/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/140810.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, August 10, 2014, Vol. 18, No. 221 Headlines AGATE BAY 2014-1: S&P Assigns BB+ Rating on Class B-4 Notes ALESCO PREFERRED VI: Moody's Confirms Ca Rating on 3 Note Classes ALM XI: Moody's Assigns '(P)Ba3' Rating on $35.7MM Class D Notes AMAC CDO: Moody's Raises Rating on Class C Notes to 'Caa1' APIDOS CLO XVIII: Moody's Assigns B2 Rating on $8MM Class E Notes ARES XXII: Moody's Affirms 'Ba1' Rating on $11MM Class C Notes ARES XXXI: Fitch to Assign 'BBsf' Rating to Class D Notes BAMLL COMMERCIAL 2014-ICTS: S&P Assigns BB- Rating on Cl. E Notes BANC OF AMERICA 2005-4: Fitch Affirms Dsf Rating on Class K Notes BANC OF AMERICA 2007-1: Fitch Cuts Rating on Cl. A-J Certs to CC BEAR STEARNS 2005-PWR8: Moody's Affirms C Rating on CL. G Secs. BEAR STEARNS 2007-TOP28: Fitch Cuts Rating on Cl. D Secs to CCC BHMS 2014-ATLS: S&P Assigns Prelim. BB+ Rating on Class D-FL Notes BIRCHWOOD PARK: Moody's Assigns (P)Ba3 Rating on 2 Note Classes BRIDGEPORT CLO II: Moody's Affirms Ba1 Rating on Class C Notes CAPITAL TRUST 2004-1: S&P Lowers Rating on Class E Notes to CC CAPMARK VII: Moody's Affirms 'C' Rating on 6 Note Classes CARFINANCE CAPITAL: S&P Assigns Prelim. 'BB-' Rating on E Notes CARLYLE GLOBAL 2014-3: Moody's Rates Class E Notes '(P)B3' CDC COMMERCIAL 2002-FX1: Moody's Ups Rating on Cl. P Certs to Ba1 CENT CDO 15: S&P Affirms 'BB' Rating on Class D Notes CIFC FUNDING 2014-IV: Moody's Assigns (P)B2 Rating on Cl. F Notes CITIGROUP MORTGAGE: Moody's Takes Action on $6.3MM RMBS From 2003 COMM 2003-LNB1: Moody's Lowers Rating on Class X-1 Certs to Caa3 COMM 2005-FL11: Moody's Lowers Rating on 2 Cert. Classes to 'C' COMM MORTGAGE 2004-LNB2: Fitch Hikes Cl. J Certs Rating to 'Bsf' COMM MORTGAGE 2006-C8: Fitch Affirms 'CC' Rating on Class B Certs COMM 2014-FL4: S&P Assigns Prelim. 'BB-' Rating on 3 Certificates COMM 2014-UBS4: DBRS Finalizes '(P)BB' Rating on Class E Secs. COMMERCIAL MORTGAGE 1999-C1: Moody's Affirms C Rating on H Certs CREST 2003-2: S&P Lowers Rating on 2 Note Classes to 'CC' CSFB 2006-TFL2: Moody's Raises Rating on Class K Certs to 'Caa1' CSFB 2007-TFL1: Moody's Affirms 'C' Ratings on 2 Certificates CSMC TRUST 2014-IVR3: S&P Assigns BB+ Rating on Class B-3 Notes CUTWATER 2014-I: Moody's Assigns 'B2' Rating on Class E Notes CVP CASCADE CLO-2: S&P Assigns 'BB' Rating on Class D Notes CVS CREDIT: Moody's Affirms Ba1 Rating on Series A-2 Certificates DENALI CAPITAL VI: Moody's Hikes Rating on Cl. B-2L Notes to Ba2 DUANE STREET III: Moody's Raises Rating on Class E Notes to Ba1 EATON VANCE 2014-1: Moody's Assigns 'Ba3' Rating on Class E Notes EVERGLADES RE 2013-I: S&P Affirms 'B(sf)' Rating on Class A Notes FLAGSHIP CLO V: Moody's Affirms 'B1' Rating on Class B Notes G-FORCE CDO 2006-1: Fitch Affirms 'Dsf' Rating on 4 Note Classes GE COMMERCIAL 2004-C3: Moody's Cuts Cl. X-1 Debt Rating to Caa2 GMAC COMMERCIAL 1999-C2: Moody's Cuts Cl. X Certs Rating to Caa1 GMAC COMMERCIAL 2004-C2: Moody's Cuts Cl. X-1 Debt Rating to Caa1 GRAMERCY REAL 2005-1: Moody's Affirms Caa2 Rating on Cl. H Notes HARBOURVIEW CLO 2006-1: S&P Raises Rating on Class D Notes to BB- HEWETT'S ISLAND VI: Moody's Raises Rating on Class E Notes to Ba1 JP MORGAN 2000-C10: Moody's Hikes Rating on Class G Notes to 'C' JP MORGAN 2003-CIBC6: Moody's Cuts Cl. X-1 Secs. Rating to 'B2' JP MORGAN 2004-PNC1: Fitch Affirms 'CCCsf' Rating on Cl. F Secs. JP MORGAN 2005-LDP5: Fitch Affirms 'Csf' Rating on Class Q Certs JP MORGAN 2007-CIBC20: Moody's Affirms 'C' Rating on 5 Certs JP MORGAN 2008-C2: Fitch Affirms 'Dsf' Rating on Cl. C Certs JP MORGAN 2012-HSBC: DBRS Confirms BB Rating on Class E Secs. JP MORGAN 2013-C14: Fitch Affirms 'Bsf' Rating on Class G Certs JP MORGAN 2013-C14: Moody's Affirms 'B2' Rating on Cl. G Certs JP MORGAN 2014-C22: Moody's Rates Class UHP Certs '(P)Ba3' KKR CLO 9: Moody's Assigns (P)Ba3 Rating on $33.7MM Class E Notes LB COMMERCIAL 1998-C4: Moody's Cuts Rating on Cl. X Secs. to Caa2 LB COMMERCIAL 1999-C2: Moody's Hikes Cl. K Certs' Rating to Caa3 LB-UBS COMMERCIAL 2002-C1: Moody's Affirms C Rating on Cl. S Certs LB-UBS COMMERCIAL 2004-C7: Moody's Affirms C Rating on Cl N Certs LB-UBS COMMERCIAL 2004-C8: Moody's Affirms C Rating on 2 Notes LCM XVI: S&P Affirms 'BB-' Rating on Class E Notes LEGG MASON II: Moody's Affirms 'Caa1' Rating on Class C Notes LEHMAN MORTGAGE 2007-5: Moody's Cuts Rating on $108MM of RMBS MAC CAPITAL: S&P Raises Rating on 2 Note Classes to 'BB' MERRILL LYNCH 2007-C1: S&P Affirms 'B-' Rating on Class AM Notes MORGAN STANLEY 1998-CF1: Moody's Affirms Caa3 Rating on 2 Certs MORGAN STANLEY 2000-PRIN: Moody's Affirms Ba3 Rating on X Secs. MORGAN STANLEY 2006-HE3: Moody's Hikes Class A-2c Debt to 'Caa2' MORGAN STANLEY 2006-HQ9: S&P Lowers Rating on Class H Notes to D MORGAN STANLEY 2006-HQ10: Moody's Affirms 'C' Rating on 3 Certs MORGAN STANLEY 2007-IQ13: Fitch Affirms Dsf Rating on Cl. H Certs MORGAN STANLEY 2007-TOP27: Fitch Cuts Rating on Class B Notes to B MORGAN STANLEY 2014-CPT: S&P Assigns 'BB-' Rating on Class G Notes NEWCASTLE CDO VI: Moody's Affirms 'B1' Rating on Class I-MM Notes NOB HILL: S&P Affirms 'B+' Rating on Class E Notes NORTHWOODS CAPITAL XII: S&P Assigns Prelim. BB Rating on E Notes NYLIM STRATFORD 2001-1: Moody's Cuts Class B Notes' Rating to Ba2 OAKTREE CLO 2014-1: S&P Affirms 'BB' Rating on Class D Notes OFSI FUND VII: S&P Assigns Prelim. 'BB' Rating on Class E Notes ONEMAIN FINANCIAL 2014-2: S&P Assigns 'BB' Rating on Class C Notes OZLM VIII: Moody's Assigns '(P)B2' Rating on $10MM Class E Notes PASADENA CDO: Moody's Hikes Rating on Class C Notes to 'Ca' PEGASUS AVIATION: Moody's Cuts Ratings on 2 Securities to 'Ca' PHOENIX CLO III: Moody's Raises Rating on Cl. E Notes to 'Ba3' PREFERRED TERM IX: Moody's Raises Ratings on 3 Note Classes to B3 PREFERRED TERM X: Moody's Hikes Ratings on 3 Note Classes to Caa1 PREFERRED TERM XI: Moody's Raises Rating on 3 Note Classes to B2 PREFERRED TERM XII: Moody's Hikes Rating on 3 Note Classes to B3 PREFERRED TERM XVIII: Moody's Raises Rating on Cl. B Secs. to Ba3 PREFERRED TERM XXI: Moody's Raises Rating on 2 Note Classes to Ca PRETSL COMBINATION: Moody's Ups $7.7MM Combi Certs Rating to Caa1 RALI RMBS: Moody's Takes Action on $78MM RMBS Issued 2002-2003 RED RIVER: Moody's Hikes Rating on $31.5MM Class E Notes to Ba2 RESOURCE CAPITAL: Moody's Assigns B2 Rating on Class C Notes SANDELMAN REALTY I: Moody's Hikes Rating on Class E Notes to B1 SARANAC CLO III: Moody's Assigns '(P)Ba3' Rating on Class E Notes SARGAS CLO I: S&P Affirms 'B+' Rating on Class D Notes SFA ABS III: Fitch Lowers Rating on Class B Notes to 'Dsf' SILVER BAY 2014-1: Moody's Assigns (P)Ba2 Rating on Cl. E Certs SILVER SPRING: Moody's Assigns (P)B2 Rating on Class E Notes SOLARCITY LMC III: S&P Assigns 'BB' Rating on Class B Notes STEELE CREEK 2014-1: Moody's Rates 2 Note Classes '(P)Ba3' STF FIRST MORTGAGE: Moody's Lowers Rating on 2007-A Notes to Caa2 STONE TOWER V: S&P Raises Rating on Class D Notes to 'B+' TICP CLO II: Moody's Assigns (P)B3 Rating on $4.8MM Class E Notes TRINITAS CLO II: S&P Assigns 'BB' Rating on Class E Notes TROPIC CDO IV: Moody's Hikes Rating on Cl. A-3L Notes to Caa1 UNITED AUTO 2014-1: DBRS Finalizes BB Rating on Class E Notes UNITED AUTO 2014-1: S&P Assigns 'BB' Rating on Class E Notes US CAPITAL FUNDING: Moody's Confirms B2 Rating on Series A Unit VENTURE IX CDO: Moody's Raises Rating on Class E Notes to Ba3 VOYA CLO 2014-3: Moody's Assigns B2 Rating on $8.75MM Cl. E Notes WACHOVIA BANK 2004-C15: Moody's Cuts Rating on Cl. J Certs to C WATERFRONT CLO 2007-1: S&P Affirms 'BB' Rating on Class D Notes WFRBS COMMERCIAL 2012-C8: Moody's Affirms C Rating on Cl. G Notes WHITEHORSE IX: Moody's Rates $8.25MM Class F Notes 'B2' * Moody's Takes Action on $144MM of Alt-A RMBS Issued in 2005 * Moody's Takes Action on $122-Mil. of RMBS Issued 2004 to 2005 * Moody's Takes Action on $48MM of Alt-A RMBS Issued 2003-2004 * Moody's Raises Ratings on $31.5MM of RMBS Issued by Two Issuers * Moody's Takes Action on $5.9MM of Prime Jumbo RMBS by 2 Issuers * Moody's Takes Action on 16 Tranches on $336MM of RMBS * S&P Takes Actions on 10 U.S. Synthetic CDO Deals After Review * S&P Raises 11 Rating on 4 CDO Transactions * S&P Withdraws Ratings on 53 Classes From 19 CDO Transactions ********* AGATE BAY 2014-1: S&P Assigns BB+ Rating on Class B-4 Notes ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Agate Bay Mortgage Trust 2014-1's $259.637 million mortgage pass-through certificates series 2014-1. The certificate issuance is a residential mortgage-backed securities transaction backed by residential mortgage loans. The ratings reflect: -- The high-quality collateral included in the pool, as described in the Collateral Summary section. -- The transaction participants associated with the transaction in conjunction with each participant's role. -- The credit enhancement provided, as well as the associated structural deal mechanics. RATINGS ASSIGNED Agate Bay Mortgage Trust 2013-1 Class Rating Amount Interest (mil. $) rate (%) 1-A AAA (sf) 151.92 4.00 1-AIO AAA (sf) Notional (ii) 1-A1 AAA (sf) 151.92 1.00 1-A2 AAA (sf) 151.92 1.50 1-A3 AAA (sf) 151.92 2.00 1-A4 AAA (sf) 151.92 2.50 1-A5 AAA (sf) 151.92 3.00 1-A6 AAA (sf) 151.92 3.50 1-A7 AAA (sf) 75.96 4.50 1-A8 AAA (sf) 75.96 5.00 1-A9 AAA (sf) 75.96 5.50 1-A10 AAA (sf) 75.96 6.00 1-A11 AAA (sf) 146.90 4.00 1-A12 AAA (sf) 5.02 4.00 1-A13 AAA (sf) 146.90 3.50 1-A14 AAA (sf) 5.02 3.50 1-AIO1 AAA (sf) Notional 3.00 1-AIO2 AAA (sf) Notional 2.50 1-AIO3 AAA (sf) Notional 2.00 1-AIO4 AAA (sf) Notional 1.50 1-AIO5 AAA (sf) Notional 1.00 1-AIO6 AAA (sf) Notional 0.50 2-A AAA (sf) 99.15 3.50 2-AIO AAA (sf) Notional (iii) 2-A1 AAA (sf) 99.15 1.00 2-A2 AAA (sf) 99.15 1.50 2-A3 AAA (sf) 99.15 2.00 2-A4 AAA (sf) 99.15 2.50 2-A5 AAA (sf) 99.15 3.00 2-A6 AAA (sf) 49.57 4.00 2-A7 AAA (sf) 49.57 4.50 2-A8 AAA (sf) 49.57 5.00 2-A9 AAA (sf) 49.57 5.50 2-A10 AAA (sf) 49.57 6.00 2-A11 AAA (sf) 95.87 3.50 2-A12 AAA (sf) 3.28 3.50 2-AIO1 AAA (sf) Notional 2.50 2-AIO2 AAA (sf) Notional 2.00 2-AIO3 AAA (sf) Notional 1.50 2-AIO4 AAA (sf) Notional 1.00 2-AIO5 AAA (sf) Notional 0.50 B-1 AA+ (sf) 2.28 Net WAC B-2 A (sf) 1.87 Net WAC B-3 BBB (sf) 1.47 Net WAC B-4 BB+ (sf) 2.95 Net WAC B-5 NR 8.03 Net WAC (i) The certificates are subject to a net WAC cap. (ii) Equal to the excess, if any, of the net WAC for group 1 over 4.00%. (iii) Equal to the excess, if any, of the net WAC for group 2 over 3.50%. NR - Not rated. WAC - Weighted average coupon. ALESCO PREFERRED VI: Moody's Confirms Ca Rating on 3 Note Classes ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by ALESCO Preferred Funding VI, Ltd.: $23,000,000 Class B-1 Deferrable Third Priority Senior Secured Floating Rate Notes Due 2035 (current balance of $24,665,325.84, including deferred interest), Upgraded to B2 (sf); previously on June 26, 2014 Caa1 (sf) Placed Under Review for Possible Upgrade $12,000,000 Class B-2 Deferrable Third Priority Senior Secured Fixed/Floating Rate Notes Due 2035 (current balance of $15,277,309.41, including deferred interest), Upgraded to B2 (sf); previously on June 26, 2014 Caa1 (sf) Placed Under Review for Possible Upgrade Moody's also confirmed the ratings on the following notes: $365,000,000 Class A-1 First Priority Senior Secured Floating Rate Notes Due 2035 (current balance of $216,319,600.63), Confirmed at Aa3 (sf); previously on June 26, 2014 Aa3 (sf) Placed Under Review for Possible Upgrade $50,000,000 Class A-2 Second Priority Senior Secured Floating Rate Notes Due 2035, Confirmed at Baa3 (sf); previously on June 26, 2014 Baa3 (sf) Placed Under Review for Possible Upgrade $20,000,000 Class A-3 Second Priority Senior Secured Fixed/Floating Rate Notes Due 2035, Confirmed at Baa3 (sf); previously on June 26, 2014 Baa3 (sf) Placed Under Review for Possible Upgrade $57,500,000 Class C-1 Deferrable Mezzanine Secured Floating Rate Notes Due 2035 (current balance of $62,732,287.14, including deferred interest), Confirmed at Ca (sf); previously on June 26, 2014 Ca (sf) Placed Under Review for Possible Upgrade $46,000,000 Class C-2 Deferrable Mezzanine Secured Fixed/Floating Rate Notes Due 2035 (current balance of $51,368,656.80, including deferred interest), Confirmed at Ca (sf); previously on June 26, 2014 Ca (sf) Placed Under Review for Possible Upgrade $10,000,000 Class C-3 Deferrable Mezzanine Secured Fixed/Floating Rate Notes Due 2035 (current balance of $12,946,158.61, including deferred interest), Confirmed at Ca(sf); previously on June 26, 2014 Ca (sf) Placed Under Review for Possible Upgrade $27,000,000 Class C-4 Deferrable Mezzanine Secured Fixed Rate Notes Due 2035 (current balance of $34,954,628.27, including deferred interest), Confirmed at Ca (sf); previously on June 26, 2014 Ca (sf) Placed Under Review for Possible Upgrade $17,000,000 Class D-1 Deferrable Subordinate Secured Floating Rate Notes Due 2035 (current balance of $19,694,176.27, including deferred interest), Confirmed at Ca (sf); previously on June 26, 2014 Ca (sf) Placed Under Review for Possible Upgrade $3,000,000 Class D-2 Deferrable Subordinate Secured Fixed/Floating Rate Notes Due 2035 (current balance of $4,117,839.39, including deferred interest), Confirmed at Ca (sf); previously on June 26, 2014 Ca (sf) Placed Under Review for Possible Upgrade ALESCO Preferred Funding VI, Ltd., issued in December 2004, is a collateralized debt obligation backed by a portfolio of bank and insurance trust preferred securities (TruPS). Ratings Rationale The rating actions on the Class B-1 and Class B-2 (Class B) notes are primarily a result of updates to Moody's TruPS CDOs methodology, as described in "Moody's Approach to Rating TruPS CDOs" published in June 2014. The Class B notes have benefited from the updates to Moody's TruPS CDOs methodology, including (1) removing the current 25% macro default probability stress for bank and insurance TruPS; (2) expanding the default timing profiles from one to six probability- weighted scenarios; (3) incorporating a redemption profile for bank and insurance TruPS; (4) using a loss distribution generated by Moody's CDOROM for deals that do not permit reinvestment; (5) giving full par credit to deferring bank TruPS that meet certain criteria; and (6) raising the assumed recovery rate for insurance TruPS. In addition, Moody's confirmed the ratings on the Class A, Class C and Class D notes due to the transaction's stable performance. As such, the expected losses on the Class A, Class C and Class D notes are still commensurate with their current rating levels. The Class A-1 notes have paid down by approximately 1.1% or $1.5 million since October 2013, using the diversion of excess interest proceeds. Based on the trustee's June 2014 report, the over- collateralization ratio of the Class A notes was 136.7% (limit 130.0%), versus 136.0% in October 2013, and that of the Class D notes, 76.6% (limit 102.8%), versus 76.3% in October 2013. The Class A-1 notes will continue to benefit from the diversion of excess interest due to the Class D overcollateralization failure and the use of proceeds from redemptions of any assets in the collateral pool. In taking the foregoing actions, Moody's also announced that it had concluded its review of its ratings on the issuer's Class A notes, Class B notes, Class C notes and Class D notes announced on June 26, 2014. At that time, Moody's had placed the ratings on review for upgrade as a result of the aforementioned methodology updates. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, are based on its methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool has having a performing par (after treating deferring securities as performing if they meet certain criteria) of $393.7 million, defaulted/deferring par of $53.7 million, a weighted average default probability of 13.2% (implying a WARF of 1247), and a weighted average recovery rate upon default of 10%. In addition to the quantitative factors Moody's explicitly models, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of an event of default, recent deal performance under current market conditions, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating TruPS CDOs" published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector and on the US insurance sector. 2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc(TM) or credit estimates. Because these are not public ratings, they are subject to additional uncertainties. Loss and Cash Flow Analysis: Moody's applied a Monte Carlo simulation framework in Moody's CDOROM(TM) v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. Moody's then used the loss distribution as an input in its CDOEdge(TM) cash flow model. CDOROM(TM) v. 2.13.1 is available on www.moodys.com under Products and Solutions -- Analytical models, upon receipt of a signed free license agreement. The portfolio of this CDO contains TruPS issued by small to medium sized U.S. community banks and insurance companies that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc(TM), an econometric model developed by Moody's KMV, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. For insurance TruPS that do not have public ratings, Moody's relies on the assessment of its Insurance team, based on the credit analysis of the underlying insurance firms' annual statutory financial reports. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 750) Class A-1: +2 Class A-2: +3 Class A-3: +3 Class B-1: +3 Class B-2: +3 Class C-1: 0 Class C-2: 0 Class C-3: 0 Class C-4: 0 Class D-1: 0 Class D-2: 0 Combo: 0 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 1798) Class A-1: -1 Class A-2: -2 Class A-3: -2 Class B-1: -3 Class B-2: -3 Class C-1: 0 Class C-2: 0 Class C-3: 0 Class C-4: 0 Class D-1: 0 Class D-2: 0 Combo: 0 ALM XI: Moody's Assigns '(P)Ba3' Rating on $35.7MM Class D Notes ---------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to six classes of notes to be issued by ALM XI, Ltd. $348,750,000 Class A-1 Senior Secured Floating Rate Notes due 2026 (the "Class A-1 Notes"), Assigned (P)Aaa (sf) $54,250,000 Class A-2a Senior Secured Floating Rate Notes due 2026 (the "Class A-2a Notes"), Assigned (P)Aa2 (sf) $10,000,000 Class A-2b Senior Secured Fixed Rate Notes due 2026 (the "Class A-2b Notes"), Assigned (P)Aa2 (sf) $25,250,000 Class B Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class B Notes"), Assigned (P)A2 (sf) $34,750,000 Class C Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Assigned (P)Baa3 (sf) $35,750,000 Class D Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Assigned (P)Ba3 (sf) The Class A-1 Notes, the Class A-2a Notes, the Class A-2b Notes, the Class B Notes, the Class C Notes and the Class D Notes are referred to herein, collectively, as the "Rated Notes." Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. 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 Rated Notes address the expected losses posed to noteholders. The provisional ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. ALM XI is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90.0% of the portfolio must consist of senior secured loans and eligible investments, and up to 10.0% of the portfolio may consist of second lien loans and unsecured loans. The portfolio is expected to be approximately 75% ramped as of the closing date. Apollo Credit Management (CLO) LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer will issue subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $550,000,000 Diversity Score: 55 Weighted Average Rating Factor (WARF): 2950 Weighted Average Spread (WAS): 3.45% Weighted Average Coupon (WAC): 6.00% Weighted Average Recovery Rate (WARR): 49.5% Weighted Average Life (WAL): 8.0 years. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2950 to 3393) Rating Impact in Rating Notches Class A-1 Notes: 0 Class A-2a Notes: -2 Class A-2b Notes: -2 Class B Notes: -2 Class C Notes: -1 Class D Notes: -1 Percentage Change in WARF -- increase of 30% (from 2950 to 3835) Rating Impact in Rating Notches Class A-1 Notes: -1 Class A-2a Notes: -3 Class A-2b Notes: -3 Class B Notes: -3 Class C Notes: -2 Class D Notes: -1 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and available on www.moodys.com. Moody's V Score provides 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. The V Score applies to the entire transaction, rather than individual tranches. AMAC CDO: Moody's Raises Rating on Class C Notes to 'Caa1' ---------------------------------------------------------- Moody's Investors Service has upgraded the ratings of the following notes issued by AMAC CDO Funding I: Cl. A-1, Upgraded to Aa3 (sf); previously on Sep 18, 2013 Affirmed A2 (sf) Cl. A-2, Upgraded to Ba1 (sf); previously on Sep 18, 2013 Affirmed Ba3 (sf) Cl. B, Upgraded to B1 (sf); previously on Sep 18, 2013 Affirmed B3 (sf) Cl. C, Upgraded to Caa1 (sf); previously on Sep 18, 2013 Affirmed Caa3 (sf) Cl. D-1, Upgraded to Caa3 (sf); previously on Sep 18, 2013 Affirmed Ca (sf) Cl. D-2, Upgraded to Caa3 (sf); previously on Sep 18, 2013 Affirmed Ca (sf) Moody's has also affirmed the ratings of the following notes: Cl. E, Affirmed Ca (sf); previously on Sep 18, 2013 Affirmed Ca (sf) Cl. F, Affirmed C (sf); previously on Sep 18, 2013 Affirmed C (sf) Ratings Rationale Moody's has upgraded the ratings of six classes of notes due to a combination of rapid amortization and stable credit quality of the underlying collateral pool as evidenced by a lower weighted average rating factor (WARF). Moody's has affirmed the ratings of two classes of notes because the key transaction metrics are commensurate with the existing ratings. The rating actions are the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO CLO) transactions. AMAC CDO Funding I is a static cash transaction backed by a portfolio of: i) whole loans and senior participations (94.3% of the pool balance); ii) B-Notes (3.8%); and iii) mezzanine loan interests (1.9%). As of the June 18, 2014 trustee report, the aggregate note balance of the transaction, including preferred shares, has decreased to $291.5 million from $400.0 million at issuance, with the paydown directed to the senior most outstanding class of notes, as a result of the combination of regular amortization, and interest proceeds re-diverted as principal due to failure of certain par value tests. There are no assets that are listed as defaulted securities as of the June 18, 2014 trustee report. Moody's has identified the following as key indicators of the expected loss in CRE CDO transactions: the WARF, the weighted average life (WAL), the weighted average recovery rate (WARR), and Moody's asset correlation (MAC). Moody's typically models these 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 its assessments for the collateral it does not rate. The rating agency modeled a bottom-dollar WARF of 3749, compared to 4009 at last review. The current ratings on the Moody's-rated collateral and the assessments of the non-Moody's rated collateral follow: Aaa-Aa3 and 1.0% compared to 0.9% at last review; A1-A3 and 13.2% compared to 0.0% at last review; Baa1-Baa3 and 11.6% compared to 7.3% at last review; Ba1-Ba3 and 5.0% compared to 6.0% at last review; B1-B3 and 33.7% compared to 25.8% at last review; and Caa1-C and 48.7% compared to 60.0% at last review. Moody's modeled a WAL of 2.7 years, compared to 2.9 years at last review. The current WAL is based on the assumption about extensions on the underlying collateral assets. Moody's modeled a fixed WARR of 54.7%, compared to 55.2% at last review. Moody's modeled a MAC of 27.8%, compared to 29.3% at last review. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes. Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for some of the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the recovery rates of the underlying collateral and credit assessments. Increasing the recovery rates by 10% would result in an average modeled rating movement on the rated notes of 0 to +4 notches (e.g., one notch up implies a ratings movement of Ba1 to Baa3). Decreasing the recovery rates by 10% would result in an average modeled rating movement on the rated notes of 0 to -3 notches (e.g., one notch down implies a ratings movement of Baa3 to Ba1). The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and commercial real estate property markets. Commercial real estate property values continue to improve modestly, 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, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate. APIDOS CLO XVIII: Moody's Assigns B2 Rating on $8MM Class E Notes ----------------------------------------------------------------- Moody's Investors Service has assigned ratings to seven classes of notes issued by Apidos CLO XVIII. Moody's rating action is as follows: $449,800,000 Class A-1 Senior Secured Floating Rate Notes due 2026 (the "Class A-1 Notes"), Definitive Rating Assigned Aaa (sf) $71,350,000 Class A-2a Senior Secured Floating Rate Notes due 2026 (the "Class A-2a Notes"), Definitive Rating Assigned Aa2 (sf) $23,000,000 Class A-2b Senior Secured Fixed Rate Notes due 2026 (the "Class A-2b Notes"), Definitive Rating Assigned Aa2 (sf) $31,300,000 Class B Mezzanine Deferrable Floating Rate Notes due 2026 (the "Class B Notes"), Definitive Rating Assigned A2 (sf) $42,700,000 Class C Mezzanine Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Definitive Rating Assigned Baa3 (sf) $39,850,000 Class D Junior Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Definitive Rating Assigned Ba3 (sf) $8,000,000 Class E Junior Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Definitive Rating Assigned B2 (sf) The Class A-1 Notes, the Class A-2a Notes, the Class A-2b Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are referred to herein, collectively, as the "Rated Notes." Ratings Rationale Moody's ratings of the Rated Notes address the expected losses posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Apidos XVIII is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90% of the portfolio must consist of senior secured loans, cash, and eligible investments, and up to 10% of the portfolio may consist of second lien loans and unsecured loans. The Issuer's documents require the portfolio to be at least 70% ramped as of the closing date. CVC Credit Partners, LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk and credit improved assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer has issued subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $714,000,000 Diversity Score: 60 Weighted Average Rating Factor (WARF): 2520 Weighted Average Spread (WAS): 3.65% Weighted Average Coupon (WAC): 7.00% Weighted Average Recovery Rate (WARR): 43.0% Weighted Average Life (WAL): 8 years Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2520 to 2898) Rating Impact in Rating Notches Class A-1 Notes: 0 Class A-2a Notes: -2 Class A-2b Notes: -2 Class B Notes: -2 Class C Notes: -1 Class D Notes: 0 Class E Notes: -1 Percentage Change in WARF -- increase of 30% (from 2520 to 3276) Rating Impact in Rating Notches Class A-1 Notes: -1 Class A-2a Notes: -4 Class A-2b Notes: -4 Class B Notes: -4 Class C Notes: -2 Class D Notes: -1 Class E Notes: -3 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and 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. ARES XXII: Moody's Affirms 'Ba1' Rating on $11MM Class C Notes -------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Ares XXII CLO, Ltd.: $26,500,000 Class A-2 Floating Rate Notes Due 2019, Upgraded to Aaa (sf); previously on September 8, 2011 Upgraded to Aa1 (sf) $19,000,000 Class A-3 Floating Rate Notes Due 2019, Upgraded to Aa1 (sf); previously on September 8, 2011 Upgraded to Aa3 (sf) $18,000,000 Class B Deferrable Floating Rate Notes Due 2019, Upgraded to A3 (sf); previously on September 8, 2011 Upgraded to Baa1 (sf) Moody's also affirmed the ratings on the following notes: $238,500,000 Class A-1 Floating Rate Notes Due 2019 (current outstanding balance $238,114,033), Affirmed Aaa (sf); previously on August 30, 2007 Assigned Aaa (sf) $11,000,000 Class C Deferrable Floating Rate Notes Due 2019, Affirmed Ba1 (sf); previously on September 8, 2011 Upgraded to Ba1 (sf) $11,000,000 Class D Deferrable Floating Rate Notes Due 2019, Affirmed Ba3 (sf); previously on September 8, 2011 Upgraded to Ba3 (sf) Ares XXII CLO, Ltd., issued in August 2007, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ends in October 2014. Ratings Rationale These rating actions reflect the benefit of the short period of time remaining before the end of the deal's reinvestment period in October 2014 and credit improvement of the underlying portfolio. Based on the trustee's July 2014 report, the weighted average rating factor is currently 2302 compared to 2569 in the last rating action. The senior tranches in the deal have also benefited from a shortening of the portfolio's weighted average life since the last rating action. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will commence and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (1943) Class A-1: 0 Class A-2: 0 Class A-3: +1 Class B: +2 Class C: +2 Class D: +2 Moody's Adjusted WARF + 20% (2914) Class A-1: 0 Class A-2: -1 Class A-3: -3 Class B: -2 Class C: -1 Class D: 0 Loss and Cash Flow Analysis: 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 Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par of $ 337.14 million, no defaulted par, a weighted average default probability of 14.74% (implying a WARF of 2429), a weighted average recovery rate upon default of 50.39%, a diversity score of 54 and a weighted average spread of 2.96%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. ARES XXXI: Fitch to Assign 'BBsf' Rating to Class D Notes --------------------------------------------------------- Fitch Ratings expects to assign the following ratings and Rating Outlooks to Ares XXXI CLO Ltd./LLC: -- $759,900,000 class A-1 notes 'AAAsf'; Outlook Stable; -- $136,900,000 class A-2 notes 'AAsf'; Outlook Stable; -- $75,700,000 class B notes 'Asf'; Outlook Stable; -- $46,250,000 class C notes 'BBBsf'; Outlook Stable; -- $57,500,000 class D notes 'BBsf'; Outlook Stable. Fitch does not expect to rate the subordinated notes. Transaction Summary Ares XXXI CLO Ltd. and Ares XXXI CLO LLC (together, Ares XXXI, or the issuer) comprise an arbitrage cash flow collateralized loan obligation (CLO) that will be managed by Ares CLO Management XXXI, L.P., a wholly owned subsidiary of Ares Management LLC (Ares Management). Net proceeds from the issuance of the secured and subordinated notes will be used to purchase a portfolio of approximately $1.25 billion of primarily senior-secured leveraged loans. The CLO will have a four-year reinvestment period and a two-year non-call period. Key Rating Drivers Sufficient Credit Enhancement: Credit enhancement (CE) available to the notes, in addition to excess spread, is sufficient to protect against portfolio default and recovery rate projections in the respective rating stress scenarios. The level of CE for each class of notes is above the average CE for notes in the same respective rating categories in recent CLO issuances. 'B' Asset Quality: The average credit quality of the indicative portfolio is approximately 'B', which is comparable to recent CLOs. Issuers rated in the 'B' rating category denote relatively weak credit quality; however, in Fitch Ratings' opinion, each class of rated notes is projected to perform with sufficient robustness against default rates commensurate with its applicable rating stress. Strong Recovery Expectations: The indicative portfolio consists of 96.1% first-lien senior-secured loans. Approximately 89.1% of the indicative portfolio has either strong recovery prospects or a Fitch-assigned recovery rating of 'RR2' or higher, resulting in a base case recovery assumption of 76.3%. In determining the notes' ratings, Fitch stressed the indicative portfolio by assuming a higher portfolio concentration of assets with lower recovery prospects and further reduced recovery assumptions for higher rating stress assumptions. For example, the analysis of the class A-1 notes assumed a 36.9% recovery rate in Fitch's 'AAAsf' scenario. Consistent Portfolio Parameters: The concentration limitations and collateral quality test levels are within the range of limits set in the majority of recent CLOs. Fitch addressed the impact of the most prominent risk-presenting concentration allowances in the Fitch stressed portfolio analysis. Rating Sensitivities Fitch evaluated the structure's sensitivity to the potential variability of key model assumptions, including decreases in recovery rates and increases in default rates or correlation. Fitch expects the class A-1 and class A-2 notes to remain investment grade, while classes B, C, and D are generally expected to remain within two rating categories, even under the most extreme sensitivity scenarios. Results under these sensitivity scenarios ranged between 'AA-sf' and 'AAAsf' for the class A-1 notes, between 'BBBsf' and 'AAAsf' for the class A-2 notes, between 'BBsf' and 'AA+sf' for the class B notes, between 'B-sf' and 'AA-sf' for the class C notes, and between a level below 'CCCsf' and 'BBB+sf' for the class D notes. The results of these scenarios remain consistent with the assigned ratings. The expected ratings are based on information provided to Fitch as of July 24, 2014. Sources of information used to assess these ratings were provided by the arranger, J.P. Morgan Securities LLC, and the public domain. BAMLL COMMERCIAL 2014-ICTS: S&P Assigns BB- Rating on Cl. E Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to BAMLL Commercial Mortgage Securities Trust 2014-ICTS's $188.0 million commercial mortgage pass-through certificates. The certificate issuance is a commercial mortgage-backed securities transaction backed by a $188.0 million commercial mortgage loan secured by the fee interest in the InterContinental New York Times Square, a 607-room, 36-story, full-service hotel in New York City. The ratings reflect S&P's view of the collateral's historical and projected performance, the sponsors' and manager's experience, the trustee-provided liquidity, the loan's terms, and the transaction's structure. Standard & Poor's determined that the loan has a 75.4% beginning and ending loan-to-value ratio, based on Standard & Poor's value, which is 50.2% lower than the appraised value. RATINGS ASSIGNED BAMLL Commercial Mortgage Securities Trust 2014-ICTS Class Rating Amount (mil. $) A AAA (sf) 74.82 X-CP BBB- (sf) 151.65(i) X-EXT BBB- (sf) 151.65(i) B AA- (sf) 28.19 C A- (sf) 20.95 D BBB- (sf) 27.69 E BB- (sf) 36.35 (i) Notional balance. The aggregate principal distributions and realized losses allocated to the class A, B, C, and D certificates will reduce the class X-CP and X-EXT certificates' notional amount. BANC OF AMERICA 2005-4: Fitch Affirms Dsf Rating on Class K Notes ----------------------------------------------------------------- Fitch Ratings has affirmed 19 classes of Banc of America Commercial Mortgage Inc. (BACM) commercial mortgage pass-through certificates series 2005-4. Key Rating Drivers The affirmations reflect sufficient credit enhancement and continued stable performance of the pool since Fitch's last rating action. Fitch modeled losses of 10.3% of the remaining pool; expected losses on the original pool balance total 10.1%, including $53 million (3.3% of the original pool balance) in realized losses to date. Fitch has designated 39 loans (33.8%) as Fitch Loans of Concern, which includes 16 specially serviced assets (10%). Of the remaining pool, 79% matures in 2015, most of which (52%) matures between May and July 2015. The largest contributor to expected losses is the Capistrano I Office Buildings loan (2.6% of the pool), which is secured by an 188,040 square foot (sf) office building located in San Juan Capistrano, CA. The largest three tenants are Los Golondrinas Mex. Food/Arturo Galindo Jr. (4%) lease expiration January 2019; Semi Conductor Technology Associates Inc. (3%) expiration December 2017; and The Effect (3%) expiration December 2014. No other tenant represents more than 2% of the total net rentable area (NRA) at the property. Per the borrower, property performance has been affected by on-going freeway and bridge construction in the area in addition to lower occupancy and declining base rents. The borrower continues to actively market the vacancies; however, per the borrower, there are no firm prospects. The year-end (YE) 2013 net operating income (NOI) declined 8% from YE 2012 and 44% since issuance. There is approximately 21% lease rollover in 2014 and 23% in 2015. Although property occupancy has improved slightly to 70% compared to 66% at Fitch's last review, average rent declined to $14 sf from $16 sf at last review; occupancy and rents remain below market. Per REIS as of 1Q 2014, the Southern Orange County submarket vacancy is 17.8% with asking rent $28.65sf. The loan remains current. The next largest contributor to expected losses is the specially- serviced Prairie Stone Commons loan (1.2%), which is secured by a 101,615 sf office property located in Hoffman Estates, IL, built in 1992. The loan transferred to special servicing in 2009 due to a payment default. As of May 2014, the property is 38% occupied. A summary judgment was received at the June 2014 hearing and a sale date has been set for July 31st. The special servicer was scheduled to attend a mandatory court ordered settlement conference in the Guaranty lawsuit. The third largest contributor to expected losses is the specially- serviced Friar's Branch Crossing (0.9%), which is a 110,027 SF office/retail property located in Chattanooga, TN. The asset was acquired via foreclosure in September 2011 and is currently real estate owned (REO). As of June 2014, the property is 58% occupied. The leasing broker is NAI Charter Real Estate Corporation. Per the special servicer, the asset is currently being marketed by a loan sale advisor with several other loan and REO assets. Rating Sensitivity Rating Outlooks on classes A-5A through A-1A and B remain Stable due to sufficient credit enhancement and continued paydown of the classes. The revision of class A-J to Positive from Stable reflects the expected increases in credit enhancement due to additional defeasance, expected paydown and upcoming loan maturities in 2015. With continued stable pool performance and loss expectations, and upgrade to class A-J is likely. Fitch affirms the following classes and assigns or revises Rating Outlooks and REs as indicated: -- $97.1 million class A-J at 'BBBsf', Outlook to Positive from Stable; -- $15.9 million class C at 'Bsf', Outlook to Stable from Negative; -- $29.7 million class D at 'CCCsf', RE 60%. Fitch affirms the following classes: -- $485.9 million class A-5A at 'AAAsf', Outlook Stable; -- $125.7 million class A3 and A4 at 'AAAsf', Outlook Stable; -- $7.3 million class A-SB at 'AAAsf', Outlook Stable; -- $69.4 million class A-5B at 'AAAsf', Outlook Stable; -- $80.5 million class A-1A at 'AAAsf', Outlook Stable; -- $31.7 million class B at 'BBsf', Outlook Stable; -- $17.8 million class E at 'CCsf', RE 0%; -- $19.8 million class F at 'CCsf', RE 0%; -- $17.8 million class G at 'Csf', RE 0%; -- $23.8 million class H at 'Csf', RE 0%; -- $7.9 million class J at 'Csf', RE 0%; -- $2.6 million class K at 'Dsf', RE 0%; -- $0 class L at 'Dsf', RE 0%; -- $0 class M at 'Dsf', RE 0%; -- $0 class N at 'Dsf', RE 0%; -- $0 class O at 'Dsf', RE 0%. Classes A-1 and A-2 are paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class XP and XC certificates. BANC OF AMERICA 2007-1: Fitch Cuts Rating on Cl. A-J Certs to CC ---------------------------------------------------------------- Fitch Ratings downgrades one distressed class and affirms 20 classes of commercial mortgage pass-through certificates from Banc of America Commercial Mortgage Trust (BACM), series 2007-1. Key Rating Drivers The downgrade to class A-J reflects the decrease in credit enhancement to distressed classes from realized losses coupled with the high level of Fitch modeled losses across the remaining pool. The Fitch modeled losses includes assumed losses on loans in special servicing and on performing loans with declines in performance indicative of a higher probability of default. Fitch modeled losses of 25.3% of the remaining pool. Expected losses on the original pool balance total 18.1% including $90.6 million (2.9% of the original pool balance) in realized losses to date. Fitch has designated 54 loans (55.1%) as Fitch Loans of Concern, which includes the two specially serviced assets (15.1%) and underperforming and/or highly leveraged assets. Rating Sensitivities The Negative Outlooks reflect the uncertainty regarding final recoveries upon disposition of specially serviced assets coupled with the pool's high percentage of Fitch Loans of Concern. Upon liquidation of the specially serviced assets, the Outlook on the super senior classes is expected to remain Stable. If losses are significantly higher than expected, or if interest shortfalls push further up the capital structure, the ratings and Outlooks of the senior classes are likely to be re-evaluated. As of the July 2014 distribution date, the pool's aggregate principal balance has decreased 39.8% to $1.89 billion from $3.15 billion at issuance. As of July 2014, there are cumulative interest shortfalls in the amount of $38.6 million, affecting classes A-J through Q. The largest contributor to modeled loss is the largest specially serviced loan (11.6% of the pool balance), which is the real estate owned (REO) Solana office complex located in Westlake, TX. The pari passu loan was transferred to special servicing in March 2009 for imminent default, was modified and is now REO. The reported appraisal value from March 2014 indicates a value significantly below the loan amount and the amount reported in 2013. The second largest contributor to modeled loss is the Skyline Portfolio (14.4% of the pool, inclusive of the A and B note). The portfolio, which consists of eight office buildings totaling 2.64 million square feet (sf) in Falls Church, VA, transferred to special servicing in March 2012 for imminent default. The sponsor, Vornado, cited the Base Realignment and Closure statute (BRAC), as contributing to recent and upcoming vacancies at the properties. The pari passu loan was modified in October 2013 with the $271.2 million pari passu portion split into a $140 million A- note and a $131.2 million B-note. The loan maturity was extended to Feb. 2022 with a one-year extension option if certain performance metrics are attained. The loan continues to perform under the terms of the modification. The third largest contributor to modeled loss is the StratREAL Industrial Portfolio I loan (3.5% of the pool). The note was sold in late 2013 via a purchase option. Proceeds were applied to outstanding receivables and pay down the loan. The remaining portion is expected to pass through as a loss to the trust. Fitch downgrades the following classes: -- $259.5 million class A-J to 'CCsf' from 'CCCsf'; RE 25%. Fitch also affirms the following classes: -- $39.7 million class A-3 at 'AAAsf'; Outlook Stable; -- $30.1 million class A-AB at 'AAAsf'; Outlook Stable; -- $698.7 million class A-4 at 'AAAsf'; Outlook Stable; -- $271.5 million class A-1A at 'AAAsf'; Outlook Stable; -- $214.5 million class A-MFX at 'BBsf'; Outlook Negative; -- $60 million class A-MFL at 'BBsf'; Outlook Negative; -- $27.5 million class B at 'Csf'; RE 0%; -- $35.4 million class C at 'Csf'; RE 0%; -- $27.5 million class D at 'Csf'; RE 0%; -- $39.3 million class E at 'Csf'; RE 0%; -- $39.3 million class F at 'Csf'; RE 0%; -- $35.4 million class G at 'Csf'; RE 0%; -- $35.4 million class H at 'Csf'; RE 0%. The $39.1 million class J remains at 'Dsf'; RE 0% due to realized losses. The fully depleted classes K, L, M, N, O and P remain at 'Dsf'; RE 0% due to realized losses. Classes A-1 and A-2 are paid in full. Fitch does not rate the fully depleted class Q. Fitch previously withdrew the rating on the interest-only class XW and the $40 million class A-MFX2. BEAR STEARNS 2005-PWR8: Moody's Affirms C Rating on CL. G Secs. --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of three classes and affirmed the ratings of seven classes and of Bear Stearns Commercial Mortgage Securities Trust, Series 2005-PWR8 as follows: Cl. A-4, Affirmed Aaa (sf); previously on Aug 29, 2013 Affirmed Aaa (sf) Cl. A-4FL, Affirmed Aaa (sf); previously on Aug 29, 2013 Affirmed Aaa (sf) Cl. A-J, Upgraded to A1 (sf); previously on Aug 29, 2013 Affirmed A3 (sf) Cl. B, Upgraded to Baa1 (sf); previously on Aug 29, 2013 Affirmed Baa3 (sf) Cl. C, Upgraded to Ba1 (sf); previously on Aug 29, 2013 Affirmed Ba2 (sf) Cl. D, Affirmed B3 (sf); previously on Aug 29, 2013 Affirmed B3 (sf) Cl. E, Affirmed Caa1 (sf); previously on Aug 29, 2013 Affirmed Caa1 (sf) Cl. F, Affirmed Ca (sf); previously on Aug 29, 2013 Affirmed Ca (sf) Cl. G, Affirmed C (sf); previously on Aug 29, 2013 Affirmed C (sf) Cl. X-1, Affirmed Ba3 (sf); previously on Aug 29, 2013 Affirmed Ba3 (sf) Ratings Rationale The ratings on Classes A-J, B and C were upgraded primarily due to an increase in credit support since Moody's last review, resulting from paydowns and amortization, as well as Moody's expectation of additional increases in credit support resulting from the payoff of loans approaching maturity that are well positioned for refinance. The pool has paid down by 8% since Moody's last review. In addition, loans constituting 77% of the pool that have defeased or have debt yields exceeding 10% and are scheduled to mature within the next 12 months. The ratings on Class A-4 and A-4F were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on Classes D through G were affirmed because the ratings are consistent with Moody's expected loss. The rating on the IO class was affirmed based on the credit performance (or the weighted average rating factor or WARF) of the referenced classes. Moody's rating action reflects a base expected loss of 3.1% of the current balance compared to 2.8% at Moody's last review. Moody's base expected loss plus realized losses is now 6.3% of the original pooled balance, compared to 6.2% at the last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 27 compared to 21 at Moody's last review. Deal Performance As of the July 11, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 30% to $1.2 billion from $1.8 billion at securitization. The certificates are collateralized by 159 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten loans constituting 33% of the pool. Nineteen loans, constituting 18% of the pool, have defeased and are secured by US government securities. Forty-nine loans, constituting 17% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Seventeen loans have been liquidated from the pool, resulting in an aggregate realized loss of $72.2 million (for an average loss severity of 52%). Four loans, constituting 2% of the pool, are currently in special servicing. Moody's estimates an aggregate $14.9 million loss for specially serviced loans (63% expected loss on average). Moody's has assumed a high default probability for seven poorly performing loans, constituting 2% of the pool, and has estimated an aggregate loss of $4.0 million (a 20% expected loss based on a 50% probability default) from these troubled loans. Moody's received full year 2012 operating results for 92% of the pool and full year 2013 operating results for 97% of the pool. Moody's weighted average conduit LTV is 84% compared to 86% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 12% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.2%. Moody's actual and stressed conduit DSCRs are 1.44X and 1.23X, respectively, compared to 1.48X and 1.24X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 21% of the pool balance. The largest loan is the One MetroTech Center Loan ($161.9 million -- 13% of the pool). The loan is secured by a 933,011 square foot, 23-story Class A office property with a 270 car garage built on 1.6 acres of land in Brooklyn, New York. The office occupancy was 95% in January 2014, same as at last review. Moody's current LTV and stressed DSCR are 89% and 1.06X, respectively, compared to 87% and 1.09X at last review. The second largest loan is the Park Place Loan ($50.9 million -- 4% of the pool). The loan is secured by a 351,955 square foot office complex in Florham Park, New Jersey. The property was 85% leased as of December 2013 compared to 96% as of December 2012. Moody's current LTV and stressed DSCR are 87% and 1.18X, respectively, compared to 79% and 1.30X at last review. The third largest loan is the Ballston Office Center Loan ($43.1 million -- 4% of the pool). The loan is secured by a 178,452 square foot, 10-story office building located in Arlington, Virginia. The property is 91% leased to the US Coast Guard through June 2016. Moody's current LTV and stressed DSCR are 103% and 0.95X respectively, compared to 104% and 0.93X at last review. BEAR STEARNS 2007-TOP28: Fitch Cuts Rating on Cl. D Secs to CCC --------------------------------------------------------------- Fitch Ratings has downgraded one class and affirmed 18 classes of Bear Stearns Commercial Mortgage Securities Trust, series 2007- TOP28 (BSCMSI 2007-TOP28). Key Rating Drivers The downgrade is due to an increase in expected losses on the specially serviced loans combined with performance deterioration on several performing loans. Fitch modeled losses of 6.0% of the remaining pool; expected losses on the original pool balance total 6.9%, including $31.5 million (1.8% of the original pool balance) in realized losses to date. Fitch has designated 51 loans (31.4%) as Fitch Loans of Concern, which includes two specially serviced assets (4.6%). As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 15% to $1.5 billion from $1.76 billion at issuance. Per the servicer reporting, two loans (3.6% of the pool) are defeased. Interest shortfalls are currently affecting classes H through P. Over 50% of the pool consists of retail properties, including eight of the Top 15 loans and the largest loan in the pool, representing 11.4% of the collateral. While updated rent rolls were provided by the servicer, recent sales information was available on only two of the eight retail properties in the top 15. The largest contributor to expected losses is the Cole Retail Portfolio (2.1% of the pool), which is secured by six single- tenant retail properties located in CA, IL, RI, TX and NJ (2). The loan is on the servicer watchlist due to decreased DSCR as of year-end 2013. The servicer reported DSCR dropped to 0.81x as of year-end 2013 from 1.59x as of year-end 2012. Current rent rolls or tenant sales information was not available for the properties. Fitch determined the property located in Houston, TX is dark, with the former tenant, Academy Sports, on a lease through May 2015. The Rite Aid in Mantua, NJ was under a lease scheduled to expire in June 2014. Per Rite Aid's website, the location is still open. The second largest contributor to expected losses is the specially-serviced RiverCenter I & II loan (3.7% of the pool), which is secured by a leasehold interest in two adjacent office buildings totaling 550,000 sf. The loan was transferred to the special servicer after the borrower indicated they would not be able to repay the loan at maturity in June 2014. The properties, which are located outside Cincinnati in Covington, KY, have seen an overall decline in performance over the last few years. As of December 2013 occupancy was reported at 70%, down from 88% at year-end 2012. Physical occupancy is estimated to be lower, at approximately 50%, based on a Cincinnati Business Journal article from 2011 that reported OmniCare, the primary tenant with 18% of the net rentable area (NRA), is still making lease payments but has fully vacated the building. The OmniCare lease expires in February 2016. Further, the second largest tenant (10% of NRA) recently renewed its lease at 15% lower than its current rent. Market conditions in the region remain challenged, with submarket Class B/C vacancy reported at 17.4% per REIS. The next largest contributor to expected losses is the Pavilions at Hartman Heritage loan (1.6%), which is secured by a 220,000 sf retail property, built in 2003, located in Independence, MO, in the Kansas City MSA. As of year-end 2013 occupancy was 65.1%, down from 70% at year-end 2012, and significantly lower than the 92% occupancy at origination. The DSCR as of year-end 2013 was 1.25x, flat with the 1.25x reported at year-end 2012. The interest only loan matures in August 2017. While the property saw an over 60% improvement in property cash flow between year-end 2012 and 2011, the property is still performing significantly below expectations at issuance when occupancy was 92% and the DSCR was 2.06x. Rating Sensitivities The ratings on the senior classes A-3 through A-J are expected to remain stable as these classes will benefit from increased credit enhancement as the pool continues to pay down. The Rating Outlook on Class B is revised to Negative from Stable due to the increase in expected losses. The Rating Outlook on Class C remains Negative as this class is subject to downgrade should performance declines continue. The distressed classes are subject to further downgrade if realized losses exceed current expectations. Fitch downgrades the following class and revises Recovery Estimates (REs) as indicated: -- $28.6 million class D to 'CCCsf' from 'Bsf'; RE 60%. Fitch affirms the following classes: -- $43.3 million class A-3 at 'AAAsf'; Outlook Stable; -- $51.4 million class A-AB at 'AAAsf'; Outlook Stable; -- $841.7 million class A-4 at 'AAAsf'; Outlook Stable; -- $117.2 million class A-1A at 'AAAsf'; Outlook Stable; -- $176.1 million class A-M at 'AAAsf'; Outlook Stable; -- $114.5 million class A-J at 'BBBsf'; Outlook Stable; -- $30.8 million class B at 'BBsf'; Outlook to Negative from Stable; -- $15.4 million class C at 'BBsf'; Outlook Negative; -- $22 million class E at 'CCCsf'; RE 0%; -- $17.6 million class F at 'CCsf'; RE 0%; -- $19.8 million class G at 'CCsf'; RE 0%; -- $15.4 million class H at 'Csf'; RE 0%; -- $2.2 million class J at 'Csf'; RE 0%; -- $1.4 million class K at 'Dsf'; RE 0%; -- $0 class L at 'Dsf'; RE 0%; -- $0 class M at 'Dsf'; RE 0%; -- $0 class N at 'Dsf'; RE 0%; -- $0 class O at 'Dsf'; RE 0%. The class A-1 and A-2 certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates. BHMS 2014-ATLS: S&P Assigns Prelim. BB+ Rating on Class D-FL Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its preliminary ratings to BHMS 2014-ATLS Mortgage Trust's $1.0 billion commercial mortgage pass-through certificates series 2014-ATLS. The certificate issuance is a commercial mortgage-backed securities transaction backed by a first-lien mortgage on the borrowers' fee interest in the Atlantis Resort, totaling 2,917 guestrooms, in Paradise Island, Bahamas. The mortgage loan is further secured by pledges of equity interests in several additional borrowers. The $1.0 billion commercial mortgage loan is split into two floating-rate components totaling $350.0 million and two fixed-rate components totaling $650.0 million. The floating-rate components have a three-year initial term and a fully extended maturity at seven years. The fixed-rate components have a seven-year term. The preliminary ratings are based on information as of Aug. 4, 2014. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect S&P's view of the collateral's historical and projected performance, the sponsor's and manager's experience, the trustee-provided liquidity, the loan's terms, and the transaction's structure. PRELIMINARY RATINGS ASSIGNED BHMS 2014-ATLS Mortgage Trust Class Rating(i) Amount ($) A-FX NR 301,521,000 X-CPFX NR 188,829,000(ii) X-EXTFX NR 188,829,000(ii) B-FX NR 59,511,000 C-FX NR 40,018,000 D-FX BB+ (sf) 67,758,000 E-FX BB- (sf) 81,533,000 F-FX B- (sf) 99,659,000 A-FL NR 162,357,000 X-CPFL NR 101,236,000(ii) X-EXTFL NR 101,236,000(ii) B-FL NR 32,044,000 C-FL NR 21,549,000 D-FL BB+ (sf) 36,485,000 E-FL BB- (sf) 43,901,000 F-FL B- (sf) 53,664,000 (i) The issuer will issue the certificates to qualified institutional buyers in line with Rule 144A of the Securities Act of 1933. (ii) The class X-CPFX, X-CPFL, X-EXTFX, and X-EXTFL certificate amounts will be reduced by the aggregate principal distributions and realized losses allocated to a portion of the class A certificates. NR-Not rated. BIRCHWOOD PARK: Moody's Assigns (P)Ba3 Rating on 2 Note Classes --------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to nine classes of notes to be issued by Birchwood Park CLO, Ltd. Moody's rating action is as follows: $375,000,000 Class A Senior Secured Floating Rate Notes due 2026 (the "Class A Notes"), Assigned (P)Aaa (sf) $54,600,000 Class B-1 Senior Secured Floating Rate Notes due 2026 (the "Class B-1 Notes"), Assigned (P)Aa2 (sf) $21,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2026 (the "Class B-2 Notes"), Assigned (P)Aa2 (sf) $22,400,000 Class C-1 Secured Deferrable Floating Rate Notes due 2026 (the "Class C-1 Notes"), Assigned (P)A2 (sf) $10,000,000 Class C-2 Secured Deferrable Floating Rate Notes due 2026 (the "Class C-2 Notes"), Assigned (P)A2 (sf) $26,000,000 Class D-1 Secured Deferrable Floating Rate Notes due 2026 (the "Class D-1 Notes"), Assigned (P)Baa3 (sf) $10,000,000 Class D-2 Secured Deferrable Floating Rate Notes due 2026 (the "Class D-2 Notes"), Assigned (P)Baa3 (sf) $35,900,000 Class E-1 Secured Deferrable Floating Rate Notes due 2026 (the "Class E-1 Notes"), Assigned (P)Ba3 (sf) $2,500,000 Class E-2 Secured Deferrable Floating Rate Notes due 2026 (the "Class E-2 Notes"), Assigned (P)Ba3 (sf) The Class A Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D-1 Notes, the Class D-2 Notes, the Class E-1 Notes and the Class E-2 Notes are referred to herein, collectively, as the "Rated Notes." Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. 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 Rated Notes address the expected losses posed to noteholders. The provisional ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Birchwood Park CLO is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 92.5% of the portfolio must consist of senior secured loans, cash, and eligible investments, and up to 7.5% of the portfolio may consist of second lien loans and unsecured loans. The Issuer's portfolio is expected to be at least 75% ramped as of the closing date and the Issuer's documents are also expected to require that the portfolio will be 100% ramped within three months thereafter. GSO/Blackstone Debt Funds Management LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four-year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer will issue subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $600,000,000 Diversity Score: 65 Weighted Average Rating Factor (WARF): 2800 Weighted Average Spread (WAS): 3.60% Weighted Average Coupon (WAC): 7.50% Weighted Average Recovery Rate (WARR): 47% Weighted Average Life (WAL): 8 years. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2800 to 3220) Rating Impact in Rating Notches Class A Notes: 0 Class B-1 Notes: -1 Class B-2 Notes: -1 Class C-1 Notes: -2 Class C-2 Notes: -2 Class D-1 Notes: -1 Class D-2 Notes: -1 Class E-1 Notes: -1 Class E-2 Notes: -1 Percentage Change in WARF -- increase of 30% (from 2800 to 3640) Rating Impact in Rating Notches Class A Notes: -1 Class B-1 Notes: -3 Class B-2 Notes: -3 Class C-1 Notes: -3 Class C-2 Notes: -3 Class D-1 Notes: -2 Class D-2 Notes: -2 Class E-1 Notes: -1 Class E-2 Notes: -1 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and available on www.moodys.com. Moody's V Score provides 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. The V Score applies to the entire transaction, rather than individual tranches. BRIDGEPORT CLO II: Moody's Affirms Ba1 Rating on Class C Notes -------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Bridgeport CLO II Ltd: $390,000,000 Class A-1 Senior Floating Rate Notes Due 2021 (current outstanding balance $386,363,301.14), Upgraded to Aaa (sf); previously on August 8, 2011 Confirmed at Aa1 (sf) $21,000,000 Class A-2 Senior Floating Rate Notes Due 2021, Upgraded to Aa1 (sf); previously on August 8, 2011 Confirmed at A1 (sf) $26,000,000 Class B Deferrable Mezzanine Floating Rate Notes Due 2021, Upgraded to A3 (sf); previously on August 8, 2011 Upgraded to Baa1 (sf) Moody's also affirmed the ratings on the following notes: $22,000,000 Class C Deferrable Mezzanine Floating Rate Notes Due 2021, Affirmed Ba1 (sf); previously on August 8, 2011 Upgraded to Ba1 (sf) $19,000,000 Class D Deferrable Mezzanine Floating Rate Notes Due 2021 (current outstanding balance $14,319,673.80), Affirmed Ba3 (sf); previously on August 8, 2011 Upgraded to Ba3 (sf) Bridgeport CLO II Ltd., issued in June 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period will end in September 2014. Ratings Rationale These rating actions reflect the benefit of the short period of time remaining before the end of the deal's reinvestment period in September 2014. In light of the reinvestment restrictions during the amortization period, and therefore the limited ability of the manager to effect significant changes to the current collateral pool, Moody's analyzed the deal assuming a higher likelihood that the collateral pool characteristics will maintain a positive buffer relative to certain covenant requirements. In particular, Moody's assumed that the deal will benefit from higher weighted average spread (WAS) and diversity levels compared to the levels during the last rating review. Moody's modeled a WAS of 3.38% and diversity of 80 versus levels at the last rating review of 2.67% and 73, respectively. The senior notes in the deal have also benefited from a shortening of the portfolio's weighted average life. Furthermore, the transaction's reported collateral quality and OC ratios have been stable. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will commence and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. 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. Realization of higher than assumed recoveries would positively impact the CLO. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2127) Class A-1: 0 Class A-2: +1 Class B: +3 Class C: +1 Class D: +2 Moody's Adjusted WARF + 20% (3191) Class A-1: -1 Class A-2: -1 Class B: -2 Class C: -1 Class D: 0 Loss and Cash Flow Analysis: 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 Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $489.7 million, defaulted par of $0.01 million, a weighted average default probability of 19.0% (implying a WARF of 2659), a weighted average recovery rate upon default of 49.68%, a diversity score of 80 and a weighted average spread of 3.38%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. CAPITAL TRUST 2004-1: S&P Lowers Rating on Class E Notes to CC -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on classes D and E from Capital Trust Re CDO 2004-1 Ltd., a commercial real estate collateralized debt obligation (CRE CDO) transaction. The downgrades reflect interest shortfalls to the classes. S&P downgraded the non-deferrable class D to 'D (sf)' because of interest shortfalls. S&P lowered its rating on the deferrable class E to 'CC (sf)' to reflect the interest shortfalls that S&P expects will continue for the foreseeable future. The remaining assets in the transaction do not generate sufficient interest proceeds to pay interest due on classes D and E, so those classes will rely on the ultimate liquidation of the collateral to repay the outstanding interest shortfalls. According to the July 17, 2014, trustee report, the transaction's collateral totaled $38.0 million, while the transaction's liabilities, including capitalized interest, totaled $245.8 million. Classes D and E's cumulative principal balance, including capitalized interest, was $13.0 million. The transaction has three assets outstanding, all of which are deemed impaired in the trustee report: -- Subordinate note on 1111 Marcus ($27.0 million, 71.2%); -- Subordinate note on Resorts International Portfolio ($10.5 million, 27.7%); and -- Class G from GE Capital Commercial Mortgage Corp. 2000-1 ($427,064, 1.1%). RATINGS LIST Capital Trust Re CDO 2004-1 Ltd. Rating Class Identifier To From D 140574AE4 D (sf) CCC- (sf) E 140574AF1 CC (sf) CCC- (sf) CAPMARK VII: Moody's Affirms 'C' Rating on 6 Note Classes --------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Capmark VII-CRE Ltd.: Cl. A-2, Upgraded to Baa2 (sf); previously on Aug 21, 2013 Upgraded to Ba1 (sf) Cl. B, Upgraded to Caa1 (sf); previously on Aug 21, 2013 Affirmed Caa2 (sf) Moody's has also affirmed the ratings on the following notes: Cl. C, Affirmed Caa3 (sf); previously on Aug 21, 2013 Affirmed Caa3 (sf) Cl. D, Affirmed Ca (sf); previously on Aug 21, 2013 Affirmed Ca (sf) Cl. E, Affirmed C (sf); previously on Aug 21, 2013 Affirmed C (sf) Cl. F, Affirmed C (sf); previously on Aug 21, 2013 Affirmed C (sf) Cl. G, Affirmed C (sf); previously on Aug 21, 2013 Affirmed C (sf) Cl. H, Affirmed C (sf); previously on Aug 21, 2013 Affirmed C (sf) Cl. J, Affirmed C (sf); previously on Aug 21, 2013 Affirmed C (sf) Cl. K, Affirmed C (sf); previously on Aug 21, 2013 Affirmed C (sf) Ratings Rationale Moody's has upgraded the ratings of two classes of notes due to rapid amortization of the underlying collateral combined with greater than expected recovery on defaulted assets. Additionally, the resulting collateral exhibits both an improved weighted average rating factor (WARF) and weighted average recovery rate (WARR). Moody's has affirmed the ratings on eight classes of notes because the key transaction metrics are commensurate with existing ratings. The affirmation is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO CLO) transactions. Capmark VII -- CRE Ltd. is a cash transaction whose reinvestment period ended in August 2011. The transaction is wholly backed by a portfolio of whole loans and senior participations. As of the July 8, 2014 trustee report, the aggregate note balance of the transaction, including preferred shares, has decreased to $386.3 million from $1.0 billion at issuance, with the pay-down currently directed to the senior most outstanding class of notes, as a result of regular amortization, recoveries from defaulted assets, and interest re-classified as principal due to the failure of certain par value tests. The pool contains two assets totaling $37.7 million (17.7% of the collateral pool balance) that are listed as defaulted securities as of the July 8, 2014 trustee report. While there have been limited realized losses on the underlying collateral to date, Moody's does expect moderate losses to occur on the defaulted securities. Moody's has identified the following as key indicators of the expected loss in CRE CLO transactions: WARF, the weighted average life (WAL), WARR, and Moody's asset correlation (MAC). Moody's typically models these as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CLO pool. Moody's has updated its assessments for the collateral it does not rate. The rating agency modeled a bottom-dollar WARF of 5,494, compared to 6,173 at last review. The current ratings on the Moody's-rated collateral and the assessments of the non-Moody's rated collateral follow: Ba1-Ba3 (0.0% compared to 9.2% at last review), B1-B3 (22.9% compared to 3.5% at last review) and Caa1- Ca/C (77.1% compared to 87.3% at last review). Moody's modeled a WAL of 3.0 years, compared to 3.1 years at last review. The WAL is based on assumptions about extensions on the underlying collateral. Moody's modeled a fixed WARR of 54.1%, compared to 53.3% at last review. Moody's modeled a MAC of 30.1%, compared to 30.4% at last review. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes. Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for some of the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the recovery rates of the underlying collateral and credit assessments. Holding all other parameters constant, reducing the recovery rates of the collateral pool by 10% would result in an average modeled rating movement on the rated notes of 0 to 2 notches downward (e.g., one notch down implies a ratings movement of Baa3 to Ba1). Holding all other parameters constant, increasing the recovery rates of the collateral pool by 10% would result in an average modeled rating movement on the rated notes of 0 to 2 notches upward (e.g., one notch up implies a rating movement from Ba1 to Baa3). The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and commercial real estate property markets. Commercial real estate property values continue to improve modestly, 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, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate. CARFINANCE CAPITAL: S&P Assigns Prelim. 'BB-' Rating on E Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to CarFinance Capital Auto Trust 2014-2's $230.50 million automobile receivables-backed notes series 2014-2. The note issuance is an asset-backed securities transaction backed by subprime auto loan receivables. The preliminary ratings are based on information as of July 24, 2014. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The availability of approximately 32.1%, 27.3%, 24.3%, 21.8%, and 19.0% credit support for the class A, B, C, D, and E notes, respectively, based on stressed cash flow scenarios (including excess spread), which provides coverage of more than 2.50x, 2.25x, 1.85x, 1.60x, and 1.40x S&P's 11.0%-12.0% 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, its ratings on the class A notes would remain within one rating category of S&P's preliminary 'A (sf)' rating during the first year; and S&P's ratings on the class B, C, D, and E notes would remain within two rating categories of S&P's preliminary 'A- (sf)', 'BBB (sf)', 'BB (sf)', and 'BB- (sf)' ratings, respectively, during the first year. These potential rating movements are consistent with S&P's credit stability criteria, which outline the outer bound of credit deterioration as a two- category downgrade within the first year for 'A' through 'BB' rated securities under the moderate stress conditions. -- S&P's view of the collateral characteristics of the subprime automobile loans securitized in this transaction including 35% of direct loans in the pool. -- The transaction's cumulative net loss trigger. -- S&P's view of the transaction's payment and legal structures. PRELIMINARY RATINGS ASSIGNED CarFinance Capital Auto Trust 2014-2 Class Rating Type Interest Amount rate(i) (mil. $)(i) A A (sf) Senior Fixed 191.88 B A- (sf) Subordinate Fixed 15.21 C BBB (sf) Subordinate Fixed 9.36 D BB (sf) Subordinate Fixed 7.61 E BB- (sf) Subordinate Fixed 6.44 (i) The interest rates and actual sizes of these tranches will be determined on the pricing date. CARLYLE GLOBAL 2014-3: Moody's Rates Class E Notes '(P)B3' ---------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to nine classes of notes to be issued by Carlyle Global Market Strategies CLO 2014-3, Ltd. Moody's rating action is as follows: $359,400,000 Class A-1A Senior Secured Floating Rate Notes due 2026 (the "Class A-1A Notes"), Assigned (P)Aaa (sf) $155,000,000 Class A-1B Senior Secured Floating Rate Notes due 2026 (the "Class A-1B Notes"), Assigned (P)Aaa (sf) $90,000,000 Class A-2 Senior Secured Floating Rate Notes due 2026 (the "Class A-2 Notes"), Assigned (P)Aa2 (sf) $38,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class B Notes"), Assigned (P)A2 (sf) $34,000,000 Class C-1 Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class C-1 Notes"), Assigned (P)Baa3 (sf) $10,000,000 Class C-2 Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class C-2 Notes"), Assigned (P)Baa3 (sf) $42,300,000 Class D-1 Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class D-1 Notes"), Assigned (P)Ba3 (sf) $6,000,000 Class D-2 Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class D-2 Notes"), Assigned (P)Ba3 (sf) $6,700,000 Class E Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Assigned (P)B3 (sf) The Class A-1A Notes, Class A-1B Notes, Class A-2 Notes, Class B Notes, Class C-1 Notes, Class C-2 Notes, Class D-1 Notes, Class D- 2 Notes and Class E Notes are referred to herein, collectively, as the "Rated Notes." Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. 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 Rated Notes address the expected losses posed to noteholders. The provisional ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Carlyle 2014-3 is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90% of the portfolio must consist of senior secured loans, cash, and eligible investments, and up to 10% of the portfolio may consist of second lien loans and unsecured loans. The is expected to be at least 90% ramped as of the closing date. Carlyle Investment Management L.L.C. (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk and credit improved assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer will issue subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $800,000,000 Diversity Score: 65 Weighted Average Rating Factor (WARF): 2825 Weighted Average Spread (WAS): 3.55% Weighted Average Coupon (WAC): 7.0% Weighted Average Recovery Rate (WARR): 46.5% Weighted Average Life (WAL): 8 years Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2825 to 3249) Rating Impact in Rating Notches Class A-1A Notes: -1 Class A-1B Notes: -1 Class A-2 Notes: -2 Class B Notes: -2 Class C-1 Notes: -1 Class C-2 Notes: -1 Class D-1 Notes: -1 Class D-2 Notes: -1 Class E Notes: -1 Percentage Change in WARF -- increase of 30% (from 2825 to 3673) Rating Impact in Rating Notches Class A-1A Notes: -1 Class A-1B Notes: -1 Class A-2 Notes: -4 Class B Notes: -4 Class C-1 Notes: -2 Class C-2 Notes: -2 Class D-1 Notes: -1 Class D-2 Notes: -1 Class E Notes: -3 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and 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. CDC COMMERCIAL 2002-FX1: Moody's Ups Rating on Cl. P Certs to Ba1 ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on five classes and affirmed the ratings on three classes in CDC Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2002-FX1 as follows: Cl. H, Affirmed Aaa (sf); previously on Sep 26, 2013 Affirmed Aaa (sf) Cl. J, Affirmed Aaa (sf); previously on Sep 26, 2013 Affirmed Aaa (sf) Cl. K, Upgraded to Aaa (sf); previously on Sep 26, 2013 Upgraded to Aa1 (sf) Cl. L, Upgraded to Aaa (sf); previously on Sep 26, 2013 Upgraded to A3 (sf) Cl. M, Upgraded to A1 (sf); previously on Sep 26, 2013 Upgraded to Ba1 (sf) Cl. N, Upgraded to A2 (sf); previously on Sep 26, 2013 Upgraded to Ba2 (sf) Cl. P, Upgraded to Ba1 (sf); previously on Sep 26, 2013 Affirmed Caa1 (sf) Cl. X-CL, Affirmed Ba3 (sf); previously on Sep 26, 2013 Affirmed Ba3 (sf) Ratings Rationale The ratings on Classes K through P were upgraded based primarily on an increase in credit support resulting from loan paydowns and amortization. The deal has paid down 25% since Moody's last review. The ratings on Classes H and J were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The rating on the IO class was affirmed based on the credit performance (or the weighted average rating factor or WARF) of the referenced classes. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description Of Models Used Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 1 compared to 2 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 17, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 90% to $64 million from $637 million at securitization. The certificates are collateralized by three mortgage loans ranging in size from less than 3% to 80% of the pool. Two loans, constituting 20% of the pool, have defeased and are secured by US government securities. The non-defeased remaining loan, constitutes 80% of the pool, and is on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. One loan has been liquidated at a loss from the pool, resulting in a realized loss of $757,000 (for a loss severity of 38%). No loans are currently in special servicing. The Outlet Collection Seattle Loan ($51 million -- 79.7% of the pool) is secured by 935,000 square foot enclosed outlet center located in Auburn, Washington. The property was formerly known as the Seattle SuperMall, but in 2012-13 the sponsor spent approximately $35 million to redevelop the collateral. The property's name was changed as part of the redevelopment and a grand re-opening occurred in October 2013. The total mall and in- line space are 96% and 90% leased, respectively, as of June 2014 compared to 90% and 80%, respectively, as of July 2013. The sponsor has been able to attract national retailers to the location since the redevelopment. Several tenants signed leases in 2013 including H&M, J.Crew, American Eagle and Nike. The loan's anticipated repayment date (ARD) is February 11, 2015. Moody's LTV and stressed DSCR are 77% and 1.40X, respectively, compared to 80% and 1.35X at last review. CENT CDO 15: S&P Affirms 'BB' Rating on Class D Notes ----------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-2a, A-3, B, and C notes from Cent CDO 15 Ltd., a collateralized loan obligation transaction managed by Columbia Management Investment Advisers LLC. At the same time, S&P affirmed its ratings on the class A-1, A-2b, and D notes from the same transaction. In addition, S&P removed its ratings on the class A- 1, A-2a, A-2b, A-3, B, and C notes from CreditWatch, where they were placed with positive implications on April 9, 2014. The upgrades reflect the low amount of defaulted assets in the portfolio as well as a decrease in 'CCC' rated assets. In addition, the transaction benefits from the assets' seasoning as it gets closer to its maturity date. Athough the cash flows point to higher ratings for the A-3, B, C, and D notes, the transaction is still in its reinvestment phase and the notes will not begin amortizing until after the September 2014 payment date. The affirmations reflect sufficient credit support available to the notes at the current rating levels. S&P 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 S&P will take rating actions as it deems necessary. RATINGS LIST Cent CDO 15 Ltd. Rating Rating Class Identifier To From A-1 15132VAA8 AA+ (sf) AA+ (sf)/Watch Pos A-2a 15132VAC4 AAA (sf) AA+ (sf)/Watch Pos A-2b 15132VAJ9 AA+ (sf) AA+ (sf)/Watch Pos A-3 15132VAL4 AA (sf) AA- (sf)/Watch Pos B 15132VAE0 A (sf) BBB+ (sf)/Watch Pos C 15132VAG5 BBB (sf) BBB- (sf)/Watch Pos D 15132UAA0 BB (sf) BB (sf) CIFC FUNDING 2014-IV: Moody's Assigns (P)B2 Rating on Cl. F Notes ----------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to seven classes of notes to be issued by CIFC Funding 2014-IV, Ltd. Moody's rating action is as follows: $4,000,000 Class X Senior Secured Floating Rate Notes due 2026 (the "Class X Notes"), Assigned (P)Aaa (sf) $378,000,000 Class A Senior Secured Floating Rate Notes due 2026 (the "Class A Notes"), Assigned (P)Aaa (sf) $81,000,000 Class B Senior Secured Floating Rate Notes due 2026 (the "Class B Notes"), Assigned (P)Aa2 (sf) $29,000,000 Class C Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Assigned (P)A2 (sf) $34,500,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Assigned (P)Baa3 (sf) $29,500,000 Class E Junior Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Assigned (P)Ba3 (sf) $12,000,000 Class F Junior Secured Deferrable Floating Rate Notes due 2026 (the "Class F Notes"), Assigned (P)B2 (sf) The Class X Notes, the Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes are referred to herein, collectively, as the "Rated Notes." Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. 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 Rated Notes address the expected losses posed to noteholders. The provisional ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. CIFC Funding 2014-IV is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90% of the portfolio must consist of senior secured loans, cash, and eligible investments, and up to 10% of the portfolio may consist of second lien loans and unsecured loans. Moody's expect the portfolio to be approximately 70% ramped as of the closing date. CIFC Asset Management LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer will issue subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $600,000,000 Diversity Score: 62 Weighted Average Rating Factor (WARF): 2765 Weighted Average Spread (WAS): 3.75% Weighted Average Coupon (WAC): 7.50% Weighted Average Recovery Rate (WARR): 47.5% Weighted Average Life (WAL): 8 years. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2765 to 3180) Rating Impact in Rating Notches Class X Notes: 0 Class A Notes: 0 Class B Notes: -2 Class C Notes: -2 Class D Notes: -1 Class E Notes: 0 Class F Notes: -2 Percentage Change in WARF -- increase of 30% (from 2765 to 3595) Rating Impact in Rating Notches Class X Notes: 0 Class A Notes: -1 Class B Notes: -3 Class C Notes: -4 Class D Notes: -2 Class E Notes: -1 Class F Notes: -4 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and available on www.moodys.com. Moody's V Score provides 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. The V Score applies to the entire transaction, rather than individual tranches. CITIGROUP MORTGAGE: Moody's Takes Action on $6.3MM RMBS From 2003 ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of six tranches issued by two Citigroup RMBS transactions backed by Alt-A RMBS loans. Issuer: Citigroup Mortgage Loan Trust, Series 2003-UP2 Cl. A-1, Downgraded to Baa1 (sf); previously on Jul 16, 2013 Downgraded to A3 (sf) Cl. B-1, Downgraded to B2 (sf); previously on Jun 29, 2012 Downgraded to Ba3 (sf) Cl. PO-1, Downgraded to Baa2 (sf); previously on Jul 16, 2013 Downgraded to A3 (sf) Cl. S-1, Downgraded to Baa1 (sf); previously on Jul 16, 2013 Downgraded to A3 (sf) Issuer: Citigroup Mortgage Loan Trust, Series 2003-UP3 Cl. A-1, Downgraded to Baa1 (sf); previously on Jul 16, 2013 Downgraded to A3 (sf) Cl. B-1, Downgraded to Ba1 (sf); previously on Jun 29, 2012 Downgraded to Baa3 (sf) Ratings Rationale The actions are a result of the recent performance of the underlying pools and reflect Moody's updated loss expectations on the pools. The ratings downgraded are due to weaker collateral performance. The cash flow models used in prior rating actions for Citigroup Mortgage Loan Trust Series 2003-UP2, and Citigroup Mortgage Loan Trust, Series 2003-UP3 mistakenly did not allocate realized losses from PO-related pools and undercollateralized amounts as losses to the subordinate certificates, as called for in the pooling and servicing agreements for these transactions. Moody's have revised Moody's cash flow modeling to include the correct loss allocation, and the rating actions reflect the change. The principal methodology used in these ratings was "US RMBS Surveillance Methodology" published in November 2013. Factors that Would Lead to an Upgrade or Downgrade of the Rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.1% in June 2014 from 7.5% in June 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. COMM 2003-LNB1: Moody's Lowers Rating on Class X-1 Certs to Caa3 ---------------------------------------------------------------- Moody's Investors Service has upgraded the rating of one class, affirmed the rating of one class and downgraded the rating of one class of COMM 2003-LNB1, Commercial Mortgage Pass-Through Certificates as follows: Cl. H, Upgraded to Baa3 (sf); previously on Jul 18, 2013 Affirmed Caa1 (sf) Cl. J, Affirmed Ca (sf); previously on Jul 18, 2013 Affirmed Ca (sf) Cl. X-1, Downgraded to Caa3 (sf); previously on Jul 18, 2013 Downgraded to B3 (sf) Ratings Rationale The rating on P&I Class H was upgraded based primarily on an increase in credit support resulting from loan paydowns and amortization. The deal has paid down 84% since Moody's last review. The rating on P&I Class J was affirmed because the rating is consistent with Moody's expected loss. The rating on IO Class X-1 was downgraded due to the decline in the credit performance of its reference classes resulting from principal paydowns of higher quality reference classes. Moody's rating action reflects a base expected loss of 25.3% of the current balance compared to 17.2% at Moody's last review. Moody's base expected loss plus realized losses is now 5.1% of the original pooled balance compared to 5.7% at the last review. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 4 compared to 3 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 10, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 98% to $21.4 million from $846 million at securitization. The certificates are collateralized by five mortgage loans ranging in size from less than 1% to 43% of the pool. No loans are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Eleven loans have been liquidated from the pool, resulting in an aggregate realized loss of $37.8 million (for an average loss severity of 56%). One loan, constituting 32% of the pool, is currently in special servicing. The specially serviced loan is the Biltmore Station Loan ($6.9 million -- 32.2% of the pool), which is secured by a 107,277 square foot (SF) mixed use property located in Asheville, NC. The loan was previously in special servicing and modified in 2011 into an A/B note split. The modification extended the loan term to May 2015. The loan transferred to special servicing again in August 2013 due to imminent default. Moody's estimates a significant loss for the specially serviced loan. Moody's received full year 2012 and 2013 operating results for 100% of the pool. Moody's weighted average conduit LTV is 81%, the same as at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 16% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.9%. Moody's actual and stressed conduit DSCRs are 0.87X and 1.40X, respectively, compared to 1.17X and 1.36X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 61% of the pool balance. The largest loan is the Shaw's Merrimack Loan ($9.1 million -- 42.5% of the pool), which is secured by a 65,000 SF grocery center located in Merrimack, NH. The property is fully leased to Shaw's Supermarket through 2024. The loan is fully amortizing. Moody's LTV and stressed DSCR are 96% and 1.13X, respectively, compared to 98% and 1.10X at the last review. The second largest loan is the Walgreens Douglasville Loan ($2.0 million -- 9.4% of the pool), which is secured by a 15,000 SF Walgreens located in Douglasville, GA. The property is 100% leased to the Walgreen Co. (Senior Unsecured Rating Baa1; Outlook Stable) through 2027. The loan is fully amortizing and matures in June 2023. Moody's LTV and stressed DSCR are 65% and 1.59X, respectively, compared to 67% and 1.54X at the last review. The third largest loan is the Walgreens Canton Mart Loan ($1.9 million -- 9.0% of the pool), which is secured by a 15,000 SF Walgreens located in Jackson, MS. The property is 100% leased to the Walgreen Co. (Senior Unsecured Rating Baa1; Outlook Stable) through 2021. The loan is fully amortizing and matures in March 2021. Moody's LTV and stressed DSCR are 48% and 2.15X, respectively, compared to 51% and 2.02X at the last review. COMM 2005-FL11: Moody's Lowers Rating on 2 Cert. Classes to 'C' --------------------------------------------------------------- Moody's Investors Service downgraded the ratings on two Interest Only classes of Deutsche Mortgage & Asset Receiving Corp., Commercial Mortgage Pass-Through Certificates, COMM 2005-FL11. Moody's rating action is as follows: Cl. X-2-DB, Downgraded to C (sf); previously on Sep 12, 2013 Downgraded to Caa3 (sf) Cl. X-3-DB, Downgraded to C (sf); previously on Sep 12, 2013 Downgraded to Caa3 (sf) Ratings Rationale The ratings on the interest only (IO) classes reference the only remaining loan in the pool, the DDR/Macquarie Mervyn's Portfolio Loan. The IO classes were downgraded as they are no longer receiving interest distributions, nor do Moody's expect them to receive interest in the future. Factors that would lead to an upgrade or downgrade of the rating: The rating of an IO class is based on the credit performance of its referenced classes or a specified set of loans. An IO class may be upgraded based on a lower weighted average rating factor or WARF due to an overall improvement in the credit quality of its reference classes or a change in the credit profile of the referenced set of loans. An IO class may be downgraded based on a higher WARF due to a decline in the credit quality of its reference classes, paydowns of higher quality reference classes, credit decline of referenced loans or non-payment of interest. Classes that have paid off through loan paydowns or amortization are not included in the WARF calculation. Classes that have experienced losses are grossed up for losses and included in the WARF calculation, even if Moody's has withdrawn the rating. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description of Models Used Moody's review incorporated the use of the excel-based Large Loan Model v8.7. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 15, 2014 Payment Date, the transaction's aggregate certificate balance has decreased to $7.6 million from $11.4 million at the prior review. The pay down is due to a release of one of the collateralized properties, The Mervyn's at Foothill Ranch Towne Center, located in Foothill Ranch, CA. The DDR/Macquarie Mervyn's Portfolio Loan ($7.6 million) is an REO loan. Currently, seven properties located in California and Arizona remain. This loan represents a pari-passu interest in a $102.1 million first mortgage loan. The pari-passu interests are securitized in two transactions, GECMC 2005-C4 and GMACC 2006-C1. The loan has paid down 84% since securitization and was originally secured by 35 single tenant buildings leased to Mervyn's. Mervyn's filed for Chapter 11 bankruptcy protection in July 2008, closed all its stores, and rejected the leases on all the properties in this portfolio. The loan was transferred to special servicing in October 2008. Moody's loan to value (LTV) ratio is over 100%, the same as last review. The Class L has experienced losses of $189,060 as of the current Payment Date. In addition, there are interest shortfalls totaling $5,594. Moody's does not rate the remaining principal classes, Class L. COMM MORTGAGE 2004-LNB2: Fitch Hikes Cl. J Certs Rating to 'Bsf' ---------------------------------------------------------------- Fitch Ratings has upgraded five classes and affirmed eight classes of COMM Mortgage Trust 2004-LNB2 commercial mortgage pass-through certificates. Key Rating Drivers The upgrades reflect increasing credit enhancement as a result of pay down since the last rating action and stable projected performance. Two Fitch loans of concern (6.8% of the pool at time of last rating action) have paid off, as well as two additional loans (7.3%), and the remaining two non-defeased, non-specially serviced loans continue to perform. Fitch modeled losses of 2.9% of the original pool balance, including 2.5% in realized losses to date. As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 91.6% to $81.3 million from $963.8 million at issuance including $23.97 million (2.5% of the original pool balance) in realized losses to date. There are five loans remaining in the pool; two are defeased (80.2% of the pool), including the largest (75.5%) and third largest loans (4.8%); and one loan is in special servicing (3.8%). The two defeased loans mature in December 2018 and January 2019, respectively. Interest shortfalls are currently affecting classes K through P. The specially-serviced loan is secured by a 59,933 square foot (sf) retail center located in Fort Worth, TX. The center is occupied by a mix of predominantly small local tenants with select national tenants. The loan transferred to special servicing in January 2014 due to maturity default. Occupancy and DSCR was 73% and 1.47x as of year-end (YE) 2013, respectively. The special servicer's anticipated strategy is an August 2014 foreclosure sale. The remaining performing loans are a multifamily property in Wilmington, NC and a single-tenant Walgreens store in College Station, TX. The multifamily property is reporting a 1.56x NOI DSCR and 92.4% occupancy as of YE 2013. The loan matures in March 2019. The Walgreens asset is a fully amortizing loan with an April 2028 maturity. Rating Sensitivities The Stable rating Outlooks on classes B through J are the result of high credit enhancement due to pay down and defeasance. Additional upgrades are not expected until there is further certainty of resolution on the specially serviced loan. Fitch upgrades the following classes as indicated: -- $8.4 million class E to 'AAAsf' from 'AAsf'; Outlook Stable; -- $9.6 million class F to 'AAAsf' from 'Asf'; Outlook Stable; -- $10.8 million class G to 'AAAsf' from 'BBsf'; Outlook Stable; -- $10.8 million class H to 'BBsf' from 'Bsf'; Outlook Stable; -- $4.8 million class J to 'Bsf' from 'CCCsf'; Outlook Stable. Fitch affirms the following classes as indicated: -- $487,243 class B at 'AAAsf'; Outlook Stable; -- $9.6 million class C at 'AAAsf'; Outlook Stable; -- $19.3 million class D at 'AAAsf'; Outlook Stable; -- $6 million class K at 'Csf'; RE 70%; -- $1.3 million class L at 'Dsf'; RE 0%; -- $0 class M at 'Dsf'; RE 0%; -- $0 class N at 'Dsf'; RE 0%; -- $0 class O at 'Dsf'; RE 0%. The class A-1, A-2, A-3 and A-4 certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates. COMM MORTGAGE 2006-C8: Fitch Affirms 'CC' Rating on Class B Certs ----------------------------------------------------------------- Fitch Ratings has affirmed all classes of COMM Mortgage Trust series 2006-C8 commercial mortgage pass-through certificates and revised the Outlook on Class A-M to Stable from Negative. Key Rating Drivers The affirmations are the result of stable overall pool performance since Fitch's last review. Fitch modeled losses of 10.9% for the remaining pool; expected losses on the original pool balance total 12.3%, including $187.5 million (7.4% of the original pool balance) in realized losses to date. Fitch has designated 30 loans (27.8%) as Fitch Loans of Concern, which includes 18 specially serviced assets (12.6%). As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 32.4% to $2.55 billion from $3.78 billion at issuance. Nine loans (7.9%) are defeased. Interest shortfalls totaling $40.1 million are currently affecting classes E through S. Rating Sensitivities All investment rated classes are expected to remain stable and no near-term rating actions are anticipated. In addition, the distressed classes (rated below 'B') may be subject to further rating actions as losses are realized. The largest contributor to expected losses is a loan secured by 405,000 square feet (sf) of a 689,601 sf regional mall located in Clovis, CA (3% of the pool). Loan was transferred to the special servicing in September 2013 due to payment default. The servicer is working with the borrower for a possible loan modification. Occupancy as of April 2014 was 73.5%, compared to 74% at year-end (YE) 2012 and 87.9% at issuance. The second largest contributor to expected losses is a portfolio of seven (12 at issuance) recreational vehicle resort communities located in five different states (2.2%). All properties became real estate owned assets (REO) as of May 2013. Based on servicer provided asset valuations, significant losses are expected upon liquidation of these assets. The third largest contributor to expected losses is an office/medical office building located in the West Central submarket of Las Vegas, Nevada totaling 130,268 SF. The property became REO as of June 2012 via foreclosure sale. The asset is on a ground lease with approximately 11 years remaining. Occupancy as of June 2014 was 66%. Fitch affirms the following classes and revises Outlook as indicated: -- $12.2 million class A-AB at 'AAAsf'; Outlook Stable; -- $1.1 billion class A-4 at 'AAAsf'; Outlook Stable; -- $481.8 million class A-1A at 'AAAsf'; Outlook Stable; -- $377.6 million class A-M at 'AAsf'; Outlook to Stable from Negative; -- $302.1 million class A-J at 'CCCsf'; RE 90%; -- $28.3 million class B at 'CCsf'; RE 0%; -- $42.5 million class C at 'CCsf'; RE 0%; -- $37.8 million class D at 'CCsf'; RE 0%; -- $23.6 million class E at 'Csf'; RE 0%; -- $28.3 million class F at 'Csf'; RE 0%; -- $51.9 million class G at 'Csf'; RE 0%; -- $37.8 million class H at 'Csf'; RE 0%; -- $15.4 million class J at 'Dsf'; RE 0%; -- $0 class K at 'Dsf'; RE 0%; -- $0 class L at 'Dsf'; RE 0%; -- $0 class M at 'Dsf'; RE 0%; -- $0 class N at 'Dsf'; RE 0%; -- $0 class O at 'Dsf'; RE 0%. The classes A-1, A-2A, A-2B and A-3 have paid in full. Fitch does not rate the class P, Q and S certificates. Fitch previously withdrew the ratings on the interest-only class X-P and X-S certificates. COMM 2014-FL4: S&P Assigns Prelim. 'BB-' Rating on 3 Certificates ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to COMM 2014-FL4 Mortgage Trust's $441.0 million commercial mortgage pass-through certificates. The certificate issuance is a commercial mortgage-backed securities transaction backed by four floating-rate loans secured by the fee interest in 15 limited-service and select-service hotels called the Blackstone Select Service Portfolio, the fee interest in the Hilton Portland & Executive Tower, the fee interest in Sofitel Chicago Water Tower, and the fee and leasehold interest in the Renaissance Aruba Resort & Casino in Oranjestad, Aruba via a mirror loan structure. The Renaissance Aruba Resort & Casino loan is not pooled. The preliminary ratings are based on information as of July 30, 2014. 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 collateral's historical and projected performance, the sponsors' and managers' experience, the trustee-provided liquidity, the loans' terms, and the transaction's structure. PRELIMINARY RATINGS ASSIGNED COMM 2014-FL4 Mortgage Trust Class Rating Amount (mil. $) A AAA (sf) 106,622,000 X-CP BBB- (sf) 213,800,000(i) X-EXT BBB- (sf) 213,800,000(i) B AA- (sf) 39,330,000 C A- (sf) 29,237,000 D BBB- (sf) 38,571,000 X-BX BBB- (sf) 99,700,000(i) X-HP BBB- (sf) 57,300,000(i) X-SOF BBB- (sf) 56,800,000(i) BX(ii) BB- (sf) 26,300,000 HP1(ii) BB- (sf) 16,500,000 HP2(ii) B (sf) 6,200,000 SOF1(ii) BB- (sf) 15,700,000 SOF2(ii) B (sf) 7,500,000 AR1(ii) NR 45,384,000 AR-X-CP(ii) BBB- (sf) 90,000,000(i) AR-X-EXT(ii) BBB- (sf) 90,000,000(i) AR2(ii) NR 12,902,000 AR3(ii) NR 8,622,000 AR4(ii) BBB- (sf) 23,092,000 AR5(ii) NR 65,000,000 (i) Notional balance. (ii) Loan-specific class. NR - Not rated. COMM 2014-UBS4: DBRS Finalizes '(P)BB' Rating on Class E Secs. -------------------------------------------------------------- DBRS Inc. has finalized its provisional ratings of the following classes of COMM 2014-UBS4 Mortgage Trust. The trends are Stable. -- Class A-1 at AAA (sf) -- Class A-2 at AAA (sf) -- Class A-SB at AAA (sf) -- Class A-3 at AAA (sf) -- Class A-4 at AAA (sf) -- Class A-5 at AAA (sf) -- Class A-M at AAA (sf) -- Class X-A at AAA (sf) -- Class X-B at AAA (sf) -- Class X-C at AAA (sf) -- Class X-D at AAA (sf) -- Class B at AA (sf) -- Class PEZ at A (sf) -- Class C at A (sf) -- Class D at BBB (low) (sf) -- Class E at BB (sf) -- Class F at B (sf) Classes X-B, X-C, X-D, D, E and F will be privately placed pursuant to Rule 144A. The Class X-A, X-B, X-C and X-D balances are notional. DBRS ratings on interest-only certificates address the likelihood of receiving interest based on the notional amount outstanding. DBRS considers the interest-only certificates' position within the transaction payment waterfall when determining the appropriate rating. Up to the full certificate balance of the Class A-M, Class B and Class C certificates may be exchanged for the Class PEZ certificates. Class PEZ certificates may be exchanged for up to the full certificate balance of the Class A-M, Class B and Class C certificates. The collateral consists of 91 fixed-rate loans secured by 124 commercial properties, for a total transaction balance of $1,288,301,798. The DBRS sample included 37 loans, representing 69.8% of the pool. The pool is relatively diverse based on loan size, with a concentration profile equivalent to that of a pool of 30 equal-sized loans, despite the largest loan representing 9.9% of the pool. Increased pool diversity helps to insulate the higher-rated classes from event risk. Properties located in urban markets represent 22.9% of the pool, greater than transactions in the recent past that typically have urban concentrations of 15.0% to 20.0% and have increased liquidity. Term default risk is moderate, as indicated by a strong DBRS Term DSCR of 1.48x. In addition, 34 loans representing 39.3% of the pool have a DBRS Term DSCR in excess of 1.50x, including four of the largest seven loans. The deal consists of sixteen properties, totaling 19.8% of the pool, leased to single tenants, which have been found to have higher losses in the event of default. DBRS modeled single-tenant properties with a higher expected loss compared with multi-tenant properties. The largest loan secured by a single tenant represents a 14-property portfolio leased to State Farm Insurance, which is rated investment grade. Additionally, none of the single-tenant properties in the pool are considered to be overly specialized in such a manner that would make it difficult to re- lease the space to another user. The transaction has a high concentration of loans exhibiting elevated refinance risk, with 35 loans, representing 52.2%, having a DBRS Refi DSCR below 1.00x and 15 loans, representing 19.7%, having a DBRS Refi DSCR below 0.90x. These DSCRs are based on a weighted-average stress refinance constant of 9.7%, which implies an interest rate of 9.2%, amortizing on a 30-year schedule. This represents a significant stress of 4.4% over the weighted-average contractual interest rate of the loans in the pool. COMMERCIAL MORTGAGE 1999-C1: Moody's Affirms C Rating on H Certs ---------------------------------------------------------------- Moody's Investors Service upgraded the ratings of three classes and affirmed one class of Paine Webber Mortgage Acceptance Corporation V, Commercial Mortgage Pass-Through Certificates, Series 1999-C1 as follows: Cl. F, Upgraded to Aaa (sf); previously on Dec 5, 2013 Upgraded to Aa2 (sf) Cl. G, Upgraded to Baa2 (sf); previously on Dec 5, 2013 Upgraded to B2 (sf) Cl. H, Affirmed C (sf); previously on Dec 5, 2013 Affirmed C (sf) Cl. X, Upgraded to Caa1 (sf); previously on Dec 5, 2013 Affirmed Caa2 (sf) Ratings Rationale The upgrades of the two principal and interest classes F and G, are based primarily on an increase in credit support resulting from scheduled amortization and defeasance. The ratings on P&I Class H was affirmed because the rating is consistent with Moody's expected loss. The upgrade to the IO Class, Class X, is based on the credit performance of its referenced classes. Moody's rating action reflects a base expected loss of 11.2% of the current balance, compared to 10.3% at last review. Moody's current base expected loss plus cumulative realized losses is 2.4% of the original balance, the same at last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had previously anticipated. Factors that may cause an upgrade of the ratings include significant loan paydowns or amortization, an increase in the pool's share of defeasance or overall improved pool performance. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool, loan concentration, increased expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Commercial Real Estate Finance: Moody's Approach to Rating Credit Tenant Lease Financings" published in November 2011. Description Of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 5, compared to 6 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Moody's currently uses a Gaussian copula model, incorporated in its public CDO rating model CDOROMv2.13-1, to generate a portfolio loss distribution for the CTL component which is used to assess the credit quality of this component. Deal Performance As of the July 15, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 96% to $31.4 million from $704.8 million at securitization. The Certificates are collateralized by 14 mortgage loans ranging in size from less than 2% to 27% of the pool, with the top ten loans representing 78% of the pool. Four loans, representing 60% of the pool, are secured by credit tenant leases (CTLs). Three loans, representing 21% of the pool, have defeased and are secured by U.S. Government securities. Three loans, representing 8% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Twelve loans have been liquidated from the pool, resulting in an aggregate realized loss of $13.4 million (38% loss severity on average). There are currently no loans in special servicing. Moody's was provided with full year 2013 operating results for 100% of the pool, excluding defeased loans and CTL Loans. Moody's weighted average conduit LTV is 35% compared to 40% at Moody's prior review. Moody's conduit component excludes loans with credit assessments, defeased and CTL loans and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 13% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 11.0%. Moody's actual and stressed conduit DSCRs are 1.51X and 3.71X, respectively, compared to 1.41X and 3.18X at prior review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The top three conduit loans represent 12% of the pool balance. The largest loan is the Post Haste Plaza Loan ($1.8 million -- 5.7% of the pool), which is secured by a 35,890 square foot (SF) retail property located in Hollywood, Florida. As of March 2014, the property was 100% leased, the same at last review. The loan is fully amortizing and has amortized by 37% since securitization. The loan matures in October 2023. Moody's LTV and stressed DSCR are 35% and 3.36X, respectively, compared to 45% and 2.63X at last review. The second largest loan is the Best Western Regent Inn Loan ($1.1 million -- 3.4% of the pool), which is secured by an 88-room limited service hotel located in Mansfield Center, Connecticut. The loan is fully amortizing and has amortized by 62% since securitization. The loan matures in September 2018. The loan is on the servicer's watchlist due to low DSCR. Moody's LTV and stressed DSCR are 47% and 2.75X, respectively, compared to 57% and 2.27X at last review. The third largest loan is the Cambridge Court Apartments Loan ($842,996 -- 2.7% of the pool), which is secured by a 100-unit multifamily property located in Briarcliff, Georgia. As of March 2014, property was 79% occupied, compared to 84% at last review. The loan is fully amortizing and has amortized by 64% since securitization. The loan matures in August 2018. The loan is on the servicer's watchlist due to low DSCR. Moody's LTV and stressed DSCR are 27% and 3.77X, respectively, compared to 31% and 3.34X at last review. The CTL component consists of four loans, totaling 60% of the pool, secured by properties leased to four tenants. The largest exposures are Beckman Coulter, Inc. ($8.3 million -- 26.5% of the pool; Beckman was acquired by Danaher Corporation; senior unsecured rating A2 -- stable outlook) and Regal Cinemas Corporation ($6.6 million -- 21.0% of the pool; Regal Entertainment Group; senior unsecured rating B3 -- stable outlook). The bottom-dollar weighted average rating factor (WARF) for the CTL component is 2,018 compared to 1,827 at last review. WARF is a measure of the overall quality of a pool of diverse credits. The bottom-dollar WARF is a measure of the default probability within the pool. CREST 2003-2: S&P Lowers Rating on 2 Note Classes to 'CC' --------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class C-1 and C-2 notes from Crest 2003-2 Ltd., a static cash flow collateralized debt obligation of commercial mortgage-backed securities (CDO of CMBS) transaction, and removed them from CreditWatch positive, where S&P placed them on April 24, 2014. At the same time, S&P affirmed its 'CCC- (sf)' ratings on the class D-1 and D-2 notes and lowered its ratings on the class E-1 and E-2 notes. The upgrades reflect the increased credit support available to the class C notes. Since S&P's December 2013 rating actions, the transaction has paid down the rated liabilities by $32.08 million. As a result, the class B notes were paid in full, and the class C notes, which are the most senior tranches, were paid down to 58.41% of their original balance. In addition, the class C overcollateralization (O/C) ratio has increased to 337.14% as of June 30, 2014, from 182.03% as of Oct. 31, 2013. Despite class C's increased O/C ratio, the class D O/C ratio has only increased slightly and the class E O/C ratio has decreased. As of the June 30, 2014, payment date, both class D's and E's deferred interest balances increased, and their O/C and interest coverage tests were failing. S&P lowered its ratings on the class E notes to reflect its view that these notes will continue to accrue deferred interest given the low interest coverage ratio (47.36%) reported in the June trustee report and also the unlikelihood that they will receive full principal and deferred interest. S&P's affirmations on the class D notes reflect the credit support available to them. S&P will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them. S&P will take rating actions as it deems necessary. RATING AND CREDITWATCH ACTIONS Crest 2003-2 Ltd. Class Rating Rating To From C-1 BBB- (sf) BB- (sf)/Watch Pos C-2 BBB- (sf) BB- (sf)/Watch Pos E-1 CC (sf) CCC- (sf) E-2 CC (sf) CCC- (sf) RATINGS AFFIRMED Crest 2003-2 Ltd. Class Rating D-1 CCC- (sf) D-2 CCC- (sf) CSFB 2006-TFL2: Moody's Raises Rating on Class K Certs to 'Caa1' ---------------------------------------------------------------- Moody's Investors Service upgraded the ratings of four classes, affirmed the ratings of two classes and downgraded the rating of one interest-only (IO) class of CSFB 2006-TFL2 Commercial Pass- Through Certificates as follows: Cl. G, Upgraded to Baa1 (sf); previously on Jan 31, 2013 Affirmed B1 (sf) Cl. H, Upgraded to Baa2 (sf); previously on Jan 31, 2013 Affirmed B2 (sf) Cl. J, Upgraded to Ba2 (sf); previously on Jan 31, 2013 Downgraded to Caa2 (sf) Cl. K, Upgraded to Caa1 (sf); previously on Jan 31, 2013 Downgraded to Caa3 (sf) Cl. L, Affirmed Ca (sf); previously on Jan 31, 2013 Affirmed Ca (sf) Cl. A-X-1, Downgraded to B3 (sf); previously on Jan 31, 2013 Affirmed Ba3 (sf) Cl. A-X-3, Affirmed Caa3 (sf); previously on Jan 31, 2013 Affirmed Caa3 (sf) Ratings Rationale The upgrades of four principal and interest (P&I) classes are primarily due to increased credit support resulting from loan pay offs. The pooled debt has paid down by 83% since last review. The affirmation of P&I Class L is consistent with Moody's expected loss and thus is affirmed. The downgrade of IO Class A-X-1 is based on a decline in the weighted average rating factor or WARF of its referenced classes due to paydowns since last review. The rating of IO Class A-X-3 is consistent with the expected credit performance of its referenced loan, the JW Marriott Starr Pass loan, and thus is affirmed. Factors That Would Lead To An Upgrade Or Downgrade Of The Rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan pay downs or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description Of Models Used Moody's review incorporated the use of the excel-based Large Loan Model v 8.7. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. Deal Performance As of the July 15, 2014 Payment Date the transaction's pooled certificate balance has decreased by 96% to $78.0 million from $1.9 billion at securitization due to the pay off 13 loans originally in the pool. The pool has experienced $249,356 in losses since securitization. The losses were due to the special servicer's workout fee associated with the Sheffield condo conversion loan that was originally 10% of the pool. Interest shortfalls total $135,390 and affect Class L. The one remaining loan in the trust is the JW Marriott Starr Pass loan ($78.0 million). It is secured by a 575-key resort hotel located in Tucson, Arizona. The loan was transferred to special servicing in April 2010 due to the borrower's inability to refinance the debt. The loan matured in August 2010 resulting in a maturity default. A receiver was appointed in November 2011. Revenue per Available Room (RevPAR) for the trailing 12-month period ended June 30, 2014 was $96. The Net Cash Flow forecast for FY 2014 is about $1.9 million. The special servicer is working through legal issues that have been impediments to loan resolution. The $145 million mortgage debt includes $67.0 million of non-trust subordinate debt. There is also $20.0 million of mezzanine debt. Moody's loan to value (LTV) ratio of the pooled debt is in excess of 100%. CSFB 2007-TFL1: Moody's Affirms 'C' Ratings on 2 Certificates ------------------------------------------------------------- Moody's Investors Service upgraded the ratings of four classes and affirmed the ratings of three classes of CSFB Commercial Mortgage Trust, Commercial Pass-Through Certificates Series 2007-TFL1 as follows: Cl. F, Upgraded to Aa3 (sf); previously on May 22, 2014 Upgraded to A1 (sf) Cl. G, Upgraded to Baa3 (sf); previously on May 22, 2014 Upgraded to Ba2 (sf) Cl. H, Upgraded to Ba3 (sf); previously on May 22, 2014 Upgraded to B2 (sf) Cl. J, Upgraded to B3 (sf); previously on May 22, 2014 Affirmed Caa2 (sf) Cl. K, Affirmed C (sf); previously on May 22, 2014 Affirmed C (sf) Cl. L, Affirmed C (sf); previously on May 22, 2014 Affirmed C (sf) Cl. A-X-1, Affirmed Caa2 (sf); previously on May 22, 2014 Downgraded to Caa2 (sf) Ratings Rationale The upgrades of four P&I classes are due to the improved operating performance and decrease in Moody's loan to value (LTV) ratio of the one remaining loan in the trust, the JW Marriott Las Vegas Resort & Spa loan. The ratings of Class K and Class L are consistent with Moody's expected loss and thus are affirmed. The rating of interest-only (IO) Class A-X-1 is consistent with the weighted average rating factor or WARF of its referenced classes and thus is affirmed. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan pay downs or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description of Models Used Moody's review incorporated the use of the excel-based Large Loan Model v 8.7. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type, and sponsorship. These aggregated proceeds are then further adjusted for any pooling benefits associated with loan level diversity, other concentrations and correlations. Deal Performance As of the July 18, 2014 Payment Date, the transaction's aggregate certificate balance has decreased by 88% to $149.8 million from $1.266 million at securitization due to the payoff of ten loans originally in the trust and the partial pay down of the JW Marriott Las Vegas Resort & Spa loan, the one remaining loan in the trust. The trust has cumulative losses of $201,649 affecting pooled Class L. Property protection advances in the amount of $2.1 million, including about $1.9 million in legal fees, are currently outstanding. All cash flow is being trapped from both the hotel and casino operations and it is expected that the outstanding shortfalls will be repaid from operating cash flow. The loan is current for debt service payments. The borrower was granted a 15- month forbearance until February 8, 2015. The JW Marriott Las Vegas Resort & Spa loan ($149.8 million) is secured by a 548-guestroom full-service hotel with a 56,750 square foot casino and 44,396 square feet of retail/restaurant space and a 40,000 square foot spa. The hotel is located in Summerlin (Las Vegas), Nevada and was constructed in 2000 and renovated in 2006. The loan was transferred to special servicing in September 2011 due to imminent default. The loan matured on November 9, 2011 and went into default as the borrower failed to pay off the loan at maturity. Total mortgage debt of $159.8 million includes a $10.0 million junior participation interest that is not included in the trust. An appraisal reduction in the amount of $37.1 million was applied in June 2014 based on a January 2014 appraisal value of $123.0 million. Previously, an Appraisal Reduction in the amount of $54.1 million had been applied in November 2013 based on a November 2012 appraised value of $109.8 million. Operating Profit increased 31% during the January through May 2014 period compared to the same four month period last year. The improved performance was primarily due to increases in food & beverage and casino revenue and a decrease in expenses, primarily casino overhead. However, revenue per available room (RevPAR) declined during the same period to $108 from $110 in the previous year. Moody's loan to value (LTV) ratio is greater than 100%. CSMC TRUST 2014-IVR3: S&P Assigns BB+ Rating on Class B-3 Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to CSMC Trust 2014-IVR3's $352.716 million mortgage pass-through certificates series 2014-IVR3. The certificate issuance is a residential mortgage-backed securities transaction backed by first-lien, fixed-rate residential mortgage loans secured by single- and two-to-four- family residences, condominiums, co-ops, and planned urban development to prime borrowers. The ratings reflect S&P's view of the transaction's credit enhancement, the pool's high-quality collateral, and the associated structural deal mechanics. RATINGS ASSIGNED CSMC Trust 2014-IVR3 Class Ratings Amount (mil. $) A-1 AAA (sf) 278.349 A-2 AAA (sf) 6.186 A-7 AAA (sf) 50.000 A-X-1 AAA (sf) Notional A-X-2 AAA (sf) Notional A-X-4 AAA (sf) Notional A-X-5 AAA (sf) Notional B-1 AA (sf) 5.272 B-2 A (sf) 6.546 B-3 BB+ (sf) 6.363 B-4 NR 5.273 B-5 NR 5.636 A-3 AAA (sf) 284.535 A-4 AAA (sf) 278.349 A-5 AAA (sf) 6.186 A-6 AAA (sf) 284.535 A-8 AAA (sf) 284.535 A-X-3 AAA (sf) Notional A-X-6 AAA (sf) Notional A-IO-S NR Notional NR-Not rated. CUTWATER 2014-I: Moody's Assigns 'B2' Rating on Class E Notes ------------------------------------------------------------- Moody's Investors Service has assigned ratings to seven classes of notes issued by Cutwater 2014-I, Ltd. $216,600,000 Class A-1a Senior Secured Floating Rate Notes due 2026 (the "Class A-1a Notes"), Definitive Rating Assigned Aaa (sf) $45,000,000 Class A-1b Senior Secured Floating Rate Notes due 2026 (the "Class A-1b Notes"), Definitive Rating Assigned Aaa (sf) $38,200,000 Class A-2 Senior Secured Floating Rate Notes due 2026 (the "Class A-2 Notes"), Definitive Rating Assigned Aa2 (sf) $25,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class B Notes"), Definitive Rating Assigned A2 (sf) $22,900,000 Class C Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Definitive Rating Assigned Baa3 (sf) $21,800,000 Class D Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Definitive Rating Assigned Ba3 (sf) $7,300,000 Class E Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Definitive Rating Assigned B2 (sf) The Class A-1a Notes, the Class A-1b Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are referred to herein, collectively, as the "Rated Notes." Ratings Rationale Moody's ratings of the Rated Notes address the expected losses posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Cutwater CLO is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90% of the portfolio must consist of senior secured loans and eligible investments, and up to 10% of the portfolio may consist of second lien loans and unsecured loans. The portfolio is approximately 75% ramped as of the closing date. Cutwater Asset Management Corp. (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest up to 50% of unscheduled principal payments and proceeds from sales of credit risk assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer issued subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $400,000,000 Diversity Score: 60 Weighted Average Rating Factor (WARF): 2664 Weighted Average Spread (WAS): 4.10% Weighted Average Recovery Rate (WARR): 43.0% Weighted Average Life (WAL): 8 years. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2664 to 3064) Rating Impact in Rating Notches Class A-1a Notes: -1 Class A-1b Notes: -1 Class A-2 Notes: -2 Class B Notes: -2 Class C Notes: -1 Class D Notes: 0 Class E Notes: 0 Percentage Change in WARF -- increase of 30% (from 2664 to 3463) Rating Impact in Rating Notches Class A-1a Notes: -1 Class A-1b Notes: -1 Class A-2 Notes: -3 Class B Notes: -4 Class C Notes: -2 Class D Notes: -1 Class E Notes: -3 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and available on www.moodys.com. The score for the "Experience of, Arrangements Among and Oversight of the Transaction Parties," a sub-category of the V Score, is one notch higher than that of the benchmark CLO, which is Low/Medium. The score of Medium reflects the fact that this transaction will be the Manager's first CLO. This higher score for "Experience of, Arrangements Among and Oversight of the Transaction Parties" does not, however, cause this transaction's overall composite V Score of Medium/High to differ from that of the CLO sector benchmark. 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. CVP CASCADE CLO-2: S&P Assigns 'BB' Rating on Class D Notes ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to CVP Cascade CLO-2 Ltd./CVP Cascade CLO-2 LLC's $474.50 million fixed- and 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 assessment 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 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 investment manager's experienced management team. -- S&P's projections regarding the timely interest and ultimate principal payments on the rated notes, which S&P assessed using its cash flow analysis and assumptions commensurate with the assigned ratings under various interest-rate scenarios, including LIBOR ranging from 0.2600%-13.8391%. -- The transaction's overcollateralization (O/C) and interest- overage 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 up to 50% of the excess interest proceeds that are available before paying uncapped administrative expenses, subordinated and incentive management fees, and subordinated note payments into principal proceeds to purchase additional collateral assets during the reinvestment period. RATINGS LIST CVP Cascade CLO-2 Ltd./CVP Cascade CLO-2 LLC Class Rating Amount (mil. $) A-1 AAA (sf) 316.25 A-2A AA (sf) 38.75 A-2B AA (sf) 20.00 B A (sf) 37.75 C BBB (sf) 24.75 D BB (sf) 24.00 E B (sf) 13.00 Subordinated notes NR 46.25 NR-Not rated. CVS CREDIT: Moody's Affirms Ba1 Rating on Series A-2 Certificates ----------------------------------------------------------------- Moody's Investors Service affirmed the rating of CVS Credit Lease Backed Pass-Through Certificates, Series A-1 and Series A-2 as follows: Series A-2, Affirmed Ba1 (sf); previously on Sep 25, 2013 Affirmed Ba1 (sf) Ratings Rationale The rating was affirmed based on the support of the long term triple net lease guaranteed by CVS/Caremark Corp. (Moody's senior unsecured debt rating Baa1, stable outlook), as well as the residual value insurance policies provided by the Royal Indemnity Company, which is unrated by Moody's. The rating on the A-2 Certificate is notched down from CVS's rating due to the size of the loan balance at maturity relative to the value of the collateral assuming the existing tenant is no longer in occupancy (the dark value). Factors that Would Lead to an Upgrade or Downgrade of the Rating: The ratings of Credit Tenant Lease (CTL) deals are primarily based on the senior unsecured debt rating (or the corporate family rating) of the tenants leasing the real estate collateral supporting the bonds. Other factors that are also considered are Moody's dark value of the collateral (value based on the property being vacant or dark), which is used to determine a recovery rate upon a loan's default and the rating of the residual insurance provider, if applicable. Factors that may cause an upgrade of the ratings include an upgrade in the rating of the corporate tenant or significant loan paydowns or amortization which results in a higher dark loan to value. Factors that may cause a downgrade of the ratings include a downgrade in the rating of the corporate tenant or the residual insurance provider. Methodology Underlying The Rating Action The principal methodology used in this rating was "Commercial Real Estate Finance: Moody's Approach to Rating Credit Tenant Lease Financings" published in November 2011. No models were used during this analysis. Deal Performance As of the July 30, 2014 distribution date, the transaction's aggregate Certificate balance was $125 million. The Certificate is supported by 96 single-tenant, stand-alone retail buildings leased to CVS. Each building is subject to a fully bondable triple net lease guaranteed by CVS. The properties are located across 17 states. The rated final distribution date is January 10, 2023. During the term of the transaction, the A-2 Certificate is supported by CVS/Caremark Corp. (CVS) lease obligations. The balloon payment is insured under residual value insurance policies. CVS/Caremark Corp., headquartered in Woonsocket, Rhode Island, fills the largest number of prescriptions in the United States. The company fills or manages more than 1 billion prescriptions annually. It operates over 7,500 retail pharmacy stores in 42 states, the District of Columbia, Puerto Rico, and Brazil. In addition, it has a pharmacy benefits management operation, a mail order and specialty pharmacy division, an on-line pharmacy, and over 650 MinuteClinics in twenty five states and the District of Columbia. It is the only fully integrated pharmacy health care company in the United States. Revenues are over $123 billion. DENALI CAPITAL VI: Moody's Hikes Rating on Cl. B-2L Notes to Ba2 ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Denali Capital CLO VI, Ltd.: $19,000,000 Class B-1L Floating Rate Notes Due 2020, Upgraded to Aa1 (sf); previously on March 7, 2014 Upgraded to A1 (sf); $14,000,000 Class B-2L Floating Rate Notes Due 2020, Upgraded to Ba1 (sf); previously on March 7, 2014 Upgraded to Ba2 (sf). Moody's also affirmed the ratings on the following notes: $27,000,000 Class A-2L Floating Rate Notes Due 2020 (current outstanding balance of $18,688,207), Affirmed Aaa (sf); previously on March 7, 2014 Affirmed Aaa (sf); $24,000,000 Class A-3L Floating Rate Notes Due 2020, Affirmed Aaa (sf); previously on March 7, 2014 Upgraded to Aaa (sf); $16,000,000 Class C-1 Combination Notes Due 2020 (current outstanding rated balance $6,134,121), Affirmed Aaa (sf); previously on March 7, 2014 Affirmed Aaa (sf). Denali CLO VI, Ltd., issued in March 2006, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans, with a significant portion of the collateral pool including debt obligations from middle market issuers. The transaction's reinvestment period ended in July 2012. Ratings Rationale These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over- collateralization (OC) ratios since February 2014. The Class A-1L and A-1LR notes have been paid down completely or by approximately $42 million and the Class A-2L notes have paid down by 31% or approximately $8.3 million since February 2014. Based on the trustee's July 7, 2014 report, the OC ratios for the Class A-2L, Class A-3L, Class B-1L and Class B-2L notes are reported at 267.36%, 166.44%, 128.15% and 109.57%, respectively, versus February 2014 levels of 194.64%, 144.47%, 119.98% and 106.66%, respectively. Moody's notes that the July 7, 2014 trustee reported OC ratios do not include $20.89 million of principal payments that were made to the Class A-1L, A-1LR and A-2L notes on the July 21, 2014 payment date. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. 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. Realization of higher than assumed recoveries would positively impact the CLO. 6) Exposure to credit estimates: The deal contains a significant number of securities whose default probabilities Moody's has assessed through credit estimates. If Moody's does not receive the necessary information to update its credit estimates in a timely fashion, the transaction could be negatively affected by any default probability adjustments Moody's assumes in lieu of updated credit estimates. 7) Decreasing portfolio granularity: The continued amortization of the portfolio has resulted in larger obligors as a percentage of par. If the diversity of this CLO continues to decrease, the portfolio could depend to a large extent on the credit conditions of a few large obligors. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2282) Class A-2L: 0 Class A-3L: 0 Class B-1L: +1 Class B-2L: +1 Class C-1: 0 Moody's Adjusted WARF + 20% (3423) Class A-2L: 0 Class A-3L: 0 Class B-1L: -1 Class B-2L: -1 Class C-1: 0 Loss and Cash Flow Analysis: 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 Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $84.85 million, defaulted par of $3.2 million, a weighted average default probability of 17.17% (implying a WARF of 2853), a weighted average recovery rate upon default of 52.28%, a diversity score of 29 and a weighted average spread of 3.64%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. DUANE STREET III: Moody's Raises Rating on Class E Notes to Ba1 --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Duane Street CLO III, Ltd.: $28,500,000 Class C Deferrable Mezzanine Floating Rate Notes Due 2021, Upgraded to Aaa (sf); previously on December 12, 2013 Upgraded to Aa2 (sf) $27,500,000 Class D Deferrable Mezzanine Floating Rate Notes Due 2021, Upgraded to A3 (sf); previously on December 12, 2013 Upgraded to Baa2 (sf) $14,000,000 Class E Deferrable Junior Floating Rate Notes Due 2021, Upgraded to Ba1 (sf); previously on December 12, 2013 Affirmed Ba2 (sf) Moody's also affirmed the ratings on the following notes: $262,100,000 Class A-1 Senior Floating Rate Notes Due 2021 (current outstanding balance of $67,695,358), Affirmed Aaa (sf); previously on December 12, 2013 Affirmed Aaa (sf) $137,500,000 Class A-2a Senior Revolving Floating Rate Notes Due 2021 (current outstanding balance of $29,950,694), Affirmed Aaa (sf); previously on December 12, 2013 Affirmed Aaa (sf) $7,500,000 Class A-2b Senior Floating Rate Notes Due 2021, Affirmed Aaa (sf); previously on December 12, 2013 Affirmed Aaa (sf) $33,000,000 Class B Senior Floating Rate Notes Due 2021, Affirmed Aaa (sf); previously on December 12, 2013 Upgraded to Aaa (sf) Duane Street CLO III, Ltd., issued in December 2006, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ended in January 2013. Ratings Rationale These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over- collateralization ratios (OC) since December 2013. Since then, the Class A-1 and A-2a notes have been paid down by approximately 48.5% or $92.1 million. Based on Moody's calculation, the OC ratios for the Class A, Class B, Class C, Class D and Class E notes are currently 226.0%, 172.0%, 142.6%, 122.4% and 114.2%, respectively, versus December 2013 levels of 168.4%, 144.3%, 128.4%, 116.0% and 110.6%, respectively. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. 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. Realization of higher than assumed recoveries would positively impact the CLO. 6) Long-dated assets: The presence of assets that mature after the CLO's legal maturity date exposes the deal to liquidation risk on those assets. This risk is borne first by investors with the lowest priority in the capital structure. Moody's assumes that the terminal value of an asset upon liquidation at maturity will 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) or the asset's current market value. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2189) Class A-1: 0 Class A-2a: 0 Class A-2b: 0 Class B: 0 Class C: 0 Class D: +3 Class E: +2 Moody's Adjusted WARF + 20% (3283) Class A-1: 0 Class A-2a: 0 Class A-2b: 0 Class B: 0 Class C: -1 Class D: -1 Class E: -1 Loss and Cash Flow Analysis: 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 Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $231.5 million, defaulted par of $16.0 million, a weighted average default probability of 17.22% (implying a WARF of 2736), a weighted average recovery rate upon default of 48.3%, a diversity score of 39 and a weighted average spread of 3.4%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. EATON VANCE 2014-1: Moody's Assigns 'Ba3' Rating on Class E Notes ----------------------------------------------------------------- Moody's Investors Service has assigned ratings to five classes of notes tissued by Eaton Vance CLO 2014-1, Ltd.: Moody's rating actions are as follows: $315,500,000 Class A Senior Secured Floating Rate Notes due 2026 (the "Class A Notes"), Definitive Rating Assigned Aaa (sf) $63,000,000 Class B Senior Secured Floating Rate Notes due 2026 (the "Class B Notes"), Definitive Rating Assigned Aa2 (sf) $29,750,000 Class C Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Definitive Rating Assigned A2 (sf) $27,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Definitive Rating Assigned Baa3 (sf) $28,500,000 Class E Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Definitive Rating Assigned Ba3 (sf) The Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are referred to herein, collectively, as the "Rated Notes." Ratings Rationale Moody's ratings of the Rated Notes address the expected losses posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Eaton Vance CLO 2014-1 is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 95% of the portfolio must consist of senior secured loans, cash, and eligible investments, and up to 5% of the portfolio may consist of second lien loans and unsecured loans. The Issuer's portfolio is approximately 70% ramped as of the closing date and the Issuer's documents require that the portfolio be 100% ramped within four months thereafter. Eaton Vance Management (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four-year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer will issue subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $500,000,000 Diversity Score: 65 Weighted Average Rating Factor (WARF): 2590 Weighted Average Spread (WAS): 3.4% Weighted Average Coupon (WAC): 7.50% Weighted Average Recovery Rate (WARR): 48.0% Weighted Average Life (WAL): 8 years. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2590 to 2979) Rating Impact in Rating Notches Class A Notes: 0 Class B Notes: -1 Class C Notes: -2 Class D Notes: -1 Class E Notes: -1 Percentage Change in WARF -- increase of 30% (from 2590 to 3367) Rating Impact in Rating Notches Class A Notes: 0 Class B Notes: -2 Class C Notes: -3 Class D Notes: -2 Class E Notes: -1 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and 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. EVERGLADES RE 2013-I: S&P Affirms 'B(sf)' Rating on Class A Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'B(sf)' rating on the Series 2013-I Class A notes issued by Everglades Re Ltd. The updated attachment level is $4.896 billion and the reset probability of attachment is 2.75%. The initial attachment level was $5.139 billion and the probability of attachment at closing was 2.91% and, per the transactions' terms and conditions, could be reset within a range of 2.75% to 3.00%. When rating natural-peril catastrophe bonds that cover hurricanes, S&P looks to the more-conservative of the base-case and sensitivity-case results to derive the natural-catastrophe (nat- cat) risk factor. For this issuance, the sensitivity case probability of attachment following the reset is 3.13%; after S&P adjusts this probability of attachment based on transaction- specific factors, the nat-cat risk factor would be 'B+'. S&P also reviewed the creditworthiness of the ceding company, Citizens Property Insurance Co. and its ratings on the collateral, Goldman Sachs Financial Square Treasury Instruments Money Market Fund #506 ('AAAm'), that, barring the occurrence of a covered event, will be used to redeem the principal on the redemption date. In 2015, when the final reset occurs, if the probability of attachment is reset to 2.75%, S&P could raise its rating on the notes to 'B+(sf)'. This depends on other factors, such as the sensitivity-case probability of attachment, the shape of the occurrence exceedance probability curve, any changes in the modeling, the creditworthiness of the ceding company, and the rating on the collateral, among others. RATINGS LIST Ratings Affirmed Everglades Re Ltd. Series 2013-I Class A B(sf) FLAGSHIP CLO V: Moody's Affirms 'B1' Rating on Class B Notes ------------------------------------------------------------ Moody's Investors Service has upgraded the ratings on the following notes issued by Flagship CLO V, Ltd.: $33,750,000 Class B Floating Rate Notes, Due 2019, Upgraded to Aaa (sf); previously on August 1, 2013 Upgraded to Aa2 (sf); $22,500,000 Class C Deferrable Floating Rate Notes, Due 2019, Upgraded to Aa3 (sf); previously on August 1, 2013 Affirmed Baa1 (sf); $17,500,000 Class D Deferrable Floating Rate Notes, Due 2019, Upgraded to Baa2 (sf); previously on August 1, 2013 Affirmed Ba1 (sf). Moody's also affirmed the ratings on the following notes: $365,000,000 Class A Floating Rate Notes, Due 2019 (current outstanding balance of $171,063,083.70), Affirmed Aaa (sf); previously on August 1, 2013 Affirmed Aaa (sf); $22,500,000 Class E Deferrable Floating Rate Notes, Due 2019, Affirmed B1 (sf); previously on August 1, 2013 Affirmed B1 (sf). Flagship CLO V, Ltd., issued in September 2006, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ended in September 2013. Ratings Rationale These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over- collateralization (OC) ratios since December 2013. The Class A notes have been paid down by approximately 53% or $194 million since December 2013. Based on the trustee's July 2014 report, the OC ratios for the Class A/B, Class C, Class D and Class E notes are reported at 134.98%, 121.62%, 112.93% and 103.42%, respectively, versus December 2013 levels of 118.69%, 112.35%, 107.87% and 102.61%, respectively. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. 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. Realization of higher than assumed recoveries would positively impact the CLO. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2071) Class A: 0 Class B: 0 Class C: +3 Class D: +1 Class E: +2 Moody's Adjusted WARF + 20% (3106) Class A: 0 Class B: 0 Class C: -1 Class D: -2 Class E: -1 Loss and Cash Flow Analysis: 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 Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par of $275.3 million, defaulted par of $4.5 million, a weighted average default probability of 14.90% (implying a WARF of 2589), a weighted average recovery rate upon default of 50.55%, a diversity score of 43 and a weighted average spread of 3.06%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for securities as published in "Moody's Approach to Rating SF CDOs." In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. G-FORCE CDO 2006-1: Fitch Affirms 'Dsf' Rating on 4 Note Classes ---------------------------------------------------------------- Fitch Ratings has affirmed 11 classes issued by G-Force CDO 2006-1 Ltd./Corp (G-Force 2006-1). The affirmations are a result of amortization of the capital structure. Key Rating Drivers Since the last rating action in September 2013, approximately 13.8% of the collateral has been downgraded and 24.7% has been upgraded. Currently, 58.6% of the portfolio has a Fitch derived rating below investment grade and 29.2% has a rating in the 'CCC' category and below, compared to 65.2% and 31.7%, respectively, at the last rating action. Over this time, the A-2 notes, A-3 notes and SSFL notes together have received $68.7 million in paydowns and the transaction has experienced approximately $26.6 million of principal losses. This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model (PCM) for projecting future default levels for the underlying portfolio. Fitch also analyzed the structure's sensitivity to the assets that are distressed, experiencing interest shortfalls, and those with near-term maturities. Based on this analysis, the credit characteristics of class SSFL are consistent with the ratings assigned. For the class A-3, JRFL, and F through G notes, Fitch analyzed the sensitivity of each class to the default of the distressed assets ('CCC' and below). Given the high probability of default of these assets and expected limited recovery prospects upon default and the risk of shortfalls in the payment of timely interest to the classes, Fitch has affirmed the class A-3 and JRFL notes at 'CCsf', indicating that default is probable. Similarly, Fitch has affirmed the class F through J notes at 'Csf', indicating that default is inevitable. On the Dec. 4, 2009 payment date, the transaction entered into an event of default (EOD) due to the failure to pay the full and timely interest on the class E notes. Subsequently, the class B through D notes defaulted on their timely interest payments. Therefore, Fitch has affirmed the class B through E notes at 'Dsf'. Although class B notes are now current on interest, the notes remain under collateralized. RATING SENSITIVITIES: The Stable Outlook on the class SSFL notes reflects Fitch's view that the transaction will continue to delever. Further negative migration and defaults beyond those projected by SF PCM as well as increasing concentration in assets of a weaker credit quality could lead to downgrades to the class A-3 and JRFL notes. G-Force 2006-1 is a commercial real estate collateralized debt obligation (CRE CDO) that closed on Sept. 13, 2006. The transaction is completely collateralized by commercial mortgage backed securities (CMBS). Fitch has affirmed the following classes and revised Outlooks as indicated: -- $122,665,000 class A-3 at 'CCsf'; -- $57,009,354 class SSFL at 'BBBsf'; Outlook to Stable from Negative; -- $67,000,000 class JRFL at 'CCsf'; -- $42,921,000 class B at 'Dsf' -- $18,709,000 class C at 'Dsf' -- $31,916,000 class D at 'Dsf' -- $28,614,000 class E at 'Dsf'; -- $15,350,493 class F at 'Csf'; -- $28,010,469 class G at 'Csf'; -- $21,128,083 class H at 'Csf'; -- $29,167,304 class J at 'Csf'. The class A-1 and A-2 certificates have paid in full. GE COMMERCIAL 2004-C3: Moody's Cuts Cl. X-1 Debt Rating to Caa2 --------------------------------------------------------------- Moody's Investors Service has affirmed the ratings on six classes, upgraded the ratings on two classes and downgraded the rating on one class in GE Commercial Mortgage Corporation, Commercial Mortgage Pass-Through Certificates, Series 2004-C3 as follows: Cl. F, Upgraded to Aaa (sf); previously on Sep 6, 2013 Affirmed Baa2 (sf) Cl. G, Upgraded to Aa3 (sf); previously on Sep 6, 2013 Affirmed Ba2 (sf) Cl. H, Affirmed B3 (sf); previously on Sep 6, 2013 Affirmed B3 (sf) Cl. J, Affirmed Caa2 (sf); previously on Sep 6, 2013 Affirmed Caa2 (sf) Cl. K, Affirmed Caa3 (sf); previously on Sep 6, 2013 Affirmed Caa3 (sf) Cl. L, Affirmed Ca (sf); previously on Sep 6, 2013 Affirmed Ca (sf) Cl. M, Affirmed C (sf); previously on Sep 6, 2013 Affirmed C (sf) Cl. N, Affirmed C (sf); previously on Sep 6, 2013 Affirmed C (sf) Cl. X-1, Downgraded to Caa2 (sf); previously on Sep 6, 2013 Affirmed Ba3 (sf) Ratings Rationale The ratings on six P&I classes were affirmed because the ratings are consistent with Moody's expected loss. The ratings on P&I classes F and G were upgraded primarily due to an increase in credit support since Moody's last review, resulting from paydowns and amortization, as well as Moody's expectation of additional increases in credit support resulting from the payoff of loans approaching maturity that are well positioned for refinance. The pool has paid down by 89% since Moody's last review. The rating on the IO Class (Class X-1) was downgraded due to a decline in the credit performance (or the weighted average rating factor or WARF) of its referenced classes due to the paydown of highly rated classes. Moody's rating action reflects a base expected loss of 31% of the current balance compared to 4.6% at Moody's last review. Moody's base expected loss plus realized losses is now 3.7% of the original pooled balance, compared to 4.2% at the last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description Of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of five compared to 35 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 10, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 95% to $74 million from $1.38 billion at securitization. The certificates are collateralized by nine mortgage loans ranging in size from 1% to 24% of the pool, with the top three non-defeased loans constituting 40% of the pool. One loan, constituting 25% of the pool, has defeased and is secured by US government securities. Three loans, constituting 40% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Twelve loans have been liquidated from the pool, resulting in an aggregate realized loss of $27 million (for an average loss severity of 26%). Three loans, constituting 29% of the pool, are currently in special servicing. The largest specially serviced loan is the Newsome Park loan (for $13.6 million 18% of the pool), which is secured by a 650 unit multifamily property. The loan transferred to special servicing effective August 2, 2012 for imminent monetary default. The current strategy is to stabilize and reposition the property by the fourth quarter of 2016. The current occupancy is 44% compared to 47% at last review. The remaining two specially serviced loans are secured by an office and retail property. Moody's estimates an aggregate $11 million loss for the specially serviced loans (65% expected loss on average). Moody's has assumed a high default probability for two poorly performing loans, constituting 29% of the pool, and has estimated a loss of $11 million (a 48% expected loss based on a 79% probability default) from the troubled loans. Moody's received full year 2012 and full or partial year 2013 operating results for 100% of the pool. Moody's weighted average conduit LTV is 67%, compared to 71% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 14% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 8.9%. Moody's actual and stressed conduit DSCRs are 1.35X and 1.56X, respectively, compared to 1.59X and 1.67X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 40% of the pool balance. The largest loan is the Maspeth Industrial Center A Loan ($18 million -- 24.2% of the pool), which is secured by a 670,000 square foot (SF) industrial building located in Queens County. The property's recent performance has been impacted by increased operating expenses. The current occupancy is 94% compared to 92% at prior review. In 2011, the loan was modified into an A/B note after the borrower injected approximately $2 million to bring the loan current and lease up the space. The current balance of the B-note is $.8 million. Moody's LTV and stressed DSCR of the A-note are 134% and 0.73X, respectively, compared to 119% and 0.82X at the last review. The second largest loan is the Moreno Valley Village Loan ($7.7 million -- 10.3% of the pool), which is secured by a 112,000 SF retail shopping center located in the Riverside MSA. Current occupancy is 83% compared to 82% at yearend 2013. The borrower was granted a 60-day extension and payoff is expected in August. Moody's LTV and stressed DSCR are 80% and 1.18X, respectively, compared to 117% and 0.81X at the last review. The third largest loan is the Greens at Marion Phase II & III Loan ($4 million -- 5.5% of the pool), which is secured by a 216 unit multifamily property located 12 miles outside of Memphis. Current occupancy is 95% compared to 93% at prior review. Moody's LTV and stressed DSCR are 44% and 2.11X, respectively, compared to 51% and 1.82X at the last review. GMAC COMMERCIAL 1999-C2: Moody's Cuts Cl. X Certs Rating to Caa1 ---------------------------------------------------------------- Moody's Investors Service upgraded the ratings of one class, affirmed three classes and downgraded one class of GMAC Commercial Mortgage Securities, Inc., Commercial Mortgage Pass-Through Certificates, Series 1999-C2 as follows: Cl. H, Upgraded to Aaa (sf); previously on Oct 17, 2013 Upgraded to A1 (sf) Cl. J, Affirmed Baa1 (sf); previously on Oct 17, 2013 Upgraded to Baa1 (sf) Cl. K, Affirmed Caa3 (sf); previously on Oct 17, 2013 Affirmed Caa3 (sf) Cl. L, Affirmed C (sf); previously on Oct 17, 2013 Affirmed C (sf) Cl. X, Downgraded to Caa1 (sf); previously on Oct 17, 2013 Affirmed B3 (sf) Ratings Rationale The upgrade on the P&I class H was due to an increase in credit support resulting from loan paydowns and amortization. The deal has paid down by 16% since Moody's last review. The affirmation of one principal and interest class, class J is due to key parameters, including Moody's loan to value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR), the Herfindahl Index (Herf), and the weighted average rating factor (WARF) of CTL component remaining within acceptable ranges. The ratings of Classes K and L are consistent with Moody's expected loss and thus are affirmed. The rating on the IO Class, Class X was downgraded based on the weighted average rating factor of its referenced classes. Moody's rating action reflects a base expected loss of 3.4% of the current balance, compared to 3.0% at last review. Moody's current base expected loss plus cumulative realized losses is 2.5% of the original balance, the same as at last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had previously anticipated. Factors that may cause an upgrade of the ratings include significant loan paydowns or amortization, an increase in the pool's share of defeasance or overall improved pool performance. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool, loan concentration, increased expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, and "Commercial Real Estate Finance: Moody's Approach to Rating Credit Tenant Lease Financings" published in November 2011. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 4, the same as at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Moody's currently uses a Gaussian copula model, incorporated in its public CDO rating model CDOROMv2.13-1, to generate a portfolio loss distribution for the CTL component which is used to assess the credit quality of this component. Deal Performance As of the July 15, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 93% to $71.9 million from $974.5 million at securitization. The Certificates are collateralized by 13 mortgage loans ranging in size from less than 1% to 35% of the pool. Six loans, representing 73% of the pool, are secured by credit tenant leases (CTLs). Four loans, representing 15% of the pool, have defeased and are secured by U.S. Government securities. One loan, representing 3% of the pool, is on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Fifteen loans have been liquidated from the pool, resulting in an aggregate realized loss of $21.6 million (16% loss severity on average). There are no loans currently in special servicing. Moody's was provided with full year 2013 operating results for 100% of the pool, excluding defeased loans and CTL loans. The conduit portion of the deal is composed of three loans. Moody's weighted average conduit LTV is 63% compared to 70% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 36% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 10.0%. Moody's actual and stressed conduit DSCRs are 1.07X and 1.92X, respectively, compared to 1.04X and 1.73X at last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The three conduit loans represent 12% of the outstanding pool balance. The largest loan is the Bal Seal Engineering Loan ($4.8 million -- 6.6% of the pool), which is secured by a 125,000 square foot (SF) industrial property located in Foothill Ranch, California. The property is 100% leased to Bal Seal Engineering Company through January 2019. Due to single tenant exposure risk, a lit/dark analysis was applied. Moody's LTV and stressed DSCR are 46% and 2.35X, respectively, compared to 50% and 2.14X at last review. The second largest loan is the Dendrite Office Building Loan ($2.0 million -- 2.8% of the pool), which is secured by a 26,280 SF office complex located in Basking Ridge, New Jersey. The property was 76% leased as of April 2014, the same as last review. The loan is on the servicer's watchlist due to low DSCR and occupancy. Moody's LTV and stressed DSCR are 105% and 1.03X, respectively, compared to 114% and 0.95X at last review. The third largest loan is the 30 Executive Avenue Loan ($1.7 million -- 2.3% of the pool), which is secured by an 89,178 SF industrial property located in Edison, New Jersey. The property is 100% leased to Skekia Group through December 2015. Due to the single tenant exposure a lit/dark analysis was applied. Moody's LTV and stressed DSCR are 61% and 1.78X, respectively, compared to 73% and 1.49X at last review. The CTL component includes six loans ($52.8 million -- 68.1% of the pool) secured by properties leased to five tenants under bondable leases. The largest exposures are Ingram Micro Inc. ($35.9 -- 47.4% of the pool; Moody's senior unsecured rating Baa3, stable outlook), CarMax ($13.5 - 16.4% of the pool), and Rite Aid Corporation ($1.4 million -- 1.8% of the pool; Moody's senior unsecured rating Caa1; stable outlook). The bottom-dollar weighted average rating factor (WARF) for the CTL component is 1,001 compared to 1,028 at last review. WARF is a measure of the overall quality of a pool of diverse credits. The bottom-dollar WARF is a measure of the default probability within the pool. GMAC COMMERCIAL 2004-C2: Moody's Cuts Cl. X-1 Debt Rating to Caa1 ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on two classes, affirmed the ratings on four classes and downgraded the rating on one class in GMAC Commercial Mortgage Securities, Inc., Series 2004-C2 as follows: Cl. A-1A, Upgraded to Aa2 (sf); previously on Sep 19, 2013 Affirmed Aa3 (sf) Cl. A-4, Upgraded to Aa2 (sf); previously on Sep 19, 2013 Affirmed Aa3 (sf) Cl. B, Affirmed Ba1 (sf); previously on Sep 19, 2013 Affirmed Ba1 (sf) Cl. C, Affirmed B1 (sf); previously on Sep 19, 2013 Affirmed B1 (sf) Cl. D, Affirmed Caa3 (sf); previously on Sep 19, 2013 Affirmed Caa3 (sf) Cl. E, Affirmed C (sf); previously on Sep 19, 2013 Affirmed C (sf) Cl. X-1, Downgraded to Caa1 (sf); previously on Sep 19, 2013 Affirmed Ba3 (sf) Ratings Rationale The ratings on P&I classes A-1A and A-4 were upgraded based primarily on an increase in credit support resulting from loan paydowns and amortization. The deal has paid down 73% since Moody's last review. The ratings on P&I classes B and C were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on P&I classes D and E were affirmed because the ratings are consistent with Moody's expected loss. The rating on the IO Class (Class X-1) was downgraded due to the decline in the credit performance of its reference classes resulting from principal paydowns of higher quality reference classes. Moody's rating action reflects a base expected loss of 11.9% of the current balance compared to 4.3% at Moody's last review. Moody's base expected loss plus realized losses is now 11.0% of the original pooled balance compared to 12.0% at the last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of four compared to 12 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 10, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 84% to $153 million from $934 million at securitization. The certificates are collateralized by 21 mortgage loans ranging in size from less than 1% to 34% of the pool, with the top ten non-defeased loans constituting 80% of the pool. Two loans, constituting 20% of the pool, have defeased and are secured by US government securities. Fourteen loans, constituting 29% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Eleven loans have been liquidated from the pool, resulting in an aggregate realized loss of $84 million (for an average loss severity of 56%). Three loans, constituting 40% of the pool, are currently in special servicing. The largest specially serviced loan is the Military Circle Mall loan ($52 million -- 34% of the pool), which is secured by a regional mall located in Norfolk, Virgina and anchored by Macy's, JC Penny's and Sears. The loan transferred to special servicing in August 2013 due to imminent default. Current occupancy is 67% compared to 70% at prior review. The borrower is currently in negotiations with the special servicer regarding potential resolutions. The remaining two specially serviced loans are secured by an industrial and office property. Moody's estimates an aggregate $17.1 million loss for the specially serviced loans (30% expected loss on average). Moody's received full year 2012 and full or partial year 2013 operating results for 94% of the pool. Moody's weighted average conduit LTV is 78%, compared to 80% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 12.3% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.1%. Moody's actual and stressed conduit DSCRs are 1.37X and 1.34X, respectively, compared to 1.38X and 1.31X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 25% of the pool balance. The largest loan is the Escondido Village Shopping Center Loan ($16 million -- 11% of the pool), which is secured by an anchored retail center located 31 miles from San Diego. Current occupancy is 94% compared to 89% at prior review. The loan is expected to payoff August 1, 2014. Moody's LTV and stressed DSCR are 87% and 1.16X, respectively, compared to 91% and 1.10X at the last review. The second largest loan is the DDC Portfolio Rollup Loan ($12 million -- 8% of the pool), which is secured by a portfolio of six retail, office and mixed-use properties located in Washington, DC. At yearend 2013, the occupancy was 94%. The servicer expects the loan to payoff August 5, 2014. Moody's LTV and stressed DSCR are 60% and 1.73X, respectively, compared to 60% and 1.70X at the last review. The third largest loan is the Diamondhead Building Loan ($10 million -- 6.6% of the pool), which is secured by an office building in suburban New Jersey. Per the borrower, the refinance is in process. Current occupancy is 93%, the same as at prior review. Moody's LTV and stressed DSCR are 71% and 1.45X, respectively, compared to 85% and 1.21X at the last review. GRAMERCY REAL 2005-1: Moody's Affirms Caa2 Rating on Cl. H Notes ---------------------------------------------------------------- Moody's Investors Service has affirmed the ratings on the following notes issued by Gramercy Real Estate CDO 2005-1 Ltd.: Cl. A-1, Affirmed Aaa (sf); previously on Sep 11, 2013 Affirmed Aaa (sf) Cl. A-2, Affirmed Aaa (sf); previously on Sep 11, 2013 Affirmed Aaa (sf) Cl. B, Affirmed Aa2 (sf); previously on Sep 11, 2013 Affirmed Aa2 (sf) Cl. C, Affirmed Baa1 (sf); previously on Sep 11, 2013 Affirmed Baa1 (sf) Cl. D, Affirmed Ba1 (sf); previously on Sep 11, 2013 Affirmed Ba1 (sf) Cl. E, Affirmed Ba2 (sf); previously on Sep 11, 2013 Affirmed Ba2 (sf) Cl. F, Affirmed B1 (sf); previously on Sep 11, 2013 Affirmed B1 (sf) Cl. G, Affirmed B3 (sf); previously on Sep 11, 2013 Affirmed B3 (sf) Cl. H, Affirmed Caa2 (sf); previously on Sep 11, 2013 Affirmed Caa2 (sf) Cl. J, Affirmed Caa3 (sf); previously on Sep 11, 2013 Affirmed Caa3 (sf) Cl. K, Affirmed Caa3 (sf); previously on Sep 11, 2013 Affirmed Caa3 (sf) Ratings Rationale Moody's has affirmed the ratings of on the transaction because key transaction metrics are commensurate with the existing ratings. 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. Gramercy Real Estate CDO 2005-1 is a cash CRE CDO transaction, whose reinvestment period ended in July 2010. The transaction is backed by a portfolio of: i) whole loans and senior participations (40.1% of the pool balance); ii) commercial mortgage backed securities (CMBS) (36.8%); iii) mezzanine interests (11.7%); and iv) B-notes and rake bonds (11.4%). As of the June 30, 2014 trustee report, the aggregate note balance of the transaction, including income notes, has decreased to $570.1 million from $1.0 billion at issuance, with junior notes cancellation to the Class E, Class F, Class G, and Class H notes and the principal paydown directed to the senior most outstanding class of notes. The paydown was the result of the combination of regular amortization, resolution and sales of defaulted collateral, and the failing of certain par value tests. In general, holding all key parameters static, the junior note cancellations can result in higher expected losses and longer weighted average lives on the senior notes, while producing slightly lower expected losses on the mezzanine and junior notes. However, this does not cause, in and of itself, a downgrade or upgrade of any outstanding classes of notes in this transaction. Moody's has identified the following as key indicators of the expected loss in CRE CDO transactions: the weighted average rating factor (WARF), the weighted average life (WAL), the weighted average recovery rate (WARR), and Moody's asset correlation (MAC). Moody's typically models these 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 its assessments for the reference obligations it does not rate. The rating agency modeled a bottom-dollar WARF of 5560, compared to 5704 at last review. The current ratings on the Moody's-rated reference obligations and the assessments of the non-Moody's rated reference obligation follow: Aaa-Aa3 and 9.0% compared to 8.4% at last review; A1-A3 and 10.7% compare to 9.4% at last review; Baa1-Baa3 and 2.2% compared to 2.4% at last review; Ba1-Ba3 and 2.4% compared to 2.2% at last review; B1-B3 and 8.6% compared to 8.3% at last review; and Caa1-Ca/C and 67.1% compared to 69.3% at last review. Moody's modeled a WAL of 2.6 years, compared to 2.5 years at last review. The WAL is based on assumptions about extensions on the underlying collateral. Moody's modeled a fixed WARR of 27.5%, compared to 32.8% at last review. Moody's modeled a MAC of 14.0%, compared to 9.7% at last review. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes. Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the recovery rate of the underlying collateral and credit assessments. Holding all other key parameters static, reducing the recovery rate by 10% would result in modeled rating movement on the rated notes of zero to four notches downward (e.g. one notch down implies a rating movement from Baa3 to Ba1). Increasing the recovery rate by 10% would result in modeled rating movement on the rated notes of zero to three notches upward (e.g. one notch up implies a rating movement from Ba1 to Baa3). The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and commercial real estate property markets. Commercial real estate property values continue to improve modestly, 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, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate. HARBOURVIEW CLO 2006-1: S&P Raises Rating on Class D Notes to BB- ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2, B, and D notes and affirmed its ratings on the class C notes from HarbourView CLO 2006-1. At the same time, S&P removed the ratings on the class A-1, A-2, and B notes from CreditWatch, where S&P placed them with positive implications on April 9, 2014. HarbourView CLO 2006-1 is a collateralized loan obligation (CLO) transaction that closed in November 2006. The transaction's reinvestment period ended in Dec. 2013 and has since paid down more than $105 million to the senior class A-1 notes. The paydowns led to increased overcollateralization (O/C) ratios indicated in the June 17, 2014, trustee report: -- The class A O/C increased to 127.23% from 121.36% in the March 15, 2012, trustee report, which S&P referenced in its previous rating actions. -- Class B increased to 117.46% from 113.31% in March 2012. -- Class C increased to 111.96% from 108.70% in March 2012. -- Class D increased to 107.55% from 104.96% in March 2012. In addition, the transaction is holding approximately $1.28 million less in defaulted assets than in S&P's previous rating action, and the weighted average life has decreased to 3.84 years. S&P 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 S&P will take further rating actions as it deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS HarbourView CLO 2006-1 Cash flow Previous implied Cash flow Final Class rating rating cushion(i) rating A-1 AA+ (sf)/Watch Pos AAA (sf) 3.51% AAA (sf) A-2 AA (sf)/Watch Pos AA+ (sf) 7.51% AA+ (sf) B A- (sf)/Watch Pos A+ (sf) 4.83% A+ (sf) C BBB (sf) BBB+ (sf) 1.74% BBB (sf) D B+ (sf) BB (sf) 1.15% BB- (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation Scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1 AAA (sf) AAA (sf) AA+ (sf) AAA (sf) AAA (sf) A-2 AA+ (sf) AA+ (sf) AA+ (sf) AAA (sf) AA+ (sf) B A+ (sf) A+ (sf) A+ (sf) AA- (sf) A+ (sf) C BBB+ (sf) BBB- (sf) BBB (sf) BBB+ (sf) BBB (sf) D BB (sf) B+ (sf) BB- (sf) BB+ (sf) BB- (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-1 AAA (sf) AAA (sf) AA+ (sf) AAA (sf) A-2 AA+ (sf) AA+ (sf) AA- (sf) AA+ (sf) B A+ (sf) A+ (sf) BBB+ (sf) A+ (sf) C BBB+ (sf) BBB (sf) BB+ (sf) BBB (sf) D BB (sf) BB- (sf) CCC+ (sf) BB- (sf) RATINGS RAISED AND REMOVED FROM CREDITWATCH HarbourView CLO 2006-1 Rating Class To From A-1 AAA (sf) AA+ (sf)/Watch Pos A-2 AA+ (sf) AA (sf)/Watch Pos B A+ (sf) A- (sf)/Watch Pos D BB- (sf) B+ (sf) RATINGS AFFIRMED HarbourView CLO 2006-1 Class Rating C BBB (sf) HEWETT'S ISLAND VI: Moody's Raises Rating on Class E Notes to Ba1 ----------------------------------------------------------------- Moody's Investors Service upgraded the ratings on the following notes issued by Hewett's Island CLO VI, Ltd.: $15,500,000 Class C Third Priority Senior Secured Deferrable Floating Rate Notes Due 2019, Upgraded to Aaa (sf); previously on January 8, 2014 Upgraded to Aa1 (sf) $15,500,000 Class D Fourth Priority Mezzanine Secured Deferrable Floating Rate Notes Due 2019, Upgraded to Aa3 (sf); previously on January 8, 2014 Upgraded to Baa1 (sf) $16,000,000 Class E Fifth Priority Mezzanine Secured Deferrable Floating Rate Notes Due 2019 (current outstanding balance of $13,414,792), Upgraded to Ba1 (sf); previously on January 8, 2014 Upgraded to Ba2 (sf) Moody's also affirmed the ratings on the following notes: $50,000,000 Class A-R First Priority Senior Secured Floating Rate Revolving Notes Due 2019 (current outstanding balance of $8,735,239.62), Affirmed Aaa (sf); previously on January 8, 2014 Affirmed Aaa (sf) $255,500,000 Class A-T First Priority Senior Secured Floating Rate Term Notes Due 2019 (current outstanding balance of $44,637,074.39), Affirmed Aaa (sf); previously on January 8, 2014 Affirmed Aaa (sf) $27,500,000 Class B Second Priority Senior Secured Floating Rate Notes Due 2019, Affirmed Aaa (sf); previously on January 8, 2014 Upgraded to Aaa (sf) Hewett's Island CLO VI, Ltd., issued in May 2007, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ended in June 2013. Ratings Rationale These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's overcollateralization ratios since the last rating action in January 2014. The Class A Notes have been paid down by approximately 20.0% or $60.0 million since the last rating action. Based on the latest trustee report in July 2014, the overcollateralization (OC) ratio for Class A/B, Class C , Class D and Class E are reported at 167.29%, 140.38%, 120.93% and 107.98% respectively, versus January 2014 levels of 138.77%, 125.02%, 113.74% and 105.51% respectively. The deal has also benefited from an improvement in the credit quality of the portfolio since the last rating action date. Based on the trustee's July 2014 report, the weighted average rating factor is currently 2261 compared to 2389 in January 2014. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Long-dated assets: The presence of assets that mature after the CLO's legal maturity date exposes the deal to liquidation risk on those assets. This risk is borne first by investors with the lowest priority in the capital structure. Moody's assumes that the terminal value of an asset upon liquidation at maturity will 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) or the asset's current market value. 6) Weighted average life: The notes' ratings are sensitive to the weighted average life assumption of the portfolio, which could lengthen owing to the manager's decision to participate in amend- to-extend offerings. Moody's tested for a possible extension of the actual weighted average life in its analysis. Life extension can increase the default risk horizon and assumed cumulative default probability of CLO collateral. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (1869) Class A-T: 0 Class A-R: 0 Class B: 0 Class C: 0 Class D: +2 Class E: +1 Moody's Adjusted WARF + 20% (2803) Class A-T: 0 Class A-R: 0 Class B: 0 Class C: 0 Class D: -2 Class E: -1 Loss and Cash Flow Analysis: 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 Global Approach to Rating Collateralized Loan Obligations," published in February 2014 The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $135.3 million, no defaulted par, a weighted average default probability of 13.09% (implying a WARF of 2336), a weighted average recovery rate upon default of 49.13%, a diversity score of 37 and a weighted average spread of 2.88%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. JP MORGAN 2000-C10: Moody's Hikes Rating on Class G Notes to 'C' ---------------------------------------------------------------- Moody's Investors Service upgraded one class and affirmed three classes in J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2000-C10 as follows: Cl. E, Affirmed Aaa (sf); previously on Sep 5, 2013 Affirmed Aaa (sf) Cl. F, Upgraded to A2 (sf); previously on Sep 5, 2013 Upgraded to Baa1 (sf) Cl. G, Affirmed C (sf); previously on Sep 5, 2013 Affirmed C (sf) Cl. X, Affirmed Caa3 (sf); previously on Sep 5, 2013 Affirmed Caa3 (sf) Ratings Rationale The rating on Class F was upgraded because of an increase in credit support resulting from loan paydowns. The deal has paid down 24% since Moody's last review. The rating on Class E was affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The rating on Class G was affirmed because the ratings are consistent with Moody's expected loss. The rating on the IO Class X was affirmed based on the credit performance (or the weighted average rating factor or WARF) of its referenced classes. Moody's rating action reflects a base expected loss of 0.9% of the current balance, the same as at last review. Moody's base expected loss plus realized losses is 8.5% of the original pooled balance, the same as at last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action 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 U.S. CMBS Conduit Transactions" published in September 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 4 compared to 5 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 15, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 98% to $16.5 million from $738.5 million at securitization. The certificates are collateralized by seven mortgage loans ranging in size from 7% to 33% of the pool. One loan, representing 16% of the pool, has defeased and is secured by U.S. Government securities. There are no loans currently on the master servicer's watchlist or in special servicing. Thirty-two loans have been liquidated from the pool, resulting in an aggregate realized loss of $62.3 million (44% loss severity on average). Moody's received full year 2012 and 2013 operating results for 91% and 100% of the pool, respectively. Moody's weighted average conduit LTV is 40% compared to 51% at Moody's last review. Moody's conduit component excludes loans with credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 12% to the most recently available net operating income (NOI) for the single tenant office building conduit loan. Moody's value reflects a weighted average capitalization rate of 10.2%. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 60% of the pool. The largest loan is the Pavilion East Loan ($5.4 million -- 32.9% of the pool), which is secured by a 171,969 square foot (SF) anchored retail center located in Richardson, Texas. Major tenants include Richardson Bike Mart (20% of the NRA -- lease expiration December 31, 2017), Sprouts Grocers (17% of the NRA -- lease expiration October 2016) and TJ Maxx (17% of the NRA - lease expiration October 2016). Spouts Grocers and TJ Maxx sublease their space from Albertson's, a supermarket retailer, which vacated the property in 2006. The property was 95% leased as of December 2013 compared to 88% as of December 2012. Property financial performance has increased and the loan has amortized 51% since securitization. Moody's LTV and stressed DSCR are 31% and 3.49X, respectively, compared to 36% and 2.99X at last review. The second largest loan is the Pavilion West Loan ($2.4 million -- 14.4% of the pool), which is secured by an 84,250 SF retail center located in Dallas, Texas. The anchor tenant is 24 Hour Fitness (38% of the NRA -- lease expiration September 2016). The property was 88% leased as of December 2013 compared to 89% as of December 2012. Property performance has been stable and the loan has amortized 50% since securitization. Moody's LTV and stressed DSCR are 27% and 4.98X, respectively, compared to 30% and 3.93X at last review. The third largest loan is the Eckerd - Media Loan ($2.1 million -- 12.5% of the pool), which is secured by a freestanding Eckerd Drug store in Media Borough, Pennsylvania. The loan is subject to a 20- year lease with multiple five-year renewal options. The loan has amortized 52% since securitization. Moody's LTV and stressed DSCR are 51% and 2.13X, compared to 57% and 1.91X at last review. JP MORGAN 2003-CIBC6: Moody's Cuts Cl. X-1 Secs. Rating to 'B2' --------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 11 classes and downgraded the rating on one class of J.P. Morgan Chase Commercial Mortgage Securities Corp. Series 2003-CIBC6 as follows: Cl. C, Affirmed Aaa (sf); previously on Sep 6, 2013 Affirmed Aaa (sf) Cl. D, Affirmed Aaa (sf); previously on Sep 6, 2013 Affirmed Aaa (sf) Cl. E, Affirmed Aaa (sf); previously on Sep 6, 2013 Upgraded to Aaa (sf) Cl. F, Affirmed A1 (sf); previously on Sep 6, 2013 Upgraded to A1 (sf) Cl. G, Affirmed A3 (sf); previously on Sep 6, 2013 Upgraded to A3 (sf) Cl. H, Affirmed Ba1 (sf); previously on Sep 6, 2013 Affirmed Ba1 (sf) Cl. J, Affirmed Ba2 (sf); previously on Sep 6, 2013 Affirmed Ba2 (sf) Cl. K, Affirmed B2 (sf); previously on Sep 6, 2013 Affirmed B2 (sf) Cl. L, Affirmed Caa1 (sf); previously on Sep 6, 2013 Affirmed Caa1 (sf) Cl. M, Affirmed Caa3 (sf); previously on Sep 6, 2013 Downgraded to Caa3 (sf) Cl. N, Affirmed C (sf); previously on Sep 6, 2013 Downgraded to C (sf) Cl. X-1, Downgraded to B2 (sf); previously on Sep 6, 2013 Affirmed Ba3 (sf) Ratings Rationale The ratings on the seven P&I classes (Class C, D, E, F, G, H and J) were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on the remaining four P&I classes were affirmed because the ratings are consistent with Moody's expected loss. The rating on the IO Class (Class X-1) was downgraded due to the decline in the credit performance of its reference classes resulting from principal paydowns of higher quality reference classes. Moody's rating action reflects a base expected loss of 12.7% of the current balance compared to 12.0% at Moody's last review. Moody's base expected loss plus realized losses is now 2.7% of the original pooled balance, the same as at last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 8, compared to 13 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 14, 2014 distribution date, the transaction's aggregate pooled certificate balance has decreased by 89% to $119 million from $1.04 billion at securitization. The certificates are collateralized by 21 mortgage loans ranging in size from less than 1% to 24% of the pool, with the top ten loans constituting 82% of the pool. Three loans, constituting 7% of the pool, have defeased and are secured by US government securities. Eight loans, constituting 33% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Ten loans have been liquidated from the pool, resulting in an aggregate realized loss of $13 million (for an average loss severity of 32%). Three loans, constituting 15% of the pool, are currently in special servicing. The largest specially serviced loan is the 2 Executive Plaza Loan ($7.4 million -- 6.2% of the pool), which is secured by a 102,000 square foot (SF) office building located in Cherry Hill, New Jersey. The loan transferred to special servicing in January 2013 due to pending maturity default. Foreclosure was filed in May 2013 and the loan became REO in October 2013. After several tenants vacated at their lease expirations in 2013, the property was only 28% leased as of April 2014 compared to 79% leased in January 2013. The special servicer indicated they are working to lease up the property. The second largest specially serviced loan is the Advance Office Building ($6.5 million -- 5.5% of the pool), which is secured by a 231,000 SF office building located in Southfield, Michigan. The loan transferred to special servicing in March 2013 due to imminent maturity default and a receiver was appointed in November 2013. The property was 71% leased as of September 2013. The special servicer indicated that the most recent Borrower proposed resolution was rejected and they are now moving forward with the foreclosure process. The remaining specially serviced loan is secured by two cross- collateralized and cross-defaulted manufactured housing properties. Moody's has also assumed a high default probability for two poorly performing loans, constituting 10% of the pool. Moody's estimates an aggregate loss of $12.8 million from these specially serviced and troubled loans. As of the most recent remittance date, the pool has experienced cumulative interest shortfalls totaling $1.5 million and the shortfalls currently reach Class F. The majority of these interest shortfalls are a result of reimbursements of advances to the master servicer associated with a previously modified loan. As of the July 2014 remittance statement only $27,551 remains to be reimbursed. Moody's anticipates that once these advances have been completely reimbursed, interest shortfalls will begin to be recovered and the shortfalls associated with the two investment grade classes (Class F and G) will be recovered in the next two to three months. Moody's received full year 2012 operating results for 87% of the pool,and full or partial year 2013 operating results for 93% of the pool. Moody's weighted average conduit LTV is 73% compared to 74% at Moody's last review. Moody's conduit component excludes defeased loans and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 12% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.5%. Moody's actual and stressed conduit DSCRs are 1.33X and 1.54X, respectively, compared to 1.43X and 1.48X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 50% of the pool balance. The largest loan is the International Paper Office Loan ($28.8 million -- 24.2%), which is secured by a 214,000 SF office building located in Memphis, Tennessee. The building is one of three identically designed buildings that make up the International Place office park. The collateral is 100% leased to International Paper Company (senior unsecured rating Baa2, stable outlook) through February 2027. International Paper has utilized the International Place office park as its headquarters since 1987. The loan has amortized 18% since securitization and matures in July 2017. Moody's analysis is based on a lit/dark analysis due to concerns about the property's single tenancy. Moody's LTV and stressed DSCR are 86% and 1.16X, respectively, compared to 88% and 1.14X at last review. The second largest loan is the Shelbyville Road Plaza Loan ($17.7 million -- 14.9%), which is secured by a 250,000 SF community shopping center located in Louisville, Kentucky. The property was previously on the watchlist due to tenant vacancies as Linens-n- Things, Circuit City and Border's all vacated the property since December 2008. Together these tenants originally leased 34% of the collateral's NRA. The property was removed from the watchlist in September 2013 after the borrower was able to lease the vacated Linens-n-Things space to Nike Factory Store, and the former Circuit City space to Nordstrom Rack. The former Border's space remains vacant.. The property was 82% leased as of April 2014 compared to 85% leased in March 2013 and 70% in June 2012. The loan is fully amortizing and matures in March 2022. Moody's LTV and stressed DSCR are 54% and 1.84X, respectively, compared to 60% and 1.66X at last review. The third largest conduit loan is the Amazon Distribution Center Loan ($12.5 million -- 10.5%), which is secured by a 589,000 SF industrial property located in Fernley, Nevada. The center is fully leased to Amazon.com, Inc. (senior unsecured rating Baa1, stable outlook) through August 2014. The master servicer indicated the Borrower contacted them in May 2014 to inform them of Amazon's intent to extend its lease for 5 years. The loan has an anticipated repayment date of August 2014. Moody's analysis is based on a lit/dark analysis due to concerns about the property's single tenancy. Moody's LTV and stressed DSCR are 59% and 1.84X, respectively, compared to 64% and 1.60X at last review. JP MORGAN 2004-PNC1: Fitch Affirms 'CCCsf' Rating on Cl. F Secs. ---------------------------------------------------------------- Fitch Ratings has upgraded two and affirmed 12 classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., series 2004- PNC1 commercial mortgage pass-through certificates. Key Rating Drivers The upgrades reflect the improved credit enhancement and the ability of the classes to withstand losses in a stressed scenario. Fitch modeled losses of 17.7% of the remaining pool; expected losses on the original pool balance total 6.6%, including $49.6 million (4.5% of the original pool balance) in realized losses to date. There are 20 loans remaining in the pool; Fitch has designated nine loans (69.5%) as Fitch Loans of Concern, which includes four specially serviced assets (24%). One loan (11.8%) is currently defeased. As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 88.5% to $111.2 million from $1.1 billion at issuance. Interest shortfalls are currently affecting classes H through NR. The largest contributor to Fitch's modeled losses is an 180,000 square foot (sf) suburban office property (13.1%) located in Farmington Hills, MI. The property is solely occupied by Jervis B Webb Co whose lease expired in September 2017. The loan transferred to the special servicer in October 2013 due to imminent payment default after the borrower was unable to obtain sufficient financing prior to the April 2014 maturity date. The second largest contributor to expected losses and the third largest in the pool is a 146,279 square foot anchored retail center (8.9%) located in Springdale, OH. The property is 100% occupied by three tenants, the largest of which has notified the borrower that they will not be renewing their lease. Average rents at the property remain below market as the borrower has previously given rent concessions in order to maintain occupancy. The third largest contributor to expected losses is a 47,367 square foot (sf) medical center (4.6%) located in Corona, CA. The property is not producing sufficient income to meet its debt service obligations and occupancy was 28% as of October 2013. Per a November inspection, the third floor is damaged due to vandalism while occupied units remain in good condition. Rating Sensitivities In order to consider upgrades as the pool is very concentrated, Fitch ran additional stresses on the specially serviced loans and two of the four largest loans in the pool. The largest loan in the pool is secured by a 320,198 sf suburban office building located in Overland Park, KS. The property is 100% occupied by Swiss Re America Holding Co who has a lease that expires in December 2018; which is before the loan's anticipated repayment date in 2019. Fitch took an additional stress on the loan to match vacancy with that of the submarket. Additionally, Fitch applied a further stress to the previously mentioned second largest contributor to Fitch model loss. The stress on the loan, which is the fourth largest in the pool, reflects the possibility for significant deterioration in the performance of the loan. The ratings on the class A-1A through E notes are expected to be stable as the credit enhancement remains high. The class F and G notes may be subject to further downgrades as losses are realized. Fitch upgrades the following classes: -- $28.8 million class B to 'AAAsf' from 'AAsf'; Outlook Stable; -- $17.8 million class D to 'BBBsf' from 'BBsf'; Outlook Stable. Fitch affirms the following classes: -- $16.5 million class A-1A at 'AAAsf'; Outlook Stable; -- $13.7 million class C at 'Asf'; Outlook Stable; -- $11 million class E at 'Bsf'; Outlook Stable; -- $16.5 million class F at 'CCCsf'; RE 100%; -- $11 million class G at 'CCsf'; RE 25%; -- $10.8 million class H at 'Dsf'; RE 0%; -- $0 class J at 'Dsf'; RE 0%; -- $0 class K at 'Dsf'; RE 0%; -- $0 class L at 'Dsf'; RE 0%; -- $0 class M at 'Dsf'; RE 0%; -- $0 class N at 'Dsf'; RE 0%; -- $0 class P at 'Dsf'; RE 0%. JP MORGAN 2005-LDP5: Fitch Affirms 'Csf' Rating on Class Q Certs ---------------------------------------------------------------- Fitch Ratings has affirmed J.P. Morgan Chase Commercial Mortgage Series Corp. commercial mortgage pass-through certificates series 2005-LDP5. Key Rating Drivers The affirmations are the result of stable overall pool performance since Fitch's last review. Fitch modeled losses of 9.7% for the remaining pool; expected losses on the original pool balance total 7.6%, including $23 million (0.5% of the original pool balance) in realized losses to date. Fitch has designated 32 loans (18.5%) as Fitch Loans of Concern, which includes four specially serviced assets (6.6%). As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 27.5% to $3.14 billion from $4.33 billion at issuance. Thirteen loans (5.2%) are defeased. Interest shortfalls totaling $16.1 million are currently affecting classes L through NR. Rating Sensitivities Ratings on all investment grade classes are expected to remain stable and no near-term rating actions are anticipated. Future downgrades to class G are likely if pool performance deteriorates. In addition, the distressed classes (rated below 'B') may be subject to further rating actions as losses are realized. The largest contributor to expected losses is a loan secured by a 526,245 square foot (sf) Class A corporate headquarters campus complex located in Las Colinas, Texas (3.1% of the pool). The loan was transferred to special servicing in March 2012 due to covenant default as a result of reserve funding shortfalls in the amount of $1.5 million. The borrower has submitted a loan modification proposal which is under review by the special servicer. The property is 100% leased to NEC Corporation of America until March 2016, who in turn subleases the space to various tenants. The next largest contributor to expected losses is a 706,684 sf regional enclosed mall located in Hanover, MA (2.7%). The property became a real estate owned asset (REO) in February 2010 through foreclosure. Anchor tenants include WalMart, JC Penney and Dick's Sporting Goods. The servicer reported property occupancy was 97% as of first quarter (1Q) 2014. The third largest contributor to expected losses is the Atlantic Development Portfolio loan (2.7%), which is secured by five office complexes and two industrial properties located in Somerset and Warren, NJ. The properties have suffered from reduced revenue due to lower occupancy as a result of tenants vacating upon or prior to lease expirations. The servicer reported occupancy as of 1Q 2014 was 73%, compared to 97% at issuance. Servicer reported second quarter 2013 debt service coverage ratio (DSCR) was 1.0x, compared to 0.8x at YE2012 and 0.81x at YE2011. Fitch affirms the following classes as indicated: -- $97.1 million class A-3 at 'AAAsf'; Outlook Stable; -- $1.4 billion class A-4 at 'AAAsf'; Outlook Stable; -- $22.7 million class A-SB at 'AAAsf'; Outlook Stable; -- $257.3 million class A-1A at 'AAAsf'; Outlook Stable; -- $419.7 million class A-M at 'AAAsf'; Outlook Stable; -- $299 million class A-J at 'AAsf'; Outlook to Stable from Negative; -- $26.2 million class B at 'Asf'; Outlook Stable; -- $73.4 million class C at 'BBBsf'; Outlook Stable; -- $42 million class D at 'BBB-sf'; Outlook Stable; -- $21 million class E at 'BBsf'; Outlook Stable; -- $52.5 million class F at 'Bsf'; Outlook Stable; -- $36.7 million class G at 'B-sf'; Outlook Negative; -- $52.5 million class H at 'CCCsf'; RE 95%. -- $42 million class J at 'CCCsf'; RE 0%; -- $63 million class K at 'CCsf'; RE 0%. -- $26.2 million class L at 'CCsf'; RE 0%; -- $15.7 million class M at 'CCsf'; RE 0%; -- $15.7 million class N at 'Csf'; RE 0%; -- $5.2 million class O at 'Csf'; RE 0%; -- $5.2 million class P at 'Csf'; RE 0%; -- $10.5 million class Q at 'Csf'; RE 0%. The class A-1, A-2FL and A-2 certificates have paid in full. Fitch does not rate the class NR, HG-1, HG-2, HG-3, HG-4 and HG-5 certificates. Fitch previously withdrew the ratings on the interest-only class X-1 and X-2 certificates. JP MORGAN 2007-CIBC20: Moody's Affirms 'C' Rating on 5 Certs ------------------------------------------------------------ Moody's Investors Service has affirmed the ratings of 18 classes in J.P. Morgan Chase Commercial Mortgage Securities Trust, Commercial Mortgage Pass-Through Certificates, Series 2007-CIBC20 as follows: Cl. A-1A, Affirmed Aaa (sf); previously on Sep 12, 2013 Affirmed Aaa (sf) Cl. A-3, Affirmed Aaa (sf); previously on Sep 12, 2013 Affirmed Aaa (sf) Cl. A-4, Affirmed Aaa (sf); previously on Sep 12, 2013 Affirmed Aaa (sf) Cl. A-J, Affirmed B1 (sf); previously on Sep 12, 2013 Downgraded to B1 (sf) Cl. A-M, Affirmed A2 (sf); previously on Sep 12, 2013 Downgraded to A2 (sf) Cl. A-MFX, Affirmed A2 (sf); previously on Sep 12, 2013 Downgraded to A2 (sf) Cl. A-SB, Affirmed Aaa (sf); previously on Sep 12, 2013 Affirmed Aaa (sf) Cl. B, Affirmed B3 (sf); previously on Sep 12, 2013 Downgraded to B3 (sf) Cl. C, Affirmed Caa1 (sf); previously on Sep 12, 2013 Downgraded to Caa1 (sf) Cl. D, Affirmed Caa2 (sf); previously on Sep 12, 2013 Downgraded to Caa2 (sf) Cl. E, Affirmed Caa3 (sf); previously on Sep 12, 2013 Downgraded to Caa3 (sf) Cl. F, Affirmed C (sf); previously on Sep 12, 2013 Downgraded to C (sf) Cl. G, Affirmed C (sf); previously on Sep 12, 2013 Downgraded to C (sf) Cl. H, Affirmed C (sf); previously on Sep 12, 2013 Affirmed C (sf) Cl. J, Affirmed C (sf); previously on Sep 12, 2013 Affirmed C (sf) Cl. K, Affirmed C (sf); previously on Sep 12, 2013 Affirmed C (sf) Cl. X-1, Affirmed Ba3 (sf); previously on Sep 12, 2013 Affirmed Ba3 (sf) Cl. X-2, Affirmed Aaa (sf); previously on Sep 12, 2013 Affirmed Aaa (sf) Ratings Rationale The ratings on the four investment grade P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to- value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on the 12 below investment grade P&I classes were affirmed because the ratings are consistent with expected recovery of principal and interest from liquidated and troubled loans. The ratings on the two IO classes were affirmed based on the credit performance of the referenced classes. Moody's rating action reflects a base expected loss of 10.1% of the current balance compared to 11.2% at Moody's prior review. Moody's base expected loss plus realized losses is now 13.0% of the original pooled balance compared to 13.5% at the prior review. Factors That Would Lead To An Upgrade Or Downgrade Of The Rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had previously anticipated. Factors that may cause an upgrade of the ratings include significant loan paydowns or amortization, an increase in the pool's share of defeasance or overall improved pool performance. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool, loan concentration, increased expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action 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 CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 19 compared to 22 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 14, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 23% to $1.96 billion from $2.54 billion at securitization. The Certificates are collateralized by 102 mortgage loans ranging in size from less than 1% to 15% of the pool, with the top ten loans (excluding defeasance) representing 55% of the pool. The pool contains one loan, representing 0.9% of the pool, that has an investment grade structured credit assessment. One loan, representing 0.3% of the pool has defeased and is secured by US Government securities. Forty-five loans, representing 30% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of our ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Twenty-five loans have been liquidated from the pool, resulting in an aggregate realized loss of $133 million (55% loss severity on average). Six loans, representing 6.4% of the pool, are in special servicing. The largest specially serviced loan is the Clark Tower Loan ($60.1 million -- 3.1% of the pool), which is secured by a 34-story, 657,245 square foot (SF) office building located in Memphis, Tennessee. The property was 68% leased as of April 2014 compared to 66% as of December 2012. The loan was transferred to special servicing in September 2013 due to imminent payment default. The special servicer has approved a note sale. The servicer has not recognized an appraisal reduction for the loan, while Moody's estimates a $25 million loss. The remaining five specially serviced loans are secured by a mix of property types. Moody's estimates an aggregate $79.3 million loss for the specially serviced loans (60% expected loss on average). Moody's has assumed a high default probability for 26 poorly performing loans representing 20% of the pool and has estimated an aggregate $76.8 million loss (19% expected loss based on a 55% probability of default) from these troubled loans. Moody's received full-year 2012 operating results for 95% of the pool and full or partial year 2013 operating results for 92% of the pool. Moody's weighted average conduit LTV is 106%, the same as at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 11% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.3%. Moody's actual and stressed conduit DSCRs are 1.29X and 0.99X, respectively, compared to 1.30X and 1.00X at the last review. Moody's actual DSCR is based on Moody's net cash flow (NCF) and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed rate applied to the loan balance. The loan with a structured credit assessment is the 1564 Broadway Loan ($18.0 million -- 0.9% of the pool), which is secured by a 52,657 SF mixed use property located in Times Square in New York, New York. Moody's structured credit assessment and stressed DSCR are a2 (sca.pd) and 2.16X, respectively, compared to baa2 (sca.pd) and 1.55X at the last review. The top three performing conduit loans represent 35% of the pool balance. The largest loan is the Retail Portfolio Loan (formerly Centro -- New Plan Pool I; $294.0 million -- 15% of the pool), which is secured by a portfolio of 18 retail properties that are cross-collateralized and cross-defaulted and total 3.1 million SF. The properties are located in 12 states, with the largest concentrations in Georgia (20%), Florida (14%) and Texas (13%). The portfolio was 93% leased as of January 2014 compared to 91% as of December 2012. Moody's LTV and stressed DSCR are 110% and 0.88X, respectively, compared to 115% and 0.84X at the last review. The second largest loan is the Gurnee Mills Loan ($246 million -- 12.6% of the pool), which is a pari-passu interest in a $321.0 million first mortgage loan. The loan is secured by the borrower's interest in a 1.8 million SF regional mall located in Gurnee, Illinois. The mall's major tenants include Sears, Bass Pro Shops Outdoor World and Kohl's. The property was 95% leased as of December 2013 compared to 94% leased as of December 2012. Moody's LTV and stressed DSCR are 122% and 0.78X, respectively, compared to 124% and 0.76X at the last review. The third largest loan is the North Hills Mall Loan ($141.5 million -- 7.2% of the pool), which is secured by the borrower's interest in a 586,000 SF mixed use property that includes Main Street outdoor retail, an office component, a 14-screen movie theater, JC Penney, and two bank outparcels. The property is situated within a mixed-use development that includes residential condominiums, commercial and hotel properties, a retirement community and recreational amenities. The property was 97% leased as of March 2014. Moody's LTV and stressed DSCR are 141% and 0.69X, respectively. JP MORGAN 2008-C2: Fitch Affirms 'Dsf' Rating on Cl. C Certs ------------------------------------------------------------ Fitch Ratings has affirmed 21 classes of J.P. Morgan Chase Commercial Mortgage Securities Trust, series 2008-C2. Key Rating Drivers The affirmations reflect sufficient credit enhancement relative to Fitch expected losses. Fitch modeled losses of 18.9% of the remaining pool; expected losses on the original pool balance total 24.9%, including $150.3 million (12.9% of the original pool balance) in realized losses to date primarily associated with the Dos Lagos retail loan disposition. Fitch has designated 22 loans (47.7%) as Fitch Loans of Concern, which includes six specially serviced assets (21.8%). As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by approximately 35% to $760 million from $1.16 billion at issuance. There are 64 loans remaining of the original 80. Interest shortfalls are currently affecting classes A-M through T. The largest contributor to expected losses is the Westin Portfolio, the current pool's largest loan (15.3%). The loan is secured by two Westin resort hotels: the 487-room Westin La Paloma in Tucson, AZ, with a 27-hole Jack Nicklaus golf course and spa, and the 416-room oceanfront Westin Hilton Head, in Hilton Head, SC, which features a Westin Heavenly Spa, the first 'Heavenly Spa' opened in the U.S. Both resorts offer numerous restaurants, pools and over 100,000 sf of meeting space. The loan, which transferred to special servicing soon after securitization (due to a borrower bankruptcy), fell short of performance expectations as a result of the recession and its impact on the hotels' performance. In early 2012, a loan modification was completed which required the newly formed sponsor, Southwest Value Partners, to timely perform the property improvement plans (PIP) agreed upon in the reorganization and approved by Westin. Recent press indicates the sponsor has completed significant renovations on both properties over the last few years, and the properties appear attractive and well kept. The sponsor continues to work on stabilizing performance and growing room revenue through Westin's strong reservation system. The franchise agreement with the Westin Hilton Head expires on 12/31/2019, and the agreement with Westin La Paloma expires on 12/31/2028. Updated valuations for the properties have not been made available; additionally, an accurate value may be more difficult to obtain as the subject properties have not been at full operation while undergoing renovations, and certain terms per the bankruptcy plan are being contested by the lender and operator. Fitch modeled a conservative value in its analysis, but took into account the significant capital investment both properties recently received, as well as the continued strong performance of the U.S. lodging industry. Fitch will closely monitor any performance updates including updated valuations as it becomes available. The next contributor to expected losses is a specially serviced loan (3.3%) secured by a 252,759 sf portfolio of three office-flex properties in Norcross, GA. A receiver was appointed in late 2013, and the asset became real estate owned (REO) in early 2014. The special servicer is pursuing a stabilization strategy with a focus on leasing up vacant space. The subject's market remains weak however, and competition for tenants is high among landlords. Rating Sensitivities The Rating Outlooks for classes A-4, A-4FL, A-SB, and A-1A remain Negative based on a lack of updated values for certain specially serviced loans. Additionally, dispositions from previously liquidated loans have eroded credit support to the lower classes in the trust. Downgrades are possible if expected losses increase or if these classes are affected by repeated interest shortfalls. Fitch affirms the following Classes and Outlooks as indicated: -- $336.3 million class A-4 at 'Asf'; Outlook Negative; -- $137.5 million class A-4FL at 'Asf'; Outlook Negative; -- $34.2 million class A-SB at 'Asf'; Outlook Negative; -- $53.5 million class A-1A at 'Asf'; Outlook Negative; -- $116.6 million class A-M at 'CCsf'; RE 50%; -- $61.2 million class A-J at 'Csf'; RE 0%; -- $14.6 million class B at 'Csf'; RE 0%; -- $7 million class C at 'Dsf'; RE 0%; -- $0 class D at 'Dsf'; RE 0%; -- $0 class E at 'Dsf';; RE 0%; -- $0 class F at 'Dsf'; RE 0%; -- $0 class G at 'Dsf'; RE 0%; -- $0 class H at 'Dsf'; RE 0%; -- $0 class J at 'Dsf'; RE 0%; -- $0 class K at 'Dsf'; RE 0%; -- $0 class L at 'Dsf'; RE 0%; -- $0 class M at 'Dsf'; RE 0%; -- $0 class N at 'Dsf'; RE 0%; -- $0 class P at 'Dsf'; RE 0%; -- $0 class Q at 'Dsf'; RE 0%; -- $0 class T at 'Dsf'; RE 0%. JP MORGAN 2012-HSBC: DBRS Confirms BB Rating on Class E Secs. ------------------------------------------------------------- DBRS Inc. has confirmed the ratings of J.P. Morgan Chase Commercial Mortgage Securities Trust 2012-HSBC, as follows: -- Class A at AAA (sf) -- Class X-A at AAA (sf) -- Class X-B at AAA (sf) -- Class B at AA (sf) -- Class C at A (sf) -- Class D at BBB (low) (sf) -- Class E at BB (high) (sf) All trends are Stable. The rating confirmations reflect the transaction's continued stable performance since issuance. The collateral consists of a $300 million first mortgage loan secured by a 30-story, 864,000 sf Class A office tower in Midtown Manhattan known as HSBC Tower. The property spans an entire block of Fifth Avenue between 39th and 40th Streets and serves as HSBC's North American headquarters. HSBC is currently rated AA (low) by DBRS. In addition to the first mortgage loan, there is mezzanine financing of $100 million. The trust loan has a ten-year term, with an initial interest-only period of five years. As of YE2013 reporting, the loan had debt service coverage ratio (DSCR) of 1.19 times (x). Future performance is expected to continue to improve, as the last remaining tenant free rent periods expired at the end of Q1 2013. The partial year reporting from Q1 2014 reflects this improvement as the DSCR was 1.41x. According to the March 2014 rent roll, the subject was 95.9% occupied, with a weighted-average rental rate of $56.41 per square foot (psf). The largest tenant is HSBC, occupying 59% of the net rentable area (NRA) across various spaces at the property. HSBC's lease expires in April 2020, approximately two years before loan maturity, representing significant refinance risk if the tenant vacates the property; however, DBRS believes that HSBC will remain at the property past its lease expiration date due to the fact that it spent $25 million renovating its space and the space serves as its North American headquarters. HSBC has two ten-year extension options at 95% of fair market rent. In the event that HSBC declines to exercise its lease extension option(s), there is significant rental revenue growth potential, as it currently pays a weighted-average rental rate of $39.30 psf on its Class B office space located on Floor Two through Floor 11. According to the Q2 2014 CoStar report, rental rates for Class B office properties in the Grand Central submarket were quoted at $53.50 psf. Along with HSBC, there are three other investment grade-rated tenants in occupancy at the subject. These include Man Group, VTB Capital and Staples. Combined, the four investment grade-rated tenants account for 72.9% of the NRA and 66.5% of the net rental income. JP MORGAN 2013-C14: Fitch Affirms 'Bsf' Rating on Class G Certs --------------------------------------------------------------- Fitch Ratings has affirmed 13 classes of J.P. Morgan Chase Commercial Mortgage Securities Trust (JPMBB) commercial mortgage pass-through certificates series 2013-C14. Key Rating Drivers The affirmations are the result of stable performance of the underlying pool since issuance. As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 1.1% to $1.14 billion from $1.15 billion at issuance. There are currently no delinquent or specially serviced loans. Thirty-one (85% of the pool balance) out of the 45 loans in the pool reported year end (YE), trailing 12-month (TTM), or partial year 2013 or 2014 financials. The largest loan in the pool is secured by 308,190 square feet (sf) of in-line space within the Meadows Mall, a 945,043 sf regional mall located in Las Vegas NV. The four anchors - Dillard's, Macy's, J.C. Penney, and Sears - own their improvements. The largest collateral tenants are Forever 21 (5.5% of the net rentable area [NRA]), Victoria Secret (3.9% NRA), and Hollister (2.4% NRA). As of YE December 2013 occupancy reported at 98.7%, and in-line tenant sales reported at $306 per square foot (psf) compared to $392 psf at YE 2012. The net operating income (NOI) debt service coverage ratio (DSCR) reported at 1.59x for YE 2013, compared to 1.55x at issuance. The subject A-1 note is parri passu with a $53.2 million A-2 note that is included in the JPMBB 2014-C18 transaction. The second largest loan in the pool is secured by the Spirit Portfolio, which is composed of 26 properties (22 retail, two office, and two industrial) totaling 1.6 million sf. The properties are located across 13 states and contain 19 different tenants. The largest property is the 573,000 sf J. Jill Distribution Center (36.8% portfolio NRA) located in Tilton, NH. The portfolio occupancy remains unchanged from issuance at 100%. The third largest loan in the pool is secured by 589 Fifth Avenue, a 169,486 sf office building located in midtown Manhattan, NY. The servicer reported occupancy at 90% as of June 2014, compared to 96.7% at issuance. The office tenants consist entirely of diamond dealers, while the entire 57,000 sf retail portion of the property is leased to H&M (33.6% NRA) through July 2033. The YE 2013 NOI DSCR reported at 1.29x, which only reflects partial year rental revenue from H&M. H&M's starting rent of approximately $12.7 million per year commenced on July 1, 2013, and increases by approximately 3% every three years. The subject A-2 note is interest only, and is parri passu with an identical $87.5 million A-1 note that is included in the JPMBB 2013-C13 transaction. Rating Sensitivity All classes maintain Stable Outlooks. Due to the recent issuance of the transaction and stable performance, Fitch does not foresee positive or negative ratings migration until a material economic or asset level event changes the transaction's portfolio-level metrics. Additional information on rating sensitivity is available in the report 'J.P. Morgan Chase Commercial Mortgage Securities Trust 2013-C14' (May 2, 2014. Fitch affirms the following classes as indicated: -- $67.8 million class A-1 at 'AAAsf'; Outlook Stable; -- $278.3 million class A-2 at 'AAAsf'; Outlook Stable; -- $75 million class A-3 at 'AAAsf'; Outlook Stable; -- $288.5 million class A-4 at 'AAAsf'; Outlook Stable; -- $81.8 million class A-SB at 'AAAsf'; Outlook Stable; -- $80.4 million class A-S at 'AAAsf'; Outlook Stable; -- $871.9 million * class X-A at 'AAAsf'; Outlook Stable; -- $76.1 million class B at 'AA-sf'; Outlook Stable; -- $45.9 million class C at 'A-sf'; Outlook Stable; -- $53.1 million class D at 'BBB-sf'; Outlook Stable; -- $11.5 million class E at 'BBB-sf'; Outlook Stable; -- $12.9 million class F at 'BB+sf'; Outlook Stable; -- $23 million class G at 'Bsf'; Outlook Stable. * Notional amount and interest-only. Fitch does not rate the class NR or class X-C certificates. The class X-B certificate was withdrawn from the transaction prior to closing. JP MORGAN 2013-C14: Moody's Affirms 'B2' Rating on Cl. G Certs -------------------------------------------------------------- Moody's Investors Service has affirmed the ratings on 13 classes in JPMBB 2013-C14, Commercial Mortgage Pass-Through Certificates, Series 2013-C14 as follows: Cl. A-1, Affirmed Aaa (sf); previously on Aug 20, 2013 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed Aaa (sf); previously on Aug 20, 2013 Definitive Rating Assigned Aaa (sf) Cl. A-3, Affirmed Aaa (sf); previously on Aug 20, 2013 Definitive Rating Assigned Aaa (sf) Cl. A-4, Affirmed Aaa (sf); previously on Aug 20, 2013 Definitive Rating Assigned Aaa (sf) Cl. A-S, Affirmed Aaa (sf); previously on Aug 20, 2013 Definitive Rating Assigned Aaa (sf) Cl. A-SB, Affirmed Aaa (sf); previously on Aug 20, 2013 Definitive Rating Assigned Aaa (sf) Cl. B, Affirmed Aa3 (sf); previously on Aug 20, 2013 Definitive Rating Assigned Aa3 (sf) Cl. C, Affirmed A3 (sf); previously on Aug 20, 2013 Definitive Rating Assigned A3 (sf) Cl. D, Affirmed Baa3 (sf); previously on Aug 20, 2013 Definitive Rating Assigned Baa3 (sf) Cl. E, Affirmed Ba2 (sf); previously on Aug 20, 2013 Definitive Rating Assigned Ba2 (sf) Cl. F, Affirmed Ba3 (sf); previously on Aug 20, 2013 Definitive Rating Assigned Ba3 (sf) Cl. G, Affirmed B2 (sf); previously on Aug 20, 2013 Definitive Rating Assigned B2 (sf) Cl. X-A, Affirmed Aaa (sf); previously on Aug 20, 2013 Definitive Rating Assigned Aaa (sf) Ratings Rationale The ratings on the 12 P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The rating on the IO class was affirmed based on the credit performance (or the weighted average rating factor or WARF) of the referenced classes. Moody's rating action reflects a base expected loss of 2.6% of the current balance. The deal has not experienced any realized losses. Moody's base expected loss plus realized losses is 2.6% of the original pooled balance. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published September 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the credit assessment level) for loans with similar credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 21, the same as at securitization. Deal Performance As of the July 17, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 1% to $1.14 billion from $1.15 billion at securitization. The certificates are collateralized by 45 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans constituting 61% of the pool. The pool does not currently contain any defeased loans, loans with structured credit assessments, loans on the master servicer's watchlist, specially serviced loans or liquidated loans. Moody's received full year 2012 and full or partial year 2013 operating results for 100% of the pool. Moody's weighted average conduit LTV is 99% compared to 103% at securitization. Moody's net cash flow (NCF) reflects a weighted average haircut of 6% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.7%. Moody's actual and stressed conduit DSCRs are 1.68X and 1.09X, respectively, compared to 1.59X and 1.02X at securitization. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 26% of the pool balance. The largest loan is the Meadows Mall Loan ($107 million -- 9.5% of the pool), which represents a pari passu interest in a $161 million first mortgage. The loan is secured by the borrower's interest in a 945,000 square foot (SF) regional mall located five miles west of the Strip in Las Vegas, Nevada. The mall is anchored by Dillard's, JC Penney, Sears and Macy's. In-line tenant sales were approximately $405 per square foot (PSF) in 2013 compared to $418 PSF in 2012. The total mall was 99% leased as of December 2013 compared to 96% as of April 2013. The in-line space was 91% leased as of December 2013. Moody's LTV and stressed DSCR are 104% and 0.99X, respectively, compared to 106% and 0.97X at securitization. The second largest loan is the Spirit Portfolio Loan ($101 million -- 8.9% of the pool), which is secured by a portfolio of 26 properties including retail, industrial, office, and mixed-use. The collateral is located in 13 different states. The top five states by allocated loan balance are Illinois (19%), New Hampshire (13%), Texas, (12%), North Carolina (11%), and Indiana (11%). Twenty-five of the 26 properties are single tenant properties, while the other has two tenants. The portfolio was fully leased as of December 2013, the same as at securitization. Several tenants lease more than one property: LA Fitness leases two properties (12% of base rent); CVS leases four properties (7% of base rent); Walgreens leases two properties (5% of base rent); Ferguson Enterprises leases three properties (3% of base rent); and Tractor Supply leases two properties (3% of base rent). Moody's LTV and stressed DSCR are 90% and 1.16X, respectively, compared to 91% and 1.15X at securitization. The third largest loan is the 589 Fifth Avenue Loan ($87.5 million -- 7.7% of the pool), which represents a pari passu interest in a $175M first mortgage. The collateral is a 17-story, 173,000 SF office and retail property located near the Diamond District in New York City. The entire retail portion is leased to H&M through July 2033. The office portion is mostly leased to jeweler tenants. No office tenant accounts for more than 5% of the net rentable area. The property was 94% leased as of February 19, 2014 compared to 97% as of May 1, 2013. Moody's LTV and stressed DSCR are 100% and 0.88X, respectively, the same as at securitization. JP MORGAN 2014-C22: Moody's Rates Class UHP Certs '(P)Ba3' ---------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to seven classes of CMBS securities, issued by JPMBB Commercial Mortgage Securities Trust, Commercial Mortgage Pass-Through Certificates, Series 2014-C22. Cl. A-1, Assigned (P)Aaa (sf) Cl. A-2, Assigned (P)Aaa (sf) Cl. A-3A1, Assigned (P)Aaa (sf) Cl. A-3A2, Assigned (P)Aaa (sf) Cl. A-4, Assigned (P)Aaa (sf) Cl. A-SB, Assigned (P)Aaa (sf) Cl. UHP, Assigned (P)Ba3 (sf) Ratings Rationale The Certificates are collateralized by 76 fixed rate loans secured by 120 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 1.44X is higher than the 2007 conduit/fusion transaction average of 1.31X, but is lower than other conduit/fusion transactions rated by Moody's during 2014. The Moody's Stressed DSCR is .94X and is in-line with CMBS 2.0 transactions. Moody's Trust LTV ratio of 114.8% is above the 2007 conduit/fusion transaction average of 110.6%, and higher than pools securitized during 2014. There are two loans in the pool with subordinate debt, including two with mezzanine debt. With the subordinate debt the Moody's total debt LTV ratio rises to 115.5%. Additionally, there is one loan (U-Haul Self Storage Portfolio) structured as a non-pooled single-class rake existing inside of the trust. However, this non-pooled rake represents pari passu interest. A second pari passu interest which is pooled, is also contributed to the trust. Moody's LTV ratio only includes the pooled debt in the transaction. The pari passu non-pooled rake is in the amount of $15.099 million. Moody's rating (Ba3) considers the thickness of the rake in its expected loss analysis. 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 Herfindahl score is 31. The transaction loan level diversity profile is favorable compared to most conduit and fusion transactions. With respect to property level diversity, the pool's property level Herfindahl score is similarly positive at 35. 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 2.42, which is higher than the 2.3 average quality grade for pools. The principal methodology used in this rating was "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000. Moody's analysis employs the excel-based CMBS Conduit Model v2.64 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 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. Moody's Parameter Sensitivities: If Moody's value of the collateral used in determining the initial rating were decreased by 5%, 15%, and 23%, the model-indicated rating for the currently rated Aaa classes would be Aaa, Aa1, and Aa2, 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. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had previously anticipated. Factors that may cause an upgrade of the ratings include significant loan paydowns or amortization, an increase in the pool's share of defeasance or overall improved pool performance. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool, loan concentration, increased expected losses from specially serviced and troubled loans or interest shortfalls. KKR CLO 9: Moody's Assigns (P)Ba3 Rating on $33.7MM Class E Notes ----------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to five classes of Notes to be issued by KKR CLO 9 Ltd. Moody's rating action is as follows: $306,250,000 Class A Senior Secured Floating Rate Notes due 2026 (the "Class A Notes"), Assigned (P)Aaa (sf) $67,750,000 Class B Senior Secured Floating Rate Notes due 2026 (the "Class B Notes"), Assigned (P)Aa2 (sf) $23,500,000 Class C Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Assigned (P)A2 (sf) $32,500,000 Class D Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Assigned (P)Baa3 (sf) $33,750,000 Class E Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Assigned (P)Ba3 (sf) The Class A Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are referred to herein, collectively, as the "Rated Notes." Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. 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 Rated Notes address the expected losses posed to noteholders. The provisional ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. KKR CLO is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90.0% of the portfolio must consist of senior secured loans, cash, and eligible investments, and up to 10.0% of the portfolio may consist of second lien loans and unsecured loans. The portfolio is expected to be at least 75% ramped as of the closing date. KKR Financial Advisors II, LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. In addition to the Rated Notes, the Issuer will issue subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $500,000,000 Diversity Score: 50 Weighted Average Rating Factor (WARF): 2850 Weighted Average Spread (WAS): 3.75% Weighted Average Coupon (WAC): 6.50% Weighted Average Recovery Rate (WARR): 47.0% Weighted Average Life (WAL): 8.0 years. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated Notes. This sensitivity analysis includes an 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 Rated 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: Percentage Change in WARF -- increase of 15% (from 2850 to 3278) Rating Impact in Rating Notches Class A Notes: 0 Class B Notes: -2 Class C Notes: -2 Class D Notes: -1 Class E Notes: -1 Percentage Change in WARF -- increase of 30% (from 2850 to 3705) Rating Impact in Rating Notches Class A Notes: -1 Class B Notes: -3 Class C Notes: -3 Class D Notes: -2 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. LB COMMERCIAL 1998-C4: Moody's Cuts Rating on Cl. X Secs. to Caa2 ----------------------------------------------------------------- Moody's Investors Service upgraded the ratings of two classes, affirmed three classes and downgraded one class in LB Commercial Trust Series 1998-C4 as follows: Cl. G, Affirmed Aaa (sf); previously on Sep 12, 2013 Affirmed Aaa (sf) Cl. H, Upgraded to Aa2 (sf); previously on Sep 12, 2013 Upgraded to A1 (sf) Cl. J, Upgraded to Baa2 (sf); previously on Sep 12, 2013 Upgraded to Ba1 (sf) Cl. K, Affirmed Caa1 (sf); previously on Sep 12, 2013 Affirmed Caa1 (sf) Cl. L, Affirmed C (sf); previously on Sep 12, 2013 Affirmed C (sf) Cl. X, Downgraded to Caa2 (sf); previously on Sep 12, 2013 Affirmed Caa1 (sf) Ratings Rationale The ratings on Classes H and J were upgraded because of an increase in credit support resulting from loan paydowns as well as increase in the share of the pool represented by defeasance. The deal has paid down 19% since Moody's last review. The rating on Class G was affirmed because the credit enhancement level for is sufficient to maintain its current rating. The ratings on Classes K and L were affirmed because their ratings are consistent with Moody's expected loss. The rating on the IO class, Class X, was downgraded due to a decline in the credit performance of its reference classes resulting from principal pay downs of higher quality reference classes. Moody's rating action reflects a base expected loss of 6.1% of the current balance compared to 5.7% at last review. Moody's base expected loss plus realized losses is now 2.2% of the original pooled balance compared to 2.3% at last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The methodologies used in this rating were "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000, "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Commercial Real Estate Finance: Moody's Approach to Rating Credit Tenant Lease Financings" published in November 2011. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 15 compared to 19 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. In rating this transaction, also used a Gaussian copula model, incorporated in its public CDO rating model CDOROMv2.13-1 to generate a portfolio loss distribution to for the credit tenant lease (CTL) component of the transaction. Deal Performance As of the July 15, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 97% to $55.9 million from $2.03 billion at securitization. The certificates are collateralized by 36 mortgage loans ranging in size from less than 1% to 12% of the pool. Ten loans, representing 17% of the pool, have defeased and are secured by U.S. Government securities. The pool contains a CTL component, representing 29% of the pool. There are five loans on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Twenty-seven loans have been liquidated from the pool, resulting in an aggregate realized loss of $42.1 million (30% loss severity on average). There are three loans that are currently in special servicing. Moody's has estimated an aggregate $1.1 million loss for the specially serviced loans (29% expected loss on average). Moody's received full year 2012 and 2013 operating results for 100% of the conduit pool and partial 2014 results for 97% of the conduit. Moody's conduit component excludes loans with credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's weighted average conduit LTV is 67%, the same as at last review. Moody's net cash flow (NCF) reflects a weighted average haircut of 15% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10.3%. Moody's actual and stressed DSCRs are 1.29X and 1.90X, respectively, compared to 1.35X and 2.04X at last review. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 28% of the pool balance. The largest loan is the Pinnacle Center Loan ($6.4 million -- 11.5% of the pool), which is secured by a 230,000 square foot (SF) retail property located in Thornton, Colorado. As of March 2014 the property was 87% leased compared to 88% at last review. The largest tenant is Hobby Lobby, which leases 21% the net rentable area (NRA) through June 2015. This loan has amortized 24% since securitization. Moody's LTV and stressed DSCR are 78% and 1.38X, respectively, compared to 86% and 1.26X at last review. The second largest loan is the Chesterfield Meadows Shopping Center Loan ($5.2 million -- 9.3% of the pool) which is secured by a 70,000 SF retail center located in Richmond, Virginia. As of March 2014 the center was 81% leased, the same as at last review. This loan has amortized 25% since securitization. Moody's LTV and stressed DSCR are 74% and 1.46X, respectively, compared to 76% and 1.43X at last review. The third largest loan is the Cineplex Multiplex Loan ($3.9 million -- 7.0% of the pool) which is secured by a 48,217 SF cinema located in Huntington, New York. This fully amortizing loan has paid down 40% since securitization. To reflect the single tenant risk, Moody's applied a lit-dark approach to this loan. Moody's LTV and stressed DSCR are 61% and 1.96X, respectively, compared to 51% and 2.31X at last review. The CTL component includes 13 loans secured by properties leased under bondable leases. The largest CTL exposures are Sweetbay Supermarket ($6.8 million, 12.2% of the pool; parent Delhaize America, LLC; Moody's senior unsecured rating Baa3; stable outlook), CVS/Caremark Corp. ($4.1 million, 5.0% of the pool; Moody's senior unsecured rating Baa1; stable outlook); Kmart (Sears Holding Corp.) $2.8 million, 4.9% of the pool; Moody's senior secured rating Caa1; stable outlook, Walgreen Co. ($1.2 million, 2.1% of the pool; Moody's senior unsecured rating Baa1; stable outlook), Rite Aid Corporation ($814,000, 1.5% of the pool; Moody's senior unsecured rating Caa1; stable outlook). The bottom-dollar weighted average rating factor (WARF) for the CTL component is 1,285 compared to 1,701 at last review. WARF is a measure of the overall quality of a pool of diverse credits. The bottom-dollar WARF is a measure of the default probability within the pool. LB COMMERCIAL 1999-C2: Moody's Hikes Cl. K Certs' Rating to Caa3 ---------------------------------------------------------------- Moody's Investors Service upgraded the ratings on two classes and affirmed the ratings on two classes in LB Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 1999- C2 as follows: Cl. H, Affirmed Aaa (sf); previously on Sep 19, 2013 Affirmed Aaa (sf) Cl. J, Upgraded to Aa2 (sf); previously on Sep 19, 2013 Upgraded to Baa1 (sf) Cl. K, Upgraded to Caa3 (sf); previously on Sep 19, 2013 Affirmed C (sf) Cl. X, Affirmed Caa3 (sf); previously on Sep 19, 2013 Affirmed Caa3 (sf) Ratings Rationale The rating of Class H was affirmed because the transaction's key metrics, the weighted average rating factor (WARF) and credit enhancement levels, are within acceptable ranges for an affirmation. The rating on the P&I class J was upgraded due to increased credit enhancement level resulting from principal amortization and the improved credit quality of the CTL loans. The pool balance has decreased 9% since last review and the WARF improved to 856 from 1189 at last review. The rating on the P&I class K was upgraded due to expectation of higher recoveries for this bond. The rating on the IO class X was affirmed based on the credit performance (or WARF) of the referenced classes. Moody's rating action reflects a base expected loss of 3.3% of the current balance compared to 4.1% at Moody's last review. Moody's base expected loss plus realized losses is now 2.67% of the original pooled balance, compared to 2.68% at the last review. Factors that would lead to an upgrade or downgrade of the rating: Currently, the transaction is secured by 12 Credit Tenant Lease (CTL) loans. CTL pools' ratings are primarily based on the senior unsecured debt rating (or the corporate family rating) of the tenants leasing the real estate collateral supporting the bonds. Other factors that are also considered are Moody's dark value of the collateral (value based on the property being vacant or dark), which is used to determine a recovery rate upon a loan's default and the rating of the residual insurance provider, if applicable. Factors that may cause an upgrade of the ratings include an upgrade in the rating of the corporate tenant or significant loan paydowns or amortization which results in a higher dark loan to value. Factors that may cause a downgrade of the ratings include a downgrade in the rating of the corporate tenant or the residual insurance provider. Methodology Underlying The Rating Action The principal methodology used in this rating was "Commercial Real Estate Finance: Moody's Approach to Rating Credit Tenant Lease Financings" published in November 2011. Description of Models Used Moody's used a Gaussian copula model, incorporated in its public CDO rating model CDOROMv2.13-1, to generate a portfolio loss distribution to assess the ratings. Moody's review incorporated the use of the CMBS IO calculator ver1.1, which uses the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit assessments; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type as defined in the published methodology. The calculator then returns a calculated IO rating based on both a target and mid-point. For example, a target rating basis for a Baa3 (sf) rating is a 610 rating factor. The midpoint rating basis for a Baa3 (sf) rating is 775 (i.e. the simple average of a Baa3 (sf) rating factor of 610 and a Ba1 (sf) rating factor of 940). If the calculated IO rating factor is 700, the CMBS IO calculator ver1.1 would provide both a Baa3 (sf) and Ba1 (sf) IO indication for consideration by the rating committee. Deal Performance As of the July 15, 2014 payment date, the transaction's aggregate certificate balance has decreased by approximately 99% to $12.1 million from $892.4 million at securitization. The Certificates are collateralized by 12 mortgage loans ranging in size from less than 1% to 12% of the pool. The pool originally included two loans with structured credit assessments, 110 conduit loans and 12 CTL loans. Due to paydowns, the entirety of the pool now consists of 12 CTL loans. Currently, there are no loans on the watchlist or in special servicing. Twenty-six loans have been liquidated from the pool, resulting in an aggregate realized loss of $23.4 million (24% loss severity on average). Due to realized losses, classes L, M, N and P have been eliminated entirely and class K has experienced a 26% principal loss. The CTL loans are secured by 12 properties leased to four tenants. The exposures are CVS/Caremark Corp. (Moody's senior unsecured rating Baa1 - stable outlook; 72.7% of the pool), Rite Aid Corporation (Moody's senior unsecured rating Caa1 - stable outlook; 13.3% of the pool), Walgreen Co. (Moody's senior unsecured rating Baa1 - stable outlook; 10.5% of the pool) and McDonald's Corporation (Moody's senior unsecured rating A2 - stable outlook; 3.5% of the pool). The bottom-dollar WARF for this pool is 856 compared to 1,189 at last review. WARF is a measure of the overall quality of a pool of diverse credits. The bottom-dollar WARF is a measure of the default probability within the pool. LB-UBS COMMERCIAL 2002-C1: Moody's Affirms C Rating on Cl. S Certs ------------------------------------------------------------------ Moody's Investors Service has affirmed the ratings on four classes in LB-UBS Commercial Mortgage Trust, Pass-Through Certificates, Series 2002-C1 as follows: Cl. P, Affirmed Caa3 (sf); previously on Oct 3, 2013 Affirmed Caa3 (sf) Cl. Q, Affirmed Ca (sf); previously on Oct 3, 2013 Affirmed Ca (sf) Cl. S, Affirmed C (sf); previously on Oct 3, 2013 Affirmed C (sf) Cl. X-CL, Affirmed Caa3 (sf); previously on Oct 3, 2013 Downgraded to Caa3 (sf) Ratings Rationale The ratings on the P&I classes were affirmed because the ratings are consistent with Moody's expected loss. The rating on the IO class was affirmed based on the credit performance (or the weighted average rating factor or WARF) of the referenced classes. Moody's rating action reflects a base expected loss of 29.5% of the current balance compared to 15.2% at Moody's last review. Moody's base expected loss plus realized losses is now 1.7% of the original pooled balance compared to 1.5% at the last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description Of Models Used Moody's used the excel-based Large Loan Model v 8.7 in formulating its rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 17, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 99% to $13 million from $1.24 billion at securitization. The certificates are collateralized by two mortgage loans. Moody's received full year 2013 operating results for both loans. One loan, constituting 95% of the pool, is on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Seventeen loans have been liquidated from the pool, resulting in an aggregate realized loss of $17.5 million (for an average loss severity of 32%). The Sprint Building Loan ($12.7 million -- 95% of the pool) is on the master servicer's watchlist. The loan is secured by a 102,315 square foot (SF) office building located in the Altamonte Springs sub-market of Orlando, Florida. The property is 100% leased to Sprint Corporation through November 30, 2016, and serves as its Altamonte Springs call-center. The tenant has no more lease renewal options remaining. The loan is on the watch list because the borrower was not able to secure refinancing prior to its anticipated repayment date (ARD) in March 2012. In March 2014, Sprint confirmed its plan to eliminate about two-thirds of the work force at this call center, as part of a companywide work- force reduction. Due to the single tenant's downsizing as well as its upcoming lease expiration, Moody's is concerned about the property's ability to refinance. Moody's valuation incorporated a lit/dark analysis. Moody's LTV and stressed DSCR are 126% and 0.91X, respectively, compared to 93% and 1.25X at last review. The Village at East Fork Loan ($0.66 million -- 5% of the pool) is currently in special servicing. The loan is secured by a 72-pad mobile home park in Leadville, Colorado. The loan transferred to special servicing in February 2011 for collateral risk non- monetary default. A receiver took over control of the property in March 2014. As of June 2014, the property was 93% leased. Moody's does not estimate a loss for this loan at this time. Moody's LTV and stressed DSCR are 65% and 1.58X, respectively, compared to 67% and 1.52X at the last review. LB-UBS COMMERCIAL 2004-C7: Moody's Affirms C Rating on Cl N Certs ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on eight classes, affirmed the ratings on seven classes and downgraded the rating on one class in LB-UBS Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2004-C7 as follows: Cl. A-1A, Affirmed Aaa (sf); previously on Feb 12, 2014 Affirmed Aaa (sf) Cl. A-6, Affirmed Aaa (sf); previously on Feb 12, 2014 Affirmed Aaa (sf) Cl. B, Upgraded to Aaa (sf); previously on Feb 12, 2014 Affirmed Aa1 (sf) Cl. C, Upgraded to Aaa (sf); previously on Feb 12, 2014 Affirmed Aa2 (sf) Cl. D, Upgraded to Aa2 (sf); previously on Feb 12, 2014 Affirmed A1 (sf) Cl. E, Upgraded to A1 (sf); previously on Feb 12, 2014 Affirmed A3 (sf) Cl. F, Upgraded to A3 (sf); previously on Feb 12, 2014 Affirmed Baa2 (sf) Cl. G, Upgraded to Baa2 (sf); previously on Feb 12, 2014 Affirmed Ba1 (sf) Cl. H, Upgraded to Baa3 (sf); previously on Feb 12, 2014 Affirmed Ba2 (sf) Cl. J, Upgraded to Ba3 (sf); previously on Feb 12, 2014 Affirmed B2 (sf) Cl. K, Affirmed Caa2 (sf); previously on Feb 12, 2014 Affirmed Caa2 (sf) Cl. L, Affirmed Caa3 (sf); previously on Feb 12, 2014 Affirmed Caa3 (sf) Cl. M, Affirmed Ca (sf); previously on Feb 12, 2014 Affirmed Ca (sf) Cl. N, Affirmed C (sf); previously on Feb 12, 2014 Affirmed C (sf) Cl. X-CL, Downgraded to B1 (sf); previously on Feb 12, 2014 Affirmed Ba3 (sf) Cl. X-OL, Affirmed Aaa (sf); previously on Feb 12, 2014 Affirmed Aaa (sf) Ratings Rationale The ratings on Classes B through J were upgraded based primarily on an increase in credit support resulting from loan paydowns and amortization. The deal has paid down 70% since Moody's last review. The ratings on Classes A-1A and A-6 were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on Classes K through N were affirmed because the ratings are consistent with Moody's expected loss. The rating on IO Class X-OL was affirmed based on the credit performance of its referenced class. The rating on IO Class X-CL was downgraded due to the decline in the credit performance of its reference classes resulting from principal paydowns of higher quality reference classes. Moody's rating action reflects a base expected loss of 3.9% of the current balance compared to 4.1% at Moody's last review. Moody's base expected loss plus realized losses is now 2.3% of the original pooled balance compared to 2.8% at the last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description Of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 17, as compared to a Herf of 8 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 17, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 84% to $223 million from $1.42 billion at securitization. The certificates are collateralized by 38 mortgage loans ranging in size from less than 1% to 8% of the pool (aside from defeasance -- the largest defeased loan is 30% of the pool), with the top ten loans excluding defeasance constituting 36% of the pool. Nine loans, constituting 42% of the pool, have defeased and are secured by US government securities. Twenty-four loans, constituting 50% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Eight loans have been liquidated from the pool, resulting in an aggregate realized loss of $23 million (for an average loss severity of 48%). Based on the most recent remittance statement, three loans, constituting 5% of the pool, are currently in special servicing. The largest specially serviced loan is the South Peoria Office Buildings Loan (for $4 million -- 2% of the pool), which is secured by two office properties with approximately 77,500 square feet (SF) of net rentable area (NRA). This loan paid off on July 25, 2014. Moody's estimates an aggregate $2 million loss for specially serviced loans (25% expected loss on average). Moody's has assumed a high default probability for four poorly performing loans, constituting 6% of the pool, and has estimated an aggregate loss of $2 million (a 15% expected loss based on a 50% probability default) from these troubled loans. Moody's received full year 2012 and 2013 operating results for 100% of the pool and partial year 2014 operating results for 80% of the pool. Moody's weighted average conduit LTV is 92% compared to 93% at Moody's last review. Moody's conduit component excludes loans with credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 14% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9%. Moody's actual and stressed conduit DSCRs are 1.21X and 1.14X, respectively, compared to 1.39X and 1.08X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 18% of the pool balance. The largest loan is the Guam Multifamily Loan ($19 million -- 8% of the pool), which is secured by 12 apartment buildings and one retail property totaling 54,377 SF located on the island of Guam. The properties are occupied mainly by Guam-native families, non- native transient workers and U.S. military personnel. As of March 2014, the weighted average occupancy was 82%. Performance has remained stable and the loan benefits from amortization. Moody's LTV and stressed DSCR are 83% and 1.17X, respectively, compared to 84% and 1.16X at the last review. The second largest loan is the Center Office Building Loan ($13 million -- 6% of the pool), which is secured by an 8-story, 377,126 SF office building built in 1978 and located 13 miles from downtown Houston. The property was 72% leased as of March 2014 as compared to 80% in December 2012. The loan matures in August 2014. Moody's LTV and stressed DSCR are 116% and 0.86X, respectively, compared to 79% and 1.26X at the last review. The third largest loan is the A&P Portfolio ($7 million -- 3% of the pool), which is secured by three single tenant grocery stores located in Louisiana. All three properties are 100% leased to Superfresh. The property benefits from amortization and matures on November 15, 2014. Moody's LTV and stressed DSCR are 95% and 1.08X, respectively, compared to 85% and 1.21X at the last review. LB-UBS COMMERCIAL 2004-C8: Moody's Affirms C Rating on 2 Notes -------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of three classes, affirmed the ratings of eight classes and downgraded the rating of one class of LB-UBS Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2004-C8 as follows: Cl. A-6, Affirmed Aaa (sf); previously on Jan 10, 2014 Affirmed Aaa (sf) Cl. A-J, Affirmed Aaa (sf); previously on Jan 10, 2014 Affirmed Aaa (sf) Cl. B, Upgraded to Aaa (sf); previously on Jan 10, 2014 Upgraded to Aa1 (sf) Cl. C, Upgraded to Aa2 (sf); previously on Jan 10, 2014 Upgraded to A1 (sf) Cl. D, Upgraded to A2 (sf); previously on Jan 10, 2014 Upgraded to Baa1 (sf) Cl. E, Affirmed B1 (sf); previously on Jan 10, 2014 Upgraded to B1 (sf) Cl. F, Affirmed Caa1 (sf); previously on Jan 10, 2014 Affirmed Caa1 (sf) Cl. G, Affirmed Caa2 (sf); previously on Jan 10, 2014 Affirmed Caa2 (sf) Cl. H, Affirmed Caa3 (sf); previously on Jan 10, 2014 Affirmed Caa3 (sf) Cl. J, Affirmed C (sf); previously on Jan 10, 2014 Affirmed C (sf) Cl. K, Affirmed C (sf); previously on Jan 10, 2014 Affirmed C (sf) Cl. X-CL, Downgraded to B3 (sf); previously on Jan 10, 2014 Affirmed Ba3 (sf) Ratings Rationale The ratings on Classes B, C and D were upgraded primarily due to an increase in credit support since Moody's last review, resulting from paydowns and amortization, as well as Moody's expectation of additional increases in credit support resulting from the payoff of loans approaching maturity that are well positioned for refinance. The pool has paid down by 51% since Moody's last review. In addition, loans constituting 48% of the pool that have either defeased or have debt yields exceeding 10.0% are scheduled to mature within the next six months. The ratings on Classes A-6 and A-J were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on the six below investment grade P&I classes were affirmed because the ratings are consistent with Moody's expected loss. The rating on the IO Class (Class X-CL) was downgraded due to the decline in the credit performance of its reference classes resulting from principal paydowns of higher quality reference classes. Moody's rating action reflects a base expected loss of 11.3% of the current balance compared to 5.2% at Moody's last review. The large percentage increase in base expected loss is mainly due to the 51% decrease in the pooled balance since last review. Moody's base expected loss plus realized losses is now 6.6% of the original pooled balance compared to 6.5% at the last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000." Description Of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 17 compared to 11 at last review the same as at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 17, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 79% to $269.8 million from $1.31 billion at securitization. The certificates are collateralized by 42 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten exposures constituting 50% of the pool. Four loans, constituting 19% of the pool, have defeased and are secured by US government securities. Fifteen loans, constituting 36% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Twenty-eight loans have been liquidated from the pool, resulting in an aggregate realized loss of $56 million (for an average loss severity of 19%). Four loans, constituting 12% of the pool, are currently in special servicing. The largest specially serviced loan is the Antioch Distribution Center Loan ($17.3 million -- 6.4% of the pool), which is secured by a 666,600 square foot (SF) warehouse/distribution center built in 1954 and located in Antioch, California. The loan was transferred to special servicing in August 2011 due to imminent maturity default as a result of high vacancy at the property. The loan became REO in August 2012. As of March 2014 the property was 76% leased compared to 59% in January 2013. The two largest tenants each represent approximately 22% of the net rentable area (NRA). The special servicer indicated they have recently executed a 10-year renewal for one of these tenants and are in discussions in regards to a seven year renewal for the other. The remaining three specially serviced loans are secured by retail properties. Additionally, Moody's has assumed a high default probability for three poorly performing loans, constituting 5% of the pool, and has estimated an aggregate loss of $19.4 million from these specially serviced and troubled loans. Moody's received full year 2012 operating results for 97% of the pool, and full year 2013 operating results for 94% of the pool. Moody's weighted average conduit LTV is 100% compared to 93% at Moody's last review. Moody's conduit component defeased loans, specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 13% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.4%. Moody's actual and stressed conduit DSCRs are 1.17X and 1.05X, respectively, compared to 1.25X and 1.12X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 25% of the pool. The largest loan is the DRA/Equity One Florida Portfolio Loan ($34.5 million - - 12.8% of the pool), which is secured by two grocery anchored retail properties and one office property for a total of 496,000 SF. The retail properties are located in Broward County, Florida and the office property is in Palm Beach County, Florida. The portfolio was originally referred to as the Gehr Florida Portfolio, however, DRA & Equity One purchased the portfolio and assumed the loan in August 2008. The portfolio was 84% leased as of March 2014 compared to 80% in September 2013. The performance of the two retail properties has improved in 2013 and each one was at least 89% leased. However, the office property, representing 116,500 SF, was only 58% leased as of March 2014. The loan matures in November 2014 and Moody's LTV and stressed DSCR are 113% and 0.86X, respectively, the same as last review. The second largest loan is the North Haven Pavilion Loan ($23.0 million -- 8.5% of the pool), which is secured by a 148,000 SF retail center located in North Haven, Connecticut. The property was 99% leased as of April 2014, the same as at last review. The collateral is shadow anchored by a Target, while major collateral tenants include Sports Authority and Michael's Stores. The loan is benefitting from amortization and matures in November 2014. Moody's LTV and stressed DSCR are 99% and 1.04X, respectively, compared to 100% and 1.03X at last review. The third largest loan is the Santa Fe Arcade Loan ($11.2 million -- 4.1% of the pool), which is secured by a 28,000 SF retail building located in Santa Fe, New Mexico. The property was 91% leased as of March 2014. The loan is on the master servicer watchlist due to low DSCR and the matures in November 2014. Moody's LTV and stressed DSCR are 123% and 0.90X, respectively, compared to 122% and 0.91X at last review. LCM XVI: S&P Affirms 'BB-' Rating on Class E Notes -------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on LCM XVI L.P./LCM XVI LLC's $654.10 million floating-rate notes following the transaction's effective date as of June 20, 2014. Most U.S. cash flow collateralized loan 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"). "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. S&P believes 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. For a CLO that has not purchased its full target level of portfolio collateral by the closing date, S&P's ratings on the closing date and prior to its effective date review are generally based on the application of S&P's criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to S&P by the collateral manager, and may also reflect its assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased. "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 noted. "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 S&P issues an effective date rating affirmation, it will periodically review whether, in its 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 S&P deems necessary. RATINGS AFFIRMED LCM XVI L.P./LCM XVI LLC Class Rating Amount (mil. $) X AAA (sf) 4.50 A AAA (sf) 441.00 B AA (sf) 84.70 C A (sf) 56.00 D BBB (sf) 34.30 E BB- (sf) 33.60 LEGG MASON II: Moody's Affirms 'Caa1' Rating on Class C Notes ------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Legg Mason Real Estate CDO II, Corp.: Cl. A-2, Upgraded to Aaa (sf); previously on Aug 28, 2013 Affirmed Aa2 (sf) Cl. B, Upgraded to Baa1 (sf); previously on Aug 28, 2013 Affirmed Baa3 (sf) Moody's Investors Service has also affirmed the ratings on the following notes issued by Legg Mason Real Estate CDO II, Corp.: Cl. A-1R, Affirmed Aaa (sf); previously on Aug 28, 2013 Affirmed Aaa (sf) Cl. A-1T, Affirmed Aaa (sf); previously on Aug 28, 2013 Affirmed Aaa (sf) Cl. C, Affirmed Caa1 (sf); previously on Aug 28, 2013 Affirmed Caa1 (sf) Ratings Rationale Moody's has upgraded the ratings on the transaction because of rapid redemption of the underlying collateral resulting in material amortization of senior classes of notes while other key credit parameters of underlying pool of assets either are improved or remain stable. Moody's has affirmed the ratings of on the transaction because key transaction metrics are commensurate with the existing ratings. 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. Legg Mason Real Estate CDO II is a cash CRE CDO transaction whose reinvestment period ended in May 2012. The transaction is backed by a portfolio of: i) whole loans and senior participations (92.3% of the pool balance); ii) CRE CDO securities (4.4%); and iii) mezzanine interests (3.3%). As of the June 25, 2014 note valuation report, the aggregate note balance of the transaction, including income notes, has decreased to $275.7 million from $525.0 million at issuance, with junior notes cancellation to the class C notes and the principal paydown directed to the senior most outstanding classes of notes. The paydown was the result of the combination of regular amortization and resolution and sales of defaulted collateral. In general, holding all key parameters static, the junior note cancellations results in slightly higher expected losses and longer weighted average lives on the senior Notes, while producing slightly lower expected losses on the mezzanine and junior Notes. However, this does not cause, in and of itself, a downgrade or upgrade of any outstanding classes of notes. Moody's has identified the following as key indicators of the expected loss in CRE CDO transactions: the weighted average rating factor (WARF), the weighted average life (WAL), the weighted average recovery rate (WARR), and Moody's asset correlation (MAC). Moody's typically models these 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 its assessments for the reference obligations it does not rate. The rating agency modeled a bottom-dollar WARF of 7168, compared to 7211 at last review. The current ratings on the Moody's-rated reference obligations and the assessments of the non-Moody's rated reference obligation follow: Aaa-Aa3 and 2.4% compared to 1.7% at last review; A1-A3 and 0.0% compare to 0.5% at last review; Baa1-Baa3 and 2.2% compared to 3.8% at last review; Ba1-Ba3 and 2.4% compared to 1.1% at last review; B1-B3 and 6.8% compared to 6.3% at last review; and Caa1-Ca/C and 86.2% compared to 86.6% at last review. Moody's modeled a WAL of 2.2 years, compared to 2.5 years at last review. The WAL is based on assumptions about extensions on the underlying collateral. Moody's modeled a fixed WARR of 52.5%, compared to 52.0% at last review. Moody's modeled a MAC of 100.0%, the same as at last review. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes. Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the recovery rate of the underlying collateral and credit assessments. Holding all other key parameters static, reducing the recovery rate by 10% would result in modeled rating movement on the rated notes of zero to seven notches downward (e.g. one notch down implies a rating movement from Baa3 to Ba1). Increasing the recovery rate by 10% would result in modeled rating movement on the rated notes of zero to ten notches upward (e.g. one notch up implies a rating movement from Ba1 to Baa3). The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and commercial real estate property markets. Commercial real estate property values continue to improve modestly, 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, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate. LEHMAN MORTGAGE 2007-5: Moody's Cuts Rating on $108MM of RMBS ------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 14 tranches issued by one Lehman RMBS transaction backed by Alt-A RMBS loans. Complete rating actions are as follows: Issuer: Lehman Mortgage Trust 2007-5 Cl. 3-A2, Downgraded to Caa2 (sf); previously on Dec 22, 2010 Downgraded to Caa1 (sf) Cl. 5-A1, Downgraded to Caa3 (sf); previously on Dec 22, 2010 Downgraded to Caa2 (sf) Cl. 5-A2, Downgraded to Caa3 (sf); previously on Dec 22, 2010 Downgraded to Caa2 (sf) Cl. 5-A3, Downgraded to Caa3 (sf); previously on Dec 22, 2010 Downgraded to Caa2 (sf) Cl. 6-A1, Downgraded to Caa3 (sf); previously on Dec 22, 2010 Downgraded to Caa2 (sf) Cl. 7-A1, Downgraded to Caa3 (sf); previously on Dec 22, 2010 Downgraded to Caa2 (sf) Cl. 7-A3, Downgraded to Caa3 (sf); previously on Dec 22, 2010 Downgraded to Caa2 (sf) Cl. 7-A4, Downgraded to Caa3 (sf); previously on Dec 22, 2010 Downgraded to Caa2 (sf) Cl. 8-A1, Downgraded to Caa3 (sf); previously on Dec 22, 2010 Downgraded to Caa2 (sf) Cl. 8-A3, Downgraded to Caa3 (sf); previously on Dec 22, 2010 Downgraded to Caa2 (sf) Cl. 8-A4, Downgraded to Caa3 (sf); previously on Dec 22, 2010 Downgraded to Caa2 (sf) Cl. AP2, Downgraded to Caa2 (sf); previously on Dec 22, 2010 Downgraded to Caa1 (sf) Cl. AX1, Downgraded to Caa3 (sf); previously on Feb 22, 2012 Upgraded to Caa1 (sf) Cl. AX2, Downgraded to Caa3 (sf); previously on Dec 22, 2010 Downgraded to Caa1 (sf) Ratings Rationale The actions are a result of the recent performance of the underlying pools and reflect Moody's updated loss expectations on the pools. The ratings downgraded are due to weaker collateral performance. The rating actions on the class AX1 and class AX2 bonds also reflect correction of an error. The notional balances of these interest-only bonds are linked to underlying pool balances. According to Moody's methodology for rating interest-only securities ("IO"), the rating of pool IOs is the lowest of: (i) Ba3 (sf); (ii) the highest current tranche rating on bonds that are outstanding backed by the referenced pool; or (iii) the rating corresponding to the pool's expected loss. In previous rating actions for Lehman Mortgage Trust 2007-5, class AX1 and class AX2 were incorrectly assigned ratings higher than the highest rating of bonds outstanding. The actions on the class AX1 and AX2 bonds correctly take into account Moody's methodology for rating interest only securities. The principal methodology used in this rating was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.1% in June 2014 from 7.5% in June 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. Finally, 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. MAC CAPITAL: S&P Raises Rating on 2 Note Classes to 'BB' -------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on all eight classes of rated notes from MAC Capital Ltd., a multi-currency cash flow collateralized loan obligation (CLO) transaction managed by Crescent Capital Group L.P. S&P also removed the eight classes of notes from CreditWatch, where they were placed with positive implications on April 9, 2014. The transaction ended its reinvestment period in July 2013. Since S&P's July 2011 rating actions, the class A-1 notes have paid down to less than 10% of their initial issuance amounts after the July 2014 payment date. The senior class A overcollateralization ratio increased to 197% in the June 2014 trustee report from 136% in the April 2011 report which S&P referenced for its July 2011 rating actions. According to the June 2014 trustee report, the portion of assets rated B+ and above in the portfolio has decreased significantly since S&P's review in 2011. Additionally, the remaining proportion of mezzanine debt has had an adverse effect on the recovery values used in S&P's cash flow analysis. Despite the credit deterioration in the pool, S&P upgraded all eight classes of rated notes because the effects of the liability paydowns resulted in increased credit support for all the notes. S&P 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 S&P will take further rating actions as it deem necessary. RATINGS LIST MAC Capital Ltd. Rating Class Identifier To From B-1F 55265AAK7 A- (sf) BBB- (sf)/Watch Pos A-1L 55265AAB7 AAA (sf) AA+ (sf)/Watch Pos A-1LV 55265AAC5 AAA (sf) AA+ (sf)/Watch Pos A-2L 55265AAH4 AAA (sf) A+ (sf)/Watch Pos A-3L 55265AAJ0 AA (sf) A- (sf)/Watch Pos B-1L 55265AAL5 A- (sf) BBB- (sf)/Watch Pos B-2F 55265AAM3 BB (sf) B+ (sf)/Watch Pos B-2L 55265AAN1 BB (sf) B+ (sf)/Watch Pos MERRILL LYNCH 2007-C1: S&P Affirms 'B-' Rating on Class AM Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on seven classes of commercial mortgage pass-through certificates from Merrill Lynch Mortgage Trust 2007-C1, a U.S. commercial mortgage- backed securities (CMBS) transaction. S&P's affirmations on the principal- and interest-paying certificates follow its analysis of the transaction, primarily using its criteria for rating U.S. and Canadian CMBS transactions, which included a review of the credit characteristics and performance of the remaining assets in the pool, the transaction's structure, and the liquidity available to the trust. "The affirmations on the principal- and interest-only certificates reflect our expectation that the available credit enhancement for these classes will be within our estimate of the necessary credit enhancement required for the current ratings. The affirmations also reflect our views regarding the current and future performance of the transaction's collateral, the transaction's structure, and the liquidity support available to the classes. It also reflects our analysis of the nine assets ($171.6 million, 6.3%) currently with the special servicer, C-III Asset Management LLC (C-III), as well as the loan modifications of the three largest loans ($825.7 million, 30.4%) in the transaction," S&P said. The 'A (sf)' rating on class A-3FL is partially dependent on the rating on Bank of America Corp. (A-/Negative/A-2) as the hedge counterparty. Following the application of S&P's counterparty criteria, the rating on class A3-FL is one notch above its rating on Bank of America Corp., based primarily on its understanding that the derivative obligations contain counterparty replacement frameworks. S&P affirmed its 'AAA (sf)' rating on the class X interest-only (IO) certificates based on its criteria for rating IO securities. Using servicer-provided financial information, S&P calculated a Standard & Poor's weighted average debt service coverage (DSC) of 1.17x and a loan-to-value (LTV) ratio of 100.2% using a Standard & Poor's weighted average capitalization rate of 7.65%. The DSC and LTV calculations exclude the nine specially serviced assets ($171.6 million, 6.3%), one defeased loan ($909,269), and two subordinate B hope notes ($214.5 million, 7.9%). CREDIT CONSIDERATIONS As of the July 14, 2014, trustee remittance report, seven assets ($98.6 million, 3.6%) in the pool were with C-III. However, after the July 2014 trustee remittance report, it was reported to S&P that two additional loans, the Radisson -- Alexandria loan ($42.5 million, 1.6%) and the Holiday Inn -- Alexandria loan ($30.5 million, 1.1%), were transferred to C-III due to imminent monetary default. Two of the specially serviced assets are real estate owned (REO), and none are deemed nonrecoverable by the master servicers, KeyBank N.A. and Wells Fargo Bank N.A. Appraisal reduction amounts (ARAs) totalling $16.4 million were reported for five of the specially serviced assets. Details of the three largest specially serviced assets, one of which is a top 10 loan, are as follows: -- The Radisson - Alexandria loan ($42.5 million, 1.6%) is the largest asset with the special servicer and is the 10th- largest loan in the transaction. -- The loan was transferred to C-III on July 14, 2014, due to imminent monetary default. The loan is secured by a 253- room full-service hotel located in Alexandria, Va. The loan's payment status, as of the July 2014 trustee report, is late, but less than one-month delinquent. No additional update is available from the special servicer due to the recent transfer as workout strategies are still being determined. The reported DSC and occupancy as of year-end 2013 was 0.59x and 69.6%, respectively. S&P expects a moderate loss upon this loan's eventual resolution. -- The Shoppes at Old Bridge loan ($39.1 million, 1.4%) is the second-largest asset with the special servicer and has a total reported exposure of $39.3 million. The loan is secured by a 123,162-sq.-ft. retail property located in Old Bridge, N.J. The loan was transferred to C-III on March 26, 2014, due to imminent default. The loan's payment status, as of the July 2014 trustee report, is late, but less than one-month delinquent. C-III stated that it is currently evaluating various workout strategies. The reported DSC as of year-end 2013 was 0.97x. S&P expects a moderate loss upon this loan's eventual resolution. -- The Holiday Inn -- Alexandria loan ($30.5 million, 1.1%) is the third-largest asset with the special servicer. The loan was transferred to C-III on July 14, 2014, due to imminent monetary default. The loan is secured by a 178-room full- service hotel located in Alexandria, Va. The loan's payment status, as of the July 2014 trustee report, is late, but less than one-month delinquent. No additional update is available from the special servicer due to the recent transfer as workout strategies are still being determined. The reported DSC and occupancy as of year-end 2013 was 0.53x and 74.8%, respectively. S&P expects a moderate loss upon this loan's eventual resolution. The six remaining assets with the special servicer have individual balances that represent less than 0.7% of the total pool trust balance. S&P estimated losses for the nine specially serviced assets, arriving at a weighted-average loss severity of 34.8%. With respect to the specially serviced assets noted above, a moderate loss is 26%-59% of the loan balance. TRANSACTION SUMMARY As of the July 14, 2014, trustee remittance report, the collateral pool balance was $2.71 billion, which is 67.0% of the pool balance at issuance. The pool currently includes 205 loans and two REO assets, down from 264 loans at issuance (reflecting crossed loans). Seven of these assets (excluding the recently transferred Radisson - Alexandria and Holiday Inn - Alexandria loans)($98.6 million, 3.6%) were reported to be with the special servicer. One ($909,269) is defeased, and 44 ($1.12 billion, 41.2%) are on the master servicers' combined watchlist (excluding the subordinate B hope note and not reflecting cross-collateralized and cross- defaulted loans as one loan), including the Radisson - Alexandria and Holiday Inn - Alexandria loans. The master servicers reported financial information for 90.9% of the nondefeased loans in the pool, of which 88.7% was partial- or year-end 2013 and 2014 data, and the remainder was year-end 2012 data. To date, the transaction has experienced $323.1 million in principal losses, or 8.0% of the original pool trust balance. S&P expects losses to reach approximately 14.7% of the original pool trust balance in the near term, based on losses incurred to date and additional losses S&P expects upon the eventual resolution or liquidation of the nine specially serviced assets and the two subordinate B hope notes ($214.5 million, 7.9%). Twenty-seven loans ($637.4 million, 23.5%) have a reported Standard & Poor's DSC of less than 1.00x, and 22 loans ($413.7 million, 15.2%) have a reported Standard & Poor's DSC between 1.00x and 1.10x. SUMMARY OF TOP 10 LOANS The top 10 loans have an aggregate outstanding pool trust balance of $1.33 billion (49.2%). Using servicer-reported numbers, S&P calculated a Standard & Poor's weighted average DSC and LTV of 1.02x and 111.2%, respectively, for nine of the top 10 loans, which excludes the Radisson - Alexandria loan, which is with the special servicer. Five ($1.06 billion, 38.9%) of the top 10 loans are on the master servicers' combined watchlist, which S&P discusses. The Radisson - Alexandria loan appears on the watchlist as of the July reporting period, but was subsequently transferred to the special servicer. The Empirian Multifamily Portfolio Pool 1 loan ($339.8 million, 12.5%) is the largest loan in the transaction. The loan is currently secured by a portfolio of 60 multifamily properties totalling 6,007 units in eight U.S. states. The loan is on the master servicers' combined watchlist due to poor property conditions noted in the property inspection reports. The reported combined DSC as of year-end 2013 was 1.16x. The loan was previously transferred to the special servicer on Nov. 11, 2010, modified on Dec. 1, 2011, and returned to the master servicer on Feb. 28, 2013. The modification resulted in a bifurcation of the trust balance into a $224.3 million A note and a $115.4 million subordinate B hope note. The modification terms included a reduction in the A note interest rate and a full deferral of interest on the subordinate B hope note, as well as an extension of the interest-only periods on the loan. The Empirian Multifamily Portfolio Pool 3 loan ($278.7 million, 10.3%) is the second-largest loan in the transaction. The loan is currently secured by a portfolio of 52 multifamily properties totalling 4,399 units in eight U.S. states. The loan is on the master servicers' combined watchlist due to poor property conditions noted in the property inspection reports. The reported combined DSC as of year-end 2013 was 1.04x. The loan was previously transferred to the special servicer on Nov. 11, 2010, modified on Dec. 1, 2011, and returned to the master servicer on Feb. 28, 2013. The loan modification resulted in a bifurcation of the trust balance into a $179.6 million A note and a $99.1 million subordinate B hope note. The modification terms included a reduction in the A note interest rate and a full deferral of interest on the subordinate B hope note, as well as an extension of the interest-only periods on the loan. The DRA/Colonial Office Portfolio loan ($207.3 million, 7.6%) is the third-largest loan in the transaction. The loan has a trust balance of $207.3 million and an outstanding whole-loan balance of $621.9 million. The whole loan is divided into three pari passu pieces: an A-1 note that is included in this transaction, a $207.3 million A-2 note held in Bear Stearns Commercial Mortgage Securities Trust 2007-PWR17, and a $207.3 million A-3 note held in Bear Stearns Commercial Mortgage Securities Trust 2007-PWR18, both U.S. CMBS transactions. The whole loan is currently secured by a portfolio of 16 office properties totalling 4.4 million sq. ft located in Alabama, Florida, Georgia, and North Carolina. The loan is on the master servicers' combined watchlist due to a low reported DSC. The reported combined DSC as of year-end 2013 was 0.98x. The loan was previously transferred to the special servicer on Aug. 21, 2012, modified on Dec. 14, 2012, and returned to the master servicer on May 29, 2013. The modification terms included an extension of the loan's maturity date to July 2016 from July 2014. The U-Haul Self Storage Portfolio 14, 15, 16, 17 loan is the fourth-largest loan in the pool and consists of four cross- collateralized and cross-defaulted loans totalling $123.3 million (4.5%). The loans are secured by a portfolio of 32 self-storage properties consisting of 19,188 units across various U.S. states. The loans are on the master servicers' combined watchlist due to a low reported DSC. The reported combined DSC as of trailing 12 months ending March 31, 2014 was 1.20x. The 1101 New York Avenue loan is the fifth-largest loan in the pool ($109.7 million, 4.0%). The loan is part of a pari passu loan structure, and the other 50% portion is included in Bear Stearns Commercial Mortgage Securities Trust 2007-PWR17, a U.S. CMBS transaction. The whole loan is secured by a 390,994-sq.-ft. office property in Washington, D.C. The loan appears on the master servicers' combined watchlist due to a low reported DSC, which S&P attributed to a decrease in occupancy. One of the property's largest tenants vacated the building in the third quarter of 2012, and occupancy dropped to 64.0% from 99.5%. Based on a recent rent roll as of April 1, 2014, provided by the master servicers, occupancy has improved to 89.2% at the property. The DSC as of the nine months ended Sept. 30, 2013, was 0.52x. RATINGS LIST Merrill Lynch Mortgage Trust 2007-C1 Rating Class Identifier To From A-3 59025KAC6 AAA (sf) AAA (sf) A-SB 59025KAD4 AAA (sf) AAA (sf) A-4 59025KAE2 BBB+ (sf) BBB+ (sf) A-1A 59025KAF9 BBB+ (sf) BBB+ (sf) AM 59025KAG7 B- (sf) B- (sf) A-3FL 59025KAN2 A (sf) A (sf) X 59025KBD3 AAA (sf) AAA (sf) MORGAN STANLEY 1998-CF1: Moody's Affirms Caa3 Rating on 2 Certs --------------------------------------------------------------- Moody's Investors Service upgraded one class and affirmed two CMBS classes in Morgan Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series 1998-CF1 as follows: Cl. F, Upgraded to Aa2 (sf); previously on Aug 29, 2013 Upgraded to Baa3 (sf) Cl. G, Affirmed Caa3 (sf); previously on Aug 29, 2013 Upgraded to Caa3 (sf) Cl. X, Affirmed Caa3 (sf); previously on Aug 29, 2013 Affirmed Caa3 (sf) Ratings Rationale The rating on one P&I class was upgraded because of an increase in credit support resulting from loan paydowns and increased defeasance. The deal has paid down 12% since Moody's last review and two additional loans have defeasanced which brings the share of defeasance to 25% of the pooled balance. The rating on one below investment grade P&I class was affirmed because the rating is consistent with Moody's expected loss. The rating on the IO class was affirmed based on the credit performance of its referenced classes. Moody's rating action reflects a base expected loss of 2.1% of the current balance compared to 4.2% at last review. Moody's base expected loss plus realized losses is now 7.3% of the original pooled balance compared to 7.4% at last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action 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 U.S. CMBS Conduit Transactions" published in September 2000. Description Of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 5 compared to 7 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 15, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 97% to $35.0 million from $1.10 billion at securitization. The certificates are collateralized by 13 mortgage loans ranging in size from less than 1% to 24% of the pool. Four loans, representing 25% of the pool, have defeased and are secured by U.S. Government securities. There are three loans on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Fifty-two loans have been liquidated from the pool, resulting in an aggregate realized loss of $79.7 million (50% loss severity on average). No loans are currently in special servicing. Moody's received full year 2012 and 2013 operating results for 66% of the pool, respectively. Moody's weighted average conduit LTV is 49%, compared to 51% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 12% to the most recently available net operating income (NOI) for the single tenant office building conduit loan. Moody's value reflects a weighted average capitalization rate of 10.2%. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 53% of the pool balance. The largest conduit loan is the Bristol Market Place Loan ($8.4 million -- 23.9% of the pool), which is secured by a 99,256 square foot (SF) retail center located in Santa Ana, California. As of December 2013, the property was 90% leased compared to 92% at last review. Overall, the property financial performance improved and the loan has amortized 27% securitization. Moody's LTV and stressed DSCR are 54% and 1.89X, respectively, compared to 56% and 1.84X at last review. The second largest conduit loan is the Van Dorn Station Loan ($6.3 million -- 17.9% of the pool), which is secured by a 74,464 SF retail center located in Alexandria, Virginia. Occupancy increased to 66% as of December 2013 compared to 42% at year-end 2012. While occupancy increased, the net cash flow declined 6% between year- end 2012 and year-end 2013 at this shadow anchored retail center. The loan has amortized over 28% since securitization. Moody's LTV and stressed DSCR are 46% and 2.45X, respectively, compared to 49% and 2.31X at last review. The third largest loan is the Gardenside Shopping Center Loan ($4.1 million -- 11.6% of the pool), which is secured by a 187,866 SF anchored retail center located in Henderson, Kentucky. The property was 77% occupied as of March 2014, the same as at last review. Kmart and Goody's occupy 58% of the NRA and the loan has amortized 43% since securitization. Moody's LTV and stressed DSCR are 73% and 1.55x, respectively, compared to 77% and 1.4x at last review. MORGAN STANLEY 2000-PRIN: Moody's Affirms Ba3 Rating on X Secs. --------------------------------------------------------------- Moody's Investors Service has affirmed the ratings on four classes in Morgan Stanley Dean Witter Capital I Trust 2000-PRIN as follows: Cl. C, Affirmed Aaa (sf); previously on Sep 12, 2013 Affirmed Aaa (sf) Cl. D, Affirmed Aaa (sf); previously on Sep 12, 2013 Affirmed Aaa (sf) Cl. E, Affirmed Aaa (sf); previously on Sep 12, 2013 Upgraded to Aaa (sf) Cl. X, Affirmed Ba3 (sf); previously on Sep 12, 2013 Affirmed Ba3 (sf) RATINGS RATIONALE The ratings on the P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The rating on the IO class was affirmed due to the credit performance (or the weighted average rating factor or WARF) of the referenced classes. Moody's rating action reflects a base expected loss of 4.6% of the current balance compared to 3.6% at Moody's last review. Moody's base expected loss plus realized losses is now 0.4% of the original pooled balance compared to 0.5% at the last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 15 compared to 14 at Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 23, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 93% to $40 million from $598 million at securitization. The certificates are collateralized by 23 mortgage loans ranging in size from less than 1% to 12% of the pool, with the top ten loans constituting 74% of the pool. Ten loans, constituting 30% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Currently there are no loans in special servicing. Moody's has assumed a high default probability for one poorly performing loan. Two loans have been liquidated from the pool, resulting in an aggregate realized loss of $0.6 million (for an average loss severity of 0.7%). Moody's received full year 2012 operating results for 87% of the pool and full year 2013 operating results for 100% of the pool. Moody's weighted average conduit LTV is 31% compared to 38% at Moody's last review. Moody's conduit component excludes loans with credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 12% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 10%. Moody's actual and stressed conduit DSCRs are 1.51X and 5.41X, respectively, compared to 1.51X and 4.09X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 33% of the pool balance. The largest loan is the 5560 Katella Avenue Loan ($5 million -- 12% of the pool), which is secured by a 215,000 square foot (SF) single- tenant industrial property located in Cypress, California. The property is 100% leased to Global Experience Specialist through December 2015. Performance has remained in line with last review, although due to the single tenant nature of this building, Moody's value reflects a stressed cashflow derived from a dark/lit analysis. Moody's LTV and stressed DSCR are 52% and 1.97X, respectively, compared to 58% and 1.78X at the last review. The second largest loan is the 10900 Research Boulevard Loan ($4 million -- 11% of the pool), which is secured by an approximately 73,900 SF portion of an approximately 83,500 SF grocery-anchored retail center located in Austin, Texas. The property was 100% leased as of December 2013. Moody's LTV and stressed DSCR are 41% and 2.56X, respectively, compared to 43% and 2.43X at the last review. The third largest loan is the 6100 Gateway Drive & 10700 Valley View Street Loan ($4 million -- 10% of the pool), which is secured by an approximately 130,000 SF industrial property located in Cypress, California. As of December 2013, the property was 42% occupied. Moody's has assigned a high default probability to this loan. MORGAN STANLEY 2006-HE3: Moody's Hikes Class A-2c Debt to 'Caa2' ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of two tranches from Morgan Stanley ABS Capital I Inc. Trust 2006-HE3, which are backed by Subprime mortgage loans. Complete rating actions are as follows: Issuer: Morgan Stanley ABS Capital I Inc. Trust 2006-HE3 Cl. A-1, Upgraded to B1 (sf); previously on May 1, 2014 Upgraded to B3 (sf) Cl. A-2c, Upgraded to Caa2 (sf); previously on Jul 15, 2010 Downgraded to Caa3 (sf) Ratings Rationale The upgrade actions are primarily a result of a Trust Settlement Agreement payment of approximately $15 million into the trust in the June 2014 remittance period over previously identified breaches of representations and warranties of certain loans, as a result of which the available amount of credit enhancement to the bonds has increased. The actions also reflect recent performance of the underlying pools and Moody's updated loss expectations on those pools. The principal methodology used in this rating was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.1% in June 2014 from 7.5% in June 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. Finally, 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. MORGAN STANLEY 2006-HQ9: S&P Lowers Rating on Class H Notes to D ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on two classes of commercial mortgage pass-through certificates from Morgan Stanley Capital I Trust 2006-HQ9, a U.S. commercial mortgage-backed securities (CMBS) transaction. In addition, S&P lowered its ratings on two classes and affirmed its ratings on 10 other classes from the same transaction. S&P's rating actions on the principal- and interest-paying certificates follow its analysis of the transaction, primarily using our criteria for rating U.S. and Canadian CMBS transactions, which included a review of the credit characteristics and performance of the remaining assets in the pool, the transaction's structure, and the liquidity available to the trust. "We raised our ratings on classes A-J and B to reflect our expectation of the available credit enhancement for these classes, which we believe is greater than our most recent necessary credit enhancement estimate for the respective rating levels. The upgrades also follow our views regarding the current and future performance of the transaction's collateral and available liquidity support. The upgrades also reflect the pool trust balance's significant reduction as well as the full repayments of the 120 Broadway loan ($215.0 million original pool trust balance), the DCT Industrial Portfolio-Roll-Up loan ($50.0 million original pool trust balance), and the RLJ Hotel Portfolio-Roll-Up loan ($41.9 million original pool trust balance)," S&P said. The downgrades on classes G and H reflect the credit support erosion that S&P anticipates will occur upon the eventual resolution of the six assets ($62.4 million, 3.5% of the pool) with the special servicer, as well as the decreased liquidity support available to these classes due to ongoing interest shortfalls. Specifically, S&P lowered its rating on class H to 'D (sf)' from 'CCC+ (sf)' because it expects the accumulated interest shortfalls to remain outstanding for the foreseeable future. As of the July 14, 2014, trustee remittance report, the trust experienced monthly interest shortfalls totaling $130,227, primarily from $63,106 in net appraisal subordinate entitlement reductions, $13,012 in special servicing fees, $23,523 in interest rate modifications, and $31,996 in interest not advanced. The current monthly interest shortfalls affected classes subordinate to and including class H. The affirmations on the principal- and interest-paying certificates reflect S&P's expectation that the available credit enhancement for classes A-4, A-4FL, A-1A, A-M, C, D, E, and F will be within its estimate for the necessary credit enhancement required at the current ratings. The affirmations also reflect S&P's views regarding the current and future performance of the transaction's collateral, the transaction structure, and liquidity support available to the classes. S&P affirmed its 'AAA (sf)' ratings on the class X and X-MP interest-only (IO) certificates based on our criteria for rating IO securities. Using servicer-provided financial information, S&P calculated its weighted average debt service coverage (DSC) of 1.47x and loan-to- value(LTV) ratio of 76.3% using a Standard & Poor's weighted average capitalization rate of 7.53%. The DSC and LTV calculations exclude the six specially serviced assets ($62.4 million, 3.5%), five defeased loans ($168.8 million, 9.5%), and three subordinate B hope notes ($4.8 million, 0.3%). TRANSACTION SUMMARY As of the July 14, 2014, trustee remittance report, the collateral pool balance was $1.77 billion, which is 69.1% of the pool balance at issuance. The pool currently includes 162 loans (reflecting cross-collateralized and cross-defaulted loans) and two real estate owned (REO) assets, down from 202 loans at issuance. Six of these assets ($62.4 million, 3.5%) are with the special servicer, five ($168.8 million, 9.5%) are defeased, and 54 ($388.4 million, 21.9%) are on the master servicer's watchlist. The master servicer, Wells Fargo Bank N.A., reported financial information for 99.0% of the nondefeased loans in the pool, of which 97.4% was year-end 2013 data and the remainder was partial- or year-end 2012 data. To date, the transaction has experienced $112.6 million in principal losses, or 4.4% of the original pool trust balance. S&P expects losses to reach approximately 5.2% of the original pool trust balance in the near term, based on losses incurred to date and additional losses S&P expects upon the eventual resolution or liquidation of the six specially serviced assets. There are 24 loans ($149.8 million, 8.5%) with a Standard and Poor's DSC less than 1.00x and 15 loans ($141.7 million, 8.0%) have a Standard & Poor's DSC between 1.00x and 1.10x. SUMMARY OF TOP 10 NONDEFEASED LOANS The top 10 nondefeased loans have an $861.2 million (48.6%) aggregate outstanding pool trust balance. Using servicer-reported numbers, S&P calculated a Standard & Poor's weighted average DSC and LTV of 1.62x and 74.2%, respectively, for nine of the top 10 nondefeased loans. The remaining loan is specially serviced. Three ($143.6 million, 8.1%) of the top 10 nondefeased loans are on the master servicer's watchlist. The Weberstown Mall loan ($60.0 million, 3.4%), the fourth-largest nondefeased loan in the pool, is secured by 605,346 sq. ft. of an 859,232-sq.-ft. enclosed regional mall in Stockton, Calif. The loan is on Wells Fargo's watchlist due to a low reported DSC, which was 1.40x as of year-end 2013. Occupancy was 99.4% according to the May 2014 rent roll. The Gateway Shopping Center loan ($60.0 million, 3.4%), the fifth- largest nondefeased loan in the pool, is secured by a 257,844-sq.- ft. retail power center in West Bloomfield, Mich. The loan appears on Wells Fargo's watchlist because it is being monitored as a corrected mortgage loan. The loan was transferred to the special servicer on Jan. 28, 2014, modified on May 5, 2014, and returned to the master servicer on May 19, 2014. The modification terms was effective as of Oct. 3, 2013, and included establishing a tenant improvement and leasing commission reserve account. The reported occupancy and DSC were 98.8% and 1.18x, respectively, as of year-end 2013. The Ritz-Carlton Portfolio-Roll-Up loan, the 10th-largest nondefeased loan in the pool, has a $183.2 million whole loan balance that is split into two pari passu pieces, one of which ($23.6 million) makes up 1.3% of the pool trust balance. The other piece is in Morgan Stanley Capital I Trust 2006-HQ8, another U.S. CMBS transaction. The whole loan is currently secured by four full-service hotels totaling 829 rooms in New York and Washington D.C. The loan appears on Wells Fargo's watchlist due to a low reported DSC, which was 0.67x as of year-end 2013. The reported combined occupancy for the portfolio was 73.7% for the same period. CREDIT CONSIDERATIONS As of the July 14, 2014, trustee remittance report, six assets in the pool were with the special servicer, C-III Asset Management LLC (C-III). The reported payment status of the specially serviced assets as of the most recent trustee remittance report is as follows: two of the specially serviced assets are REO ($15.0 million, 0.8%), one is 90-plus-days delinquent ($5.8 million, 0.3%), one is two-months delinquent ($1.9 million, 0.1%), one is in foreclosure ($13.5 million, 0.8%), and one is current ($26.2 million, 1.5%). Appraisal reduction amounts (ARAs) totaling $18.2 million were reported for four of the six specially serviced assets; however, the master servicer subsequently deemed one of the assets ($6.4 million, 0.4%) nonrecoverable. Details of the two largest specially serviced assets, one of which is a top 10 nondefeased loan, are as follows: The Indianapolis Office Portfolio-Roll-Up loan ($26.2 million, 1.5%) is the ninth-largest nondefeased loan in the pool, and has $26.4 million in total reported exposure and is secured by two office properties totaling 608,054 sq.ft. in Indianapolis. The loan was transferred to C-III on April 9, 2014 (according to C-III, effective as of March 31, 2014), because the borrower indicated that it could no longer fund property shortfalls. C-III stated that it is evaluating its options, including foreclosure proceedings. The reported DSC and occupancy as of year-end 2013 were 1.28x and 72.7%, respectively. S&P expects a minimal loss upon this loan's eventual resolution. The One Chatham Center loan ($13.5 million, 0.8%) has $13.9 million in total reported exposure and is secured by a 236,019- sq.-ft. office building in Pittsburgh. The loan was transferred to C-III on March 14, 2014, because the borrower stated that it could no longer fund property shortfalls. C-III indicated that it has filed for foreclosure and expects it to close this year. The reported DSC and occupancy as of year-end 2013 were 0.49x and 47.2%, respectively. A $6.6 million ARA is in effect against this loan and S&P expects a moderate loss upon its eventual resolution. The four remaining assets with the special servicer have individual balances that represent less than 0.5% of the total pooled trust balance. S&P estimated losses for the six specially serviced assets, deriving a weighted-average loss severity of 35.2%. With respect to the specially serviced assets noted above, a minimal loss is less than 25%, a moderate loss is 26%-59%, and a significant loss is 60% or greater. RATINGS LIST Morgan Stanley Capital I Trust 2006-HQ9 Commercial mortgage pass-through certificates series 2006-HQ9 Rating Class Identifier To From A-1A 61750CAB3 AAA (sf) AAA (sf) A-4 61750CAF4 AAA (sf) AAA (sf) A-4FL 61750CBM8 AAA (sf) AAA (sf) A-M 61750CAG2 AAA (sf) AAA (sf) A-J 61750CAH0 A- (sf) BBB+ (sf) B 61750CAJ6 BBB+ (sf) BBB (sf) C 61750CAK3 BBB- (sf) BBB- (sf) D 61750CAL1 BB+ (sf) BB+ (sf) E 61750CAM9 BB (sf) BB (sf) F 61750CAN7 B+ (sf) B+ (sf) G 61750CAS6 CCC (sf) B (sf) H 61750CAT4 D (sf) CCC+ (sf) X 61750CAP2 AAA (sf) AAA (sf) X-MP 61750CAQ0 AAA (sf) AAA (sf) MORGAN STANLEY 2006-HQ10: Moody's Affirms 'C' Rating on 3 Certs --------------------------------------------------------------- Moody's Investors Service has affirmed the ratings on 12 classes in Morgan Stanley I Trust 2006-HQ10, Commercial Mortgage Pass- Through Certificates, Series 2006-HQ10 as follows: Cl. A-1A, Affirmed Aaa (sf); previously on Sep 26, 2013 Affirmed Aaa (sf) Cl. A-4, Affirmed Aaa (sf); previously on Sep 26, 2013 Affirmed Aaa (sf) Cl. A-4FL, Affirmed Aaa (sf); previously on Sep 26, 2013 Affirmed Aaa (sf) Cl. A-4FX, Affirmed Aaa (sf); previously on Sep 26, 2013 Affirmed Aaa (sf) Cl. A-M, Affirmed A2 (sf); previously on Sep 26, 2013 Affirmed A2 (sf) Cl. A-J, Affirmed B1 (sf); previously on Sep 26, 2013 Affirmed B1 (sf) Cl. B, Affirmed Caa1 (sf); previously on Sep 26, 2013 Affirmed Caa1 (sf) Cl. C, Affirmed Caa3 (sf); previously on Sep 26, 2013 Affirmed Caa3 (sf) Cl. D, Affirmed C (sf); previously on Sep 26, 2013 Affirmed C (sf) Cl. E, Affirmed C (sf); previously on Sep 26, 2013 Affirmed C (sf) Cl. F, Affirmed C (sf); previously on Sep 26, 2013 Affirmed C (sf) Cl. X-1, Affirmed Ba3 (sf); previously on Sep 26, 2013 Affirmed Ba3 (sf) Ratings Rationale The ratings on six P&I classes (Classes A-1A - A-J) were affirmed because the transaction's key metrics, including Moody's loan-to- value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on five P&I classes (Classes B - F) were affirmed because the ratings are consistent with Moody's expected loss. The rating on the IO class was affirmed due to the credit performance (or the weighted average rating factor or WARF) of the referenced classes. Moody's rating action reflects a base expected loss of 5.4% of the current balance compared to 7.9% at Moody's last review. Moody's base expected loss plus realized losses is now 9.7% of the original pooled balance compared to 9.9% at the last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating Fusion U.S. CMBS Transactions" published in April 2005. Description Of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade Structured Credit Assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the Structured Credit Assessment level) for loans with similar Structured Credit Assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 22 compared to 28 at Moody's last review. Deal Performance As of the July 14, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 26% to $1.1 billion from $1.5 billion at securitization. The certificates are collateralized by 96 mortgage loans ranging in size from less than 1% to 11% of the pool, with the top ten loans constituting 51% of the pool. Three loans, constituting 18% of the pool, have investment-grade Structured Credit Assessments. Five loans, constituting 9% of the pool, have defeased and are secured by US government securities. Twenty-seven loans, constituting 16% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Twenty-four loans have been liquidated from the pool, resulting in an aggregate realized loss of $85.5 million (for an average loss severity of 40%). One loan, constituting less than 1% of the pool, is currently in special servicing. Moody's has assumed a high default probability for 17 poorly performing loans, constituting 15% of the pool, and has estimated an aggregate loss of $45 million (a 27% expected loss based on a 62% probability default) from the specially serviced and troubled loans. Moody's received full year 2012 operating results for 89% of the pool, full year 2013 operating results for 99% of the pool and partial year 2014 operating results for 44% of the pool. Moody's weighted average conduit LTV is 100% compared to 105% at Moody's last review. Moody's conduit component excludes loans with Structured Credit Assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 13% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9%. Moody's actual and stressed conduit DSCRs are 1.34X and 1.09X, respectively, compared to 1.25X and 1.00X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The largest loan with a Structured Credit Assessment is the Waterside Shops Loan ($120 million -- 11% of the pool), which is secured by a 265,664 square foot (SF) regional mall located in Naples, Florida. The loan is interest-only throughout its term. The property is also encumbered with a $45 million B-note held outside the trust. The center is anchored by Nordstrom (which is not part of the collateral for the loan), Saks Fifth Avenue, and Barnes & Noble. As of year-end 2013, the property was 99% leased compared to 98% at last review. Excluding the Apple store, jewelry stores and food service stores, comparable inline sales per SF for the trailing twelve months as of March 2014 were $537 compared to $539 in 2013. The loan matures in October 2016. Moody's Structured Credit Assessment and stressed DSCR are baa3 (sca.pd) and 1.17X, respectively, compared to baa3 (sca.pd) and 1.12X at the last review. The second largest loan with a Structured Credit Assessment is the Sony Pictures Plaza Loan ($46 million -- 4% of the pool), which is secured by a 328,847 SF office building located in Culver City, California. The property is also encumbered with a $37 million B- note held outside the trust. The property is 100% leased to Sony Pictures Entertainment through 2027 with an early termination option available in 2017. The loan is benefitting from amortization and matures in September 2016. Moody's value is based on a lit/dark analysis. Moody's Structured Credit Assessment and stressed DSCR are baa1 (sca.pd) and 1.74X, respectively, compared to baa1 (sca.pd) and 1.71X at the last review. The third largest loan with a Structured Credit Assessment is the Cherry Creek Shopping Center Loan ($30 million -- 3% of the pool), which is secured by an 11% pari-passu interest in an interest-only first mortgage loan secured by the borrower's interest in a 547,457 SF regional mall located in Denver, Colorado. The property is anchored by Neiman Marcus, Saks Fifth Avenue, Macy's and Nordstrom, which are not part of the collateral. As of March 2014, the collateral space was 91% occupied, compared to 92% at last review. Excluding the Apple store, jewelry stores and food service stores, comparable inline sales per SF were $477 in 2013 compared to $466 in 2012. The loan matures in June 2016. Moody's Structured Credit Assessment and stressed DSCR are baa2 (sca.pd) and 1.28X, respectively, compared to baa2 (sca.pd) and 1.24X at the last review. The top three conduit loans represent 22% of the pool balance. The largest loan is the PPG Portfolio ($100 million -- 9% of the pool), which is secured by seven cross-collateralized and cross- defaulted office properties located in Arizona, Colorado, and Indiana. As of December 2013, the portfolio was 88% leased, essentially the same as at last review. The portfolio's performance has been stable and the loan is benefitting from amortization. Moody's LTV and stressed DSCR are 112% and 0.87X, respectively, compared to 111% and 0.88X at the last review. The second largest loan is the AZ Office/Retail Porfolio ($72 million -- 7% of the pool), which is secured by which is secured by three cross-collateralized and cross-defaulted mixed use (retail and office) properties located in Scottsdale, Arizona. As of March 2014, the portfolio was 77% leased compared to 78% at last review. The loan transferred to special servicing in March 2012 due to imminent payment default. The loan was returned to the Master Servicer with no modification in February 2014. Due to the portfolio's poor performance for the last three years, Moody's has assigned a high default probability to this loan. Moody's LTV and stressed DSCR are 190% and 0.57X, respectively, compared to 174% and 0.62X at the last review. The third largest loan is The Shops at Briargate Loan ($71 million -- 6% of the pool), which is secured by a 225,922 SF luxury lifestyle center located in Colorado Springs, Colorado. As of March 2014, the property was 93% leased compared to 95% at the last review. Excluding the Apple store, jewelry stores and food service stores, comparable sales per SF for 2013 were $324 compared to $314 for 2012. Performance remains stable and the loan is benefitting from amortization. Moody's LTV and stressed DSCR are 117% and 0.83X, respectively, compared to 129% and 0.76X at the last review. MORGAN STANLEY 2007-IQ13: Fitch Affirms Dsf Rating on Cl. H Certs ----------------------------------------------------------------- Fitch Ratings has affirmed 18 classes of Morgan Stanley Capital I Trust (MSC 2007-IQ13) commercial mortgage pass-through certificates series 2007-IQ13. Key Rating Drivers The affirmations reflect sufficient credit enhancement of the remaining classes relative to Fitch's expected losses. Fitch modeled losses of 13.6% of the remaining pool; expected losses on the original pool balance total 14%, including $60 million (3.7% of the original pool balance) in realized losses to date. Fitch has designated 36 loans (35.8%) as Fitch Loans of Concern, which includes 13 specially serviced assets (11.5%). As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 23.6% to $1.25 billion from $1.64 billion at issuance. Per the servicer reporting, four loans (5.1% of the pool) are defeased. The largest contributor to expected losses is the 75-101 Federal Street loan (16.8% of the pool), which is secured by two interconnected, class A office buildings composed of 811,687 square feet (sf) in Boston's financial district. The second largest tenant EnerNOC (4.7% of NRA) vacated and relocated its corporate headquarters to the Innovation District in June 2013. As of June 2014, occupancy for the building was 77%. Due to the decline in occupancy, cash flow has been insufficient to service the debt with servicer reported debt service coverage ratio (DSCR) as of March 2014 at 0.74x. As of May 2014, Reis reported the Central Business District submarket of Boston vacancy rate at 10.7% and asking rents of $53.18 psf compared to in-place rents of approximately $38 psf. Although losses were modeled for the loan, refinance and default risk is mitigated by strong loan structural features, institutional sponsorship and a central CBD location. As of July 2014, the loan is current and approximately $1.6 million remains in tenant reserves. The next largest contributor to expected losses is a specially- serviced 1.2 million-sf, outlet mall (6.2%) in Hazelwood, MO, a suburb of St. Louis. The loan transferred to special servicing in October 2011 due to the borrower's inability to secure financing by the loan's maturity date. A deed-in-lieu of foreclosure was signed in August 2012. As of June 2014, servicer reported occupancy for the property was 78%. The servicer has made leasing progress by securing a new lease with Ross Dress for Less in addition to renewing Books-A-Million and Burlington Coat Factory; however, the mall continues to face challenges in tenant retention due to increased competition from two new outlet malls in nearby Chesterfield, MO. Recent tenants vacating the mall include Marshall's and Nascar Speedpark representing 9.1% of the NRA collectively. Approximately 25.9% of leases are scheduled to expire through the end of 2015. The third largest contributor to expected losses is a specially serviced asset (1.6%), secured by a 119,898 sf retail property located in Ontario, CA. The loan transferred to special servicing in July 2010 for non-monetary default due to a change in property management and transfer of ownership without lender consent. The loan was scheduled for a foreclosure sale prior to the borrower filing for bankruptcy protection in July 2013. As of January 2014, occupancy for the property was 87%. The largest tenant, Platt College, occupies 35% of the property and has a lease expiring in July 2021, while the second largest tenant, West Coast Ultrasound, occupies 25% with lease expiration in May 2019. Rating Sensitivity Rating Outlooks on classes A-1A through A-4 remain Stable due to increasing credit enhancement and continued paydown of the classes. Class A-M, rated 'AAsf', continues to have a Stable Outlook. Fitch applied additional stresses to the REO ST. Louis Mills asset given the high concentration of lease expirations coupled with increased competition in the area. Should property performance deteriorate, a Negative Rating Outlook or rating action is possible. The distressed classes (those rated below 'B- sf') are subject to further downgrades as losses are realized. Fitch affirms the following classes as indicated: -- $267.6 million class A-1A at 'AAAsf', Outlook Stable; -- $41.3 million class A-2 at 'AAAsf', Outlook Stable; -- $64 million class A-3 at 'AAAsf', Outlook Stable; -- $448.8 million class A-4 at 'AAAsf', Outlook Stable; -- $163.9 million class A-M at 'AAsf', Outlook Stable; -- $149.6 million class A-J at 'CCCsf', RE 70%; -- $32.8 million class B at 'CCCsf', RE 0%; -- $16.4 million class C at 'CCsf', RE 0%; -- $16.4 million class D at 'Csf', RE 0%; -- $14.3 million class E at 'Csf', RE 0%; -- $18.4 million class F at 'Csf', RE 0%; -- $14.3 million class G at 'Csf', RE 0%; -- $5.6 million class H at 'Dsf', RE 0%; -- $0 class J at 'Dsf', RE 0%; -- $0 class K at 'Dsf', RE 0%; -- $0 class L at 'Dsf', RE 0%; -- $0 class M at 'Dsf', RE 0%; -- $0 class N at 'Dsf', RE 0%. Fitch does not rate the class O and P certificates. Class A-1 is paid in full. Fitch previously withdrew the ratings on the interest-only class X and X-Y certificates. MORGAN STANLEY 2007-TOP27: Fitch Cuts Rating on Class B Notes to B ------------------------------------------------------------------ Fitch Ratings has downgraded three classes and affirmed 18 classes of Morgan Stanley Capital I Trust, commercial mortgage pass- through certificates, series 2007-TOP27 (MSCI 2007-TOP27). Key Rating Drivers The downgrades are due to an increase in expected losses for the pool. Fitch modeled losses of 6.4% of the remaining pool; expected losses on the original pool balance total 7.8%, including $85.4 million (3.1% of the original pool balance) in realized losses to date. Fitch has designated 51 loans (26.3%) as Fitch Loans of Concern, which includes four specially serviced assets (4.1%). As of the July 2014 distribution date, there are 186 loans remaining from the original 234 loans and the pool's aggregate principal balance has been reduced by 24.9% to $2.08 billion from $2.77 billion at issuance. Per the servicer reporting, one loan (0.2% of the pool) is defeased. Interest shortfalls are currently affecting classes E through P. The largest contributor to expected losses is the Springfield Hotel Portfolio (III) (1.8% of the pool). The original loan was secured by two hotels that are attached by a walkway, have a total of 428 rooms and are located in Springfield, IL. The hotels are flagged as a Crowne Plaza with 288 rooms and a Holiday Inn Express with 140 rooms. The loan was transferred to the special servicer in October 2011 for imminent default and the property became real estate-owned (REO) in April 2013. Fitch's expected loss has increased significantly since the previous rating action due to a substantial decline in the value of the two properties. The hotels have been marketed since Jan. 2014. Additionally, the Franchise License Agreements that were set to expire in September 2014 have been finalized and executed with Intercontinental Hotel Group. According to a recent STR report, the hotels are performing in line with their competitive sets, but the market remains soft. The next largest contributor to expected losses is the specially- serviced 791 Park of Commerce loan (1.4%), which is secured by a 138,132 square foot (sf) office property in Boca Raton, FL. The loan transferred to special servicing in February 2013 due to imminent payment default. The borrower had failed to pay the required reserve payment triggered in December 2012 as a result of the largest tenant's failure to renew its lease 24 months prior to expiration. The largest tenant has since vacated the 88,729 sf space (64% of NRA). However, it continues to pay rent through the end of the year, leaving the property 92% leased and 28% physically occupied. The loan is in process of foreclosure. The third largest contributor to expected losses is a specially-serviced portfolio (0.7%) initially secured by three grocery anchored retail properties with 193,566 sf located in Aurora, Bridgeview, and Joliet IL. The loan was transferred to the special servicer in March 2009 due to payment default and the asset became real estate owned (REO) in December 2010. The Aurora property sold in July 2012 for $2.25 million and the Bridgeview property sold in August 2013 for $1.8 million. There is an interested party for the Joliet property and negotiations are ongoing. The transaction also includes a non-pooled trust component secured by the leased fee of 330 West 34th Street, a 46,412 sf parcel of land ground leased on a triple-net basis to Vornado Realty Trust until December 2021. Vornado has been the only tenant at the property since 1986 and is currently in its first extension option, with four options totaling 128 years remaining. The parcel is improved with an 18-story, 636,915 sf office building with retail at street level. RATING SENSITIVITIES The Rating Outlooks on classes A-1A through A-MFL remain Stable due to increasing credit enhancement and continued pay down. The Rating Outlooks on classes A-J and B remain Negative due to the declining value and uncertainty surrounding the resolution of the Springfield Hotel Portfolio (III). Distressed classes (those rated below 'B') may be subject to downgrades as losses are realized or if realized losses are greater than Fitch's expectations. Fitch downgrades the following classes and assigns or revises Recovery Estimates (REs) as indicated: -- $190.6 million class A-J to 'BBB-sf' from 'BBBsf', Outlook Negative; -- $54.5 million class B to 'Bsf' from 'BBsf', Outlook Negative; -- $30.6 million class C to 'CCCsf' from 'Bsf', RE 55%. Fitch affirms the following classes as indicated: -- $255.2 million class A-1A at 'AAAsf', Outlook Stable; -- $19 million class A-3 at 'AAAsf', Outlook Stable; -- $31.1 million class A-AB at 'AAAsf', Outlook Stable; -- $1.1 billion class A-4 at 'AAAsf', Outlook Stable; -- $172.3 million class A-M at 'AAAsf', Outlook Stable; -- $100 million class A-MFL at 'AAAsf', Outlook Stable; -- $30.6 million class D at 'CCCsf', RE 0%. -- $23.8 million class E at 'CCsf', RE 0%; -- $23.8 million class F at 'Csf', RE 0%; -- $23.4 million class G at 'Dsf', RE 0%; -- $0 class H at 'Dsf', RE 0%; -- $0 class J at 'Dsf', RE 0%; -- $0 class K at 'Dsf', RE 0%; -- $0 class L at 'Dsf', RE 0%; -- $0 class M at 'Dsf', RE 0%; -- $0 class N at 'Dsf', RE 0%; -- $0 class O at 'Dsf', RE 0%; -- $50.2 million class AW34 at 'AAAsf', Outlook Stable. The class A-1 and A-2 certificates have paid in full. Fitch does not rate the class P certificates. Fitch previously withdrew the rating on the interest-only class X certificates. MORGAN STANLEY 2014-CPT: S&P Assigns 'BB-' Rating on Class G Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its ratings to Morgan Stanley Capital I Trust 2014-CPT's $800 million commercial mortgage pass-through certificates series 2014-CPT. S&P withdrew its preliminary rating on the non-offered class X-B certificates. The note issuance is a commercial mortgage-backed securities transaction backed by an $800 million commercial mortgage loan secured by the fee interest in Century Plaza Towers, two 44-story class A office buildings comprising 2.4 million sq. ft. in the Century City submarket of Los Angeles. The ratings reflect S&P's view of the collateral's historical and projected performance, the sponsor's and manager's experience, the trustee-provided liquidity, the loan's terms, and the transaction's structure. RATINGS ASSIGNED Morgan Stanley Capital I Trust 2014-CPT Class Rating Amount ($) A AAA (sf) 415,000,000 X-A AA (sf) 480,000,000(i) X-B NR 105,000,000(i) A-M AA (sf) 65,000,000 B AA- (sf) 30,000,000 C A- (sf) 75,000,000 D BBB (sf) 50,000,000 E BBB- (sf) 40,000,000 F BB (sf) 80,000,000 G BB- (sf) 45,000,000 (i) Notional balance. The notional amount of the class X-A certificates will be equal to the class A and A-M certificates' balance, and the notional amount of the class X-B certificates will be equal to the class B and C certificates' balance. NR-Not rated. NEWCASTLE CDO VI: Moody's Affirms 'B1' Rating on Class I-MM Notes ----------------------------------------------------------------- Moody's Investors Service has affirmed the rating of the following notes issued by Newcastle CDO VI, limited: Class I-MM Floating Rate Notes, Affirmed B1 (sf); previously on Aug 14, 2013 Affirmed B1 (sf) Ratings Rationale Moody's has affirmed the rating of one class of notes because the key transaction metrics are commensurate with the existing rating. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO and Re-REMIC) transactions. Newcastle CDO VI, Ltd. is a static cash transaction backed by a portfolio of: i) commercial mortgage backed securities (CMBS) including rake bonds (59.1% of the current collateral pool balance); ii) residential mortgage backed securities, primarily in the form of sub-prime certificates, (RMBS) (22.4%); and iii) REIT debt (18.5%). As of the June 17, 2014 trustee report, the aggregate Note balance of the transaction, including preferred shares, has decreased to $293.9 million from $500.0 million at issuance, with the paydown directed to the senior most outstanding class of notes, as a result of the combination of regular amortization and interest proceeds re-diverted as principal due to failure of certain par value tests. The pool contains eighteen assets totaling $54.7 million (34.7% of the collateral pool balance) that are listed as defaulted securities as of the June 17, 2014 trustee report. Fifteen of these assets (56.5% of the defaulted balance) are RMBS; and three (43.5%) are CMBS. Moody's does expect significant losses to occur from these defaulted securities once they are realized. Moody's has identified the following as key indicators of the expected loss in CRE CDO transactions: the weighted average rating factor (WARF), the weighted average life (WAL), the weighted average recovery rate (WARR), and Moody's asset correlation (MAC). Moody's typically models these 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 its assessments for the collateral it does not rate. The rating agency modeled a bottom-dollar WARF of 4369, compared to 4393 at last review. The current ratings on the Moody's-rated collateral and the assessments of the non-Moody's rated collateral follow: Aaa-Aa3 and 6.4% compared to 7.6% at last review; A1-A3 and 10.4% compared to 9.3% at last review; Baa1-Baa3 and 15.8% compared to 14.8% at last review; Ba1-Ba3 and 16.6% compared to 5.8% at last review; B1-B3 and 10.6% compared to 23.8% at last review; and Caa1-C and 40.3% compared to 38.7% at last review. Moody's modeled a WAL of 2.8 years, the same as at last review. The current WAL is based on the assumption about extensions on the underlying collateral assets. Moody's modeled a fixed WARR of 9.7%, compared to 15.0% at last review. Moody's modeled a MAC of 8.3%, compared to 8.4% at last review. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes. Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for some of the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the recovery rates of the underlying collateral and credit assessments. Increasing the recovery rates by 10% would result in an average modeled rating movement on the rated notes of +1 notch (e.g., one notch up implies a ratings movement of Ba1 to Baa3). Decreasing the recovery rates to 0% would result in an average modeled rating movement on the rated notes of -2 notches (e.g., one notch down implies a ratings movement of Baa3 to Ba1). The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and commercial real estate property markets. Commercial real estate property values continue to improve modestly, 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, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate. NOB HILL: S&P Affirms 'B+' Rating on Class E Notes -------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class B and C notes from Nob Hill CLO Ltd., a U.S. collateralized loan obligation transaction managed by Newfleet Asset Management, LLC. At the same time, S&P removed the ratings from CreditWatch, where it had placed them with positive implications on April 9, 2014. S&P also affirmed its ratings on the class A-1, A-2, D, and E notes from the same transaction. The upgrades reflect post-reinvestment period principal amortization paydowns to the class A-1 notes. Since October 2013, when S&P raised its ratings on five classes, the class A-1 notes paid down a total of $63.7 million to 15.2% of their original balance, increasing credit support for the subordinate notes. As of June 2014, there were $11.0 million (10.0%) of assets from obligors in the 'CCC' rating category, down from $20.0 million (11.1%) in October 2013. In addition, defaulted assets increased to $13.6 million (12.4%) from $9.9 million (5.5%) in October 2013. The ratings on the class C and D notes are constrained at 'AA+ (sf)' and 'BBB+(sf)', respectively, by the application of S&P's top obligor test, which measures concentration risk. While the top obligor test constrains the rating on the class E notes at 'CCC+', S&P believes the tranche has lower risk than indicated by its criteria for assigning 'CCC+', 'CCC', 'CCC-', and 'CC' ratings. Accordingly, S&P affirmed its 'B+ (sf)' rating based on cashflow results. tempered by S&P's view of potential concentration risk in the portfolio. S&P's affirmation of the 'AAA (sf)' ratings on the class A-1 and A-2 notes reflects the availability of adequate credit support at the current rating level. "Our review of this transaction included a cash flow analysis, based on the portfolio and transaction as reflected in the aforementioned trustee report, to estimate future performance. In line with our criteria, our cash flow scenarios applied forward- looking assumptions on the expected timing and pattern of defaults, as well as on recoveries upon default, under various interest rate and macroeconomic scenarios. In addition, our analysis considered the transaction's ability to pay timely interest and/or ultimate principal to each of the rated tranches. The results of the cash flow analysis demonstrated, in our view, that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with this rating action," S&P said. S&P will continue to review our ratings on the notes and assess whether they remain consistent with the credit enhancement available to support them, and S&P will take rating actions as it deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS Nob Hill CLO Ltd. Cash flow Previous implied Cash flow Final Class rating rating rating rating A-1 AAA (sf) AAA (sf) 31.42% AAA (sf) A-2 AAA (sf) AAA (sf) 31.42% AAA (sf) AA+ (sf)/Watch B Pos AAA (sf) 31.42% AAA (sf) AA- (sf)/Watch C Pos AAA (sf) 8.78% AA+ (sf) D BBB+ (sf) AA- (sf) 3.29% BBB+ (sf) E BB+ (sf) BB+ (sf) 2.44% B+ (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation Within Between scenario industry (%) industries(%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) C AAA (sf) AAA (sf) AAA (sf) AAA (sf) AA+ (sf) D AA- (sf) A+ (sf) AA- (sf) AA+ (sf) BBB+ (sf) E BB+ (sf) B+ (sf) BB+ (sf) BB+ (sf) B+ (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AAA (sf) AAA (sf) AAA (sf) AAA (sf) C AAA(sf) AAA(sf) AA+(sf) AA+(sf) D AA- (sf) AA- (sf) A- (sf) BBB+(sf) E BB+ (sf) BB (sf) CCC (sf) B+ (sf) RATINGS LIST Nob Hill CLO Ltd. Rating Rating Class Identifier To From A-1 654883AA5 AAA (sf) AAA (sf) A-2 654883AL1 AAA (sf) AAA (sf) B 654883AC1 AAA (sf) AA+ (sf)/Watch Pos C 654883AE7 AA+ (sf) AA- (sf)/Watch Pos D 654883AG2 BBB+ (sf) BBB+ (sf) E 654883AJ6 B+ (sf) B+ (sf) NORTHWOODS CAPITAL XII: S&P Assigns Prelim. BB Rating on E Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Northwoods Capital XII Ltd./Northwoods Capital XII LLC's $556.80 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 preliminary ratings are based on information as of Aug. 4, 2014. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- 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 (excluding 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 regarding the timely interest and ultimate principal payments on the preliminary rated notes, which S&P assessed using its cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.2341%-12.7531%. -- 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 reinvestment test, a failure of which will lead to the reclassification of up to 50.00% of excess interest proceeds that are available before paying uncapped administrative expenses and fees, collateral manager subordinated and incentive management fees, and subordinated note payments to principal proceeds to purchase additional collateral assets during the reinvestment period. PRELIMINARY RATINGS ASSIGNED Northwoods Capital XII Ltd./Northwoods Capital XII LLC Class Rating Amount (mil. $) A AAA (sf) 376.20 B AA (sf) 69.60 C (deferrable) A 52.20 D (deferrable) BBB (sf) 30.00 E (deferrable) BB (sf) 28.80 Subordinate notes NR 59.00 NYLIM STRATFORD 2001-1: Moody's Cuts Class B Notes' Rating to Ba2 ----------------------------------------------------------------- Moody's Investors Service has downgraded the rating on notes issued by NYLIM Stratford CDO 2001-1 Ltd.: $40,000,000 Class B Floating Rate Notes Due 2036 (current outstanding balance of $16,688,511.40), Downgraded to Ba2 (sf); previously on March 6, 2014 Baa2 (sf) Placed Under Review for Possible Upgrade. NYLIM Stratford CDO 2001-1 Ltd., issued in April 2001, is a collateralized debt obligation backed primarily by a portfolio of bonds, REITs, Residential Mortgage Backed Securities and other Asset Backed Securities originated in 1996 to 2004. Ratings Rationale The downgrade action is primarily due to the erosion of collateral coverage available for the Class B notes, which is caused by the diversion of principal proceeds to pay the Class C notes' interest payments. As interest collections shrink due to a declining collateral pool balance (because of deleveraging or defaults), increasing amounts of principal proceeds are used to pay the Class C interest payment, causing Class B par coverage deterioration. Moody's expects the erosion of collateral coverage to continue. Based on the July 2014 trustee report, the Class C Interest Coverage test ratio is 60.0% compared to 70.6% as of August 2013. On the July 2014 payment date, $0.33 million of principal proceeds was used to make interest payments on the Class C notes. Nevertheless, the deal benefits from the updates to Moody's SF CDO methodology described in "Moody's Approach to Rating SF CDOs" published on March 6, 2014. These updates include: (i) lowering the resecuritization stress factors for RMBS (US Prime, Subprime, Manufactured Housing), CDOs exposed to investment grade corporate assets, and ABS backed by franchise loans or by mutual fund fees; (ii) using a common table of recovery rates for all structured finance assets (except for CMBS and SF CDO); and (iii) providing more guidance on the rating caps Moody's apply to deals experiencing event of default. In taking the foregoing actions, Moody's also announced that it had concluded its review of its rating on the issuer's Class B notes announced on March 6, 2014. At that time, Moody's said that it had placed the rating on review for upgrade as a result of the aforementioned methodology updates. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs," published in March 2014. Factors That Would Lead To an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Primary causes of uncertainty about assumptions are the extent of any slowdown in growth in the current macroeconomic environment and in the residential real estate property markets. The residential real estate property market is subject to uncertainty about housing prices; the pace of residential mortgage foreclosures, loan modifications and refinancing; the unemployment rate; and interest rates. 2) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds, recoveries from defaulted assets, and excess interest proceeds will continue and at what pace. Faster deleveraging than Moody's expects could have a significant impact on the notes' ratings. 3) Recovery of defaulted assets: The amount of recoveries received from defaulted assets reported by the trustee and those that Moody's assumes as having defaulted as well as the timing of these recoveries create additional uncertainty. Moody's analyzed defaulted assets assuming no recoveries, and therefore, realization of any recoveries in the future would positively impact the notes' ratings. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes. Below is a summary of the impact of different default probabilities on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Ba1 and below ratings notched up by two rating notches: Class B: 0 Ba1 and below ratings notched down by two notches: Class B: 0 Loss and Cash Flow Analysis: Moody's applies a Monte Carlo simulation framework in Moody's CDOROM to model the loss distribution for SF CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios define the reference pool's loss distribution. Moody's then uses the loss distribution as an input in the CDOEdge cash flow model. The key model inputs Moody's used in its analysis, such as par and weighted average rating factor, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $25.7 million, defaulted par of $4.2 million, a weighted average default probability of 2.81% (implying a WARF of 509), a weighted average spread of 1.95%, and a weighted average coupon of 7.67%. OAKTREE CLO 2014-1: S&P Affirms 'BB' Rating on Class D Notes ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings on Oaktree CLO 2014-1 Ltd./Oaktree CLO 2014-1 LLC's $462 million floating- rate notes following the transaction's effective date as of May 30, 2014. Most U.S. cash flow collateralized loan 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"). "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 added. For a CLO that has not purchased its full target level of portfolio collateral by the closing date, S&P's ratings on the closing date and prior to its effective date review are generally based on the application of S&P's criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to S&P the collateral manager and may also reflect its assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased. "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 noted. "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 added. On an ongoing basis after S&P issues an effective date rating affirmation, it will periodically review whether, in its 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 S&P deems necessary. RATINGS AFFIRMED Oaktree CLO 2014-1 Ltd./Oaktree CLO 2014-1 LLC Class Rating Amount (mil.$) A-1 AAA (sf) 310.00 A-2A AA (sf) 60.00 A-2B AA (sf) 10.00 B (deferrable) A (sf) 35.00 C (deferrable) BBB (sf) 25.00 D (deferrable) BB (sf) 22.00 OFSI FUND VII: S&P Assigns Prelim. 'BB' Rating on Class E Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to OFSI Fund VII Ltd./OFSI Fund VII LLC's $470.50 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 July 30, 2014. 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 consists primarily of 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 preliminary rated notes, which S&P assessed using its cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.234%-12.753%. -- 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. PRELIMINARY RATINGS ASSIGNED OFSI Fund VII Ltd./OFSI Fund VII LLC Class Rating Amount (mil. $) X AAA (sf) 2.50 A AAA (sf) 298.50 B (deferrable) AA (sf) 73.75 C (deferrable) A (sf) 36.00 D (deferrable) BBB (sf) 28.00 E (deferrable) BB (sf) 22.75 F (deferrable) B (sf) 9.00 Subordinated notes NR 51.50 NR-Not rated. ONEMAIN FINANCIAL 2014-2: S&P Assigns 'BB' Rating on Class C Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its ratings to OneMain Financial Issuance Trust 2014-2's $1.184 billion asset-backed notes series 2014-2. The note issuance is an asset-backed securities transaction backed by personal consumer loan receivables. The ratings reflect: -- The availability of approximately 54.8%, 47.4%, 42.3%, and 34.7% credit support to the class A, B, C, and D notes, respectively, in the form of subordination, overcollateralization, a reserve account, and excess spread. These credit support levels are sufficient to withstand stresses commensurate with the ratings on the notes based on S&P's stressed cash flow scenarios. -- S&P's expectation that under a moderate ('BBB') stress scenario, the ratings on the class A, B, and C notes would remain within two rating categories of our 'A (sf)', 'BBB (sf)', and 'BB (sf)' ratings, respectively. These potential rating movements are consistent with S&P's credit stability criteria, which outline the outer bounds of credit deterioration as equal to a two-category downgrade within the first year for 'A' through 'BB' rated securities under moderate stress conditions. -- The timely interest and full principal payments expected to be made under stressed cash flow modeling scenarios appropriate to the assigned ratings. -- The characteristics of the pool being securitized. -- The operational risks associated with OneMain Financial Inc.'s decentralized business model. -- The transaction's payment and legal structures. RATINGS ASSIGNED OneMain Financial Issuance Trust 2014-2 Class Rating Type Interest Amount rate (mil. $) A A (sf) Senior Fixed 875.000 B BBB (sf) Subordinate Fixed 118.430 C BB (sf) Subordinate Fixed 69.080 D B (sf) Subordinate Fixed 121.710 OZLM VIII: Moody's Assigns '(P)B2' Rating on $10MM Class E Notes ---------------------------------------------------------------- Moody's Investors Service assigned the following provisional ratings to notes to be issued by OZLM VIII, Ltd.: $315,000,000 Class A-1 Senior Secured Floating Rate Notes due 2026 (the "Class A-1 Notes"), Assigned (P)Aaa (sf) $34,000,000 Class A-2a Senior Secured Floating Rate Notes due 2026 (the "Class A-2a Notes"), Assigned (P)Aa2 (sf) $30,000,000 Class A-2b Senior Secured Fixed Rate Notes due 2026 (the "Class A-2b Notes"), Assigned (P)Aa2 (sf) $28,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class B Notes"), Assigned (P)A2 (sf) $28,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Assigned (P)Baa3 (sf) $25,000,000 Class D Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Assigned (P)Ba3 (sf) $10,000,000 Class E Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Assigned (P)B2 (sf) Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. 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 Class A-1 Notes, the Class A-2a Notes, the Class A-2b Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes (collectively, the "Rated Notes") address the expected losses posed to the holders of the Rated Notes. 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. OZLM VIII is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90% of the portfolio must be invested in senior secured loans and eligible investments and up to 10% of the portfolio may consist of second lien loans and unsecured loans. The underlying collateral pool is expected to be approximately 75% ramped as of the closing date. Och-Ziff Loan Management LP ("Och-Ziff" or the "Manager") will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk obligations or credit improved obligations, and are subject to certain restrictions. In addition to the Rated Notes, the Issuer will issue one class of subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount of $500,000,000 Diversity of 55 WARF of 2550 Weighted Average Spread of 3.85% Weighted Average Coupon of 7.0% Weighted Average Recovery Rate of 43% Weighted Average Life of 8 years Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated Notes. This sensitivity analysis includes an 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 Rated 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: Percentage Change in WARF -- increase of 15% (from 2550 to 2933) Rating Impact in Rating Notches Class A-1 Notes: 0 Class A-2a Notes: -2 Class A-2b Notes: -2 Class B Notes: -2 Class C Notes: -1 Class D Notes: 0 Class E Notes: 0 Percentage Change in WARF -- increase of 30% (from 2550 to 3315) Rating Impact in Rating Notches Class A-1 Notes: -1 Class A-2a Notes: -3 Class A-2b Notes: -3 Class B Notes: -4 Class C Notes: -2 Class D Notes: -1 Class E Notes: -3 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 Score provides 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 Score applies to the entire transaction, rather than individual tranches. PASADENA CDO: Moody's Hikes Rating on Class C Notes to 'Ca' ----------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Pasadena CDO Ltd.: $66,500,000 Class B Floating Rate Notes Due June 21, 2037 (current outstanding of $33,149,869), Upgraded to Baa1 (sf); previously on April 24, 2013 Affirmed Caa3 (sf); $26,500,000 Class C Floating Rate Notes Due June 21, 2037(current outstanding of $30,546,906), Upgraded to Ca (sf); previously on April 24, 2013 Downgraded to C (sf). Pasadena CDO Ltd., issued in June 2002, is a collateralized debt obligation backed primarily by a portfolio of RMBS and other types of asset-backed securities ("ABS") originated from 1997 to 2005. Ratings Rationale The rating actions are primarily due to the deleveraging of the senior notes and an increase in the transaction's over- collateralization ("OC") ratios since January 2014. The Class B notes have been paid down by approximately 44%, or $26 million, since January 2014. A large proportion of the principal proceeds used in the paydown, or approximately $18 million, was received from the sale of defaulted assets in February 2014. The realized recoveries on these defaulted assets were higher than previously assumed. As a result, the Class B OC ratio, which did not account for the realized recoveries, increased significantly since January 2014. Based on the trustee's June 30, 2014 report, the OC ratios for the Class B and Class C notes are 126.81% and 66.00% respectively, compared to 85.79% and 56.43% respectively, in January 2014. The credit quality of the underlying portfolio has been stable since January 2014. Moody's also notes that the current portfolio is generating excess interest proceeds, which is being used to pay down the Class B notes as a result of the failure of the Class C OC test. On the last payment date in June 2014, $0.25 million of interest proceeds were diverted to pay the principal on Class B notes. Additionally, the periodic interest on the Class C notes is current, although $4 million of deferred interest remains outstanding. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs," published in March 2014. Factors That Would Lead To an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: Primary causes of uncertainty about assumptions are the extent of any slowdown in growth in the current macroeconomic environment and in the commercial and residential real estate property markets. Although the commercial real estate property markets are gaining momentum, consistent growth will be unlikely until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The residential real estate property market is subject to uncertainty about housing prices; the pace of residential mortgage foreclosures, loan modifications and refinancing; the unemployment rate; and interest rates. 2) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds, recoveries from defaulted assets, and excess interest proceeds will continue and at what pace. Faster deleveraging than Moody's expects could have a significant impact on the notes' ratings. 3) Lack of portfolio granularity: The performance of the portfolio depends to a large extent on the credit conditions of a few large obligors Moody's rates Baa1 or lower, especially if they jump to default. Loss and Cash Flow Analysis: Moody's applies a Monte Carlo simulation framework in Moody's CDOROM to model the loss distribution for SF CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios define the reference pool's loss distribution. Moody's then uses the loss distribution as an input in the CDOEdge cash flow model. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Ba1 and below ratings notched up by two rating notches (406): Class B: +1 Class C: 0 Ba1 and below ratings notched down by two notches (801): Class B: -1 Class C: 0 PEGASUS AVIATION: Moody's Cuts Ratings on 2 Securities to 'Ca' -------------------------------------------------------------- Moody's has downgraded the ratings of the Pegasus Aviation Lease Securitization III (PALS III), Series 2001-1 Class A-1 and A-2 Notes issued by issued by PALS III. The complete rating action is as follows: Issuer: Pegasus Aviation Lease Securitization III (PALS III), Series 2001-1 Class A-1, Downgraded to Ca (sf); previously on Nov 16, 2010 Downgraded to Caa3 (sf) Class A-2, Downgraded to Ca (sf); previously on Nov 16, 2010 Downgraded to Caa3 (sf) Ratings Rationale The downgrade reflects the continued increase in loan-to-value ratio (LTV) of the Classes A-1 and A-2 Notes, and Moody's expectation about the pace of future note amortization. The portfolio consists of older aircraft with a weighted average age of 18 years. The LTV for the Class A Notes is now in the mid-190% range, assuming 10% per annum depreciation of the aircraft since the last appraisal which was December 2013. When the reserve accounts are taken into consideration, the LTV is in the high-160% range. The portfolio consists of 25 aircraft and 2 engines with a 30% concentration in Boeing 757s, 28% in Airbus 320s, and 27% in B767s, weighted by aircraft value. The remainder of the portfolio consists of B727, B737, McDonnell Douglas DC-10, MD-11, MD-82, MD- 83, and MD-87 aircraft. 57% of the portfolio were manufactured prior to 1998, and 3% of the portfolio are currently on the ground. The principal methodology used in this rating was "Moody's Approach To Pooled Aircraft-Backed Securitization" published in March 1999. Primary sources of uncertainty include the global economic environment, aircraft lease income generating ability, aircraft maintenance and other expenses to the trust, and valuation for the aircraft backing the transaction. Factors that would lead to an upgrade or downgrade of the rating: Changes to lease rates or aircraft values that differ from historical and current trends. PHOENIX CLO III: Moody's Raises Rating on Cl. E Notes to 'Ba3' -------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Phoenix CLO III, Ltd.: $33,000,000 Class B Senior Notes Due July 17, 2019, Upgraded to Aaa (sf); previously on July 11, 2013 Upgraded to Aa2 (sf) $24,000,000 Class C Deferrable Mezzanine Notes Due July 17, 2019, Upgraded to Aa3 (sf); previously on July 11, 2013 Upgraded to Baa1 (sf) $19,000,000 Class D Deferrable Mezzanine Notes Due July 17, 2019, Upgraded to Baa3 (sf); previously on July 11, 2013 Affirmed Ba2 (sf) $13,000,000 Class E Deferrable Junior Notes Due July 17, 2019, Upgraded to Ba3 (sf); previously on July 11, 2013 Affirmed B1 (sf) Moody's also affirmed the ratings on the following notes: $336,000,000 Class A-1 Senior Notes Due July 17, 2019 (current outstanding balance of $136,861,869), Affirmed Aaa (sf); previously on July 11, 2013 Affirmed Aaa (sf) $37,000,000 Class A-2 Senior Notes Due July 17, 2019, Affirmed Aaa (sf); previously on July 11, 2013 Upgraded to Aaa (sf) Phoenix CLO III, Ltd., issued in May 2007, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ended in July 2013. Ratings Rationale These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over- collateralization ratios since January 2014. The Class A-1 notes have been paid down by approximately 53.6% or $158 million since that time. Based on the trustee's July 2014 report, the over- collateralization (OC) ratios for the Class A/B, Class C and Class D notes are reported at 126.9%, 116.1%, and 108.7%, respectively, versus January 2014 levels of 118.7%, 111.3%, and 106.2%, respectively. The overcollateralization ratios reported in the trustee report do not include the July 2014 payment distribution when $51.2 million of principal proceeds were used to pay down the Class A-1 notes. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. 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. Realization of higher than assumed recoveries would positively impact the CLO. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2171) Class A-1: 0 Class A-2: 0 Class B: 0 Class C: +2 Class D: +2 Class E: +1 Moody's Adjusted WARF + 20% (3257) Class A-1: 0 Class A-2: 0 Class B: 0 Class C: -2 Class D: -1 Class E: -1 Loss and Cash Flow Analysis: 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 Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $275.7 million, defaulted par of $8.5 million, a weighted average default probability of 16.65% (implying a WARF of 2714), a weighted average recovery rate upon default of 52.07%, a diversity score of 53 and a weighted average spread of 3.23%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. PREFERRED TERM IX: Moody's Raises Ratings on 3 Note Classes to B3 ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Preferred Term Securities IX, Ltd.: $42,000,000 Floating Rate Class A-2 Senior Notes Due April 3, 2033, Upgraded to Aa1 (sf); previously on June 26, 2014 Aa2 (sf) Placed Under Review for Possible Upgrade $33,000,000 Fixed/Floating Rate Class A-3 Senior Notes Due April 3, 2033, Upgraded to Aa1 (sf); previously on June 26, 2014 Aa2 (sf) Placed Under Review for Possible Upgrade $86,000,000 Floating Rate Class B-1 Mezzanine Notes Due April 3, 2033, Upgraded to B3 (sf); previously on June 26, 2014 Caa1 (sf) Placed Under Review for Possible Upgrade $16,250,000 Fixed/Floating Rate Class B-2 Mezzanine Notes Due April 3, 2033, Upgraded to B3 (sf); previously on June 26, 2014 Caa1 (sf) Placed Under Review for Possible Upgrade $66,250,000 Fixed/Floating Rate Class B-3 Mezzanine Notes Due April 3, 2033, Upgraded to B3 (sf); previously on June 26, 2014 Caa1 (sf) Placed Under Review for Possible Upgrade Moody's also affirmed the rating on the following notes: $245,000,000 Floating Rate Class A-1 Senior Notes Due April 3, 2033 (current outstanding balance of $21,728,614), Affirmed Aaa (sf); previously on August 9, 2013 Upgraded to Aaa (sf) Preferred Term Securities IX, Ltd., issued in March 2003 is a collateralized debt obligation backed by a portfolio of bank trust preferred securities (TruPS). Ratings Rationale The rating actions are primarily a result of updates to Moody's TruPS CDOs methodology, as described in "Moody's Approach to Rating TruPS CDOs" published in June 2014. They also reflect deleveraging of the Class A-1 notes, an increase in the transaction's over-collateralization ratios and the resumption of interest payments of previously deferring assets since August 2013. The transaction has benefited from the updates to Moody's TruPS CDOs methodology, including (1) removing the 25% macro default probability stress for bank TruPS; (2) expanding the default timing profiles from one to six probability-weighted scenarios; (3) incorporating a redemption profile for bank TruPS; (4) using a loss distribution generated by Moody's CDOROM for deals that do not permit reinvestment; and (5) giving full par credit to deferring bank TruPS that meet certain criteria. In addition, the Class A-1 notes have paid down by approximately 69.6% or $49.8 million since December 2013, using principal proceeds from the redemption of the underlying assets and the diversion of excess interest proceeds. The Class A-1 notes' par coverage has thus improved to 1134.7% by Moody's calculations. Based on the trustee's July 2014 payment report, the over- collateralization ratio of the Class A notes was 246.6% (limit 128.0%), versus 182.4%% in December 2013. The Class A-1 notes will continue to benefit from the diversion of excess interest due to a unique structural feature where the notes will be paid in note payment sequence if the decrease of the aggregate principal amount of the collateral since closing date exceeds the decrease of the aggregate principal amount of the outstanding notes since closing date. In addition, the Class A-1 notes benefit from the use of proceeds from redemptions of any assets in the collateral pool. The total par amount that Moody's treated as having defaulted or deferring declined to $ 77.78 million from $101.3 million in December 2013. Since December 2013, three previously deferring banks with a total par of $15.5 million have resumed making interest payments on their TruPS. In taking the foregoing actions, Moody's also announced that it had concluded its review of its ratings on the issuer's Class A-2, Class A-3, Class B-1, Class B-2 and Class B-3 notes announced on June 26, 2014. At that time, Moody's had placed the ratings on review for possible upgrade as a result of the aforementioned methodology updates. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, are based on its methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool has having a performing par (after treating deferring securities as performing if they meet certain criteria) of $246.6 million, defaulted/deferring par of $77.8 million, a weighted average default probability of 8.56% (implying a WARF of 782), and a weighted average recovery rate upon default of 10.0%. In addition to the quantitative factors Moody's explicitly models, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of an event of default, recent deal performance under current market conditions, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating TruPS CDOs," published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector. 2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc(TM) or credit estimates. Because these are not public ratings, they are subject to additional uncertainties. Loss and Cash Flow Analysis: Moody's applied a Monte Carlo simulation framework in Moody's CDOROM(TM) v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. Moody's then used the loss distribution as an input in its CDOEdge(TM) cash flow model. CDOROM(TM) v. 2.13.1 is available on www.moodys.com under Products and Solutions -- Analytical models, upon receipt of a signed free license agreement. The portfolio of this CDO contains mainly TruPS issued by small to medium sized U.S. community banks that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc(TM), an econometric model developed by Moody's Analytics, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 509) Class A-1: 0 Class A-2: +1 Class A-3: +1 Class B-1: +1 Class B-2: +1 Class B-3: +1 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 1197) Class A-1: 0 Class A-2: 0 Class A-3: 0 Class B-1: -1 Class B-2: -1 Class B-3: -1 PREFERRED TERM X: Moody's Hikes Ratings on 3 Note Classes to Caa1 ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Preferred Term Securities X, Ltd.: $287,000,000 Floating Rate Class A 1 Senior Notes Due July 3, 2033 (current outstanding balance of $65,572,405), Upgraded to Aaa (sf); previously on September 26, 2013 Upgraded to Aa1 (sf) $67,000,000 Floating Rate Class A 2 Senior Notes Due July 3, 2033, Upgraded to Aa1 (sf); previously on September 26, 2013 Upgraded to Aa2 (sf) $2,000,000 Fixed/Floating Rate Class A 3 Senior Notes Due July 3, 2033, Upgraded to Aa1 (sf); previously on September 26, 2013 Upgraded to Aa2 (sf) $88,000,000 Floating Rate Class B 1 Mezzanine Notes Due July 3, 2033, Upgraded to Caa1 (sf); previously on June 26, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade $19,000,000 Fixed/Floating Rate Class B 2 Mezzanine Notes Due July 3, 2033, Upgraded to Caa1 (sf); previously on June 26, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade $70,500,000 Fixed/Floating Rate Class B 3 Mezzanine Notes Due July 3, 2033, Upgraded to Caa1 (sf); previously on June 26, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade Preferred Term Securities X, Ltd., issued in June 2003, is a collateralized debt obligation backed by a portfolio of bank trust preferred securities (TruPS). Ratings Rationale The rating actions are primarily a result of updates to Moody's TruPS CDOs methodology, as described in "Moody's Approach to Rating TruPS CDOs" published in June 2014. They also reflect deleveraging of the Class A-1 notes, an increase in the transaction's over-collateralization ratios and the resumption of interest payments of previously deferring assets since September 2013. The transaction has benefited from the updates to Moody's TruPS CDOs methodology, including (1) removing the 25% macro default probability stress for bank TruPS; (2) expanding the default timing profiles from one to six probability-weighted scenarios; (3) incorporating a redemption profile for bank TruPS; (4) using a loss distribution generated by Moody's CDOROM for deals that do not permit reinvestment; and (5) giving full par credit to deferring bank TruPS that meet certain criteria. In addition, the Class A-1 notes have paid down by approximately 23.9% or $20.6 million since December 2013 using principal proceeds from the redemption of the underlying assets and the diversion of excess interest proceeds. The Class A-1 notes' par coverage has thus improved to 398.7% by Moody's calculations. Based on the trustee's July 2014 payment report, the over- collateralization ratio of the Class A notes was 173.42% (limit 128.0%), versus 167.2% in December 2013. The Class A-1 notes will continue to benefit from the diversion of excess interest due to a unique structural feature where the notes will be paid in note payment sequence if the decrease of the aggregate principal amount of the collateral since closing date exceeds the decrease of the aggregate principal amount of the outstanding notes since closing date. In addition, the Class A-1 notes benefit from the use of proceeds from redemptions of any assets in the collateral pool. The total par amount that Moody's treated as having defaulted or deferring declined to $86.0 million from $131.5 million in December 2013. Since December 2013 trustee report, three previously deferring bank with a total par of $15.0 million has resumed making interest payments on its' TruPS. In taking the foregoing actions, Moody's also announced that it had concluded its review of its ratings on the issuer's Class B-1, Class B-2 and Class B-3 notes announced on June 26, 2014. At that time, Moody's had placed the ratings on review for possible upgrade as a result of the aforementioned methodology updates. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, are based on its methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool has having a performing par (after treating deferring securities as performing if they meet certain criteria) of $261.4 million, defaulted/deferring par of $86.0 million, a weighted average default probability of 6.68% (implying a WARF of 598), and a weighted average recovery rate upon default of 10%. In addition to the quantitative factors Moody's explicitly models, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of an event of default, recent deal performance under current market conditions, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating TruPS CDOs," published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector. 2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc(TM) or credit estimates. Because these are not public ratings, they are subject to additional uncertainties. Loss and Cash Flow Analysis: Moody's applied a Monte Carlo simulation framework in Moody's CDOROM(TM) v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. Moody's then used the loss distribution as an input in its CDOEdge(TM) cash flow model. CDOROM(TM) v. 2.13.1 is available on www.moodys.com under Products and Solutions -- Analytical models, upon receipt of a signed free license agreement. The portfolio of this CDO contains mainly TruPS issued by small to medium sized U.S. community banks that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc(TM), an econometric model developed by Moody's Analytics, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 383) Class A-1: +1 Class A-2: 0 Class A-3: 0 Class B-1: +1 Class B-2: +1 Class B-3: +1 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 902) Class A-1: 0 Class A-2: 0 Class A-3: 0 Class B-1: -1 Class B-2: -1 Class B-3: -1 PREFERRED TERM XI: Moody's Raises Rating on 3 Note Classes to B2 ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Preferred Term Securities XI, Ltd.: $343,000,000 Floating Rate Class A-1 Senior Notes Due September 24, 2033 (current balance of $169,358,599), Upgraded to Aaa (sf); previously on June 26, 2014 Aa2 (sf) Placed Under Review for Possible Upgrade $70,000,000 Floating Rate Class A-2 Senior Notes Due September 24, 2033, Upgraded to Aa1 (sf); previously on June 26, 2014 A1 (sf) Placed Under Review for Possible Upgrade $124,500,000 Floating Rate Class B-1 Mezzanine Notes Due September 24, 2033, Upgraded to B2 (sf); previously on June 26, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade $13,000,000 Fixed/Floating Rate Class B-2 Mezzanine Notes Due September 24, 2033, Upgraded to B2 (sf); previously on June 26, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade $65,500,000 Fixed/Floating Rate Class B-3 Mezzanine Notes Due September 24, 2033, Upgraded to B2 (sf); previously on June 26, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade Preferred Term Securities XI, Ltd., issued in September 2003, is a collateralized debt obligation backed by a portfolio of bank trust preferred securities (TruPS). Ratings Rationale The rating actions are primarily a result of the updates to Moody's TruPS CDOs methodology described in "Moody's Approach to Rating TruPS CDOs" published in June 2014, the deleveraging of the Class A-1 notes, an increase in the transaction's over- collateralization ratios and the resumption of interest payments of previously deferring assets since September 2013. The transaction has benefited from the updates to Moody's TruPS CDOs methodology described in "Moody's Approach to Rating TruPS CDOs" published in June 2014. These updates include: (1) removing the 25% macro default probability stress for bank and insurance TruPS; (2) expanding the default timing profiles from one to six probability-weighted scenarios; (3) incorporating a redemption profile for bank and insurance TruPS; (4) using a loss distribution generated by Moody's CDOROM for deals that do not permit reinvestment; and (5) giving full par credit to deferring bank TruPS that meet certain criteria. In addition, the Class A-1 notes have paid down by approximately 24.4% or $54.5 million since September 2013, using principal proceeds from the redemption of the underlying assets and the diversion of excess interest proceeds. Due to the methodology update mentioned above, Moody's gave full par credit in its analysis to three deferring assets that meet certain criteria, totaling $23.0 million in par. As a result, the Class A-1 notes' par coverage has thus improved to 238.9% from 178.7% since September 2013, by Moody's calculations. Based on the trustee's June 2014 report, the over-collateralization ratio of the Class A notes was 159.4% (limit 128.0%), versus 136.1% in September 2013. The Class A-1 notes will continue to benefit from the diversion of excess interest and the use of proceeds from redemptions of any assets in the collateral pool. The deal has also benefited from improvement in the credit quality of the underlying portfolio. The total par amount that Moody's treated as having defaulted declined to $86.5 million (after giving par credit to deferring securities that meet certain criteria) from $167.3 million in September 2013. Since September 2013, four previously deferring banks with a total par of $26.0 million has resumed making interest payments on their TruPS; two assets with a total par of $38.0 million have redeemed at par. In taking the foregoing actions, Moody's also announced that it had concluded its review of its ratings on the issuer's Class A Notes and Class B Notes announced on June 24, 2014. At that time, Moody's had placed the ratings on review for upgrade as a result of the aforementioned methodology updates. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, are based on its methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool has having a performing par (after giving par credit to deferring securities that meet certain criteria) of $404.6 million, defaulted/deferring par of $86.5 million, a weighted average default probability of 9.6% (implying a WARF of 694), and a weighted average recovery rate upon default of 10%. In addition to the quantitative factors Moody's explicitly models, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of an event of default, recent deal performance under current market conditions, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating TruPS CDOs," published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector. 2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc or credit estimates. Because these are not public ratings, they are subject to additional estimation uncertainty. Loss and Cash Flow Analysis: Moody's applied a Monte Carlo simulation framework in Moody's CDOROM(TM) v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. The portfolio of this CDO contains mainly TruPS issued by small to medium sized U.S. community banks companies that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc(TM), an econometric model developed by Moody's Analytics, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 442) Class A-1: 0 Class A-2: 0 Class B-1: +2 Class B-2: +2 Class B-3: +2 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 1155) Class A-1: 0 Class A-2: -1 Class B-1: -2 Class B-2: -2 Class B-3: -2 PREFERRED TERM XII: Moody's Hikes Rating on 3 Note Classes to B3 ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Preferred Term Securities XII, Ltd.: $64,000,000 Floating Rate Class A-2 Senior Notes Due December 24, 2033, Upgraded to Aa1 (sf); previously on June 26, 2014 A1 (sf) Placed Under Review for Possible Upgrade $10,000,000 Fixed/Floating Rate Class A-3 Senior Notes Due December 24, 2033, Upgraded to Aa1 (sf); previously on June 26, 2014 A1 (sf) Placed Under Review for Possible Upgrade $17,000,000 Fixed/Floating Rate Class A-4 Senior Notes Due December 24, 2033, Upgraded to Aa1 (sf); previously on June 26, 2014 A1 (sf) Placed Under Review for Possible Upgrade $204,400,000 Floating Rate Class B-1 Mezzanine Notes Due December 24, 2033, Upgraded to B3 (sf); previously on June 26, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade $20,500,000 Fixed/Floating Rate Class B-2 Mezzanine Notes Due December 24, 2033, Upgraded to B3 (sf); previously on June 26, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade $37,700,000 Fixed/Floating Rate Class B-3 Mezzanine Notes Due December 24, 2033), Upgraded to B3 (sf); previously on June 26, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade Moody's also confirmed the rating on the following notes: $442,400,000 Floating Rate Class A-1 Senior Notes Due December 24, 2033 (current balance of $193,601,309), Confirmed at Aa1 (sf); previously on June 26, 2014 Aa1 (sf) Placed Under Review for Possible Upgrade Preferred Term Securities XII, Ltd., issued on December 17, 2003, is a collateralized debt obligation backed by a portfolio of bank trust preferred securities (TruPS). Ratings Rationale The rating actions are primarily a result of the updates to Moody's TruPS CDOs methodology described in "Moody's Approach to Rating TruPS CDOs" published in June 2014, the deleveraging of the Class A-1 notes, an increase in the transaction's over- collateralization ratios and the resumption of interest payments of previously deferring assets since August 2013. The transaction has benefited from the updates to Moody's TruPS CDOs methodology described in "Moody's Approach to Rating TruPS CDOs" published in June 2014. These updates include: (1) removing the 25% macro default probability stress for bank and insurance TruPS; (2) expanding the default timing profiles from one to six probability-weighted scenarios; (3) incorporating a redemption profile for bank and insurance TruPS; (4) using a loss distribution generated by Moody's CDOROM(TM) for deals that do not permit reinvestment; and (5) giving full par credit to deferring bank TruPS that meet certain criteria. In addition, the Class A-1 notes have paid down by approximately 14.2% or $32.1 million since August 2013, using principal proceeds from the redemption of the underlying assets and the diversion of excess interest proceeds. Due to the methodology update mentioned above, Moody's gave full par credit in its analysis to six deferring assets that meet certain criteria, totaling $30.5 million in par. As a result, the Class A-1 notes' par coverage has thus improved to 237.9% from 202.0% since August 2013, by Moody's calculations. Based on the trustee's June 2014 report, the over- collateralization ratio of the Class A notes was 151.1% (limit 128.0%), versus 144.0% in August 2013. The deferred interest on Class B notes has been fully repaid since August 2013. The Class A-1 notes will continue to benefit from the diversion of excess interest and the use of proceeds from redemptions of any assets in the collateral pool. The deal has also benefited from improvement in the credit quality of the underlying portfolio. The total par amount that Moody's treated as having defaulted declined to $119.6 million (after giving par credit to deferring securities that meet certain criteria) from $203.6 million in August 2013. Since August 2013, one previously deferring bank with a total par of $2.5 million has resumed making interest payments on their TruPS; three assets with a total par of $20.5 million have redeemed at par. In taking the foregoing actions, Moody's also announced that it had concluded its review of its ratings on the issuer's Class A Notes and Class B Notes announced on June 26, 2014. At that time, Moody's had placed the ratings on review for upgrade as a result of the aforementioned methodology updates. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, are based on its methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool has having a performing par (after giving par credit to deferring securities that meet certain criteria) of $460.5 million, defaulted/deferring par of $119.6 million, a weighted average default probability of 8.6% (implying a WARF of 597), and a weighted average recovery rate upon default of 10%. In addition to the quantitative factors Moody's explicitly models, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of an event of default, recent deal performance under current market conditions, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating TruPS CDOs," published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector. 2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc(TM) or credit estimates. Because these are not public ratings, they are subject to additional estimation uncertainty.. Loss and Cash Flow Analysis: Moody's applied a Monte Carlo simulation framework in Moody's CDOROM v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. The portfolio of this CDO contains mainly TruPS issued by small to medium sized U.S. community banks companies that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc(TM), an econometric model developed by Moody's Analytics, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 365) Class A-1: 0 Class A-2: 0 Class A-3: 0 Class A-4: 0 Class B-1: +2 Class B-2: +2 Class B-3: +2 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 923) Class A-1: 0 Class A-2: -1 Class A-3: -1 Class A-4: -1 Class B-1: -1 Class B-2: -1 Class B-3: -1 PREFERRED TERM XVIII: Moody's Raises Rating on Cl. B Secs. to Ba3 ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Preferred Term Securities XVIII, Ltd.: $372,100,000 Class A-1 Senior Notes Due 2035 (current outstanding balance of $250,971,965.92), Upgraded to A1 (sf); previously on June 26, 2014 A3 (sf) Placed Under Review for Possible Upgrade $87,900,000 Class A-2 Senior Notes Due 2035 (current outstanding balance of $86,460,334.64), Upgraded to A3 (sf); previously on November 8, 2013 Upgraded to Baa2 (sf) $78,800,000 Class B Mezzanine Notes (current outstanding balance of $77,509,378.48), Upgraded to Ba3 (sf); previously on June 26, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade Preferred Term Securities XVIII, Ltd., issued in June 2005, is a collateralized debt obligation backed by a portfolio of bank, insurance trust preferred securities (TruPS) and TruPS CDO tranches. Ratings Rationale The rating actions are primarily a result of updates to Moody's TruPS CDOs methodology, as described in "Moody's Approach to Rating TruPS CDOs" published in June 2014. They also reflect deleveraging of the A-1 notes, an increase in the transaction's over-collateralization ratios and resumption of interest payments of previously deferring assets since November 2013. The transaction has benefited from the updates to Moody's TruPS CDOs methodology, including (1) removing the current 25% macro default probability stress for bank and insurance TruPS; (2) expanding the default timing profiles from one to six probability- weighted scenarios; (3) incorporating a redemption profile for bank and insurance TruPS; (4) using a loss distribution generated by Moody's CDOROM(TM) for deals that do not permit reinvestment; (5) giving full par credit to deferring bank TruPS that meet certain criteria; and (6) raising the assumed recovery rate for insurance TruPS. In addition, the Class A-1 notes have paid down by approximately 12% or $34.6 million since November 2013, using principal proceeds from the redemption of the underlying assets and the diversion of excess interest proceeds. Due to the methodology update mentioned above, Moody's gave full par credit in its analysis to one deferring asset that met certain criteria, totaling $2 million in par. As a result, the Class A-1 notes' par coverage has thus improved to 182.82% from 172.26% since November 2013, by Moody's calculations. Based on the trustee's June 2014 report, the over- collateralization ratio of the Class A notes was 135.41% (limit 128.0%), the Class B notes, 110.11% (limit 115.0%), and the Class C notes, 91.08% (limit 107.0%) versus 120.78%, 98.95% and 83.27% respectively in November 2013. The Class A-1 notes will benefit from proceeds from redemptions of any assets in the collateral pool. The Class A-1, A-2 and B notes will continue to benefit from the diversion of excess interest as long as the class B overcollateralization test continues to fail. The total par amount that Moody's treated as having defaulted or deferring declined to $150.32 million from $186.32 million in November 2013. Since November 2013, five previously deferring banks with a total par of $36 million have resumed making interest payments on their TruPS; five assets with a total par of $30.68 million have wholly or partially redeemed at par. In taking the foregoing actions, Moody's also announced that it had concluded its review of its ratings on the issuer's Class A-1 Notes and Class B Notes and announced on June 26, 2014. At that time, Moody's had placed the ratings on review for upgrade as a result of the aforementioned methodology updates. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, are based on its methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool has having a performing par and principal proceeds balance (after treating deferring securities as performing if they meet certain criteria) of $457.98 million, defaulted/deferring par of $150.32 million, a weighted average default probability of 10.38% (implying a WARF of 945), and a weighted average recovery rate upon default of 9.72%. In addition to the quantitative factors Moody's explicitly models, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of an event of default, recent deal performance under current market conditions, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating TruPS CDOs," published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector. Moody's maintains its stable outlook on the US insurance sector. 2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc(TM) or credit estimates. Because these are not public ratings, they are subject to additional uncertainties. Loss and Cash Flow Analysis: Moody's applied a Monte Carlo simulation framework in Moody's CDOROM v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. Moody's then used the loss distribution as an input in its CDOEdge cash flow model. CDOROM v. 2.13.1 is available on www.moodys.com under Products and Solutions -- Analytical models, upon receipt of a signed free license agreement. The portfolio of this CDO contains mainly of TruPS issued by small to medium sized U.S. community banks and insurance companies that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc, an econometric model developed by Moody's KMV, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. For insurance TruPS that do not have public ratings, Moody's relies on the assessment of its Insurance team, based on the credit analysis of the underlying insurance firms' annual statutory financial reports. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 608) Class A-1: +2 Class A-2: +2 Class B: +2 Class C: 0 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 1470) Class A-1: -1 Class A-2: -3 Class B: -3 Class C: 0 PREFERRED TERM XXI: Moody's Raises Rating on 2 Note Classes to Ca ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Preferred Term Securities XXI, Ltd.: $413,500,000 Floating Rate Class A-1 Senior Notes Due 2038 (current balance of $294,521,501.18), Upgraded to A2 (sf); previously on February 7, 2014 Upgraded to A3 (sf) $105,300,000 Floating Rate Class A-2 Senior Notes Due 2038 Current balance of $103,513,025.11), Upgraded to Baa1 (sf); previously on June 26, 2014 Baa2 (sf) Placed Under Review for Possible Upgrade $46,000,000 Floating Rate Class B-1 Mezzanine Notes Due 2038 (current balance of $45,555,100.78), Upgraded to B3 (sf); previously on June 26, 2014 Caa2 (sf) Placed Under Review for Possible Upgrade $35,800,000 Fixed/Floating Rate Class B-2 Mezzanine Notes Due 2038 (current balance of $35,933,318.20), Upgraded to B3 (sf); previously on June 26, 2014 Caa2 (sf) Placed Under Review for Possible Upgrade $48,500,000 Floating Rate Class C-1 Mezzanine Notes Due 2038 (current balance of $52,392,172.95), Upgraded to Ca (sf); previously on June 28, 2013 Affirmed C (sf) $28,350,000 Fixed/Floating Rate Class C-2 Mezzanine Notes Due 2038 (current balance of $33,768,278.10), Upgraded to Ca (sf); previously on June 28, 2013 Affirmed C (sf) Preferred Term Securities XXI, Ltd., issued in March 2006, is a collateralized debt obligation backed primarily by a portfolio of bank and insurance trust preferred securities. Ratings Rationale The rating actions are primarily a result of updates to Moody's TruPS CDOs methodology, as described in "Moody's Approach to Rating TruPS CDOs" published in June 2014. They also reflect deleveraging of the Class A-1 Notes, an increase in the transaction's over-collateralization ratios and resumption of interest payments of previously deferring assets since the rating action in February 2014. The transaction has benefited from the updates to Moody's TruPS CDOs methodology, including (1) removing the current 25% macro default probability stress for bank and insurance TruPS; (2) expanding the default timing profiles from one to six probability- weighted scenarios; (3) incorporating a redemption profile for bank and insurance TruPS; (4) using a loss distribution generated by Moody's CDOROM for deals that do not permit reinvestment; (5) giving full par credit to deferring bank TruPS that meet certain criteria; and (6) raising the assumed recovery rate for insurance TruPS. In addition, the Class A-1 notes have paid down by approximately $15 million since February 2014 using principal proceeds from the sale of two underlying assets. The Class A-1 notes' par coverage has thus improved to 174.65% from 161.30% as calculated by Moody's. Based on the trustee's June 2014 report, the over- collateralization ratios of the Senior Notes, Class B Notes, Class C Notes and Class D Notes are 134.70%, 111.81%, 94.78% and 84.73% respectively versus December 2013 trustee reported levels of 127.87%, 105.18%, 89.85% and 80.73%, respectively. The Class A-1 notes will continue to benefit from the diversion of excess interest and the use of proceeds from the sale of any assets in the collateral pool. The total par amount that Moody's treated as having defaulted or deferring declined to $160 million from $199 million in February 2014. Since then three previously deferring banks with a total par of $28 million have resumed making interest payments on their TruPS and one asset with a total par of $13.6 million has redeemed at par. In taking the foregoing actions, Moody's also announced that it had concluded its review of its ratings on the issuer's Class A-2 Notes, Class B-1 Notes and Class B-2 Notes announced on June 26, 2014. At that time, Moody's had placed the ratings on review for upgrade as a result of the aforementioned methodology updates. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, are based on its methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool has having a performing par of $514.4 million, defaulted/deferring par of $160 million, a weighted average default probability of 8.57% (implying a WARF of 865) and a weighted average recovery rate upon default of 10%. In addition to the quantitative factors Moody's explicitly models, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of an event of default, recent deal performance under current market conditions, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating TruPS CDOs," published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector. Moody's maintains its stable outlook on the US insurance sector. 2) Credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc(TM) or credit estimates. Because these are not public ratings, they are subject to additional uncertainties. Loss and Cash Flow Analysis: Moody's applied a Monte Carlo simulation framework in Moody's CDOROM(TM) v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. Moody's then used the loss distribution as an input in its CDOEdge(TM) cash flow model. CDOROM(TM) v. 2.13.1 is available on www.moodys.com under Products and Solutions -- Analytical models, upon receipt of a signed free license agreement. The portfolio of this CDO contains mainly TruPS issued by small to medium sized U.S. community banks and insurance companies that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc(TM), an econometric model developed by Moody's KMV, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. For insurance TruPS that do not have public ratings, Moody's relies on the assessment of its Insurance team, based on the credit analysis of the underlying insurance firms' annual statutory financial reports. For REIT TruPS that do not have public ratings, Moody's REIT group assesses their credit quality using the REIT firms' annual financials. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 597) Class A-1: +1 Class A-2: +1 Class B-1: +2 Class B-2: +2 Class C-1: 0 Class C-2: 0 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 1087) Class A-1: -1 Class A-2: -1 Class B-1: -1 Class B-2: -1 Class C-1: 0 Class C-2: 0 PRETSL COMBINATION: Moody's Ups $7.7MM Combi Certs Rating to Caa1 ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following combination notes issued by PreTSL Combination Certificates: $7,715,000 Combination Certificates, Series P XVIII-3 due September 23, 2035 (current rated balance of $5,318,902.95), Upgraded to Caa1 (sf); previously on June 26, 2014 Ca (sf) Placed Under Review for Possible Upgrade $9,000,000 Combination Certificates, Series P XIX-4 due December 22, 2035 (current rated balance of $6,372,406.89), Upgraded to Caa2 (sf); previously on October 31, 2013 Affirmed Ca (sf) PreTSL Combination Certificates, Series P XVIII-3, a combination note security, was issued in July 2006 and comprises $3.5 million of Class B notes and $4.215 million of subordinated income notes issued by Preferred Term Securities XVIII, Ltd, a TruPS CDO. PreTSL Combination Certificates, Series P XIX-4, a combination note security, was issued in July 2006 and comprises $4.0 million of Class B notes and $5.0 million of subordinated income notes issued by Preferred Term Securities XIX, Ltd., a TruPS CDO. Ratings Rationale The rating actions are primarily a result of recent changes in the ratings of the underlying securities backing the two combination note securities. The ratings on the combination notes are based on the credit quality of their respective underlying components and the legal structure of the transaction. The Class B note in Preferred Term Securities XVIII, Ltd, the underlying component in Series P XVIII-3, was upgraded to Ba3 (sf) from Caa3 (sf) on August 4, 2014. In addition, the Class B note in Preferred Term Securities XIX, Ltd, the underlying component in Series P XIX-3, was upgraded to B1 (sf) from Caa2 (sf) on July 25, 2014. These rating actions on the underlying transactions were primarily a result of updates to Moody's TruPS CDOs methodology, as described in "Moody's Approach to Rating TruPS CDOs" published in June 2014. In taking the foregoing actions, Moody's also announced that it had concluded its review of its rating on the Combination Certificates, Series P XVIII-3 announced on June 26, 2014. At that time, Moody's had placed the rating on review for upgrade as a result of the aforementioned methodology updates. The key model inputs Moody's used in its analysis such as par, weighted average rating factor, and weighted average recovery rate, are based on its methodology and could differ from the trustee's reported numbers. In addition to the quantitative factors Moody's explicitly models, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of an event of default, recent deal performance under current market conditions, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating TruPS CDOs," published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector. Moody's maintains its stable outlook on the US insurance sector. 2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc(TM) or credit estimates. Because these are not public ratings, they are subject to additional uncertainties. Loss and Cash Flow Analysis: Moody's applied a Monte Carlo simulation framework in Moody's CDOROM(TM) v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. Moody's then used the loss distribution as an input in its CDOEdge(TM) cash flow model. CDOROM(TM) v. 2.13.1 is available on www.moodys.com under Products and Solutions -- Analytical models, upon receipt of a signed free license agreement. The portfolio of the referenced CDOs contains mainly TruPS issued by small to medium sized U.S. community banks and insurance companies that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc(TM), an econometric model developed by Moody's KMV, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. For insurance TruPS that do not have public ratings, Moody's relies on the assessment of its Insurance team, based on the credit analysis of the underlying insurance firms' annual statutory financial reports. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 608 for Series P XVIII-3 and WARF 623 for Series P XIX-4) Series P XVIII-3: +2 Series P XIX-4: +1 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 1470 for Series P XVIII-3 and WARF 1426 for Series P XIX-4) Series P XVIII-3: -2 Series P XIX-4: -3 RALI RMBS: Moody's Takes Action on $78MM RMBS Issued 2002-2003 -------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 23 tranches issued by three RALI RMBS transaction backed by Alt-A RMBS loans. Complete rating actions are as follows: Issuer: RALI Series 2002-QS13 Trust A-1, Downgraded to Ba2 (sf); previously on Feb 4, 2013 Downgraded to Baa3 (sf) A-2, Downgraded to Ba2 (sf); previously on Feb 4, 2013 Downgraded to Baa3 (sf) A-7, Downgraded to Ba2 (sf); previously on Feb 4, 2013 Downgraded to Baa3 (sf) A-7A, Downgraded to B2 (sf); previously on Feb 4, 2013 Downgraded to Ba3 (sf) A-8, Downgraded to Ba2 (sf); previously on Feb 4, 2013 Downgraded to Baa3 (sf) A-P, Downgraded to Ba3 (sf); previously on Feb 4, 2013 Downgraded to Ba1 (sf) A-V, Downgraded to B1 (sf); previously on Feb 4, 2013 Affirmed Ba3 (sf) Issuer: RALI Series 2003-QS11 Trust Cl. A-1, Downgraded to Ba3 (sf); previously on Apr 18, 2012 Downgraded to Ba1 (sf) Cl. A-2, Downgraded to Ba3 (sf); previously on Apr 18, 2012 Downgraded to Ba1 (sf) Cl. A-4, Downgraded to Ba3 (sf); previously on Apr 18, 2012 Downgraded to Ba1 (sf) Cl. A-5, Downgraded to Ba3 (sf); previously on Apr 18, 2012 Downgraded to Ba1 (sf) Cl. A-6, Downgraded to Ba3 (sf); previously on Apr 18, 2012 Downgraded to Ba1 (sf) Cl. A-8, Downgraded to B1 (sf); previously on Apr 18, 2012 Downgraded to Ba3 (sf) Cl. A-9, Downgraded to Ba3 (sf); previously on Apr 18, 2012 Downgraded to Ba1 (sf) Cl. A-10, Downgraded to Ba3 (sf); previously on Apr 18, 2012 Downgraded to Ba1 (sf) Cl. A-11, Downgraded to Ba3 (sf); previously on Apr 18, 2012 Downgraded to Ba1 (sf) Cl. A-12, Downgraded to Ba1 (sf); previously on Apr 18, 2012 Downgraded to Baa2 (sf) Cl. A-13, Downgraded to B3 (sf); previously on Apr 18, 2012 Downgraded to B1 (sf) Cl. A-14, Downgraded to Ba3 (sf); previously on Apr 18, 2012 Downgraded to Ba1 (sf) Cl. A-P, Downgraded to Ba3 (sf); previously on Apr 18, 2012 Downgraded to Ba1 (sf) Cl. A-V, Downgraded to B1 (sf); previously on Apr 18, 2012 Downgraded to Ba3 (sf) Issuer: RALI Series 2003-QS18 Trust A-1, Downgraded to Ba2 (sf); previously on Apr 18, 2012 Downgraded to Baa3 (sf) A-P, Downgraded to Ba3 (sf); previously on Apr 18, 2012 Downgraded to Ba1 (sf) Ratings Rationale The actions are a result of the recent performance of the underlying pools and reflect Moody's updated loss expectations on the pools. The ratings downgraded are due to weaker collateral performance. The principal methodology used in these ratings was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.1% in June 2014 from 7.5% in June 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. Finally, 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. RED RIVER: Moody's Hikes Rating on $31.5MM Class E Notes to Ba2 --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Red River CLO Ltd.: $45,000,000 Class B Floating Rate Senior Secured Extendable Notes Due 2018, Upgraded to Aaa (sf); previously on July 24, 2013 Upgraded to Aa1 (sf) $40,500,000 Class C Floating Rate Senior Secured Deferrable Interest Extendable Notes Due 2018, Upgraded to Aa1 (sf); previously on July 24, 2013 Upgraded to A1 (sf) $45,000,000 Class D Floating Rate Senior Secured Deferrable Interest Extendable Notes Due 2018, Upgraded to Baa1 (sf); previously on July 24, 2013 Upgraded to Ba1 (sf) $31,500,000 Class E Floating Rate Senior Secured Deferrable Interest Extendable Notes Due 2018 (current outstanding balance of $26,342,207.08), Upgraded to Ba2 (sf); previously on July 18, 2014 Ba3 (sf) Placed Under Review for Possible Downgrade Moody's also affirmed the rating on the following notes: $657,000,000 Class A Floating Rate Senior Secured Extendable Notes Due 2018 (current outstanding balance of $346,137,596), Affirmed Aaa (sf); previously on July 24, 2013 Upgraded to Aaa (sf) Red River CLO Ltd., issued in August 2006, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ended in August 2013. Ratings Rationale These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over- collateralization (OC) ratios since January 2014. Since then, the Class A notes have been paid down by approximately 32.9% or $186.8 million. Based on June 2014 trustee report, the OC ratios for the Class A/B, Class C, Class D and Class E notes are reported at 134.8%, 122.1%, 110.6% and 104.8%, respectively, versus January 2014 levels of 125.1%, 116.9%, 109.0% and 104.8%, respectively. The deal has also benefited from an improvement in the credit quality of the portfolio since January 2014. Based on the trustee's June 2014 report, the weighted average rating factor (WARF) is currently 2315 compared to 2569 in January 2014. The portfolio includes a number of investments in securities that mature after the notes do. Based on the trustee's June 2014 report, securities that mature after the notes do currently make up approximately 8.2% of the portfolio. These investments could expose the notes to market risk in the event of liquidation when the notes mature. In taking the foregoing actions, Moody's announced that it had concluded its review of its rating on the issuer's Class E Notes announced on July 18, 2014. At that time, Moody's said that it had placed the rating on review as a result of a change in the methodology Moody's uses to estimate recovery rates for structured finance securities including CLO notes in a CDO or CLO transaction. Moody's latest Structured Finance CDO methodology continues to differentiate recovery rates of CLO tranches by their current rating and tranche size, but the updated recovery rates are lower than previously assumed. The upgrade of the Class E notes is due to substantial deleveraging of the senior notes and increases in OC ratios, which offset the impact from lower recovery rates assumed on CLO tranches. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. 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. Realization of higher than assumed recoveries would positively impact the CLO. 6) Long-dated assets: The presence of assets that mature after the CLO's legal maturity date exposes the deal to liquidation risk on those assets. This risk is borne first by investors with the lowest priority in the capital structure. Moody's assumes that the terminal value of an asset upon liquidation at maturity will 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) or the asset's current market value. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2027) Class A: 0 Class B: 0 Class C: +1 Class D: +3 Class E: +1 Moody's Adjusted WARF + 20% (3041) Class A: 0 Class B: 0 Class C: -1 Class D: -1 Class E: -1 Loss and Cash Flow Analysis: 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 Global Approach to Rating Collateralized Loan Obligations,"published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $514.3 million, defaulted par of $67.9 million, a weighted average default probability of 14.1% (implying a WARF of 2534), a weighted average recovery rate upon default of 51.0%, a diversity score of 33 and a weighted average spread of 3.3%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs." In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. RESOURCE CAPITAL: Moody's Assigns B2 Rating on Class C Notes ------------------------------------------------------------ Moody's Investors Service has assigned the following definitive ratings to notes issued by Resource Capital Corp. 2014-CRE2, Ltd. Cl. A, Definitive Rating Assigned Aaa (sf) Cl. B, Definitive Rating Assigned Baa3 (sf) Cl. C, Definitive Rating Assigned B2 (sf) Ratings Rationale Moody's ratings of the Class A, Class B, and Class C Notes address the expected loss posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Resource Capital Corp. 2014-CRE2, Ltd. is a static cash flow CRE CLO. The issued notes are collateralized by a pool of 16 commercial real estate loans in the form of whole loans and pari- passu participations. All of the assets are ramped as of the closing date with a par amount of $353,901,000. The related pari- passu participation interests are held outside of the trust and total $44,424,000. The Issuer may acquire these related pari-passu participation interests once they are funded by using transaction pre-payments, if any, through July 2016. The assets are floating rate with a 5.048% weighted average spread over one-month LIBOR. The transaction closed on July 30, 2014. Park Bridge Lender Services LLC will act as operating advisor to the asset pool during the life of the transaction. Resource Real Estate Funding, Inc. originated all of the collateral loans. Resource Real Estate, Inc. will act as special servicer and an affiliate company, RCC Real Estate, Inc., will act as advancing agent. Wells Fargo Bank, NA will act as servicer and back-up advancing agent on the underlying collateral. The transaction incorporates overcollateralization triggers which, subject to transaction performance, divert interest proceeds to pay down the Class A and Class B Notes. Moody's has identified the following parameters as key indicators of the expected loss within CRE CLO 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 CLO pool. We have completed credit assessments for all of the collateral. Moody's modeled a WARF of 4213. Moody's modeled to a WAL of 4.9 years as of the closing date. Moody's modeled a fixed WARR of 56.7%. Moody's modeled a MAC of 33.5% corresponding to a pair-wise correlation of 35%. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: 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. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes. Moody's Parameter Sensitivities: 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 rating factor assumptions of the underlying collateral. Holding all other key parameters static, stressing the portfolio WARF to 5158 would result in no rating movement on the Class A or C notes and a -1 notch in the rating movement on the Class B notes (e.g., minus one notch implies a ratings movement of Baa3 to Ba1). Stressing the portfolio to 5667 would result in no rating movement on the Class A or C notes and a -1 notch in the rating movement on the Class B notes. Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment given the weak pace of recovery and commercial real estate property markets. Commercial real estate property values are continuing to move in a modestly 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. SANDELMAN REALTY I: Moody's Hikes Rating on Class E Notes to B1 --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Sandelman Realty CRE CDO I: Cl. E, Upgraded to B1 (sf); previously on Aug 8, 2013 Upgraded to Caa3 (sf) Moody's has also affirmed the ratings on the following notes: Cl. F, Affirmed Caa3 (sf); previously on Aug 8, 2013 Upgraded to Caa3 (sf) Cl. G, Affirmed C (sf); previously on Aug 8, 2013 Affirmed C (sf) Cl. J, Affirmed C (sf); previously on Aug 8, 2013 Affirmed C (sf) Cl. K, Affirmed C (sf); previously on Aug 8, 2013 Affirmed C (sf) Cl. L, Affirmed C (sf); previously on Aug 8, 2013 Affirmed C (sf) Ratings Rationale Moody's has upgraded the ratings of the senior-most outstanding class of notes due the future expected recovery from the resolution of defaulted assets in the transaction; the transaction currently has one asset remaining. Moody's has affirmed the ratings on the other notes because the key transaction metrics are commensurate with existing ratings. The affirmation is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO CLO) transactions. Sandelman Realty CRE CDO I, Ltd. is a currently static cash transaction whose reinvestment period ended in March 2012. The transaction is wholly backed by one whole loan (100% of the current pool balance). As of the June 23, 2014 trustee report, the aggregate note balance of the transaction, including preferred shares, has decreased to $100.0 million from $507.0 million at issuance, with pay-down currently directed to senior most outstanding class of notes. In addition to the pay-down, the note balance has also decreased as a result of cancellation of junior notes. In general, holding all key parameters static, the junior note cancellations results in slightly higher expected losses and longer weighted average lives on the senior notes, while producing slightly lower expected losses on the mezzanine and junior notes. However, this does not cause, in and of itself, a downgrade or upgrade of any outstanding classes of notes. The deal is currently under-collateralized by $57.7million. The pool contains one asset totaling $42.3 million (100.0% of the collateral pool balance) that is listed as a defaulted asset as of the June 23, 2014 trustee report. While there have been realized losses on the underlying collateral to date, Moody's does expect moderate losses to occur on the defaulted asset. Moody's has identified the following as key indicators of the expected loss in CRE CLO transactions: the weighted average rating factor (WARF), the weighted average life (WAL), the weighted average recovery rate (WARR), and Moody's asset correlation (MAC). Moody's typically models these as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CLO pool. Moody's has updated its assessments for the collateral it does not rate. The rating agency modeled a bottom-dollar WARF of 10,000 compared to 8,360 at last review. The current ratings on the Moody's-rated collateral and the assessments of the non-Moody's rated collateral follow: Ba1-Ba3 (0.0% compared to 8.9% at last review); and Caa1-Ca/C (100.0% compared to 91.1% at last review). Moody's modeled a WAL of 3.0 years compared to 3.1 years at last review. The WAL is based on assumptions about extensions on the underlying collateral. Moody's modeled a fixed WARR of 45.0%, compared to 34.4% at last review. Moody's modeled a MAC of 100.0% compared to 0.0% at last review. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes. Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for some of the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the recovery rates of the underlying collateral and credit assessments. Increasing the recovery rate of the collateral pool by 10% would result in an average modeled rating movement on the rated notes of 0 to 4 notches upward (e.g., one notch up implies a ratings movement of Ba1 to Baa3). Reducing the recovery rate of the collateral pool by 10% would result in an average modeled rating movement on the rated notes of 0 to 2 notches downward (e.g., one notch down implies a ratings movement of Baa3 to Ba1). The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and commercial real estate property markets. Commercial real estate property values continue to improve modestly, 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, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate. SARANAC CLO III: Moody's Assigns '(P)Ba3' Rating on Class E Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has assigned the following provisional ratings to notes to be issued by Saranac CLO III Limited: $164,000,000 Class A-1 Senior Secured Floating Rate Notes due 2025 (the "Class A-1 Notes"), Assigned (P)Aaa (sf) $74,000,000 Class A-2A Senior Secured Floating Rate Notes due 2025 (the "Class A-2A Notes"), Assigned (P)Aaa (sf) $11,000,000 Class A-2B Senior Secured Floating Rate Notes due 2025 (the "Class A-2B Notes"), Assigned (P)Aaa (sf) $31,000,000 Class B Senior Secured Floating Rate Notes due 2025 (the "Class B Notes"), Assigned (P)Aa2 (sf) $31,000,000 Class C Secured Deferrable Floating Rate Notes due 2025 (the "Class C Notes"), Assigned (P)A2 (sf) $23,000,000 Class D Secured Deferrable Floating Rate Notes due 2025 (the "Class D Notes"), Assigned (P)Baa3 (sf) $24,500,000 Class E Secured Deferrable Floating Rate Notes due 2025 (the "Class E 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 opinions. 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 Class A-1 Notes, the Class A-2A Notes, the Class A-2B Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes (collectively, the "Rated Notes") address the expected losses posed to the holders of the Rated Notes. 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. Saranac III is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 92.5% of the portfolio must be invested in senior secured loans and eligible investments and up to 7.5% of the portfolio may consist of senior unsecured loans, second lien loans and first-lien last-out obligations. The underlying collateral pool is expected to be approximately 75% ramped as of the closing date. Saranac Advisory Limited (the "Manager") will direct the selection, acquisition and disposition of collateral on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, purchases are permitted using principal proceeds from unscheduled principal payments and proceeds from sales of credit risk obligations and credit improved obligations, and are subject to certain restrictions. In addition to the Rated Notes, the Issuer will issue two tranches of notes, including income notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount of $387,000,000 Diversity of 65 WARF of 2600 Weighted Average Spread of 3.65% Weighted Average Coupon of 4.5% Weighted Average Recovery Rate of 45% Weighted Average Life of 8 years Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated Notes. This sensitivity analysis includes an 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 Rated 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: Percentage Change in WARF -- increase of 15% (from 2600 to 2990) Rating Impact in Rating Notches Class A-1 Notes: 0 Class A-2A Notes: 0 Class A-2B Notes: 0 Class B Notes: 0 Class C Notes: -1 Class D Notes: -1 Class E Notes: 0 Percentage Change in WARF -- increase of 30% (from 2600 to 3380) Rating Impact in Rating Notches Class A-1 Notes: -1 Class A-2A Notes: 0 Class A-2B Notes: -1 Class B Notes: -2 Class C Notes: -3 Class D Notes: -2 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 Score provides 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. The V Score applies to the entire transaction, rather than individual tranches. SARGAS CLO I: S&P Affirms 'B+' Rating on Class D Notes ------------------------------------------------------ Standard & Poor's Ratings Services raised its rating on the class B notes from Sargas CLO I Ltd. and affirmed its ratings on the class C and D notes from the same transaction. At the same time, S&P removed its ratings on the class B and C notes from CreditWatch, where it had placed them with positive implications on April 9, 2014. Sargas CLO I Ltd. is a collateralized loan obligation transaction (CLO) that closed in August 2006. Since S&P's last rating action in July 2013, the transaction has paid down more than $68 million cumulatively to the class A-1, A- 2A, A-2B, and B notes. The three class A tranches have been completely paid down, and the class B notes currently have $2.42 million outstanding (11.54% of the original balance). With a total performing collateral balance of $41.36 million composed of only 14 unique obligors and a large percentage of 'CCC' rated collateral backing the notes, the transaction is subject to significant concentration risk. Because of these two factors, S&P affirmed its rating on the class C notes (rather than raising the rating by one notch, as the cash flow analysis and supplemental top obligor test would indicate). Although the top obligor test technically limits the rating on the class D notes to the 'CCC' category, the transaction's strong cash flow results indicating passing runs at the 'BBB+' level, and the overcollateralization ratio of 116.39% reported in the monthly trustee report dated June 17, 2014, led S&P to affirm the current rating. S&P 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 S&P will take further rating actions as it deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS Sargas CLO I Ltd. Cash flow Previous implied Cash flow Final Class rating rating cushion (i rating B AA+ (sf)/Watch Pos AAA (sf) 6.21% AAA (sf) C BBB (sf)/Watch Pos AA+ (sf) 5.23% BBB (sf) D B+ (sf) BBB+ (sf) 0.23% B+ (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. CORRELATION Scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating B AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) C AA+ (sf) AA+ (sf) AA+ (sf) AAA (sf) BBB (sf) D BBB+ (sf) BB+ (sf) BBB (sf) BBB+ (sf) B+ (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating B AAA (sf) AAA (sf) AAA (sf) AAA (sf) C AA+ (sf) AA+ (sf) AA (sf) BBB (sf) D BBB+ (sf) BBB (sf) BB+ (sf) B+(sf) RATING/CREDITWATCH ACTIONS Sargas CLO I Ltd. Rating Class To From B AAA (sf) AA+ (sf)/Watch Pos C BBB (sf) BBB (sf)/Watch Pos RATING AFFIRMED Sargas CLO I Ltd. Class Rating D B+ (sf) SFA ABS III: Fitch Lowers Rating on Class B Notes to 'Dsf' ---------------------------------------------------------- Fitch Ratings has downgraded one and affirmed two classes of notes issued by SFA ABS CDO III Ltd./Inc. (SFA III) as follows: -- $16,216,828 class A notes affirmed at 'CCsf'; -- $50,117,618 class B notes downgraded to 'Dsf' from 'Csf'; -- $16,315,009 class C notes affirmed at 'Csf'. KEY RATING DRIVERS The downgrade of the non-deferrable class B notes follows the interest payment default caused by SFA III's acceleration in May 2014. The class A notes have benefited from the acceleration of the capital structure and have continued to amortize since Fitch's April 2014 review. Although the credit enhancement (CE) available to the class has increased, the notes were still unable to withstand losses projected at the 'CCCsf' rating stress under Fitch's Structured Finance Portfolio Credit Model (SF PCM) analysis. The CE level of the class C notes was exceeded by expected losses (EL) from the distressed collateral ('CCsf' and below) without factoring potential losses from the performing portion of the portfolio. RATING SENSITIVITIES The notes of SFA III have limited sensitivity to further negative migration given their highly distressed rating levels. However, there is potential for the class A notes to be downgraded to 'Dsf' should they experience any interest payment shortfalls. This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Structured Finance Portfolio Credit Model (SF PCM) for projecting future default levels for the underlying portfolio. The cash flow model framework was not used to analyze the transaction given the highly distressed rating level of the notes. SILVER BAY 2014-1: Moody's Assigns (P)Ba2 Rating on Cl. E Certs --------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to five classes of certificates issued by Silver Bay Realty 2014-1 and backed by one floating rate loan secured by mortgages on 3,089 single-family rental properties. The complete rating action follows: $147.7 million of Class A certificates, assigned (P) Aaa (sf) $37.7 million of Class B certificates, assigned (P) Aa2 (sf) $33.0 million of Class C certificates, assigned (P) A2 (sf) $30.4 million of Class D certificates, assigned (P) Baa3 (sf) $17.1 million of Class E certificates, assigned (P) Ba2 (sf) Ratings Rationale Credit Analysis of Silver Bay Realty 2014-1 Moody's evaluation of the issuer's ultimate ability to repay interest and principal was based on a recovery analysis (detailed below) of the portfolio of single-family rental properties backing this securitization. Moody's recovery analysis approach is not an opinion that the loan will default, nor a prediction of the sponsor's intended future plans, but rather represents the rating agency's analysis of what it considers to be a significantly stressful resolution. Moody's also evaluated the portfolio cash flow of Silver Bay Realty 2014-1 to assess the probability of default during the term of the loan. However, the limited amount of historical information currently available on vacancy rates, expenses and cash flow associated with single-family rental properties in a stress environment precludes the rating agency from relying significantly on the transaction's cash flow to meet its long-term obligations. Moody's concerns about equity foreclosure, as expressed in "Single Family Rental Securitization Structures Without Mortgages Would Increase Risk," published on 17 January 2013, were mitigated for this transaction because both mortgages and pledges of borrower equity secure the loans backing the transaction. Moody's was therefore able to assign high investment-grade ratings to the senior certificates. Moody's assessment of Silver Bay Property Corp., the property manager, is that the company has proven its ability to effectively handle the day-to-day business of managing a national single- family rental platform. A seasoned senior management team and effective use of technology are strengths of the property manager. However, approximately 21% of the properties in this pool are managed by six third-party managers in five markets. Use of external managers can result in weaker control and higher operating costs. Moody's increased Moody's property management expense assumptions to account for these risks. Although Moody's did not find Silver Bay to be as strong as some of the operators in this space, Moody's deem them to be acceptable in their role. The master servicer and special servicer is Midland Loan Services, a division of PNC Bank, National Association. Background Moody's "Single-Family Rental Securitizations - Institutional buyers bring different approaches to a new asset class," published on 6 March 2014, provides a detailed overview of the market for single-family rental properties. Methodology The principal methodology used in this rating was "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions," published in July 2000. In rating securities backed by single-family rental properties, Moody's compares the credit risk inherent in the underlying properties with the credit protection the transaction structure offers. On 6 March 2014, Moody's published a "Request for Comment: Moody's Approach to Rating Single-Family Rental Securitizations." The request for comment period is now closed. If the new approach becomes effective as proposed, it will have no ratings impact on this transaction. The analysis of Silver Bay Realty 2014-1 is based largely on the approach Moody's uses to rate large loan commercial mortgage backed securities (CMBS) backed by multifamily housing, "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions." Moody's relied on this CMBS rating methodology to analyze the expenses incurred and cash flows generated by the underlying properties and to assess the probability of the loan's default during its term, and it stresses the recovery value of properties upon refinancing or liquidation, as detailed below. Moody's deviated from the published methodology when assessing the collateral value, basing its collateral value analysis on the lower of the recent BPO (broker price opinion) values, subject to further haircuts and partial adjustment of the purchase price for renovations completed by Silver Bay, instead of its usual cash flow analysis based on cap rates. The analysis took into account, among other things, a review of the housing markets in key metropolitan statistical areas (MSAs), Moody's home price depreciation assumptions for conventional RMBS, and Moody's Analytics' "Scenario 4" stress, which models a protracted slump in the economy. As a result of using these stressed values, Moody's deviated from its published LTV targets. For example, to calculate an advance rate (LTV) consistent with a Aaa rating, Moody's assumed a further 40%-45% price decline on the unsold properties, depending on the MSA. The performance of the manager is a key driver of cash flows in a single-family rental securitization. Although the operation and management of single-family rental properties may closely resemble that of multi-family rental properties, the operating costs for single-family properties may be higher than for multi-family properties because of their geographic dispersion. Additionally, because each home has unique features, the renovation, maintenance, and marketing may be more demanding than in a typical multi-family setting. Managing on the national level requires greater economies of scale. The value of single-family residential properties has not traditionally been directly related to the income the property can generate as a rental property. "Value" as interpreted by traditional buyers and sellers of single-family residential properties could include many qualitative factors that cannot be quantified using an income approach. Moody's believes that the traditional RMBS valuation of the single-family residential properties, which is based on recent sales of comparable properties, is more appropriate for this asset class. However, because of the high concentration of properties in a few markets and the potential for greater price volatility, Moody's assumes greater home price depreciation when determining the recovery values of these properties, compared to the stress it uses to rate typical RMBS transactions. Recovery Value Analysis Moody's bases its principal recovery estimates on a liquidation scenario in which the trust liquidates a significant portion of the properties under stress conditions, such as falling home prices and long foreclosure timelines, which increase the costs of maintaining the properties. Moody's recovery estimates also account for rental income on the assumption that the trust will continue to rent out some of the homes following a default until the properties are foreclosed on and vacated prior to REO sale. The collateral's final recovery value is equal to Moody's estimate of the properties' initial value (the Moody's Value), minus the value lost following home price stress, adjusted for a portion of the rental revenue net of the full rental expenses and all expenses incurred by vacant properties. Additionally, Moody's adjusts the final recovery amount by the legal, servicing and other carrying costs associated with a portfolio liquidation. Moody's bases its assumptions on the amount of historical data it has accumulated from its assessments of single-family residential values and of current market conditions. Moody's determines a stressed recovery value in a default scenario by: -- assigning an initial Moody's Value to the collateral -- assuming that a limited percentage of properties will be sold at full market value and the trust will receive only the applicable release premium -- stressing the recovery values of the remaining properties that were not released Moody's then calculates revenue and expense adjustments on the stressed recovery value by: -- assuming that a portion of the properties are vacant at default and estimating the rental income and associated costs on that portion of properties during the stressed liquidation timelines -- estimating the total cost required to maintain all the remaining properties until liquidation -- estimating foreclosure costs such as fixed legal costs, servicing fees, special servicing liquidation fees and transfer taxes -- estimating potential master servicer advances plus the interest on the servicer advances Net Cash Flow Adjustment and DSCR Moody's evaluates the net cash flow from the properties to assess the loan's probability of default during the term. It makes property-specific adjustments to the underwriter's net cash flow projections. To derive the net cash flow available to service the debt, Moody's considers current rental market conditions, recent portfolio performance, operating expense ratios, and industry outlooks and forecasts by industry participants. Moody's also considers market-level adjustments to concessions, sales and marketing, commissions, management fees, and capital items such as ongoing maintenance expenses and replacement reserves to the extent these items are not already fully reflected in the underwritten cash flow. Moody's derives its adjustment to property level cash flow for single-family rental properties from its experience in assessing stabilized net cash flow for multifamily properties. Highlights of the Credit Analysis of Silver Bay 2014-1 The transaction's Aaa advance rate (the ratio of the par balance of the senior certificate to the Moody's Value) is 41.3%. Moody's uses the advance rate to determine whether the asset's value is sufficient to support a targeted rating level given the amount of the transaction's liabilities. Moody's calculates the final recovery value, which varies by rating levels, by following these steps. 1) Moody's determined an initial Moody's Value for this portfolio of $358 million, after considering (a) the sponsor's acquisition cost, adjusted for 50% of Moody's estimate of home price appreciation (excluding lower-value properties) since acquisition, plus 45% of rehabilitation cost, and (b) 85% of the most recent broker price opinion. The cumulative broker price opinion on the properties is about $481 million. 2) Moody's assumed that a certain percentage of these properties would be sold out of the transaction at full market value prior to the borrower's default, netting proceeds equal to the allocated loan amounts plus a pre-determined premium on those properties. 3) Moody's then stressed the recovery values of the remaining properties the sponsor did not release by applying a home price depreciation factor to the properties' Moody's Value, ranging from 40% to 45%, depending on the MSA. 4) In its Aaa stress scenarios, Moody's assumed that the total cost required to maintain all the properties remaining in the pool after default, including real estate taxes, property management fees, vacancy, Home Owner's Association fees, insurance, repairs, and sales and marketing, would stretch out over 38 months, while a portion of the properties would generate income for 28 months. Moody's stress for the foreclosure timeline for this transaction is lower than for a typical RMBS transaction because the rating agency expects the foreclosure process to be quicker, given that the trust does not have to foreclose on individual borrowers; instead, it can foreclose either on the lien on the mortgage or on the equity of the SPV borrower. 5) Moody's estimated additional foreclosure costs which include fixed legal costs, a special servicer fee of 0.25% and a master servicing fee of 0.135% of the loan amount; special servicing liquidation fees of 0.75% of the property value; and transfer taxes of 0.70% for any property in Florida. 6) Finally, Moody's assumed that the master servicer would continue to advance interest (to the extent deemed recoverable) on the certificates until the properties were liquidated, and estimated the interest that would accrue on the servicer advances. Cash Flow Analysis: Moody's weighted average adjustment to the pool's underwritten net cash flow was -17.4%. The Moody's debt service coverage ratio is 2.18x (based on initially indicated pricing). Factors that would lead to an upgrade or downgrade of the rating: A larger decline in home prices and higher rental vacancy rates and expenses than Moody's initially assumed could have an adverse impact on the ratings. The ratings could also be negatively affected if the ability of the property manager to effectively manage the day-to-day operations of the business is compromised. Sensitivity Analysis If, in determining the initial rating, Moody's decreased the Moody's recovery on the collateral by 5%, the model-indicated ratings would be the following: for the Class A's current rating of (P)Aaa (sf), Aa1 for the Class B's current rating of (P)Aa2 (sf), A1 for the Class C's current rating of (P)A2 (sf), Baa1 for the Class D's current rating of (P)Baa3 (sf), Ba1 for the Class E's current rating of (P)Ba2 (sf), B1 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. SILVER SPRING: Moody's Assigns (P)B2 Rating on Class E Notes ------------------------------------------------------------ Moody's Investors Service has assigned provisional ratings to eight classes of notes to be issued by Silver Spring CLO Ltd.: Moody's rating action is as follows: $258,000,000 Class A Senior Secured Floating Rate Notes due 2026 (the "Class A Notes"), Assigned (P)Aaa (sf) $36,900,000 Class B-1 Senior Secured Floating Rate Notes due 2026 (the "Class B-1 Notes"), Assigned (P)Aa2 (sf) $10,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2026 (the "Class B-2 Notes"), Assigned (P)Aa2 (sf) $6,100,000 Class C-1 Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class C-1 Notes"), Assigned (P)A2 (sf) $15,000,000 Class C-2 Senior Secured Deferrable Fixed Rate Notes due 2026 (the "Class C-2 Notes"), Assigned (P)A2 (sf) $22,700,000 Class D Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Assigned (P)Baa3 (sf) $20,700,000 Class E Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Assigned (P)Ba3 (sf) $4,100,000 Class F Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class F Notes"), Assigned (P)B2 (sf) The Class A Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Notes and the Class F Notes are referred to herein, collectively, as the "Rated Notes." Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. 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 Rated Notes address the expected losses posed to noteholders. The provisional ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Silver Spring is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90% of the portfolio must consist of senior secured loans, cash, and eligible investments, and up to 10% of the portfolio may consist of second lien loans and unsecured loans. We expect the portfolio to be approximately 70% ramped as of the closing date. Silvermine Capital Management LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of equity securities, credit risk assets and credit improved assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer will issue subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $400,000,000 Diversity Score: 55 Weighted Average Rating Factor (WARF): 2500 Weighted Average Spread (WAS): 3.45% Weighted Average Coupon (WAC): 7.00% Weighted Average Recovery Rate (WARR): 46.5% Weighted Average Life (WAL): 8 years. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2500 to 2875) Rating Impact in Rating Notches Class A Notes: 0 Class B-1 Notes: -1 Class B-2 Notes: -1 Class C-1 Notes: -2 Class C-2 Notes: -2 Class D Notes: -1 Class E Notes: 0 Class F Notes: 0 Percentage Change in WARF -- increase of 30% (from 2500 to 3250) Rating Impact in Rating Notches Class A Notes: -1 Class B-1 Notes: -3 Class B-2 Notes: -3 Class C-1 Notes: -3 Class C-2 Notes: -3 Class D Notes: -2 Class E Notes: -1 Class F Notes: -3 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and 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. SOLARCITY LMC III: S&P Assigns 'BB' Rating on Class B Notes ----------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to SolarCity LMC Series III LLC's $201.5 million solar asset-backed series 2014-2 notes. SolarCity LMC Series III LLC's issuance is an asset-backed securities transaction backed by all rights, title, and interest of the issuer in and to a portfolio of solar photovoltaic (PV) systems. The ratings reflect: -- The credit enhancement available in the form of overcollateralization and subordination (for the class A notes); -- The manager's operational and management abilities; -- The customer base's initial credit quality underlying the portfolio that is subject to the master lease; -- The projected cash flows supporting the notes; and -- The transaction's structure. RATINGS ASSIGNED SolarCity LMC Series III LLC Series 2014-2 Class Rating Amount (mil. $) A BBB+ (sf) 160.0 B BB (sf) 41.5 STEELE CREEK 2014-1: Moody's Rates 2 Note Classes '(P)Ba3' ---------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to seven classes of notes to be issued by Steele Creek CLO 2014-1, Ltd. Moody's rating action is as follows: $213,800,000 Class A-1 Senior Secured Floating Rate Notes due 2026 (the "Class A-1 Notes"), Assigned (P)Aaa (sf) $40,000,000 Class A-2 Senior Secured Floating Rate Notes due 2026 (the "Class A-2 Notes"), Assigned (P)Aaa (sf) $46,200,000 Class B Senior Secured Floating Rate Notes due 2026 (the "Class B Notes"), Assigned (P)Aa2 (sf) $24,000,000 Class C Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Assigned (P)A2 (sf) $25,000,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Assigned (P)Baa3 (sf) $7,000,000 Class E-1 Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class E-1 Notes"), Assigned (P)Ba3 (sf) $12,500,000 Class E-2 Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class E-2 Notes"), Assigned (P)Ba3 (sf) The Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E-1 Notes and the Class E-2 Notes are referred to herein, collectively, as the "Rated Notes." Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. 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 Rated Notes address the expected losses posed to noteholders. The provisional ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Steele Creek CLO is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 95.0% of the portfolio must consist of senior secured loans, cash, and eligible investments, and up to 5.0% of the portfolio may consist of second lien loans and unsecured loans. The portfolio is expected to be at least 75% ramped as of the closing date. Steele Creek Investment Management LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer will issue subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $400,000,000 Diversity Score: 60 Weighted Average Rating Factor (WARF): 2750 Weighted Average Spread (WAS): 3.80% Weighted Average Coupon (WAC): 7.50% Weighted Average Recovery Rate (WARR): 47.0% Weighted Average Life (WAL): 8 years Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2750 to 3163) Rating Impact in Rating Notches Class A-1 Notes: 0 Class A-2 Notes: 0 Class B Notes: -1 Class C Notes: -2 Class D Notes: -1 Class E-1 Notes: 0 Class E-2 Notes: 0 Percentage Change in WARF -- increase of 30% (from 2750 to 3575) Rating Impact in Rating Notches Class A-1 Notes: -1 Class A-2 Notes: -1 Class B Notes: -3 Class C Notes: -4 Class D Notes: -2 Class E-1 Notes: -1 Class E-2 Notes: -1 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and available on www.moodys.com. The score for the "Experience of, Arrangements Among and Oversight of the Transaction Parties," a sub-category of the V Score, is one notch higher than that of the benchmark CLO, which is Low/Medium. The score of Medium reflects the fact that this transaction will be the Manager's first CLO. This higher score for "Experience of, Arrangements Among and Oversight of the Transaction Parties" does not, however, cause this transaction's overall composite V Score of Medium/High to differ from that of the CLO sector benchmark. Moody's V Score provides 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. The V Score applies to the entire transaction, rather than individual tranches. STF FIRST MORTGAGE: Moody's Lowers Rating on 2007-A Notes to Caa2 ----------------------------------------------------------------- Moody's Investors Service has downgraded the notes issued by STF First Mortgage Bond Trust 2007-A. The notes are secured by a pool of mortgage assets including mortgage bonds and participation certificates secured primarily by church-related real property such as church buildings and church affiliated schools. The transaction was originally sponsored by Strongtower Financial, Inc. The pool is serviced by Reliance Trust Company. The trustee and remittance report provider is Bank of New York Mellon Trust Company N.A. Issuer: STF First Mortgage Bond Trust 2007-A Mortgage Backed Notes, Downgraded to Caa2 (sf); previously on Jul 22, 2011 Downgraded to B3 (sf) Rating Rationale The downgrade was prompted by the performance of the underlying collateral and the increasing accrued interest shortfall to the notes. As of the July 2014 semi-annual reporting date, approximately $6.5 million, representing 48.3% of the outstanding collateral pool, is 60 or more days delinquent. In addition, $6.2 million of collateral was charged off after more than 3 years of delinquency and is now in various stages of liquidation. The reserve account for the transaction has been exhausted. The notes' interest shortfall stands at $1.0 million, and the notes' principal balance is $2.7 million undercollateralized as of July 2014 report. Future recoveries from charged-off loans will be used first to repay interest shortfalls and then to amortize principal. Amount and timing of recoveries are subject to a high uncertainty. Additionally, the substantial obligor concentrations at closing have increased further due to defaults and prepayments. Specifically, there are now 16 obligors in the pool, down from 29 at deal closing. Principal Methodology The principal methodology used in this rating was "Moody's Global Approach to Rating SME Balance Sheet Securitizations" published in January 2014. Moody's approach used for the rating action included a default analysis of the underlying collateral. The underlying loans and securities in default were considered on an individual obligor and property basis. Moody's applied various recovery assumptions to the defaulted and charged-off collateral, including scenarios based on flat recovery rates of 30% to 50%, and a scenario that considers individual loan-level recoveries from 20% to 100%, reflecting each property's unique status as described by the trustee. Moody's also considered recoveries based on property appraised values adjusted for the date of the appraisal in accordance with changes in the non-major market CPPI index. The range of tranche losses associated with Moody's analysis of the underlying loans, including future recoveries from charged-off loans, is 17% to 40% of the outstanding balance. The tranche loss estimates also take into account that as of the July 2014 reporting date, the transaction is undercollateralized, note holders are experiencing interest shortfalls and the reserve account has been depleted. Primary sources of assumption uncertainty are the general economic environment, property values and the ability of the underlying church borrowers to recover from the recession. Factors that would lead to an upgrade or downgrade of the rating: Up Losses below Moody's expectations as a result of a decrease in seriously delinquent loans or lower severities than expected on liquidated loans. Down Losses above Moody's expectations as a result of an increase in seriously delinquent loans or higher severities than expected on liquidated loans. STONE TOWER V: S&P Raises Rating on Class D Notes to 'B+' --------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2a I, A-2a NV, A-2a V, A-2b, A-3, B, C-1, C-2, and D notes from Stone Tower CLO V Ltd., a U.S. collateralized loan obligation transaction managed by Apollo ST Debt Advisors LLC. At the same time, S&P removed the ratings from CreditWatch, where it had placed them with positive implications on April 9, 2014. The upgrades reflect post-reinvestment period principal amortization paydowns to the class A-1, A-2a I, A-2a NV, and A-2a V notes. Since Dec. 2011, when S&P raised its ratings on seven classes, the class A-1 notes paid down a total of $23.0 million to 61.7% of their original balance, and the class A-2a I, A-2a NV, and A-2a V notes paid down a total of $207.5 million to 57.4% of their original balances, increasing credit support for the subordinate notes. As of July 2014, there were $5.0 million (0.9%) of assets from obligors in the 'CCC' rating category, down from $21.5 million (2.8%) in December 2011. In addition, defaulted assets decreased to $3.2 million (0.6%) from $9.7 million (1.3%) as of Dec. 2011. Immediately following the July 16 payment date, the transaction's class D overcollateralization ratio was approximately 106.4%. "Our review of this transaction included a cash flow analysis, based on the portfolio and transaction as reflected in the aforementioned trustee report, to estimate future performance. In line with our criteria, our cash flow scenarios applied forward- looking assumptions on the expected timing and pattern of defaults, as well as on recoveries upon default, under various interest rate and macroeconomic scenarios. In addition, our analysis considered the transaction's ability to pay timely interest and/or ultimate principal to each of the rated tranches. The results of the cash flow analysis demonstrated, in our view, that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with this rating action," S&P said. S&P will continue to review its ratings on the notes and assess whether they remain consistent with the credit enhancement available to support them, and S&P will take rating actions as it deems necessary. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2a I AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2a NV AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2a V AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2b AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-3 AA+ (sf) AA+ (sf) AA+ (sf) AAA (sf) AA+ (sf) B AA- (sf) A+ (sf) A+ (sf) AA+ (sf) AA- (sf) C-1 BBB+ (sf) BBB (sf) BBB+ (sf) A- (sf) BBB+ (sf) C-2 BBB+ (sf) BBB (sf) BBB+ (sf) A- (sf) BBB+ (sf) D B+ (sf) B+ (sf) B+ (sf) B+ (sf) B+ (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2a I AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2a NV AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2a V AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2b AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-3 AA+ (sf) AA+ (sf) AA+ (sf) AA+ (sf) B AA- (sf) AA- (sf) A (sf) AA- (sf) C-1 BBB+ (sf) BBB+ (sf) BB+ (sf) BBB+ (sf) C-2 BBB+ (sf) BBB+ (sf) BB+ (sf) BBB+ (sf) D B+ (sf) B+ (sf) B- (sf) B+ (sf) RATINGS LIST Stone Tower CLO V Ltd. Rating Class Identifier To From A-1 861754AA7 AAA (sf) AA (sf)/Watch Pos A-2a I 861754AB5 AAA (sf) AA+ (sf)/Watch Pos A-2b 861754AE9 AAA (sf) AA (sf)/Watch Pos A-3 861754AF6 AA+ (sf) AA- (sf)/Watch Pos B 861754AG4 AA- (sf) A- (sf)/Watch Pos C-1 861754AH2 BBB+ (sf) BB+ (sf)/Watch Pos C-2 861754AJ8 BBB+ (sf) BB+ (sf)/Watch Pos D 861754AK5 B+ (sf) CCC+ (sf)/Watch Pos A-2a NV 861754AD1 AAA (sf) AA+ (sf)/Watch Pos A-2a V 861754AC3 AAA (sf) AA+ (sf)/Watch Pos TICP CLO II: Moody's Assigns (P)B3 Rating on $4.8MM Class E Notes ----------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to eight classes of notes to be issued by TICP CLO II, Ltd. Moody's rating action is as follows: $255,000,000 Class A-1A Senior Secured Floating Rate Notes due 2026 (the "Class A-1A Notes"), Assigned (P)Aaa (sf) $65,300,000 Class A-1B Senior Secured Fixed Rate Notes due 2026 (the "Class A-1B Notes"), Assigned (P)Aaa (sf) $43,000,000 Class A-2A Senior Secured Floating Rate Notes due 2026 (the "Class A-2A Notes"), Assigned (P)Aa2 (sf) $18,100,000 Class A-2B Senior Secured Fixed Rate Notes due 2026 (the "Class A-2B Notes"), Assigned (P)Aa2 (sf) $25,400,000 Class B Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class B Notes"), Assigned (P)A2 (sf) $26,400,000 Class C Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Assigned (P)Baa3 (sf) $28,000,000 Class D Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Assigned (P)Ba3 (sf) $4,800,000 Class E Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Assigned (P)B3 (sf) The Class A-1A Notes, the Class A-1B Notes, the Class A-2A Notes, the Class A-2B Notes, the Class B Notes, the Class C Notes, the Class D Notes and the Class E Notes are referred to herein, collectively, as the "Rated Notes." Moody's issues provisional ratings in advance of the final sale of financial instruments, but these ratings only represent Moody's preliminary credit opinions. 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 rating of the Rated Notes addresses the expected loss posed to noteholders. The provisional rating reflects the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. TICP CLO II is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90% of the portfolio must consist of senior secured loans, cash and eligible investments, and up to 10% of the portfolio may consist of second lien loans and unsecured loans. The underlying collateral pool is expected to be approximately 80% ramped as of the closing date. TICP CLO II Management, LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest any proceeds from sales of credit risk and credit improved assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer will issue one tranche of subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $500,000,000 Diversity Score: 60 Weighted Average Rating Factor (WARF): 2600 Weighted Average Spread (WAS): 3.45% Weighted Average Coupon (WAC): 6.50% Weighted Average Recovery Rate (WARR): 47.0% Weighted Average Life (WAL): 8 years. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the rating assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2600 to 2990) Rating Impact in Rating Notches Class A-1A Notes: 0 Class A-1B Notes: 0 Class A-2A Notes: -2 Class A-2B Notes: -2 Class B Notes: -2 Class C Notes: -1 Class D Notes: 0 Class E Notes: 0 Percentage Change in WARF -- increase of 30% (from 2600 to 3380) Rating Impact in Rating Notches Class A-1A Notes: -1 Class A-1B Notes: -1 Class A-2A Notes: -4 Class A-2B Notes: -4 Class B Notes: -4 Class C Notes: -2 Class D Notes: -1 Class E Notes: -2 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and available on www.moodys.com. The score for the "Experience of, Arrangements Among and Oversight of the Transaction Parties," a sub-category of the V Score, is one notch higher than that of the benchmark CLO, which is Low/Medium. The score of Medium reflects the fact that this transaction will be the Manager's second CLO. This higher score for "Experience of, Arrangements Among and Oversight of the Transaction Parties" does not, however, cause this transaction's overall composite V Score of Medium/High to differ from that of the CLO sector benchmark. 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. TRINITAS CLO II: S&P Assigns 'BB' Rating on Class E Notes --------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Trinitas CLO II Ltd./Trinitas CLO II LLC's $381.625 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: -- 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 consists primarily of broadly syndicated speculative-grade senior secured term loans. -- The asset manager's and designated successor manager's experienced management teams. -- The transaction's ability to make timely interest and ultimate principal payments on the rated notes, which S&P assessed using its cash flow analysis and assumptions commensurate with the assigned ratings under various interest-rate scenarios, including LIBOR ranging from 0.2600%-13.8391%. -- The transaction's overcollateralization (O/C) 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 a certain amount of excess interest proceeds available before paying deferred interest on the class F notes; uncapped administrative expenses and fees; subordinated hedge termination payments; subordinated management fees; asset manager incentive fees; and subordinated note payments; during the reinvestment period, at the collateral manager's discretion, as principal proceeds to purchase additional collateral assets or to pay principal on the notes according to the principal payment sequence. RATINGS LIST Trinitas CLO II Ltd./Trinitas CLO II LLC Class Rating Amount (mil. $) X AAA (sf) 3.625 A-1 AAA (sf) 165.750 A-2 AAA (sf) 83.000 B-1 AA (sf) 42.750 B-2 AA (sf) 21.000 C A (sf) 22.000 D BBB (sf) 20.250 E BB (sf) 17.500 F B (sf) 5.750 Combination notes(i) AA (sf) 208.229 Subordinated notes NR 34.500 (i) Combination notes consist of an aggregate amount of up to $208,228,643 with the components comprising up to $165,750,000 of the class A-1 notes and $42,478,643 of the class B-1 notes. At closing, the issuer expects to have $191,050,000 in total combination notes outstanding, comprising $152,075,800 of the class A-1 notes and $38,974,200 of the class B-1 notes. The individual components of the combination notes are included in the outstanding amount of the related components and will earn interest in the same manner as the related components. The component amounts outstanding can vary, subject to conditions as described in the indenture. NR-Not rated. TROPIC CDO IV: Moody's Hikes Rating on Cl. A-3L Notes to Caa1 ------------------------------------------------------------- Moody's Investors Service has upgraded the rating on the following notes issued by Tropic CDO IV Ltd.: $37,500,000 Class A-3L Deferrable Floating Rate Notes due April 2035 (current balance of $40,347,123 including deferred interest balance), Upgraded to Caa1 (sf); previously on May 6, 2014 Upgraded to Ca (sf). Moody's also confirmed the rating on the following notes: $40,000,000 Class A-2L Floating Rate Notes due April 2035, Confirmed Baa2 (sf); previously on June 26, 2014 Baa2 (sf) Placed Under Review for Possible Upgrade. Tropic CDO IV Ltd., issued in November 2004, is a collateralized debt obligation backed by a portfolio of bank trust preferred securities (TruPS). Ratings Rationale The rating actions are primarily a result of updates to Moody's TruPS CDOs methodology, as described in "Moody's Approach to Rating TruPS CDOs" published in June 2014. They also reflect an increase in the transaction's over-collateralization ratios after treating $28 million of deferring securities that meet certain criteria as performing since May 2014. The transaction has benefited from the updates to Moody's TruPS CDOs methodology, including (1) removing the 25% macro default probability stress for bank TruPS; (2) expanding the default timing profiles from one to six probability-weighted scenarios; (3) incorporating a redemption profile for bank TruPS; (4) using a loss distribution generated by Moody's CDOROM(TM) for deals that do not permit reinvestment; and (5) giving full par credit to deferring bank TruPS that meet certain criteria. In taking the foregoing actions, Moody's also announced that it had concluded its review of its rating on the issuer's Class A-2L Notes announced on June 26, 2014. At that time, Moody's had placed the rating on review for upgrade as a result of the aforementioned methodology updates. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, are based on its methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool having a performing par (after treating deferring securities as performing if they meet certain criteria) of $197 million, defaulted/deferring par of $85 million, a weighted average default probability of 10.28% (implying a WARF of 935), and a weighted average recovery rate upon default of 10%. In addition to the quantitative factors Moody's explicitly models, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of an event of default, recent deal performance under current market conditions, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating TruPS CDOs" published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector. 2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc(TM) or credit estimates. Because these are not public ratings, they are subject to additional uncertainties. Loss and Cash Flow Analysis: Moody's applied a Monte Carlo simulation framework in Moody's CDOROM(TM) v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. Moody's then used the loss distribution as an input in its CDOEdge(TM) cash flow model. CDOROM(TM) v. 2.13.1 is available on www.moodys.com under Products and Solutions -- Analytical models, upon receipt of a signed free license agreement. The portfolio of this CDO contains TruPS issued by small to medium sized U.S. community banks that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc(TM), an econometric model developed by Moody's KMV, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 555) Class A-1L: +2 Class A-2L: +3 Class A-3L: +3 Class A-4L: 0 Class A-4: 0 Class B-1L: 0 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 1428) Class A-1L: -2 Class A-2L: -1 Class A-3L: -3 Class A-4L: 0 Class A-4: 0 Class B-1L: 0 UNITED AUTO 2014-1: DBRS Finalizes BB Rating on Class E Notes ------------------------------------------------------------- DBRS Inc. has finalized its provisional ratings of the following classes issued by United Auto Credit Securitization Trust 2014-1: -- Series 2014-1 Notes, Class A-1 at R-1 (high) (sf) -- Series 2014-1 Notes, Class A-2 at AAA (sf) -- Series 2014-1 Notes, Class B at AA (sf) -- Series 2014-1 Notes, Class C at A (sf) -- Series 2014-1 Notes, Class D at BBB (sf) -- Series 2014-1 Notes, Class E at BB (sf) UNITED AUTO 2014-1: S&P Assigns 'BB' Rating on Class E Notes ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its ratings to United Auto Credit Securitization Trust 2014-1's $175.66 million notes Series 2014-1. The note issuance is an ABS securitization backed by subprime auto loan receivables. The ratings reflect S&P's view of: -- The availability of approximately 54.8%, 47.0%, 38.6%, 32.7%, and 24.9% credit support for the class A, B, C, D, and E notes, respectively, based on stressed break-even cash flow scenarios (including excess spread). -- These credit support levels provide coverage of more than 3.20x, 2.70x, 2.15x, 1.65x, and 1.35x its expected net loss range of 16.75%-17.25% for the class A, B, C, D, and E notes, respectively. -- The likelihood of timely interest and principal payments by the assumed legal final maturity dates under stressed cash- flow modeling scenarios that are appropriate for the assigned ratings. -- S&P's expectation that under a moderate ('BBB') stress scenario, the ratings on the class A, B, C, and D notes would not decline by more than one rating category. Under this scenario, the 'BB (sf)' rated class E notes would not decline by more than one rating category in the first year but would ultimately not pay off in a 'BBB' stress scenario, as expected. These potential rating movements are consistent with S&P's credit stability criteria, which outlines the outer bound of credit deterioration as a one- category downgrade within the first year for 'AAA' and 'AA' rated securities and a two-category downgrade within the first year for 'A' through 'BB' rated securities under moderate stress conditions. -- The credit enhancement in the form of subordination, overcollateralization, a reserve account, and excess spread as well as a performance trigger to build overcollateralization if net losses exceed designated levels. -- The collateral characteristics of the subprime pool being securitized: It is approximately five months seasoned, with a weighted average remaining term of about 35 months. Approximately 8.5% of the loans have an original term of 49 to 60 months, and as a result, we expect the pool will pay down more quickly than many other subprime pools with longer loan terms. -- S&P's analysis of five years of static pool data following the credit crisis and after United Auto Credit Corp. (UACC) centralized its operations and shifted toward shorter loan terms. S&P also reviewed the performance of UACC's two outstanding securitizations as well as its seven securitizations from 2004 to 2007. -- UACC's 18-plus-year history of originating, underwriting, and servicing subprime auto loans. -- The transaction's payment and legal structures. RATINGS ASSIGNED United Auto Credit Securitization Trust 2014-1 Interest Interest Class Rating Type rate amount (Mil. $) A-1 A-1+ (sf) Senior Fixed 52.300 A-2 AAA (sf) Senior Fixed 40.700 B AA (sf) Subordinate Fixed 25.000 C A (sf) Subordinate Fixed 24.000 D BBB (sf) Subordinate Fixed 14.660 E BB Subordinate Fixed 19.000 US CAPITAL FUNDING: Moody's Confirms B2 Rating on Series A Unit -------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of the following notes issued by US Capital Funding III, Ltd: $111,000,000 Class A-1 Floating Rate Senior Notes Due 2035 (current balance of $42,062,833.28), Upgraded to Aa3 (sf); previously on Jun 26, 2014 A3 (sf) Placed Under Review for Possible Upgrade $23,000,000 Class A-2 Floating Rate Senior Notes Due 2035, Upgraded to A3 (sf); previously on May 8, 2014 Upgraded to Baa2 (sf) US Capital Funding III, Ltd., issued on November 22, 2004, is a collateralized debt obligation backed by a portfolio of bank trust preferred securities (TruPS). Moody's also confirmed the rating of notes issued by USCF III 2.5% Combination Security Trust: $7,500,000 Series A Trust Units (current rated balance of $5,763,302), Confirmed at B2 (sf); previously on Jun 26, 2014 B2 (sf) Placed Under Review for Possible Upgrade USCF III 2.5% Combination Security Trust, issued on November 22, 2004, is a combination note comprised of $2 million of the Class B-1 notes, $2 million of the Class B-2 notes and $2.62 million of the Income Notes issued by US Capital Funding III, Ltd. as well as a Fannie Mae Strip with a face value of $3.5 million maturing Nov 15, 2029. Ratings Rationale The rating actions are primarily a result of updates to Moody's TruPS CDOs methodology, as described in "Moody's Approach to Rating TruPS CDOs" published in June 2014. They also reflect a slight increase in the transaction's over-collateralization ratios, because of the resumption of interest payments by an asset that had previously been deferring interest. The transaction has benefited from the updates to Moody's TruPS CDOs methodology, including (1) removing the 25% macro default probability stress for bank and insurance TruPS; (2) expanding the default timing profiles from one to six probability-weighted scenarios; (3) incorporating a redemption profile for bank and insurance TruPS; (4) using a loss distribution generated by Moody's CDOROM(TM) for deals that do not permit reinvestment; and (5) giving full par credit to deferring bank TruPS that meet certain criteria. In addition, one asset that had previously been deferring interest, with a balance of $2.15 million, has cured its interest deferral and resumed interest payments on May 27,2014. As a result of this resumption of interest payment and treatment of the asset as performing, the Class A1 notes' par coverage improved by 24.72% to 332.00% as calculated by Moody's. Based on the latest trustee report dated June 3, 2014, the Senior Principal Coverage Test was 205.82% (limit 130.0%), versus 191.9% as of March 3, 2014 and the Senior Subordinate Coverage test was 88.321% (103.98%), versus 83.28% as of March 3, 2014. In taking the foregoing actions, Moody's also announced that it had concluded its review of its ratings on the Class A-1 Notes issued by US Capital Funding III, Ltd. and the Series A Trust Units issued by the USCF III 2.5% Combination Security Trust announced on June 26, 2014. At that time, Moody's had placed the rating on review for upgrade as a result of the aforementioned methodology updates Moody's notes that the key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, are based on its published methodology and may be different from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool to have a performing par balance (after treating deferring securities as performing if they meet certain criteria) of $139.65 million, defaulted/deferring par of $35 million, a weighted average default probability of 6.98% (implying a WARF of 618), and a weighted average recovery rate upon default of 10%. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of triggering an Event of Default, recent deal performance under current market conditions, the legal environment, and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. Methodology Underlying the Rating Action The principal methodology used in these ratings was "Moody's Approach to Rating TruPS CDOs," published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector. 2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc(TM) or credit estimates. Moody's evaluates the sensitivity of the ratings of the notes to the volatility of these credit assessments. Loss and Cash Flow Analysis: Moody's applied a Monte Carlo simulation framework in Moody's CDOROM v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. The portfolio of this CDO contains trust preferred securities issued by small to medium sized U.S. community banks that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc(TM), an econometric model developed by Moody's Analytics, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 412): Class A-1:+1 Class A-2: +1 Class B-1: 0 Class B-2: 0 Combination Security Trust: 0 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 907): Class A-1: -1 Class A-2: -1 Class B-1: 0 Class B-2: 0 Combination Security Trust: 0 VENTURE IX CDO: Moody's Raises Rating on Class E Notes to Ba3 ------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Venture IX CDO, Limited: $370,000,000 Class A Senior Notes Due October 10, 2021, Upgraded to Aaa (sf); previously on September 12, 2011 Upgraded to Aa1 (sf) $35,000,000 Class B Senior Notes Due October 10, 2021, Upgraded to Aa3 (sf); previously on September 12, 2011 Upgraded to A2 (sf) $25,000,000 Class C Deferrable Mezzanine Notes Due October 10, 2021, Upgraded to Baa2 (sf); previously on September 12, 2011 Upgraded to Baa3 (sf) $14,000,000 Class E Deferrable Junior Notes Due October 10, 2021, Upgraded to Ba3 (sf); previously on September 12, 2011 Upgraded to B1 (sf) Moody's also affirmed the ratings of the following notes: $16,000,000 Class D Deferrable Mezzanine Notes Due October 10, 2021, Affirmed Ba2 (sf); previously on September 12, 2011 Upgraded to Ba2 (sf) Venture IX CDO, Limited, issued in September 2007, is a collateralized loan obligation CLO backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period will end in October 2014. Ratings Rationale These rating actions reflect the benefit of the short period of time remaining before the end of the deal's reinvestment period in October 2014. In light of the reinvestment restrictions during the amortization period, and therefore the limited ability of the manager to effect significant changes to the current collateral pool, Moody's analyzed the deal assuming a higher likelihood that the collateral pool characteristics will maintain a positive buffer relative to certain covenant requirements. In particular, Moody's assumed that the deal will benefit from higher spread and diversity levels compared to the covenant levels. Moody's modeled a spread of 4.04% and diversity of 97 compared to the covenant levels of 1.95% and 90, respectively. Furthermore, the transaction's reported OC ratios have been stable. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will commence and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. 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. Realization of higher than assumed recoveries would positively impact the CLO. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2325) Class A: 0 Class B: +2 Class C: +2 Class D: +2 Class E: +1 Moody's Adjusted WARF + 20% (3487) Class A: -1 Class B: -2 Class C: -2 Class D: 0 Class E: -1 Loss and Cash Flow Analysis: 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 Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $482.2 million, defaulted par of $14.9 million, a weighted average default probability of 21.40% (implying a WARF of 2906), a weighted average recovery rate upon default of 48.77%, a diversity score of 97 and a weighted average spread of 4.04%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs." In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. VOYA CLO 2014-3: Moody's Assigns B2 Rating on $8.75MM Cl. E Notes ----------------------------------------------------------------- Moody's Investors Service has assigned ratings to eight classes of notes issued by Voya CLO 2014-3, Ltd. Moody's rating action is as follows: $320,000,000 Class A-1 Floating Rate Notes due 2026 (the "Class A-1 Notes"), Definitive Rating Assigned Aaa (sf) $53,750,000 Class A-2A Floating Rate Notes due 2026 (the "Class A-2A Notes"), Definitive Rating Assigned Aa2 (sf) $12,500,000 Class A-2B Fixed Rate Notes due 2026 (the "Class A-2B Notes"), Definitive Rating Assigned Aa2 (sf) $23,750,000 Class B Deferrable Floating Rate Notes due 2026 (the "Class B Notes"), Definitive Rating Assigned A2 (sf) $31,250,000 Class C Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Definitive Rating Assigned Baa3 (sf) $23,000,000 Class D Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Definitive Rating Assigned Ba3 (sf) $8,750,000 Class E Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Definitive Rating Assigned B2 (sf) $71,250,000 Combination Securities (composed of components representing U.S.$12,500,000 Class A-2A Notes, U.S.$12,500,000 Class A-2B Notes, U.S.$23,750,000 Class B Notes and U.S.$22,500,000 subordinated notes) due 2026 (the "Combination Securities"), Definitive Rating Assigned A3 (sf) The Class A-1 Notes, the Class A-2A Notes, the Class A-2B Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes and Combination Securities are referred to herein, collectively, as the "Rated Notes." Ratings Rationale Moody's ratings of the Rated Notes address the expected losses posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Moody's rating of the Combination Securities addresses only the ultimate payment of principal to the holders of the Combination Securities. For the avoidance of doubt, Moody's rating of the Combination Securities does not address any other payments or additional amounts that a holder of the Combination Securities may receive pursuant to the underlying documents. Voya 2014-3 is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 92.5% of the portfolio must consist of senior secured loans and eligible investments, and up to 7.5% of the portfolio may consist of second lien loans. The Issuer's documents require the portfolio to be at least 78% ramped as of the closing date. Voya Alternative Asset Management LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer has issued subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $500,000,000 Diversity Score: 55 Weighted Average Rating Factor (WARF): 2820 Weighted Average Spread (WAS): 3.75% Weighted Average Coupon (WAC): 7.00% Weighted Average Recovery Rate (WARR): 48.0% Weighted Average Life (WAL): 8 years Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2820 to 3243) Rating Impact in Rating Notches Class A-1 Notes: 0 Class A-2A Notes: -2 Class A-2B Notes: -2 Class B Notes: -2 Class C Notes: -1 Class D Notes: 0 Class E Notes: 0 Combination Securities: -1 Percentage Change in WARF -- increase of 30% (from 2820 to 3666) Rating Impact in Rating Notches Class A-1 Notes: -1 Class A-2A Notes: -3 Class A-2B Notes: -3 Class B Notes: -4 Class C Notes: -2 Class D Notes: -1 Class E Notes: -3 Combination Securities: -2 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and available on www.moodys.com. Moody's V Score provides 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. The V Score applies to the entire transaction, rather than individual tranches. WACHOVIA BANK 2004-C15: Moody's Cuts Rating on Cl. J Certs to C --------------------------------------------------------------- Moody's Investors Service has affirmed the ratings on ten classes and downgraded the ratings on two classes of Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2004-C15 as follows: Cl. A-1A, Affirmed Aaa (sf); previously on Mar 7, 2013 Affirmed Aaa (sf) Cl. A-4, Affirmed Aaa (sf); previously on Mar 7, 2013 Affirmed Aaa (sf) Cl. B, Affirmed Aa2 (sf); previously on Mar 7, 2013 Affirmed Aa2 (sf) Cl. C, Affirmed Aa3 (sf); previously on Mar 7, 2013 Affirmed Aa3 (sf) Cl. D, Affirmed A2 (sf); previously on Mar 7, 2013 Affirmed A2 (sf) Cl. E, Affirmed Baa2 (sf); previously on Mar 7, 2013 Downgraded to Baa2 (sf) Cl. F, Affirmed Ba1 (sf); previously on Mar 7, 2013 Downgraded to Ba1 (sf) Cl. G, Affirmed B1 (sf); previously on Mar 7, 2013 Downgraded to B1 (sf) Cl. H, Downgraded to Caa3 (sf); previously on Mar 7, 2013 Downgraded to Caa2 (sf) Cl. J, Downgraded to C (sf); previously on Mar 7, 2013 Downgraded to Caa3 (sf) Cl. K, Affirmed C (sf); previously on Mar 7, 2013 Downgraded to C (sf) Cl. X-C, Affirmed Ba3 (sf); previously on Mar 7, 2013 Affirmed Ba3 (sf) Ratings Rationale The ratings on Classes A-1A through G were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on Class K was affirmed because the rating is consistent with Moody's expected loss. The rating on the IO class was affirmed based on the credit performance (or the weighted average rating factor or WARF) of the referenced classes. The ratings on Classes H and J were downgraded due to realized and anticipated losses from specially serviced and troubled loans that were higher than Moody's had previously expected. Moody's rating action reflects a base expected loss of 9.3% of the current balance compared to 6.0% at Moody's last review. Moody's base expected loss plus realized losses is now 5.9% of the original pooled balance compared to 4.5% at the last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000 and "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 14 compared to 19 Moody's last review. When the Herf falls below 20, Moody's uses the excel-based Large Loan Model v 8.7 and then reconciles and weights the results from the conduit and large loan models in formulating a rating recommendation. The large loan model derives credit enhancement levels based on an aggregation of adjusted loan-level proceeds derived from Moody's loan-level LTV ratios. Major adjustments to determining proceeds include leverage, loan structure, property type and sponsorship. Moody's also further adjusts these aggregated proceeds for any pooling benefits associated with loan level diversity and other concentrations and correlations. Deal Performance As of the July 17, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 67% to $387 million from $1.2 billion at securitization. The certificates are collateralized by 47 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top ten loans constituting 49% of the pool. Nine loans, constituting 19% of the pool, have defeased and are secured by US government securities. Twenty loans, constituting 53% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Five loans have been liquidated from the pool, resulting in an aggregate realized loss of $32 million (for an average loss severity of 77%). Two loans, constituting 7% of the pool, are currently in special servicing. The largest specially serviced loan is the 10 Independence Boulevard Loan ($17.0 million -- 4.4% of the pool), which is secured by a 121,000 square foot (SF) office building located in Warren, New Jersey. The loan transferred to special servicing in October 2013 due to imminent default. The property was 93% leased as of April 2014. The other specially serviced loan is the 10 East Baltimore Street Loan ($10.9 million -- 2.8% of the pool), which is secured by a 168,000 SF office building located in the central business district of Baltimore, Maryland. The loan transferred to special servicing in March 2013, and became REO in May 2014. The property was 63% leased as of April 2014. The servicer's strategy is to lease up and stabilize the property. The servicer has recognized a $3.9 million appraisal reduction for this loan. Moody's estimates an aggregate $12.3 million loss for the specially serviced loans (44% expected loss on average). Moody's has assumed a high default probability for three poorly performing loans, constituting 24% of the pool, and has estimated an aggregate loss of $13.6 million (15% expected loss based on a 50% probability default) from these troubled loans. Moody's received full year 2013 operating results for 100% of the pool, and partial year 2014 operating results for 84% of the pool. Moody's weighted average conduit LTV is 91%, compared to 90% at Moody's last review. Moody's conduit component excludes loans with credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 12% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 9.1%. Moody's actual and stressed conduit DSCRs are 1.22X and 1.12X, respectively, compared to 1.30X and 1.12X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 25% of the pool balance. The largest loan is the New Jersey Portfolio Loan ($65 million -- 16.8% of the pool), which is secured by four suburban office properties totaling 576,000 SF located in northern New Jersey. The portfolio was 83% leased as of April 2014, the same as at last review. The loan has been on the master servicer's watchlist since September 2010 due primarily to the underperformance of one of the properties. Additionally, leases making up 23% of the net rentable area (NRA) roll by year-end 2015. The loan is scheduled to mature next month and the borrower has not indicated it will pay off at maturity. Moody's has identified the loan as a troubled loan. Moody's LTV and stressed DSCR are 134% and 0.77X, respectively, compared to 118% and 0.87X at the last review. The second largest loan is the Mahopac Village Center Loan ($15.9 million -- 4.1% of the pool), which is secured by a 149,000 SF grocery anchored retail center located in Mahopac, New York. The property is anchored by an A&P grocery store, which leases 42% of the NRA through January 2049. The property was 88% leased as of March 2014. Moody's LTV and stressed DSCR are 98% and 0.99X, respectively, compared to 97% and 1.0X at the last review. The third largest exposure is the cross-collateralized Shops at Lufkin Loan ($12.0 million -- 3.1% of the pool) and the Rite Aid - - Augusta Loan ($2.7 million -- 0.7% of the pool). The Shops at Lufkin Loan is secured by a 110,000 SF anchored retail center located in Lufkin, Texas. The center is located adjacent to the Lufkin Mall. The major anchor tenants include Best Buy (18% of the NRA; lease expiration January 2015), Bed Bath & Beyond (16% of the NRA; lease expiration January 2021), and Ross (27% of the NRA; lease expiration January 2015). The property was 98% leased as of June 2014. The Rite Aid Loan is secured by a 13,800 SF Rite Aid store located in Augusta, Georgia. The property is 100% leased triple-net to Rite-Aid Corporation (Senior Unsecured; Caa1) through June 2024. Moody's combined LTV and stressed DSCR are 103% and 0.97X, respectively, compared to 104% and 0.93X at the last review. WATERFRONT CLO 2007-1: S&P Affirms 'BB' Rating on Class D Notes --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2, A-3, and B notes from Waterfront CLO 2007-1 Ltd., a U.S. collateralized loan obligation transaction managed by Grandview Capital Management LLC. At the same time, S&P removed these ratings from CreditWatch, where it had placed them with positive implications on April 9, 2014. S&P also affirmed its ratings on the class C and D notes from the same transaction. The upgrades reflect post-reinvestment period principal amortization paydowns to the class A-1 notes. Since March 2013, when S&P raised its ratings on two classes, the class A-1 notes paid down a total of $76.0 million to 60.1% of their original balance, increasing credit support for the subordinate notes. As of June 2014, there were $1.4 million (0.7%) of assets from obligors in the'CCC' rating category, down from $9.3 million (3.4%) in March 2013. In addition, defaulted assets have increased to $2.4 million (1.1%) from none in March 2013. Immediately following the July 15 payment date, the transaction's class D overcollateralization ratio was approximately 107.9%. Although the credit support to the senior tranches has improved, the July 2014 monthly trustee report indicates that $12.1 million of the underlying collateral is scheduled to mature after the notes' stated maturity. This represents 5.65% of the underlying collateral immediately following the July 15 payment date. S&P's analysis included a sensitivity test that evaluated the affect of the market-value risk on this exposure to long-dated securities. Although S&P's cash flow analysis indicated that it could raise the rating on the class B notes to 'A+ (sf)', S&P only raised the rating to 'A- (sf)' based on the results of this sensitivity test. S&P's rating affirmations on the class C and D notes reflect the availability of adequate credit support at their current rating levels. As mentioned, S&P's review of this transaction included a cash flow analysis, based on the portfolio and transaction as reflected in the aforementioned trustee report, to estimate future performance. In line with S&P's criteria, its cash flow scenarios applied forward-looking assumptions on the expected timing and pattern of defaults, as well as on recoveries upon default, under various interest rate, and macroeconomic scenarios. In addition, S&P's analysis considered the transaction's ability to pay timely interest and/or ultimate principal to each of the rated tranches. The results of the cash flow analysis demonstrated, in S&P's view, that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with this rating action. S&P will continue to review its ratings on the notes and assess whether they remain consistent with the credit enhancement available to support them, and S&P will take rating actions as it deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS Waterfront CLO 2007-1 Ltd. Cash flow Previous implied Cash flow Final Class rating rating cushion(i) rating A-1 AA+ (sf)/Watch Pos AAA (sf) 10.03% AAA (sf) A-2 AA (sf)/Watch Pos AA+ (sf) 9.36% AA+ (sf) A-3 AA- (sf)/Watch Pos AA+ (sf) 3.80% AA+ (sf) B BBB+ (sf)/Watch Pos A+ (sf) 0.47% A- (sf) C BBB- (sf) BBB- (sf) 2.34% BBB- (sf) D BB (sf) BB (sf) 1.49% BB (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined below. Correlation scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AA+ (sf) AA+ (sf) AA+ (sf) AAA (sf) AA+ (sf) A-3 AA+ (sf) AA+ (sf) AA (sf) AA+ (sf) AA+ (sf) B A+ (sf) A- (sf) A- (sf) A+ (sf) A- (sf) C BBB- (sf) BB+ (sf) BBB- (sf) BBB+ (sf) BBB- (sf) D BB (sf) B+ (sf) BB (sf) BB+ (sf) BB (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AA+ (sf) AA+ (sf) AA- (sf) AA+ (sf) A-3 AA+ (sf) AA+ (sf) A+ (sf) AA+ (sf) B A+ (sf) A- (sf) BBB- (sf) A- (sf) C BBB- (sf) BB+ (sf) BB- (sf) BBB- (sf) D BB (sf) B+ (sf) CCC (sf) BB (sf) RATINGS LIST Waterfront CLO 2007-1 Ltd. Rating Class Identifier To From A-1 941574AA3 AAA (sf) AA+ (sf)/Watch Pos A-2 941574AB1 AA+ (sf) AA (sf)/Watch Pos A-3 941574AC9 AA+ (sf) AA- (sf)/Watch Pos B 941574AD7 A- (sf) BBB+ (sf)/Watch Pos C 941574AE5 BBB- (sf) BBB- (sf) D 941574AF2 BB (sf) BB (sf) WFRBS COMMERCIAL 2012-C8: Moody's Affirms C Rating on Cl. G Notes ----------------------------------------------------------------- Moody's Investors Service has affirmed the ratings of 15 classes of WFRBS Commercial Mortgage Trust, Commercial Mortgage Pass- Through Certificates, Series 2012-C8 as follows: Cl. A-1, Affirmed Aaa (sf); previously on Aug 1, 2013 Affirmed Aaa (sf) Cl. A-2, Affirmed Aaa (sf); previously on Aug 1, 2013 Affirmed Aaa (sf) Cl. A-3, Affirmed Aaa (sf); previously on Aug 1, 2013 Affirmed Aaa (sf) Cl. A-FL, Affirmed Aaa (sf); previously on Aug 1, 2013 Affirmed Aaa (sf) Cl. A-FX, Affirmed Aaa (sf); previously on Aug 1, 2013 Affirmed Aaa (sf) Cl. A-S, Affirmed Aaa (sf); previously on Aug 1, 2013 Affirmed Aaa (sf) Cl. A-SB, Affirmed Aaa (sf); previously on Aug 1, 2013 Affirmed Aaa (sf) Cl. B, Affirmed Aa2 (sf); previously on Aug 1, 2013 Affirmed Aa2 (sf) Cl. C, Affirmed A2 (sf); previously on Aug 1, 2013 Affirmed A2 (sf) Cl. D, Affirmed Baa1 (sf); previously on Aug 1, 2013 Affirmed Baa1 (sf) Cl. E, Affirmed Baa3 (sf); previously on Aug 1, 2013 Affirmed Baa3 (sf) Cl. F, Affirmed Ba2 (sf); previously on Aug 1, 2013 Affirmed Ba2 (sf) Cl. G, Affirmed B2 (sf); previously on Aug 1, 2013 Affirmed B2 (sf) Cl. X-A, Affirmed Aaa (sf); previously on Aug 1, 2013 Affirmed Aaa (sf) Cl. X-B, Affirmed Aa2 (sf); previously on Aug 1, 2013 Affirmed Aa2 (sf) Ratings Rationale The ratings on the P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on the IO classes were affirmed based on the credit performance (or the weighted average rating factor or WARF) of the referenced classes. Moody's rating action reflects a base expected loss of 2.6% of the current balance compared to 2.7% at Moody's last review. Moody's base expected loss plus realized losses is now 2.5% of the original pooled balance, compared to 2.7% at the last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 24 compared to 25 at Moody's last review. Deal Performance As of the July 17, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 2% to $1.28 billion from $1.30 billion at securitization. The certificates are collateralized by 80 mortgage loans ranging in size from less than 1% to 12% of the pool, with the top ten loans constituting 54% of the pool. The pool contains no loans with investment-grade structured credit assessments and no defeased loans. Three loans, constituting just over 1% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. There are no loans in special servicing. The top three performing conduit loans represent 27% of the pool balance. The largest loan is the 100 Church Street Loan ($150 million -- 12% of the pool), which represents a participation interest in a $230 million mortgage loan secured by a 1.1 million square foot office property in Lower Manhattan. The top three tenants at the property account for over 62% of the property's net rentable area (NRA) and include the City of New York, the largest tenant, and New York State. Since securitization the City of New York expanded into an additional 132,000 square feet, helping to boost occupancy to 94% in March 2014, up from 84% at securitization. Moody's LTV and stressed DSCR are 102% and 0.96X, respectively, compared to 103% and 0.94X at prior review. The second largest loan is the Brennan Industrial Portfolio Loan ($103 million -- 8% of the pool). The loan is secured by 20 industrial and flex properties totaling 2.4 million square feet and located across 12 U.S. states. The portfolio was 100% leased as of March 2014, unchanged from at securitization. Each property is occupied by a single tenant and eight properties serve as headquarters for the respective tenants. Moody's LTV and stressed DSCR are 86% and 1.33X, respectively, compared to 87% and 1.31X at the last review. The third largest loan is the Northridge Fashion Center Loan ($87 million -- 7% of the pool). The Loan represents a participation interest in a larger, $240 million mortgage loan, and is secured by a regional mall in Northridge, California. Mall anchors include Macy's, Sears, and JC Penney. Mall occupancy was 94% as of March 2014, up from the 90% reported at securitization. Moody's LTV and stressed DSCR are 89% and, 1.09X, respectively, compared to 98% and 1.00X at the last review. WHITEHORSE IX: Moody's Rates $8.25MM Class F Notes 'B2' ------------------------------------------------------- Moody's Investors Service has assigned ratings to seven classes of notes issued by WhiteHorse IX, Ltd. $252,000,000 Class A Senior Secured Floating Rate Notes due 2026 (the "Class A Notes"), Definitive Rating Assigned Aaa (sf) $32,500,000 Class B-1 Senior Secured Floating Rate Notes due 2026 (the "Class B-1 Notes"), Definitive Rating Assigned Aa2 (sf) $20,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2026 (the "Class B-2 Notes"), Definitive Rating Assigned Aa2 (sf) $22,750,000 Class C Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Definitive Rating Assigned A2 (sf) $24,250,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Definitive Rating Assigned Baa3 (sf) $19,500,000 Class E Junior Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Definitive Rating Assigned Ba3 (sf) $8,250,000 Class F Junior Secured Deferrable Floating Rate Notes due 2026 (the "Class F Notes"), Definitive Rating Assigned B2 (sf) The Class A Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C Notes, the Class D Notes, the Class E Notes and the Class F Notes are referred to herein, collectively, as the "Rated Notes." Ratings Rationale Moody's ratings of the Rated Notes address the expected losses posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. WhiteHorse IX is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90% of the portfolio must consist of senior secured loans and eligible investments, and up to 10% of the portfolio may consist of second lien loans and senior unsecured loans. The Issuer's documents require the portfolio to be at least 85% ramped as of the closing date. H.I.G. WhiteHorse Capital, LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer has issued subordinated notes. The transaction incorporates interest and par coverage tests 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 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $400,000,000 Diversity Score: 55 Weighted Average Rating Factor (WARF): 3005 Weighted Average Spread (WAS): 4.00% Weighted Average Coupon (WAC): 7.00% Weighted Average Recovery Rate (WARR): 49.0% Weighted Average Life (WAL): 8 years Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that would lead to an upgrade or downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated 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 Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 3005 to 3455) Rating Impact in Rating Notches Class A Notes: 0 Class B-1 Notes: -2 Class B-2 Notes: -2 Class C Notes: -2 Class D Notes: -1 Class E Notes: 0 Class F Notes: -1 Percentage Change in WARF -- increase of 30% (from 3005 to 3906) Rating Impact in Rating Notches Class A Notes: -1 Class B-1 Notes: -3 Class B-2 Notes: -3 Class C Notes: -4 Class D Notes: -2 Class E Notes: -1 Class F Notes: -3 The V Score for this transaction is Medium/High. This V Score has been assigned 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 and 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. * Moody's Takes Action on $144MM of Alt-A RMBS Issued in 2005 ------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of two tranches from one transaction and downgraded the ratings of eight tranches from two transactions backed by Alt-A RMBS loans. Complete rating actions are as follows: Issuer: First Horizon Alternative Mortgage Securities Trust 2005- FA10 Cl. II-A-1, Downgraded to Caa1 (sf); previously on Aug 17, 2012 Downgraded to B2 (sf) Issuer: First Horizon Alternative Mortgage Securities Trust 2005- FA5 Cl. I-A-1, Downgraded to Caa2 (sf); previously on Sep 16, 2010 Downgraded to Caa1 (sf) Cl. I-A-2, Downgraded to Caa2 (sf); previously on Sep 16, 2010 Downgraded to Caa1 (sf) Cl. I-A-3, Downgraded to Caa2 (sf); previously on Sep 16, 2010 Downgraded to Caa1 (sf) Cl. I-A-4, Downgraded to Caa2 (sf); previously on Sep 16, 2010 Downgraded to Caa1 (sf) Cl. I-A-6, Downgraded to Caa2 (sf); previously on Sep 16, 2010 Downgraded to Caa1 (sf) Cl. I-A-PO, Downgraded to Caa2 (sf); previously on Sep 16, 2010 Downgraded to Caa1 (sf) Cl. III-A-2, Downgraded to C (sf); previously on Sep 16, 2010 Downgraded to Caa2 (sf) Issuer: Nomura Asset Acceptance Corporation, Alternative Loan Trust, Series 2005-WF1 Cl. I-A, Upgraded to Ba3 (sf); previously on Jul 12, 2010 Downgraded to B3 (sf) Cl. II-A-2, Upgraded to Ba3 (sf); previously on Jul 12, 2010 Downgraded to B2 (sf) Ratings Rationale The actions are a result of the recent performance of the underlying pools and reflect Moody's updated loss expectations on the pools. The ratings upgraded are a result of improving collateral performance and credit enhancement available to bonds. The ratings downgraded are due to weaker collateral performance. In addition, the rating action on First Horizon Alternative Mortgage Securities Trust 2005-FA5 reflects the correction of an error in the cash flow model previously used by Moody's in rating this transaction. In prior rating actions, the cash flow model applied losses to classes IIIA1 and IIIA2 pro rata, instead of allocating the pro rata share of class IIIA1 losses to class IIIA2. The error has now been corrected, and to the action reflects this change. The principal methodology used in these ratings was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.1% in June 2014 from 7.5% in June 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. Finally, 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. * Moody's Takes Action on $122-Mil. of RMBS Issued 2004 to 2005 --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of 19 tranches from six transactions backed by Alt-A and Option ARM RMBS loans, issued by multiple issuers. Complete rating actions are as follows: Issuer: HarborView Mortgage Loan Trust 2004-10 Cl. X-1, Upgraded to B1 (sf); previously on Jun 29, 2012 Downgraded to B3 (sf) Cl. X-2, Upgraded to Ba3 (sf); previously on Jun 29, 2012 Downgraded to B3 (sf) Issuer: HarborView Mortgage Loan Trust 2005-11 Cl. 2-A-1A, Upgraded to Ba1 (sf); previously on Sep 27, 2013 Upgraded to Ba3 (sf) Cl. 2-A-1B, Upgraded to Caa3 (sf); previously on Dec 5, 2010 Downgraded to Ca (sf) Cl. X, Upgraded to Caa2 (sf); previously on Feb 22, 2012 Downgraded to Caa3 (sf) Issuer: Structured Asset Securities Corp Trust 2004-11XS Cl. 2-M1, Upgraded to Ba2 (sf); previously on Oct 3, 2013 Upgraded to Ba3 (sf) Cl. 2-M2, Upgraded to Caa1 (sf); previously on Oct 3, 2013 Upgraded to Caa2 (sf) Issuer: Structured Asset Securities Corp Trust 2004-19XS Cl. A3B, Upgraded to Ba2 (sf); previously on May 14, 2012 Downgraded to B1 (sf) Cl. A4, Upgraded to Baa1 (sf); previously on May 14, 2012 Confirmed at Baa3 (sf) Cl. A5, Upgraded to Ba1 (sf); previously on Mar 2, 2011 Downgraded to Ba2 (sf) Cl. A6A, Upgraded to Baa3 (sf); previously on Mar 2, 2011 Downgraded to Ba1 (sf) Cl. A6B, Upgraded to Baa1 (sf); previously on May 14, 2012 Confirmed at Baa2 (sf) Cl. A6C, Upgraded to Ba1 (sf); previously on Mar 2, 2011 Downgraded to Ba2 (sf) Issuer: Structured Asset Securities Corp Trust 2004-21XS Cl. 2-A5B, Upgraded to Ba2 (sf); previously on May 14, 2012 Downgraded to B1 (sf) Cl. 2-A6B, Upgraded to Ba1 (sf); previously on May 14, 2012 Downgraded to Ba3 (sf) Issuer: Structured Asset Securities Corp Trust 2004-6XS Cl. A3, Upgraded to Baa3 (sf); previously on May 14, 2012 Downgraded to Ba2 (sf) Cl. A5A, Upgraded to Baa3 (sf); previously on May 14, 2012 Downgraded to Ba2 (sf) Cl. A5B, Upgraded to Baa3 (sf); previously on May 14, 2012 Downgraded to Ba2 (sf) Underlying Rating: Upgraded to Baa3 (sf); previously on May 14, 2012 Downgraded to Ba2 (sf) Financial Guarantor: Ambac Assurance Corporation (Segregated Account - Unrated) Cl. A6, Upgraded to Baa2 (sf); previously on May 14, 2012 Confirmed at Baa3 (sf) Ratings Rationale The majority of the actions are a result of the recent performance of the underlying pools and reflect Moody's updated loss expectations on the pools. The ratings upgraded are a result of improving performance and credit enhancement available to these bonds. In addition, Moody's has upgraded the ratings of Class X-1 and X-2 issued by Harborview Mortgage Loan Trust 2004-10 to reflect the correction of a prior error. In our June 2012 rating action, the notional amounts of these interest-only securities were linked to the wrong tranches. The error has now been corrected, and the actions reflect this change. The principal methodology used in these ratings was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.2% in July 2014 from 7.3% in July 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. Finally, 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. * Moody's Takes Action on $48MM of Alt-A RMBS Issued 2003-2004 -------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of one tranche and downgraded the ratings of ten tranches from four transactions backed by Alt-A RMBS loans, issued by multiple issuers. Complete rating actions are as follows: Issuer: MASTR Adjustable Rate Mortgages Trust 2003-3 Cl. 1-A-1, Downgraded to Ba1 (sf); previously on May 2, 2012 Downgraded to Baa2 (sf) Issuer: MASTR Adjustable Rate Mortgages Trust 2004-3 Cl. 4-A-1, Downgraded to Ba3 (sf); previously on May 2, 2012 Downgraded to Ba1 (sf) Cl. 4-A-2, Downgraded to Ba3 (sf); previously on May 2, 2012 Downgraded to Ba1 (sf) Cl. 4-A-X, Downgraded to Ba3 (sf); previously on May 2, 2012 Downgraded to Ba1 (sf) Cl. 7-A-1, Downgraded to Ba2 (sf); previously on May 2, 2012 Confirmed at Baa3 (sf) Cl. 7-A-X, Downgraded to Ba2 (sf); previously on May 2, 2012 Confirmed at Baa3 (sf) Issuer: MASTR Adjustable Rate Mortgages Trust 2004-9 Cl. M-2, Upgraded to B3 (sf); previously on Feb 15, 2013 Affirmed Caa2 (sf) Issuer: Structured Asset Securities Corp Trust 2004-12H Cl. 1A, Downgraded to B2 (sf); previously on Mar 21, 2011 Downgraded to Ba3 (sf) Cl. 1A-IO, Downgraded to B2 (sf); previously on May 14, 2012 Confirmed at Ba3 (sf) Cl. 1A-PO, Downgraded to B2 (sf); previously on Mar 21, 2011 Downgraded to Ba3 (sf) Cl. 2A, Downgraded to Caa2 (sf); previously on May 14, 2012 Confirmed at B3 (sf) Ratings Rationale The actions are a result of the recent performance of the underlying pools and reflect Moody's updated loss expectations on the pools. The ratings upgraded are a result of improving collateral performance and credit enhancement available to bonds. The ratings downgraded are due to weaker collateral performance. The principal methodology used in these ratings was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.1% in June 2014 from 7.5% in June 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. Finally, 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. * Moody's Raises Ratings on $31.5MM of RMBS Issued by Two Issuers ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of eleven tranches issued by two issuers. The tranches are backed by Prime Jumbo RMBS loans issued from 2004. Complete rating actions are as follows: Issuer: Citigroup Mortgage Loan Trust, Series 2004-HYB1 Cl. A-2, Upgraded to B3 (sf); previously on Feb 27, 2013 Upgraded to Caa2 (sf) Cl. A-3-1, Upgraded to Ba3 (sf); previously on Feb 27, 2013 Affirmed B1 (sf) Cl. A-3-2, Upgraded to Ba3 (sf); previously on Feb 27, 2013 Affirmed B1 (sf) Cl. A-4-1, Upgraded to B2 (sf); previously on Feb 27, 2013 Affirmed Caa1 (sf) Cl. A-4-2, Upgraded to B3 (sf); previously on Feb 27, 2013 Affirmed Caa2 (sf) Cl. IO-3-1, Upgraded to Ba3 (sf); previously on Feb 27, 2013 Affirmed B1 (sf) Cl. IO-3-2, Upgraded to Ba3 (sf); previously on Feb 27, 2013 Affirmed B1 (sf) Cl. B-1, Upgraded to Ca (sf); previously on Feb 27, 2013 Affirmed C (sf) Issuer: GSR Mortgage Loan Trust 2004-13F Cl. 3A-3, Upgraded to Ba3 (sf); previously on Mar 21, 2012 Confirmed at B1 (sf) Cl. 4A-1, Upgraded to Ba3 (sf); previously on Mar 21, 2012 Downgraded to B1 (sf) Cl. 4A-2, Upgraded to Ba3 (sf); previously on Mar 21, 2012 Downgraded to B1 (sf) Ratings Rationale The actions are a result of the recent performance of the underlying pools and reflect Moody's updated loss expectations on the pools. The rating upgrades are due to improving collateral performance and/or buildup of credit enhancement. The principal methodology used in these ratings was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.1% in June 2014 down from 7.5% in June 2013. Moody's forecasts an unemployment central range of 6.0% to 7.0% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. * Moody's Takes Action on $5.9MM of Prime Jumbo RMBS by 2 Issuers ----------------------------------------------------------------- Moody's Investors Service has upgraded the ratings of two tranches and downgraded the ratings of two tranches issued by two issuers. The tranches are backed by Prime Jumbo RMBS loans issued from 2004 and 2007. Complete rating actions are as follows: Issuer: Chase Mortgage Finance Trust, Series 2004-S3 Cl. A-P, Downgraded to Ba2 (sf); previously on Aug 30, 2013 Downgraded to Baa3 (sf) Cl. IA-1, Downgraded to Ba1 (sf); previously on Aug 30, 2013 Downgraded to Baa2 (sf) Issuer: Citicorp Mortgage Securities Trust, Series 2007-4 Cl. IIIA-1, Upgraded to B2 (sf); previously on Jun 4, 2010 Downgraded to Caa1 (sf) Cl. IIIA-IO, Upgraded to B2 (sf); previously on Jun 4, 2010 Downgraded to Caa1 (sf) Ratings Rationale The actions are primarily a result of the recent performance of the underlying pools and reflect Moody's updated loss expectation on the pools. The rating upgrades are due to improving collateral performance. The rating downgrades are a result of deteriorating performance and structural features resulting in higher expected losses for the bond than previously anticipated. The rating actions also reflect corrections to the cash-flow models used by Moody's in rating these transactions. In prior rating actions, the calculations of principal payments to the principal-only bonds were modeled incorrectly. The errors have now been corrected, and rating actions reflect these changes. The principal methodology used in these ratings was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.1% in June 2014 down from 7.5% in June 2013. Moody's forecasts an unemployment central range of 6.0% to 7.0% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. Finally, 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. * Moody's Takes Action on 16 Tranches on $336MM of RMBS ------------------------------------------------------- Moody's Investors Service has upgraded the ratings of 16 tranches backed by Manufactured Housing RMBS loans, issued by miscellaneous issuers. Complete rating actions are as follows: Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series 2006-MH1 Cl. M-1, Upgraded to Baa3 (sf); previously on Sep 10, 2013 Upgraded to Ba2 (sf) Cl. M-2, Upgraded to Caa1 (sf); previously on Sep 10, 2013 Upgraded to Caa3 (sf) Issuer: Conseco Finance Securitizations Corp. Series 2002-1 Class M-1-A, Upgraded to B1 (sf); previously on Aug 2, 2006 Downgraded to B3 (sf) Class M-1-F, Upgraded to B1 (sf); previously on Aug 2, 2006 Downgraded to B3 (sf) Issuer: Green Tree Financial Corporation MH 1995-04 B-1, Upgraded to Baa3 (sf); previously on Sep 10, 2013 Upgraded to Ba1 (sf) Issuer: Green Tree Financial Corporation MH 1995-05 B-1, Upgraded to Baa3 (sf); previously on Sep 10, 2013 Upgraded to Ba1 (sf) Issuer: Green Tree Financial Corporation MH 1995-07 B-1, Upgraded to Ba3 (sf); previously on Dec 29, 2003 Downgraded to B3 (sf) Issuer: Green Tree Financial Corporation MH 1995-08 B-1, Upgraded to B2 (sf); previously on Mar 30, 2009 Downgraded to Caa1 (sf) Issuer: Green Tree Financial Corporation MH 1996-01 M-1, Upgraded to A3 (sf); previously on Dec 29, 2003 Downgraded to Baa1 (sf) Issuer: Green Tree Financial Corporation MH 1998-04 A-5, Upgraded to Ba1 (sf); previously on Aug 2, 2006 Downgraded to Ba3 (sf) A-6, Upgraded to Ba1 (sf); previously on Aug 2, 2006 Downgraded to Ba3 (sf) A-7, Upgraded to Ba1 (sf); previously on Aug 2, 2006 Downgraded to Ba3 (sf) Issuer: Green Tree Financial Corporation MH 1998-07 A-1, Upgraded to Baa3 (sf); previously on Aug 2, 2006 Downgraded to Ba1 (sf) Issuer: Greenpoint Manufactured Housing Contract Trust 1999-5 Cl. M-1A, Upgraded to Ba1 (sf); previously on Sep 10, 2013 Upgraded to Ba3 (sf) Cl. M-1B, Upgraded to Ba3 (sf); previously on Sep 10, 2013 Upgraded to B1 (sf) Issuer: Oakwood Mortgage Investors, Inc. Series 1997-D M, Upgraded to Baa3 (sf); previously on Sep 10, 2013 Upgraded to Ba1 (sf) Ratings Rationale The actions are a result of the recent performance of the underlying pools and reflect Moody's updated loss expectations on the pools. The upgrade rating actions are primarily due to the build-up in credit enhancement due to sequential pay structures and non-amortizing subordinate bonds. Performance on the underlying pools has remained generally stable from Moody's last review. The principal methodology used in these ratings was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.1% in June 2014 from 7.5% in June 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. Finally, 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. * S&P Takes Actions on 10 U.S. Synthetic CDO Deals After Review --------------------------------------------------------------- Standard & Poor's Ratings Services took various rating actions on 10 tranches from 10 synthetic collateralized debt obligation (CDO) transactions. The rating actions follow S&P's monthly review of synthetic CDO transactions. The CreditWatch positive placements and rating upgrades reflect the transactions' seasoning, the rating stability of the obligors in the underlying reference portfolios the past few months, and the synthetic rated overcollateralization (SROC) ratios that had risen above 100% at the next highest rating level. The affirmation follows S&P's monthly SROC review and reflects rating stability in the reference portfolio and SROC ratios that were at or above 100% at the current rating level. RATING AND CREDITWATCH ACTIONS Athenee CDO PLC Series 2007-12 Rating Class To From B BB (sf) BB- (sf)/Watch Pos Cloverie PLC Series 2007-43 Rating Class To From Notes BB (sf)/Watch Pos BB (sf) Cloverie PLC Series 2007-44 Rating Class To From Notes BB (sf)/Watch Pos BB (sf) Credit Default Swap CDS Reference No. Torino II Rating Class To From Tranche CCC-srb (sf)/Watch Pos CCC-srb (sf) Credit Default Swap CDO No. 795246 Rating Class To From Tranche Bsrb (sf)/Watch Pos Bsrb (sf) Infiniti SPC Ltd. Series 10A-2 Rating Class To From 10A-2 BBB+ (sf)/Watch Pos BBB+ (sf) Infiniti SPC Ltd. Series 10B-1 Rating Class To From 10B-1 BB (sf) BB- (sf)/Watch Pos Marvel Finance 2007-1 LLC Series 2007-1 Rating Class To From IA BB+ (sf)/Watch Pos BB+ (sf) Marvel Finance 2007-4 LLC Series 2007-4 Rating Class To From IA BBB (sf)/Watch Pos BBB (sf) Newport Waves CDO Series 2 Rating Class To From A1-$FMS BBB+ (sf) BBB+ (sf)/Watch Pos * S&P Raises 11 Rating on 4 CDO Transactions -------------------------------------------- Standard & Poor's Ratings Services raised its ratings on 11 classes from four U.S. cash flow trust-preferred collateralized debt obligation (CDO) transactions and removed nine of these ratings from CreditWatch with positive implications. The upgrades mainly reflect the improved credit quality of the underlying trust-preferred securities, which are mainly issued by financial institutions, as well as improvement in principal coverage ratios due to paydowns on the senior tranches. The paydowns have generally accelerated over the past year due to increased redemption of the underlying trust preferred securities. Most of the transactions' senior notes have also benefitted from the excess spread that was captured because of overcollateralization (O/C) ratio failures, leading to further paydowns to the senior notes. Since S&P's last rating actions, the aggregate balance of defaulted and deferred obligations in each of the four transactions' collateral portfolios decreased. This was primarily due to a decrease in the number of underlying trust-preferred securities deferring their interest payments. MMCapS Funding XVII Ltd. continues to fail its class C principal coverage test. As of the May 27, 2014, trustee report, the class C principal coverage test was 97.81% compared with a required minimum of 102.10%. As a result, the transaction continues to divert available interest proceeds (after payment the class C-1 and C-2 interest) to pay down the class A-1 notes. After the June 2014 payment date, the outstanding class A-1 note balance is $69.28 million (representing approximately 42.76% of its balance at issuance). This is down from $94.64 million outstanding as of the May 2013 trustee report, which S&P used for its last rating action. Over this same time period, the aggregate balance of defaulted and deferred obligations in the underlying portfolio dropped by $8.00 million. Preferred Term Securities XVI Ltd. continues to fail all of its principal coverage tests. As of the June 2014 trustee report, the most senior principal coverage test was 119.48% compared with a required minimum of 128.00%. The transaction is currently benefiting the rated notes by diverting excess interest proceeds to pay down the class A-1 notes in connection with this failure, which is causing a shortfall in the payment of interest to the unrated class B, C, and D notes. Following the June 2014 distribution, the balance of the class A-1 notes is $209.10 million, which is 63.90% of its balance at issuance. This compares with $270.35 million outstanding in March 2012 trustee report, which S&P used for its last rating action. The transaction has also seen a modest improvement in the total balance of defaulted and deferred obligations in the underlying portfolio, with decreases of $7.60 million and $74.92 million, respectively, over the same time period. Preferred Term Securities XXIII Ltd. is currently failing its class C and D mezzanine coverage tests. As a result of the class C coverage test failure, the transaction is diverting available interest proceeds to pay down each of the notes pro rata, which is causing a deferral of interest on the class D notes. Since the March 2012 trustee report (which S&P used for its last rating action), total paydown to all notes in the transaction was $143.57 million, with $119.50 million allocated to the rated notes. Though the transaction has seen an increase of $10.00 million in defaulted obligations over that time period, deferred obligations dropped by $75.50 million, which translates to a net positive movement in the credit quality of the underling collateral. Trapeza Edge CDO Ltd. had paid down about 36% of its class A-1 notes following the failure of its class B O/C test. Since the transaction is in compliance with all its coverage tests, it is no longer diverting excess interest proceeds to pay down the class A- 1 notes. As per the June 2014 monthly trustee report, the class B O/C ratio is 105.42% compared with its required minimum of 104.49%. This represents a large increase from the 96.34% result in May 2012, at the time of S&P's last rating action. In addition, the aggregate balance of defaulted and deferred obligations dropped by $16.2 million over the same time period. S&P's review of these transactions included a cash flow analysis, based on the portfolio and transactions, as reflected in the aforementioned trustee reports, to estimate future performance. In line with S&P's criteria, its cash flow scenarios applied forward-looking assumptions on the expected timing and pattern of defaults, and recoveries upon default, under various interest rate and macroeconomic scenarios. In addition, S&P's analysis considered the transaction's ability to pay timely interest, ultimate principal, or both to each of the rated tranches. The cash flow analysis results demonstrated, in S&P's view, that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with these rating actions. S&P 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 S&P will take further rating actions as it deems necessary. CAPITAL STRUCTURE AND KEY METRICS COMPARISON MMCapS Funding XVII Ltd. Notional balance (Mil. $) Class May 2013 (i) May 2014 A-1 94.64 69.28 (ii) A-2 19.50 19.50 B 33.00 33.00 C-1 35.48 35.48 C-2 35.48 35.48 Principal Coverage Tests (%) A/B 139.01 154.70 C 93.78 97.81 (i) Trustee report used for our July 2013 rating actions. (ii) Following the June 2014 distribution date. Preferred Term Securities XVI Ltd. Notional balance (Mil. $) Class March 2012 (i) June 2014 (ii) A-1 270.35 209.10 A-2 69.90 69.90 A-3 12.00 12.00 B 65.10 67.36 C 81.80 85.82 D 45.39 48.90 Principal Coverage Tests (%) Senior (A) 87.69 120.13 B 74.01 97.55 C 61.88 78.70 D 56.72 70.89 (i) Trustee report used for our June 2012 rating actions. (ii) Following the June 2014 distribution date. Preferred Term Securities XXIII Ltd. Notional balance (Mil. $) Class March 2012 (i) June 2014 (ii) A-1 417.96 347.81 A-2 137.46 134.42 A-FP 214.99 168.67 B-1 67.34 64.26 B-2 34.48 29.55 B-FP 47.25 40.99 C-1 83.14 79.55 C-2 32.21 27.43 C-FP 44.14 42.72 D-1 77.34 82.28 D-FP 32.39 34.03 Coverage Tests (%) Senior (A) 122.10 141.05 B 102.31 116.85 C 87.18 98.15 D 79.14 87.30 (i) Trustee report used for our June 2012 rating actions. (ii) Following the June 2014 distribution date. Trapeza Edge CDO Ltd. Notional balance (Mil. $) Class May 2012 June 2014 A-1 140.48 124.42 A-2 26.00 26.00 A-3 32.00 32.00 B-1 50.50 50.50 B-2 22.50 22.50 O/C Tests (%) A 131.77 147.61 B 96.34 105.42 RATING ACTIONS MMCaps Funding XVII Ltd. Rating Class To From A-1 BBB (sf) BB+ (sf)/Watch Pos A-2 BB+ (sf) BB- (sf)/Watch Pos B B+ (sf) CCC (sf)/Watch Pos Preferred Term Securities XVI Ltd. Rating Class To From A-1 BBB-(sf) CCC+ (sf)/Watch Pos A-2 B+ (sf) CCC- (sf) A-3 B+ (sf) CCC- (sf) Preferred Term Securities XXIII Ltd. Rating Class To From A-1 BBB (sf) BB (sf)/Watch Pos A-2 BB+ (sf) B (sf)/Watch Pos A-FP BB+ (sf) B (sf)/Watch Pos Trapeza Edge CDO Ltd. Rating Class To From A-1 BBB (sf) BB+ (sf)/Watch Pos A-3 BB- (sf) B+ (sf)/Watch Pos * S&P Withdraws Ratings on 53 Classes From 19 CDO Transactions -------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings on 52 classes from 18 cash flow (CF) collateralized loan obligation (CLO) transactions and one class from one CF collateral debt obligation (CDO) transaction backed by commercial mortgage-backed securities (CMBS). The withdrawals follow the complete paydown of the notes as reflected in the most recent trustee-issued note payment reports: -- Ares Enhanced Loan Investment Strategy II Ltd. (CF CLO): optional redemption in July 2014; -- Babson CLO Ltd. 2006-I (CF CLO): senior-most tranches paid down, other rated tranches still outstanding; -- Ballyrock CLO 2006-2 Ltd. (CF CLO): optional redemption in July 2014; -- Black Diamond CLO 2013-1 Ltd. (CF CLO): class X notes(i) paid down, other rated tranches still outstanding; -- Blue Hill CLO Ltd. (CF CLO): class X notes(i) paid down, other rated tranches still outstanding; -- Callidus Debt Partners CLO Fund IV Ltd. (CF CLO): optional redemption in July 2014; -- Carlyle Global Market Strategies CLO 2013-4 Ltd. (CF CLO): class X notes(i) paid down, other rated tranches still outstanding; -- Denali Capital CLO VI Ltd. (CF CLO): senior-most tranches paid down, other rated tranches still outstanding; -- Eaton Vance CDO IX Ltd. (CF CLO): senior-most tranche paid down, other rated tranches still outstanding; -- Emporia Preferred Funding II Ltd. (CF CLO): senior-most tranches paid down, other rated tranches still outstanding; -- Fairway Loan Funding Co. (CF CLO): senior-most tranches paid down, other rated tranches still outstanding; -- Founders Grove CLO Ltd. (CF CLO): optional redemption in July 2014; -- Gulf Stream-Compass CLO 2005-II Ltd. (CF CLO): optional redemption in July 2014; -- Kennecott Funding Ltd. (CF CLO): senior-most tranche paid down, other rated tranches still outstanding; -- LCM IV Ltd. (CF CLO): last remaining rated tranches paid down; -- Madison Square 2004-1 Ltd. (CF CDO of CMBS): senior-most tranche paid down, other rated tranches still outstanding; -- Neuberger Berman CLO XVI Ltd. (CF CLO): class X notes(i) paid down, other rated tranches still outstanding; -- Pacifica CDO V Ltd. (CF CLO): optional redemption in July 2014; and -- Silverado CLO 2006-I Ltd. (CF CLO): senior-most tranche paid down, other rated tranches still outstanding. (i) An "X note" within a CLO is generally a note with a principal balance intended to be repaid early in the CLO's life using interest proceeds from the CLO's waterfall. RATINGS WITHDRAWN Ares Enhanced Loan Investment Strategy II Ltd. Rating Class To From A-1 NR AAA (sf) A-2 NR AAA (sf) B-1 NR AA (sf)/Watch Pos B-2 NR AA (sf)/Watch Pos C-1 NR A- (sf)/Watch Pos C-2 NR A- (sf)/Watch Pos Babson CLO Ltd. 2006-I Rating Class To From A-2 NR AAA (sf) A-2B NR AAA (sf) A-3 NR AAA (sf) Ballyrock CLO 2006-2 Ltd. Rating Class To From A NR AAA (sf) B NR AAA (sf) C NR AAA (sf) D NR AA+ (sf) E NR BBB+ (sf) Black Diamond CLO 2013-1 Ltd. Rating Class To From X NR AAA (sf) Blue Hill CLO Ltd. Rating Class To From X NR AAA (sf) Callidus Debt Partners CLO Fund IV Ltd. Rating Class To From A-1A NR AAA (sf) A-1B NR AAA (sf) A-2 NR AAA (sf) B NR AAA (sf) C NR AA- (sf) D NR BBB+ (sf) Carlyle Global Market Strategies CLO 2013-4 Ltd. Rating Class To From X NR AAA (sf) Denali Capital CLO VI Ltd. Rating Class To From A-1L NR AAA (sf) A-1LR NR AAA (sf) Eaton Vance CDO IX Ltd. Rating Class To From A-1A NR AAA (sf) Emporia Preferred Funding II Ltd. Rating Class To From A-1 NR AAA (sf) A-2 NR AAA (sf) A-3 NR AAA (sf) Fairway Loan Funding Co. Rating Class To From A-1L NR AAA (sf) A-1LV NR AAA (sf) Founders Grove CLO Ltd. Rating Class To From A-1 NR AAA (sf) A-2 NR AAA (sf) B NR AAA (sf) C NR AA+ (sf) D NR CCC+ (sf) Gulf Stream-Compass CLO 2005-II Ltd. Rating Class To From A-1 NR AAA (sf) A-2 NR AAA (sf) B NR AAA (sf) C NR AAA (sf) D NR BB+ (sf) Kennecott Funding Ltd. Rating Class To From B NR AAA (sf) LCM IV Ltd. Rating Class To From C NR AA (sf) D NR BB+ (sf) Madison Square 2004-1 Ltd. Rating Class To From O NR BB (sf) Neuberger Berman CLO XVI Ltd. Rating Class To From X NR AAA (sf) Pacifica CDO V Ltd. Rating Class To From A-1 NR AAA (sf) A-2 NR AAA (sf) B-1 NR AA+ (sf) B-2 NR AA+ (sf) C NR A+ (sf) D NR BB+ (sf) Silverado CLO 2006-I Ltd. Rating Class To From A-1-S NR AAA (sf) NR--Not rated. ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com by e-mail. On Thursdays, the TCR delivers a list of recently filed Chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to the nation's bankruptcy courts. The list includes links to freely downloadable of these small-dollar petitions in Acrobat PDF documents. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. The Sunday TCR delivers securitization rating news from the week then-ending. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Valerie Udtuhan, Howard C. Tolentino, Carmel Paderog, Meriam Fernandez, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Ivy B. Magdadaro, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2014. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $975 for 6 months delivered via e-mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Peter A. Chapman at 215-945-7000 or Nina Novak at 202-241-8200. *** End of Transmission ***