, 2018, Upgraded to A2 (sf); previously on August 26, 2011 Upgraded to Baa1 (sf); U.S.$32,000,000 Class B-1L Notes Due October 17, 2018, Upgraded to Baa3 (sf); previously on August 26, 2011 Upgraded to Ba1 (sf); U.S.$32,000,000 Class B-2L Notes Due October 17, 2018, Upgraded to Ba2 (sf); previously on August 26, 2011 Upgraded to B1 (sf). Ratings Rationale According to Moody's, the rating actions taken on the notes reflect the benefit of the short period of time remaining before the end of the deal's reinvestment period in October 2012. In consideration of the reinvestment restrictions applicable during the amortization period, and therefore limited ability to effect significant changes to the current collateral pool, Moody's analyzed the deal assuming a higher likelihood that the collateral pool characteristics will continue to maintain a positive buffer relative to certain covenant requirements. In particular, the deal is assumed to benefit from lower WARF and higher spread levels compared to the levels assumed at the last rating action in August 2011. Moody's also notes that the transaction's reported overcollateralization ratios are stable since the last rating action. 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 $736.9 million, defaulted par of $2 million, a weighted average default probability of 17.61% (implying a WARF of 2667), a weighted average recovery rate upon default of 51.11%, 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. Fairway Loan Funding Company, issued in July 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 a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011 In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (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 Adjusted WARF -- 20% (2134) Class X: 0 Class A-1L: 0 Class A-1LV: 0 Class A-2L: +1 Class A-3L: +3 Class B-1L: +3 Class B-2L: +1 Moody's Adjusted WARF + 20% (3201) Class X: 0 Class A-1L: 0 Class A-1LV: 0 Class A-2L: -1 Class A-3L: -1 Class B-1L: -1 Class B-2L: -1 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 upcoming speculative-grade debt maturities 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 described below: 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will commence and at what pace. Deleveraging 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. 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. 3) 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. FRASER SULLIVAN VII: S&P Affirms 'BB' Rating on Class D Notes ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Fraser Sullivan CLO VII Ltd./Fraser Sullivan CLO VII Corp.'s $406.00 million floating-rate notes following the transaction's effective date as of July 18, 2012. "Most U.S. cash flow collateralized debt obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The 'effective date' for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral, or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request the rating agencies that have issued ratings upon closing to affirm the ratings issued on the closing date after reviewing the effective date portfolio (typically referred to as an 'effective date rating affirmation')," S&P said. "An effective date rating affirmation reflects our opinion that the portfolio collateral purchased by the issuer, as reported to us by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that we assigned on the transaction's closing date. The effective date reports provide a summary of certain information that we used in our analysis and the results of our review based on the information presented to us," S&P said. "We believe the transaction may see some benefit from allowing a window of time after the closing date for the collateral manager to acquire the remaining assets for a CLO transaction. This window of time is typically referred to as a 'ramp-up period.' Because some CLO transactions may acquire most of their assets from the new issue leveraged loan market, the ramp-up period may give collateral managers the flexibility to acquire a more diverse portfolio of assets," S&P said. "For a CLO that has not purchased its full target level of portfolio collateral by the closing date, our ratings on the closing date and prior to our effective date review are generally based on the application of our criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to us by the collateral manager, and may also reflect our assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased," S&P said. "When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee," S&P said. "In our published effective date report, we discuss our analysis of the information provided by the transaction's trustee and collateral manager in support of their request for effective date rating affirmation. In most instances, we intend to publish an effective date report each time we issue an effective date rating affirmation on a publicly rated U.S. cash flow CLO," S&P said. "On an ongoing basis after we issue an effective date rating affirmation, we will periodically review whether, in our view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as we deem necessary," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS AFFIRMED Fraser Sullivan CLO VII Ltd./Fraser Sullivan CLO VII Corp. Class Rating Amount (mil. $) A-1 AAA (sf) 273.50 A-2 AA (sf) 53.50 B (deferrable) A (sf) 39.00 C (deferrable) BBB (sf) 21.00 D (deferrable) BB (sf) 19.00 Subordinated notes NR 52.65 NR-Not rated. FREMONT HOME: Moody's Confirms 'Ca' Rating on One RMBS Tranche -------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on five tranches, and confirmed the ratings on five tranches from four subprime RMBS transactions issued by Fremont. The collateral backing these transactions are subprime residential mortgage loans. Complete rating actions are as follows: Issuer: Fremont Home Loan Trust 2005-B Cl. M3, Confirmed at A3 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Upgrade Cl. M4, Confirmed at B2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Cl. M5, Confirmed at Ca (sf); previously on May 30, 2012 Ca (sf) Placed Under Review for Possible Upgrade Issuer: Fremont Home Loan Trust 2005-D Cl. 1-A-1, Confirmed at Baa3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Cl. 2-A-3, Downgraded to B1 (sf); previously on Jul 18, 2011 Downgraded to Ba3 (sf) Issuer: Fremont Home Loan Trust 2005-E Cl. 1-A-1, Downgraded to B3 (sf); previously on Apr 29, 2010 Downgraded to Ba3 (sf) Cl. 2-A-3, Downgraded to B3 (sf); previously on Apr 29, 2010 Downgraded to Ba3 (sf) Cl. 2-A-4, Confirmed at Caa3 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Issuer: Fremont Home Loan Trust 2006-2 Cl. I-A-1, Downgraded to B2 (sf); previously on Apr 29, 2010 Downgraded to Ba3 (sf) Cl. II-A-2, Downgraded to Baa3 (sf); previously on May 30, 2012 A2 (sf) Placed Under Review for Possible Upgrade RATINGS RATIONALE The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The downgrades in the rating action are a result of deteriorating performance and/or structural features resulting in higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R)(SFW), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297109 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 GSAA HOME 2007-H1: Moody's Cuts Rating on 2 RMBS Tranches to 'Ca' ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on four tranches, upgraded the ratings on two tranches and confirmed the ratings on two tranches from four subprime RMBS transactions issued by Goldman Sachs. The collateral backing these transactions are subprime residential mortgage loans. Complete rating actions are as follows: Issuer: GSAA Home Equity Trust 2005-2 Cl. B-1, Confirmed at Baa1 (sf); previously on May 30, 2012 Baa1 (sf) Placed Under Review for Possible Upgrade Issuer: GSAA Home Equity Trust 2006-2 Cl. 1A1, Upgraded to B3 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Cl. 2A2, Confirmed at Baa2 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade Cl. 2A4, Upgraded to Caa3 (sf); previously on May 30, 2012 Ca (sf) Placed Under Review for Possible Upgrade Issuer: GSAMP Trust 2006-FM3 Cl. A-2A, Downgraded to Ca (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Issuer: GSAMP Trust 2007-H1 Cl. A-1A, Downgraded to B2 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Cl. A-1B, Downgraded to Ca (sf); previously on Sep 17, 2010 Downgraded to Caa3 (sf) Cl. A-2B, Downgraded to Ca (sf); previously on Sep 17, 2010 Downgraded to Caa3 (sf) RATINGS RATIONALE The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades/downgrades in the rating action are a result of improving/deteriorating performance and/or structural features resulting in lower/higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications and 2) small pool volatility. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on subprime pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For subprime pools, Moody's first applies a baseline delinquency rate of 10% for 2005, 19% for 2006 and 21% for 2007. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2005 pool with 75 loans, the adjusted rate of new delinquency is 10.1%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.80 to 1.8 for current delinquencies that range from 10% to greater than 50% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R)(SFW), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297062 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 HEWETT'S ISLAND II: S&P Raises Rating on Class C Notes From 'BB+' ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-2A, A-2B, B-1A, B-1B, B-2, and C notes from Hewett's Island CLO II Ltd., a collateralized loan obligation (CLO) transaction managed by CypressTree Investment Management Co. "At the same time, we affirmed the ratings on the class A-1 and D notes and removed our ratings on the A-2A, A-2B, B-1A, and B-1B notes from CreditWatch, where we placed them with positive implications on June 18, 2012," S&P said. "Hewett's Island CLO II Ltd. ended its reinvestment period in December 2010. The A-1 notes have paid down more than $81 million since our October 2011 rating actions and currently have a balance of $52.81 million, 20.71% of their original notional balance," S&P said. "The B-1A and B-1B notes in this transaction receive a fixed amount of $333,333 pro rata from the interest waterfall. In the event that the interest proceeds are not sufficient to make this payment, the transaction may use principal proceeds to pay this amount. As a result, the B-1A and B-1B notes have paid down $1 million since our last review, and the notes' current balances are at 3.33% of their original note balances," S&P said. The D class notes receive 15% of available interest proceeds before the transaction makes any payment to equityholders. To date, the transaction has paid the class D notes down to 77.26% of their original balance. "Due to the large paydowns to the A-1 notes, the overcollateralization ratios (O/C) have improved significantly, especially at the senior O/C levels. According to the July 31, 2012, monthly report, the class A-2B O/C was at 153.83%, about 27% more than the 126.09% noted in the Sept. 30, 2011, report, which we used for our October 2011 rating actions," S&P said. "The amount of defaulted securities held in the transaction's portfolio total approximately $5.27 million, slightly more than the $4 million noted in September 2011. The transaction now has two assets that are treated as defaulted, compared with one at the time of the October 2011 rating actions," S&P said. "Although the credit quality of the collateral has not changed significantly, the paydowns have increased the level of credit support to the tranches, leading us to upgrade classes A-2A, A-2B, B-1A, B-1B, B-2, and C. The ratings of the class C and D notes are constrained at 'BBB+ (sf)' and 'CCC- (sf)', respectively, by the top obligor test," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Hewett's Island CLO II Ltd. Rating Class To From A-2A AAA (sf) AA+ (sf)/Watch Pos A-2B AAA (sf) AA+ (sf)/Watch Pos B-1A AAA (sf) AA (sf)/Watch Pos B-1B AAA (sf) AA (sf)/Watch Pos B-2 AA+ (sf) A+ (sf) C BBB+ (sf) BB+ (sf) RATING AFFIRMATIONS Hewett's Island CLO II Ltd. Class Rating A-1 AAA (sf) D CCC- (sf) TRANSACTION INFORMATION Issuer: Hewett's Island CLO II Ltd. Coissuer: Hewett's Island CLO II Corp. Collateral manager: CypressTree Investment Management Co. Trustee: Deutsche Bank Trust Co. Transaction type: Cash flow CLO HIGHBRIDGE LOAN 2012-1: S&P Rates Class E Deferrable Notes 'B' -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Highbridge Loan Management 2012-1 Ltd./Highbridge Loan Management 2012-1 LLC's $283.25 million floating-rate notes. The note issuance is a collateralized loan obligation securitization backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The ratings reflect S&P's view of: -- The asset manager's experience: Highbridge Loan Management 2012-1 Ltd. will be Highbridge Principal Strategies LLC's (Highbridge's) first collateralized loan obligation (CLO) transaction. However, Highbridge is experienced in managing investment vehicles that focus on debt securities, and the specific team of individuals that will be managing this transaction has previous experience managing CLOs. -- The credit enhancement provided to the 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. -- The transaction's legal structure, which is expected to be bankruptcy remote. -- The diversified collateral portfolio, which comprises primarily broadly syndicated speculative-grade senior secured term loans. -- The asset manager's experienced management team. -- S&P's projections regarding the timely interest and ultimate principal payments on the rated notes, which it assessed using its cash flow analysis and assumptions commensurate with the assigned ratings under various interest-rate scenarios, including LIBOR ranging from 0.34%-13.84%. -- 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, subordinated hedge and synthetic security termination payments, portfolio manager incentive fees, and subordinated note payments to principal proceeds for the purchase of additional collateral assets during the reinvestment period. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS ASSIGNED Highbridge Loan Management 2012-1 Ltd./ Highbridge Loan Management 2012-1 LLC Class Rating Amount (mil. $) A-1 AAA (sf) 200.00 A-2 AA (sf) 27.50 B (deferrable) A (sf) 23.00 C (deferrable) BBB (sf) 13.50 D (deferrable) BB (sf) 12.25 E (deferrable) B (sf) 7.00 ING IM 2012-1: S&P Affirms 'B' Rating on Class E Deferrable Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on ING IM CLO 2012-1 Ltd./ING IM CLO 2012-1 LLC's $326.50 million floating- rate notes following the transaction's effective date as of July 24, 2012. "Most U.S. cash flow collateralized debt obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The 'effective date' for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral, or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request the rating agencies that have issued ratings upon closing to affirm the ratings issued on the closing date after reviewing the effective date portfolio (typically referred to as an 'effective date rating affirmation')," S&P said. "An effective date rating affirmation reflects our opinion that the portfolio collateral purchased by the issuer, as reported to us by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that we assigned on the transaction's closing date. The effective date reports provide a summary of certain information that we used in our analysis and the results of our review based on the information presented to us," S&P said. "We believe the transaction may see some benefit from allowing a window of time after the closing date for the collateral manager to acquire the remaining assets for a CLO transaction. This window of time is typically referred to as a 'ramp-up period.' Because some CLO transactions may acquire most of their assets from the new issue leveraged loan market, the ramp-up period may give collateral managers the flexibility to acquire a more diverse portfolio of assets," S&P said. "For a CLO that has not purchased its full target level of portfolio collateral by the closing date, our ratings on the closing date and prior to our effective date review are generally based on the application of our criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to us by the collateral manager, and may also reflect our assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased," S&P said. "When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee," S&P said. "In our published effective date report, we discuss our analysis of the information provided by the transaction's trustee and collateral manager in support of their request for effective date rating affirmation. In most instances, we intend to publish an effective date report each time we issue an effective date rating affirmation on a publicly rated U.S. cash flow CLO," S&P said. "On an ongoing basis after we issue an effective date rating affirmation, we will periodically review whether, in our view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as we deem necessary," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS AFFIRMED ING IM CLO 2012-1 Ltd./ING IM CLO 2012-1 LLC Class Rating Amount (mil. $) A-1 AAA (sf) 227.00 A-2 AA (sf) 32.50 B (deferrable) A (sf) 27.75 C (deferrable) BBB (sf) 16.25 D (deferrable) BB (sf) 14.00 E (deferrable) B (sf) 9.00 ITIGROUP COMMERCIAL: Moody's Rates Class F Certificates '(P)B2' --------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to thirteen classes of CMBS securities, issued by Citigroup Commercial Mortgage Trust 2012-GC8, Commercial Mortgage Pass- Through Certificates, Series 2012-GC8. Cl. A-1, Assigned (P)Aaa (sf) Cl. A-2, Assigned (P)Aaa (sf) Cl. A-3, Assigned (P)Aaa (sf) Cl. A-4, Assigned (P)Aaa (sf) Cl. A-AB, Assigned (P)Aaa (sf) Cl. X-A, Assigned (P)Aaa (sf) Cl. X-B, Assigned (P)Ba3 (sf) Cl. A-S, Assigned (P)Aaa (sf) Cl. B, Assigned (P)Aa3 (sf) Cl. C, Assigned (P)A3 (sf) Cl. D, Assigned (P)Baa3 (sf) Cl. E, Assigned (P)Ba2 (sf) Cl. F, Assigned (P)B2 (sf) RATINGS RATIONALE The Certificates are collateralized by 57 fixed rate loans secured by 139 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 greater than the 2007 conduit/fusion transaction average of 1.31X. The Moody's Stressed DSCR of 1.07X is greater than the 2007 conduit/fusion transaction average of 0.92X. Moody's Trust LTV ratio of 99.3% is lower than the 2007 conduit/fusion transaction average of 110.6%. Moody's Total LTV ratio (inclusive of subordinated debt and debt-like preferred equity) of 102.4% is also considered when analyzing various stress scenarios for the rated debt. 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 2.04, which is lower than the indices calculated in most multi-borrower transactions since 2009. The low weighted average grade is indicative of the strong market composition of the pool and the stability of the cash flows underlying the assets. The pool's small market percentage is 14.9% which is lower than other multi-borrower deals rated by Moody's since the financial crisis and implies that the assets in the pool are generally in major markets. Properties situated in major markets tend to exhibit more cash flow and capitalization rate stability over time compared to assets located in smaller or tertiary markets. 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 20.0. The transaction's loan level diversity is at the lower end of 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 20.6. The transaction's property diversity profile is lower than the indices calculated in most multi-borrower transactions issued since 2009. This deal has a super-senior Aaa class with 30% credit enhancement. Although the additional enhancement offered to the senior most certificate holders provides additional protection against pool loss, the super-senior structure is credit negative for the certificate that supports the super-senior class. If the support certificate were to take a loss, the loss would have the potential to be quite large on a percentage basis. Thin tranches need more subordination to reduce the probability of default in recognition that their loss-given default is higher. This adjustment helps keep expected loss in balance and consistent across deals. The transaction was structured with additional subordination at class A-S to mitigate the potential increased severity to class A-S. The methodologies used in this rating were "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's analysis employs the excel-based CMBS Conduit Model v2.60 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. Moody's analysis also uses the CMBS IO calculator ver1.0, which references the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology. 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%, 14%, and 22%, the model-indicated rating for the currently rated Aaa Super Senior class would be Aaa, Aaa, and Aa1, respectively; for the most junior Aaa rated class A-S would be Aa1, Aa2, and Aa3, respectively. 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. JASPER CLO: Moody's Raises Rating on Class 1 Notes From 'Ba1' ------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by Jasper CLO Ltd.: U.S.$10,000,000 Class 1 Composite Securities Due 2017 (current outstanding balance of $1,423,765.71), Upgraded to Baa2 (sf); previously on August 11, 2011 Upgraded to Ba1 (sf); U.S.$5,000,000 Class 2 Composite Securities Due 2017 (current outstanding balance of $3,264,977.57), Upgraded to Baa2 (sf); previously on August 11, 2011 Upgraded to Baa3 (sf). Ratings Rationale According to Moody's, the rating action taken on the Class 1 Extendable Composite Securities is primarily a result of the amortization of the rated balance and an increase in the collateralization of the notes. The Class 1 Extendable Composite Securities have been paid down by approximately 29% or $703,136 since the last rating action in August 2011. The rating action on the Class 2 Extendable Composite Securities reflects a correction to Moody's modeling. Due to an input error, interest payments on the Class 2 Extendable Composite Securities were not taken into account in previous rating actions. Modeling for the notes has now been corrected, and the rating action reflects that change. In addition, the current ratings of the notes reflect the end of the deal's reinvestment period in August 2012. In consideration of the reinvestment restrictions applicable during the amortization period, and therefore limited ability to effect significant changes to the current collateral pool, Moody's analyzed the deal assuming a higher likelihood that the collateral pool characteristics will continue to maintain a positive buffer relative to certain covenant requirements. In particular, the deal is assumed to benefit from lower WARF and higher spread levels compared to the levels assumed at the last rating action in August 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 $596.8 million, defaulted par of $56.6 million, a weighted average default probability of 18.90% (implying a WARF of 3066), a weighted average recovery rate upon default of 50.26%, 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. Jasper CLO Ltd, issued in June 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The methodologies used in this rating were "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011 and "Using the Structured Note Methodology to Rate CDO Combo-Notes" published in February 2004. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (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 Adjusted WARF -- 20% (2453) Class A: +1 Class B: +2 Class C: +1 Class D1: +1 Class D1: +1 Moody's Adjusted WARF + 20% (3679) Class A: -1 Class B: -1 Class C: -1 Class D1: -1 Class D2: -1 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 upcoming speculative-grade debt maturities. 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 described below: 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging 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) 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. 4) The deal has a material exposure to securities representing approximately 5% of the portfolio whose default probabilities are not assessed through either Moody's ratings or Moody's credit estimates. In the absence of such ratings and credit estimates, Moody's assumed a range of possible credit quality assessments in its review. Although Moody's believes it has adopted reasonable assumptions in its analysis, the transaction may be impacted by the occurrence of credit transitions or actual defaults at rates significantly different from those Moody's has assumed with respect to such securities. LAND O'LAKES: Moody's Reviews Ba1 Securities Rating for Downgrade ----------------------------------------------------------------- Moody's Investors Service placed all ratings of Land O'Lakes on review for downgrade. Ratings placed on review for downgrade include: Land O'Lakes, Inc. $475 million senior secured revolving credit facility expiring April 2016 at Baa2; $150 million senior secured term loan expiring August 2021 Baa2; $155 million of 6.24% senior secured notes due December 2016 at Baa2; $85 million of 6.67% senior secured notes due December 2019 at Baa2; $85 million of 6.77% senior secured notes due 2021 at Baa2. Land O'Lakes Capital Trust I $191 million of 7.45% subordinated capital securities at Ba1. RATINGS RATIONALE The review for downgrade reflects Land O'Lakes' weakened credit metrics as a result of a series of debt-fueled acquisitions over the last year. Accordingly, leverage has grown to approximately 4.3 times (incorporating Moody's adjustments) which the rating agency views as very high for the rating category. The review also reflects the risks of earnings volatility in a volatile commodity market stemming from the drought sweeping the U.S. farm belt in the summer of 2012. The ratings review also incorporates Moody's view that the company's rapid series of acquisitions and increased leverage implies an increased risk appetite on the part of management. Moody's review will focus on Land O'Lakes' ability to strengthen the performance of operations acquired over the past year, as well as the pace at which the cooperative can reduce leverage to levels more appropriate for an investment grade rating. The review will also seek clarity on Land O'Lakes financial policies as they pertain to acquisitions, leverage, and capital structure. Given Moody's expectation for flat-to-modest earnings growth and continued volatility in the agricultural commodities market, the rating agency does not anticipate an upgrade in the near-term. However, if Land O'Lakes is able to materially reduce financial leverage, and improve the diversity and stability of its product portfolio, an upgrade could occur. Land O'Lakes' leverage has increased meaningfully over the last twelve months in an effort to fund its growth efforts. While these investments are expected to enhance and diversify its earnings over the long term, an environment of volatile commodity pricing may compound execution challenges. Additional debt financed acquisitions or a deterioration in operating performance such that debt to EBITDA continues to be sustained above 3.5 times could contribute to a downgrade. The principal methodology used in rating Land O'Lakes was the Global Agricultural Cooperatives Industry Methodology published in August 2010. Land O'Lakes, Inc. based in Arden Hills, Minnesota, is an agricultural cooperative focusing on dairy food, animal feed, and agricultural crop inputs. Moody's-adjusted revenues, EBITDA and Debt/EBITDA for the twelve months ending June 30, 2012 were approximately $13.4 billion, $518 million, and 4.3 times, respectively. LANDMARK VI: S&P Raises Rating on Class E Notes to 'B'; Off Watch ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A, B, C, D, and E notes from Landmark VI CDO Ltd., a U.S. collateralized loan obligation (CLO) transaction managed by Aladdin Capital Management LLC. "At the same time, we removed each of the five ratings from CreditWatch with positive implications, where we placed them on June 18, 2012," S&P said. "The upgrades mainly reflect paydowns to the class A notes and a subsequent increase in the credit enhancement available to support the notes since January 2011, when we upgraded some of the notes. Since that time, the transaction has paid down the class A notes by approximately $47.1 million, reducing their outstanding note balance to 71.42% of their original balance. The reinvestment period for this transaction formally ended in January 2012. We expect the paydowns to continue, which will further increase the credit enhancement available to the liabilities," S&P said. "he upgrades also reflect an improvement in the overcollateralization (O/C) available to support the notes, primarily due to the paydowns. The trustee reported the following O/C ratios in the July 2012 monthly report: The class A/B O/C ratio was 130.77%, compared with a reported ratio of 122.99% in November 2010; The class C O/C ratio was 117.87%, compared with a reported ratio of 113.24% in November 2010; The class D O/C ratio was 109.35%, compared with a reported ratio of 106.57% in November 2010; and The class E O/C ratio was 104.32%, compared with a reported ratio of 102.55% in November 2010. "The upgrades also reflect a slight improvement in the performance of the transaction's underlying asset portfolio since the time of the last action. As of the July 2012 trustee report, the transaction had $13.16 million of defaulted assets. This was down slightly from the $13.46 million we referenced for our January 2011 rating action. Furthermore, assets from obligors rated in the 'CCC' category were reported at $13.72 million in July 2012, down from the $25.11 million," S&P said. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Landmark VI CDO Ltd. Rating Class To From A AAA (sf) AA+ (sf)/Watch Pos B AA+ (sf) AA (sf)/Watch Pos C A+ (sf) A (sf)/Watch Pos D BBB+ (sf) BBB- (sf)/Watch Pos E B (sf) CCC+ (sf)/Watch Pos TRANSACTION INFORMATION Issuer: Landmark VI CDO Ltd. Coissuer: Landmark VI CDO LLC Collateral manager: Aladdin Capital Management LLC Underwriter: Wachovia Capital Markets LLC Trustee: The Bank of New York Mellon Transaction type: Cash flow CDO LIBERTY CLO: Moody's Raises Rating on Class C Notes to 'B2' ----------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by Liberty CLO, Ltd.: U.S. $68,500,000 Class A-3 Floating Rate Senior Secured Extendable Notes due 2017, Upgraded to Aa2 (sf); previously on July 26, 2011 Upgraded to Aa3 (sf); U.S. $43,000,000 Class A-4 Floating Rate Senior Secured Extendable Notes due 2017, Upgraded to A2 (sf); previously on July 26, 2011 Upgraded to Baa1 (sf); U.S. $52,000,000 Class C Floating Rate Deferrable Senior Secured Extendable Notes due 2017 (current outstanding balance $30,378,080.82), Upgraded to B2 (sf); previously on July 26, 2011 Upgraded to Caa2 (sf). RATINGS RATIONALE According to Moody's, the rating actions taken on the notes reflect the benefit of the short period of time remaining before the end of the deal's reinvestment period in November 2012. In consideration of the reinvestment restrictions applicable during the amortization period, and therefore limited ability to effect significant changes to the current collateral pool, Moody's analyzed the deal assuming a higher likelihood that the collateral pool characteristics will continue to maintain a positive buffer relative to certain covenant requirements. In particular, the deal is assumed to benefit from higher spread levels compared to the levels assumed at the last rating action in July 2011. Moody's also notes that the transaction has benefited from an increase in the weighted average recovery rate of the portfolio and that the reported collateral quality and overcollateralization ratios have been stable since the last rating action. Additionally, Moody's notes that the underlying portfolio includes a number of investments in securities that mature after the maturity date of the notes. Based on the July 2012 trustee report, securities that mature after the maturity date of the notes currently make up approximately 8% of the underlying portfolio. These investments potentially expose the notes to market risk in the event of liquidation at the time of the notes' maturity. 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 $787.1 million, defaulted par of $58.3 million, a weighted average default probability of 18.55% (implying a WARF of 2959), a weighted average recovery rate upon default of 50.62%, 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. Liberty CLO, 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 a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is a summary of the impact of different default probabilities (expressed in terms of WARF levels) on all rated notes (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 Adjusted WARF -- 20% (2367) Class A-1a: 0 Class A-1b: 0 Class A-1c: 0 Class A-2: 0 Class A-3: +2 Class A-4: +2 Class B: +1 Class C: 0 Moody's Adjusted WARF + 20% (3551) Class A-1a: 0 Class A-1b: 0 Class A-1c: 0 Class A-2: 0 Class A-3: -2 Class A-4: -2 Class B: -1 Class C: -2 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 upcoming speculative-grade debt maturities 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 described below: 1) Deleveraging: The main source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will commence and at what pace. Deleveraging 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. 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. 3) 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. 4) 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. MAGNETITE VI: S&P Rates $18 Million Class E Deferrable Notes 'BB' ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Magnetite VI Ltd./Magnetite VI Corp.'s $369.75 million floating-rate notes. The note issuance is a collateralized loan obligation securitization backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The preliminary ratings are based on information as of Sept. 12, 2012. 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. -- The transaction's legal structure, which is expected to be bankruptcy remote. -- The diversified collateral portfolio, which primarily comprises broadly syndicated speculative-grade senior secured term loans. -- The asset manager's experienced management team. -- S&P's projections regarding the timely interest and ultimate principal payments on the preliminary rated notes, which it assessed using its cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.34%-13.84%. -- 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, subordinated hedge and synthetic security termination payments, portfolio manager incentive fees, and subordinated note payments to principal proceeds for the purchase of additional collateral assets during the reinvestment period. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com PRELIMINARY RATINGS ASSIGNED Magnetite VI Ltd./Magnetite VI Corp. Class Rating Amount (mil. $) X AAA (sf) 2.00 A AAA (sf) 245.75 B AA (sf) 51.50 C (deferrable) A (sf) 32.50 D (deferrable) BBB (sf) 20.00 E (deferrable) BB (sf) 18.00 Subordinated notes NR 46.00 NR-Not rated. MAREA CLO: Moody's Assigns '(P)Ba3' Rating to $18MM Class E Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following provisional ratings to notes to be issued by Marea CLO, Ltd. (the "Issuer" or "Marea CLO"): U.S. $291,214,000 Class A Senior Secured Floating Rate Notes due 2023 (the "Class A Notes"), Assigned (P)Aaa (sf) U.S. $18,000,000 Class E Secured Deferrable Floating Rate Notes due 2023 (the "Class E Notes" and, together with the Class A Notes, the "Notes"), Assigned (P)Ba3 (sf). Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinion. Upon a conclusive review of a transaction and associated documentation, Moody's will endeavor to assign definitive ratings. A definitive rating (if any) may differ from a provisional rating. Ratings Rationale Moody's provisional ratings of the Notes address the expected losses posed to noteholders. The provisional ratings reflect the risks due to defaults on the underlying portfolio of loans, the transaction's legal structure, and the characteristics of the underlying assets. Marea CLO is a managed cash flow CLO. The transaction is collateralized primarily by broadly syndicated first-lien senior secured corporate loans. At least 95% of the portfolio must be invested in senior secured loans and eligible investments and up to 5% of the portfolio may consist of senior secured notes, bonds and second lien loans. At closing, the portfolio is expected to be approximately 90% ramped and 100% ramped within three months thereafter. Invesco Senior Secured Management, Inc. ("Invesco") will direct the selection, acquisition and disposition of collateral on behalf of the Issuer. Invesco may engage in trading activity during the transaction's four-year reinvestment period, including discretionary trading. Thereafter, sale proceeds of credit risk obligations and unscheduled principal payments can be used to purchase additional collateral obligations, subject to certain conditions. In addition to the Notes rated by Moody's, the Issuer will issue four other tranches, including subordinated notes. The transaction incorporates coverage tests, both par and interest, which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011. For modeling purposes, Moody's used the following base-case assumptions: Target Par Amount of $450,000,000; Diversity of 45; WARF of 2800; Weighted Average Spread of 4.10%; Weighted Average Coupon of 7.00%; Weighted Average Recovery Rate of 45.00%; and Weighted Average Life of 7.5 years. The performance of the Notes is subject to uncertainty. The Notes' performance is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. Invesco's investment decisions and management of the transaction will also affect the Notes' performance. Together with the set of modeling assumptions above, Moody's conducted additional sensitivity analysis which was an important component in determining the ratings assigned to the Notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on the Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), holding all other factors equal: Moody's WARF + 15% (3220) Class A Notes: -1 Class E Notes: -1 Moody's WARF +30% (3640) Class A Notes: -1 Class E Notes: -1. The V Score for this transaction is Medium/High. Moody's assigned this V Score in a manner similar to the Medium/High V Score assigned for the global cash flow CLO sector, as described in the special report titled "V Scores and Parameter Sensitivities in the Global Cash Flow CLO Sector," dated July 6, 2009, available on www.moodys.com. 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. Further details regarding Moody's analysis of this transaction may be found in the upcoming pre-sale report, available soon on Moodys.com. The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. MAREA CLO: S&P Rates $18-Mil. Class E Deferrable Notes 'BB' ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Marea CLO Ltd./Marea CLO LLC's $415.928 million floating-rate notes. The note issuance is a collateralized loan obligation securitization backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. "The preliminary ratings are based on information as of Sept. 12, 2012. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings," S&P said. 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. -- 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. -- S&P's projections of the timely interest and ultimate principal payments on the preliminary rated notes, which it assessed using its cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.34%-11.41%. -- 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 interest diversion test, a failure of which during the reinvestment period will lead to the reclassification of up to 50% of available excess interest proceeds (before paying uncapped administrative expenses, subordinated hedge payments, deferred, subordinated, and incentive management fees, and subordinated note payments) to principal proceeds for the purchase of additional collateral assets. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com PRELIMINARY RATINGS ASSIGNED Marea CLO Ltd./Marea CLO LLC Class Rating Amount (mil. $) A AAA (sf) 291.214 B AA (sf) 50.143 C (deferrable) A (sf) 36.964 D (deferrable) BBB (sf) 19.607 E (deferrable) BB (sf) 18.000 Subordinated notes NR 49.423 NR-Not rated. MARQUETTE PARK: S&P Affirms 'B+' Rating on Class D Notes --------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A, B, and C notes from Marquette Park CLO Ltd., a U.S. collateralized loan obligation (CLO) managed by Deerfield Capital Management LLC. "Simultaneously, we affirmed our rating on the class D notes, and we removed our ratings on the class B, C, and D notes from CreditWatch, where we placed them with positive implications on June 18, 2012," S&P said. "The upgrades reflect improving credit support, primarily due to a $49.95 million paydown on the class A notes, and an improvement in the credit quality of the underlying assets since our June 2011 rating actions. The rating affirmation reflects sufficient credit enhancement at the current rating level," S&P said. "According to the Aug. 1, 2012, trustee report, the transaction held $2.36 million in defaulted assets, down from $4.41 million noted in the March 1, 2011, trustee report, which we used for our June 2011 rating actions," S&P said. "Similarly, the amount of 'CCC' rated collateral held in the transaction's underlying portfolio declined during this period. According to the August 2012 trustee report, the transaction held $10.71 million in 'CCC' rated collateral, down from $22.30 million noted in the March 2011 trustee report," S&P said. Additional improvements in the transaction over the same time period include an increase in the class A, B, C, and D overcollateralization ratio tests. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATING AND CREDITWATCH ACTIONS Marquette Park CLO Ltd. Rating Class To From A AAA (sf) AA+ (sf) B A+ (sf) A- (sf)/Watch Pos C BBB+ (sf) BBB (sf)/Watch Pos D B+ (sf) B+ (sf)/Watch Pos MORGAN STANLEY 2007-HE3: Moody's Cuts Rating on A-2a Tranche to Ca ------------------------------------------------------------------ Moody's Investors Service has downgraded the ratings on one tranche, upgraded the ratings on 15 tranches and confirmed the ratings on 17 tranches from 18 subprime RMBS transactions issued by Morgan Stanley. Complete rating actions are as follows: Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE1 Cl. M-1, Confirmed at Baa3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-HE2 Cl. M-1, Upgraded to Baa3 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-NC1 Cl. M-1, Upgraded to Ba2 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Confirmed at B3 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-NC2 Cl. M-2, Upgraded to Baa2 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Cl. M-3, Upgraded to Ba3 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Upgrade Cl. M-4, Confirmed at Ca (sf); previously on May 30, 2012 Ca (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC2 Cl. M-2, Upgraded to Baa3 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC3 Cl. M-2, Confirmed at A1 (sf); previously on May 30, 2012 A1 (sf) Placed Under Review for Possible Upgrade Cl. M-3, Upgraded to Ba2 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC4 Cl. M-3, Confirmed at A2 (sf); previously on May 30, 2012 A2 (sf) Placed Under Review for Possible Upgrade Cl. M-4, Confirmed at Ba1 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC5 Cl. M-3, Confirmed at A3 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Upgrade Cl. M-4, Confirmed at B1 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Upgrade Cl. M-5, Confirmed at Caa3 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2005-WMC6 Cl. M-2, Confirmed at Ba1 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Cl. M-3, Confirmed at Caa1 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Cl. M-4, Confirmed at C (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-HE3 Cl. A-1, Confirmed at Caa2 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-WMC1 Cl. A-1, Upgraded to B1 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Cl. A-2c, Upgraded to Caa3 (sf); previously on May 30, 2012 Ca (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley ABS Capital I Inc. Trust 2007-HE3 Cl. A-2a, Downgraded to Ca (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Downgrade Issuer: Morgan Stanley Capital I Inc. Trust 2006-NC2 Cl. A-1, Confirmed at Caa3 (sf); previously on May 30, 2012 Caa3 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley Home Equity Loan Trust 2005-1 Cl. M-2, Upgraded to A3 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade Cl. M-3, Upgraded to B2 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Cl. M-4, Upgraded to Ca (sf); previously on Jul 15, 2010 Downgraded to C (sf) Issuer: Morgan Stanley Home Equity Loan Trust 2005-3 Cl. M-1, Confirmed at Baa2 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Upgraded to B3 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley Home Equity Loan Trust 2005-4 Cl. A-2c, Upgraded to Ba1 (sf); previously on May 30, 2012 B1 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley Home Equity Loan Trust 2006-1 Cl. A-1, Confirmed at B2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Cl. A-2c, Confirmed at Caa1 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Issuer: Morgan Stanley Structured Trust I 2007-1 Cl. A-1, Upgraded to Baa1 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Cl. A-2, Upgraded to Ba1 (sf); previously on Sep 24, 2010 Upgraded to B2 (sf) Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades/downgrades in the rating action are a result of improving/deteriorating performance and/or structural features resulting in lower/higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current views on loan modifications. As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R) (SFW), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above methodology only applies to pools with at least 40 loans and a pool factor of greater than 5%. Moody's may withdraw its rating when the pool factor drops below 5% and the number of loans in the pool declines to 40 loans or lower unless specific structural features allow for a monitoring of the transaction (such as a credit enhancement floor). The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions . A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297201 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 MORGAN STANLEY 2007-HQ13: Fitch Affirms 'D' Rating on $2.9MM Notes ------------------------------------------------------------------ Fitch Ratings has placed three classes of Morgan Stanley Capital I Trust 2007-HQ13 (MSCI 2007-HQ13) on Rating Watch Negative. Additionally, Fitch affirms three senior 'AAA' and nine distressed classes. The Negative Watch reflects continued concerns surrounding the loans in special servicing, most notably the largest loan in the pool, The Pier at Caesars (10.8%). Efforts to stabilize and improve performance at the property have proven to be challenging, and anticipated progress in the workout of this asset has not materialized. Recently, the property failed to attract the minimum bid at an auction sale, which maintains concerns that the unique nature of the property adds a level of complexity to the workout. As of the August 2012 remittance period, there are four loans (16.8%) in special servicing. The transaction has realized losses of 7% to date, an increase from 0.5% at the last rating action which has caused the class F through P notes to experience principal losses Based on current loss estimates in the pool, which include loss expectations on specially serviced loans, the potential for multi-category downgrades exists. Fitch expects to resolve the Rating Watch status within the next several months following a complete review of the transaction including updated valuation details and collateral/workout discussions with the loan servicers. Fitch has affirmed the following classes as indicated: -- $117.2 million class A-1A notes at 'AAAsf'; Outlook Stable; -- $55.4 million class A-2 notes at 'AAAsf'; Outlook Stable; -- $334.5 million class A-3 notes at 'AAAsf'; Outlook Stable; -- $11.7 million class C notes at 'Csf'; RE 0%; -- $16.9 million class D notes at 'Csf'; RE 0%; -- $13.0 million class E notes at 'Csf'; RE 0%; -- $2.9 million class F notes at 'Dsf'; RE 0%; -- $0 class G notes at 'Dsf'; RE 0%; -- $0 class H notes at 'Dsf'; RE 0%; -- $0 class J notes at 'Dsf'; RE 0%; -- $0 class K notes at 'Dsf'; RE 0%; -- $0 class L notes at 'Dsf'; RE 0%. Fitch has placed the following classes on Rating Watch Negative as indicated: -- $103.9 million class A-M 'AAsf'; -- $72.8 million class A-J 'CCCsf'; RE 95%; -- $18.2 million class B 'CCsf' RE 0%;. Additionally, Fitch has marked the class A-1 notes as 'PIF'. Fitch previously withdrew the rating on the class X notes. NELNET STUDENT: Moody's Cuts Rating on Sub. Note Classes to 'Ba2' ----------------------------------------------------------------- Moody's Investors Service has downgraded subordinated classes of notes issued by Nelnet Student Loan trusts 2008-1 and 2008-4. The underlying collateral consists of student loans originated under the Federal Family Education Loan Program (FFELP), which are guaranteed by the US government for a minimum of 97% of defaulted principal and accrued interest. RATINGS RATIONALE The downgrades result from the correction of an input error made in Moody's cash flow model runs used in rating actions issued on 28 August, 2012. An incorrect calculation of accrued interest on the student loans caused its material overstatement when compounded over the term of the transactions. The correction of this error resulted in a larger negative carry in the cash flow scenarios Moody's uses in rating highly rated tranches in FFELP securitizations. The increase in the negative carry accelerated the decline in the overcollateralization in Moody's cash flow scenarios and led to a larger portion of unpaid principal on the subordinate notes on the respective maturity dates, resulting in the downgrades. The principal methodology used in this rating was "Moody's Approach to Rating Securities Backed by FFELP Student Loans", published in April 2012. 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. The ratings on the subordinate bonds would not be upgraded or downgraded if spread between LIBOR index on the liability side and the one-month LIBOR index on the asset side is 10 bps lower or 10 bps higher. To assess rating implications of the higher expected losses, each individual transaction was run through a variety of stress scenarios using the Structured Finance Workstation(R) (SFW), a cash flow model developed by Moody's Wall Street Analytics. The complete rating actions are as follows: Issuer: Nelnet Student Loan Trust 2008-1 Class B, Downgraded to Ba1 (sf); previously on Aug 28, 2012 Downgraded to Baa3 (sf) Issuer: Nelnet Student Loan Trust 2008-4 Class B, Downgraded to Ba2 (sf); previously on Aug 28, 2012 Downgraded to Ba1 (sf) NEWCASTLE IX1: Moody's Raises Rating on Class H Notes to 'Caa2' --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of seven classes and affirmed the ratings of four classes of Notes issued by Newcastle IX 1, Limited. The upgrades are due to greater than expected amortization of collateral and a decrease in defaulted securities par amount since last review. Additionally, the underlying collateral performance has been relatively stable as evidenced by transition in Moody's weighted average rating factor (WARF) and weighted average recovery rate (WARR) since last review. The affirmations are 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 and collateralized loan obligation (CRE CDO CLO) transactions. Moody's rating action is as follows: Cl. A-1, Upgraded to A1 (sf); previously on Sep 30, 2010 Downgraded to Baa1 (sf) Cl. A-2, Upgraded to Ba1 (sf); previously on Sep 30, 2010 Downgraded to B1 (sf) Cl. B, Upgraded to Ba3 (sf); previously on Sep 30, 2010 Downgraded to B3 (sf) Cl. E, Upgraded to B2 (sf); previously on Sep 30, 2010 Downgraded to Caa1 (sf) Cl. F, Upgraded to B3 (sf); previously on Sep 30, 2010 Downgraded to Caa2 (sf) Cl. G, Upgraded to Caa1 (sf); previously on Sep 30, 2010 Downgraded to Caa2 (sf) Cl. H, Upgraded to Caa2 (sf); previously on Sep 30, 2010 Downgraded to Caa3 (sf) Cl. J, Affirmed at Caa3 (sf); previously on Sep 30, 2010 Downgraded to Caa3 (sf) Cl. K, Affirmed at Caa3 (sf); previously on Sep 30, 2010 Confirmed at Caa3 (sf) Cl. L, Affirmed at Ca (sf); previously on Sep 30, 2010 Downgraded to Ca (sf) Cl. M, Affirmed at Ca (sf); previously on Sep 30, 2010 Confirmed at Ca (sf) Ratings Rationale Newcastle CDO IX1, Limited is a static (the reinvestment period ended in May 2012) cash CRE CDO transaction backed by a portfolio of mezzanine loans (51.4% of the pool balance), B-Notes (18.3%), CRE CDO (13.3%), commercial mortgage backed securities (CMBS) (6.6%), asset-backed securities primarily in the form of wireless tower backed notes (ABS) (3.5%), whole loans (1.3%), CMBS raked bond (0.2%) and other real estate related debt (i.e. term loans) (5.3%). As of the August 20, 2012 Trustee report, the aggregate Note balance of the transaction, including Preferred Shares, has decreased to $730.7 million (including junior note partial and full cancellations) from $825 million at issuance, due to amortization of collateral with the paydowns directed to the Class A-1 Note. There are two assets with a par balance of $14.0 million (1.7% of the current pool balance) that are considered defaulted securities as of the August 20, 2012 Trustee report, compared to two assets with 4.1% of the pool balance at last review. Moody's expects significant losses from those 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: WARF, weighted average life (WAL), 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 assessments 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 5,088 compared to 4,750 at last review. The current distribution of Moody's rated collateral and assessments for non-Moody's rated collateral is as follows: Aaa-Aa3 (0.1% compared to 0.2% at last review), A1-A3 (2.0% compared to 1.3% at last review), Baa1-Baa3 (2.9% compared to 3.8% at last review), Ba1-Ba3 (10.6% compared to 19.6% at last review), B1-B3 (15.9% compared to 10.9% at last review), and Caa1-C (68.5% compared to 64.2% at last review). WAL acts to adjust the probability of default of the reference obligations in the pool for time. Moody's modeled to a WAL of 3.2 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 35.6% compared to 42.2% 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 16.5% compared to 16.6% at last review. Moody's review incorporated CDOROM(R) v2.8.8, one of Moody's CDO rating models, which was released on March 22, 2012. The cash flow model, CDOEdge(R) v3.2.1.2, 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 35.6% to 25.6% or up to 45.6% would result in average rating movement on the rated tranches of 0 to 5 notches downward and 0 to 6 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. Commercial real estate property values are continuing to move in a positive direction along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, a consistent upward trend will not be evident until the volume of investment activity steadily increases for a significant period, non-performing properties are cleared from the pipeline, and fears of a Euro area recession are abated. The hotel sector is performing strongly with eight straight quarters of growth and the multifamily sector continues to show increases in demand with a growing renter base and declining home ownership. Slow recovery in the office sector continues with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow and employers are considering decreases in the leased space per employee. Also, primary urban markets are outperforming secondary suburban markets. Performance in the retail sector continues to be mixed with retail rents declining for the past four years, weak demand for new space and lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending resulting in increased sales. Across all property sectors, the availability of debt capital continues to improve with robust securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario maintains its forecast of relatively robust growth in the US and an expectation of a mild recession in the euro area for 2012. Downside risks remain significant, and elevated downside risks and their materialization could pose a serious threat to the outlook. Major downside risks include: a deeper than expected recession in the euro area; the potential for a hard landing in major emerging markets; an oil supply shock; and material fiscal tightening in the US given recent political gridlock. Healthy but below-trend growth in GDP is expected through the rest of this year and next with risks trending to the downside. The methodologies used in this rating were "Moody's Approach to Rating SF CDOs" published in May 2012, and "Moody's Approach to Rating Commercial Real Estate CDOs" published in July 2011. NUCO2 FUNDING: Fitch Affirms 'BB' Rating on $75 Million Notes ------------------------------------------------------------- Fitch Ratings affirms NuCO2 Funding LLC, series 2008-1 notes as follows: -- $75,000,000 class B at 'BB', Outlook Stable. Fitch's affirmation reflects trust performance within initial rating expectations. Since issuance, NuCO2 has strengthened its industry position and improved trust interest coverage and leverage. As of the August 2012 payment date, customer locations have increased by 33.26% to 154,712. Revenues on a trailing 12-month basis have increased 54.4% to $208.1 million when compared to Dec. 31, 2007. NuCO2's three-month and 12-month interest coverage ratios on the senior debt were 3.56 times (x) and 3.41x, respectively. These coverage ratios compare favorably to the original three-month interest coverage ratio of 2.59x when first reported in June 2008. Fitch expects trust performance to remain stable, as additional revenues attributable to NuCO2's ongoing acquisition strategy and organic growth will be available to service the additional debt and maintain coverage and leverage metrics. However, Fitch expects future growth to be somewhat constrained due to the limited acquisition opportunities available, as NuCO2 has already acquired the majority of their largest competitors. Fitch's Stable Outlook reflects the trust's expected continued performance despite the challenging economic and restaurant environment, because of the unique nature of its product and business model. Over the remaining term of the securitization, Fitch will continually monitor NuCO2's performance. Any material change in Fitch's assessment or assumptions could affect the ratings of the trust. The notes are backed by cash flows generated by substantially all of NuCO2's business activities, which are primarily the leasing of bulk carbon dioxide systems and the distribution of carbon dioxide (CO2) to quick service restaurants (QSRs) and other retailers of fountain beverages in the United States. OWNIT MORTGAGE 2006-C5: Moody's Cuts 1 RMBS Tranche Rating to Ca ---------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of two tranches, upgraded the rating of one tranche, and confirmed the ratings of two tranches from three deals issued by Ownit trusts. The collateral backing the transactions are subprime residential mortgages. Complete rating actions are as follows: Issuer: Ownit Mortgage Loan Trust 2005-2 Cl. M-3, Confirmed at A2 (sf); previously on May 30, 2012 A2 (sf) Placed Under Review for Possible Upgrade Cl. M-4, Upgraded to B3 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Issuer: Ownit Mortgage Loan Trust 2005-5 Cl. A-1, Downgraded to A1 (sf); previously on Jul 14, 2010 Downgraded to Aa2 (sf) Cl. A-2B, Confirmed at Baa3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Issuer: Ownit Mortgage Loan Trust 2006-5 Cl. A-2B, Downgraded to Ca (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Downgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades/downgrades in the rating action are a result of improving/deteriorating performance and/or structural features resulting in lower/higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications and 2) small pool volatility. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on subprime pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For subprime pools, Moody's first applies a baseline delinquency rate of 10% for 2005, 19% for 2006 and 21% for 2007. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2005 pool with 75 loans, the adjusted rate of new delinquency is 10.1%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.80 to 1.8 for current delinquencies that range from 10% to greater than 50% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R)(SFW), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297214 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 PARK PLACE: Moody's Raises Ratings on Two Tranches to 'Caa3' ------------------------------------------------------------ Moody's Investors Service has downgraded the ratings of three tranches, upgraded the ratings of six tranches, and confirmed the ratings of 11 tranches from eight deals issued by Park Place trusts. The collateral backing the transactions are subprime residential mortgages. Complete rating actions are as follows: Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2005-WCH1 Cl. M-2, Upgraded to Baa1 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Cl. M-3, Upgraded to B2 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Cl. M-4, Upgraded to Caa3 (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Cl. M-5, Confirmed at C (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2005-WCW1 Cl. A-1B, Confirmed at A1 (sf); previously on May 30, 2012 A1 (sf) Placed Under Review for Possible Upgrade Cl. M-1, Confirmed at Ba3 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Confirmed at Caa2 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Cl. M-3, Confirmed at C (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2005-WCW2 Cl. A-1D, Downgraded to Aa2 (sf); previously on Aug 2, 2011 Confirmed at Aaa (sf) Cl. A-2D, Upgraded to Baa1 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade Cl. M-1, Upgraded to B1 (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Upgraded to Caa3 (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2005-WCW3 Cl. A-1B, Confirmed at A3 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Upgrade Cl. M-1, Confirmed at Caa1 (sf); previously on May 30, 2012 Caa1 (sf) Placed Under Review for Possible Upgrade Cl. M-2, Confirmed at C (sf); previously on May 30, 2012 C (sf) Placed Under Review for Possible Upgrade Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2005-WHQ1 Cl. M-2, Downgraded to A2 (sf); previously on May 30, 2012 Aa2 (sf) Placed Under Review for Possible Downgrade Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2005-WHQ2 Cl. A-1B, Downgraded to Aa2 (sf); previously on May 30, 2012 Aaa (sf) Placed Under Review for Possible Downgrade Cl. M-3, Confirmed at Caa2 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Downgrade Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2005-WHQ3 Cl. M-3, Confirmed at B2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Issuer: Park Place Securities, Inc., Asset-Backed Pass-Through Certificates, Series 2005-WHQ4 Cl. A-2D, Confirmed at Ba3 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade RATINGS RATIONALE The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades/downgrades in the rating action are a result of improving/deteriorating performance and/or structural features resulting in lower/higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for Moody's current view on loan modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R)(SFW), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297210 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 PHH MORTGAGE 28-CIM1: Moody's Cuts Rating on One Tranche to 'Caa2' ------------------------------------------------------------------ Moody's Investors Service has upgraded six tranches, downgraded four tranches and confirmed the ratings on seven tranches from two RMBS transactions issued by PHH Mortgage Trust. The collateral backing these deals primarily consists of first-lien, fixed and adjustable-rate prime Jumbo residential mortgages. The actions impact approximately $171 million of RMBS issued from 2008. Complete rating actions are as follows: Issuer: PHH Mortgage Trust, Series 2008-CIM1 Cl. I-4A-1, Confirmed at A3 (sf); previously on May 30, 2012 A3 (sf) Placed Under Review for Possible Downgrade Cl. I-4A-2, Confirmed at Baa2 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. I-B-1, Downgraded to Caa2 (sf); previously on May 19, 2010 Downgraded to Caa1 (sf) Cl. II-1A-1, Upgraded to A3 (sf); previously on Jul 18, 2011 Downgraded to Baa2 (sf) Cl. II-1A-2, Upgraded to Ba1 (sf); previously on May 30, 2012 Ba3 (sf) Placed Under Review for Possible Upgrade Cl. II-1-PO, Upgraded to Baa1 (sf); previously on Jul 18, 2011 Downgraded to Ba1 (sf) Cl. II-2A-2, Confirmed at Baa2 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Upgrade Cl. II-B-1, Upgraded to B2 (sf); previously on Jul 18, 2011 Downgraded to Caa2 (sf) Cl. II-B-2, Upgraded to Caa3 (sf); previously on Jul 18, 2011 Downgraded to C (sf) Issuer: PHH Mortgage Trust, Series 2008-CIM2 Cl. 1-A-1, Confirmed at Baa3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 2-A-1, Confirmed at Baa3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 3-A-1, Confirmed at Baa1 (sf); previously on May 30, 2012 Baa1 (sf) Placed Under Review for Possible Downgrade Cl. 4-A-1, Confirmed at Baa3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Downgrade Cl. 4-A-X, Upgraded to Ba3 (sf); previously on Feb 22, 2012 Downgraded to B3 (sf) Cl. 5-A-1, Downgraded to A3 (sf); previously on May 30, 2012 A1 (sf) Placed Under Review for Possible Downgrade Cl. A-X, Downgraded to Ba1 (sf); previously on May 30, 2012 Baa2 (sf) Placed Under Review for Possible Downgrade Cl. A-PO, Downgraded to Ba2 (sf); previously on Feb 14, 2012 Downgraded to Baa3 (sf) RATINGS RATIONALE The actions are a result of the recent performance of Prime jumbo pools originated on or after 2005 and reflect Moody's updated loss expectations on these pools. The rating action consists of a number of upgrades, downgrades, and confirmations. The upgrades are due to significant improvement in collateral performance, and rapid build-up in credit enhancement due to high prepayments. The downgrades are a result of deteriorating performance and structural features resulting in higher expected losses for certain bonds than previously anticipated. The actions taken on these deals also reflect two error corrections. A model input error occurred when the class A-X bond in PHH Mortgage Trust, Series 2008-CIM2 was rated on February 22, 2012. The inputs have been corrected, and the rating action reflects that change. In addition, due to a coding error in Moody's cash flow model, the following seven bonds were incorrectly placed on watch for downgrade on May 30, 2012: PHH Mortgage Trust, Series 2008-CIM1 classes I-4A-1 and I-4A-2 and PHH Mortgage Trust, Series 2008-CIM2 classes 1-A-1, 2-A-1, 3-A-1, 4-A- 1 and A-X. The error has been fixed, and the correct model was used for the rating actions. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. The methodology used in rating Interest- Only Securities was "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications 2) small pool volatility and 3) bonds that financial guarantors insure. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility The above RMBS approach only applies to structures with at least 40 loans and pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on prime jumbo pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For prime jumbo pools, Moody's first applies a baseline delinquency rate of 3.5% for 2005, 6.5% for 2006 and 7.5% for 2007. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2005 pool with 75 loans, the adjusted rate of new delinquency is 3.54%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.20 to 2.0 for current delinquencies that range from less than 2.5% to greater than 50% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. When assigning the final ratings to bonds, in addition to the approach described above, Moody's considered the volatility of the projected losses and timeline of the expected defaults. Bonds insured by financial guarantors The credit quality of RMBS that a financial guarantor insures reflect the higher of the credit quality of the guarantor or the RMBS without the benefit of the guarantee. As a result, the rating on the security is the higher of 1) the guarantor's financial strength rating and 2) the current underlying rating, which is what the rating of the security would be absent consideration of the guaranty. The principal methodology Moody's uses in determining the underlying rating is the same methodology for rating securities that do not have financial guaranty, described earlier. The primary source of assumption uncertainty is the uncertainty in Moody's central macroeconomic forecast and performance volatility due to servicer-related issues. The unemployment rate fell from 9.0% in April 2011 to 8.2% in June 2012. Moody's forecasts a further drop to 7.8% for 2013. Moody's expects house prices to drop another 1% from their 4Q2011 levels before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297110 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF196023 SECURITIZED ASSET: Moody's Cuts Rating on Two Tranches to 'Ca' -------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of two tranches, upgraded the rating of one tranche, and confirmed the ratings of five tranches from seven deals issued by SABR trusts. The collateral backing the transactions are subprime residential mortgages. Complete rating actions are as follows: Issuer: Securitized Asset Backed Receivables LLC Trust 2005-FR1 Cl. M-1, Upgraded to A3 (sf); previously on May 30, 2012 Baa3 (sf) Placed Under Review for Possible Upgrade Issuer: Securitized Asset Backed Receivables LLC Trust 2005-OP1 Cl. M-2, Confirmed at B2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Issuer: Securitized Asset Backed Receivables LLC Trust 2005-OP2 Cl. M-2, Confirmed at Caa2 (sf); previously on May 30, 2012 Caa2 (sf) Placed Under Review for Possible Upgrade Issuer: Securitized Asset Backed Receivables LLC Trust 2006-FR3 Cl. A-2, Downgraded to Ca (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Issuer: Securitized Asset Backed Receivables LLC Trust 2006-NC2 Cl. A-2, Confirmed at Ba1 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Issuer: Securitized Asset Backed Receivables LLC Trust 2006-WM1 Cl. A-1A, Confirmed at Ba1 (sf); previously on May 30, 2012 Ba1 (sf) Placed Under Review for Possible Upgrade Cl. A-1B, Confirmed at B2 (sf); previously on May 30, 2012 B2 (sf) Placed Under Review for Possible Upgrade Issuer: Securitized Asset Backed Receivables LLC Trust 2007-BR5 Cl. A-2A, Downgraded to Ca (sf); previously on May 30, 2012 B3 (sf) Placed Under Review for Possible Downgrade Ratings Rationale The actions are a result of the recent performance of Subprime pools originated after 2005 and reflect Moody's updated loss expectations on these pools. The upgrades/downgrades in the rating action are a result of improving/deteriorating performance and/or structural features resulting in lower/higher expected losses for certain bonds than previously anticipated. The methodologies used in these ratings were "Moody's Approach to Rating US Residential Mortgage-Backed Securities" published in December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology" published in July 2011. Moody's adjusts the methodologies noted above for 1) Moody's current view on loan modifications and 2) small pool volatility. Loan Modifications As a result of an extension of the Home Affordable Modification Program (HAMP) to 2013 and an increased use of private modifications, Moody's is extending its previous view that loan modifications will only occur through the end of 2012. It is now assuming that the loan modifications will continue at current levels until the end of 2013. Small Pool Volatility For pools with loans less than 100, Moody's adjusts its projections of loss to account for the higher loss volatility of such pools. For small pools, a few loans becoming delinquent would greatly increase the pools' delinquency rate. To project losses on subprime pools with fewer than 100 loans, Moody's first calculates an annualized delinquency rate based on vintage, number of loans remaining in the pool and the level of current delinquencies in the pool. For subprime pools, Moody's first applies a baseline delinquency rate of 10% for 2005, 19% for 2006 and 21% for 2007. Once the loan count in a pool falls below 76, this rate of delinquency is increased by 1% for every loan fewer than 76. For example, for a 2005 pool with 75 loans, the adjusted rate of new delinquency is 10.1%. Further, to account for the actual rate of delinquencies in a small pool, Moody's multiplies the rate calculated above by a factor ranging from 0.80 to 1.8 for current delinquencies that range from 10% to greater than 50% respectively. Moody's then uses this final adjusted rate of new delinquency to project delinquencies and losses for the remaining life of the pool under the approach described in the methodology publication. The above RMBS approach only applies to structures with at least 40 loans and a pool factor of greater than 5%. Moody's can withdraw its rating when the pool factor drops below 5% and the number of loans in the deal declines to 40 loans or lower. If, however, a transaction has a specific structural feature, such as a credit enhancement floor, that mitigates the risks of small pool size, Moody's can choose to continue to rate the transaction. To assess the rating implications of the updated loss levels on subprime RMBS, each individual pool was run through a variety of scenarios in the Structured Finance Workstation(R)(SFW), the cash flow model developed by Moody's Wall Street Analytics. This individual pool level analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, average life of the tranches, current balances of the tranches and future cash flows under expected and stressed scenarios. The scenarios include ninety-six different combinations comprising of six loss levels, four loss timing curves and four prepayment curves. The volatility in losses experienced by a tranche due to extended foreclosure timelines by servicers is taken into consideration when assigning ratings. The primary sources of assumption uncertainty are Moody's central macroeconomic forecast and performance volatility as a result of servicer-related activity such as modifications. The unemployment rate fell from 9.1% in June 2011 to 8.1% in August 2012. Moody's forecasts a further drop to 7.8% by the end of 2Q 2013. Moody's expects housing prices to remain stable through the remainder of 2012 before gradually rising towards the end of 2013. Performance of RMBS continues to remain highly dependent on servicer activity such as modification-related principal forgiveness and interest rate reductions. Any change resulting from servicing transfers or other policy or regulatory change can also impact the performance of these transactions. A list of these actions including CUSIP identifiers may be found at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF297139 A list of updated estimated pool losses, sensitivity analysis, and tranche recovery details is being posted on an ongoing basis for the duration of this review period and may be found at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689 SHACKLETON I: S&P Rates $20-Mil. Class E Deferrable Notes 'BB' -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Shackleton I CLO Ltd./Shackleton I CLO Corp.'s $367.0 million floating-rate notes. The note issuance is a collateralized loan obligation transaction backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The ratings reflect S&P's view of: -- The credit enhancement provided to the 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. -- The transaction's legal structure, which is expected to be bankruptcy remote. -- The diversified collateral portfolio, which primarily comprises broadly syndicated speculative-grade senior secured term loans. -- The collateral manager's experienced management team. -- S&P's projections regarding the timely interest and ultimate principal payments on the rated notes, which it assessed using its cash flow analysis and assumptions commensurate with the assigned ratings under various interest rate scenarios, including LIBOR ranging from 0.34%-10.94%. -- 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 interest diversion test, a failure of which will lead to the reclassification of excess interest proceeds that are available prior to paying uncapped administrative expenses; deferred senior, income, and incentive management fees; hedge payments; and income note payments into principal proceeds for the purchase of additional collateral assets during the reinvestment period. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS ASSIGNED Shackleton I CLO Ltd./Shackleton I CLO Corp. Class Rating Amount (mil. $) A-1 AAA (sf) 255.0 A-X AAA (sf) 5.0 B-1 AA (sf) 17.0 B-2 AA (sf) 25.0 C (deferrable) A (sf) 24.0 D (deferrable) BBB (sf) 21.0 E (deferrable) BB (sf) 20.0 Income notes NR 37.0 NR-Not rated. * Moody's Says Canadian High-Yield Bonds Offer Better Protection ---------------------------------------------------------------- Canadian high-yield bond offerings have tighter covenants, which provide more protection for investors than offerings by US-based companies, says a new special comment by Moody's Investors Service, "Canadian High-Yield Bonds Offer More Investor Protection Than US Bonds." In addition, domestic high-yield bonds denominated in Canadian dollars offer more investor protection than high-yield cross-border bonds that Canadian companies issue in US dollars. Since 2010, non-financial speculative-grade Canadian companies have raised about C$9 billion (US$9.2 billion) in the domestic bond market, up from zero in 2008, says Moody's. This amount is less than half the US$20 billion of cross-border bonds that Canada-based speculative-grade companies raised in the more established US market, and a fraction of the US$3.3 trillion US- based high yield issuance during the same period. "High-yield bonds issued by Canadian companies have stronger covenants than their US peers, offering investors more protection," said Ed Sustar, a Moody's Vice President -- Senior Credit Officer. "These protections include prevention of structural subordination, and preserving cash flow for debt service through tighter restricted payments and debt incurrence provisions." One possible explanation for the difference: the limited number of investors in the relatively new Canadian high-yield market allows investors to influence the covenant structure, says Moody's. "In this fairly nascent market, less-known Canadian issuers may offer stronger covenant packages to attract a wide investor base," added Mr. Sustar. "In addition, weaker covenants are more common in the US, thanks to the greater number of private equity sponsored and high-yield lite deals, compared to the Canadian market." High-yield lite bonds provide investors with significantly less protection since they lack either or both a restricted-payments or debt-incurrence covenant. Moody's has analyzed and assessed the covenant quality of about one-thousand bonds that were issued over the past two years globally. Overall, covenant quality for domestic and cross-border high-yield bonds issued by Canadian companies, excluding high- yield lite bonds, was stronger than in the US but weaker than in Asia, EMEA and Latin America. The report includes a company-by-company comparison of covenant strength based on Covenant Quality Assessments found in Moody's High-Yield Covenant Database. * S&P Withdraws Ratings on 43 Classes From 31 CMBS Transactions --------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings on 43 classes from 31 commercial mortgage-backed securities (CMBS) transactions. "We withdrew our ratings on 30 principal and interest paying classes from 25 CMBS transactions following the full repayment of each class' principal balance, as noted in each transaction's respective August 2012 trustee remittance report. We withdrew our ratings on seven interest-only (IO) classes from seven CMBS transactions following the reduction of the classes' notional balances, as noted in each transaction's respective trustee remittance report," S&P said. "We also withdrew our ratings on two IO classes from two CMBS transactions following the repayment of all principal and interest paying classes rated 'AA- (sf)' or higher, according to our criteria for rating IO securities," S&P said. "In addition, we withdrew our ratings on four principal and interest paying classes from three CMBS transactions following the repayment in full of each class' principal balance," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 Disclosure Report included in this credit rating report is available at: http://standardandpoorsdisclosure-17g7.com RATINGS WITHDRAWN FOLLOWING REPAYMENT OF PRINCIPAL BALANCE OR REDUCTION OF NOTIONAL BALANCE Banc of America Commercial Mortgage Inc. Commercial mortgage pass-through certificates series 2001-PB1 Rating Class To From K NR A (sf) Bear Stearns Commercial Mortgage Securities Inc. Commercial mortgage pass-through certificates series 1999-C1 Rating Class To From B NR AAA (sf) Bear Stearns Commercial Mortgage Securities Trust 2007-PWR17 Commercial mortgage pass-through certificates Rating Class To From A-2 NR AAA (sf) Citigroup Commercial Mortgage Trust 2004-C2 Commercial mortgage pass-through certificates Rating Class To From A-3 NR AAA (sf) COMM 2005-C6 Commercial mortgage pass-through certificates Rating Class To From X-P NR AAA (sf) COMM 2005-FL10 Commercial mortgage pass-through certificates Rating Class To From G NR BB- (sf) H NR B+ (sf) Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2001-CKN5 Rating Class To From D NR BBB- (sf) Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2002-CKS4 Rating Class To From A-2 NR AAA (sf) Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2004-C4 Rating Class To From A-4 NR AAA (sf) Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2005-C4 Rating Class To From A-SP NR AAA (sf) Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2006-TFL2 Rating Class To From MW-A NR BB+ (sf) CRESI Finance L.P. 2006-A Commercial real estate synthetic investment notes Rating Class To From E NR A (sf) F NR BBB (sf) Falcon Trust Commercial mortgage pass-through certificates series 2003-SMU Rating Class To From B NR AA+ (sf) C NR A+ (sf) X NR AAA (sf) First Union National Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 1999-C4 Rating Class To From G NR BBB (sf) First Union National Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2000-C1 Rating Class To From E NR AA- (sf) GE Capital Commercial Mortgage Corp. Commercial mortgage pass-through certificates series 2001-3 Rating Class To From F NR A- (sf) GE Capital Commercial Mortgage Corp. Commercial mortgage pass-through certificates series 2002-2 Rating Class To From J NR A- (sf) GE Commercial Mortgage Corp. Commercial mortgage pass-through certificates series 2005-C3 Rating Class To From X-P NR AAA (sf) GMAC Commercial Mortgage Securities Inc. Commercial mortgage pass-through certificates series 2002-C1 Rating Class To From J NR CCC+ (sf) JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2001-C1 Rating Class To From G NR BB+ (sf) JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2001-CIBC1 Rating Class To From F NR BBB+ (sf) JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2002-C1 Rating Class To From A-3 NR AAA (sf) B NR AAA (sf) JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2004-FL1 Rating Class To From L NR CCC- (sf) JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2005-LDP3 Rating Class To From X-2 NR AAA (sf) LB-UBS Commercial Mortgage Trust 2002-C4 Commercial mortgage pass-through certificates Rating Class To From A-5 NR AAA (sf) B NR AAA (sf) LB-UBS Commercial Mortgage Trust 2005-C5 Commercial mortgage pass-through certificates Rating Class To From X-CP NR AAA (sf) Merrill Lynch Mortgage Trust 2005-CKI1 Commercial mortgage pass-through certificates Rating Class To From A-3 NR AAA (sf) ML-CFC Commercial Mortgage Trust 2006-1 Commercial mortgage pass-through certificates Rating Class To From A-2 NR AAA (sf) Morgan Stanley Capital I Trust 2006-HQ8 Commercial mortgage pass-through certificates Rating Class To From A-3 NR AAA (sf) Salomon Bros. Commercial Mortgage Trust 2000-C3 Commercial mortgage pass-through certificates Rating Class To From F NR BB+ (sf) Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2005-C20 Rating Class To From X-P NR AAA (sf) RATINGS WITHDRAWN DUE TO REPAYMENT OF ALL PRINCIPAL AND INTEREST PAYING CLASSES RATED 'AA- (sf)' OR HIGHER First Union National Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2000-C1 Rating Class To From IO NR AAA (sf) GE Capital Commercial Mortgage Corp. Commercial mortgage pass-through certificates series 2002-2 Rating Class To From X-1 NR AAA (sf) RATINGS WITHDRAWN FOLLOWING REPAYMENT OF PRINCIPAL BALANCE AND REMOVED FROM CREDITWATCH NEGATIVE Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2006-TFL2 Rating Class To From MW-B NR BB (sf)/Watch Neg Falcon Trust Commercial mortgage pass-through certificates series 2003-SMU Rating Class To From D NR BBB (sf)/Watch Neg RATINGS WITHDRAWN FOLLOWING REPAYMENT OF PRINCIPAL BALANCE AND REMOVED FROM CREDITWATCH POSITIVE GE Capital Commercial Mortgage Corp. Commercial mortgage pass-through certificates series 2002-2 Rating Class To From G NR AA- (sf)/Watch Pos H NR A+ (sf)/Watch Pos NR-Not rated. * S&P Keeps 'D' Ratings on 93 Classes From Green Tree ABS Deals --------------------------------------------------------------- Standard & Poor's Ratings Services took various rating actions affecting 203 classes from 45 Green Tree-related manufactured housing asset-backed securities (ABS) transactions. "Overall, we raised our ratings on 19 classes, lowered our ratings on 16 classes, and affirmed our ratings on 75 classes. At the same time, we maintained our 'D (sf)' ratings on 93 classes issued from these trusts," S&P said. The 45 affected transactions were issued out of the following trusts: Green Tree Financial Corp. Manufactured Housing Trust; Manufactured Housing Contract Senior-Subordinate Pass-Through Trust; Manufactured Housing Contract Senior-Subordinate Pass-Through Certificates; and Manufactured Housing Contract Trust Senior-Subordinate Pass -Through Certificates. "The rating actions reflect the transactions' collateral performance to date, our views regarding future collateral performance, the transactions' structure, and credit enhancement available. Furthermore, our analysis incorporated secondary credit factors such as credit stability, payment priorities under certain scenarios, and sector- and issuer-specific analysis," S&P said. "All 45 transactions are experiencing higher cumulative net losses than we initially expected. We attribute the increase in losses to increased default frequencies and loss severities," S&P said. "The lowered ratings reflect our view that the available credit enhancement, which continues to deteriorate, is no longer sufficient to support our previous ratings given our revised expected cumulative net losses," S&P said. "The upgrades reflect our assessment of the growth in credit enhancement as some of the classes in the capital structure benefit from subordination that continues to grow as a percent of the current pool balance, which mitigates our higher loss expectations for these pools," S&P said. "The affirmations reflect our view that the total credit support as a percent of the amortizing pool balances, compared with our revised expected remaining cumulative net losses, is sufficient to support the current ratings. In addition, we affirmed 45 ratings in the 'CCC' and 'CC' rating categories to reflect our view of the classes' high vulnerability to nonpayment of full and timely interest at a future date or ultimate principal at the stated final maturity date. In addition, our ratings on 93 classes remain at 'D (sf)', where we lowered them after the classes failed to pay full and timely interest," S&P said. Table 1 Collateral Performance (%) As of August 2012 Distribution Series Mo. Pool Current Revised Expected Factor CNL Lifetime CNL (i) Green Tree Financial Corp. Manufactured Housing Trust 1995-2 208 4.27% 14.66% 15.00-16.00 1995-3 207 5.54% 15.98% 16.50-17.50 1995-4 206 6.13% 15.19% 16.00-17.00 1995-5 205 6.52% 14.01% 15.00-16.00 1995-6 204 7.88% 13.57% 14.50-15.50 1995-7 203 7.82% 13.44% 14.50-15.50 1995-8 202 7.79% 13.73% 15.00-16.00 1995-9 201 8.30% 13.23% 14.50-15.50 1995-10 200 8.41% 13.18% 14.50-15.50 1996-1 198 9.09% 12.76% 14.50-15.50 1996-2 197 9.73% 15.85% 17.50-18.50 1996-3 196 10.04% 16.73% 18.00-19.00 1996-4 195 10.60% 15.55% 17.00-18.00 1996-5 194 10.61% 15.74% 17.50-18.50 1996-6 193 10.49% 15.61% 17.00-18.00 1996-7 192 10.31% 15.79% 17.00-18.00 1996-8 191 10.57% 15.00% 16.50-17.50 1996-9 187 10.93% 16.44% 18.00-19.00 1996-10 188 11.06% 15.09% 16.50-17.50 1997-4 182 12.83% 16.13% 18.00-19.00 1997-6 179 13.71% 15.44% 17.50-18.50 1997-7 178 14.14% 15.87% 18.00-19.00 1997-8 176 15.15% 16.02% 18.50-19.50 1998-2 173 14.78% 19.20% 22.00-23.00 1998-3 172 16.72% 19.45% 23.00-24.00 1998-5 170 18.80% 16.36% 19.50-20.50 1998-6 168 17.30% 19.11% 23.00-24.00 1998-8 165 20.28% 18.38% 22.50-23.50 Manufactured Housing Contract Senior-Subordinate Pass-Through Trust 1999-1 162 20.24% 19.75% 23.50-24.50 1999-2 161 18.74% 20.66% 24.00-25.00 1999-3 159 20.71% 21.72% 25.50-26.50 1999-4 158 20.00% 24.56% 27.50-28.50 1999-5 156 19.34% 27.07% 29.50-30.50 1999-6 153 19.12% 26.07% 28.50-29.50 2000-2 146 17.90% 27.35% 30.00-31.00 Manufactured Housing Contract Senior-Subordinate Pass-Through Certificates 2000-3 145 19.09% 25.50% 28.00-29.00 2000-4 144 18.37% 28.54% 31.50-32.50 2000-5 142 18.55% 26.49% 29.50-30.50 2000-6 140 18.18% 30.26% 33.50-34.50 2001-1 136 17.37% 29.77% 33.00-34.00 2001-2 133 19.37% 30.96% 34.50-35.50 2001-3 131 21.42% 28.03% 32.00-33.00 2001-4 128 20.69% 25.11% 29.50-30.50 2002-1 124 22.01% 24.73% 30.00-31.00 2002-2 122 22.06% 23.29% 29.50-30.50 (i) Lifetime CNL expectations based on current performance data. CNL-cumulative net loss. Each transaction was initially structured with overcollateralization (O/C) and subordination. However, due to higher-than-expected losses, the O/C on each of these transactions has been depleted to zero and many of the subordinated classes have experienced principal write-downs. "Standard & Poor's will continue to monitor the performance of the transactions relative to our cumulative net loss expectations and the available credit enhancement. We will take rating actions as we consider appropriate," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 ' included in this credit rating report are available at: http://standardandpoorsdisclosure-17g7.com RATINGS RAISED Green Tree Manufactured Housing Trust Rating Series Class To From 1995-2 B-1 AAA(sf) AA(sf) 1995-3 B-1 AA-(sf) BBB-(sf) 1995-4 M-1 AAA(sf) AA+(sf) 1995-4 B-1 BBB(sf) BB-(sf) 1995-5 M-1 AAA(sf) AA+(sf) 1995-5 B-1 BB(sf) B+(sf) 1995-6 M-1 A(sf) A-(sf) 1995-6 B-1 B+(sf) B(sf) 1995-7 M-1 AA+(sf) A+(sf) 1995-7 B-1 B+(sf) B-(sf) 1995-8 M-1 AAA(sf) AA(sf) 1995-8 B-1 B-(sf) CCC(sf) 1995-9 M-1 AA-(sf) BBB+(sf) 1995-9 B-1 B+(sf) B-(sf) 1995-10 M-1 AA+(sf) AA-(sf) 1995-10 B-1 BB-(sf) B(sf) 1996-1 M-1 A(sf) BBB(sf) 1996-4 A-6 AA+(sf) AA(sf) 1996-4 A-7 AA+(sf) AA(sf) RATINGS LOWERED Green Tree Manufactured Housing Trust Rating Series Class To From 1996-2 M-1 CCC(sf) B-(sf) 1996-10 M-1 B(sf) B+(sf) 1997-4 A-5 A+(sf) AA(sf) 1997-4 A-6 A+(sf) AA(sf) 1997-4 A-7 A+(sf) AA(sf) 1998-3 A-5 BB+(sf) BBB-(sf) 1998-3 A-6 BB+(sf) BBB-(sf) 1998-5 A-1 BB+(sf) BBB(sf) 1998-6 A-8 BB+(sf) BBB-(sf) Manufactured Housing Contract Senior-Subordinate Pass-Through Trust Rating Series Class To From 1999-1 A-6 CCC+(sf) B-(sf) 1999-1 A-7 CCC+(sf) B-(sf) 1999-2 A-5 CCC(sf) B-(sf) 1999-2 A-6 CCC(sf) B-(sf) 1999-2 A-7 CCC(sf) B-(sf) Manufactured Housing Contract Senior-Subordinate Pass-Through Certificates Rating Series Class To From 2001-3 A-4 CCC(sf) B-(sf) 2002-2 M-1 CCC+(sf) B-(sf) RATINGS AFFIRMED Green Tree Manufactured Housing Trust Series Class Rating 1996-1 B-1 CCC (sf) 1996-2 B-1 CCC- (sf) 1996-3 A-5 AAA (sf) 1996-3 A-6 AAA (sf) 1996-3 M-1 CCC- (sf) 1996-3 B-1 CCC-(sf) 1996-4 M-1 CCC-(sf) 1996-5 A-6 AAA (sf) 1996-5 A-7 AAA (sf) 1996-5 M-1 CCC-(sf) 1996-6 A-6 AAA (sf) 1996-6 M-1 CCC(sf) 1996-7 A-6 AAA (sf) 1996-7 M-1 B-(sf) 1996-8 A-6 AAA (sf) 1996-8 A-7 AAA (sf) 1996-8 M-1 CCC(sf) 1996-9 A-5 AAA (sf) 1996-9 A-6 AAA (sf) 1996-9 M-1 CCC(sf) 1996-10 A-5 AAA (sf) 1996-10 A-6 AAA (sf) 1997-4 M-1 CCC-(sf) 1997-6 A-6 A+ (sf) 1997-6 A-7 A+ (sf) 1997-6 A-8 A+ (sf) 1997-6 A-9 A+ (sf) 1997-6 A-10 A+ (sf) 1997-6 M-1 CCC-(sf) 1997-7 A-6 A+ (sf) 1997-7 A-7 A+ (sf) 1997-7 A-8 A+ (sf) 1997-7 A-9 A+ (sf) 1997-7 A-10 A+ (sf) 1997-7 M-1 CCC-(sf) 1997-8 A-1 A+ (sf) 1997-8 M-1 CCC-(sf) 1998-2 A-5 BBB (sf) 1998-2 A-6 BBB (sf) 1998-2 M-1 CCC-(sf) 1998-3 M-1 CCC-(sf) 1998-5 M-1 CCC-(sf) 1998-6 M-1 CCC-(sf) 1998-8 A-1 B+(sf) 1998-8 M-1 CCC-(sf) Manufactured Housing Contract Senior-Subordinate Pass-Through Trust Series Class Rating 1999-1 M-1 CCC- (sf) 1999-2 M-1 CCC- (sf) 1999-3 A-7 CCC- (sf) 1999-3 A-8 CCC- (sf) 1999-3 A-9 CCC- (sf) 1999-4 A-7 CCC- (sf) 1999-4 A-8 CCC- (sf) 1999-4 A-9 CCC- (sf) 1999-5 A-5 CCC- (sf) 1999-5 A-6 CCC- (sf) 1999-6 A-1 CCC- (sf) 2000-2 A-5 CCC- (sf) 2000-2 A-6 CCC- (sf) Manufactured Housing Contract Senior-Subordinate Pass-Through Certificates Series Class Rating 2000-3 A CCC- (sf) 2000-4 A-5 CCC- (sf) 2000-4 A-6 CCC- (sf) 2000-5 A-6 CCC- (sf) 2000-5 A-7 CCC- (sf) 2000-6 A-5 CCC- (sf) 2001-1 A-5 CCC- (sf) 2001-2 A CCC- (sf) 2001-4 A-4 B- (sf) 2001-4 M-1 CCC- (sf) 2002-1 A-1 BBB+ (sf) 2002-1 M-1-A CCC+ (sf) 2002-1 M-1-F CCC+ (sf) 2002-1 M-2 CCC- (sf) 2002-1 B-1 CC (sf) 2002-2 A-2 BB+(sf) 2002-2 M-2 CCC- (sf) OTHER OUTSTANDING RATINGS Green Tree Manufactured Housing Trust Series Class Rating 1995-2 B-2 D (sf) 1995-3 B-2 D (sf) 1995-4 B-2 D (sf) 1995-5 B-2 D (sf) 1995-6 B-2 D (sf) 1995-7 B-2 D (sf) 1995-8 B-2 D (sf) 1995-9 B-2 D (sf) 1995-10 B-2 D (sf) 1996-1 B-2 D (sf) 1996-2 B-2 D (sf) 1996-3 B-2 D (sf) 1996-4 B-1 D (sf) 1996-4 B-2 D (sf) 1996-5 B-1 D (sf) 1996-5 B-2 D (sf) 1996-6 B-1 D (sf) 1996-6 B-2 D (sf) 1996-7 B-1 D (sf) 1996-7 B-2 D (sf) 1996-8 B-1 D (sf) 1996-8 B-2 D (sf) 1996-9 B-1 D (sf) 1996-9 B-2 D (sf) 1996-10 B-1 D (sf) 1996-10 B-2 D (sf) 1997-4 B-1 D (sf) 1997-4 B-2 D (sf) 1997-6 B-1 D (sf) 1997-6 B-2 D (sf) 1997-7 B-1 D (sf) 1997-7 B-2 D (sf) 1997-8 B-1 D (sf) 1997-8 B-2 D (sf) 1998-2 B-1 D (sf) 1998-2 B-2 D (sf) 1998-3 B-1 D (sf) 1998-3 B-2 D (sf) 1998-5 B-1 D (sf) 1998-5 B-2 D (sf) 1998-6 M-2 D (sf) 1998-6 B-1 D (sf) 1998-6 B-2 D (sf) 1998-8 M-2 D (sf) 1998-8 B-1 D (sf) 1998-8 B-2 D (sf) Manufactured Housing Contract Senior-Subordinate Pass-Through Trust Series Class Rating 1999-1 M-2 D (sf) 1999-1 B-1 D (sf) 1999-1 B-2 D (sf) 1999-2 M-2 D (sf) 1999-2 B-1 D (sf) 1999-2 B-2 D (sf) 1999-3 M-1 D (sf) 1999-3 M-2 D (sf) 1999-3 B-1 D (sf) 1999-3 B-2 D (sf) 1999-4 M-1 D (sf) 1999-4 M-2 D (sf) 1999-4 B-1 D (sf) 1999-4 B-2 D (sf) 1999-5 M-1 D (sf) 1999-5 M-2 D (sf) 1999-5 B-1 D (sf) 1999-5 B-2 D (sf) 1999-6 M-1 D (sf) 1999-6 M-2 D (sf) 1999-6 B-1 D (sf) 1999-6 B-2 D (sf) 2000-2 M-1 D (sf) 2000-2 M-2 D (sf) 2000-2 B-1 D (sf) Manufactured Housing Contract Senior-Subordinate Pass-Through Certificates Series Class Rating 2000-3 B-1 D (sf) 2000-4 M-1 D (sf) 2000-4 M-2 D (sf) 2000-4 B-1 D (sf) 2000-5 M-1 D (sf) 2000-5 M-2 D (sf) 2000-5 B-1 D (sf) 2000-6 M-1 D (sf) 2000-6 M-2 D (sf) 2000-6 B-1 D (sf) 2001-1 M-1 D (sf) 2001-1 M-2 D (sf) 2001-1 B-1 D (sf) 2001-2 M-1 D (sf) 2001-2 M-2 D (sf) 2001-2 B-1 D (sf) 2001-3 M-1 D (sf) 2001-3 M-2 D (sf) 2001-3 B-1 D (sf) 2001-4 M-2 D (sf) 2001-4 B-1 D (sf) 2002-2 B-1 D (sf) * S&P Keeps 'D' Ratings on 46 Classes From 24 Oakwood ABS Deals --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on five classes, lowered its ratings on 11 classes, and affirmed its ratings on 34 classes of certificates from 24 Oakwood Homes Corp. (Oakwood)-related manufactured housing asset-backed securities (ABS) transactions. "At the same time, we maintained 'D (sf)' ratings on 46 classes issued from these transactions," S&P said. "Most of the transactions are experiencing higher cumulative net losses than we expected at deal inception. We attribute the increase in losses to rises in both default frequencies and loss severities," S&P said. "The upgrades reflect our assessment of the growth in credit enhancement because some of the classes in the capital structure benefit from subordination that continues to grow as a percent of the current pool balance, which mitigates our higher loss expectations for these pools. It also reflects our expectations regarding the likelihood of repayment in full of the remaining balances of the affected classes before these classes would become undercollateralized in our stress scenarios," S&P said. "The lowered ratings reflect our view that the available credit enhancement is no longer sufficient to support our previous ratings given our revised expected cumulative net losses. The downgrades of certain classes to 'CC (sf)' reflect our view of the likelihood that these classes will not receive full repayment of their original principal amount at legal final maturity date," S&P said. "The affirmations reflect our view that the total credit support as a percent of the amortizing pool balances is sufficient to support the classes at their current rating levels, compared with our revised expected remaining cumulative net losses,. In addition, we affirmed a number of 'CCC-' and 'CC' ratings. This reflects our view of the high probability that the transactions may be unable to meet full and timely interest or ultimate principal on these classes at a future date," S&P said. "Furthermore, our rating on 46 classes remain at 'D (sf)' to reflect failure to pay full and timely interest at the time of the downgrades," S&P said. "Based on the ongoing performance of the Oakwood manufactured housing collateral pools, we anticipate further deterioration in performance of some transaction that will exceed our previously revised lifetime cumulative net loss expectation (see table 1). As a result, the rating actions reflect our revised views regarding future collateral performance and each transaction's structure," S&P said. Table 1 Collateral Performance (%) As of August 2012 Distribution Oakwood Mortgage Investors Inc. Series Pool Current Revised expected factor CNL lifetime CNL (i) 1995-A 2.64% 16.80% 17.00 - 17.25 1995-B 4.05% 15.77% 16.00 - 16.25 1996-B 6.46% 18.72% 19.50 - 20.00 1996-C 8.11% 20.38% 21.75 - 22.25 1997-A 9.96% 17.95% 19.50 - 20.00 1997-B 10.76% 20.24% 22.25 - 22.75 1997-C 12.68% 19.05% 21.75 - 22.25 1998-A 10.78% 24.39% 26.50 - 27.50 1998-B 10.33% 28.54% 31.00 - 32.00 1998-D 14.78% 29.20% 33.50 - 34.50 OMI Trust Series Pool Current Revised expected Factor CNL lifetime CNL (i) 1999-C 16.31% 30.96% 36.00 - 37.00 1999-D 17.11% 29.96% 36.00 - 37.00 1999-E 18.66% 27.79% 34.50 - 35.50 2000-A 19.15% 28.97% 35.00 - 36.00 2000-B 15.69% 34.33% 39.50 - 40.50 2000-C 14.55% 34.57% 40.50 - 41.50 2000-D 14.00% 42.59% 48.25 - 49.25 2001-C 15.03% 46.48% 54.00 - 55.00 2001-D 19.70% 37.87% 47.25 - 48.25 2001-E 22.42% 33.79% 42.50 - 43.50 2002-A 23.09% 32.78% 42.00 - 43.00 2002-B 22.56% 33.23% 43.00 - 44.00 2002-C 26.96% 32.60% 44.50 - 45.50 (i)Lifetime CNL expectations based on current performance data. CNL-cumulative net loss. "Each transaction was initially structured with subordination (for the higher-rated classes), overcollateralization (O/C), excess spread, and/or reserve funds. Since the transactions are experiencing higher-than-expected losses, the O/C on each of these transactions, except for series 2004-OAK1, has been fully depleted to zero. In addition, many of the mezzanine and subordinate certificates in these transactions have been fully or partially written-down," S&P said. "Series 2000-A, 2000-B, 2000-D, 2001-C, and 2001-D, which all contain outstanding class A certificates rated 'CCC- (sf)', have collateral balances that are currently less than the outstanding certificate balance. In our view, these class A certificates are highly vulnerable to nonpayment of ultimate principal at each certificate's legal final maturity date," S&P said. "The class A-1 certificates from series 2001-C, 2001-D, and 2002- B, have legal final maturity date within the next 12 months. Given the current performance of these transactions, we expect the class A-1 certificates from these three series will not receive full repayment of their remaining principal balance at the legal final maturity date. As such, we have lowered our ratings to 'CC (sf)'," S&P said. "The 2004-OAK1 transaction is a REMIC trust. The collateral for this transaction consists of two underlying securities: class A-1 from OMI Trust 2000-B and class A-1 from OMI Trust 2000-C. This transaction incorporates additional credit enhancement in the form of overcollateralization from the underlying securities, which is sufficient to support the certificates from this transaction at their current rating levels," S&P said. "Standard & Poor's will continue to monitor the performance of the transactions relative to their cumulative net loss expectations and the available credit enhancement. We will take rating actions as we consider appropriate," S&P said. STANDARD & POOR'S 17G-7 DISCLOSURE REPORT SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating relating to an asset-backed security as defined in the Rule, to include a description of the representations, warranties and enforcement mechanisms available to investors and a description of how they differ from the representations, warranties and enforcement mechanisms in issuances of similar securities. The Rule applies to in-scope securities initially rated (including preliminary ratings) on or after Sept. 26, 2011. If applicable, the Standard & Poor's 17g-7 ' included in this credit rating report are available at: http://standardandpoorsdisclosure-17g7.com RATINGS RAISED Oakwood Mortgage Investors Inc. Rating Series Class To From 1998-A A-4 AAA (sf) AA- (sf) 1998-A A-5 AAA (sf) AA- (sf) 1998-B A-3 AA (sf) A (sf) 1998-B A-4 AA (sf) A (sf) 1998-B A-5 AA (sf) A (sf) RATINGS LOWERED OMI Trust Rating Series Class To From 2001-C A-1 CC (sf) CCC- (sf) 2001-D A-1 CC (sf) CCC- (sf) 2002-A A-1 CCC- (sf) B- (sf) 2002-A A-2 CCC+ (sf) B- (sf) 2002-A A-3 CCC+ (sf) B- (sf) 2002-A A-4 CCC+ (sf) B- (sf) 2002-B A-1 CC (sf) B- (sf) 2002-B A-2 CCC (sf) B- (sf) 2002-B A-3 CCC (sf) B- (sf) 2002-B A-4 CCC (sf) B- (sf) 2002-C A-1 CCC (sf) B- (sf) RATINGS AFFIRMED Oakwood Mortgage Investors Inc. Series Class Rating 1995-A B-1 CCC- (sf) 1995-B B-1 CCC- (sf) 1996-B A-6 AAA (sf) 1996-C A-6 AAA (sf) 1997-A A-6 AAA (sf) 1997-A B-1 CC (sf) 1997-B M-1 A (sf) 1997-C M-1 A (sf) 1998-A M CCC (sf) 1998-B M-1 CCC- (sf) 1998-D A-1 BB (sf) 1998-D A-1 ARM BB (sf) OMI Trust Series Class Rating 1999-C A-2 CCC- (sf) 1999-D A-1 CCC- (sf) 1999-E A-1 CCC- (sf) 2000-A A-2 CCC- (sf) 2000-A A-3 CCC- (sf) 2000-A A-4 CCC- (sf) 2000-A A-5 CCC- (sf) 2000-B A-1 CCC- (sf) 2000-C A-1 CCC- (sf) 2000-D A-4 CCC- (sf) 2001-C A-2 CCC- (sf) 2001-C A-3 CCC- (sf) 2001-C A-4 CCC- (sf) 2001-D A-2 CCC- (sf) 2001-D A-3 CCC- (sf) 2001-D A-4 CCC- (sf) 2001-E A-1 CCC- (sf) 2001-E A-2 CCC- (sf) 2001-E A-3 CCC- (sf) 2001-E A-4 CCC- (sf) ABSC Manufactured Housing Contract Resecuritization Trust 2004- OAK1 Class Rating A-3 BBB+ (sf) A-4 BB+ (sf) OTHER OUTSTANDING RATINGS Oakwood Mortgage Investors Inc. Series Class Rating 1997-A B-2 D (sf) 1997-B B-1 D (sf) 1997-B B-2 D (sf) 1997-C B-1 D (sf) 1997-C B-2 D (sf) 1998-A B-1 D (sf) 1998-B M-2 D (sf) 1998-B B-1 D (sf) 1998-B B-2 D (sf) OMI Trust Series Class Rating 1999-C M-1 D (sf) 1999-C M-2 D (sf) 1999-C B-1 D (sf) 1999-D M-1 D (sf) 1999-D M-2 D (sf) 1999-D B-1 D (sf) 1999-E M-1 D (sf) 1999-E M-2 D (sf) 2000-A M-1 D (sf) 2000-A M-2 D (sf) 2000-A B-1 D (sf) 2000-B M-1 D (sf) 2000-B B-1 D (sf) 2000-C M-1 D (sf) 2000-C M-2 D (sf) 2000-C B-1 D (sf) 2000-D M-1 D (sf) 2000-D M-2 D (sf) 2000-D B-1 D (sf) 2001-C M-1 D (sf) 2001-C M-2 D (sf) 2001-C B-1 D (sf) 2001-D M-1 D (sf) 2001-D M-2 D (sf) 2001-D B-1 D (sf) 2001-E M-1 D (sf) 2001-E M-2 D (sf) 2001-E B-1 D (sf) 2002-A M-1 D (sf) 2002-A M-2 D (sf) 2002-A B-1 D (sf) 2002-B M-1 D (sf) 2002-B M-2 D (sf) 2002-B B-1 D (sf) 2002-C M-1 D (sf) 2002-C M-2 D (sf) 2002-C B-1 D (sf) ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. 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