/raid1/www/Hosts/bankrupt/TCR_Public/141109.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, November 9, 2014, Vol. 18, No. 312
Headlines
ADAMS OUTDOOR 2010-1: Fitch Affirms 'BBsf' Rating on Class C Notes
ALESCO PREFERRED III: Moody's Affirms Ca Rating on 2 Note Classes
ALESCO PREFERRED XVII: Moody's Ups Rating on Cl. B Notes to Caa2
BANC OF AMERICA 2006-6: Moody's Affirms C Rating on 7 Certs
CARLYLE GLOBAL 2014-2: S&P Affirms B Rating on Class F Notes
CENTERLINE 2007-1: Moody's Affirms 'C' Rating on Class A-1 Certs
CITIGROUP 2014-J2: DBRS Finalizes BB Rating of Class B-4 Certs
COA CAERUS: Moody's Raises Rating on EUR9.5MM Cl. D Notes to Ba1
COLONY MULTIFAMILY 2014-1: Moody's Rates Cl. F Certificates 'B3'
COMM 2013-CCRE6: Moody's Affirms B2 Rating on Class F Certificate
COMM 2014-CCRE20: DBRS Finalizes BB Rating of Class E Certificates
COMM 2014-CCRE20: Fitch Expects to Rate Class F Certs 'B-sf'
CONTEGO CLO II: Moody's Assigns B2 Rating on EUR10.8-Mil. Notes
DRYDEN XII 2006-3: Moody's Ups Rating on Cl. A7-$F Notes to Caa2
GOLDEN KNIGHT II: Moody's Affirms Ba3 Rating on $13MM Cl. E Notes
IMPACT FUNDING 2014-1: DBRS Rates Class E Certs '(P)BB'
MACH ONE 2004-1: S&P Lowers Rating on Class M Notes to 'CC'
MARATHON CLO VI: S&P Affirms B Rating on Class E Notes
MAYPORT CLO: Moody's Raises Rating on $20MM Cl. B-2L Notes to Ba1
MMCAPS FUNDING XVII: Moody's Hikes Rating on $35MM Cl. C-2 Notes
MORGAN STANLEY 2006-IQ11: S&P Affirms CCC- Rating on E Notes
OAKTREE CLO 2014-2: S&P Assigns BB Rating on Class D Notes
PUTNAM STRUCTURED 2003-1: Moody's Affirms C Rating on 3 Notes
RESOURCE REAL 2006-1: Moody's Affirms Caa3 Rating on Cl. K Notes
SYMPHONY CLO V: Moody's Raises Rating on Class D Notes to Ba2
WACHOVIA BANK 2006-C24: S&P Lowers Rating on Class A-J Notes to B+
WELLS FARGO 2005-5: Moody's Ups Rating on 2 Debt Tranches to B1
WELLS FARGO 2014-C24: Fitch Expects to Rate Class X-D Certs B-
WFRBS COMMERCIAL 2012-C10: Moody's Affirms B2 Rating on Cl F Debt
ZAIS INVESTMENT IX: Moody's Hikes Rating on $58MM Notes to Ba3
ZIGGURAT CLO: Moody's Assigns (P)B2 Rating on $10MM Class F Notes
* S&P Lowers 65 Ratings on 53 U.S. RMBS Deals to 'Dsf'
*********
ADAMS OUTDOOR 2010-1: Fitch Affirms 'BBsf' Rating on Class C Notes
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Fitch Ratings affirms Adams Outdoor Advertising LP secured
billboard revenue notes, series 2010-1, as:
-- $232.25 million class A notes at 'Asf'; Outlook Stable;
-- $44 million class B notes at 'BBBsf'; Outlook Stable;
-- $57.25 million class C notes at 'BBsf'; Outlook Stable.
Key Rating Drivers
The affirmations are due to the stable performance of the
collateral since issuance. As Fitch monitors the transaction, the
possibility of upgrades may be limited due to the provision that
allows additional notes.
As part of its review, Fitch analyzed the financial information
provided by the master servicer, Midland Loan Services and the
issuer. As of Sept. 2014, the reported trailing 12-month (TTM)
net cash flow has increased to $60.2 million, compared with $59.6
million as of Fitch's last rating action. Due to the scheduled
amortization of the class A notes and the performance of the pool,
Fitch's calculated debt yield has increased to 16.8% from 16.2% a
year earlier.
The transaction represents a securitization in the form of notes
backed by outdoor advertising structures, with nearly 10,000
billboard faces and other advertising displays. The notes are
secured by: a pledge of the equity in the issuer, Adams Outdoor
Advertising (AOA), which owns the permits, billboard structures,
ground leases, and advertising contracts; and a lien on all of the
assets of the issuer.
AOA focuses on maximizing profitability of the portfolio through
the most effective combination of occupancy and rate levels. In
addition, AOA faces limited competition in its market as result of
the billboard permitting process and the significant federal,
state, and local regulations that limit supply and prohibit new
billboards.
Rating Sensitivities
Ratings on this transaction are expected to remain stable. As
indicated above, upgrades may be limited due to the provision
allowing the issuance of additional notes.
ALESCO PREFERRED III: Moody's Affirms Ca Rating on 2 Note Classes
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Moody's Investors Service has upgraded the ratings on the
following notes issued by Alesco Preferred Funding III, Ltd.:
$160,000,000 Class A-1 First Priority Senior Secured Floating
Rate Notes Due 2034 (current balance of $54,247,874.86),
Upgraded to Aaa (sf); previously on August 9, 2013 Upgraded to
Aa2 (sf)
$70,000,000 Class A-2 Second Priority Senior Secured Floating
Rate Notes Due 2034, Upgraded to Aa1 (sf); previously on August
9, 2013 Upgraded to A1 (sf)
Moody's also affirmed the ratings on the following notes:
$40,500,000 Class B-1 Mezzanine Secured Floating Rate Notes Due
2034 (current balance of $43,597,059 including deferred
interest of $3,097,059), Affirmed Ca (sf); previously on March
27, 2009 Downgraded to Ca (sf)
$63,500,000 Class B-2 Mezzanine Secured Fixed/Floating Rate
Notes Due 2034 (current balance of $68,355,883 including
deferred interest of $4,855,883), Affirmed Ca (sf); previously
on March 27, 2009 Downgraded to Ca (sf)
Alesco Preferred Funding III, Ltd., issued in March 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 deleveraging of the
Class A-1 notes which led to an increase in the transaction's
over-collateralization ratios since March 2014.
The Class A-1 notes have paid down by approximately 17% or $11.3
million since March 2014, using principal proceeds from the
redemption of the underlying assets and the diversion of excess
interest proceeds. Moody's also gave full par credit in its
analysis to two deferring assets that meet certain criteria,
totaling $11 million in par. As a result, the Class A-1 notes' par
coverage has improved to 353.51% from 292.23% since March 2014 by
Moody's calculations. Based on the trustee's October 2014 report,
the over-collateralization ratio of the Class A notes was 145.46%
(limit 130.0%), versus 141.29% on March 31, 2014, and that of the
Class B notes, 76.66% (limit 101.7%), versus 79.75% in March 2014.
The Class A-1 notes will continue to benefit from the diversion of
excess interest due to Class B over-collateralization test failure
and the use of proceeds from redemptions of any assets in the
collateral pool.
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 $191.8 million,
defaulted/deferring par of $24 million, a weighted average default
probability of 7.05% (implying a WARF of 626), 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 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 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 Q2-2014 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 405)
Class A-1: 0
Class A-2: 0
Class B-1: +1
Class B-2: +1
Assuming a two-notch downgrade to assets with below-investment
grade ratings or rating estimates (WARF of 919)
Class A-1: -1
Class A-2: 0
Class B-1: 0
Class B-2: 0
ALESCO PREFERRED XVII: Moody's Ups Rating on Cl. B Notes to Caa2
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Moody's Investors Service has upgraded the ratings on the
following notes issued by Alesco Preferred Funding XVII, Ltd.:
$16,000,000 Class A-2 Second Priority Senior Secured Floating
Rate Notes Due 2038, Upgraded to Baa1 (sf); previously on May 5,
2014 Upgraded to Baa3 (sf)
$44,000,000 Class B Deferrable Third Priority Secured Floating
Rate Notes Due 2038 (current balance of $47,256,060.26, including
deferred interest), Upgraded to Caa2 (sf); previously on June 27,
2013 Upgraded to Ca (sf)
Moody's also affirmed the rating on the following notes:
$236,000,000 Class A-1 First Priority Senior Secured Floating
Rate Notes Due 2038 (current balance of $188,248,196.47), Affirmed
A3 (sf); previously on May 5, 2014 Upgraded to A3 (sf)
Alesco Preferred Funding XVII, Ltd., issued in October, 2007, 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 resumption of
interest payments of a previously deferring asset and an increase
in the transaction's over-collateralization ratios since May 2014.
Since May 2014 a previously deferring bank, with a notional amount
of $6.45 million, resumed making interest payments on its TruPS.
Additionally, Moody's gave full par credit in its analysis to two
deferring assets that meet certain criteria, totaling $20 million
in par. The Class A-1 notes' par coverage has thus improved to
148.0% from 132.3% in May 2014, by Moody's calculations. Based on
the trustee's September 2014 report, the over-collateralization
ratio of the Class A notes was 129.1% (limit 131.23%), versus
125.7% in May 2014, the Class B notes was 105.0% (limit 113.13%),
versus 102.4% in May 2014, and that of the Class C notes, 88.6%
(limit 110.16%), versus 86.5% in May 2014. Moody's notes that the
trustee's September 2014 OC ratios do not reflect the $1.3 million
principal payment to the Class A-1 notes on September 23, 2014.
In addition, the Class A-1 notes have paid down by approximately
1.2% or $2.4 million since May 2014, from the diversion of excess
interest proceeds. 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 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 $278.6 million, defaulted/deferring par of $48.0
million, a weighted average default probability of 7.36% (implying
a WARF of 674), 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 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 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 Q2-2014 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 399)
Class A-1: +2
Class A-2: +2
Class B: +3
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 1054)
Class A-1: -2
Class A-2: -2
Class B: -2
Class C-1: 0
Class C-2: 0
BANC OF AMERICA 2006-6: Moody's Affirms C Rating on 7 Certs
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings on two classes
and affirmed the ratings on 17 classes of Banc of America
Commercial Mortgage Inc. Commercial Mortgage Pass-Through
Certificates, Series 2006-6 as follows:
Cl. A-1A, Affirmed Aaa (sf); previously on Dec 5, 2013 Affirmed
Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Dec 5, 2013 Affirmed Aaa
(sf)
Cl. A-3, Affirmed Aaa (sf); previously on Dec 5, 2013 Affirmed Aaa
(sf)
Cl. A-4, Affirmed Aaa (sf); previously on Dec 5, 2013 Affirmed Aaa
(sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Dec 5, 2013 Affirmed
Aaa (sf)
Cl. A-M, Upgraded to Baa2 (sf); previously on Dec 5, 2013 Affirmed
Ba1 (sf)
Cl. A-J, Upgraded to B2 (sf); previously on Dec 5, 2013 Affirmed
B3 (sf)
Cl. B, Affirmed Caa1 (sf); previously on Dec 5, 2013 Affirmed Caa1
(sf)
Cl. C, Affirmed Caa2 (sf); previously on Dec 5, 2013 Affirmed Caa2
(sf)
Cl. D, Affirmed Caa3 (sf); previously on Dec 5, 2013 Affirmed Caa3
(sf)
Cl. E, Affirmed Ca (sf); previously on Dec 5, 2013 Affirmed Ca
(sf)
Cl. F, Affirmed C (sf); previously on Dec 5, 2013 Affirmed C (sf)
Cl. G, Affirmed C (sf); previously on Dec 5, 2013 Affirmed C (sf)
Cl. H, Affirmed C (sf); previously on Dec 5, 2013 Affirmed C (sf)
Cl. J, Affirmed C (sf); previously on Dec 5, 2013 Affirmed C (sf)
Cl. K, Affirmed C (sf); previously on Dec 5, 2013 Affirmed C (sf)
Cl. L, Affirmed C (sf); previously on Dec 5, 2013 Affirmed C (sf)
Cl. M, Affirmed C (sf); previously on Dec 5, 2013 Affirmed C (sf)
Cl. XC, Affirmed Ba3 (sf); previously on Dec 5, 2013 Affirmed Ba3
(sf)
Ratings Rationale
The ratings on P&I classes A-M and A-J were upgraded based
primarily on a decline in Moody's anticipated losses.
The affirmations of the investment grade P&I classes are due to
key parameters, including Moody's loan-to-value (LTV) ratio,
Moody's stressed debt service coverage ratio (DSCR) and the
Herfindahl Index (Herf), remaining within acceptable ranges. The
ratings of the below investment grade P&I classes are consistent
with Moody's expected loss and thus are affirmed.
The rating of the IO Class, Class XC, is affirmed based on the
credit performance or WARF of its referenced classes.
Moody's rating action reflects a base expected loss of 13.3% of
the current balance compared to 14.2% at Moody's last review.
Moody's base expected loss plus realized losses is now 10.9% of
the original pooled balance, compared to 11.5% 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.
On October 9, 2014, Moody's issued a "Request for Comment" asking
for market feedback on proposed changes to the methodology it uses
to rate conduit and fusion CMBS transactions. If Moody's adopts
the new methodology as proposed, the changes could affect the
ratings of BACM 2006-6.
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 18 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 October 10, 2014 distribution date, the transaction's
aggregate certificate balance has decreased by 29% to $1.74
billion from $2.46 billion at securitization. The certificates are
collateralized by 90 mortgage loans ranging in size from less than
1% to 12% of the pool, with the top ten loans constituting 65% of
the pool. Seven loans, constituting 2% of the pool, have defeased
and are secured by US government securities.
Twenty-five loans, constituting 23% 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.
Thirteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $38.3 million (for an average loss
severity of 56%). Two loans, constituting 3% of the pool, are
currently in special servicing. The largest specially serviced
loan is the 1700 Twinbrook Office Center Loan ($39 million -- 2.2%
of the pool), which is secured by a 163,174 square foot (SF)
office building in Rockville, Maryland. The property was 78%
leased as of December 2013. The servicer has recognized an $21.5
million appraisal reduction for this loan.
Moody's estimates an aggregate $35 million loss for the specially
serviced loans (77% expected loss on average).
Moody's has assumed a high default probability for 20 poorly
performing loans, constituting 16% of the pool, and has estimated
an aggregate loss of $114 million (a 41% expected loss based on a
63% probability default) from these troubled loans.
Moody's received full year 2013 operating results for 91% of the
pool. Moody's weighted average conduit LTV is 102% compared to
109% 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 9.1%.
Moody's actual and stressed conduit DSCRs are 1.57X and 1.00X,
respectively, compared to 1.36X and 0.95X 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 Riverchase Galleria Loan ($305 million -- 12%
of the pool). This loan was modified in February 2012 into a $215
million A-note and a $90 million B-note. The loan is secured by a
580,000 SF retail center in Hoover, Alabama, 10 miles south of
Birmingham. Major tenants include Sears, JC Penney and Macy's. As
of December 2013, the property was 98% leased, compared to 94% at
last review. Moody's current LTV and stressed DSCR on the A-note
are 100% and 0.92X, respectively, compared to 102% and 0.90X at
the last review.
The second largest loan is the Empire Mall Loan ($176 million --
10% of the pool). The loan is secured by a one million SF mall
located in Sioux Falls, South Dakota. The mall is anchored by JC
Penney, Yonkers, Sears and Macy's. The property was 98% leased as
of June 2014 compared to 94% at last review. Moody's current LTV
and stressed DSCR are 92% and 1.02X, respectively, compared to
105% and 0.90X at last review.
The third largest loan is the LNR Warner Center Loan ($174 million
-- 10% of the pool). The loan is secured by five office properties
totaling 808,000 SF located in Woodland Hills, California. As of
June 2014, the property was 86% leased, compared to 91% at last
review. The servicer indicated a new tenant will be leasing
146,600 SF effective February 2015. Moody's stabilized value takes
into account the additional leasing. Moody's current LTV and
stressed DSCR are 103% and 0.98X, respectively, compared to 136%
and 0.73X at last review.
CARLYLE GLOBAL 2014-2: S&P Affirms B Rating on Class F Notes
------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on Carlyle
Global Market Strategies CLO 2014-2 Ltd./Carlyle Global Market
Strategies CLO 2014-2 LLC's $566.50 million floating-rate notes
following the transaction's effective date as of Sept. 4, 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. 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
Carlyle Global Market Strategies CLO 2014-2 Ltd./Carlyle Global
Market Strategies CLO 2014-2 LLC
Amount
Class Rating (Mil. $)
A AAA (sf) 377.00
B-1 AA (sf) 37.00
B-2 AA (sf) 43.00
C (deferrable) A (sf) 40.00
D (deferrable) BBB (sf) 31.50
E (deferrable) BB (sf) 26.40
F (deferrable) B (sf) 11.60
CENTERLINE 2007-1: Moody's Affirms 'C' Rating on Class A-1 Certs
----------------------------------------------------------------
Moody's Investors Service has affirmed the rating on the following
class issued by Centerline 2007-1 Resecuritization Trust:
Cl. A-1, Affirmed C (sf); previously on Nov 6, 2013 Affirmed
C (sf)
Ratings Rationale
Moody's has affirmed the rating on the transaction because its 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 and
ReRemic) transactions.
Centerline 2007-1 Resecuritization Trust is a static cash
transaction backed by a portfolio of: i) CRE CDOs (54.7% of the
current pool balance), and ii) commercial mortgage backed
securities (CMBS) (45.3%). As of the October 22, 2014 trustee
report, the aggregate certificate balance of the transaction has
decreased to $189.3 million from $985.9 million at issuance,
primarily due to realized losses on the collateral pool.
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 8,862,
compared to 9,163 at last review. The current ratings on the
Moody's-rated collateral and the assessments of the non-Moody's
rated collateral follow: A1-A3 (2.4% compared to 0.0% at last
review), Ba1-Ba3 (2.4% compared to 0.0% at last review), B1-B3
(2.4% compared to 4.2% compared at last review), and Caa1-Ca/C
(92.8% compared to 95.8% at last review).
Moody's modeled a WAL of 5.4 years compared to 8.9 years at last
review. The WAL is based on assumptions about extensions on the
underlying collateral.
Moody's modeled a fixed WARR of 0%, compared to 0.2% at last
review.
Moody's modeled a MAC of 0%, the same as that 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 certificates 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
certificates.
Moody's Parameter Sensitivities: Changes to any one or more of the
key parameters could have rating implications for some of the
rated certificates, 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 certificates are particularly
sensitive to changes in the recovery rates of the underlying
collateral and credit assessments. However, in light of the
performance indicators noted above, Moody's believes that it is
unlikely that the ratings announced are sensitive to further
change.
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.
CITIGROUP 2014-J2: DBRS Finalizes BB Rating of Class B-4 Certs
--------------------------------------------------------------
DBRS Inc. has finalized the following provisional ratings on the
Mortgage Pass Through Certificates, Series 2014-J2 issued by
Citigroup Mortgage Loan Trust 2014-J2 (the Trust):
-- $129.2 million Class A-1A at AAA (sf)
-- $51.8 million Class A-1B at AAA (sf)
-- $180.9 million Class A-1-IO at AAA (sf)
-- $180.9 million Class A-1 at AAA (sf)
-- $180.9 million Class A-1W at AAA (sf)
-- $8.9 million Class A-2 at AAA (sf)
-- $8.9 million Class A-2-IO at AAA (sf)
-- $8.9 million Class A-2W at AAA (sf)
-- $189.8 million Class A at AAA (sf)
-- $189.8 million Class A-IO at AAA (sf)
-- $189.8 million Class AW at AAA (sf)
-- $3.4 million Class B-1 at AA (sf)
-- $3.6 million Class B-2 at A (sf)
-- $2.6 million Class B-3 at BBB (sf)
-- $4.6 million Class B-4 at BB (sf)
Class A-1-IO, Class A-2-IO and Class A-IO are interest-only
certificates. The class balances represent notional amounts.
Class A-1, Class A-1W, Class A-2W, Class A, Class A-IO and Class
AW are exchangeable certificates. These classes can be exchanged
for combinations of base certificates as specified in the offering
documents.
Class A-1A, Class A-1B, Class A-1, Class A-1W and Class A-1-IO are
super senior certificates. These classes benefit from additional
protection from senior support certificates with respect to loss
allocation.
The AAA (sf) ratings in this transaction reflect the 8.55% of
credit enhancement provided by subordination. The AA (sf), A (sf),
BBB (sf) and BB (sf) ratings reflect 6.90%, 5.15%, 3.90% and 1.70%
of credit enhancement, respectively. Other than the specified
classes, DBRS does not rate any other classes in this transaction.
The certificates are backed by 290 loans with a total principal
balance of $207,557,447 as of the Cut-Off Date (October 1, 2014).
The mortgage loans were acquired by Citigroup Global Markets
Realty Corp. (Citi). The originators for the mortgage pool are
Stearns Lending, LLC (36.2%), Chicago Mortgage Solutions
Corporation d/b/a Interbank Mortgage Company (18.6%), Nationstar
Mortgage LLC (9.9%), Guaranteed Rate, Inc. (9.6%), PennyMac Corp.
(PennyMac 7.6%), Sierra Pacific Mortgage Company, Inc. (6.8%) and
various other originators each comprising less than 5% of the
mortgage loans.
The loans will be serviced by Fay Servicing, LLC (92.4%) and
PennyMac (7.6%). Deutsche Bank National Trust Company will act as
the Trust Administrator and Custodian. The transaction employs a
senior-subordinate shifting-interest cash flow structure that is
enhanced from a pre-crisis structure.
The ratings reflect transactional strengths that include high-
quality underlying assets, well-qualified borrowers and
satisfactory third-party due diligence review. Compared with two
most recent prime jumbo transactions issued under the same
Citigroup Mortgage Loan Trust shelf, this portfolio exhibited
generally weaker credit characteristics and more barbelled
distributions. In addition, the pool contains 12.3% 15-year
mortgages and no interest-only loans.
The originators provide traditional lifetime representations and
warranties to the Trust. The enforcement mechanism for breaches
of representations includes automatic breach reviews by a third-
party reviewer for any seriously delinquent loans or any loans
that incur loss upon liquidation, and the resolution of disputes
is ultimately subject to determination in an arbitration
proceeding. The loans also benefit from representations and
warranties backstopped by the sponsor, Citi, a wholly owned
subsidiary of Citigroup Inc. (DBRS rates Citigroup Inc. at A
(low), Stable), in the event of an originator's bankruptcy or
insolvency proceeding and if the originator fails to complete an
effective remedy. However, such backstop is subject to certain
sunset provisions that give consideration to prior loan
performance.
DBRS views the representations and warranties features for this
transaction to be consistent with recent DBRS-rated prime jumbo
transactions. Although the transaction employs a strong standard,
which includes automatic review of seriously delinquent loans,
mandatory arbitration and a sponsor backstop for representations
and warranties, the limited operating history and the weak
financial strength of certain originators and the sunset
provisions of the sponsor backstop still demand additional
penalties and credit enhancement protections. To capture the
perceived weaknesses, DBRS adjusted downward the origination
scores of certain lenders to account for the potential inability
to fulfill repurchase obligations. Such adjustment resulted in
increases in default and loss assumptions for the transaction.
COA CAERUS: Moody's Raises Rating on EUR9.5MM Cl. D Notes to Ba1
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the
following notes issued by COA Caerus CLO Ltd. (fka APIDOS CDO VI):
$181,500,000 Class A-1 Floating Rate Notes Due December 13, 2019,
Upgraded to Aaa (sf); previously on August 22, 2011 Confirmed at
Aa1 (sf);
$6,000,000 Class A-2 Floating Rate Notes Due December 13, 2019,
Upgraded to Aa1 (sf); previously on August 22, 2011 Upgraded to
Aa3 (sf);
$13,000,000 Class B Floating Rate Notes Due December 13, 2019,
Upgraded to A1 (sf); previously on August 22, 2011 Upgraded to A3
(sf);
$8,000,000 Class C Floating Rate Notes Due December 13, 2019,
Upgraded to Baa1 (sf); previously on August 22, 2011 Upgraded to
Baa3 (sf);
$9,500,000 Class D Floating Rate Notes Due December 13, 2019,
Upgraded to Ba1 (sf); previously on August 22, 2011 Upgraded to
Ba2 (sf).
COA Caerus CLO Ltd. (fka APIDOS CDO VI), issued in December 2007,
is a collateralized loan obligation (CLO) backed primarily by a
portfolio of senior secured loans. The transaction's reinvestment
period will end in January 2015.
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
January 2015. 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 a higher spread
level compared to the covenant level. Moody's modeled a weighted
average spread ("WAS") of 3.12% compared to the covenant level of
3.0%.
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. 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% (1950)
Class A-1: 0
Class A-2: +1
Class B: +2
Class C: +2
Class D: +2
Moody's Adjusted WARF + 20% (2926)
Class A-1: -1
Class A-2: -2
Class B: -2
Class C: -2
Class D: -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 $239 million, defaulted par
of $1.4 million, a weighted average default probability of 14.28%
(implying a WARF of 2438), a weighted average recovery rate upon
default of 50.92%, a diversity score of 40 and a weighted average
spread of 3.12%.
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.
COLONY MULTIFAMILY 2014-1: Moody's Rates Cl. F Certificates 'B3'
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to seven
classes of CMBS securities, issued by Colony Multifamily Mortgage
Trust, Commercial Mortgage Pass-Through Certificates, Series 2014-
1.
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. X, Definitive Rating Assigned Ba3 (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba3 (sf)
Cl. F, Definitive Rating Assigned B3 (sf)
Ratings Rationale
The Certificates are collateralized by 298 fixed rate loans
secured by 304 properties. The ratings are based on the collateral
and the structure of the transaction.
The analyzed pool is comprised of seasoned small balance loans
secured by multifamily, manufactured housing, and mixed-use
(multifamily with ground floor retail) properties. The loans,
which were acquired by the Seller through multiple bulk purchases,
have a weighted average seasoning of 93 months. Loans representing
approximately 73.8% of the pool balance were acquired from Fannie
Mae "FNMA" and have an average seasoning of 87 months. The
remaining loans (26.2%) were originated by LaSalle Bank N.A and
represent a share of performing loans previously securitized in
the LASL 2005-MF1 transaction.
Approximately 262 loans, representing 69.4% of the pool balance,
had an original loan balance that was less than or equal to $2.0
million. Approximately 35 loans, representing 28.7% of the pool
balance, had an original loan balance that was between $2.0
million and $5.0 million. Only one loan, representing 1.8% of the
pool balance, had an original loan balance of $6.4 million.
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 1.21X is lower than the 2007
conduit/fusion transaction average of 1.31X. The Moody's Stressed
DSCR of 1.07X is greater than the 2007 conduit/fusion transaction
average of 0.92X.
Moody's Trust LTV ratio of 114.1% is higher than the 2007
conduit/fusion transaction average of 110.6%.
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 3.76, which is worse
than the indices calculated in most multi-borrower transactions
since 2009. The weighted average grade is indicative of the below
average market composition of the pool and the stability of the
cash flows underlying the assets.
Moody's also considers both loan level diversity and property
level diversity when selecting a ratings approach. With respect to
loan level diversity, the pool's loan level (includes cross
collateralized and cross defaulted loans) Herfindahl Index is
195.7. The transaction is significantly more diverse than most
conduit transactions rated since 2009.
With respect to property level diversity, the pool's property
level Herfindahl score is 199.7. The transaction's property
diversity profile is higher the indices calculated in most multi-
borrower transactions issued since 2009.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000.
On October 9, 2014, Moody's issued a "Request for Comment" asking
for market feedback on proposed changes to the methodology it uses
to rate conduit and fusion CMBS transactions. If Moody's adopts
the new methodology as proposed, the changes could affect the
ratings of Colony Multifamily Mortgage Trust 2014-1.
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 ver1.1, 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%, 14%, and 23%, the model-indicated rating for the currently
rated Aaa class A would be Aa1, Aa2, and A1, respectively.
Parameter Sensitivities are not intended to measure how the rating
of the security might migrate over time; rather they are designed
to provide a quantitative calculation of how the initial rating
might change if key input parameters used in the initial rating
process differed. The analysis assumes that the deal has not aged.
Parameter Sensitivities only reflect the ratings impact of each
scenario from a quantitative/model-indicated standpoint.
Qualitative factors are also taken into consideration in the
ratings process, so the actual ratings that would be assigned in
each case could vary from the information presented in the
Parameter Sensitivity analysis.
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.
COMM 2013-CCRE6: Moody's Affirms B2 Rating on Class F Certificate
-----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings of fifteen
classes in COMM 2013-CCRE6 Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2013-CCRE6 as follows:
Cl. A-1, Affirmed Aaa (sf); previously on Jan 24, 2014 Affirmed
Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Jan 24, 2014 Affirmed
Aaa (sf)
Cl. A-3FL*, Affirmed Aaa (sf); previously on Jan 24, 2014 Affirmed
Aaa (sf)
Cl. A-3FX, Affirmed Aaa (sf); previously on Jan 24, 2014 Affirmed
Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Jan 24, 2014 Affirmed
Aaa (sf)
Cl. A-M, Affirmed Aaa (sf); previously on Jan 24, 2014 Affirmed
Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Jan 24, 2014 Affirmed
Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Jan 24, 2014 Affirmed Aa3
(sf)
Cl. C, Affirmed A3 (sf); previously on Jan 24, 2014 Affirmed A3
(sf)
Cl. D, Affirmed Baa3 (sf); previously on Jan 24, 2014 Affirmed
Baa3 (sf)
Cl. E, Affirmed Ba2 (sf); previously on Jan 24, 2014 Affirmed Ba2
(sf)
Cl. F, Affirmed B2 (sf); previously on Jan 24, 2014 Affirmed B2
(sf)
Cl. PEZ, Affirmed A1 (sf); previously on Jan 24, 2014 Affirmed A1
(sf)
Cl. X-A, Affirmed Aaa (sf); previously on Jan 24, 2014 Affirmed
Aaa (sf)
Cl. X-B, Affirmed A2 (sf); previously on Jan 24, 2014 Affirmed A2
(sf)
* Certificates may be exchanged for Class A-3FX Certificates of
like balance.
Ratings Rationale
The ratings on the eleven 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 two below investment grade P&I classes were
affirmed because the ratings are consistent with Moody's expected
loss.
The ratings on the two IO classes were affirmed based on the
credit performance of the referenced classes.
The transaction contains a group of exchangeable certificates.
Classes A-M (Aaa (sf)), B (Aa3 (sf)) and C (A3 (sf)) may be
exchanged for Class PEZ (A1 (sf)) certificates and Class PEZ may
be exchanged for the Classes A-M, B and C. The PEZ certificates
will be entitled to receive the sum of interest and principal
distributable on the Classes A-M, B and C certificates that are
exchanged for such PEZ certificates. The initial certificate
balance of the Class PEZ certificates is equal to the aggregate of
the initial certificate balances of the Class A-M, B and C and
represent the maximum certificate balance of the PEZ certificates
that may be issued in an exchange.
Moody's rating action reflects a base expected loss of 2.6% of the
current balance compared to 2.5% at Moody's prior review. Moody's
base expected loss plus realized losses is now 2.6% of the
original pooled balance compared to 2.4% 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 principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions" published in
April 2005.
On October 9, 2014, Moody's issued a "Request for Comment" asking
for market feedback on proposed changes to the methodology it uses
to rate conduit and fusion CMBS transactions. If Moody's adopts
the new methodology as proposed, the changes could affect the
ratings of COMM 2013-CCRE6.
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 20, the same as at Moody's last review.
Deal Performance
As of the October 10, 2014 distribution date, the transaction's
aggregate certificate balance has decreased by 1.5% to $1.47
billion from $1.49 billion at securitization. The Certificates are
collateralized by 48 mortgage loans ranging in size from less than
1% to 9% of the pool, with the top ten loans (excluding
defeasance) representing 66% of the pool. The pool contains one
loan, representing 8.8% of the pool, that has an investment grade
structured credit assessment.
Five loans, representing 12.5% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
No loans have been liquidated from the pool and no loans are in
special servicing.
Moody's has assumed a high default probability for one poorly-
performing loans representing less than 1% of the pool and has
estimated a minimal loss from this troubled loan.
Moody's received full-year 2013 operating results for 96% of the
pool. Moody's weighted average conduit LTV is 95% compared to 93%
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 11.1% 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 1.94X and 1.13X,
respectively, compared to 2.00X and 1.14X 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 Federal Center
Plaza Loan ($130 million -- 8.8% of the pool), which is secured by
two adjacent office buildings totaling 725,000 square feet (SF) in
Washington, DC. The property was 100% leased as of June 2014, same
as at last review, with federal government agencies as the largest
tenants. Moody's structured credit assessment and stressed DSCR
are baa1 (sca.pd) and 1.74X, respectively, compared to baa1
(sca.pd) and 1.70X at the last review.
The top three performing conduit loans represent 23% of the pool
balance. The largest loan is the Rochester Hotel Portfolio Loan
($107.7 million -- 7.3% of the pool), which is secured by two
full-service, one limited-service and one extended stay hotels
located in Rochester, Minnesota. The four Interstate Hotels &
Resorts-managed hotels total 1,230 keys and are each connected to
the Mayo Clinic via climate controlled pedestrian tunnels. Moody's
LTV and stressed DSCR are 88% and 1.39X, respectively, compared to
97% and 1.25X at the last review.
The second largest loan is the Moffett Towers Loan ($120 million -
- 8.2% of the pool), which is secured by three eight-story Class A
office buildings totaling 950,000 SF located in Sunnyvale,
California. Each building is LEED Gold certified and the
properties have 2,881 parking spaces as well as shared amenities.
The loan is pari passu with two other loans that are securitized
in two other CMBS deals. All tenants at the property are on triple
net leases. Moody's LTV and stressed DSCR are 105% and 0.95X,
respectively, the same as at last review.
The third largest loan is The Avenues Loan ($110 million -- 7.5%
of the pool), which is secured by a 600,000 SF retail component of
a 1.1M SF super-regional mall in Jacksonville, Florida. The
property was 89% leased as of June 2014 compared to 86% leased as
of last review. The sponsor is Simon Property Group. Moody's LTV
and stressed DSCR are 71% and 1.40X, respectively, the same as at
last review.
COMM 2014-CCRE20: DBRS Finalizes BB Rating of Class E Certificates
------------------------------------------------------------------
DBRS Inc. has finalized the provisional ratings on the following
classes of Commercial Mortgage Pass-Through Certificates, Series
2014-CCRE20, to be issued by COMM 2014-CCRE20 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 X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-C at AAA (sf)
-- Class X-D at AAA (sf)
-- Class X-E at AAA (sf)
-- Class X-F at AAA (sf)
-- Class X-G at AAA (sf)
-- Class A-M at AAA (sf)
-- Class B at AA (sf)
-- Class PEZ at A (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (low) (sf)
-- Class F at B (high) (sf)
-- Class G at B (low) (sf)
Classes X-B, X-C, X-D, X-E, X-F, X-G, D, E, F, G and H will be
privately placed pursuant to Rule 144A. The Class X balances are
notional. DBRS ratings on interest-only (IO) certificates address
the likelihood of receiving interest based on the notional amount
outstanding. DBRS considers the IO 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 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 64 fixed-rate loans secured by 101
commercial and multifamily properties, with a transaction balance
of $1,182,593,628. The pool exhibits a DBRS weighted-average term
debt service coverage ratio (DSCR) and debt yield of 1.62 times
(x) and 8.8%, respectively, based on the whole loan balances. The
DBRS sample included 30 loans, representing 74.3% of the pool.
Properties representing 43.6% of the pool are located in urban
markets with increased liquidity, greater than transactions in the
recent past that typically have urban concentrations of 15% to
20%.
The pool is concentrated by loan size, as the top ten loans
represent 53.9% of the overall pool balance. The pool has a
concentration level similar to a pool of 24 equal-sized loans.
The combined partial IO and full-term IO concentration is 56.6%.
There are eight loans that are IO for the full term, representing
32.1% of the pool, including the two largest loans in the pool.
Overall, this results in a relatively low level of amortization
during the loan term of -13.5%. Additionally, 29 loans,
representing 48.1% of the pool, have a DBRS-calculated Refi DSCR
of less than 1.00x. However, these DSCRs are based on a weighted-
average stressed refinance constant of 9.7%, which implies an
interest rate of 9.1%, amortizing on a 30-year schedule. This
represents a significant stress of nearly 4.6% over the weighted-
average contractual interest rate of the loans in the pool.
COMM 2014-CCRE20: Fitch Expects to Rate Class F Certs 'B-sf'
------------------------------------------------------------
Fitch Ratings has issued a presale report on Deutsche Bank
Securities, Inc.'s COMM 2014-CCRE20 Commercial Mortgage Trust
Pass-Through Certificates.
Fitch expects to rate the transaction and assign Rating Outlooks
as follows:
-- $57,053,000 class A-1 'AAAsf'; Outlook Stable;
-- $99,016,000 class A-2 'AAAsf'; Outlook Stable;
-- $79,067,000 class A-SB 'AAAsf'; Outlook Stable;
-- $275,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $317,679,000 class A-4 'AAAsf'; Outlook Stable;
-- $891,379,000a class X-A 'AAAsf'; Outlook Stable;
-- $63,564,000b class A-M 'AAAsf'; Outlook Stable;
-- $57,652,000bc class B 'AA+sf'; Outlook Stable;
-- $199,563,000b class PEZ 'A-sf'; Outlook Stable;
-- $78,347,000b class C 'A-sf'; Outlook Stable;
-- $135,999,000ac class X-B 'A-sf'; Outlook Stable;
-- $60,608,000c class D 'BBB-sf'; Outlook Stable;
-- $60,608,000ac class X-C 'BBB-sf'; Outlook Stable;
-- $26,608,000c class E 'BB-sf'; Outlook Stable.
-- $11,826,000c class F 'B-sf'; Outlook Stable.
(a) Notional amount and interest-only.
(b) Class A-M, B and C certificates may be exchanged for class PEZ
certificates, and class PEZ certificates may be exchanged for
class A-M, B, and C certificates.
(c) Privately placed and pursuant to Rule 144A.
The expected ratings are based on information provided by the
issuer as of Oct. 15, 2014. Fitch does not expect to rate the
$26,608,000 interest-only class X-D, the $11,826,000 interest-only
class X-E, the $17,739,000 class G, the $17,739,000 interest-only
class X-F, the $38,434,627 class H or the $38,434,627 interest-
only class X-G certificates.
The certificates represent the beneficial ownership interest in
the trust, primary assets of which are 64 loans secured by 101
commercial properties having an aggregate principal balance of
approximately $1.18 billion, as of the cutoff date. The loans were
contributed to the trust by Cantor Commercial Real Estate Lending,
L.P., German American Capital Corporation, UBS Real Estate
Securities, Inc., and Natixis Real Estate Capital LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 67% of the properties by
balance, cash flow analysis of 73.1%, and asset summary reviews on
73.1% of the pool.
Key Rating Drivers
High Fitch Leverage: This transaction has higher leverage than
other recent Fitch-rated fixed-rate deals. The pool's Fitch DSCR
of 1.19x matches the first-half 2014 average. However the pool's
Fitch LTV of 111.1% exceeds the first-half 2014 average of 105.6%.
High Hotel Concentration: Hotel properties comprise 27.9% of the
pool, which is greater than the 2013 and first-half 2014 averages
of 14.7% and 13.3%, respectively. Hotels have the highest
probability of default in Fitch's multiborrower model.
Limited Amortization: The pool is scheduled to amortize by 13.5%
of the initial pool balance prior to maturity. Eight loans
(32.1%), including four of the top 10 loans, are full-term
interest only, and 24 loans (23.15%) are partial interest only.
Fitch-rated transactions in the first quarter of 2014 had an
average full-term interest only percentage of 15.8% and a partial
interest only percentage of 37.6%. This transaction has a higher
amount of full-term interest only.
Rating Sensitivities
For this transaction, Fitch's net cash flow (NCF) was 14.8% below
the most recent net operating income (NOI; for properties for
which a recent NOI was provided, excluding properties that were
stabilizing during this period). Unanticipated further declines in
property-level NCF could result in higher defaults and loss
severities on defaulted loans, and could result in potential
rating actions on the certificates. Fitch evaluated the
sensitivity of the ratings assigned to COMM 2014-CCRE20
certificates and found that the transaction displays slightly
above average sensitivity to further declines in NCF. In a
scenario in which NCF declined a further 20% from Fitch's NCF, a
downgrade of the junior 'AAAsf' certificates to 'A-sf' could
result. In a more severe scenario, in which NCF declined a further
30% from Fitch's NCF, a downgrade of the junior 'AAAsf'
certificates to 'BBBsf' could result. The presale report includes
a detailed explanation of additional stresses and sensitivities on
pages 83 - 84.
The master servicer will be Wells Fargo Bank, N.A, rated 'CMS1-'
by Fitch. The special servicer will be Torchlight Loan Services,
LLC, rated 'CSS2-'.
CONTEGO CLO II: Moody's Assigns B2 Rating on EUR10.8-Mil. Notes
---------------------------------------------------------------
Moody's Investors Service announced that it has assigned the
following definitive ratings to notes issued by Contego CLO II
B.V.:
EUR209,500,000 Class A Senior Secured Floating Rate Notes due
2026, Definitive Rating Assigned Aaa (sf)
EUR37,600,000 Class B Senior Secured Floating Rate Notes due
2026, Definitive Rating Assigned Aa2 (sf)
EUR24,250,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2026, Definitive Rating Assigned A2 (sf)
EUR16,250,000 Class D Senior Secured Deferrable Floating Rate
Notes due 2026, Definitive Rating Assigned Baa2 (sf)
EUR23,400,000 Class E Senior Secured Deferrable Floating Rate
Notes due 2026, Definitive Rating Assigned Ba2 (sf)
EUR10,800,000 Class F Senior Secured Deferrable Floating Rate
Notes due 2026, Definitive Rating Assigned B2 (sf)
Ratings Rationale
Moody's rating of the rated notes addresses the expected loss
posed to noteholders by legal final maturity of the notes in 2026.
The ratings reflect the risks due to defaults on the underlying
portfolio of loans given the characteristics and eligibility
criteria of the constituent assets, the relevant portfolio tests
and covenants as well as the transaction's capital and legal
structure. Furthermore, Moody's is of the opinion that the
collateral manager, N.M. Rothschild & Sons Limited ("Rothschild
"), has sufficient experience and operational capacity and is
capable of managing this CLO.
Contego CLO II is a managed cash flow CLO. At least 90% of the
portfolio must consist of secured senior loans and up to 10% of
the portfolio may consist of unsecured senior loans, second-lien
loans and mezzanine loans. The portfolio is expected to be 70%
ramped up as of the closing date and to be comprised predominantly
of corporate loans to obligors domiciled in Western Europe. The
remainder of the portfolio will be acquired during the six month
ramp-up period in compliance with the portfolio guidelines.
Rothschild will manage the CLO. It 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 are subject to certain restrictions.
In addition to the six classes of notes rated by Moody's, the
Issuer issued EUR 37,500,000 of subordinated notes. Moody's has
not assigned rating to this class of 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.
Factors that would lead to an upgrade or downgrade of the rating:
The rated notes' performance 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. Rothschild's investment decisions and management
of the transaction will also affect the notes' performance.
Loss and Cash Flow Analysis:
Moody's modeled the transaction using CDOEdge, 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" rating methodology published in February 2014. The
cash flow model evaluates all default scenarios that are then
weighted considering the probabilities of the binomial
distribution assumed for the portfolio default rate. In each
default scenario, the corresponding loss for each class of notes
is calculated given the incoming cash flows from the assets and
the outgoing payments to third parties and noteholders. Therefore,
the expected loss or EL for each tranche is the sum product of (i)
the probability of occurrence of each default scenario and (ii)
the loss derived from the cash flow model in each default scenario
for each tranche.
Moody's used the following base-case modeling assumptions:
Par Amount: EUR350,000,000
Diversity Score: 36
Weighted Average Rating Factor (WARF): 2870
Weighted Average Spread (WAS): 3.70%
Weighted Average Coupon (WAC): 6.00%
Weighted Average Recovery Rate (WARR): 44.5%
Weighted Average Life (WAL): 8 years.
As part of the base case, Moody's has addressed the potential
exposure to obligors domiciled in countries with local currency
country risk ceiling (LCC) of A1 or below. As per the portfolio
constraints, exposures to countries with foreign currency
government bond rating of A3 or below cannot exceed 10%, with
exposures to countries foreign with currency government bond
rating of Baa3 further limited to 5%. Following the effective
date, and given these portfolio constraints and the current
sovereign ratings of eligible countries, the total exposure to
countries with a LCC of A1 or below may not exceed 10% of the
total portfolio. As a worst case scenario, a maximum 5% of the
pool would be domiciled in countries with LCC of A3 and 5% in
countries with LCC of Baa3. The remainder of the pool will be
domiciled in countries which currently have a LCC of Aa3 and
above. Given this portfolio composition, the model was run with
different target par amounts depending on the target rating of
each class of notes as further described in the methodology. The
portfolio haircuts are a function of the exposure size to
peripheral countries and the target ratings of the rated notes and
amount to 0.75% for the Class A notes, 0.50% for the Class B
notes, 0.375% for the Class C notes and 0% for Classes D, E and F.
Stress Scenarios:
Together with the set of modelling assumptions above, Moody's
conducted additional sensitivity analyses, which were important
components in determining the rating assigned to the rated notes.
These sensitivity analyses include increasing the 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 each of 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: WARF + 15% (to 3301 from 2870)
Ratings Impact in Rating Notches:
Class A Senior Secured Floating Rate Notes: 0
Class B Senior Secured Floating Rate Notes: -2
Class C Senior Secured Deferrable Floating Rate Notes: -2
Class D Senior Secured Deferrable Floating Rate Notes: -2
Class E Senior Secured Deferrable Floating Rate Notes: -1
Class F Senior Secured Deferrable Floating Rate Notes: 0
Percentage Change in WARF: WARF +30% (to 3731 from 2870)
Class A Senior Secured Floating Rate Notes: -1
Class B Senior Secured Floating Rate Notes: -3
Class C Senior Secured Deferrable Floating Rate Notes: -3
Class D Senior Secured Deferrable Floating Rate Notes: -2
Class E Senior Secured Deferrable Floating Rate Notes: -2
Class F Senior Secured Deferrable Floating Rate Notes: -2
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.
DRYDEN XII 2006-3: Moody's Ups Rating on Cl. A7-$F Notes to Caa2
----------------------------------------------------------------
Moody's Investors Service announced the following upgrades on
Dryden XII IG Synthetic CDO 2006:
Issuer: Dryden XII IG Series 26 Synthetic CDO 2006-3
EUR3,716,000 Class A3-EL Notes (current balance EUR 3,311,000),
Upgraded to Ba3 (sf); previously on April 15, 2014 Upgraded to
B1 (sf)
EUR6,155,000 Class A6B-EL Notes (current balance EUR 5,565,000),
Upgraded to Caa1 (sf); previously on April 15, 2014 Upgraded to
Caa2 (sf)
EUR11,405,000 Class A6-EL Notes (current balance EUR 9,779,000),
Upgraded to Caa1 (sf); previously on February 23, 2009
Downgraded to Caa3 (sf)
Issuer: Dryden XII IG Synthetic CDO 2006-3
US$12,500,000 Class A6-$LS Notes (current balance $10,500,000),
Upgraded to Caa1 (sf); previously on April 15, 2014 Upgraded to
Caa2 (sf)
US$20,000,000 Class A7-$F Notes, Upgraded to Caa2 (sf);
previously on February 23, 2009 Downgraded to Caa3 (sf)
Issuer: Dryden XII IG Synthetic CDO 2006-2
US$5,000,000 Class A1-$LS Notes, Upgraded to Baa3 (sf);
previously on July 29, 2011 Upgraded to Ba1 (sf)
This transaction is a corporate synthetic collateralized debt
obligation (CSO) referencing a portfolio of corporate senior
unsecured bonds, originally rated in 2006.
Ratings Rationale
The rating action is due to the shortened time to maturity of the
CSO, the level of credit enhancement remaining in the transaction
and the improving credit quality of the reference portfolio.
Since the last rating review in April 2014, the credit quality of
the portfolio has improved. The portfolio's ten-year weighted
average rating factor (WARF) has declined to 897 from 941,
excluding settled credit events. Moody's rates the majority of the
reference credits investment grade, with 4.9% rated Caa, which is
unchanged from April 2014. In addition, the number of reference
credits with a negative outlook has remained stable at 10,
compared to an increase of five for reference credits with a
positive outlook; the number of reference credits whose ratings
are on review for downgrade has increased by three, compared to a
decrease of one for the number of references on review for
upgrade.
In contrast, The average gap between Market Implied Ratings (MIRs)
and Moody's senior unsecured ratings has deteriorated. The average
gap between MIRs and Moody's senior unsecured ratings is currently
-0.74 notches compared to -0.67 in April 2014 for over-
concentrated sectors, and -0.16 notches compared to 0.22 in April
2014 for non-over concentrated sectors. Currently, the over-
concentrated sectors are Banking and FIRE comprising 33.9% of the
portfolio.
The CSO has a remaining life of 1.66 years.
Based on the trustee's September 2014 report, 8 credit events,
equivalent to 7.75% of the portfolio based on the portfolio's
notional value at closing, have taken place. Since inception,
there have been 3.00% in losses due to credit events on Federal
Home Loan Mortgage Corp, Federal National Mortgage Association,
Lehman Brothers Holdings, Washington Mutual Inc, Abitibi-
Consolidated Inc, CIT Group Inc, Ambac Assurance Corporation and
Residential Capital Corporation. The subordination of the A1-$LS,
A3-EL, A6-$LS, A6B-EL, A7-$F and A6-EL notes are 8.53%, 6.24%,
4.27%, 4.27%, 3.78% and 4.27%, respectively. Furthermore, the
portfolio is exposed to Harrah's Operating Company, Inc., which is
not a credit event, but has a senior unsecured rating of Ca.
The action also reflects a correction to the current rated balance
of the Class A6-EL Notes, which was incorrectly reported in the
February 2014 trustee report that was used in the April 2014
rating action. Previously, Moody's did not take action on these
notes due to the error. The correction has been confirmed with the
trustee and the upgrade incorporates this correction.
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's
Approach to Rating Corporate Synthetic Collateralized Debt
Obligations" published in November 2013.
Factors that would lead to an upgrade or downgrade of the rating:
These transactions are subject to a high level of uncertainty,
primarily because of 1) unexpected volatility in the credit and
macroeconomic environment; 2) divergence in the legal
interpretation of documentation by different transactional parties
because of embedded ambiguities; and 3) unexpected changes in the
portfolio composition as a result of the actions of the
transaction parties.
For CSOs, the performance of the credit default swaps can be
affected either positively or negatively by 1) variations over
time in default rates for instruments with a given rating; 2)
variations in recovery rates for instruments with particular
seniority/security characteristics; and 3) uncertainty about the
default and recovery correlations characteristics of the reference
pool. Given the tranched nature of CSO liabilities, rating
transitions in the reference pool can have leveraged rating
implications for the ratings of the CSO liabilities that could
lead to a high degree of rating volatility, which is likely to be
higher for the more junior or thinner liabilities.
In addition to the base case analysis described above, Moody's
also conducted sensitivity analyses. Results are in the form of
the difference in the number of notches from the base case, in
which a higher number of notches corresponds to lower expected
losses, and vice-versa.
* Moody's ran a scenario in which it reduced the maturity of the
CSO by six months, keeping all other things equal. The result
of this run was comparable to the base case for the A1-$LS
notes, and one notch higher than in the base case for the
other notes.
* Moody's conducted a sensitivity analysis in which the adverse
selection adjustment is removed. The result of this run was
three to four notches higher than in the base case.
* Moody's conducted a stress analysis in which it defaulted all
entities rated Caa or lower. The result was one to two notches
lower than in the base case.
In addition to the quantitative factors Moody's models explicitly,
rating committees also consider qualitative factors in the rating
process. These qualitative factors include a transaction's
structural protections, recent deal performance in the current
market environment, the legal environment, specific documentation
features and the portfolio manager's track record. All information
available to rating committees, including macroeconomic forecasts,
input 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.
GOLDEN KNIGHT II: Moody's Affirms Ba3 Rating on $13MM Cl. E Notes
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the
following notes issued by Golden Knight II CLO, Ltd.:
$18,250,000 Class C Third Priority Senior Subordinate Deferrable
Interest Floating Rate Notes Due 2019, Upgraded to Aa1 (sf);
previously on June 23, 2014 Upgraded to A1 (sf)
$14,000,000 Class D Fourth Priority Subordinate Deferrable
Interest Floating Rate Notes Due 2019, Upgraded to Baa1 (sf);
previously on June 23, 2014 Upgraded to Baa3 (sf)
Moody's also affirmed the ratings on the following notes:
$292,500,000 Class A First Priority Senior Floating Rate Notes
Due 2019 (current outstanding balance of $86,221,594), Affirmed
Aaa (sf); previously on June 23, 2014 Affirmed Aaa (sf)
$40,000,000 Class B Second Priority Senior Floating Rate Notes
Due 2019, Affirmed Aaa (sf); previously on June 23, 2014 Upgraded
to Aaa (sf)
$13,000,000 Class E Fifth Priority Junior Subordinate Deferrable
Interest Floating Rate Notes Due 2019, Affirmed Ba3 (sf);
previously on June 23, 2014 Affirmed Ba3 (sf)
Golden Knight II CLO, Ltd., issued in March 2007, is a
collateralized loan obligation (CLO) backed primarily by a
portfolio of senior secured loans. The transaction's reinvestment
period ended in April 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 June 2014. The Class A Notes have
been paid down by $66.7 million, or 43.6% since then. Based on the
Moody's October 2014 calculation, which accounts for principal
payments of $16.2 million to the Class A Notes on the October
payment date, the over-collateralization ratios for the Class A,
B, C, D and E Notes are 219.9%, 150.2%, 131.2%, 119.6% and 110.6%,
respectively, versus June 2014 levels of 167.2%, 132.5%, 121.1%,
113.5% and 107.3%, respectively.
The portfolio includes a number of investments in securities that
mature after the notes do. Based on the Moody's October 2014
calculation, securities that mature after the notes currently make
up approximately 18.5% or $34.8 million of the portfolio. These
investments could expose the notes to market risk in the event of
liquidation when the notes mature.
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% (2178)
Class A: 0
Class B: 0
Class C: +1
Class D: +3
Class E: +1
Moody's Adjusted WARF + 20% (3268)
Class A: 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 $187.9 million, defaulted
par of $3.3 million, a weighted average default probability of
16.35% (implying a WARF of 2723), a weighted average recovery rate
upon default of 50.8%, a diversity score of 44 and a weighted
average spread of 3.21%.
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.
IMPACT FUNDING 2014-1: DBRS Rates Class E Certs '(P)BB'
-------------------------------------------------------
DBRS Inc. has assigned provisional ratings to the following
classes of Affordable Multifamily Mortgage Loan Pass-Through
Certificates, Series 2014-1, to be issued by Impact Funding
Affordable Multifamily Housing Mortgage Loan Trust 2014-1. The
trends are Stable.
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-FXI at AAA (sf)
-- Class X-B at AAA (sf)
-- Class X-FX2 at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
Classes A-1, A-2, A-3, X-A and X-FXI represent the certificates
that will be purchased and guaranteed by Freddie Mac and will be
deposited into the SPC Trust to back the Offered SPCs.
Classes B, C, D, E, F, X-B and X-FX2 represent the non-guaranteed
offered certificates.
All classes will be privately placed pursuant to Rule 144A.
The Class X balances are notional. DBRS ratings on interest-only
(IO) certificates address the likelihood of receiving interest
based on the notional amount outstanding. DBRS considers the IO
certificates' position within the transaction payment waterfall
when determining the appropriate rating.
The collateral consists of 124 fixed-rate loans secured by 118
multifamily properties, for a total transaction balance of
$215,216,599. The DBRS sample included 33 loans, representing
44.9% of the pool. The loans benefit from strong origination
practices through the Impact platform, with Freddie Mac
guaranteeing the AAA Classes and the tax credit investor having a
vested interest in the continued performance of the properties.
Within this Impact platform, there have been three rated
securitizations since 2000 which together have an extremely low
delinquency rate of only 0.04% as of June 2014. This compares
very favorably with the delinquency rate for CMBS multifamily
loans of approximately 4.74% for the same period. In addition,
cash flow underwriting is prudent, as evidenced by an average DBRS
net cash flow variance of -5.1% on the sampled loans.
The pool is concentrated by property type, with affordable
multifamily properties representing 100% of the collateral;
however, it is also very granular, based on loan size. The pool
has a concentration profile of 82 equal-sized loans helping to
insulate the higher-rated classes from event risk. Additionally,
the leverage level is quite low, as evidenced by the strong DBRS
Going-In and Exit Debt Yields of 11.4% and 16.7%, respectively.
While the average remaining loan term for the pool is long at 208
months, 13% of the pool fully amortizes over the loan term and the
overall pool amortizes by 42.5% over the loan term. This is
further evidenced by the strong weighted-average DBRS Term and
Refi DSCR of 1.41x and 1.99x.
Classes A-1, A-2, A-3 X-A and X-FX1 are being purchased by Freddie
Mac and conveyed into separate trust funds. Freddie Mac will
offer structured pass-through certificates (SPCs) that represent
pass-through interests in Classes A-1, A-2, A-3, X-A and X-FX1.
With respect to the SPCs, Freddie Mac guarantees: (1) timely
payment of interest; (2) payment of related principal on the
distribution date following the maturity date of each mortgage
loan, to the extent such principal would have been distributed to
the underlying Class A-1, A-2 and A-3 certificates; (3)
reimbursement of any realized losses and additional trust fund
expenses allocated to the Underlying Guaranteed Certificates; and
(4) ultimate payment of principal by the assumed final
distribution date for the underlying Class A-1, A-2 and A-3
certificates.
MACH ONE 2004-1: S&P Lowers Rating on Class M Notes to 'CC'
-----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
F, G, H, and J notes, lowered its rating on the class M notes, and
affirmed its ratings on the class K and L notes from Mach One
2004-1 LLC, a U.S. resecuritized real estate mortgage investment
conduit (re-REMIC) transaction that closed in July 2004. At the
same time, S&P removed its ratings on the class F and G notes from
CreditWatch, where it had placed them with positive implications
on Sept. 17, 2014.
The upgrades reflect the paydowns to the notes since S&P's last
rating action in Oct. 2013 when S&P upgraded the class D, E, F,
and G notes. Since then, the class D and E notes have been paid
in full and the class F notes have received $13.0 million in
paydowns. As of the Sept. 30, 2014, trustee report, the class F
balance has been reduced to $4.6 million. The upgrades reflect
these paydowns, which have also helped provide additional support
to the subordinate notes.
S&P lowered its ratings on the class M notes to 'CC (sf)' from
'CCC- (sf)' based on its expectation that the classes are unlikely
to be repaid in full.
The rating on the class F notes was constrained by the application
of S&P's largest industry test. As of the Sept. 30, 2014, trustee
report, only 11 CMBS assets remained in the transaction and S&P
treated seven of these assets as performing in its analysis.
The affirmations of the class K and L notes reflect S&P's belief
that the credit support available to the notes is commensurate
with their current 'CCC- (sf)' 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 further
rating actions as it deems necessary.
RATINGS LIST
Mach One 2004-1 LLC
Commercial mortgage-backed securities pass-though certificates
Rating Rating
Class Identifier To From
F 55445RAJ6 A+ (sf) BBB (sf)/Watch Pos
G 55445RAK3 BBB (sf) BB (sf)/Watch Pos
H 55445RAL1 BB+ (sf) CCC+ (sf)
J 55445RAM9 CCC (sf) CCC- (sf)
K 55445RAN7 CCC- (sf) CCC- (sf)
L 55445RAP2 CCC- (sf) CCC- (sf)
M 55445RAQ0 CC (sf) CCC- (sf)
MARATHON CLO VI: S&P Affirms B Rating on Class E Notes
------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on
Marathon CLO VI Ltd./Marathon CLO VI LLC's $441.75 million
floating-rate notes following the transaction's effective date as
of Sept. 5, 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 said.
"In our published effective date report, we discuss our analysis
of the information provided by the transaction's trustee and
collateral manager in support of their request for effective date
rating affirmation. In most instances, we intend to publish an
effective date report each time we issue an effective date rating
affirmation on a publicly rated U.S. cash flow CLO," S&P 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
Marathon CLO VI Ltd./Marathon CLO VI LLC
Class Rating Amount
(mil. $)
A-1 AAA (sf) 288.50
A-2 AA (sf) 51.70
B (deferrable) A (sf) 45.80
C (deferrable) BBB (sf) 25.75
D (deferrable) BB (sf) 22.70
E (deferrable) B (sf) 7.30
MAYPORT CLO: Moody's Raises Rating on $20MM Cl. B-2L Notes to Ba1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the
following notes issued by Mayport CLO Ltd.:
$19,500,000 Class B-1L Floating Rate Notes due February 2020,
Upgraded to Aa1 (sf); previously on June 19, 2014 Upgraded to
Aa3 (sf)
$20,000,000 Class B-2L Floating Rate Notes due February 2020
(current outstanding balance of $19,262,292), Upgraded to Ba1
(sf); previously on June 19, 2014 Upgraded to Ba2 (sf)
Moody's also affirmed the ratings on the following notes:
$250,000,000 Class A-1L Floating Rate Notes due February 2020
(current outstanding balance of $10,593,888), Affirmed Aaa (sf);
previously on June 19, 2014 Affirmed Aaa (sf)
$60,000,000 Class A-1LV Floating Rate Revolving Notes due
February 2020 (current outstanding balance of $2,542,533),
Affirmed Aaa (sf); previously on June 19, 2014 Affirmed Aaa (sf)
$26,000,000 Class A-2L Floating Rate Notes due February 2020,
Affirmed Aaa (sf); previously on June 19, 2014 Affirmed Aaa (sf)
$25,000,000 Class A-3L Deferrable Floating Rate Notes due
February 2020, Affirmed Aaa (sf); previously on June 19, 2014
Affirmed Aaa (sf)
Mayport CLO 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
February 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 June 2014. The Class A-1L and A-1LV
Notes have been collectively paid down by $26.6 million, or 66.9%
since then. Based on the Moody's calculations, the October 2014
over-collateralization ratios for the Class A-1L, A-2L, A-3L, B-1L
and B-2L Notes are 854.3%, 286.7%, 175.0%, 134.2% and 109.1%,
respectively, versus June 2014 levels of 349.6%, 211.3%, 153.1%,
126.0% and 107.2%, 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% (2130)
Class A-1L: 0
Class A-1LV: 0
Class A-2L: 0
Class A-3L: 0
Class B-1L: +1
Class B-2L: +1
Moody's Adjusted WARF + 20% (3196)
Class A-1L: 0
Class A-1LV: 0
Class A-2L: 0
Class A-3L: 0
Class B-1L: -1
Class B-2L: -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 $112.2 million, defaulted
par of $1.0 million, a weighted average default probability of
15.72% (implying a WARF of 2663), a weighted average recovery rate
upon default of 53.1%, a diversity score of 25 and a weighted
average spread of 3.02% (before adjustments for LIBOR floors).
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.
MMCAPS FUNDING XVII: Moody's Hikes Rating on $35MM Cl. C-2 Notes
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the
following notes issued by MMCAPS Funding XVII, Ltd.:
$35,475,000 Class C-1 Floating Rate Deferrable Interest Notes due
2035, Upgraded to B3 (sf); previously on May 7, 2014 Upgraded to
Caa1 (sf)
$35,475,000 Class C-2 Fixed Rate Deferrable Interest Notes due
2035, Upgraded to B3 (sf); previously on May 7, 2014 Upgraded to
Caa1 (sf)
Moody's also affirmed the ratings on the following notes:
$162,000,000 Class A-1 Floating Rate Notes due 2035 (current
outstanding balance of $68,748,631.82), Affirmed Aa2 (sf);
previously on May 7, 2014 Upgraded to Aa2 (sf)
$19,500,000 Class A-2 Floating Rate Notes due 2035, Affirmed Aa3
(sf); previously on May 7, 2014 Upgraded to Aa3 (sf)
$33,000,000 Class B Floating Rate Notes due 2035, Affirmed A1
(sf); previously on May 7, 2014 Upgraded to A1 (sf)
MMCAPS Funding XVII, Ltd., issued in September 2005, is a
collateralized debt obligation backed by a portfolio of bank and
insurance trust preferred securities (TruPS).
Ratings Rationale
The rating actions are primarily a result of deleveraging of the
Class A-1 notes, which resulted in an increase in the
transaction's over-collateralization ratios, the resumption of
interest payments of previously deferring assets, and the
improvement in the credit quality of the underlying portfolio
since the last rating action in May 2014.
The Class A-1 notes have paid down by approximately 1.06% or $0.74
million since May 2014, due to the diversion of excess interest
proceeds. The Class A-1 and Class A-2 notes' par coverage has thus
improved to 280.01% and 218.13%, respectively, from 277.03% and
216.32%, respectively, in May 2014, by Moody's calculations. Based
on the trustee's September 2014 report, the Class B, and Class C
overcollateralization ratios were 157.30% (limit 125.00%) and
99.39% (limit 102.10%), respectively, versus 150.58%, and 97.60%
in February 2014. In the near term, the Class A-1 notes will
continue to benefit from the diversion of excess interest due to
the Class C overcollateralization test failure 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. According to Moody's calculations,
the weighted average rating factor (WARF) improved to 632 from 654
in May 2014. The total par amount that Moody's treated as having
defaulted or deferring declined to $28.7 million from $34.2
million in May 2014. Since May 2014, one previously deferring bank
with a total par of $3.0 million has resumed making interest
payments on its TruPS.
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 $192.5
million, defaulted/deferring par of $28.7 million, a weighted
average default probability of 7.13% (implying a WARF of 632), 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 both, the US
banking sector and 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 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. 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 Analytics, to derive credit scores. Moody's evaluation
of the credit risk of most of the bank obligors in the pool relies
on FDIC Q2-2014 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: +1
Class A-2: +1
Class B: +1
Class C-1: +2
Class C-2: +2
Assuming a two-notch downgrade to assets with below-investment
grade ratings or rating estimates (WARF of 908)
Class A-1: -1
Class A-2: -1
Class B: -1
Class C-1: -1
Class C-2: -1
MORGAN STANLEY 2006-IQ11: S&P Affirms CCC- Rating on E Notes
------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on two
classes of commercial mortgage pass-through certificates from
Morgan Stanley Capital I Trust 2006-IQ11, a U.S. commercial
mortgage-backed securities (CMBS) transaction. In addition, S&P
affirmed its ratings on eight 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 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.
S&P raised its ratings on classes A-M and A-J to reflect its
expectation of the available credit enhancement for these classes,
which S&P believes is greater than its most recent estimates of
necessary credit enhancement for the respective rating levels.
The upgrades also result from S&P's views regarding the current
and future performance of the transaction's collateral, available
liquidity support, and reduction in the trust balance.
The affirmations on the principal- and interest-paying
certificates reflect S&P's expectation that the available credit
enhancement for these classes will be within its estimate of the
necessary credit enhancement required for 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-Y
interest-only (IO) certificates based on its criteria for rating
IO securities.
TRANSACTION SUMMARY
As of the Oct. 15, 2014, trustee remittance report, the collateral
pool balance was $1.06 billion, which is 65.9% of the pool balance
at issuance. The pool currently includes 176 loans and six real
estate-owned (REO) assets (reflecting cross-collateralized and
cross-defaulted loans), down from 229 loans at issuance. Twelve
assets ($102.1 million, 9.6%) are with the special servicer, 10
loans ($78.6 million, 7.4%) are defeased, 54 loans ($135.6
million, 12.7%) are identified as residential cooperative (co-op)
loans, and 40 loans ($223.2 million, 21.0%) are on the master
servicers' combined watchlist. The master servicers, Wells Fargo
Bank N.A. and NCB FSB, reported financial information for 97.1% of
the nondefeased loans in the pool, of which 90.2% was partial- or
year-end 2013 or partial-year 2014 data and the remainder was
year-end 2012 data.
S&P calculated a Standard & Poor's weighted average debt service
coverage (DSC) of 1.32x and loan-to-value (LTV) ratio of 79.2%
using a Standard & Poor's weighted average capitalization rate of
7.69%. The DSC, LTV, and capitalization rate calculations exclude
the 12 specially serviced assets, 10 defeased loans, 54 co-op
loans, and one ($24.5 million, 2.3%) ground lease loan. The top
10 nondefeased assets have an aggregate outstanding pool trust
balance of $400.4 million (37.6%). Using servicer-reported
numbers, S&P calculated a Standard & Poor's weighted average DSC
and LTV of 1.20x and 85.7%, respectively, for seven of the top 10
nondefeased performing assets. Excluded from the DSC and LTV
calculations are one co-op loan ($22.1 million, 2.1%), one ground
lease loan, and one specially serviced REO asset ($38.4 million,
3.6%), which S&P discussed.
The properties securing the underlying loans are concentrated
within the New York-Newark-Jersey City, San Antonio-New Braunfels,
and Orlando metropolitan statistical areas (MSAs). Standard &
Poor's U.S. Public Finance group provides credit ratings on two
counties (New York City and Bexar County) that participate within
these MSAs:
-- New York City in the New York-Newark-Jersey City MSA: S&P
considers New York City's ('AA'/Stable, general obligation
debt rating) economy to be strong, with projected per capita
effective buying income at 106% of the U.S. The total
market value of all real estate within the city reached $929
billion for 2015, up 11% from the prior year. The county's
per capita real estate market value was $111,609 for 2015.
With a population of 8.3 million, the city participates in
the New York-Newark-Jersey City MSA (comprising New York,
New Jersey, and Pennsylvania), which S&P considers to be
strong. The city's unemployment rate for calendar year 2013
was 9%. Some of the loans secured by properties located in
New York City include the Crossroads Tower Office Building;
Home Depot Jamaica NY; and 300 West 23rd Street Owners Corp.
loans.
-- Bexar County, Texas in the San Antonio-New Braunfels MSA:
S&P considers Bexar County's ('AA+'/Stable, general
obligation) economy to be strong, with projected per capita
effective buying income at 86% of the U.S. The total market
value of all real estate within the county reached $99
billion for 2013. The county's per capita real estate
market value was $55,395 for 2013. With a population of 1.8
million, the county participates in the San Antonio-New
Braunfels MSA in Texas, which S&P considers to be strong.
Some of the loans secured by properties located in Bexar
County include the Rivercenter Mall and Wilshire Woods
Apartments loans.
To date, the transaction has experienced $43.0 million in
principal losses, or 2.7% of the original pool trust balance. S&P
expects losses to reach approximately 6.1% 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 of
the 12 specially serviced assets.
CREDIT CONSIDERATIONS
As of the Oct. 15, 2014, trustee remittance report, 12 assets in
the pool were with the special servicer, LNR Partners, LLC (LNR).
Details of the two largest specially serviced assets, one of which
is a top 10 nondefeased asset, are:
-- The Capital Plaza REO asset ($38.4 million, 3.6%) is the
fourth-largest nondefeased asset in the trust and the
largest asset with the special servicer. The asset consists
of three suburban office buildings totaling 415,977 sq. ft.
in Jacksonville, Fla. and has a total reported exposure of
$40.2 million. The loan was transferred to LNR on Nov. 21,
2012, because of imminent default, and the property became
REO on March 5, 2014. LNR stated that the property was
95.0% occupied as of Sept. 30, 2014, and it is currently
working on stabilizing the property. An appraisal reduction
amount (ARA) of $12.4 million is in effect against the
asset. S&P expects a moderate loss upon the asset's
eventual resolution.
-- The L-3/Bulova Building loan ($14.0 million, 1.3%) is the
second-largest loan with the special servicer and has a
total reported exposure of $14.5 million. The loan has a
90-plus days' delinquent payment status and is secured by a
212,000-sq.-ft. office property in Lancaster, Pa. The loan
was transferred to LNR on April 29, 2008, because of
imminent default. LNR stated that the property is currently
100% vacant, and it is pursuing foreclosure. Wells Fargo
deemed this loan nonrecoverable. S&P expects a significant
loss upon the loan's eventual resolution.
The 10 remaining assets with the special servicer have individual
balances that represent less than 1.3% of the total pool trust
balance. S&P estimated losses for the 12 specially serviced
assets, arriving at a 53.7% weighted-average loss severity.
With respect to the specially serviced assets, 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-IQ11
Commercial mortgage pass-through certificates
Rating Rating
Class Identifier To From
A-1A 617453AQ8 AAA (sf) AAA (sf)
A-4 617453AT2 AAA (sf) AAA (sf)
A-M 617453AU9 AAA (sf) AA+ (sf)
A-J 617453AV7 BBB+ (sf) BBB- (sf)
B 617453AW5 BB (sf) BB (sf)
C 617453AX3 BB- (sf) BB- (sf)
D 617453AY1 B- (sf) B- (sf)
E 617453AC9 CCC- (sf) CCC- (sf)
X 617453AA3 AAA (sf) AAA (sf)
X-Y 617453AB1 AAA (sf) AAA (sf)
OAKTREE CLO 2014-2: S&P Assigns BB Rating on Class D Notes
----------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to Oaktree
CLO 2014-2 Ltd./Oaktree CLO 2014-2 LLC's $459.50 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 view of:
-- The credit enhancement provided to the rated notes through
the subordination of cash flows that are payable to the
subordinated notes.
-- The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting excess spread), and cash flow structure, which
can withstand the default rate projected by Standard &
Poor's CDO Evaluator model, as assessed by Standard & Poor's
using the assumptions and methods outlined in its corporate
collateralized debt obligation 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 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 0.2336%-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 diversion test, a failure of
which will lead to the reclassification of excess interest
proceeds that are available before paying uncapped
administrative expenses, incentive management fees, and
subordinated note payments into principal proceeds for
additional collateral asset purchases during the
reinvestment period.
RATINGS ASSIGNED
Oaktree CLO 2014-2 Ltd./Oaktree CLO 2014-2 LLC
Class Rating Amount
(mil. $)
A-1A AAA (sf) 280.00
A-1B AAA (sf) 27.00
A-2A AA (sf) 61.00
A-2B AA (sf) 17.00
B (deferrable) A (sf) 27.50
C (deferrable) BBB (sf) 24.00
D (deferrable) BB (sf) 23.00
Subordinated notes NR 51.00
NR--Not rated.
PUTNAM STRUCTURED 2003-1: Moody's Affirms C Rating on 3 Notes
-------------------------------------------------------------
Moody's Investors Service has affirmed the ratings on the
following notes issued by Putnam Structured Product Funding 2003-1
Ltd/Putnam Structured Product Funding 2003-1 LLC.
Cl. A-1LT-a, Affirmed Ba2 (sf); previously on Nov 20, 2013
Affirmed Ba2 (sf)
Cl. A-1LT-b, Affirmed Ba2 (sf); previously on Nov 20, 2013
Affirmed Ba2 (sf)
Cl. A-1LT-c, Affirmed Ba2 (sf); previously on Nov 20, 2013
Affirmed Ba2 (sf)
Cl. A-2, Affirmed Caa3 (sf); previously on Nov 20, 2013 Affirmed
Caa3 (sf)
Cl. B, Affirmed Ca (sf); previously on Nov 20, 2013 Affirmed Ca
(sf)
Cl. C, Affirmed C (sf); previously on Nov 20, 2013 Affirmed C (sf)
Equity, Affirmed C (sf); previously on Nov 20, 2013 Affirmed C
(sf)
Ratings Rationale
Moody's has affirmed the ratings on the transaction because its
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 and
Re-remic) transactions.
Putnam Structured Product Funding 2003-1 is a cash transaction
whose reinvestment period ended in October 2010. The transaction
is backed by a portfolio of: i) asset backed securities
(ABS)(49.5% of the pool balance) which are primarily in the form
of subprime Residential Mortgage Backed Securities (RMBS); ii)
commercial mortgage backed securities (CMBS) (31.3%); iii) CRE CDO
bonds (16.5%); and iv) real estate investment trust (REIT) debt
(2.7%). As of the trustee's October 7, 2014 report, the aggregate
note balance of the transaction, including preferred shares, is
$255.4 million, as compared to $296.7 million at last review.
The pool contains fifty eight assets totaling $91.6 million (38.4%
of the collateral pool balance) that are listed as defaulted
securities as of the trustee's October 7, 2014 report. Sixteen of
these assets (44.1% of the defaulted balance) are CMBS, nine
assets (28.9%) are CDO, and thirty three assets (27%) are RMBS
bonds. While there have been limited realized losses on the
underlying collateral to date, Moody's does expect moderate losses
to occur on the defaulted assets 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 6,379,
compared to 6,251 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 (7.0% compared to 7.9% at last
review), A1-A3 (6.6% compared to 3.1% at last review), Baa1-Baa3
(6.4 compared to 11.4% at last review), Ba1-Ba3 (5.8% compared to
7.3% at last review), B1-B3 (7.2% compared to 3% at last review),
and Caa1-Ca/C (65.7% compared to 67.3% at last review).
Moody's modeled a WAL of 4 years, as compared to 2.3 years at last
review. The WAL is based on assumptions about extensions on the
underlying collateral.
Moody's modeled a fixed WARR of 9.9%, as compared to 12.8% at last
review.
Moody's modeled a MAC of 100%, same as 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 rates of the underlying collateral and credit
assessments. Reducing the recovery rate by 5% would result in an
average modeled rating movement on the rated notes of one or two
notches downward (e.g., one notch down implies a ratings movement
of Baa3 to Ba1). Increasing the recovery rate by 5% would result
in an average modeled rating movement on the rated notes of two 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.
RESOURCE REAL 2006-1: Moody's Affirms Caa3 Rating on Cl. K Notes
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the
following notes issued by Resource Real Estate Funding CDO
2006-1, Ltd.:
Cl. C, Upgraded to Aa2 (sf); previously on Nov 12, 2013
Upgraded to A3 (sf)
Cl. D, Upgraded to A1 (sf); previously on Nov 12, 2013 Upgraded
to Baa1 (sf)
Cl. E, Upgraded to Baa1 (sf); previously on Nov 12, 2013
Upgraded to Baa3 (sf)
Moody's has also affirmed the ratings on the following notes:
Cl. F, Affirmed B1 (sf); previously on Nov 12, 2013 Upgraded to
B1 (sf)
Cl. G, Affirmed B2 (sf); previously on Nov 12, 2013 Upgraded to
B2 (sf)
Cl. J, Affirmed Caa1 (sf); previously on Nov 12, 2013 Upgraded
to Caa1 (sf)
Cl. K, Affirmed Caa3 (sf); previously on Nov 12, 2013 Affirmed
Caa3 (sf)
Ratings Rationale
Moody's has upgraded the ratings of three classes of notes due to
full amortization of high credit risk whole loan and mezzanine
collateral. Moody's has affirmed the ratings on the transaction
because its key transaction metrics are commensurate with 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.
Resource RE Funding 2006-1 is a cash transaction whose
reinvestment period ended in September 2011. The transaction is
backed by a portfolio of: i) whole loans (54% of the current pool
balance); ii) mezzanine interests (21.7%); iii) CRE CDO bonds
(9.3%); iv) B-notes (8.7%); and v) commercial mortgage backed
securities (CMBS) (6.3%). As of the trustee's October 19, 2014
trustee report, the aggregate note balance of the transaction,
including preferred shares, is $169.6 million, compared to $204.4
at last review with the paydown directed to the senior most
outstanding class of notes, as a result of regular amortization
and prepayments.
The pool contains one CMBS and one mezzanine loan totaling $10.4
million (5.6% of the collateral pool balance) that are listed as
impaired securities as of October 19, 2014. While there have been
limited realized losses on the underlying collateral to date,
Moody's does expect low/moderate losses to occur on the impaired
securities.
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 6,721,
compared to 5,785 at last review. The current ratings on the
Moody's-rated collateral and the assessments of the non-Moody's
rated collateral follow: Aaa (0.1% compared to 0.0% at last
review), Baa1-Baa3 (1.1% compared to 2.3% at last review), B1-B3
(10.9% compared to 9.2% at last review) and Caa1-Ca/C (87.9%
compared to 88.5% at last review).
Moody's modeled a WAL of 4.0 years, compared to 6.0 years at last
review. The WAL is based on assumptions about extensions on the
underlying collateral.
Moody's modeled a fixed WARR of 30.8%, compared to 35.2% at last
review.
Moody's modeled a MAC of 100%, same as 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 ratings 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 zero to nine notches upward (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 zero to two 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.
SYMPHONY CLO V: Moody's Raises Rating on Class D Notes to Ba2
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on the
following notes issued by Symphony CLO V, Ltd.:
$311,300,000 Class A-1 Senior Secured Floating Rate Notes Due
2024, Upgraded to Aaa (sf); previously on September 9, 2011
Upgraded to Aa1 (sf)
$25,000,000 Class A-2 Senior Secured Floating Rate Notes Due
2024, Upgraded to Aa3 (sf); previously on September 9, 2011
Upgraded to A2 (sf)
$16,000,000 Class B Senior Secured Deferrable Floating Rate
Notes Due 2024, Upgraded to A3 (sf); previously on September 9,
2011 Upgraded to Baa2 (sf)
$14,000,000 Class C Senior Secured Deferrable Floating Rate
Notes Due 2024, Upgraded to Baa3 (sf); previously on September
9, 2011 Upgraded to Ba1 (sf)
$12,240,000 Class D Secured Deferrable Floating Rate Notes Due
2024, Upgraded to Ba2 (sf); previously on September 9, 2011
Upgraded to Ba3 (sf)
Symphony CLO V, Ltd., issued in December 2007, is a collateralized
loan obligation (CLO) backed primarily by a portfolio of senior
secured loans. The transaction's reinvestment period will end in
January 2015.
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
January 2015. 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 lower weighted
average rating factor (WARF), higher weighted average spread (WAS)
and weighted average recovery rate (WARR) levels compared to the
covenant levels. Moody's modeled a WARF of 2906 compared to the
current covenant level of 2965. Moody's also modeled a WAS and
WARR of 3.96% and 49.89%, respectively, compared to the current
covenant levels of 3.50% and 45.00%, 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 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-1: 0
Class A-2: +2
Class B: +2
Class C: +2
Class D: +1
Moody's Adjusted WARF + 20% (3487)
Class A-1: -1
Class A-2: -2
Class B: -2
Class C: -1
Class D: -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 $415.8 million, defaulted
par of $0.8 million, a weighted average default probability of
22.5% (implying a WARF of 2906), a weighted average recovery rate
upon default of 49.89%, a diversity score of 55 and a weighted
average spread of 3.96% (before adjustments for LIBOR floors).
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.
WACHOVIA BANK 2006-C24: S&P Lowers Rating on Class A-J Notes to B+
------------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on five
classes of commercial mortgage pass-through certificates from
Wachovia Bank Commercial Mortgage Trust's series 2006-C24, a U.S.
commercial mortgage-backed securities (CMBS) transaction. In
addition, S&P raised its rating on class A-M and affirmed its
ratings on three 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 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 upgrade on class A-M reflects S&P's expectation of the
available credit enhancement for the class, which S&P believes is
greater than its most recent estimates of necessary credit
enhancement for the respective rating level. The upgrade is also
based on S&P's views regarding the collateral's current and future
performance, deal structure, and available liquidity support. The
downgrades on classes A-J, B, and C reflect credit support erosion
that S&P anticipates will occur upon the eventual resolution of
the five assets ($121.9 million, 9.7%) with the special servicer
(discussed below), as well as less liquidity support available to
these classes.
In addition, S&P lowered its ratings on classes D and E to 'D
(sf)' because it expects the accumulated interest shortfalls to
remain outstanding for the foreseeable future. As of the Oct. 14,
2014, trustee remittance report, the net monthly interest
shortfalls totaled $409,936, and primarily reflected:
-- $206,338 in net appraisal subordinate entitlement reduction
amounts associated with four loans;
-- $164,040 of interest deferred on the Woodbridge Hilton Pool
asset, which was deemed non-recoverable; and
-- $39,558 in special servicing, workout fees, and other fees.
The affirmations on the principal- and interest-paying
certificates reflect S&P's expectation that the available credit
enhancement for these classes will be within its estimate of the
necessary credit enhancement required for the current ratings.
The affirmations also reflect S&P's views regarding the
collateral's current and future performance, the transaction
structure, and liquidity support available to the classes.
S&P affirmed its 'AAA (sf)' rating on the class X-C interest-only
(IO) certificates based on its criteria for rating IO securities.
TRANSACTION SUMMARY
As of the Oct. 14, 2014, trustee remittance report, the collateral
pool balance was $1.26 billion, which is 62.9% of the pool balance
at issuance. The pool currently includes 87 loans and five real
estate-owned (REO) assets, down from 119 loans at issuance. The
five REO assets ($121.9 million, 9.7%) are with the special
servicer, three loans ($73.7 million, 5.9%) are defeased, and 20
loans ($358.1 million, 28.4%) are on the master servicer's
watchlist. The master servicer, Wells Fargo Bank N.A., reported
financial information for 96.3% of the nondefeased loans in the
pool, of which 91.2% was year-end 2013 data, and the remainder was
partial-year 2014 data.
S&P calculated a 1.26x Standard & Poor's weighted average debt
service coverage (DSC) and 85.8% loan-to-value (LTV) ratio using a
7.72% Standard & Poor's weighted average capitalization rate. The
DSC and LTV calculations exclude the five specially serviced
assets ($121.9 million, 9.7%), and three defeased loans ($73.7
million, 5.9%). The top 10 nondefeased loans have an aggregate
outstanding pool trust balance of $642.5 million (51.0%). Using
servicer-reported numbers, S&P calculated a Standard & Poor's
weighted average DSC and LTV of 1.22x and 89.9%, respectively, for
nine of the top 10 nondefeased loans. The remaining asset is
specially serviced and discussed below.
The properties securing the underlying loans are concentrated
within the Los Angeles-Long Beach-Anaheim, Philadelphia, and New
York-Newark-Jersey City metropolitan statistical areas (MSAs).
Standard & Poor's U.S. Public Finance Group provides credit
ratings on two of the top three counties, Los Angeles County and
Suffolk County, which participate within those MSAs.
To date, the transaction has experienced $108.4 million in
principal losses, or 5.4% of the original pool trust balance. S&P
expects losses to reach approximately 9.7% of the original pool
trust balance in the near term, based on loss incurred to date and
additional losses S&P expects upon the eventual resolution of the
five ($121.9 million, 9.7%) specially serviced assets.
CREDIT CONSIDERATIONS
As of the Oct. 20, 2014, trustee remittance report, five assets
($121.9 million, 9.7%) in the pool were with the special servicer,
LNR Partners LLC (LNR). Details of the two largest specially
serviced assets, one of which is a top 10 nondefeased loan, are:
-- The Woodbridge Hilton Pool asset ($33.5 million, 2.6%) is
the ninth-largest nondefeased asset in the pool and the
largest asset with the special servicer and has a total
reported exposure of $44.7 million.
-- The asset is an 11-story mixed use building that contains
124,146 sq. ft. of office use and a 198-room hotel. The
loan was transferred to LNR on Nov. 22, 2010, because the
borrower requested the loan be restructured. The property
became REO on Oct. 18, 2013. The asset has been deemed
non-recoverable. A $23.4 million appraisal reduction amount
(ARA) is in effect against this asset and S&P expects a
significant loss upon its eventual resolution.
-- The Grandeville on Saxon loan ($25.9 million, 2.0%) has
$29.0 million in total reported exposure and is secured by a
316-unit multifamily complex built in 2005 and located in
Orange City, Fla. The loan was transferred to LNR on
Aug. 23, 2010, for delinquent payments. The property became
REO on July 23, 2013. A $5.7 million ARA is in effect
against this loan and S&P expects a minimal loss upon its
eventual resolution.
The four remaining assets with the special servicer have
individual balances that represent less than 2.0% of the total
pool trust balance. S&P estimated losses for the five specially
serviced assets, arriving at a weighted-average loss severity of
70.5%.
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 LOWERED
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2006-C24
Rating
Class To From Credit enhancement (%)
A-J B+ (sf) BB- (sf) 11.66
B B (sf) B+ (sf) 10.27
C CCC (sf) B (sf) 8.48
D D (sf) CCC (sf) 7.09
E D (sf) CCC- (sf) 5.89
RATING RAISED
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2006-C24
Rating
Class To From Credit enhancement (%)
A-M A- (sf) BBB+ (sf) 23.2
RATINGS AFFIRMED
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2006-C24
Class Rating Credit enhancement (%)
A-3 AAA (sf) 39.10
A-1A AAA (sf) 39.10
X-C AAA (sf) N/A
N/A--Not applicable.
WELLS FARGO 2005-5: Moody's Ups Rating on 2 Debt Tranches to B1
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of six tranches
backed by Prime Jumbo RMBS loans, issued by Wells Fargo.
Complete rating actions are as follows:
Issuer: Wells Fargo Mortgage Backed Securities 2005-5 Trust
Cl. II-A-1, Upgraded to B1 (sf); previously on May 19, 2010
Downgraded to B3 (sf)
Cl. II-A-PO, Upgraded to B1 (sf); previously on May 19, 2010
Downgraded to B3 (sf)
Issuer: Wells Fargo Mortgage Backed Securities 2005-AR9 Trust
Cl. III-A-1, Upgraded to Ba3 (sf); previously on May 14, 2010
Downgraded to B1 (sf)
Cl. III-A-2, Upgraded to Caa1 (sf); previously on May 14, 2010
Downgraded to Caa3 (sf)
Cl. IV-A-1, Upgraded to Ba3 (sf); previously on May 14, 2010
Downgraded to B2 (sf)
Cl. IV-A-2, Upgraded to Caa1 (sf); previously on May 14, 2010
Downgraded to Caa3 (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 a result of improving
performance of the related pools and/or faster pay-down of the
bonds due to high prepayments/fast liquidations.
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 5.9% in September 2014 from
7.2% in September 2013. Moody's forecasts an unemployment central
range of 6% to 7% 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.
WELLS FARGO 2014-C24: Fitch Expects to Rate Class X-D Certs B-
--------------------------------------------------------------
Fitch Ratings has amended its presale report, which was published
on Oct. 22, 2014, on Wells Fargo Commercial Mortgage Securities,
Inc.'s WFRBS Commercial Mortgage Trust 2014-C24 Pass-Through
Certificates.
Fitch now expects to rate the transaction and assign Rating
Outlooks as:
-- $34,202,000 class A-1 'AAAsf'; Outlook Stable;
-- $55,254,000 class A-2 'AAAsf'; Outlook Stable;
-- $86,298,000 class A-3 'AAAsf'; Outlook Stable;
-- $240,000,000 class A-4 'AAAsf'; Outlook Stable;
-- $286,297,000 class A-5 'AAAsf'; Outlook Stable;
-- $59,202,000 class A-SB 'AAAsf'; Outlook Stable;
-- $99,234,000c class A-S 'AAAsf'; Outlook Stable;
-- $860,487,000b class X-A 'AAAsf'; Outlook Stable;
-- $44,860,000c class B 'AA-sf'; Outlook Stable;
-- $32,625,000c class C 'A-sf'; Outlook Stable;
-- $176,719,000c class PEX 'A-sf'; Outlook Stable;
-- $25,829,000ab class X-C 'BB-sf'; Outlook Stable;
-- $10,875,000ab class X-D 'B-sf'; Outlook Stable;
-- $72,047,000a class D 'BBB-sf'; Outlook Stable;
-- $25,829,000a class E 'BB-sf'; Outlook Stable;
-- $10,875,000a class F 'B-sf'; Outlook Stable.
a Privately placed and pursuant to rule 144A/Reg D/Reg S.
b Notional amount and interest only.
c Class A-S, B and C certificates may be exchanged for class PEX
certificates, and class PEX certificates may be exchanged for
class A-S, B and C certificates.
Since the WFRBS Commercial Mortgage Trust 2014-C24 presale report
was published on October 22, 2014, the issuer replaced the
$21,750,000 interest-only class X-C, the $12,235,000 interest-only
class X-D, the $21,750,000 class E, and the $12,235,000 class F,
respectively, with the class X-C, class X-D, class E, and class F,
with balances as noted in the above capital structure. As such,
Fitch amended its expected ratings of 'BBsf' on the interest-only
class X-C and class B to 'BB-sf' for the new interest-only class C
and class B. Fitch also amended its expected ratings of 'Bsf' on
the interest-only class X-D and class F to 'B-sf' for the new
interest-only class X-D and class F.
The expected ratings are based on information provided by the
issuer as of Oct. 21, 2014. Fitch does not expect to rate the
$149,532,000 interest-only class X-B, $40,781,577 interest-only
class X-E, or the $40,781,577 class G. Fitch also does not expect
to rate the $34,400,000 class SJ-A, $34,400,000 interest-only
class X-SJ, $28,400,000 class SJ-B, $30,400,000 class SJ-C, or the
$53,300,000 class SJ-D, which represent the beneficial interests
in the non-pooled St. Johns Town Center B note.
The certificates represent beneficial ownership in the trust,
primary assets of which are 86 loans secured by 109 commercial
properties having an aggregate principal balance of approximately
$1.088 billion as of the cutoff date. The loans were contributed
to the trust by Wells Fargo Bank, National Association, Rialto
Mortgage Finance, LLC, Liberty Island Group I, LLC, the Royal Bank
of Scotland, C-III Commercial Mortgage, LLC, and Basis Real Estate
Capital II, LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 75.6% of the properties
by balance as well as cash flow analysis and asset summary reviews
on 77.9% of the pool.
KEY RATING DRIVERS
Fitch Leverage: The transaction has high leverage, consistent with
other recent Fitch-rated fixed-rate transactions. The pool's
Fitch DSCR and LTV are 1.20x and 105.8%, respectively, compared
with the first half 2014 averages of 1.19x and 105.6%,
respectively.
Very Limited Amortization: The pool is scheduled to amortize by
only 9.3% of the initial pool balance prior to maturity.
Approximately 29.9% of the pool is full term interest only, 46.9%
of the pool is partial interest only and 23.2% of the pool
consists of amortizing balloon loans. Fitch-rated transactions in
the first half of 2014 had an average full-term interest-only
percentage of 18.3% and partial interest-only percentage of 37.8%.
Lower Loan Concentration: Loan concentration is lower than that of
other recent transactions. The largest loan represents 9.5% of
the pool, and the top 10 loans represent 46.2%. The average top
10 concentrations for first-half 2014 and 2013 conduit
transactions were 52.5% and 54.5%, respectively.
RATING SENSITIVITIES
For this transaction, Fitch's net cash flow (NCF) was 9.6% below
the most recent NOI (for properties for which a recent NOI was
provided, excluding properties that were stabilizing during this
period). Unanticipated further declines in property-level NCF
could result in higher defaults and loss severities on defaulted
loans, and could result in potential rating actions on the
certificates. Fitch evaluated the sensitivity of the ratings
assigned to WFRBS 2014-C24 certificates and found that the
transaction displays average sensitivity to further declines in
NCF. In a scenario in which NCF declined a further 20% from
Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to
'BBB+sf' could result. In a more severe scenario, in which NCF
declined a further 30% from Fitch's NCF, a downgrade of the junior
'AAAsf' certificates to 'BBB-sf' could result. The presale report
includes a detailed explanation of additional stresses and
sensitivities on pages 75 - 76.
The master servicer will be Wells Fargo Bank, National Association
rated 'CMS1-' by Fitch. The special servicer will be Rialto
Capital Advisors, LLC 'CSS2-'by Fitch.
WFRBS COMMERCIAL 2012-C10: Moody's Affirms B2 Rating on Cl F Debt
-----------------------------------------------------------------
Moody's Investors Service affirmed the ratings on fourteen classes
of WFRBS Commercial Mortgage Trust, Series 2012-C10 as follows:
Cl. A-1, Affirmed Aaa (sf); previously on Nov 14, 2013 Affirmed
Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Nov 14, 2013 Affirmed
Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Nov 14, 2013 Affirmed
Aaa (sf)
Cl. A-FL, Affirmed Aaa (sf); previously on Nov 14, 2013 Affirmed
Aaa (sf)
Cl. A-FX, Affirmed Aaa (sf); previously on Nov 14, 2013 Affirmed
Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Nov 14, 2013 Affirmed
Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Nov 14, 2013 Affirmed
Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Nov 14, 2013 Affirmed Aa3
(sf)
Cl. C, Affirmed A3 (sf); previously on Nov 14, 2013 Affirmed A3
(sf)
Cl. D, Affirmed Baa3 (sf); previously on Nov 14, 2013 Affirmed
Baa3 (sf)
Cl. E, Affirmed Ba2 (sf); previously on Nov 14, 2013 Affirmed Ba2
(sf)
Cl. F, Affirmed B2 (sf); previously on Nov 14, 2013 Affirmed B2
(sf)
Cl. X-A, Affirmed Aaa (sf); previously on Nov 14, 2013 Affirmed
Aaa (sf)
Cl. X-B, Affirmed A2 (sf); previously on Nov 14, 2013 Affirmed A2
(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 2.3% of the
current balance, compared to 2.0% at Moody's last review. Moody's
base expected loss plus realized losses is now 2.2% of the
original pooled balance, compared to 2.0% 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 principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions" published in
April 2005.
On October 9, 2014, Moody's issued a "Request for Comment" asking
for market feedback on proposed changes to the methodology it uses
to rate conduit and fusion CMBS transactions. If Moody's adopts
the new methodology as proposed, the changes could affect the
ratings of WFRBS 2012-C10.
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 28, compared to 29 at Moody's last review.
Deal Performance
As of the September 17, 2014 distribution date, the transaction's
aggregate certificate balance has decreased by 2.2% to $1.23
billion from $1.31 billion at securitization. The certificates are
collateralized by 85 mortgage loans ranging in size from less than
1% to 11% of the pool, with the top ten loans constituting 50% of
the pool. One loan, constituting 8.6% of the pool, has an
investment-grade structured credit assessment.
Five loans, constituting 3.4% 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.
No loans have been liquidated from the pool. There are no troubled
or specially serviced loans.
Moody's received full year 2013 operating results for 93% of the
pool. Moody's weighted average conduit LTV is 92%, compared to
100% 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 12.4% to the most recently
available net operating income (NOI). Moody's value reflects a
weighted average capitalization rate of 10.0%.
Moody's actual and stressed conduit DSCRs are 1.76X and 1.21X,
respectively, compared to 1.61X and 1.10X 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 loan with a structured credit assessment is the the Concord
Mills Loan ($110 million -- 8.6% of the pool), which represents a
participation interest in the senior component of a $234 million
mortgage loan. The loan is secured by a 1.28 million square foot
(SF) super regional mall located in Concord, North Carolina. Major
tenants include Bass Pro Shops Outdoor, Burlington Coat Factory
and AMC Corporation. As of June 2014, the mall was 98% leased,
compared to 97% at last review. Moody's structured credit
assessment and stressed DSCR are baa3 (sca.pd) and 1.30X,
respectively, the same as at the last review.
The top three performing conduit loans represent 21% of the pool.
The largest loan is the Republic Plaza Loan ($125 million -- 9.8%
of the pool), which represents a participation interest in a $278
million dollar loan. The loan is secured by a 56-story Class-A
trophy office tower and a separate 12-story parking garage located
in Denver, Colorado. Major tenants include Encana Oil & Gas, DCP
Midstream, LP and Wheeler Trigg O'Donnell LLP. As of June 2014,
the office tower was 89% leased, compared to 95% at last review.
Moody's LTV and stressed DSCR are 94% and 1.04X, respectively,
compared to 107% and 0.91X at the last review.
The second largest loan is Dayton Mall Loan ($82 million -- 6.4%
of the pool). The loan is secured by a 778,500 SF, two story
regional mall located in Dayton, Ohio. The mall's anchor tenants
include Macy's, Elder Beerman and Sears, which are borrower-owned
and contributed collateral for the loan. As of June 2014, the
total mall and in-line space of tenants leasing less than 10,000
SF was 98% and 91%, respectively. Moody's current LTV and stressed
DSCR are 91% and 1.22X, compared to 95% and 1.17X at the last
review.
The third largest loan is the STAG REIT Portfolio Loan ($66
million -- 5.2% of the pool). The loan is secured 28 industrial
buildings totaling 3.6 million SF, located throughout eight
states. As of June 2014, the portfolio was 87% leased, compared to
95% at last review. Moody's current LTV and stressed DSCR are 80%
and 1.32X respectively, compared to 82% and 1.28X at the last
review.
ZAIS INVESTMENT IX: Moody's Hikes Rating on $58MM Notes to Ba3
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings on notes issued
by Zais Investment Grade Limited IX:
$81,000,000 Class A-1A Senior Secured Floating Rate Notes Due
April 27, 2052 (current outstanding balance of $9,680,776 ),
Upgraded to Aaa (sf); previously on April 11, 2014 Upgraded to A3
(sf)
$90,079,566 Class A-1B Senior Secured Floating Rate Notes Due
April 27, 2052 (current outstanding balance of $40,010,625),
Upgraded to Aaa (sf); previously on April 11, 2014 Upgraded to A3
(sf)
$39,920,434 Class A-1C Senior Secured Floating Rate Notes Due
April 27, 2052, Upgraded to Aa3 (sf); previously on April 11, 2014
Upgraded to Baa2 (sf)
$54,000,000 Class A-2 Senior Secured Floating Rate Notes Due
April 27, 2052, Upgraded to A3 (sf); previously on April 11, 2014
Upgraded to Ba1 (sf)
$58,000,000 Class B Senior Secured Floating Rate Notes Due April
27, 2052, Upgraded to Ba3 (sf); previously on April 11, 2014
Upgraded to B3 (sf)
ZAIS Investment Grade Limited IX, issued in March 2007, is a
collateralized debt obligation backed primarily by a portfolio of
CLOs originated from 2005 to 2007.
Ratings Rationale
These rating actions are due primarily to the deleveraging of the
senior notes and an increase in the transaction's over-
collateralization ratios. Since the last rating action in April
2014, $25.1 million of principal proceeds have been paid to the
notes, mostly from unscheduled redemptions of underlying CLO
assets. The Class A-1A notes have paid down by approximately 67%,
or $19.5 million. The Class A-1B notes have deleveraged by 35%, or
$21.1 million, resulting from both cash payments from principal
proceeds and amortization of synthetic assets. Based on Moody's
calculation, the par coverage on the Class A-1 notes has increased
to 245.5% from 193.3% in April 2014.
The deal has also benefited from an improvement in the credit
quality of the underlying portfolio since April 2014. Based on the
trustee's October 2014 report, the weighted average rating factor
is currently 599, compared to 809 in April 2014.
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: The performance of SF CDOs backed by
CLOs (CLO Squareds) could be negatively affected by 1) uncertainty
about credit conditions in the general economy (macroeconomic
uncertainty), and 2) the large concentration of upcoming
speculative-grade debt maturities, which could make refinancing
difficult for issuers. Additionally, the performance of the CLO
assets can also be affected positively or negatively by 1) the
manager's investment strategy and behavior and 2) differences in
the legal interpretation of CLO documentation by different
transactional parties owing to embedded ambiguities.
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.
Loss and Cash Flow Analysis:
Moody's applies a Monte Carlo simulation framework in Moody's
CDOROM(TM) 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(TM)
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 (387):
Class A-1A: +1
Class A-1B: +1
Class A-1C: +1
Class A-2: +1
Class B: +1
Class C: 1
Class D: 0
Class Y: +1
Ba1 and below ratings notched down by two notches (874):
Class A-1A: -1
Class A-1B: -1
Class A-1C: -1
Class A-2: -1
Class B: -1
Class C: 0
Class D: 0
Class Y: -1
ZIGGURAT CLO: Moody's Assigns (P)B2 Rating on $10MM Class F Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
eight classes of notes to be issued by Ziggurat CLO Ltd.
Moody's rating action is as follows:
$290,000,000 Class A-1 Senior Secured Floating Rate Notes due
2026 (the "Class A-1 Notes"), Assigned (P)Aaa (sf)
$25,000,000 Class A-2 Senior Secured Fixed Rate Notes due 2026
(the "Class A-2 Notes"), Assigned (P)Aaa (sf)
$39,000,000 Class B-1 Senior Secured Floating Rate Notes due 2026
(the "Class B-1 Notes"), Assigned (P)Aa2 (sf)
$25,000,000 Class B-2 Senior Secured Fixed Rate Notes due 2026
(the "Class B-2 Notes"), Assigned (P)Aa2 (sf)
$24,500,000 Class C Secured Deferrable Floating Rate Notes due
2026 (the "Class C Notes"), Assigned (P)A2 (sf)
$31,500,000 Class D Secured Deferrable Floating Rate Notes due
2026 (the "Class D Notes"), Assigned (P)Baa3 (sf)
$25,000,000 Class E Secured Deferrable Floating Rate Notes due
2026 (the "Class E Notes"), Assigned (P)Ba3 (sf)
$10,000,000 Class F Secured Deferrable Floating Rate Notes due
2026 (the "Class F Notes"), Assigned (P)B2 (sf)
The Class A-1 Notes, the Class A-2 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."
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.
Ziggurat 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, 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 75% ramped as of the closing date.
Guggenheim Partners 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 and
credit improved and 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: 50
Weighted Average Rating Factor (WARF): 2600
Weighted Average Spread (WAS): 4.00%
Weighted Average Coupon (WAC): 7.00%
Weighted Average Recovery Rate (WARR): 43%
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 2600 to 2990)
Rating Impact in Rating Notches
Class A-1 Notes: 0
Class A-2 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 2600 to 3380)
Rating Impact in Rating Notches
Class A-1 Notes: -1
Class A-2 Notes: -1
Class B-1 Notes: -4
Class B-2 Notes: -4
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 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.
* S&P Lowers 65 Ratings on 53 U.S. RMBS Deals to 'Dsf'
------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 65
classes of mortgage pass-through certificates from 53 U.S.
residential mortgage-backed securities (RMBS) transactions issued
between 2002 and 2008 to 'D (sf)'.
The downgrades reflect S&P's assessment of the impact of principal
write-downs on the affected classes during recent remittance
periods. Before the rating actions, S&P rated all of these
classes either 'CCC (sf)' or 'CC (sf)'.
The 65 defaulted classes consist of these:
-- 24 from prime jumbo transactions (36.92%).
-- 24 from Alternative-A transactions (36.92%).
-- 11 from subprime transactions (16.92%).
-- Two from resecuritized real estate mortgage investment
conduit transactions.
-- One from an RMBS negative amortization transaction.
-- One from a first-lien high loan-to-value ratio transaction.
-- One from a re-performing transaction.
-- One from a federal housing administration/veterans affairs
transaction.
All of the transactions in this review receive credit enhancement
from a combination of subordination, excess spread, and
overcollateralization (where applicable).
S&P will continue to monitor its ratings on securities that
experience principal write-downs, and S&P will adjust its ratings
as it considers appropriate in accordance with its criteria.
*********
Monday's edition of the TCR delivers a list of indicative prices
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The Sunday TCR delivers securitization rating news from the week
then-ending.
*********
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