/raid1/www/Hosts/bankrupt/TCR_Public/110918.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, September 18, 2011, Vol. 15, No. 259
Headlines
ACA ABS: Moody's Downgrades Class A-2 Notes Rating to 'Caa2'
ALABAMA 21: Moody's Finishes Review of Tobacco Settlement Bonds
ALLY MASTER: Moody's Assigns Provisional Ratings to Floorplan ABS
ALM LOAN: Moody's Raises Rating of Class D Notes to A3 From Ba2
ARCAP 2004-1: S&P Affirms 'CCC-' Ratings on 2 Classes of Certs.
ARES XXII: Moody's Upgrades $11-Mil. Class C Notes Rating to 'Ba1'
ATRIUM III: Moody's Upgrades Rating of Class C Notes to 'B2'
ATRIUM CDO: Moody's Upgrades Rating of Class C-1 Notes to 'Ba2'
BEAR STEARNS: Fitch Junks Rating on Three Class Certificates
CANYON CAPITAL: Moody's Upgrades Rating of Class D Notes to 'Ba2'
CARLYLE AZURE: Moody's Raises Rating of Class B-1L Notes to 'Ba1'
CD 2007-CD5: S&P Lowers Rating on Class J Certificates to 'CCC'
CENT CDO: Moody's Upgrades Rating of Class C Notes to 'Ba2'
COMMERCIAL CAPITAL: Credit Enhancement Cues Fitch to Lift Rating
CRATOS CLO: Moody's Upgrades Rating of Class E Notes to 'Ba2'
CREDIT SUISSE: Moody's Affirms Cl. A-J Notes Rating at 'B3'
CSFB MANUFACTURED: S&P Lowers Rating on Class B-1 Certs. to 'D'
DEUSTCHE BANK: Stable Performance Cues Fitch to Hold Low-B Rating
DUNHILL ABS: Moody's Downgrades Class A-1VA Notes Rating to 'Ca'
EASTMAN HILL: Fitch Withdraws 'Dsf' Ratings on Two Note Classes
FAIRWAY LOAN: S&P Gives 'B+' Rating on Class B-1L Income Notes
FLATIRON CLO: Moody's Upgrades Class D Notes Rating to 'Ba1'
FORD AUTO: Moody's Assigns Provisional Ratings to Series 2011-R3
GLACIER FUNDING: Fitch Cuts Ratings on Two Note Classes to 'Dsf'
GS MORTGAGE: Moody's Upgrades Class G Notes Rating to 'B2'
JP MORGAN: Moody's Upgrades Class H Notes Rating to 'Ba1'
JP MORGAN: Moody's Reviews Cl. D 'Ba1' Rating for Downgrade
JPMORGAN CHASE: Fitch Expects to Put Low-B Ratings on Three Notes
LANDMARK IV: Moody's Upgrades Rating of Class B-2L Notes to 'Ba3'
LB-UBS COMMERCIAL: Moody's Affirms Class B Notes Rating at 'Ba1'
LB-UBS COMMERCIAL: Moody's Affirms Class K Notes Rating at 'Ba2'
MORGAN STANLEY: Moody's Assigns (P)Ba2 (sf) Rating to Cl. F Notes
MORGAN STANLEY: S&P Raises Rating on Class 6-A-1 From 'D' to 'CC'
MOUNTAIN VIEW: Moody's Upgrades Rating of Class D Notes to 'Ba1'
MT. WILSON: Moody's Upgrades Class D Notes Rating to 'Ba1'
N-STAR REAL: Moody's Lowers Rating of Class C-1 Notes to 'B1'
NEVADA HOUSING: S&P Lowers Rating on Series 2003A Bonds to 'B+'
NEVADA HOUSING: S&P Cuts Series 2002A & 200B Bond Rating to 'B+'
NEWCASTLE CDO: Moody's Downgrades Rating of Class II Notes to 'B3'
NEWSTAR COMMERCIAL: Fitch Affirms $29.1 Million Notes at 'BBsf'
NESWTAR COMMERCIAL: Fitch Holds Rating on $13 Mil. Notes at 'BBsf'
NEWSTAR TRUST: Fitch Affirms Junk Rating on Two Note Classes
NOB HILL: Moody's Upgrades Rating of Class E Notes to 'B1'
OHA PARK: Moody's Upgrades Class D Notes Rating to 'Ba2'
PACIFICA CDO: Moody's Raises Rating of Class B-2L Notes to 'Ba2'
PRIMUS CLO: Moody's Raises Rating of Class D Notes to 'Ba2'
REAL ESTATE ASSET: DBRS Confirms Class F Rating at 'BB'
SAGAMORE CLO: S&P Affirms Ratings on 2 Classes of Notes at 'B-'
SASCO FHA/VA: Moody's Confirms Rating of Class A Notes at 'Caa1'
SIERRA CLO: Moody's Upgrades Rating of Class B-2L Notes to 'Ba2'
SLM STUDENT 2008-1: Fitch Holds Rating on Class B Notes at 'BBsf'
SLM STUDENT 2008-2: Fitch Holds Rating on Class B Notes at 'BBsf'
STONE TOWER: Moody's Upgrades Rating of Class C-1 Notes to Ba1
STONEY LANE: Moody's Uprades Rating of Class C Notes to 'Ba1'
SYMPHONY CLO II: Moody's Upgrades Ratings of Class C Notes to Ba1
SYMPHONY CLO IV: Moody's Upgrades Rating of Class D Notes to 'Ba1'
SYMPHONY CLO V: Moody's Upgrades Rating of Class C Note to 'Ba1'
SYMPHONY CLO VI: Moody's Raises Rating of Cl. D Note to 'Ba2'
TRALEE CDO: Moody's Upgrades Ratings of Class D Notes to 'Ba2'
TRIBECA PARK: Moody's Raises Rating of Class D Notes to Ba2 (sf)
VELOCITY CLO: S&P Withdraws 'BB+' Rating on Class D Notes
VENTURE VI: Moody's Ugrades Class C Notes Rating to 'Ba1'
VENTURE VIII: Moody's Upgrades Rating of Class D Notes to 'Ba2'
VENTURE IX: Moody's Upgrades Rating of Class D Notes to 'Ba2'
WACHOVIA BANK: Moody's Lowers Rating of Class B Notes to 'Ba3'
WACHOVIA BANK: S&P Lowers Ratings on 6 Classes of Certs. to 'D'
WACHOVIA BANK: S&P Withdraws 'CCC-' Ratings on 2 Classes of Certs.
* S&P Lowers Ratings on 11 Classes of Certificates to 'D'
*********
ACA ABS: Moody's Downgrades Class A-2 Notes Rating to 'Caa2'
------------------------------------------------------------
Moody's Investors Service downgraded one class of notes issued by
ACA ABS 2004-1, LIMITED. The notes affected by the rating action:
US$49,500,000 Class A-2 Senior Secured Floating Rate Notes Due
2039, Downgraded to Caa2 (sf); previously on May 7, 2010
Downgraded to B3 (sf).
According to Moody's, the rating downgrade is the result of
deterioration in the credit quality of the underlying portfolio.
Such credit deterioration is observed through numerous factors,
including an increase in the dollar amount of defaulted securities
and failure of the coverage tests. The defaulted securities, as
reported by the trustee, have increased from $45.3 million in
March 2010 to $56.5 million in Sep 2011. In addition, the Trustee
reports that the transaction is currently failing its interest and
principal coverage tests.
ACA ABS 2004-1, LIMITED is a collateralized debt obligation
issuance backed by a portfolio of primarily Residential Mortgage-
Backed Securities (RMBS) originated between 2002 and 2003.
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Moody's applied the Monte Carlo simulation framework within
CDOROMv2.8 to model the loss distribution for SF CDOs. Within this
framework, defaults are generated so that they occur with the
frequency indicated by the adjusted default probability pool (the
default probability associated with the current rating multiplied
by the Resecuritization Stress) for each credit in the reference
pool. Specifically, correlated defaults are simulated using a
normal (or Gaussian) copula model that applies the asset
correlation framework. Recovery rates for defaulted credits are
generated by applying within the simulation the distributional
assumptions, including correlation between recovery values.
Together, the simulated defaults and recoveries across each of the
Monte Carlo scenarios define the loss distribution for the
reference pool.
Once the loss distribution for the collateral has been calculated,
each collateral loss scenario derived through the CDOROM loss
distribution is associated with the interest and principal
received by the rated liability classes via the CDOEdge cash-flow
model. The cash flow model takes into account the following:
collateral cash flows, the transaction covenants, the priority of
payments (waterfall) for interest and principal proceeds received
from portfolio assets, reinvestment assumptions, the timing of
defaults, interest-rate scenarios and foreign exchange risk (if
present). The Expected Loss for each tranche is the weighted
average of losses to each tranche across all the scenarios, where
the weight is the likelihood of the scenario occurring. Moody's
defines the loss as the shortfall in the present value of cash
flows to the tranche relative to the present value of the promised
cash flows. The present values are calculated using the promised
tranche coupon rate as the discount rate. For floating rate
tranches, the discount rate is based on the promised spread over
Libor and the assumed Libor scenario.
Moody's rating action factors in a number of sensitivity analyses
and stress scenarios, discussed below. Results are shown in terms
of the number of notches' difference versus the current model
output, where a positive difference corresponds to lower expected
loss, assuming that all other factors are held equal:
Collateral WAL + 1 yrs.:
Class A-2: 0
Collateral WAL + 3 yrs.:
Class A-2: -2
ALABAMA 21: Moody's Finishes Review of Tobacco Settlement Bonds
---------------------------------------------------------------
Moody's Investors Service has concluded its review of tobacco
settlement revenue bonds. The review follows the May 25, 2011,
publication of Moody's updated cash flow modeling assumptions. The
bonds are securitizations of payments that domestic tobacco
manufacturers owe to 46 states and certain territories under the
Master Settlement Agreement (MSA payments).
Moody's has downgraded 60 tranches in 13 securitizations
(approximately $17 billion). Moody's also confirmed seven tranches
in three securitizations ($1.1 billion) and upgraded 134 tranches
in 27 securitizations (approximately $3.5 billion).
RATINGS RATIONALE
The primary reason for the downgrades was the continuing decline
in MSA payments to the transactions. The MSA payments depend on
the volume of domestic cigarette shipments, which have been on the
decline following falling cigarette consumption. Public awareness
of smoking-related health risks, smoking bans and regulations,
increasing prices, and wide availability of smoking cessation
products have all contributed to the fall in tobacco use. Moody's
modeling assumptions published on May 25, 2011, in Addendum A to
the methodology entitled "Moody's Approach to Rating Tobacco
Settlement Revenues Securitizations" reflect Moody's updated
expectation of the mean cigarette consumption decline. In Addendum
A, Moody's revised the estimate upward to 4% per year from on
average around 3%.
The confirmed and upgraded tranches benefit from lower transaction
leverage and the resultant high debt service coverage ratios,
often significant cash reserves, and relatively short-term
maturities, which minimize the impact of the cigarette consumption
declines over the long term.
Although some transactions benefit strongly from these factors, a
structural feature of the tobacco settlement securitizations
limits the credit quality of the bonds. Upon an event of default
the cash allocation in many transactions switches from sequential
to pro-rata, which weakens cash flow to the bonds with short-term
maturities. This limit does not apply if there is only one class
of bonds outstanding, or if an event of default is unlikely.
In assigning the ratings Moody's conducted cash flow simulation
analyses using assumptions published in the methodology. Among
other factors, Moody's considered the internal rate of return, the
probability of default, and the expected loss on the bonds. In all
cases, Moody's assumed that the portion of MSA payments either
withheld or escrowed by the tobacco manufacturers that are party
to MSA (NPM adjustments) will continue until 2020 and reduce the
MSA payments by 13% per year. Moody's also assumed that the
settling states would ultimately fully recover the withheld or
escrowed disputed funds. Should the tobacco manufacturers prevail,
however, such an outcome would materially reduce future cash flow
to the affected states, which could result in further downgrades
to their bonds.
In addition to the quantitative factors, Moody's considered
qualitative factors. Such factors included the structural
protections in each transaction, the breakeven cigarette
consumption declines for each rated tranche and recent deal
performance indicators, including debt service coverage ratios,
interest coverage ratios, and the transactions' leverage.
The principal methodology used in rating these issues is "Moody's
Approach to Rating Tobacco Settlement Revenue Securitizations"
published on May 25, 2011.
Primary sources of uncertainty include future trends in domestic
cigarette consumption, the domestic market share of the tobacco
manufacturers who are parties to the MSA, as well as the market
share split between major and minor tobacco manufacturers. In
addition, Moody's published methodology includes an assumption
that inflation remains at the 3% minimum for the term of the
bonds. Therefore, inflation above the 3% minimum could result in
the increase of the MSA payment revenue.
The complete rating actions are:
Issuer: Alabama 21 Century Authority, Series 2001
Cl. 9, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1 (sf)
Placed Under Review for Possible Upgrade
Cl. 10, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1 (sf)
Placed Under Review for Possible Upgrade
Cl. 11, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1 (sf)
Placed Under Review for Possible Upgrade
Cl. 12, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1 (sf)
Placed Under Review for Possible Upgrade
Cl. 13, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1 (sf)
Placed Under Review for Possible Upgrade
Cl. 14, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1 (sf)
Placed Under Review for Possible Upgrade
Cl. 15, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1 (sf)
Placed Under Review for Possible Upgrade
Cl. 16, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1 (sf)
Placed Under Review for Possible Upgrade
Cl. 17, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1 (sf)
Placed Under Review for Possible Upgrade
Term Bond Cl. 1, Upgraded to A1 (sf); previously on Dec 21, 2010
Baa1 (sf) Placed Under Review for Possible Upgrade
Issuer: Alabama 21st Century Authority, Series 2000
Class 11, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1
(sf) Placed Under Review for Possible Upgrade
Class 12, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1
(sf) Placed Under Review for Possible Upgrade
Class 13, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1
(sf) Placed Under Review for Possible Upgrade
Class 14, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1
(sf) Placed Under Review for Possible Upgrade
Class 15, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa1
(sf) Placed Under Review for Possible Upgrade
Issuer: Arkansas Development Finance Authority, Tobacco Settlement
Revenue Bonds, Series 2001 (Biosciences Institutes and College of
Public Health Projects)
Term Bond Class 1, Upgraded to A1 (sf); previously on Dec 21, 2010
Baa1 (sf) Placed Under Review for Possible Upgrade
Term Bond Class 2, Upgraded to A1 (sf); previously on Dec 21, 2010
Baa1 (sf) Placed Under Review for Possible Upgrade
Term Bond Class 3, Upgraded to A1 (sf); previously on Dec 21, 2010
Baa1 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 9, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa1 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 10, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa1 (sf) Placed Under Review for Possible Upgrade
Issuer: Buckeye Tobacco Settlement Financing Authority, Tobacco
Settlement Asset-Backed Bonds, Series 2007 (State of Ohio)
Series 2007A-1-6 Senior Current Interest Serial Bonds, Upgraded to
Aaa (sf); previously on Dec 21, 2010 Baa3 (sf) Placed Under Review
for Possible Upgrade
Series 2007A-1-7 Senior Current Interest Serial Bonds, Upgraded to
Aaa (sf); previously on Dec 21, 2010 Baa3 (sf) Placed Under Review
for Possible Upgrade
Series 2007A-1-8 Senior Current Interest Serial Bonds, Upgraded to
Aa1 (sf); previously on Dec 21, 2010 Baa3 (sf) Placed Under Review
for Possible Upgrade
Series 2007A-1-9 Senior Current Interest Serial Bonds, Upgraded to
A1 (sf); previously on Dec 21, 2010 Baa3 (sf) Placed Under Review
for Possible Upgrade
Series 2007A-1-10 Senior Current Interest Serial Bonds, Upgraded
to A1 (sf); previously on Dec 21, 2010 Baa3 (sf) Placed Under
Review for Possible Upgrade
Series 2007A-1-11 Senior Current Interest Serial Bonds, Upgraded
to A3 (sf); previously on May 26, 2011 Baa3 (sf) Placed Under
Review for Possible Upgrade
Series 2007A-1-12 Senior Current Interest Serial Bonds, Upgraded
to Baa1 (sf); previously on May 26, 2011 Baa3 (sf) Placed Under
Review for Possible Upgrade
Series 2007A-2-1 Senior Current Interest Turbo Term Bonds,
Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3 (sf) Placed
Under Review for Possible Downgrade
Series 2007A-2-2 Senior Current Interest Turbo Term Bonds,
Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3 (sf) Placed
Under Review for Possible Downgrade
Series 2007A-2-3 Senior Current Interest Turbo Term Bonds,
Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3 (sf) Placed
Under Review for Possible Downgrade
Series 2007A-2-4 Senior Current Interest Turbo Term Bonds,
Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3 (sf) Placed
Under Review for Possible Downgrade
Series 2007A-2-5 Senior Current Interest Turbo Term Bonds,
Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3 (sf) Placed
Under Review for Possible Downgrade
Series 2007A-2-6 Senior Current Interest Turbo Term Bonds,
Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3 (sf) Placed
Under Review for Possible Downgrade
Series 2007A-2-7 Senior Current Interest Turbo Term Bonds,
Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3 (sf) Placed
Under Review for Possible Downgrade
Series 2007-A-3 Senior Convertible Capital Appreciation Turbo Term
Bonds, Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3 (sf)
Placed Under Review for Possible Downgrade
Issuer: California County Tobacco Securitization Agency (Los
Angeles County Securitization Corporation) Series 2006A
Convertible Turbo Bonds
Cl. 2006A-1, Downgraded to Ba1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 2006A-2, Downgraded to B1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 2006A-3, Downgraded to B1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 2006A-4, Downgraded to B1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
Cl. 2006A-5, Downgraded to B1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
Issuer: California County Tobacco Securitization Agency (Merced
County Tobacco Funding Corporation) - Tobacco Settlement Asset-
Backed Refunding Bonds
2005A-1, Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
2005A-2, Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
2005A-3, Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
2005B, Downgraded to B1 (sf); previously on Dec 21, 2010 Baa3 (sf)
Placed Under Review for Possible Downgrade
Issuer: California Statewide Financing Authority (Pooled Tobacco
Securitization Program) , Series 2002
Ser. 2002A Term Bonds 1, Downgraded to B2 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Ser. 2002A Term Bonds 2, Downgraded to B2 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Ser. 2002A Term Bonds 3, Downgraded to B2 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Ser. 2002A Serial Bonds 8, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002A Serial Bonds 9, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002A Serial Bonds 10, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002A Serial Bonds 11, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002A Serial Bonds 12, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002A Serial Bonds 13, Upgraded to Baa1 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Downgrade
Ser. 2002B Term Bonds 1, Downgraded to B2 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Ser. 2002B Term Bonds 2, Downgraded to B2 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Ser. 2002B Term Bonds 3, Downgraded to B2 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Ser. 2002B Serial Bonds 8, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002B Serial Bonds 9, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002B Serial Bonds 10, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002B Serial Bonds 11, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002B Serial Bonds 12, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002B Serial Bonds 13, Upgraded to Baa1 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Children's Trust, Series 2002
Term Bond 1, Confirmed at Baa3 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
Term Bond 2, Confirmed at Baa3 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
Term Bond 3, Confirmed at Baa3 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
Serial Bond 7, Upgraded to A1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond 5, Upgraded to A1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond 6, Upgraded to A1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: City of San Diego Tobacco Settlement Revenue Funding
Corporation
Term Bonds, Upgraded to Baa1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
Issuer: District of Columbia Tobacco Settlement Financing
Corporation, Series 2001
Term Bond 1, Upgraded to A1 (sf); previously on May 26, 2011 Baa3
(sf) Placed Under Review for Possible Upgrade
Term Bond 2, Upgraded to Baa1 (sf); previously on May 26, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade
Term Bond 3, Upgraded to Baa1 (sf); previously on May 26, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 5, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 6, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 7, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: Educational Enhancement Funding Corporation - Tobacco
Settlement Asset-Backed Bonds, Series 2002A and 2002B
Ser. 2002A Taxable Term Bond 1, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002B Tax-Exempt Term Bond 2, Upgraded to A3 (sf); previously
on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: Golden State Tobacco Securitization Corporation (2007
Indenture)
TT Bds A-1-1, Downgraded to B3 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
TT Bds A-1-2, Downgraded to B3 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
TT Bds A-1-3, Downgraded to B3 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
TT Bds A-1-4, Downgraded to B3 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
CI Bds A-1-5, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
CI Bds A-1-6, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
CI Bds A-1-7, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
CI Bds A-1-8, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
CI Bds A-1-9, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
CI Bds A-1-10, Upgraded to A3 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Upgrade
CI Bds A-1-11, Upgraded to Baa1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Upgrade
CI Bds A-1-12, Upgraded to Baa1 (sf); previously on May 26, 2011
Baa3 (sf) Placed Under Review for Possible Downgrade
CI Bds A-1-13, Upgraded to Baa1 (sf); previously on May 26, 2011
Baa3 (sf) Placed Under Review for Possible Downgrade
CVT Bds A-2, Downgraded to B3 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Michigan Tobacco Settlement Finance Authority, Tobacco
Settlement Asset-Backed Bonds, Series 2006 and 2008
Series 2006A Fixed Rate Turbo Term Bonds, Downgraded to B2 (sf);
previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for
Possible Downgrade
Series 2008A Current Interest Turbo Term Bonds, Downgraded to B2
(sf); previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for
Possible Downgrade
Issuer: New York Counties Tobacco Trust I, Series 2000
Term Bond 1, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
Flex. Amort. Term Bond 2, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Flex. Amort. Term Bond 3, Upgraded to Baa1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Flex. Amort. Term Bond 4, Upgraded to Baa1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 11, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 12, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 13, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 14, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: New York Counties Tobacco Trust II, Series 2001
Super Sinker Term Bond 1, Upgraded to A3 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade
Super Sinker Term Bond 2, Upgraded to Baa1 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade
Super Sinker Term Bond 3, Upgraded to Baa2 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 7, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 8, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 9, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 10, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 11, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: New York Counties Tobacco Trust III, Series 2003
2003 TTB-1, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
2003 TTB-2, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
2003 TTB-3, Upgraded to A3 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
Issuer: Niagara Tobacco Asset Securitization Corporation, Series
2000
Term 3, Upgraded to Baa2 (sf); previously on May 26, 2011 Baa3
(sf) Placed Under Review for Possible Upgrade
Term 4, Confirmed at Baa3 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
Term 5, Confirmed at Baa3 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
Serial 13, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
Serial 14, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
Serial 15, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
Serial 16, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
Serial 17, Upgraded to A1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
Serial 18, Upgraded to A3 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
Serial 19, Upgraded to A3 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
Serial 20, Upgraded to Baa1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Upgrade
Issuer: Northern Tobacco Securitization Corporation, Series 2006
2006-A-1, Downgraded to Ba1 (sf); previously on May 26, 2011 Baa3
(sf) Placed Under Review for Possible Downgrade
2006-A-2, Downgraded to B2 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
2006-A-3, Downgraded to B2 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
Issuer: Rensselaer Tobacco Asset Securitization Corporation,
Series A
Super Sinker Term Bond, Upgraded to A3 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Super Sinker Term Bond 2, Upgraded to A3 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade
Super Sinker Term Bond 3, Upgraded to A3 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 7, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 8, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 9, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 10, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 11, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: Rockland Tobacco Asset Securitization Corporation, Series
2001
Super Sinker Term Bond 1, Upgraded to Baa1 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade
Super Sinker Term Bond 2, Upgraded to Baa1 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade
Super Sinker Term Bond 3, Upgraded to Baa1 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 7, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond Class 8, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: The California County Tobacco Securitization Agency (
Fresno County Tobacco Funding Corporation), Series 2002
Ser. 2002 Term Bonds 1, Upgraded to A3 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Term Bonds 2, Upgraded to Baa1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Term Bonds 3, Upgraded to Baa2 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Term Bond 4, Confirmed at Baa3 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Serial Bonds 4, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Serial Bonds 5, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Serial Bonds 6, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Serial Bonds 7, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: The California County Tobacco Securitization Agency
(Alameda County Tobacco Asset Securitization Corporation), Series
2002
Ser. 2002 Turbo Bond 1, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Turbo Bond 2, Upgraded to Baa1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Turbo Bond 3, Upgraded to Baa1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Turbo Bond 4, Confirmed at Baa3 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Serial Bonds 10, Upgraded to A1 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: The California County Tobacco Securitization Agency
(Stanislaus County Tobacco Funding Corporation), Series 2002
Ser. 2002A Term Bond 1, Upgraded to Baa1 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002A Term Bond 2, Upgraded to Baa1 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: Tobacco Securitization Authority of Northern California
(Sacramento County)
2005A-1-1, Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
2005A-1-2, Downgraded to Caa1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
2005A-1-3, Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
2005A-2, Downgraded to Caa1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
Issuer: Tobacco Securitization Authority of Southern California
(San Diego)
2006A-1-1, Downgraded to B1 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
2006A-1-2, Downgraded to B3 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
2006A-1-3, Downgraded to B2 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
Issuer: Tobacco Settlement Authority (Iowa), Series 2005
2005A TNs, Downgraded to B2 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
2005B TNs, Downgraded to B2 (sf); previously on Dec 21, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
2005-C1 TNs, Downgraded to B2 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
2005-C2 TNs, Downgraded to B2 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
2005-C3 TNs, Downgraded to B2 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Tobacco Settlement Authority (Washington), Series 2002
Ser. 2002 Serial Bond 7, Upgraded to A1 (sf); previously on Dec
21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Term Bond 8, Upgraded to A3 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2002 Term Bond 9, Upgraded to Baa1 (sf); previously on Dec
21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: Tobacco Settlement Finance Authority (Taxable Tobacco
Settlement Asset-Backed Bonds, Series 2007) West Virginia
2007A TT CIBS, Downgraded to B2 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Tobacco Settlement Financing Corporation (New Jersey),
Series 2007-1
2007-1A Term Bond 1, Downgraded to B1 (sf); previously on May 26,
2011 Baa3 (sf) Placed Under Review for Possible Downgrade
2007-1A Term Bond 2, Downgraded to B1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
2007-1A Term Bond 3, Downgraded to B2 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
2007-1A Term Bond 4, Downgraded to B2 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
2007-1A Term Bond 5, Downgraded to B2 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
2007-1A Serial Bond 5, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
2007-1A Serial Bond 6, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
2007-1A Serial Bond 7, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
2007-1A Serial Bond 8, Upgraded to A1 (sf); previously on Dec 21,
2010 Baa3 (sf) Placed Under Review for Possible Upgrade
2007-1A Serial Bond 9, Upgraded to A1 (sf); previously on May 26,
2011 Baa3 (sf) Placed Under Review for Possible Downgrade
2007-1A Serial Bond 10, Upgraded to A3 (sf); previously on May 26,
2011 Baa3 (sf) Placed Under Review for Possible Downgrade
2007-1A Serial Bond 11, Upgraded to Baa1 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Downgrade
2007-1A Serial Bond 12, Upgraded to Baa1 (sf); previously on
May 26, 2011 Baa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Tobacco Settlement Financing Corporation (Virgin Islands),
Series 2001
Term Bond 1, Upgraded to A1 (sf); previously on May 26, 2011 Baa3
(sf) Placed Under Review for Possible Upgrade
Term Bond 2, Upgraded to A3 (sf); previously on May 26, 2011 Baa3
(sf) Placed Under Review for Possible Upgrade
Serial Bond 5, Upgraded to A1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond 6, Upgraded to A1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Upgrade
Serial Bond 7, Upgraded to A1 (sf); previously on Dec 21, 2010
Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: Tobacco Settlement Financing Corporation, Series 2001A and
2001B
Ser. 2001B-1 Tax-Exempt Term Bond, Upgraded to A1 (sf); previously
on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Ser. 2001B-2 Tax-Exempt Term Bond, Upgraded to A3 (sf); previously
on Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Upgrade
Issuer: Tobacco Settlement Financing Corporation, Series 2002A and
2002B
Ser. 2002A Tax-Exempt Term Bond 1, Upgraded to Baa1 (sf);
previously on May 26, 2011 Baa3 (sf) Placed Under Review for
Possible Upgrade
Ser. 2002A Tax-Exempt Term Bond 2, Downgraded to Ba1 (sf);
previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for
Possible Downgrade
Ser. 2002A Tax-Exempt Term Bond 3, Downgraded to B1 (sf);
previously on Dec 21, 2010 Baa3 (sf) Placed Under Review for
Possible Downgrade
Issuer: Tobacco Settlement Financing Corporation, Series 2007
2007A Turbo Term Bonds, Downgraded to B2 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade
2007B-1 Turbo Term Bonds, Downgraded to B2 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade
2007B-2 Turbo Term Bonds, Downgraded to B2 (sf); previously on
Dec 21, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Tobacco Settlement Revenue Management Authority - Tobacco
Settlement Asset-Backed Refunding Bonds, Series 2008 (State of
South Carolina)
Tobacco Settlement Asset-Backed Refunding Bonds, Series 2008,
Upgraded to Aa3 (sf); previously on Dec 21, 2010 Baa3 (sf) Placed
Under Review for Possible Upgrade
Issuer: Ulster Tobacco Asset Securitization Corporation, Series
2001
Term CI Bond-1, Downgraded to B1 (sf); previously on May 26, 2011
Baa3 (sf) Placed Under Review for Possible Downgrade
Term CI Bond-2, Downgraded to B1 (sf); previously on May 26, 2011
Baa3 (sf) Placed Under Review for Possible Downgrade
Term CCA Bond-1, Downgraded to B1 (sf); previously on May 26, 2011
Baa3 (sf) Placed Under Review for Possible Downgrade
Term CCA Bond-2, Downgraded to B1 (sf); previously on May 26, 2011
Baa3 (sf) Placed Under Review for Possible Downgrade
ALLY MASTER: Moody's Assigns Provisional Ratings to Floorplan ABS
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to the
Series 2011-4 notes (Notes) to be issued by Ally Master Owner
Trust (AMOT 2011-4). The Notes are collateralized primarily by
dealer floorplan loans extended by Ally Bank, a subsidiary of Ally
Financial Inc., to franchised new car dealers associated with
General Motors and Chrysler brands.
The complete rating action is:
$500,000,000, Class A1 and A2 Asset Backed Notes, rated (P)Aaa
(sf)
$24,648,000, Class B Asset Backed Notes, rated (P)Aa2 (sf)
$38,732,000, Class C Asset Backed Notes, rated (P)A2 (sf)
$28,169,000, Class D Asset Backed Notes, rated (P)Baa2 (sf)
RATINGS RATIONALE
Moody's said the ratings are based on an assessment of the quality
of the underlying auto dealer floorplan receivables, the legal
structure and structural provisions, the manufacturers which the
transaction is primarily exposed to (General Motors and Chrysler),
the experience of Ally Financial Inc. as servicer, and the
experience of Wells Fargo Bank, National Association as back-up
servicer.
The quality of the floorplan receivables was considered based upon
a number of characteristics. A primary consideration is the
strength of the manufacturers and the vehicles that the
dealerships and the receivables have exposure. Moody's also
considered the size of the dealership base that is part of Ally
Master Owner Trust, the dealer credit rating distribution
according to Ally Bank's proprietary dealer credit evaluation
system, the age distribution of the receivables, and the overall
trust monthly payment rate. Vehicle values under stressed
scenarios were also a consideration in Moody's analysis.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. Floorplan ABS Securities" published in
January 2010.
In Moody's simulation analysis it assumed that General Motors was
a B2, three notches below its current rating of Ba2, and that
Chrysler experienced a liquidation bankruptcy scenario. Chrysler
is currently rated B2. The simulation analysis incorporated a
stressed average dealer default rate of 50%. Moody's primary
assumptions for recovery rates of repossessed cars from defaulted
dealers was 72% for new cars and 67% for used cars. Moody's Aaa
Level for AMOT 2011-4 is 30%.
The V Score for this transaction is Medium, which is equal to the
Medium V score assigned for the U.S. Dealer Floorplan Loan ABS
sector. The V Score indicates "Medium" uncertainty about critical
assumptions such as dealer default probabilities and recovery
rates. Volatility of performance based on loss experience is low,
but historical data does not include key variables such as payment
rates, recoveries and dealer defaults during a stressed,
disorganized manufacturer bankruptcy scenario. Given that, Moody's
feels the level of historical data is only a moderate predictor of
future performance of a stressed environment. Additionally,
although floorplan transaction structures are typically straight-
forward, the credit risk characteristics are reasonably complex.
Therefore, despite low loss experience for the sector, the V Score
for this transaction reflects the Sector score of Medium.
Moody's V Scores provide a relative assessment of the quality of
available credit information and the potential variability around
the various inputs to a rating determination. The V Score ranks
transactions by the potential for significant rating changes owing
to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling and the transaction governance that
underlie the ratings. V Scores apply to the entire transaction
(rather than individual tranches).
Moody's Parameter Sensitivities: Moody's simulation analysis
reveals Class A sensitivity down to the Baa level when dealer
defaults are increased to 65% and recovery rates are stressed an
additional 15%. The Class B rating shows sensitivity down to the
Ba level with dealer defaults up to 60% and recovery rates
stressed an additional 15%. The Class C rating shows sensitivity
down to the B level with dealer defaults up to 60% and a recovery
rate haircut of 5%. The Class D rating shows sensitivity down to
the B level with a recovery rate haircut of 5% and the initial
stressed average dealer default rate of 50%. This Parameter
Sensitivity is based upon the expected amount of enhancement in
AMOT 2011-4 at closing and does not include potential additions to
credit enhancement due to payment rate triggers that are included
with the transaction.
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.
ALM LOAN: Moody's Raises Rating of Class D Notes to A3 From Ba2
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by ALM Loan Funding 2010-3, Ltd.:
US$20,500,000 Class A-2 Senior Secured Floating Rate Notes due
November 20, 2020, Upgraded to Aaa (sf); previously on June 22,
2011 Aa2 (sf) Placed Under Review for Possible Upgrade;
US$25,750,000 Class B Senior Secured Deferrable Floating Rate
Notes due November 20, 2020, Upgraded to Aa1 (sf); previously on
June 22, 2011 A2 (sf) Placed Under Review for Possible Upgrade;
US$14,000,000 Class C Senior Secured Deferrable Floating Rate
Notes due November 20, 2020, Upgraded to A1 (sf); previously on
June 22, 2011 Baa2 (sf) Placed Under Review for Possible Upgrade;
US$10,000,000 Class D Secured Deferrable Floating Rate Notes due
November 20, 2020, Upgraded to A3 (sf); previously on June 22,
2011 Ba2 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $403 million,
defaulted par of $0 million, a weighted average default
probability of 21.75% (implying a WARF of 2757), a weighted
average recovery rate upon default of 50.32%, and a diversity
score of 50. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
ALM Loan Funding 2010-3, Ltd., issued in December 2010, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average coupon and
diversity score. However, as part of the base case, Moody's
considered a spread level higher than the covenant and a weighted
average rating factor lower than the covenant level due to the
large difference between the reported and covenant levels.
ARCAP 2004-1: S&P Affirms 'CCC-' Ratings on 2 Classes of Certs.
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on eight
classes from ARCap 2004-1 Resecuritization Trust (ARCap 2004-1),
as well as its ratings on linked grantor trust certificates from
seven additional ARCap transactions. "At the same time, we
affirmed our 'CCC- (sf)' ratings on two other classes from ARCap
2004-1," S&P related.
ARCap 2004-1 is a multi-tiered structure, which issued 10
individual rated notes and seven rated grantor trust certificates.
The class A through G notes were repackaged into separate newly
formed individual grantor trusts, each of which issued
certificates. Each note received cash flow from the underlying
CMBS collateral, which is directly passed through to the
corresponding grantor trust certificates. Accordingly, the ratings
on the grantor trust certificates are dependent on the ratings on
the corresponding notes.
"The downgrades and affirmations primarily reflect our analysis of
the interest shortfalls affecting ARCap 2004-1. We also considered
the potential for additional classes to experience interest
shortfalls in the future. Our analysis considered the underlying
collateral, as well as the transaction structure," S&P stated.
According to the Aug. 18, 2011, remittance report, cumulative
deferred interest to the transaction totaled $11.6 million, which
affected class F and all of the classes subordinate to it. The
interest shortfalls resulted from interest shortfalls on 13 of the
underlying CMBS classes primarily due to the master servicer's
recovery of prior advances, appraisal subordinate entitlement
reductions (ASERs), servicers' nonrecoverability determinations
for advances, and special servicing fees. "It is our understanding
that interest shortfalls also resulted from the allocation of
interest proceeds accrued from defaulted collateral securities to
principal proceeds. According to the transaction's August
remittance report, the trust allocated $360,784 of interest
proceeds from defaulted collateral as principal proceeds," S&P
stated.
The rating actions also reflect exposure to rated CMBS
certificates that have experienced downgrades. Standard & Poor's
has downgraded certificates from four underlying CMBS transactions
totaling $60.5 million (22.6% of total asset balance).
According to the Aug. 18, 2011, remittance report, ARCap 2004-1 is
collateralized by 58 CMBS classes ($267.2 million, 100%) from 16
distinct transactions issued between 1999 and 2004. ARCap 2004-1
has assets totaling $267.2 million, with liabilities totaling
$330.1 million. ARCap 2004-1 has exposure to the following CMBS
transactions that Standard & Poor's has downgraded:
JPMorgan Chase Commercial Mortgage Securities Corp. series
2001-CIBC3 (classes H, J, K, L and M; $29.3 million, 11.0%);
Merrill Lynch Mortgage Trust series 2003-KEY1 (classes K, L,
M, N and P; $19.8 million, 7.4%);
JPMorgan Chase Commercial Mortgage Securities Corp. series
2001-CIBC2 (class J; $7.2 million, 2.7%); and
Banc of America Commercial Mortgage Inc. series 2002-2 (class
N; $4.2 million, 1.6%).
"Standard & Poor's analyzed ARCap 2004-1 and the linked grantor
trust certificates according to our current criteria. Our analysis
is consistent with the lowered and affirmed ratings," S&P added.
Ratings Lowered
ARCap 2004-1 Resecuritization Trust
Collateralized debt obligation certificates
Rating
Class To From
A A+ (sf) AA+ (sf)
B BBB+ (sf) A+ (sf)
C BB+ (sf) BBB+ (sf)
D BB- (sf) BBB- (sf)
E B- (sf) BB- (sf)
F CCC- (sf) B (sf)
G CCC- (sf) CCC+ (sf)
H CCC- (sf) CCC (sf)
ARCap 2004-1 Resecuritization Trust, Class A
Grantor Trust Certificate
Rating
To From
A+ (sf) AA+ (sf)
ARCap 2004-1 Resecuritization Trust, Class B
Grantor Trust Certificate
Rating
To From
BBB+ (sf) A+ (sf)
ARCap 2004-1 Resecuritization Trust, Class C
Grantor Trust Certificate
Rating
To From
BB+ (sf) BBB+ (sf)
ARCap 2004-1 Resecuritization Trust, Class D
Grantor Trust Certificate
Rating
To From
BB- (sf) BBB- (sf)
ARCap 2004-1 Resecuritization Trust, Class E
Grantor Trust Certificate
Rating
To From
B- (sf) BB- (sf)
ARCap 2004-1 Resecuritization Trust, Class F
Grantor Trust Certificate
Rating
To From
CCC- (sf) B (sf)
ARCap 2004-1 Resecuritization Trust, Class G
Grantor Trust Certificate
Rating
To From
CCC- (sf) CCC+ (sf)
Ratings Affirmed
ARCap 2004-1 Resecuritization Trust
Collateralized debt obligation certificates
Rating
J CCC- (sf)
K CCC- (sf)
ARES XXII: Moody's Upgrades $11-Mil. Class C Notes Rating to 'Ba1'
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Ares XXII CLO Ltd.:
US$26,500,000 Class A-2 Floating Rate Notes Due August 15, 2019,
Upgraded to Aa1 (sf); previously on June 22, 2011 Aa3 (sf) Placed
Under Review for Possible Upgrade;
US$19,000,000 Class A-3 Floating Rate Notes Due August 15, 2019,
Upgraded to Aa3 (sf); previously on June 22, 2011 A2 (sf) Placed
Under Review for Possible Upgrade;
US$18,000,000 Class B Deferrable Floating Rate Notes Due August
15, 2019, Upgraded to Baa1 (sf); previously on June 22, 2011 Baa3
(sf) Placed Under Review for Possible Upgrade;
US$11,000,000 Class C Deferrable Floating Rate Notes Due August
15, 2019, Upgraded to Ba1 (sf); previously on June 22, 2011 Ba3
(sf) Placed Under Review for Possible Upgrade;
US$11,000,000 Class D Deferrable Floating Rate Notes Due August
15, 2019, Upgraded to Ba3 (sf); previously on June 22, 2011 B3
(sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in September
2009. In particular, as of the trustee report dated August 5,
2011, the weighted average rating factor is currently 2569
compared to 2782 in the August 2009 report. The Class A, Class B,
Class C, and Class D overcollateralization ratios are reported at
119.90%, 112.75%, 108.78%, and 105.08%, respectively, versus
August 2009 levels of 116.72%, 109.76%, 105.89%, and 102.29%,
respectively, and all related overcollateralization tests are
currently in compliance.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate,
may be different from the trustee's reported numbers. In its
base case, Moody's analyzed the underlying collateral pool to
have a performing par balance, including principal proceeds, of
$339.9 million, defaulted par of $1.7 million, a weighted average
default probability of 22.0% (implying a WARF of 2728), a weighted
average recovery rate upon default of 49.5%, and a diversity score
of 70.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends, and collateral manager
latitude for trading the collateral are also factors.
Ares XXII CLO Ltd., issued in August 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2016 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming worse
of reported and covenanted values for weighted average rating
factor, weighted average coupon, and diversity score. As part
of the base case, Moody's considered weighted average spread
levels higher than the covenant levels due to the large
difference between the reported and covenant levels.
ATRIUM III: Moody's Upgrades Rating of Class C Notes to 'B2'
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Atrium III:
US$373,000,000 Class A1 Floating Rate Notes Due 2016 (current
balance of $241,864,361), Upgraded to Aaa (sf); previously on
June 22, 2011 Aa2 (sf) Placed Under Review for Possible Upgrade;
US$13,000,000 Class A-2a Floating Rate Notes Due 2016, Upgraded to
Aa1 (sf); previously on June 22, 2011 A2 (sf) Placed Under Review
for Possible Upgrade;
US$13,500,000 Class A-2b Fixed Rate Notes Due 2016, Upgraded to
Aa1 (sf); previously on June 22, 2011 A2 (sf) Placed Under Review
for Possible Upgrade;
US$31,750,000 Class B Floating Rate Notes Due 2016, Upgraded to A3
(sf); previously on June 22, 2011 Baa3 (sf) Placed Under Review
for Possible Upgrade;
US$16,500,000 Class C Floating Rate Notes Due 2016, Upgraded to
Ba1 (sf); previously on June 22, 2011 B2 (sf) Placed Under Review
for Possible Upgrade;
US$6,000,000 Class D-1 Floating Rate Notes Due 2016, Upgraded to
Ba3 (sf); previously on June 22, 2011 Caa2 (sf) Placed Under
Review for Possible Upgrade;
US$5,000,000 Class D-2 Fixed Rate Notes Due 2016, Upgraded to Ba3
(sf); previously on June 22, 2011 Caa2 (sf) Placed Under Review
for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of delevering of the senior
notes since the rating action in January 2010. Moody's notes that
the Class A-1 Notes have been paid down by approximately 35% or
$128 million since the rating action in January 2010. As a result
of the delevering, the overcollateralization ratios have increased
since the last rating action. Based on the August 2011 trustee
report, the Class A, Class B, Class C, and Class D
overcollateralization ratios are reported at 129.92%, 118.18%,
112.88%, and 109.60%, (ratios do not reflect delevering of the
Class A Notes on the August 2011 payment date) versus November
2010 levels of 124.2%, 115.0%, 110.73%, and 108.06%, respectively.
Moody's noted that the number of investments in securities that
mature after the maturity date of the notes has grown as a result
of the deal's decision to participate in amend-and-extend
activities. As of the latest trustee report, dated August 22,
2011, securities that mature after the maturity date of the notes
make up approximately 14.07% of the underlying portfolio versus
3.49% in November 2010. The high percentage of these securities
potentially exposes the notes to market risk in the event of
liquidation at the time of the notes' maturity.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $363.5 million,
defaulted par balance of $15 million, a weighted average default
probability of 18.03% (implying a WARF of 2825), a weighted
average recovery rate upon default of 48%, and a diversity score
of 60. The default and recovery properties of the collateral pool
are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Atrium III, issued in October of 2004, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Delevering: The main source of uncertainty in this transaction
is whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to high
prepayment levels in the loan market and/or collateral sales by
the manager, which may have significant impact on the notes'
ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
3) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assumes an asset's terminal value upon
liquidation at maturity to be equal to the lower of an assumed
liquidation value (depending on the extent to which the asset's
maturity lags that of the liabilities) and the asset's current
market value.
ATRIUM CDO: Moody's Upgrades Rating of Class C-1 Notes to 'Ba2'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Atrium CDO:
US$243,000,000 Class A Floating Rate Notes Due 2015 (current
outstanding balance of $150,385,481), Upgraded to Aaa (sf);
previously on June 22, 2011 Aa1 (sf) Placed Under Review for
Possible Upgrade;
US$10,000,000 Class B-1 Fixed Rate Notes Due 2015, Upgraded to Aa1
(sf); previously on June 22, 2011 Baa1 (sf) Placed Under Review
for Possible Upgrade;
US$15,000,000 Class B-2 Floating Rate Notes Due 2015, Upgraded to
Aa1 (sf); previously on June 22, 2011 Baa1 (sf) Placed Under
Review for Possible Upgrade;
US$3,000,000 Class C-1 Fixed Rate Notes Due 2015, Upgraded to Baa1
(sf); previously on June 22, 2011 Ba2 (sf) Placed Under Review for
Possible Upgrade;
US$11,500,000 Class C-2 Floating Rate Notes Due 2015, Upgraded to
Baa1 (sf); previously on June 22, 2011 Ba2 (sf) Placed Under
Review for Possible Upgrade;
US$5,000,000 Class D-1 Fixed Rate Notes Due 2015, Upgraded to Ba2
(sf); previously on June 22, 2011 Caa2 (sf) Placed Under Review
for Possible Upgrade;
US$2,500,000 Class D-2 Floating Rate Notes Due 2015, Upgraded to
Ba2 (sf); previously on June 22, 2011 Caa2 (sf) Placed Under
Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of delevering of the senior
notes since the rating action in December 2010. Moody's notes that
the Class A Notes have been paid down by approximately 27% or $55
million since the rating action in December 2010. As a result of
the delevering, the Class A overcollateralization ratio has
increased since the last rating action. Based on the August 2011
trustee report, the Class A overcollateralization ratio is
reported at 134.27%, versus November 2010 level of 129.03%.
Moody's noted that the number of investments in securities that
mature after the maturity date of the notes has grown since the
rating action in December 2010. As of the latest trustee report,
dated August 15, 2011, securities that mature after the maturity
date of the notes make up approximately 18.5% of the underlying
portfolio versus 7.0% in November 2010. The high percentage of
these securities potentially exposes the notes to market risk in
the event of liquidation at the time of the notes' maturity.
Furthermore, Moody's notes that the overcollateralization ratios
in the deal incorporate a haircut for securities that mature after
the maturity date of the notes. As a result, the Class B, Class C,
and Class D overcollateralization ratios have remained unchanged
or decreased since the last rating action due to a greater
overcollateralization haircut for such long dated securities.
Based on the August 2011 trustee report, the Class B, Class C, and
Class D overcollateralization ratios are reported at 115.13%,
106.34%, and 102.30%, respectively, versus November 2010 levels of
115.04%, 108.24%, and 105.02%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $221.9 million,
defaulted par balance of $8.8 million, a weighted average default
probability of 16.28% (implying a WARF of 2771), a weighted
average recovery rate upon default of 49.7%, and a diversity score
of 47. The default and recovery properties of the collateral pool
are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Atrium CDO, issued in June 2002, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Delevering: The main source of uncertainty in this transaction
is whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to high
prepayment levels in the loan market and/or collateral sales by
the manager, which may have significant impact on the notes'
ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
3) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assumes an asset's terminal value upon
liquidation at maturity to be equal to the lower of an assumed
liquidation value (depending on the extent to which the asset's
maturity lags that of the liabilities) and the asset's current
market value.
4) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
BEAR STEARNS: Fitch Junks Rating on Three Class Certificates
------------------------------------------------------------
Fitch Ratings has placed one class on Rating Watch Negative and
downgraded four classes from Bear Stearns & Co., Inc.'s Small
Balance Commercial Loan Trust 2006-1. The small balance
commercial transaction consists of floating rate loans secured by
senior liens on lodging, office, and mixed-use properties.
The negative rating actions reflect an increase in the projected
loss-severity on liquidated loans and a decrease in the projected
excess-spread available to cover losses. Fitch now expects future
loss-severities to exceed 80%, reflecting recent loss-severity
trends. In the rating-stressed scenarios, Fitch also assumed a
reduction in servicer advancing on loans seriously delinquent.
The combination of higher projected severities and reduced
cashflow available to cover losses resulted in revised ratings for
several classes listed below.
To determine the projected base-case loss, Fitch used vintage
average default assumptions derived from small balance commercial
loans that were adjusted based on this pool's performance. The
loss severity was derived from the actual realized severity of the
loans liquidated over the past 15 months for this transaction.
For the remaining loans, the base case default and severity were
25% and 87% respectively. Fitch then utilized Residential
Mortgage Backed Securities (RMBS) cash flow assumptions due to the
similarity in the collateral's historical behavior to residential
mortgages. The cash flow assumptions are described in the July 8,
2011 report 'U.S. RMBS Surveillance Criteria'.
Over the past year, the average 60+ day delinquencies have
decreased modestly from 22.05% to 20.77% of the remaining pool
balance. Over the same time period, realized cumulative losses to
date as a percent of original balance have increased from .84% to
4.11%. The average updated expected collateral loss as a
percentage of the remaining pool balance and as a percentage of
the original balance are 21.71% and 17.03% respectively.
Fitch's rating actions are as follows:
-- Class A (07400SAB5) 'AAAsf'; placed on Rating Watch Negative;
-- Class M-1 (07400SAC3) downgraded to 'BBBsf' from 'AAsf';
Outlook Negative;
-- Class M-2 (07400SAD1) downgraded to 'BBsf' from 'Asf';
Outlook Negative;
-- Class M-3 (07400SAE9) downgraded to 'CCsf/RR5' from 'Bsf';
-- Class M-4 (07400SAF6) downgraded to 'CCsf/RR6' from
'CCCsf/RR2';
-- Class B (07400SAG4) downgraded to 'Csf/RR6' from 'CCsf/RR4'.
These actions were reviewed by a committee of Fitch analysts.
CANYON CAPITAL: Moody's Upgrades Rating of Class D Notes to 'Ba2'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Canyon Capital CLO 2004-1 Ltd:
US$100,000,000 Class A-1-A Senior Floating Rate Notes Due 2016
(current outstanding balance of $72,896,579), Upgraded to Aaa
(sf); previously on June 22, 2011 Aa1 (sf) Placed Under Review for
Possible Upgrade;
US$100,000,000 Class A-1-B Senior Insured Floating Rate Notes Due
2016 (current outstanding balance of $72,896,579), Upgraded to Aaa
(sf); previously on June 22, 2011 Aa1 (sf) Placed Under Review for
Possible Upgrade;
US$40,000,000 Class A-2-A Senior Variable Funding Floating Rate
Notes Due 2016 (current outstanding balance of $29,158,631),
Upgraded to Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed
Under Review for Possible Upgrade;
US$40,000,000 Class A-2-B Senior Insured Variable Funding Floating
Rate Notes Due 2016 (current outstanding balance of $29,158,631),
Upgraded to Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed
Under Review for Possible Upgrade;
US$36,000,000 Class B Senior Floating Rate Deferrable Notes Due
2016, Upgraded to Aa1 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$29,000,000 Class C Senior Floating Rate Deferrable Notes Due
2016, Upgraded to Baa2 (sf); previously on June 22, 2011 B1 (sf)
Placed Under Review for Possible Upgrade;
US$16,000,000 Class D Senior Floating Rate Deferrable Notes Due
2016 (current outstanding balance of $13,577,446), Upgraded to Ba2
(sf); previously on June 22, 2011 Caa3 (sf) Placed Under Review
for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of delevering of the senior
notes since the rating action in July 2009. Moody's notes that the
Class A Notes have been paid down by approximately 27% or $76
million since the rating action in July 2009. As a result of the
delevering, the overcollateralization ratios have increased since
the last rating action. Based on the August 2011 trustee report,
the Class A, Class B, Class C, and Class D overcollateralization
ratios are reported at 151.19%, 128.52%, 114.67%, and 109.16%,
respectively, versus July 2009 levels of 134.97%, 119.59%,
109.54%, and 105.39%, respectively.
The ratings on the Class A-1-B and Class A-2-B Insured Notes
reflect the actual underlying ratings of the Notes. These
underlying ratings are based solely on the intrinsic credit
quality of the Notes in the absence of the guarantee from Ambac
Assurance Corporation. The above action is a result of, and is
consistent with, Moody's modified approach to rating structured
finance securities wrapped by financial guarantors as described in
the press release dated November 10, 2008, titled "Moody's
modifies approach to rating structured finance securities wrapped
by financial guarantors."
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $308 million,
defaulted par balance of $2 million, a weighted average default
probability of 18.8% (implying a WARF of 3195), a weighted average
recovery rate upon default of 46.5%, and a diversity score of 40.
The default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Canyon Capital CLO 2004-1 Ltd., issued in June 2004, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Delevering: The main source of uncertainty in this transaction
is whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to high
prepayment levels in the loan market and/or collateral sales by
the manager, which may have significant impact on the notes'
ratings.
2) Interest rate swap: The deal has a large pay-fixed receive-
floating interest rate swap that is currently out of the money.
Payments to hedge counterparties may consume a large portion of
the interest proceeds.
CARLYLE AZURE: Moody's Raises Rating of Class B-1L Notes to 'Ba1'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Carlyle Azure CLO, Ltd.:
US$273,000,000 Class A-1L Floating Rate Notes due 2020, Upgraded
to Aaa (sf); previously on June 22, 2011 Aa3 (sf) Placed Under
Review for Possible Upgrade;
US$100,000,000 Class A-1LV Floating Rate Revolving Notes due 2020,
Upgraded to Aaa (sf); previously on June 22, 2011 Aa3 (sf) Placed
Under Review for Possible Upgrade;
US$31,000,000 Class A-2L Floating Rate Notes due 2020, Upgraded to
Aa2 (sf); previously on June 22, 2011 Baa2 (sf) Placed Under
Review for Possible Upgrade;
U.S. 28,000,000 Class A-3L Floating Rate Notes due 2020, Upgraded
to A3 (sf); previously on June 22, 2011 Ba3 (sf) Placed Under
Review for Possible Upgrade;
US$22,000,000 Class B-1L Floating Rate Notes due 2020, Upgraded to
Ba1 (sf); previously on June 22, 2011 Caa3 (sf) Placed Under
Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of an increase in the
transaction's overcollateralization ratios since the rating action
in September 2009. The Senior Class A, Class A and Class B-1L
overcollateralization ratios are reported at 119.83%, 112.06% and
106.63%, respectively, versus August 2009 levels of 115.43%,
107.95% and 102.51%, respectively, and all related
overcollateralization tests are currently in compliance.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $484 million,
defaulted par of $3 million, a weighted average default
probability of 18.23% (implying a WARF of 2567), a weighted
average recovery rate upon default of 50.57%, and a diversity
score of 70. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Carlyle Azure CLO, Ltd., issued in March 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor,
weighted average spread, weighted average coupon and diversity
score.
CD 2007-CD5: S&P Lowers Rating on Class J Certificates to 'CCC'
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 12
classes of commercial mortgage pass-through certificates from CD
2007-CD5 Mortgage Trust, a U.S. commercial mortgage-backed
securities (CMBS) transaction. "Concurrently, we affirmed our
ratings on eight other classes from the same transaction," S&P
stated.
"Our rating actions follow our analysis of the transaction
primarily using our U.S. conduit/fusion CMBS criteria. Our
analysis included a review of the credit characteristics of
the remaining assets in the pool, the transaction structure,
and the liquidity available to the trust. The downgrades
reflect credit support erosion that we anticipate will occur
following the resolution of 14 ($133.9 million, 7.0%) of the
16 assets ($138.3 million, 7.2%) currently with the special
servicer and two additional loans ($15.1 million, 0.8%) that
we determined to be credit-impaired," S&P stated.
"The affirmed ratings on the principal and interest-only (IO)
certificates reflect subordination and liquidity support levels
that are consistent with our outstanding ratings. We affirmed our
'AAA (sf)' ratings on the class XP and XS IO certificates based on
our current criteria," S&P related.
"Using servicer-provided financial information, we calculated an
adjusted debt service coverage (DSC) of 1.33x and a loan-to-value
(LTV) ratio of 112.0%. We further stressed the loans' cash flows
under our 'AAA' scenario to yield a weighted average DSC of 0.86x
and an LTV ratio of 152.9%. The implied defaults and loss severity
under the 'AAA' scenario were 88.7% and 40.1%. The DSC and LTV
calculations noted above exclude 14 ($133.9 million, 7.0%) of
the 16 assets ($138.3 million, 7.2%) currently with the special
servicer and two additional loans ($15.1 million, 0.8%) that we
determined to be credit-impaired. We separately estimated losses
for the excluded assets and included them in our 'AAA' scenario
implied default and loss severity figures," S&P said.
Credit Considerations
As of the Aug. 17, 2011, trustee remittance report, 16 assets
($138.3 million, 7.2%) in the pool were with the special
servicers, Helios AMC LLC (Helios) and LNR Partners Inc. The
reported payment status of the specially serviced assets is:
one is real estate owned (REO; $9.1 million, 0.5%), three are
in foreclosure ($25.6 million, 1.3%), eight are 90-plus-days
delinquent ($94.2 million, 4.9%), one is 60 days delinquent
($1.3 million, 0.1%), and three ($8.1 million, 0.4%) are current.
Appraisal reduction amounts (ARAs) totaling $30.7 million are in
effect against 12 of these assets.
The Georgian Towers loan ($58.0 million, 3.0%) is the largest
specially serviced loan and the sixth-largest loan in the pool.
The loan, which entered special servicing on Dec. 23, 2009, is
collateralized by an 890-unit multifamily property in Silver
Spring, Md., and is 90-plus-days delinquent. According to Helios,
the proposed strategy is to sell the property via a managed-bid
sale through the bankruptcy court. "We expect a minimal loss upon
the eventual resolution of this asset," S&P said.
The 15 remaining specially serviced assets have individual
balances that represent less than 0.9% of the pool trust balance.
ARAs totaling $30.7 million are in effect against 12 of these
assets. "We estimated a 42.5% weighted-average loss severity for
13 of these 15 remaining assets," S&P said.
"In addition to the specially serviced assets mentioned, we
consider two other loans to be credit-impaired. The Merrimac Plaza
loan ($12.3 million, 0.6%) is secured by a 116,964-sq.-ft. retail
property in Methuen, Mass. The loan appears on the master
servicers' combined watchlist for other default risk. According to
the watchlist comments, the property lost a major tenant in
AJWright (26,540 sq. ft., 17.0% of gross leasable area [GLA])
after their store at the subject property recently closed. Recent
financial information was not available for the loan. Given this,
we consider this loan to be at an increased risk of default and
loss," S&P related.
The County Inn - Mountainview, Calif. loan ($2.8 million, 0.2%) is
secured by a 53-room lodging property in Mountain View, Calif.
"The loan appears on the master servicers' combined watchlist for
low DSC and other default risk. According to the watchlist
comments, the borrower has stated that the current land is
contaminated and that the County of Santa Clara wants to
decontaminate the existing property. The reported DSC as of
December 2010 was 0.19x. Given this, we consider this loan to be
at an increased risk of default and loss," S&P stated.
Transaction Summary
As of the Aug. 17, 2011 trustee remittance report, the collateral
pool balance was $1.92 billion or 91.9% of the balance at
issuance. The pool includes 147 loans and one REO asset, down from
161 loans at issuance. The master servicers, Wells Fargo
Commercial Mortgage Servicing and Berkadia Commercial Mortgage LLC
provided financial information for 94.0% of the assets in the
pool, 73.2% of which reflected full-year 2010 or later data.
"We calculated a weighted average DSC of 1.41x for the loans in
the pool based on the servicer-reported figures. Our adjusted
DSC and LTV ratio were 1.33x and 112.0%. Our adjusted DSC and
LTV figures exclude 14 ($133.9 million, 7.0%) of the 16 assets
($138.3 million, 7.2%) currently with the special servicer and
two additional loans ($15.1 million, 0.8%) that we determined
to be credit-impaired. We separately estimated losses for the
excluded assets and included them in our 'AAA' scenario implied
default and loss severity figures. The transaction has experienced
$59.7 million in principal losses on 12 assets to date. Forty-two
loans ($385.8 million, 20.1%) in the pool are on the master
servicers' combined watchlist, including two of the top 10 loans.
Thirty-two loans ($281.4 million, 14.6%) have a reported DSC of
less than 1.10x, 23 of which ($166.4 million, 8.7%) have a
reported DSC below 1.00x," S&P related.
Summary of Top 10 Loans
The top 10 loans have an aggregate outstanding balance of
$812.2 million (42.2%). "Excluding the specially serviced Georgian
Towers loan, we calculated an adjusted DSC of 1.35x and LTV ratio
of 115.2% for the top 10 loans. Two ($72.7 million, 3.8%) of the
top 10 loans appear on the master servicers' combined watchlist.
The larger of these is the Quality King loan ($38.9 million,
2.0%), which is the seventh-largest loan in the pool," S&P said.
The loan is secured by a 571,408-sq.-ft. industrial property in
Bellport, N.Y. According to the watchlist comments, a servicer
trigger event on this loan prompted its placement on the
watchlist. The loan is 100% occupied by Quality King Distributors.
As of October 2010, reported DSC was 1.68x.
The Royale Retail Condominium loan ($33.9 million, 1.8%) is the
second-largest loan on the master servicers' combined watchlist
and the 10th-largest loan in the pool. The loan is secured by
40,500-sq.-ft. property consisting of a ground-level retail
portion and a 98-space below-grade parking garage on Manhattan's
Upper East Side. The loan appears on the master servicers'
combined watchlist because A&P (18,023 sq. ft., 44.5% of GLA), a
major tenant, filed for bankruptcy. According to the watchlist
comments, the borrower does not believe that A&P will rescind its
lease at this location, and if it does, retenancy at this location
shouldn't be an issue given the location's appeal. As of December
2010, reported DSC and occupancy were 1.26x and 100.0%.
Standard & Poor's stressed the collateral in the pool according to
its current criteria. "The resultant credit enhancement levels are
consistent with our lowered and affirmed ratings," S&P said.
Ratings Lowered
CD 2007-CD5 Mortgage Trust
Commercial mortgage pass-through certificates
Rating
Class To From Credit enhancement (%)
AM BBB+ (sf) A- (sf) 18.67
A-MA BBB+ (sf) A- (sf) 18.67
AJ BB (sf) BBB- (sf) 11.45
A-JA BB (sf) BBB- (sf) 11.45
B BB- (sf) BB+ (sf) 10.37
C B+ (sf) BB+ (sf) 9.28
D B+ (sf) BB (sf) 8.19
E B+ (sf) BB (sf) 7.24
F B (sf) BB- (sf) 6.28
G B- (sf) BB- (sf) 5.20
H CCC+ (sf) B+ (sf) 3.97
J CCC (sf) B+ (sf) 2.75
Ratings Affirmed
CD 2007-CD5 Mortgage Trust
Commercial mortgage pass-through certificates
Class Rating Credit enhancement (%)
A-2 AAA (sf) 29.55
A-3 AAA (sf) 29.55
A-AB AAA (sf) 29.55
A-4 AAA (sf) 29.55
A-1A AAA (sf) 29.55
K CCC- (sf) 1.66
XP AAA (sf) N/A
XS AAA (sf) N/A
N/A -- Not applicable.
CENT CDO: Moody's Upgrades Rating of Class C Notes to 'Ba2'
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Cent CDO XI Ltd.:
US$543,000,000 Class A-1 Notes, Upgraded to Aa1 (sf); previously
on June 22, 2011 Aa2 (sf) Placed Under Review for Possible Upgrade
US$36,000,000 Class A-2 Notes, Upgraded to A2 (sf); previously on
June 22, 2011 A3 (sf) Placed Under Review for Possible Upgrade
US$30,000,000 Class B Notes, Upgraded to Baa3 (sf); previously on
June 22, 2011 Ba1 (sf) Placed Under Review for Possible Upgrade
US$39,000,000 Class C Notes, Upgraded to Ba2 (sf); previously on
June 22, 2011 B2 (sf) Placed Under Review for Possible Upgrade
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Moody's also notes that the deal has benefited from improvement in
the credit quality of the underlying portfolio since the rating
action in June 2009. Based on the September 2011 trustee report,
the weighted average rating factor is currently 2481 compared to
2798 in May 2009.
The overcollateralization ratios of the rated notes have also
improved since the rating action in June 2009. The Class A, Class
B and Class C overcollateralization ratios are reported at 120.6%,
114.7% and 107.8%, respectively, versus May 2009 levels of 117.9%,
112.1% and 105.4%, respectively. All related overcollateralization
tests are currently in compliance.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $698.3 million,
defaulted par of $4.1million, a weighted average default
probability of 20.7% (implying a WARF of 2791), a weighted average
recovery rate upon default of 47.5%, and a diversity score of 83.
Moody's generally analyzes deals in their reinvestment period by
assuming the worse of reported and covenanted values for all
collateral quality tests. However, in this case given the limited
time remaining in the deal's reinvestment period, Moody's analysis
reflects the benefit of assuming a higher likelihood that the
collateral pool characteristics will continue to maintain a
positive "cushion" relative to certain covenant requirements, as
seen in the actual collateral quality measurements. The default
and recovery properties of the collateral pool are incorporated in
the cash flow model analysis where they are subject to stresses as
a function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Cent CDO XI Limited, issued in March 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
COMMERCIAL CAPITAL: Credit Enhancement Cues Fitch to Lift Rating
----------------------------------------------------------------
Fitch Ratings has upgraded one class of Commercial Capital Access
One, series 3 (CCA One, series 3) commercial mortgage pass-through
certificates.
The upgrade is the result of increased credit enhancement from
pay-down. Fitch modeled losses of 2.8% of the remaining pool
balance from the loans in special servicing and the loans that are
not expected to refinance at maturity based on Fitch's refinance
test. There are 57 of the original 108 loans remaining in the
pool.
As of the August 2011 distribution date, the pool has paid down
64% to $156.1 million from $433.7 million at issuance. There are
four loans in special servicing (9.6%). The Rating Outlooks
reflect the likely direction of any rating changes over the next
one to two years.
Of the remaining pool, 40.2% are multifamily properties that had
low-income housing tax credits at issuance, with approximately 13%
of the pool now past their compliance periods. Additionally, 18
loans in the pool are covered by a SunAmerica limited guaranty
(30.6%).
SunAmerica's parent company, AIG, is rated 'BBB' with a Stable
Outlook by Fitch. The guaranty requires Sun America to pay the
special servicer an amount equal to any realized losses arising
from covered specially serviced loans, or to purchase the covered
loans directly from the trust at par if they become distressed.
None of the specially serviced loans in the pool are covered by
the SunAmerica guaranty.
The largest specially serviced asset (5.1% of the pool) is secured
by a participation interest in a merchandise mart located in
Denver, CO. The loan is greater than 90 days delinquent and the
special servicer is exploring workout options.
Fitch stressed the cash flow of the non-specially serviced and
non-defeased loans by applying a minimum 5% reduction to most
recently available fiscal year-end net operating income, and
applying an adjusted market cap rate between 8% and 11% to
determine value.
Fitch upgrades the following class:
-- $43.4 million class 3C to 'AAsf' from 'A+sf'; Outlook Stable.
Fitch affirms the following classes:
-- $27.1 million class 3A-2 at 'AAAsf'; Outlook Stable;
-- $45.5 million class 3B at 'AAAsf'; Outlook Stable;
-- $19.5 million class 3D at 'BBB+sf'; Outlook Stable;
-- $6.5 million class 3E at 'BBBsf'; Outlook Negative;
-- $10.8 million class 3F at 'CCCsf/RR1'.
The $3.15 million class 3G remains at 'Dsf/RR6'.
-- Classes 3A-1 and 3X have been paid in full. Fitch does not
rate class 3H.
CRATOS CLO: Moody's Upgrades Rating of Class E Notes to 'Ba2'
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Cratos CLO I, Ltd.:
US$30,000,000 Class B Senior Secured Floating Rate Notes due 2021,
Upgraded to Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed
Under Review for Possible Upgrade;
US$35,000,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2021, Upgraded to Aa3 (sf); previously on June 22, 2011
A1 (sf) Placed Under Review for Possible Upgrade;
US$34,000,000 Class D Secured Deferrable Floating Rate Notes due
2021, Upgraded to A3 (sf); previously on June 22, 2011 Baa2 (sf)
Placed Under Review for Possible Upgrade;
US$30,000,000 Class E Secured Deferrable Floating Rate Notes due
2021, Upgraded to Ba2 (sf); previously on June 22, 2011 Ba3 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in the publication "Moody's Approach to Rating
Collateralized Loan Obligations" published in June 2011. The
primary changes to the modeling assumptions include (1) a removal
of the temporary 30% default probability macro stress implemented
in February 2009 as well as (2) increased BET liability stress
factors and increased recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $472 million,
defaulted par of $3.6 million, a weighted average default
probability of 24.0% (implying a WARF of 2901), a weighted average
recovery rate upon default of 49.6%, and a diversity score of 55.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Cratos CLO I, Ltd., issued in May 2007, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor,
weighted average spread, weighted average coupon, and diversity
score. However, Moody's notes that the transaction's current WARF
and diversity levels are significantly better than their
respective covenant levels due to a shift in the collateral
manager's investment focus from middle-market loans to less
concentrated positions in broadly syndicated loans with higher
credit quality. The large cushions in WARF and diversity covenant
levels were considered in the modeling of the transaction, and as
part of the base case, Moody's considered WARF, diversity, and
spread levels better than the covenant levels due to the large
difference between the reported and covenant levels.
CREDIT SUISSE: Moody's Affirms Cl. A-J Notes Rating at 'B3'
-----------------------------------------------------------
Moody's Investors Service (Moody's) affirmed the ratings of 18
classes of Credit Suisse Commercial Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, Series 2007-C3:
Cl. A-2, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. A-AB, Affirmed at Aa2 (sf); previously on Nov 4, 2010
Downgraded to Aa2 (sf)
Cl. A-4, Affirmed at Aa2 (sf); previously on Nov 4, 2010
Downgraded to Aa2 (sf)
Cl. A-1-A1, Affirmed at Aa2 (sf); previously on Nov 4, 2010
Downgraded to Aa2 (sf)
Cl. A-1-A2, Affirmed at Aa2 (sf); previously on Nov 4, 2010
Downgraded to Aa2 (sf)
Cl. A-M, Affirmed at A3 (sf); previously on Nov 4, 2010 Downgraded
to A3 (sf)
Cl. A-J, Affirmed at B3 (sf); previously on Nov 4, 2010 Downgraded
to B3 (sf)
Cl. B, Affirmed at Caa1 (sf); previously on Nov 4, 2010 Downgraded
to Caa1 (sf)
Cl. C, Affirmed at Caa3 (sf); previously on Nov 4, 2010 Downgraded
to Caa3 (sf)
Cl. D, Affirmed at Ca (sf); previously on Nov 4, 2010 Downgraded
to Ca (sf)
Cl. E, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to
C (sf)
Cl. F, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to
C (sf)
Cl. G, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to
C (sf)
Cl. H, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to
C (sf)
Cl. J, Affirmed at C (sf); previously on Dec 16, 2009 Downgraded
to C (sf)
Cl. K, Affirmed at C (sf); previously on Dec 16, 2009 Downgraded
to C (sf)
Cl. A-X, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
RATINGS RATIONALE
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
11.6% of the current balance. At last full review, Moody's
cumulative base expected loss was 12.8%. Since last full review,
the pool has realized losses additional losses of $55 million
dollars that eliminated seven classes. Moody's stressed scenario
loss is 29.2% of the current balance. Moody's provides a current
list of base and stress scenario losses for conduit and fusion
CMBS transactions on moodys.com at:
http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption uncertainty
are the current sluggish macroeconomic environment and performance
in the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are
continuing to show signs of recovery through the first half of
2011, while recovery in the non-core office and retail sectors are
tied to pace of recovery of the broader economy. Core office
markets are showing signs of recovery through lending and leasing
activity. The availability of debt capital continues to improve
with terms returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The primary methodology used in this rating was "Moody's Approach
to Rating U.S. CMBS Conduit Transactions" published in September
2000.
Moody's review incorporated the use of the Excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit estimates is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
underlying rating of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar credit estimates in
the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 58, compared to 61 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated November 4, 2010.
DEAL PERFORMANCE
As of the August 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 7% to $2.51 billion
from $2.68 billion at securitization. The Certificates are
collateralized by 225 mortgage loans ranging in size from less
than 1% to 6% of the pool, with the top ten loans representing 32%
of the pool. The pool does not include any defeased loans or loans
with investment grade credit estimates.
Sixty-five loans, representing 31% 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.
Nineteen loans have been liquidated from the pool since
securitization, resulting in an aggregate $86.3 million loss
(51% loss severity on average). Due to realized losses, classes
L through T have been eliminated entirely and Class K has
experienced a 8% principal loss. Currently, twenty-seven loans,
representing 18% of the pool, are in special servicing. The
master servicer has recognized appraisal reductions totaling
$170.8 million for the specially serviced loans. Moody's has
estimated a $176.8 million loss (49% expected loss) for the
specially serviced loans.
Moody's has assumed a high default probability for 20 poorly
performing loans representing 11% of the pool. Moody's has
estimated a $47.3 million loss (17% expected loss based on a 36%
probability default) from these troubled loans.
Moody's was provided with full year 2010 and partial year 2011
operating results for 96% and 68%, respectively, of the performing
pool. Excluding specially serviced and troubled loans, Moody's
weighted average LTV for the conduit component is 120% compared to
117% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 10% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.1%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs for the conduit component are 1.26X and 0.87X,
respectively, the same as at last review. Moody's actual DSCR is
based on Moody's net cash flow (NCF) and the loan's actual debt
service. Moody's stressed DSCR is based on Moody's NCF and a 9.25%
stressed rate applied to the loan balance.
The top three performing conduit loans represent 16% of the pool.
The largest loan is the Main Plaza Loan ($160.7 million -- 6.4%),
which is secured by two 12-story office buildings located in
Irvine, California. The two buildings total 583,000 square feet
(SF). As of July 2011, the properties were 73% leased compared to
70% at last review. At Moody's prior review, the loan had been
transferred into special servicing for imminent default when the
borrower requested a loan modification. The borrower subsequently
withdrew the modification request and the loan returned to the
master servicer in June 2011 where it has remained current. Due to
ongoing poor property performance and a weak Irvine office market,
Moody's has recognized this loan as a troubled loan. Moody's LTV
and stressed DSCR are 184% and 0.53X, respectively, compared to
203% and 0.48X at last review.
The second largest loan is the Mandarin Oriental Loan
($135.0 million -- 5.4%), which is secured by a 248-key luxury
hotel located at Columbus Circle in New York City. The loan is
on the the master servicer's watchlist due to low debt service
coverage (DSCR). Performance has declined since securitization due
to a significant decline in tourist and business travel during the
economic downturn. However, the property demonstrated improved
performance in 2010 with a year-end 2010 actual DSCR of 1.01X
compared to -1.74X in the prior year. Additional mezzanine debt of
$103.0 million exists and the loan is interest-only for its entire
60-month term maturing in March 2012. Moody's LTV and stressed
DSCR are 121% and 0.89X, essentially the same as at last review.
The third largest loan is the Westwood Complex Loan ($95.0 million
-- 3.8% of the pool), which is secured by a six building mixed-use
complex located in Bethesda, Maryland. The six buildings consist
of two apartment buildings, a retail center, a mixed-use space, an
assisted living facility and a bowling alley. As of July 2011, the
complex was 98% leased, essentially the same as at last review and
securitization. The loan is interest-only throughout its entire
60-month term and matures in April 2012. Moody's LTV and stressed
DSCR are 136% and 0.65X, respectively, compared to 139% and 0.66X
at last review.
CSFB MANUFACTURED: S&P Lowers Rating on Class B-1 Certs. to 'D'
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on the class
B-1 certificates from CSFB Manufactured Housing Pass-Through
Certificates Series 2002-MH3 to 'D (sf)' from 'CCC- (sf)'.
"The downgrade reflects a payment default resulting from the
class' interest shortfall on the July 2011 payment date, which the
trustee confirmed. We believe that the interest shortfall will
likely persist due to the adverse performance trends we have
observed in the underlying pool of collateral originated by CIT
Group/Sales Financing Inc.," S&P related.
Standard & Poor's will continue to monitor the other outstanding
ratings associated with this transaction.
DEUSTCHE BANK: Stable Performance Cues Fitch to Hold Low-B Rating
-----------------------------------------------------------------
Fitch Ratings has affirmed 13 classes of Deutsche Bank Securities
COMM 2010-C1 commercial mortgage pass-through certificates.
The affirmations are due to stable performance of the collateral
and sufficient credit enhancement to the Fitch-rated classes. As
of the August 2011 distribution date, the pool's certificate
balance has paid down 0.85% to $849.4 million from $856.6 million
at issuance.
The transaction is collateralized by 42 loans and 63 underlying
properties. As of August 2011, no loans were in specially
servicing.
The largest loan in the pool is the Fashion Outlets of Niagara
Falls (14.3%), which is secured by a 525,663 square foot (sf)
outlet center with a diverse tenant mix located in Niagara Falls,
NY. The loan was assumed in July 2011 and is now sponsored by The
Macerich Company. Tenant sales and occupancy have both improved
since issuance. In addition, servicer-reported 2010 net operating
income (NOI) improved modestly year-over-year. While rollover is
fairly evenly distributed over the next 10 years, the largest
rollover concentrations occur in 2014 and 2015 when approximately
18% and 17% of the space rolls, respectively. As of the August
2011 remittance, approximately $4.3 million remained in a tenant
improvement/leasing commission (TI/LC) reserve. Fitch expects the
loan could default at its eventual maturity, as it did not pass
Fitch's refinance test, but no losses were modeled on the loan.
The second largest loan in the pool is the Scottsdale Quarter
Ground Lease (8.1%), which is secured by 14.5 acres of land leased
to Scottsdale Quarter, an open-air lifestyle center located in
Scottsdale, AZ. The improvements that sit on the collateral land
consist of two phases of retail and office space totaling 529,664
sf. Approximately 70% of the space consists of retail and the
remaining 30% office. The improvements are on a 99-year ground
lease that commenced in December 2006. The ground lease payment
is the sole source of cash flow available to pay debt service.
However, in the event of a default on the ground lease payment,
the ground lessor has the right to foreclose on the improvements,
which would provide material additional value.
The 12th largest loan in the pool, the Bridgewater Campus (2.8%),
is a Fitch loan of concern. The loan is secured by a 473,909-sf
business complex consisting of seven office and research and
development buildings located in Somerset County in Northern New
Jersey. The property is situated alongside the Raritan River,
which experienced severe flooding following record rainfall from
Hurricane Irene. The property sits on the north bank of the
Raritan, with Manville situated immediately to the river's south.
Manville has been widely reported as one of the most affected
areas in New Jersey from flooding. Fitch has contacted the
servicer to obtain an update on the property's condition and is
awaiting a response.
Fitch stressed the cash flow of the loans by applying a 5%
reduction to the most recent year-end NOI and applying an adjusted
market cap rate to determine value. Two loans, both outside the
pool's top 15, were modeled with losses based on Fitch's refinance
test. In both cases, servicer-reported NOI was approximately 35%
below the issuer's original underwritten amounts.
Fitch has affirmed the following classes:
-- $406.6 million class A-1 at 'AAAsf', Outlook Stable;
-- $39.4 million class A-1D at 'AAAsf', Outlook Stable;
-- $75.1 million class A-2 at 'AAAsf', Outlook Stable;
-- $179.5 million class A-3 at 'AAAsf', Outlook Stable;
-- $349.4 million class XP-A at 'AAAsf', Outlook Stable;
-- $350.3 million class XS-A at 'AAAsf', Outlook Stable;
-- $350.3 million class XW-A at 'AAAsf', Outlook Stable;
-- $24.6 million class B at 'AAsf', Outlook Stable;
-- $28.9 million class C at 'Asf', Outlook Stable;
-- $45 million class D at 'BBB-sf', Outlook Stable;
-- $7.5 million class E at 'BBB-sf', Outlook Stable;
-- $12.8 million class F at 'BBsf', Outlook Stable;
-- $12.9 million class G at 'B-sf', Outlook Stable.
Fitch does not rate the interest-only class XW-B or the
$17.1 million class H.
DUNHILL ABS: Moody's Downgrades Class A-1VA Notes Rating to 'Ca'
----------------------------------------------------------------
Moody's Investors Service has downgraded three classes of notes
issued by Dunhill ABS CDO, Ltd. The notes affected by the rating
action are:
US$250,000 Class A-1VA First Priority Senior Secured Voting
Floating Rate Notes Due 2041 (current balance of $77,911),
Downgraded to Ca (sf); previously on March 16, 2010 Downgraded to
Caa3 (sf);
US$327,250,000 Class A-1NV First Priority Senior Secured Non-
Voting Floating Rate Delayed Draw Notes Due 2041 (current balance
of $102,031,700), Downgraded to Ca (sf); previously on March 16,
2010 Downgraded to Caa3 (sf);
US$20,000,000 Class A-1VB First Priority Senior Secured Voting
Floating Rate Notes Due 2041 (current balance of $6,232,879),
Downgraded to Ca (sf); previously on March 16, 2010 Downgraded to
Caa3 (sf);
RATINGS RATIONALE
According to Moody's, the rating downgrade actions are the result
of deterioration in the credit quality of the underlying
portfolio. Such credit deterioration is observed through numerous
factors, including an increase in the dollar amount of defaulted
securities and failure of the coverage tests. The defaulted
securities, as reported by the trustee, have increased from
$112.6 million in March 2010 to $139.9 million in Aug 2011, while
the Class A/B Overcollateralization Ratio has deteriorated from
38.38 to 18.52.
Dunhill ABS CDO, Ltd., is a collateralized debt obligation
issuance backed by a portfolio of primarily Residential Mortgage-
Backed Securities (RMBS) with the majority originated in 2004 and
2005.
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Moody's applied the Monte Carlo simulation framework within
CDOROMv2.8 to model the loss distribution for SF CDOs. Within this
framework, defaults are generated so that they occur with the
frequency indicated by the adjusted default probability pool (the
default probability associated with the current rating multiplied
by the Resecuritization Stress) for each credit in the reference
pool. Specifically, correlated defaults are simulated using a
normal (or Gaussian) copula model that applies the asset
correlation framework. Recovery rates for defaulted credits are
generated by applying within the simulation the distributional
assumptions, including correlation between recovery values.
Together, the simulated defaults and recoveries across each of the
Monte Carlo scenarios define the loss distribution for the
reference pool.
Once the loss distribution for the collateral has been calculated,
each collateral loss scenario derived through the CDOROM loss
distribution is associated with the interest and principal
received by the rated liability classes via the CDOEdge cash-flow
model. The cash flow model takes into account the following:
collateral cash flows, the transaction covenants, the priority of
payments (waterfall) for interest and principal proceeds received
from portfolio assets, reinvestment assumptions, the timing of
defaults, interest-rate scenarios and foreign exchange risk (if
present). The Expected Loss for each tranche is the weighted
average of losses to each tranche across all the scenarios, where
the weight is the likelihood of the scenario occurring. Moody's
defines the loss as the shortfall in the present value of cash
flows to the tranche relative to the present value of the promised
cash flows. The present values are calculated using the promised
tranche coupon rate as the discount rate. For floating rate
tranches, the discount rate is based on the promised spread over
Libor and the assumed Libor scenario.
EASTMAN HILL: Fitch Withdraws 'Dsf' Ratings on Two Note Classes
---------------------------------------------------------------
Fitch Ratings has downgraded and subsequently withdrawn ratings on
two classes of notes issued by Eastman Hill Funding I, Ltd./Inc.
(Eastman Hill I) as follows:
-- $30,327,461 class B-1 notes downgraded to 'Dsf' from 'Csf'
and withdrawn;
-- $25,000,000 combination notes downgraded to 'Dsf' from 'Csf'
and withdrawn.
The portfolio of Eastman Hill I was liquidated on Aug. 17, 2011 as
part of a litigation settlement order given by the Supreme Court
of the State of New York, County of New York on July 20, 2011.
The nature of the dispute leading to this order and the rationale
behind placing the class A-1-FL, A-1-FX and A-2 notes on Rating
Watch Evolving are described in Fitch's press releases dated
March 5, 2009 and April 6, 2010.
The final distribution occurred on Aug. 30, 2011, where funds from
the liquidation and escrow accounts were distributed to the
noteholders. The class A-1-FL, A-1-FX, A-2 and A-3 notes were paid
in full, receiving full interest and principal repayment, which
consequently resolves the Rating Watch for the applicable classes.
The class B-1 notes received approximately $9 million of proceeds
and the combination notes did not receive any distributions.
Eastman Hill I was a cash flow collateralized debt obligation
invested in residential mortgage-backed securities and corporate
bonds.
FAIRWAY LOAN: S&P Gives 'B+' Rating on Class B-1L Income Notes
--------------------------------------------------------------
Standard & Poor's Ratings Services corrected its rating on the
class C-6 income notes from Fairway Loan Funding Co. by lowering
it to 'AA+ (sf)'.
"Due to an error, we did not lower our rating on the class C-6
income notes, which are backed by U.S. treasury strips, to 'AA+
(sf)' when we lowered 154 other U.S. structured credit ratings on
Aug. 10, 2011, after lowering of the long-term sovereign credit
rating on the United States of America to 'AA+'. The rating action
corrects this," S&P said.
Rating Corrected
Fairway Loan Funding Co.
Rating
Class To From
C-6 Income AA+ (sf) AAA (sf)
Ratings Unaffected
Fairway Loan Funding Co.
Class Rating
X AAA (sf)
A-1L AAA (sf)
A-1LV AAA (sf)
A-2L AA+ (sf)
A-3L BBB+ (sf)
B-1L B+ (sf)
B-2L CCC- (sf)
FLATIRON CLO: Moody's Upgrades Class D Notes Rating to 'Ba1'
------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Flatiron CLO 2007-1:
US$25,400,000 Class A-1b Senior Term Notes Due 2021, Upgraded to
Aa1 (sf); previously on June 22, 2011 Aa2 (sf) Placed Under Review
for Possible Upgrade;
US$14,000,000 Class C Deferrable Mezzanine Term Notes Due 2021,
Upgraded to Baa2 (sf); previously on June 22, 2011 Ba1 (sf) Placed
Under Review for Possible Upgrade;
US$15,000,000 Class D Deferrable Mezzanine Term Notes Due 2021,
Upgraded to Ba1 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade;
US$11,500,000 Class E Deferrable Junior Term Notes Due 2021,
Upgraded to Ba3 (sf); previously on June 22, 2011 Caa2 (sf) Placed
Under Review for Possible Upgrade;
Moody's also confirmed the following rating:
US$29,000,000 Class B Senior Term Notes Due 2021, Confirmed at A2
(sf); previously on June 22, 2011 A2 (sf) Placed Under Review for
Possible Upgrade;
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Moody's notes that the deal has benefited from an improvement in
the credit quality of the underlying portfolio. Based on the
latest trustee report dated August 8, 2011, the weighted average
rating factor is currently 2388 compared to 2820 in the July 2009
report. The overcollateralization ratios of the rated notes have
also improved since the rating action in August 2009. The Senior,
Class C and Class D par coverage ratios are reported at 119.75%,
114.1% and 108.62%, respectively, versus July 2009 levels of
118.28%, 112.7% and 107.29%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $338.9 million, a
weighted average default probability of 24.47% (implying a WARF of
2829), a weighted average recovery rate upon default of 50.15%,
and a diversity score of 59. The default and recovery properties
of the collateral pool are incorporated in cash flow model
analysis where they are subject to stresses as a function of the
target rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Flatiron CLO 2007-1, issued in August 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
FORD AUTO: Moody's Assigns Provisional Ratings to Series 2011-R3
----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to the
notes to be issued by Ford Auto Securitization Trust, Series 2011-
R3 (FAST 2011-R3). The transaction is administered by Ford Credit
Canada Limited (rated Ba2), who is also the originator and
servicer of the auto loan receivable pool which supports the FAST
2011-R3 notes. Ford Credit Canada Limited is the Canadian
subsidiary of Ford Motor Credit Company LLC (rated Ba2).
The complete rating actions are:
Issuer: Ford Auto Securitization Trust, Series 2011-R3
Fixed-rate Class A-1 Notes, rated (P)Aaa (sf)
Fixed-rate Class A-2 Notes, rated (P)Aaa (sf)
Fixed-rate Class A-3 Notes, rated (P)Aaa (sf)
Fixed-rate Class B Notes, rated (P)Aa1 (sf)
Fixed-rate Class C Notes, rated (P)Aa2 (sf)
Fixed-rate Class D Notes, rated (P)A1 (sf)
RATINGS RATIONALE
Moody's median cumulative net loss expectation for the FAST 2011-
R3 pool is 1.50% and the Volatility Proxy Aaa Level is 8.50%.
Moody's net loss expectation and Volatility Proxy Aaa Level for
the transaction are derived from an analysis of the credit quality
of the underlying pool of fixed rate retail installment sales
contracts, the collateral's historical performance, the servicing
ability of Ford Credit Canada Limited, the performance guarantee
provided by Ford Motor Credit Company LLC, and expectations for
future economic conditions.
All classes of notes are enhanced by a 1.0% cash reserve account
as well as overcollateralization in the form of yield supplement
overcollateralization. The Class A Notes are further enhanced by
subordinate Class B, Class C, and Class D Notes which constitute
3.00%, 2.00% and 2.00% respectively of the adjusted pool balance
(pool balance less yield supplement overcollateralization amount).
Initially, the Class A, Class B and Class C Notes will be fully
collateralized on an adjusted pool balance basis and Class D will
comprise of the over-issuance of 2% on an adjusted pool basis.
This transaction is Ford Credit Canada's third retail loan
issuance of the year. The most notable difference between FAST
2011-R3 and the prior FAST 2011-R2 transaction is the higher
percentage of contracts with original terms greater than 60 months
(42% compared to 36% for FAST 2011-R2). Both these transactions
have materially higher amounts of over 60 month original terms
compared with series issued in 2009 and 2010. A higher percentage
of contracts with original terms greater than 60 months typically
has a negative impact on pool performance. Additionally, the
weighted average FICO score of the 2011-R3 pool is lower than the
2011-R2 pool (732 compared to 739). Also, a review of the
favorable historical performance of Ford Credit Canada's retail
loan securitizations together with a deal-by-deal comparison of
collateral are important ratings considerations.
PRINCIPAL METHODOLOGY
The principal methodology used in this rating was Moody's Approach
to Rating U.S. Auto Loan-Backed Securities, rating methodology
published in May 2011.
PARAMETER SENSITIVITY
If the net loss used in determining the initial rating were
changed to 5.50%, 6.50%, or 8.50%, the initial model-indicated
output for the Class A notes might change from Aaa to Aa2, A1, and
Baa1, respectively, the initial model-indicated output for the
Class B notes might change from Aa1 to Ba2, B2, and respectively, the initial model-indicated output for the Class C
notes might change from Aa2 to B3, the initial model-indicated output for the Class D notes might
change from A1 to
Parameter Sensitivities are not intended to measure how the rating
of the security might migrate over time, rather they are designed
to provide a quantitative calculation of how the initial rating
might change if key input parameters used in the initial rating
process differed. The analysis assumes that the deal has not aged.
Parameter Sensitivities only reflect the ratings impact of each
scenario from a quantitative/model-indicated standpoint.
Qualitative factors are also taken into consideration in the
ratings process, so the actual ratings that would be assigned in
each case could vary from the information presented in the
Parameter Sensitivity analysis.
GLACIER FUNDING: Fitch Cuts Ratings on Two Note Classes to 'Dsf'
----------------------------------------------------------------
Fitch Ratings has downgraded two and affirmed three classes of
notes issued by Glacier Funding CDO II, Ltd. (Glacier Funding II).
The rating actions are as follows:
-- $80,710,560 class A-1 notes affirmed at 'CCCsf';
-- $70,000,000 class A-2 notes downgraded to 'Dsf' from 'Csf';
-- $65,750,000 class B notes downgraded to 'Dsf' from 'Csf';
-- $21,719,677 class C notes affirmed at 'Csf';
-- $5,598,186 class D notes affirmed at 'Csf'.
Fitch last reviewed Glacier II on June 24, 2011 using the
Structured Finance Portfolio Credit Model (SF PCM) and cash flow
model analysis. The driver of this review is that the required
majority of the controlling class voted to accelerate the
transaction's maturity as of July 21, 2011 following an event of
default on June 17, 2011. The acceleration waterfall diverts
interest and principal collections to redeem class A-1 principal
rather than pay class A-2 and class B accrued interest.
The class A-1 notes were reviewed under the framework described in
the reports 'Global Structured Finance Rating Criteria' and
'Global Rating Criteria for Structured Finance CDOs' using the SF
PCM. Cash flow model analysis was not performed because Fitch
does not expect the amount of additional excess spread going
forward to substantially improve the class A-1 notes' breakeven
levels from the June 24, 2011 review.
Interest collections for the Aug. 12, 2011 payment date were lower
than recent periods and the portfolio continues to experience
credit deterioration. Since June 24, there has been an additional
5.2% of the portfolio downgraded a weighted average of 3.2 notches
and 0.4% upgraded 3 notches. While credit enhancement for the
class A-1 notes increased marginally following the August payment,
it is offset by a comparable increase in the SF PCM default
hurdles.
The class A-2 and class B notes did not receive their accrued
interest on the Aug. 12, 2011 distribution date because proceeds
were diverted to redeem the class A-1 notes. The class A-2 and
class B notes are non-deferrable, therefore, this missed interest
constitutes a payment default. Consequently, these two classes
are downgraded to 'Dsf'.
The class C and class D notes are not impacted by the acceleration
as they remain significantly undercollateralized, indicating that
default continues to appear inevitable at or prior to maturity.
Glacier Funding II is a structured finance collateralized debt
obligation (SF CDO) that closed on Oct. 12, 2004 and is now
monitored by Aventine Hill Capital, LLC., as a successor
collateral manager. The portfolio is comprised of residential
mortgage-backed securities (73%), commercial mortgage-backed
securities (20%), structured finance collateralized debt
obligations (3.4%), real estate investment trusts (1.6%), consumer
and commercial asset-backed securities (1.5%), and corporate CDOs
(.4%), from 2001 through 2004 vintage transactions.
GS MORTGAGE: Moody's Upgrades Class G Notes Rating to 'B2'
----------------------------------------------------------
Moody's Investors Service (Moody's) upgraded the ratings of four
classes and affirmed the rating of one class of GS Mortgage
Securities Corporation II, Commercial Mortgage Pass-Through
Certificates, Series 2006-GSFL VIII. Moody's rating action is:
Cl. X, Affirmed at Aaa (sf); previously on Aug 11, 2006 Definitive
Rating Assigned Aaa (sf)
Cl. E, Upgraded to Aaa (sf); previously on Dec 3, 2009 Downgraded
to Baa3 (sf)
Cl. F, Upgraded to Baa1 (sf); previously on Dec 3, 2009 Downgraded
to B1 (sf)
Cl. G, Upgraded to B2 (sf); previously on Dec 3, 2009 Downgraded
to Caa1 (sf)
Cl. H, Upgraded to B3 (sf); previously on Dec 3, 2009 Downgraded
to Caa2 (sf)
RATINGS RATIONALE
The upgrades are due to the pay off of two mortgage loans that
totaled 48.4% of the pool balance at last review. One loan, the
CarrAmerica Corporate Center loan, remains in the pool. The
affirmation is due to key parameters, including Moody's loan to
value (LTV) ratio and Moody's stressed debt service coverage ratio
(DSCR), remaining within acceptable ranges.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and performance in the commercial real
estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation
rebounds. The hotel and multifamily sectors are continuing to show
signs of recovery through the first half of 2011, while recovery
in the non-core office and retail sectors are tied to pace of
recovery of the broader economy. Core office markets are showing
signs of recovery through lending and leasing activity. The
availability of debt capital continues to improve with terms
returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The principal methodology used in these ratings was "Moody's
Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000. Please see the Credit Policy page on
www.moodys.com for a copy of this methodology.
In addition, Moody's publishes a weekly summary of structured
finance credit, ratings and methodologies, available to all
registered users of Moody's website, at
www.moodys.com/SFQuickCheck.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.1. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated November 11, 2010.
DEAL PERFORMANCE
As of the August 8, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 90% to
$65.0 million from $661.2 million at securitization. The
Certificates are collateralized by one mortgage loan.
The pool has not experienced losses to date. Classes G through J
have experienced interest shortfalls totaling $26,450 as of the
August 2011 distribution date. Interest shortfalls are caused by
special servicing fees, including workout and liquidation fees,
appraisal subordinate entitlement reductions (ASERs) and
extraordinary trust expenses.
The CarrAmerica Corporate Center Loan ($65.0 million; 100% of the
pool) is secured by a campus of eight Class A office buildings
with 1,013,280 square feet of net rentable area (NRA) located in
Pleasanton, California. The largest tenants include AT&T, Ross
Stores and Farmers Insurance. As of December 2010, the occupancy
rate was 51% compared to 73% at securitization. The loan was
modified in December 2010 which included an extension through
November 2012 and a $10 million paydown. At the time of the
modificatin, a new appraisal valued the subject at $130 million.
Moody's current LTV is 76% and stressed DSCR is 1.39X. Moody's
credit estimate is B3, compared to C at last review.
JP MORGAN: Moody's Upgrades Class H Notes Rating to 'Ba1'
---------------------------------------------------------
Moody's Investors Service (Moody's) upgraded the ratings of three
CMBS classes and affirmed 12 CMBS classes and three non-pooled or
rake classes of JP Morgan Chase Commercial Mortgage Securities
Corporation Commercial Mortgage Pass-Through Certificates, Series
2002-CIBC5:
Cl. A-1, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. E, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. F, Upgraded to Aa3 (sf); previously on Apr 23, 2007 Upgraded
to A2 (sf)
Cl. G, Upgraded to A3 (sf); previously on Apr 23, 2007 Upgraded to
Baa1 (sf)
Cl. H, Upgraded to Ba1 (sf); previously on Dec 17, 2010 Downgraded
to Ba2 (sf)
Cl. J, Affirmed at B3 (sf); previously on Dec 17, 2010 Downgraded
to B3 (sf)
Cl. K, Affirmed at Caa3 (sf); previously on Dec 17, 2010
Downgraded to Caa3 (sf)
Cl. L, Affirmed at Ca (sf); previously on Dec 17, 2010 Downgraded
to Ca (sf)
Cl. M, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded
to C (sf)
Cl. N, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded
to C (sf)
Cl. S-1, Affirmed at Ba1 (sf); previously on Nov 4, 2002
Definitive Rating Assigned Ba1 (sf)
Cl. S-2, Affirmed at Ba2 (sf); previously on Nov 4, 2002
Definitive Rating Assigned Ba2 (sf)
Cl. S-3, Affirmed at Ba3 (sf); previously on Nov 4, 2002
Definitive Rating Assigned Ba3 (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
RATINGS RATIONALE
The upgrades are due to increased subordination from loan payoffs
and amortization and overall stable pool performance. The pool has
paid down 32% since securitization and 5% since last review.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
3.5% of the current pooled balance compared to 4.8% at last
review. Moody's stressed scenario loss is 5.3% of the current
pooled balance. Depending on the timing of loan payoffs and the
severity and timing of losses from specially serviced loans, the
credit enhancement level for investment grade classes could
decline below the current levels. If future performance materially
declines, the expected level of credit enhancement and the
priority in the cash flow waterfall may be insufficient for the
current ratings of these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time to
time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and varying performance in the
commercial real estate property markets. However, Moody's expects
to see increasing or stabilizing property values, higher
transaction volumes, a slowing in the pace of loan delinquencies
and greater liquidity for commercial real estate in 2011. The
hotel and multifamily sectors are continuing to show signs of
recovery, while recovery in the office and retail sectors will be
tied to recovery of the broader economy. The availability of debt
capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions," published April
2005. Please see the Credit Policy page on www.moodys.com for a
copy of this methodology.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit estimates is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit estimate of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the credit estimate level, is
incorporated for loans with similar credit estimates in the same
transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The conduit level Herf is 31 as compared to
37 at last review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated December 17, 2010. Please see
the ratings tab on the issuer / entity page on moodys.com for the
last rating action and the ratings history.
DEAL PERFORMANCE
As of the August 12, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 31% to $695 million
from $1.0 billion at securitization. The Certificates are
collateralized by 92 mortgage loans ranging in size from less than
1% to 14% of the pool, with the top ten loans representing 40% of
the pool. The largest loan in the pool has an investment grade
credit estimate. The deal contains three non-pooled or rake bonds,
which total $16 million and brings the total outstanding deal
balance to $711 million. The rake bonds are secured by a junior
component or B-Note of the loan with a credit estimate. Thirty
loans, representing 32% of the pool, have defeased and are
collateralized by U.S. Government securities.
Fourteen loans, representing 10% 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.
Six loans have been liquidated from the pool since securitization,
resulting in an aggregate $12 million loss (36% average loss
severity). Two loans, representing 3% of the pool, are currently
in special servicing. The servicer has recognized an aggregate
appraisal reduction of $8.2 million for the specially serviced
loans. Moody's has estimated a $7.5 million loss for the two
specially serviced loans.
Moody's has assumed a high default probability for five poorly
performing loans representing 7% of the pool and has estimated an
$11 million loss (25% expected loss based on a 50% probability
default) from these troubled loans.
Based on the most recent remittance statement, cumulative interest
shortfalls total only $419 thousand and are limited to a non-rated
class. Interest shortfalls are caused by special servicing fees,
including workout and liquidation fees, appraisal subordinate
entitlement reductions (ASERs) and extraordinary trust expenses.
Moody's was provided full year 2010 and partial year 2011
operating results for 99% and 49% of the conduit loans,
respectively. The conduit portion of the pool excludes specially
serviced, defeased, troubled loans and loans with credit
estimates. Moody's weighted average conduit LTV is 73% compared to
74% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 11% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.5%.
Moody's actual and stressed conduit DSCRs are 1.45X and 1.51X,
respectively, compared to 1.44X and 1.47X at last review. Moody's
actual DSCR is based on Moody's net cash flow (NCF) and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's NCF
and a 9.25% stressed rate applied to the loan balance. Moody's
stressed DSCR is higher than the actual DSCR for this deal because
most loans are near maturity and the current debt constant is
greater than Moody's 9.25% stressed rate.
The loan with a credit estimate is the Simon Mall Portfolio Loan
($94 million -- 13.5%), which is secured by four regional malls
totaling 2.5 million SF (1.5 million SF of borrower owned
collateral). The portfolio is also encumbered by a $15.8 million
B-note that is held within the trust and secures non-pooled
classes S-1, S-2 and S-3. The centers are located in Ohio
(Richmond Town Square), Texas (Midland Park Mall), Indiana
(Markland Mall) and Wisconsin (Forest Mall). All of the centers
are considered middle-market and contain at least three anchors.
Total mall occupancy is 92%, while in-line occupancy was 83% as of
June 2011. Moody's current credit estimate and stressed DSCR of
the A-note are Baa3 and 1.57X, respectively, compared to Baa3 and
1.50X at last review.
The top three performing conduit loans represent 7.7% of the
pool balance. The largest loan is the Fountains at Bay Hill Loan
($20 million -- 2.8%), which is secured by a 104,000 SF community
shopping center located in Orlando, Florida. The property was 84%
leased as of December 2009 compared to 98% at securitization. The
property's reported NOI improved in 2010 resulted from an increase
in base rent revenue. Moody's LTV and stressed DSCR are to 84% and
1.36X, respectively, compared to 92% and 1.12X at last review.
The second largest loan is the Edgewater Apartments Loan
($17 million -- 2.4%), which is secured by a 316 unit class B
apartment complex located along the shore of Lake Washington in
Seattle, Washington. The property was 99% leased as of December
2010. Moody's LTV and stressed DSCR are 83% and 1.24X,
respectively, compared to 80% and 1.18X at last review.
The third largest loan is Southern Wine & Spirits Building Loan
($17 million -- 2.4%), which is secured by a 385,000 SF single
tenant industrial building located in Las Vegas, Nevada. The
property is 100% leased to Southern Wine & Spirits under a 20-
year, triple net lease that expires in 2021. The loan fully
amortizes over a 20-year term and has amortized 27% since
securitization. Moody's LTV and stressed DSCR are 59% and 1.69X,
respectively, compared to 62% and 1.62X at last review.
JP MORGAN: Moody's Reviews Cl. D 'Ba1' Rating for Downgrade
-----------------------------------------------------------
Moody's Investors Service (Moody's) placed eight classes of J.P.
Morgan Chase Commercial Mortgage Pass-Through Certificates, Series
2006-LDP7 on review for possible downgrade:
Cl. A-M, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Nov 17, 2010 Confirmed at Aaa (sf)
Cl. A-J, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 17, 2010 Downgraded to A3 (sf)
Cl. B, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 17, 2010 Downgraded to Baa2 (sf)
Cl. C, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 17, 2010 Downgraded to Baa3 (sf)
Cl. D, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 17, 2010 Downgraded to Ba1 (sf)
Cl. E, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 17, 2010 Downgraded to Ba3 (sf)
Cl. F, Caa1 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 17, 2010 Downgraded to Caa1 (sf)
Cl. G, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov 17, 2010 Downgraded to Caa3 (sf)
The classes were placed on review due to an increase in realized
losses and an expected increase in losses from specially serviced
and troubled loans. Cumulative realized losses increased to
$46 million from $18 million at last review.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time to
time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and varying performance in the
commercial real estate property markets. However, Moody's expects
to see increasing or stabilizing property values, higher
transaction volumes, a slowing in the pace of loan delinquencies
and greater liquidity for commercial real estate in 2011. The
hotel and multifamily sectors are continuing to show signs of
recovery, while recovery in the office and retail sectors will be
tied to recovery of the broader economy. The availability of debt
capital continues to improve with terms returning toward market
norms. Moody's central global macroeconomic scenario reflects an
overall sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations.
The primary methodology used in this rating was "Moody's Approach
to Rating U.S. CMBS Conduit Transactions" published September
2000. Please see the Credit Policy page on www.moodys.com for a
copy of this methodology.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit estimates is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit estimate of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the credit estimate level, is
incorporated for loans with similar credit estimates in the same
transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The pool level Herf is 45 as compared to 51
at last review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated November 17, 2010. Please see
the ratings tab on the issuer / entity page on moodys.com for the
last rating action and the ratings history.
DEAL AND PERFORMANCE SUMMARY
As of the August 15, 2011 distribution date, the deal's aggregate
certificate balance has decreased by 10% to $3.5 billion from $3.9
billion at securitization. The Certificates are collateralized by
235 mortgage loans ranging in size from less than 1% to 7% of the
pool, with the top ten loans representing 40% of the pool. One
loan, representing 1% of the pool, has defeased and is secured by
U.S. Government securities. The pool does not contain any loans
with credit estimates.
Fifty-four loans, representing 17% 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.
Sixteen loans have been liquidated from the pool, resulting in
an aggregate realized loss of $46 million (55% average loss
severity). Thirty-one loans, representing 12% of the pool, are
currently in special servicing. The specially serviced loans are
secured by a mix of multifamily, hotel, retail, office, and self
storage property types. The master servicer has recognized an
aggregate $129 million appraisal reduction for 23 of the specially
serviced loans, which is a $62 million increase since last review.
Moody's review will focus on potential losses from specially
serviced and troubled loans and the performance of the overall
pool.
JPMORGAN CHASE: Fitch Expects to Put Low-B Ratings on Three Notes
-----------------------------------------------------------------
Fitch Ratings has issued a presale report on JPMorgan Chase & Co.
2011-C5.
Fitch expects to rate the transaction and assign Outlooks as
follows:
-- $49,765,000 class A-1 'AAAsf'; Outlook Stable;
-- $199,727,000 class A-2 'AAAsf'; Outlook Stable;
-- $405,850,000 class A-3 'AAAsf'; Outlook Stable;
-- $65,448,000 class A-SB 'AAAsf'; Outlook Stable;
-- $807,027,000 class X-A 'AAAsf'; Outlook Stable;
-- $86,237,000 class A-S 'AAAsf'; Outlook Stable;
-- $51,485,000 class B 'AAsf'; Outlook Stable;
-- $39,901,000 class C 'Asf'; Outlook Stable;
-- $65,644,000 class D 'BBB-sf'; Outlook Stable;
-- $12,871,000 class E 'BBsf'; Outlook Stable;
-- $9,010,000 class F 'B+sf'; Outlook Stable;
-- $16,732,000 class G 'B-sf'; Outlook Stable.
The expected ratings are based on information provided by the
issuer as of Sept. 1, 2011. Fitch does not expect to rate the
$27,029,910 class NR or the $222,672,910 interest only class X-B.
The certificates represent the beneficial ownership in the trust,
primary assets of which are 44 loans secured by 209 commercial
properties having an aggregate principal balance of approximately
$1.03 billion as of the cutoff date. The loans were originated by
JPMorgan Chase Bank, N.A. (JPM). In this transaction, four loans
comprising approximately 13.7% of the pool were originated by
KeyBank and acquired by JPM and three loans comprising
approximately 8% of the pool were co-originated by JPM and
KeyBank. These loans were all underwritten or re-underwritten by
JPM in accordance with its origination and underwriting
guidelines.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 72.9% of the properties
by balance, cash flow analysis of 90% of the pool, and asset
summary reviews on 92.7% of the pool.
The transaction has a Fitch stressed debt service coverage ratio
(DSCR) of 1.26 times (x), a Fitch stressed loan-to value (LTV) of
92.7%, and a Fitch debt yield of 10.4%. Fitch's aggregate net
cash flow represents a variance of 5.2% to issuer cash flows and
13.5% below full-year 2010 net operating income.
The transaction is concentrated by loan size. The largest 10
loans account for 61.8% of the pool. The largest sponsors were
Strategic Hotels (14.1% of the pool) and Inland American (12.1% of
the pool).
The Master Servicer will be Midland Loan Services, Inc., a
Division of PNC Bank, N.A., rated 'CMS1' by Fitch. The Special
Servicer will be Torchlight Loan Services, LLC, rated 'CSS2' by
Fitch.
LANDMARK IV: Moody's Upgrades Rating of Class B-2L Notes to 'Ba3'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Landmark IV CDO, Ltd.:
US$10,000,000 Class A-1LB Floating Rate Notes Due 2016, Upgraded
to Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed Under
Review for Possible Upgrade;
US$20,000,000 Class A-2L Floating Rate Notes Due 2016, Upgraded to
Aaa (sf); previously on June 22, 2011 A1 (sf) Placed Under Review
for Possible Upgrade;
US$19,000,000 Class A-3L Floating Rate Notes Due 2016, Upgraded to
Aa3 (sf); previously on June 22, 2011 Baa3 (sf) Placed Under
Review for Possible Upgrade;
US$15,500,000 Class B-1L Floating Rate Notes Due 2016, Upgraded to
Baa3 (sf); previously on June 22, 2011 Ba3 (sf) Placed Under
Review for Possible Upgrade;
US$10,500,000 Class B-2L Floating Rate Notes Due 2016 (current
outstanding balance of $9,777,117), Upgraded to Ba3 (sf);
previously on June 22, 2011 Caa1 (sf) Placed Under Review for
Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and delevering of the senior notes since
the rating action in September 2009. Based on the August 2011
trustee report, the weighted average rating factor is currently
2782 compared to 2972 in August 2009.
Moody's also notes that the Class A-1L Notes and Class A-1LA Notes
have been paid down by approximately 37% or $59 million and 46% or
$18 million, respectively, since the rating action in September
2009. As a result of the delevering, the overcollateralization
ratios have increased. Based on the latest trustee report dated
August 8, 2011, the Senior Class A, Class A, Class B-1L and Class
B-2L overcollateralization ratios are reported at 134.98%,
119.98%, 110.02% and 104.54%, respectively, versus August 2009
levels of 126.31%, 116.64%, 109.78% and 102.63%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $202 million,
defaulted par of $11 million, a weighted average default
probability of 19.16% (implying a WARF of 2957), a weighted
average recovery rate upon default of 48.72%, and a diversity
score of 64. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Landmark IV CDO, Ltd., issued in October 2004, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Delevering: The main source of uncertainty in this transaction
is whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to high
prepayment levels in the loan market and/or collateral sales by
the manager, which may have significant impact on the notes'
ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. 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.
LB-UBS COMMERCIAL: Moody's Affirms Class B Notes Rating at 'Ba1'
----------------------------------------------------------------
Moody's Investors Service upgraded the rating of nine pooled
classes and four raked classes and affirmed the ratings of 12
pooled classes of Lehman Brothers-UBS Commercial Mortgage Inc.,
Commercial Pass-Through Certificates, Series 2006-C3:
Cl. A-2, Affirmed at Aaa (sf); previously on Apr 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on Apr 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Affirmed at Aaa (sf); previously on Apr 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on Nov 4, 2010 Confirmed
at Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on Nov 4, 2010
Confirmed at Aaa (sf)
Cl. A-M, Upgraded to Aa2 (sf); previously on Nov 4, 2010
Downgraded to A1 (sf)
Cl. A-J, Upgraded to Baa3 (sf); previously on Nov 4, 2010
Downgraded to Ba2 (sf)
Cl. B, Upgraded to Ba1 (sf); previously on Nov 4, 2010 Downgraded
to Ba3 (sf)
Cl. C, Upgraded to Ba3 (sf); previously on Nov 4, 2010 Downgraded
to B1 (sf)
Cl. D, Upgraded to B2 (sf); previously on Nov 4, 2010 Downgraded
to B3 (sf)
Cl. E, Upgraded to B3 (sf); previously on Nov 4, 2010 Downgraded
to Caa1 (sf)
Cl. F, Upgraded to Caa1 (sf); previously on Nov 4, 2010 Downgraded
to Caa2 (sf)
Cl. G, Upgraded to Caa2 (sf); previously on Nov 4, 2010 Downgraded
to Ca (sf)
Cl. H, Upgraded to Caa3 (sf); previously on Nov 4, 2010 Downgraded
to C (sf)
Cl. J, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to
C (sf)
Cl. K, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to
C (sf)
Cl. L, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to
C (sf)
Cl. M, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to
C (sf)
Cl. N, Affirmed at C (sf); previously on Nov 4, 2010 Downgraded to
C (sf)
Cl. X-CL, Affirmed at Aaa (sf); previously on Apr 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. X-CP, Affirmed at Aaa (sf); previously on Apr 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. FTH-1, Upgraded to A3 (sf); previously on Feb 11, 2009
Downgraded to Baa3 (sf)
Cl. FTH-2, Upgraded to Ba1 (sf); previously on Feb 11, 2009
Downgraded to Ba3 (sf)
Cl. FTH-3, Upgraded to B1 (sf); previously on Feb 11, 2009
Downgraded to B3 (sf)
Cl. FTH-4, Upgraded to B2 (sf); previously on Feb 11, 2009
Downgraded to Caa1 (sf)
RATINGS RATIONALE
The upgrades for the pooled classes are due to lower than expected
losses from specially serviced and troubled loans along with
increased credit support due to loan payoffs and amortization. The
pool has paid down by 12% since Moody's last full review. The
upgrades of the four pooled or rake classes are due to improved
performance of the 623 Fifth Avenue Loan, which supports these
classes.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
9.0% of the current pooled balance. At last review, Moody's
cumulative base expected loss was 11.0%. Moody's stressed scenario
loss is 20.4% of the current pooled balance. Moody's provides a
current list of base and stress scenario losses for conduit and
fusion CMBS transactions on moodys.com at:
http://v3.moodys.com/viewresearchdoc.aspx?docid=PBS_SF215255
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time to
time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and varying performance in the
commercial real estate property markets. However, Moody's expects
to see increasing or stabilizing property values, higher
transaction volumes, a slowing in the pace of loan delinquencies
and greater liquidity for commercial real estate in 2011 The hotel
and multifamily sectors are continuing to show signs of recovery,
while recovery in the office and retail sectors will be tied to
recovery of the broader economy. The availability of debt capital
continues to improve with terms returning toward market norms.
Moody's central global macroeconomic scenario reflects an overall
sluggish recovery through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however downside risks to
the outlook have risen since last quarter.
The primary methodology used in this rating was "Moody's Approach
to Rating Fusion U.S. CMBS Transactions" published in April 2005.
Please see the Credit Policy page on www.moodys.com for a copy of
this methodology.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit estimates is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit estimate of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the credit estimate level, is
incorporated for loans with similar credit estimates in the same
transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 30 compared to 33 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated November 4, 2010.
DEAL PERFORMANCE
As of the August 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 16% to
$1.49 billion from $1.74 billion at securitization. The
Certificates are collateralized by 107 mortgage loans ranging
in size from less than 1% to 10% of the pool, with the top ten
loans representing 49% of the pool. The pool contains two loans
with investment grade credit estimates, representing 11% of the
pool.
Forty-two loans, representing 32% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of
Moody's ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
Eight loans have been liquidated from the pool, resulting in a
realized loss of $27.6 million (18% loss severity). Currently
nine loans, representing 13% of the pool, are in special servicing
compared ot twelve loans, representing 21% at last review. The
largest specially serviced loan is the Eastpoint Mall Loan
($91.9 million -- 6.4% of the pool), which is secured by a 850,000
square foot (SF) regional mall located in Baltimore, Maryland. The
loan sponsor is Thor Equities. The loan was transferred to special
servicing in June 2010 due to imminent default due to cash flow
problems. The borrower and special servicer are in negotiations
for a potential loan modification at this time. The loan is
current.
The second largest specially serviced loan is the Spring Creek
Apartments Loan ($60.0 million -- 4.2% of the pool), which is
secured by a 1,180 unit apartment complex located in Atlanta,
GA. The loan was recently transferred to special servicing due
to maturity default. A recent appraisal valued the property at
$69.5 million. Moody's is not expecting that the trust will take
a loss on this loan at this time given the inherent value of the
property.
The remaining seven specially serviced properties are secured
by a mix of property types. Moody's estimates an aggregate
$56.2 million loss for the specially serviced loans (43% expected
loss on average).
Moody's has assumed a high default probability for nine poorly
performing loans representing 12% of the pool and has estimated an
aggregate $24.7 million loss (15% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2010 operating results for 98%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 104%, essentially the same
compared to Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 10% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.0%.
Excluding special serviced and troubled loans, Moody's actual and
stressed DSCRs are 1.31X and 0.98X, respectively, compared to
1.30X and 0.97X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The largest loan with a credit estimate is the Station Place II
Loan ($99.6 million -- 6.9%), which is secured by a built-to-suit
office building built in 2005 with a total of 362,000 SF located
in the Capitol Hill submarket of Washington, DC. The property is
100% leased to the U.S. Securities and Exchange Commission through
January 2020. The loan has an anticipated repayment date (ARD) in
February 2016. Moody's current credit estimate and stressed DSCR
are A3 and 1.04X, respectively, the same as at Moody's last full
review.
The second largest loan with a credit estimate is the 623 Fifth
Avenue Loan ($53.9 million -- 3.8%), which is secured by a 351,000
SF Class A office building located in New York City. The loan had
a 36-month interest only period and matures in June 2015. The
property is also encumbered by a $37.0 million subordinate non-
pooled B-Note which is held in the trust and secures rake classes
FTH-1, FTH-2, FTH-3, FTH-4 and FTH-5. Moody's current credit
estimate and stressed DSCR are A2 and 1.90X, respectively,
compared to A3 and 1.97X at Moody's last full review. Due to
improved performance, rake classes have been upgraded along with
the credit estimate on the senior note.
The top three performing conduit loans represent 18% of the
pool balance. The largest loan is the 888 Seventh Avenue Loan
($145.9 million -- 8.9%), which is a pari-passu interest in a
$291.8 million first mortgage loan. The property is also
encumbered by a $26.8 million subordinate note. The loan is
secured by a 908,000 SF office building located in New York City.
The property was 96% leased as of December 2010, essentially the
same as at last review. Overall, the property is stable. The loan
is interest only for the entire term and matures in January 2016.
Moody's LTV and stressed DSCR are 86% and 1.07X, respectively,
compared to 92% and 1.00X at last review.
The second largest loan is the Marriott Hotel - Orlando Airport
Loan ($58.6 million -- 4.1%), which is secured by a 486-room full
service hotel built in 1983 and located in Orlando, Florida.
Property performance declined since last review as the hotel had
been impacted by the downturn in the tourism industry. Though
property performance declined, the submarket has seen signs of
improvement as occupancy, ADR, and RevPAR have all improved year-
over-year. The loan is scheduled to mature in January 2016.
Moody's LTV and stressed DSCR are 142% and 0.82X, respectively,
compared to 122% and 0.96X at last review.
The third largest loan is the Time Hotel Loan ($55.0 million --
3.8%), which is secured by a 193-room full service hotel built in
1927 located in the Broadway Theater District of New York, New
York. At last review, the property was in special servicing due to
the borrower requesting a loan modification. The borrower and
special servicer executed a modification to the loan agreement in
January 2011 and the loan transferred back to the master servicer
in May 2011. Major terms of the modification include a interest
deferral feature, interest rate adjustment, principal pay down,
and the formation of a debt service reserve. Property performance
significantly declined since last review but the loan has been
able to perform under the new terms of the loan. Moody's considers
this a troubled loan because of poor performance. Moody's LTV and
stressed DSCR are 182% and 0.63%, respectively, compared to 103%
and 1.24% at last review.
LB-UBS COMMERCIAL: Moody's Affirms Class K Notes Rating at 'Ba2'
----------------------------------------------------------------
Moody's Investors Service (Moody's) upgraded the ratings of six
classes, affirmed seven classes and downgraded three classes of
LB-UBS Commercial Mortgage Trust 2001-C7, Commercial Mortgage
Pass-Through Certificates, Series 2001-C7:
Cl. B, Affirmed at Aaa (sf); previously on May 25, 2005 Upgraded
to Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Jan 11, 2006 Upgraded
to Aaa (sf)
Cl. D, Upgraded to Aaa (sf); previously on Apr 12, 2007 Upgraded
to Aa1 (sf)
Cl. E, Upgraded to Aaa (sf); previously on Apr 12, 2007 Upgraded
to Aa2 (sf)
Cl. F, Upgraded to Aa2 (sf); previously on Apr 12, 2007 Upgraded
to A1 (sf)
Cl. G, Upgraded to A1 (sf); previously on Apr 12, 2007 Upgraded to
A3 (sf)
Cl. H, Upgraded to Baa1 (sf); previously on Apr 12, 2007 Upgraded
to Baa2 (sf)
Cl. J, Upgraded to Baa2 (sf); previously on Apr 12, 2007 Upgraded
to Baa3 (sf)
Cl. K, Affirmed at Ba2 (sf); previously on Dec 18, 2001 Assigned
Ba2 (sf)
Cl. L, Affirmed at B2 (sf); previously on Apr 28, 2010 Downgraded
to B2 (sf)
Cl. M, Affirmed at B3 (sf); previously on Mar 9, 2011 Upgraded to
B3 (sf)
Cl. N, Downgraded to Caa3 (sf); previously on Mar 9, 2011 Upgraded
to Caa1 (sf)
Cl. P, Downgraded to Ca (sf); previously on Mar 9, 2011 Upgraded
to Caa2 (sf)
Cl. Q, Downgraded to C (sf); previously on Mar 9, 2011 Upgraded to
Caa3 (sf)
Cl. X-CL, Affirmed at Aaa (sf); previously on Dec 18, 2001
Assigned Aaa (sf)
Cl. X-CP, Affirmed at Aaa (sf); previously on Dec 18, 2001
Assigned Aaa (sf)
RATINGS RATIONALE
The upgrades are due to increased subordination from loan payoffs
and amortization. The pool has paid down 77% since last review.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain the existing ratings.
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced loans.
Moody's rating action reflects a cumulative base expected loss of
8.6% of the current balance compared to 1.3% at last review.
Moody's stressed scenario loss is 14.0% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and performance in the commercial real
estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation
rebounds. The hotel and multifamily sectors are continuing to show
signs of recovery through the first half of 2011, while recovery
in the non-core office and retail sectors are tied to pace of
recovery of the broader economy. Core office markets are showing
signs of recovery through lending and leasing activity. The
availability of debt capital continues to improve with terms
returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The primary methodology used in this rating was "Moody's Approach
to Rating Fusion U.S. CMBS Transactions" published in April 2005.
The other methodology used in this rating was "Moody's Approach to
Rating CMBS Large Loan/Single Borrower Transactions" published in
July 2000. Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade underlying ratings is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
underlying rating of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar underlying ratings
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 9 compared to 7 at last review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.1 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated March 10, 2011.
DEAL PERFORMANCE
As of the August 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 86% to
$175.7 million from $1.2 billion at securitization. The
Certificates are collateralized by 32 mortgage loans ranging in
size from less than 1% to 17% of the pool, with the top ten loans
representing 49% of the pool. Eleven loans, representing 26% of
the pool, have defeased and are collateralized by U.S. Government
securities. Defeasance at last review represented 47% of the pool.
There is one loan in the pool with an investment grade credit
estimate.
Fourteen loans, representing 50% 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.
Seven loans have been liquidated from the pool, resulting in an
aggregate realized loss of $11.2 million (46% loss severity
overall). Currently five loans, representing 9% of the pool, are
in special servicing. Specially serviced loans represented 1% of
the pool at last review. The largest specially serviced loan is
the Shadow Creek Apartments Loan ($5.8 million -- 3.3% of the
pool), which is secured by a 231-unit apartment complex located in
Kansas City, Missouri. The loan was transferred to special
servicing December 2010 due to monetary default. The borrower
filed for bankruptcy in May 2011. The master servicer recognized a
$2.6 million appraisal reduction for this loan in March 2011.
The second largest loan in special servicing is the East Paris
Shoppes Loan ($3.6 million -- 2.1% of the pool), which is secured
by a 37,500 square foot (SF) unanchored retail center located in
Grand Rapids, Michigan. The loan was transferred to special
servicing in May 2011 for maturity default. The master servicer
recognized a $1.6 million appraisal reduction for this loan in
August 2011.
The remaining three specially serviced loans are secured by
industrial facilities and an apartment complex. The master
servicer has recognized an aggregate $5.3 million appraisal
reduction for four of the specially serviced loans. Moody's has
estimated an aggregate $7.4 million loss (48% expected loss on
average) for the specially serviced loans.
Moody's has assumed a high default probability for two poorly
performing loans representing 9% of the pool and has estimated a
$4 million loss (25% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full-year 2010 and partial year 2011
operating results for 100% and 99% of the pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 90% compared to 82% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 13%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 10.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.19X and 1.23X, respectively, compared to
1.33X and 1.55X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The loan with a credit estimate is the Connell Corporate Center I
Loan ($11.6 million -- 6.6% of the pool) which is secured by a
415,000 SF Class A suburban office building located in Berkeley
Heights, New Jersey. The property is 100% leased to two tenants --
American Home Assurance (87% of net rentable area (NRA); lease
expiration June 2018) and EMC Corporation (13% of the NRA; lease
expiration March 2013). The loan fully amortizes over its 11.75-
year term, maturing June 2013 and has amortized 20% since last
review. Moody's current credit estimate and stressed DSCR are Aaa
and 4.0X, the same as at last review.
The top three performing conduit loans represent 33% of the pool
balance. The largest loan is the Torrance Executive Plaza East and
West Loans ($30.2 million -- 17.2% of the pool), two cross
collateralized loans which are secured by two office properties
located in Torrance, California. The properties total 344,612 SF
and were 73% leased as of March 2011 compared to 78% leased at
last review. Property performance has deteriorated due to the
decrease in occupancy. These loans are currently on the master
servicer's watchlist due to their upcoming anticipated repayment
date (ARD) of October 11, 2011. Moody's LTV and stressed DSCR are
95% and 1.19X, respectively, compared to 82% and 1.38X at last
review.
The second largest loan is the Meadows Corporate Park Loan
($15.5 million -- 8.8% of the pool), which is secured by a 165,000
SF Class A office complex located in Silver Spring, Maryland. The
property was 95% leased as of March 2011, the same as at last
review. Moody's LTV and stressed DSCR are 76% and 1.35X,
respectively, compared to 90% and 1.14X at last review.
The third largest loan is the Catonsville Plaza Shopping Center
Loan ($12.8 million -- 7.3% of the pool), which is secured by a
277,400 SF anchored retail center located in Catonsville,
Maryland. The property was 79% leased as of June 2011, the same as
at last review. This loan is currently on the master servicer's
watchlist due to passing its ARD of August 11, 2011. Moody's LTV
and stressed DSCR are 100% and 1.0X, respectively, compared to 87%
and 1.16X at last review.
MORGAN STANLEY: Moody's Assigns (P)Ba2 (sf) Rating to Cl. F Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
thirteen classes of CMBS securities, issued by Morgan Stanley
Capital I Trust 2011-C3, Commercial Mortgage Pass-Through
Certificates Series 2011-C3.
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-J, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa2 (sf)
Cl. C, Assigned (P)A2 (sf)
Cl. D, Assigned (P)Baa1 (sf)
Cl. E, Assigned (P)Baa3 (sf)
Cl. F, Assigned (P)Ba2 (sf)
Cl. G, Assigned (P)B2 (sf)
Cl. X-A, Assigned (P)Aaa (sf)
Cl. X-B, Assigned (P)Aaa (sf)
RATINGS RATIONALE
The Certificates are collateralized by 63 fixed rate loans secured
by 76 properties. The ratings are based on the collateral and the
structure of the transaction.
Moody's CMBS ratings methodology combines both commercial real
estate and structured finance analysis. Based on commercial real
estate analysis, Moody's determines the credit quality of each
mortgage loan and calculates an expected loss on a loan specific
basis. Under structured finance, the credit enhancement for each
certificate typically depends on the expected frequency, severity,
and timing of future losses. Moody's also considers a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors:
1) Moody's assessment of the probability of default, which is
largely driven by each loan's DSCR, and 2) Moody's assessment of
the severity of loss upon a default, which is largely driven by
each loan's LTV ratio.
The Moody's Actual DSCR of 1.63X is higher than the 2007
conduit/fusion transaction average of 1.31X. The Moody's Stressed
DSCR of 1.14X is higher than the 2007 conduit/fusion transaction
average of 0.92X.
Moody's Trust LTV ratio of 93.2% is lower than the 2007
conduit/fusion transaction average of 110.6%. Moody's Total LTV
ratio (inclusive of subordinated debt) of 97.9% is also considered
when analyzing various stress scenarios for the rated debt.
Moody's also considers both loan level diversity and property
level diversity when selecting a ratings approach.
With respect to loan level diversity, the pool's loan level
(includes cross collateralized and cross defaulted loans)
Herfindahl Index is 25.9. The transaction's loan level diversity
is higher than the band of Herfindahl scores found in most multi-
borrower transactions issued since 2009. With respect to property
level diversity, the pool's property level Herfindahl Index is
27.1. The transaction's property diversity profile is higher than
the indices calculated in most multi-borrower transactions issued
since 2009.
This deal has a super-senior Aaa class with 30% credit
enhancement. Although the additional enhancement offered to the
senior most certificate holders provides additional protection
against pool loss, the super-senior structure is credit negative
for the certificate that supports the super-senior class. If the
support certificate were to take a loss, the loss would have the
potential to be quite large on a percentage basis. Thin tranches
need more subordination to reduce the probability of default in
recognition that their loss-given default is higher. This
adjustment helps keep expected loss in balance and consistent
across deals. The transaction was structured with additional
subordination at class A-J to mitigate the potential increased
severity to class A-J.
Moody's also grades properties on a scale of 1 to 5 (best to
worst) and considers those grades when assessing the likelihood of
debt payment. The factors considered include property age, quality
of construction, location, market, and tenancy. The pool's
weighted average property quality grade is 2.04, which is better
than the indices calculated in most multi-borrower transactions
since 2009.
The principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions" published in
April 2005. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Moody's analysis employs the excel-based CMBS Conduit Model v2.50
which derives credit enhancement levels based on an aggregation of
adjusted loan level proceeds derived from Moody's loan level DSCR
and LTV ratios. Major adjustments to determining proceeds include
loan structure, property type, sponsorship and diversity.
The V Score for this transaction is assessed as Low/Medium, the
same as the V score assigned to the U.S. Conduit and CMBS sector.
This reflects typical volatility with respect to the critical
assumptions used in the rating process as well as an average
disclosure of securitization collateral and ongoing performance.
Moody's V Scores provide a relative assessment of the quality of
available credit information and the potential variability around
the various inputs to a rating determination. The V Score ranks
transactions by the potential for significant rating changes owing
to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling, and the transaction governance that
underlie the ratings. V Scores apply to the entire transaction
(rather than individual tranches).
Moody's Parameter Sensitivities: If Moody's value of the
collateral used in determining the initial rating were decreased
by 5%, 14%, or 23%, the model-indicated rating for the currently
rated Super Senior Aaa classes and the rated Aaa A-J class would
be Aaa, Aa1; Aaa,Aa2; and Aa1, A1. Parameter Sensitivities are not
intended to measure how the rating of the security might migrate
over time; rather they are designed to provide a quantitative
calculation of how the initial rating might change if key input
parameters used in the initial rating process differed. The
analysis assumes that the deal has not aged. Parameter
Sensitivities only reflect the ratings impact of each scenario
from a quantitative/model-indicated standpoint. Qualitative
factors are also taken into consideration in the ratings process,
so the actual ratings that would be assigned in each case could
vary from the information presented in the Parameter Sensitivity
analysis.
These ratings: (a) are based solely on information in the public
domain and/or information communicated to Moody's by the issuer at
the date it was prepared and such information has not been
independently verified by Moody's; (b) must be construed solely as
a statement of opinion and not a statement of fact or an offer,
invitation, inducement or recommendation to purchase, sell or hold
any securities or otherwise act in relation to the issuer or any
other entity or in connection with any other matter. Moody's does
not guarantee or make any representation or warranty as to the
correctness of any information, rating or communication relating
to the issuer. Moody's shall not be liable in contract, tort,
statutory duty or otherwise to the issuer or any other third party
for any loss, injury or cost caused to the issuer or any other
third party, in whole or in part, including by any negligence (but
excluding fraud, dishonesty and/or willful misconduct or any other
type of liability that by law cannot be excluded) on the part of,
or any contingency beyond the control of, Moody's, or any of its
employees or agents, including any losses arising from or in
connection with the procurement, compilation, analysis,
interpretation, communication, dissemination, or delivery of any
information or rating relating to the issuer.
MORGAN STANLEY: S&P Raises Rating on Class 6-A-1 From 'D' to 'CC'
-----------------------------------------------------------------
Standard & Poor's Ratings Services corrected its rating on class
6-A-1 from Morgan Stanley Mortgage Loan Trust 2007-13 by raising
it to 'CC (sf)' from 'D (sf)'.
"On April 19, 2011, we incorrectly downgraded class 6-A-1 based on
the trustee's February 2011 remittance report, which had indicated
that this class had experienced a principal write-down. However,
the trustee subsequently issued a revised remittance report, which
removed the realized loss amount previously allocated to this
class," S&P related.
"The 'CC (sf)' rating on class 6-A-1 reflects our view that the
current projected credit support will likely be insufficient to
meet the projected loss amount for this class," S&P said.
The underlying pool of loans backing this transaction consists
primarily of fixed-rate U.S. Alt-A loans that are secured by first
liens on one- to four-family residential properties.
rating corrected
Morgan Stanley Mortgage Loan Trust 2007-13
Rating
Class CUSIP Current 4/19/11 Pre-4/19/11
6-A-1 61756HBN9 CC (sf) D (sf) CCC (sf)
MOUNTAIN VIEW: Moody's Upgrades Rating of Class D Notes to 'Ba1'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Mountain View Funding CLO 2006-1, Ltd.:
US$305,000,000 Class A-1 Floating Rate Notes Due April 2019
(current outstanding balance of $302,488,709.25), Upgraded to Aaa
(sf); previously on June 22, 2011 Aa3 (sf) Placed on Review for
Possible Upgrade;
US$40,000,000 Class A-2 Variable Funding Floating Rate Notes Due
April 2019 (current outstanding balance of $39,124,634.10),
Upgraded to Aaa (sf); previously on June 22, 2011 Aa3 (sf) Placed
on Review for Possible Upgrade;
US$18,000,000 Class B-1 Floating Rate Notes Due April 2019,
Upgraded to Aa2 (sf); previously on June 22, 2011 Baa1 (sf) Placed
on Review for Possible Upgrade;
US$8,000,000 Class B-2 Fixed Rate Notes Due April 2019, Upgraded
to Aa2 (sf); previously on June 22, 2011 Baa1 (sf) Placed on
Review for Possible Upgrade;
US$11,000,000 Class C-1 Floating Rate Deferrable Notes Due April
2019, Upgraded to A3 (sf); previously on June 22, 2011 Ba1 (sf)
Placed on Review for Possible Upgrade;
US$12,000,000 Class C-2 Fixed Rate Deferrable Notes Due April
2019, Upgraded to A3 (sf); previously on June 22, 2011 Ba1 (sf)
Placed on Review for Possible Upgrade;
US$19,500,000 Class D Floating Rate Deferrable Notes Due April
2019, Upgraded to Ba1 (sf); previously on June 22, 2011 B2 (sf)
Placed on Review for Possible Upgrade;
US$13,500,000 Class E Floating Rate Deferrable Notes Due April
2019, Upgraded to B1 (sf); previously on June 22, 2011 Caa3 (sf)
Placed on Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $438.5 million,
defaulted par of $5.7 million, a weighted average default
probability of 16.8% (implying a WARF of 2525), a weighted average
recovery rate upon default of 49.31%, and a diversity score of 65.
Moody's generally analyzes deals in their reinvestment period by
assuming the worse of reported and covenanted values for all
collateral quality tests. However, in this case given the limited
time remaining in the deal's reinvestment period, Moody's analysis
reflects the benefit of assuming a higher likelihood that the
collateral pool characteristics will continue to maintain a
positive "cushion" relative to certain covenant requirements, as
seen in the actual collateral quality measurements. The default
and recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Mountain View Funding CLO 2006-1, Ltd., issued in May 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
A source of additional performance uncertainties is recovery of
defaulted assets: Market value fluctuations in defaulted assets
reported by the trustee and those assumed to be defaulted by
Moody's may create volatility in the deal's overcollateralization
levels. Further, the timing of recoveries and the manager's
decision to work out versus sell defaulted assets create
additional uncertainties. Moody's analyzed defaulted recoveries
assuming the lower of the market price and the recovery rate in
order to account for potential volatility in market prices.
MT. WILSON: Moody's Upgrades Class D Notes Rating to 'Ba1'
----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Mt. Wilson CLO II, Ltd.:
US$60,000,000 Class A-2 Floating Rate Notes Due 2020, Upgraded to
Aa1 (sf); previously on June 22, 2011 Aa3 (sf) Placed Under Review
for Possible Upgrade;
US$18,000,000 Class B Floating Rate Notes Due 2020, Upgraded to
Aa2 (sf); previously on June 22, 2011 Baa1 (sf) Placed Under
Review for Possible Upgrade;
US$24,000,000 Class C Floating Rate Deferrable Notes Due 2020,
Upgraded to A3 (sf); previously on June 22, 2011 Ba2 (sf) Placed
Under Review for Possible Upgrade;
US$32,000,000 Class D Floating Rate Deferrable Notes Due 2020,
Upgraded to Ba1 (sf); previously on June 22, 2011 B3 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $388.3 million,
defaulted par of $5.9 million, a weighted average default
probability of 23.04% (implying a WARF of 2808), a weighted
average recovery rate upon default of 49.99%, and a diversity
score of 50. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Mt. Wilson CLO II, Ltd. issued on July 17, 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score.
N-STAR REAL: Moody's Lowers Rating of Class C-1 Notes to 'B1'
-------------------------------------------------------------
Moody's has affirmed the ratings of three classes and downgraded
the ratings of one class of Notes issued by N Star CDO II Ltd. The
downgrades are due to deterioration in the underlying collateral
as evidenced by the Moody's weighted average rating factor (WARF)
and recovery rate (WARR). The affirmations are due to key
transaction parameters performing within levels commensurate with
the existing ratings levels. The rating action is the result of
Moody's on-going surveillance of commercial real estate
collateralized debt obligation (CRE CDO) transactions.
Moody's rating action is:
Class A-1 Floating Rate Senior Notes due 2039, Affirmed at Aaa
(sf); previously on Sep 22, 2010 Upgraded to Aaa (sf)
Class B-1 Floating Rate Senior Subordinate Notes due 2039,
Affirmed at Baa2 (sf); previously on Mar 24, 2009 Confirmed at
Baa2 (sf)
Class B-2 Floating Rate Senior Subordinate Notes due 2039,
Affirmed at Baa3 (sf); previously on Mar 24, 2009 Confirmed at
Baa3 (sf)
Class C-1 Floating Rate Subordinate Notes due 2039, Downgraded to
B1 (sf); previously on Mar 24, 2009 Confirmed at Ba3 (sf)
RATINGS RATIONALE
N-Star Real Estate CDO II Ltd. is a static cash CRE CDO
transaction backed by a portfolio of commercial mortgage backed
securities (CMBS) (74.3% of the pool balance), CRE collaterized
debt obligations (CRE CDO) (15.2% of the pool balance) and real
estate investment trust (REIT) debt (10.5%). As of the August 23,
2011 Trustee report, the aggregate Note balance of the
transaction, including preferred shares was $216.8 million from
$400.0 million at issuance, with the payments directed to the
Class A Notes, as a result of regular amortization of the
underlying collateral.
There are six assets with a par balance of $132.5 million (9.0% of
the current pool balance) that are considered Defaulted Securities
as of the August 23, 2011 Trustee report. Two of these assets
(51.6% of the defaulted balance) are CDO's and four assets are
CMBS (48.4% of the defaulted balance). There have been minimal
realized losses to the underlying collateral and Moody's expects
moderate losses to occur on the defaulted securities.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has completed updated credit estimates for the non-Moody's
rated collateral. The bottom-dollar WARF is a measure of the
default probability within a collateral pool. Moody's modeled a
bottom-dollar WARF of 2,739 compared to 1,157 at last review. The
distribution of current ratings and credit estimates is as
follows: Aaa-Aa3 (13.0% compared to 12.5% at last review), A1-A3
(4.8% compared to 7.4% at last review), Baa1-Baa3 (31.6% compared
to 44.7% at last review), Ba1-Ba3 (13.2% compared to 17.3% at last
review), B1-B3 (14.5% compared to 7.5% at last review), and Caa1-C
(23.0% compared to 20.5% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 3.6 years compared
to 5.2 years at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR of
22.2% compared to 33.5% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 8.4% compared to 14.0% at last review.
Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO
rating models, which was released on January 24, 2011.
The cash flow model, CDOEdge(R) v3.2.1.0, was used to analyze the
cash flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
22.5% to 17.5% or up to 27.5% would result in average rating
movement on the rated tranches of 0 to 2 notches downward.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take a rating action is dependent on an assessment of
a range of factors including, but not exclusively, the performance
metrics. Primary sources of assumption uncertainty are the current
sluggish macroeconomic environment and performance in the
commercial real estate property markets. While commercial real
estate property markets are gaining momentum, a consistent upward
trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are
continuing to show signs of recovery through the first half of
2011, while recovery in the non-core office and retail sectors are
tied to pace of recovery of the broader economy. Core office
markets are showing signs of recovery through lending and leasing
activity. The availability of debt capital continues to improve
with terms returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The principal methodology used in this rating is "Moody's Approach
to Rating SF CDOs" published in November 2010.
Other methodology used in this rating is "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
NEVADA HOUSING: S&P Lowers Rating on Series 2003A Bonds to 'B+'
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on Nevada
Housing Division's (Whittell Pointe Apartments) multifamily
housing revenue bonds series 2003A to 'B+' from 'BB+'.
"The downgrade is based on our view of the project's reliance on
short-term market rate investments," S&P said.
The rating reflects S&P's view of:
The insufficiency of revenues from mortgage debt service
payments and investment earnings to pay full and timely debt
service on the bonds until remarketing date;
Asset/liability parity is projected to fall below investment-
grade levels by 2023; and
Debt service coverage falling below investment-grade levels at
the remarketing date.
Credit strengths include S&P's opinion of:
The high credit quality of the assets consisting of a Fannie
Mae pass-through certificate;
Investments held in Dreyfus Treasury and Agency Cash
Management money market fund (AAAm); and
An asset-to-liability ratio of 101.08% as of April 1, 2011.
Standard & Poor's has assessed the updated cash flow statements
based on the revised criteria for certain federal government-
enhanced housing transactions. "Based on our current stressed
reinvestment rate assumptions for all scenarios as set forth in
the related criteria articles, we believe the revenues are unable
to meet bond costs from transaction cash flows beyond 2020," S&P
added.
NEVADA HOUSING: S&P Cuts Series 2002A & 200B Bond Rating to 'B+'
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on Nevada
Housing Division's (Whittell Pointe Apartments) multifamily
housing revenue bonds series 2002A and 2002B to 'B+' from 'BB+'.
"The downgrade is based on our view of the project's reliance on
short-term market rate investments," said Standard & Poor's credit
analyst Renee J. Berson.
The rating reflects S&P's view of:
The insufficiency of revenues from mortgage debt service
payments and investment earnings to pay full and timely debt
service on the bonds until remarketing date;
Asset/liability parity is projected to fall below investment-
grade levels by 2020; and
Debt service coverage falling below investment-grade levels at
the remarketing date.
Credit strengths include S&P's opinion of:
The high credit quality of the assets consisting of a Fannie
Mae pass-through certificate;
Investments held in Dreyfus Treasury and Agency Cash
Management money market fund (AAAm); and
An asset-to-liability ratio of 100.73% as of April 1, 2011.
Standard & Poor's has assessed updated cash flow statements based
on the revised criteria for certain federal government-enhanced
housing transactions. "Based on our current stressed reinvestment
rate assumptions for all scenarios as set forth in the related
criteria articles, we believe the revenues are unable to meet bond
costs from transaction cash flows beyond 2020," S&P related.
NEWCASTLE CDO: Moody's Downgrades Rating of Class II Notes to 'B3'
------------------------------------------------------------------
Moody's has downgraded the ratings of three classes and affirmed
the ratings of three classes of Notes issued by Newcastle CDO V,
Ltd. due to deterioration in the underlying collateral as
evidenced by the Moody's weighted average rating factor (WARF) and
recovery rate (WARR). The affirmations are due to key transaction
parameters performing within levels commensurate with the existing
ratings levels. The rating action is the result of Moody's on-
going surveillance of commercial real estate collateralized debt
obligation (CRE CDO) transactions.
Class I Floating Rate Notes, Downgraded to Baa3 (sf); previously
on Oct 5, 2010 Downgraded to Baa1 (sf)
Class II Deferrable Floating Rate Notes, Downgraded to B3 (sf);
previously on Oct 5, 2010 Downgraded to B1 (sf)
Class III Deferrable Floating Rate Notes, Downgraded to Caa2 (sf);
previously on Oct 5, 2010 Downgraded to Caa1 (sf)
Class IV-FL Deferrable Floating Rate Notes, Affirmed at Caa3 (sf);
previously on Oct 5, 2010 Downgraded to Caa3 (sf)
Class IV-FX Deferrable Fixed Rate Notes, Affirmed at Caa3 (sf);
previously on Oct 5, 2010 Downgraded to Caa3 (sf)
Class V Deferrable Fixed Rate Notes, Affirmed at C (sf);
previously on Oct 5, 2010 Downgraded to C (sf)
RATINGS RATIONALE
Newcastle CDO V, limited is a CRE CDO transaction backed by a
portfolio commercial mortgage backed securities (CMBS) (49.0%),
REIT debt (22.1%), residential mortgage backed securities
(RMBS) (15.6%), CMBS rake-bonds (10.2%), and small business
loans (3.1%). As of the July 29, 2011 Trustee report, the
aggregate Note balance of the transaction has decreased to
$361.9 million from $500.0 million at issuance, with the
amortization directed to the Class I Notes, both resulting from
regular amortization and failing of the Class I Par Value Test.
The Reinvestment Period ended in September 2009.
There are fifteen assets with a par balance of $41.8 million
(12.4% of the current pool balance) that are considered Defaulted
Securities as of the July 29, 2011 Trustee report. Moody's expects
significant losses to occur from these assets once they are
realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has completed updated credit estimates for the non-Moody's
rated collateral. The bottom-dollar WARF is a measure of the
default probability within a collateral pool. Moody's modeled a
bottom-dollar WARF of 3,002 compared to 1,975 at last review. The
distribution of current ratings and credit estimates is as
follows: Aaa-Aa3 (3.7% compared to 6.3% at last review), A1-A3
(2.7% compared to 5.1% at last review), Baa1-Baa3 (29.8% compared
to 39.8% at last review), Ba1-Ba3 (25.0% compared to 29.8% at last
review), B1-B3 (10.2% compared to 4.8% at last review), and Caa1-C
(28.6% compared to 14.2% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 3.6 years compared
to 3.7 at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR of
18.4% compared to 22.0% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 10.4% compared to 10.5% at last review.
Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO
rating models, which was released on January 24, 2011.
The cash flow model, CDOEdge(R) v3.2.1.0, was used to analyze the
cash flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
18.4% to 13.4% or up to 23.4% would result in average rating
movement on the rated tranches of 0 to 1 notches downward and 0 to
1 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption uncertainty
are the current sluggish macroeconomic environment and performance
in the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are
continuing to show signs of recovery through the first half of
2011, while recovery in the non-core office and retail sectors are
tied to pace of recovery of the broader economy. Core office
markets are showing signs of recovery through lending and leasing
activity. The availability of debt capital continues to improve
with terms returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The principal methodology used in this rating is "Moody's Approach
to Rating SF CDOs" published in November 2010.
The other methodology used in this rating is "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
NEWSTAR COMMERCIAL: Fitch Affirms $29.1 Million Notes at 'BBsf'
---------------------------------------------------------------
Fitch Ratings has affirmed these six classes of notes issued by
NewStar Commercial Loan Trust 2007-1 (NewStar 2007-1):
-- $318,266,648 class A-1 notes at 'AAAsf'; Outlook Stable;
-- $65,618,649 class A-2 notes at 'AAAsf'; Outlook Stable;
-- $24,000,000 class B notes at 'AAsf'; Outlook Stable;
-- $58,500,000 class C notes at 'Asf'; Outlook Negative;
-- $27,000,000 class D notes at 'BBB+sf'; Outlook Negative;
-- $29,100,000 class E notes at 'BBsf'; Outlook Negative.
The affirmations are based on the stable performance of the
transaction since Fitch's last rating action in September 2010.
Credit enhancement levels have remained relatively stable from the
transaction's closing date. According to the August 2011 trustee
report, the portfolio credit quality has remained generally
unchanged from the last review, with a weighted average rating
factor (WARF) at 'B/B-'. In addition, Fitch considers
approximately 15.9% of the total commitments of the portfolio in
the 'CCC' category or below, compared to 16.9% in the last review.
The transaction is still in its reinvestment period, which is
scheduled to end in May 2013.
The notes of NewStar 2007-1 benefit from the credit enhancement
in the form of collateral coverage, note subordination, and the
application of excess spread via the additional principal amount
(APA). For every dollar that is charged off of the performing
portfolio, the APA feature directs the excess interest proceeds
otherwise available to the certificateholders to pay down the
senior-most notes in an amount equal to the charged-off amount.
As of the August 2011 report, the cumulative APA stood at
$20.7 million, and a cumulative $21.7 million of excess spread had
been used to pay down the senior notes, which paid the APA in
full. Since the last review, no additional APA was due and the
certificateholders have continued to receive proceeds that flowed
through the interest waterfall.
Fitch maintained the Stable Outlooks on the class A-1, class A-2
notes (collectively, the class A notes) and class B notes due to
the stable performance of the portfolio. Fitch also maintained
the Negative Outlooks on the rest of the notes due to the amount
of credit enhancement available to the notes, relative to the
concentration of 'CCC' assets in the portfolio.
This review was conducted under the framework described in the
report 'Global Rating Criteria for Corporate CDOs' using the
Portfolio Credit Model (PCM) for projecting future default and
recovery levels for the underlying portfolio. These default and
recovery levels were then utilized in Fitch's cash flow model
under various default timing and interest rate stress scenarios,
as described in the report 'Global Criteria for Cash Flow Analysis
in CDOs'. The default timing scenarios were also adjusted since
the weighted average life of the portfolio was approximately three
years. As a result, Fitch assumed that a peak of 70% of the
defaults would occur in the first, second, and third year for the
front, middle, and back default timing, respectively. The class A
notes passed the majority of the stress scenarios at ratings
levels in line with their current ratings, with a minor failure in
a front-loaded default stress scenario. The rest of the notes
passed the various stress scenarios at rating levels in line with
their current ratings.
NewStar 2007-1 is a collateralized debt obligation (CDO) that
closed on June 5, 2007 and is managed by NewStar Financial, Inc.
(NewStar). The transaction's reinvestment period is scheduled to
end in May 2013, and its maturity date is in September 2022.
NewStar 2007-1 is secured by a portfolio comprised of 96.8%
corporate loans, primarily to middle-market issuers, and 3.2%
commercial real estate loans, based on the total commitment
amounts. Approximately 98.3% of the loans are first-lien loans or
whole loans, with the remaining 1.7% representing second-lien
positions. The majority of these loans are not publicly rated.
Instead, Fitch provides model-based credit opinions for the
performing loans. Information for the model-based credit opinions
was gathered from financial statements provided to Fitch by
NewStar.
NESWTAR COMMERCIAL: Fitch Holds Rating on $13 Mil. Notes at 'BBsf'
------------------------------------------------------------------
Fitch Ratings has affirmed six classes of notes issued by NewStar
Commercial Loan Trust 2006-1 (NewStar 2006-1). Fitch has also
revised Rating Outlooks on four classes of notes. The rating
actions are:
-- $298,880,903 class A-1 notes at 'AAAsf'; Outlook revised to
Stable from Negative;
-- $40,000,000 class A-2 notes at 'AAAsf'; Outlook revised to
Stable from Negative;
-- $22,500,000 class B notes at 'AAsf'; Outlook revised to
Stable from Negative;
-- $35,000,000 class C notes at 'Asf'; Outlook revised to Stable
from Negative;
-- $25,000,000 class D notes at 'BBBsf'; Outlook Negative;
-- $13,750,000 class E notes at 'BBsf'; Outlook Negative.
The affirmations are based on the stable performance of the
transaction since Fitch's last rating action in September 2010.
Since the last review, each class of notes has benefited from
increases of credit enhancement levels due to the principal
repayments of the class A-1 notes. The class A-2 are pro-rata
for principal and interest payments with the class A-1 notes
(collectively, the class A notes), but the revolving class A-2
notes were fully drawn to its maximum commitment amount of
$40 million when the reinvestment period terminated in June 2011.
According to the June 2011 trustee report, the weighted average
rating factor (WARF) of the portfolio remained unchanged at 'B/B-'
from the last review, with a trustee-reported factor of 31.3,
relative to a 30.0 trigger. There were some limited improvements
in the credit quality of the portfolio, as Fitch considered
approximately 23.3% of the total commitments of the portfolio in
the 'CCC' category or below, compared to 33% in the last review.
The notes of NewStar 2006-1 benefit from the credit enhancement in
the form of collateral coverage, note subordination, and the
application of excess spread via the additional principal amount
(APA). For every dollar that is charged off of the performing
portfolio, the APA feature directs the excess interest proceeds
otherwise available to the certificateholders to pay down the
senior-most notes in an amount equal to the charged-off amount.
The cumulative APA peaked at $37.6 million by the end of 2010, but
recoveries on charged-off amounts have brought the APA down to
approximately $21.6 million by the March 2011 payment date.
Additional recoveries and repurchases of charged-off amounts have
brought the cumulative APA further down to $18.0 million, as of
the June 2011 trustee report. To date, a cumulative $21.6 million
of excess spread was used to pay down the senior notes, which paid
the APA in full. As of the March 2011 payment date, interest
proceeds were no longer diverted for APA payments and resumed to
flow through the waterfall to the certificateholders.
Fitch revised the Outlooks on the class A, class B, and class C
notes due to the stable performance of the portfolio, combined
with limited improvements in its credit quality since the last
review. The portfolio also remains diversified with 89 obligors,
as the transaction recently exited its reinvestment period. Fitch
expects the notes' performance to remain stable for the near term.
Fitch maintained the Negative Outlooks on the class D and class E
notes due to their subordinate position in the capital structure
and the amount of credit enhancement available to the notes,
relative to the portfolio's concentration of 'CCC' assets.
This review was conducted under the framework described in the
report 'Global Rating Criteria for Corporate CDOs' using the
Portfolio Credit Model (PCM) for projecting future default and
recovery levels for the underlying portfolio. These default and
recovery levels were then utilized in Fitch's cash flow model
under various default timing and interest rate stress scenarios,
as described in the report 'Global Criteria for Cash Flow Analysis
in CDOs'. The default timing scenarios were also adjusted since
the weighted average life of the portfolio was approximately three
years. As a result, Fitch assumed that a peak of 70% of the
defaults would occur in the first, second, and third year for the
front, middle, and back default timing, respectively. All notes
passed the various stress scenarios at rating levels in line with
their credit ratings, which supported the affirmations. The class
E notes also passed stress scenarios at rating levels above their
current rating levels, but the notes were affirmed and kept on
Negative Outlooks due to their subordinate position in the capital
structure and the significant concentration of 'CCC' assets,
relative to the credit enhancement available to the notes.
NewStar 2006-1 is a collateralized debt obligation (CDO) that
closed on June 8, 2006 and is managed by NewStar Financial, Inc.
(NewStar). The transaction's reinvestment period ended in June
2011 and its legal final maturity date is in March 2022. NewStar
2006-1 is secured by a portfolio comprised of 94.6% corporate
loans, primarily to middle-market issuers, 3.1% commercial real
estate loans, and 2.3% in structured finance assets, based on
total commitment amounts. Approximately 97.5% of the loans are
first-lien loans or whole loans, with the remaining 2.5%
representing second-lien positions. The majority of these loans
are not publicly rated. Instead, Fitch provides model-based
credit opinions for the performing loans. Information for the
model-based credit opinions was gathered from financial statements
provided to Fitch by NewStar.
NEWSTAR TRUST: Fitch Affirms Junk Rating on Two Note Classes
------------------------------------------------------------
Fitch Ratings has affirmed six classes of notes and revised the
Recovery Ratings (RR) on two classes of notes issued by NewStar
Trust 2005-1 (NewStar 2005-1). The rating actions are as follows:
-- $57,684,566 class A-1 notes at 'AAAsf'; Outlook Negative;
-- $29,446,870 class A-2 notes at 'AAAsf'; Outlook Negative;
-- $18,682,557 class B notes at 'AAsf'; Outlook Negative;
-- $39,233,370 class C notes at 'BBsf'; Outlook Negative;
-- $24,287,324 class D notes at 'CCCsf'; RR revised to 'RR3'
from 'RR2';
-- $24,287,324 class E notes at 'CCsf'; RR revised to 'RR6' from
'RR5'.
The affirmations are based on the stable performance of the
transaction since Fitch's last rating action in September 2010.
Since the last review, each class of notes has benefited from
increased credit enhancement levels due to the principal repayment
of the class A-1 and class A-2 notes (collectively, the class A
notes). Through a combination of loan prepayments and the
diversion of excess spread to pay principal on the notes via the
additional principal amount (APA), the class A notes have received
over $60 million of principal payments since Fitch's last rating
action. The weighted average rating of the portfolio deteriorated
slightly in the 'B-/CCC+' range, according to the July 2011
trustee report. In addition, Fitch considers approximately 48.7%
of the portfolio in the 'CCC' category or below, relatively stable
from 49.7% in the last review.
The notes of NewStar 2005-1 benefit from the credit enhancement in
the form of collateral coverage, note subordination, and the
application of excess spread via the APA. For every dollar that
is charged off of the performing portfolio, the APA feature
directs the excess interest otherwise available to the
certificateholders to pay down the senior-most notes in an amount
equal to the charged-off amount. An additional $7.0 million of
loans were charged off since the last review, while approximately
$6.0 million of excess spread was used to pay principal to the
class A notes. The cumulative APA currently stands at
approximately $48.4 million after the July 2011 payment date,
compared to the $15.0 of cumulative excess spread that was used to
pay down the class A notes. This implies that an additional $33.4
million of excess spread would have to be diverted to the senior
notes in order to pay down the remaining APA balance, assuming
that no additional charge-offs are made.
Fitch maintains Negative Rating Outlooks on the notes due to the
increasing concentration of the portfolio, particularly in
commercial real estate. The portfolio consists of 34 unique
obligors, with the top 3 obligors totaling almost 20% of the
commitments of the performing portfolio. The underlying loan
portfolio has a significant exposure to commercial real estate
loans at approximately 38.5% of the total committed amount of the
portfolio. In addition, 7.3% of the portfolio is made up of long-
dated collateralized loan obligations (CLOs), which may expose the
transaction to market value risk when it reaches its maturity date
in July 2018.
The Recovery Rating (RR) on the class D and class E notes were
revised to 'RR3' and 'RR6', respectively, from 'RR2' and 'RR5',
respectively. The discounted cash flows yield a recovery
projection in a range between 50-70% for the class D notes and
less than 10% for the class E notes in a base-case default
scenario. Recovery Ratings are designed to provide a forward-
looking estimate of recoveries on currently distressed or
defaulted structured finance securities rated 'CCCsf' or below.
For further details on Recovery Ratings, please see Fitch's
reports 'Global Rating Criteria for Corporate CDOs' and 'Criteria
for Structured Finance Recovery Ratings'.
This review was conducted under the framework described in the
report 'Global Rating Criteria for Corporate CDOs' using the
Portfolio Credit Model (PCM) for projecting future default and
recovery levels for the underlying portfolio. These default and
recovery levels were then utilized in Fitch's cash flow model
under various default timing and interest rate stress scenarios,
as described in the report 'Global Criteria for Cash Flow Analysis
in CDOs'. The default timing scenarios were also adjusted since
the weighted average life of the portfolio was less than three
years. As a result, Fitch assumed that a peak of 70% of the
defaults would occur in the first, second, and third year for the
front, middle, and back default timing, respectively. The class A
notes passed the majority of the stress scenarios at rating levels
in line with their current rating, with a couple of failures in
back-loaded default timing scenarios. The class B and the class C
notes passed various stress scenarios at ratings levels in line
with their current ratings. The class D notes and the class E
notes also passed the majority of the stress scenarios at their
current ratings, but they are highly sensitive to the future
performance of an increasingly concentrated portfolio. Their
ratings, however, appropriately reflects this substantial credit
risk.
NewStar 2005-1 is a collateralized debt obligation (CDO) that
closed on Aug. 10, 2005 and is managed by NewStar Financial, Inc.
(NewStar). The transaction's reinvestment period ended in October
2008 and its legal final maturity date is in July 2018. NewStar
2005-1 is secured by a portfolio comprised of 54.2% corporate
loans (primarily to middle-market issuers), 38.5% commercial real
estate loans, and 7.3% of structured finance assets, based on the
total performing commitment amount. Approximately 11.4% represent
second-lien loan or subordinate positions, while the rest of the
loans are first-lien or whole loan positions. The majority of
these loans are not publicly rated. Instead, Fitch provides
model-based credit opinions for the performing loans. Information
for the model-based credit opinions was gathered from financial
statements provided to Fitch by NewStar.
NOB HILL: Moody's Upgrades Rating of Class E Notes to 'B1'
----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Nob Hill CLO, Limited:
US$210,000,000 Class A-1 Senior Secured Floating Rate Notes Due
2018 Notes (current balance of $203,750,942.95), Upgraded to Aaa
(sf); previously on June 22, 2011 Aa1 (sf) Placed Under Review for
Possible Upgrade;
US$23,000,000 Class A-2 Senior Secured Floating Rate Notes Due
2018 Notes, Upgraded to Aa1 (sf); previously on June 22, 2011 A1
(sf) Placed Under Review for Possible Upgrade;
US$11,350,000 Class B Senior Secured Floating Rate Notes Due 2018
Notes, Upgraded to Aa3 (sf); previously on June 22, 2011 A3 (sf)
Placed Under Review for Possible Upgrade;
US$14,145,000 Class C Secured Deferrable Floating Rate Notes Due
2018 Notes, Upgraded to A3 (sf); previously on June 22, 2011 Baa3
(sf) Placed Under Review for Possible Upgrade;
US$13,580,000 Class D Secured Deferrable Floating Rate Notes Due
2018 Notes, Upgraded to Baa3 (sf); previously on June 22, 2011 Ba3
(sf) Placed Under Review for Possible Upgrade;
US$11,300,000 Class E Secured Deferrable Floating Rate Notes Due
2018 Notes, Upgraded to B1 (sf); previously on June 22, 2011 Caa3
(sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $291.7 million,
defaulted par of $6.9 million, a weighted average default
probability of 22.93% (implying a WARF of 2944), a weighted
average recovery rate upon default of 50.85%, and a diversity
score of 55. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Nob Hill CLO, Limited, issued in July 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor,
weighted average spread, weighted average coupon, and diversity
score. However, as part of the base case, Moody's considered
spread levels higher than the covenant levels due to the large
difference between the reported and covenant levels.
OHA PARK: Moody's Upgrades Class D Notes Rating to 'Ba2'
--------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by OHA Park Avenue CLO I, Ltd.
US$50,000,000 Class A-1a Senior Secured Revolving Floating Rate
Notes, Due 2022, Upgraded to Aaa (sf); Previously on June 22, 2011
Aa2 (sf) Placed Under Review for Possible Upgrade;
US$346,560,000 Class A-1b Senior Secured Floating Rate Notes, Due
2022, Upgraded to Aaa (sf); Previously on June 22, 2011 Aa2 (sf)
Placed Under Review for Possible Upgrade;
US$30,940,000 Class A-2 Senior Secured Floating Rate Notes, Due
2022, Upgraded to Aa3 (sf); Previously on June 22, 2011 A2 (sf)
Placed Under Review for Possible Upgrade;
US$36,560,000 Class B Secured Deferrable Floating Rate Notes, Due
2022, Upgraded to A3 (sf); Previously on June 22, 2011 Ba1 (sf)
Placed Under Review for Possible Upgrade;
US$25,310,000 Class C Secured Deferrable Floating Rate Notes, Due
2022, Upgraded to Baa3 (sf); Previously on June 22, 2011 B1 (sf)
Placed Under Review for Possible Upgrade;
US$28,130,000 Class D Secured Deferrable Floating Rate Notes, Due
2022, Upgraded to Ba2 (sf); Previously on June 22, 2011 Caa2 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of improvement in the
credit quality of the underlying portfolio since the rating action
in August 2009. Based on the August 2011 trustee report, the
weighted average rating factor is currently 2361 compared to 2507
in August 2009. Further, the transaction's overcollateralization
ratios have improved since the last rating action. Based on the
latest trustee report, the Class A-1 Notes Overcollateralization
Event, Class A, Class B, Class C and Class D Notes
Overcollateralization Tests are reported at 140.13%, 129.99%,
119.75%, 113.56% and 107.38%, respectively, versus August 2009
levels of 136.12%, 126.71%, 116.73%, 110.69% and 104.68,
respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $556 million,
defaulted par of $645,000, a weighted average default probability
of 23% (implying a WARF of 2928), a weighted average recovery rate
upon default of 51% and a diversity score of 43. The default and
recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
OHA Park Avenue CLO I, Ltd., issued in March of 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by
1) uncertainties of credit conditions in the general economy and
2) the large concentration of speculative-grade debt maturing
between 2013 and 2015 which may create challenges for issuers to
refinance. CDO notes' performance may also be impacted by 1) the
manager's investment strategy and behavior and 2) divergence in
legal interpretation of CDO documentation by different
transactional parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor and diversity score. However, as part of the base
case, Moody's considered spread and coupon levels higher than
the covenant levels due to the large difference between the
reported and covenant levels.
PACIFICA CDO: Moody's Raises Rating of Class B-2L Notes to 'Ba2'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Pacifica CDO IV, Ltd.:
US$21,000,000 Class A-2L Floating Rate Notes Due February 2017,
Upgraded to Aaa (sf); previously on June 22, 2011 Aa3 (sf) Placed
Under Review for Possible Upgrade;
US$20,000,000 Class A-3L Floating Rate Notes Due February 2017,
Upgraded to Aa2 (sf); previously on June 22, 2011 Baa1 (sf) Placed
Under Review for Possible Upgrade;
US$14,000,000 Class B-1L Floating Rate Notes Due February 2017,
Upgraded to Baa1 (sf); previously on June 22, 2011 Ba2 (sf) Placed
Under Review for Possible Upgrade; and
US$10,000,000 Class B-2L Floating Rate Notes Due February 2017,
Upgraded to Ba2 (sf); previously on June 22, 2011 B2 (sf) Placed
Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect the consideration of credit improvement
of the underlying portfolio, an increase in the transaction's
overcollateralization ratios, and delevering of the senior notes
since the rating action in February 2011. The Class A-1L notes
have been paid down by approximately 30% or $63.9 million since
the rating action, and as a result of the delevering, the
overcollateralization ratios have increased since then. Based on
the latest trustee report dated August 4, 2011, the Senior Class
A, Class A, Class B-1L, and Class B-2L overcollateralization
ratios are reported at 129.27%, 117.46%, 110.40%, and 105.86%,
respectively, versus January 2011 levels of 124.70%, 114.57%,
108.40%, and 104.38%, respectively. The weighted average rating
factor is currently 2421 compared to 2587 in January 2011.
Additionally, Moody's notes that the underlying portfolio includes
a number of investments in securities that mature after the
maturity of the notes. Based on the August 2011 trustee report,
reference securities that mature after the maturity date of the
notes currently make up approximately 6.05% of the underlying
collateral portfolio. These investments potentially expose the
notes to market risk in the event of liquidation at the time of
the notes' maturity.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $219.95 million,
defaulted par of $0.9 million, a weighted average default
probability of 15.0% (implying a WARF of 2492), a weighted average
recovery rate upon default of 50.7%, and a diversity score of 51.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Pacifica CDO IV, Ltd., issued in December 2004, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Delevering: A source of uncertainty in this transaction is
whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to high
prepayment levels in the loan market and/or collateral sales by
the manager, which may have significant impact on the notes'
ratings.
2) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assumes an asset's terminal value upon
liquidation at maturity to be equal to the lower of an assumed
liquidation value (depending on the extent to which the asset's
maturity lags that of the liabilities) and the asset's current
market value.
PRIMUS CLO: Moody's Raises Rating of Class D Notes to 'Ba2'
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Primus CLO II, Ltd.:
US$302,500,000 Class A Senior Secured Floating Rate Notes due 2021
(current balance US$289,231,014), Upgraded to Aa1 (sf); previously
on June 22, 2011 Aa3 (sf) Placed Under Review for Possible
Upgrade;
US$8,500,000 Class B Second Priority Floating Rate notes Due 2021,
Upgraded to Aa3 (sf); previously on June 22, 2011 A2 (sf) Placed
Under Review for Possible Upgrade;
US$31,500,000 Class C Third Priority Deferrable Floating Rate
notes Due 2021, Upgraded to Baa2 (sf); previously on June 22, 2011
Ba1 (sf) Placed Under Review for Possible Upgrade;
US$10,500,000 Class D Fourth Priority Deferrable Floating Rate
notes Due 2021, Upgraded to Ba2 (sf); previously on June 22, 2011
B1 (sf) Placed Under Review for Possible Upgrade;
US. $15,500,000 Class E Fifth Priority Floating Rate Notes Due
2021 (current balance US$14,645,606), Upgraded to B1 (sf);
previously on June 22, 2011 Caa3 (sf) Placed Under Review for
Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $367.1 million, a
weighted average default probability of 20.48% (implying a WARF of
2606), a weighted average recovery rate upon default of 47.34%,
and a diversity score of 65. The default and recovery properties
of the collateral pool are incorporated in cash flow model
analysis where they are subject to stresses as a function of the
target rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Primus CLO II Ltd., issued in July 2007, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011. Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average spread, weighted average
coupon, and diversity score. However, as part of the base case,
Moody's considered spread levels higher than the covenant
levels due to the large difference between the reported and
covenant levels.
REAL ESTATE ASSET: DBRS Confirms Class F Rating at 'BB'
-------------------------------------------------------
DBRS has confirmed the ratings of 15 classes of Real Estate Asset
Liquidity Trust, Commercial Mortgage Pass-Through Certificates,
Series 2005-2.
The following classes were confirmed with Stable trends:
Class A-1 at AAA
Class A-2 at AAA
Class B at AA
Class C at A
Class D-1 at BBB
Class D-2 at BBB
Class E-1 at BBB (low)
Class E-2 at BBB (low)
Class F at BB (high)
Class G at BB
Class XP-1 at AAA
Class XC-1 at AAA
Class XP-2 at AAA
Class XC-2 at AAA
In addition, Class L was confirmed at CCC.
DBRS has downgraded three classes as follows:
Class H to B (high) from BB (low)
Class J to B (low) from B
Class K to CCC from B (low)
Classes H and J have been placed on trend Negative.
DBRS does not rate the $6.1 million first loss piece, Class M.
The pool collateral has been reduced by 31.27% since issuance,
with the current pool balance at approximately $427.5 million, as
of the August 2011 remittance report.
There have been realized losses of approximately $149,000 to the
Class M certificate as of the August 2011 remittance report, due
to the liquidation of Prospectus ID#67, Metropolitan Road, in
January 2011.
Although the overall financial performance for the remaining
collateral is considered healthy, the weighted-average debt-
service coverage ratio (WADSCR) of 1.64x is a decline from 1.99x
at issuance. The pool collateral has been reduced by 31.27%
since issuance, with the current pool balance at approximately
$427.5 million, as of the August 2011 remittance report. There
are two defeased loans, representing 0.81% of the pool.
As of the August 2011 remittance report, there were 19 loans on
the servicer's watchlist, representing 32.9% of the pool balance.
Of these loans, 11 individually represent greater than 1.0% of the
pool.
The largest loan on the servicer's watchlist is the third largest
loan in the pool, SRI Portfolio, with 5.13% of the current pool
balance. The loan is secured by a portfolio of quick-service
restaurants located throughout Canada. At closing, the whole loan
was comprised of a $55 million A-note, included in this
transaction, and a B-note in the amount of $10 million, held
outside the trust. Both notes are interest-only with the original
maturity scheduled for October 2010. The servicer granted an
extension of the maturity to February 2012 and in March 2011, a
partial payoff of the loan in the amount of $33 million was
received. That transaction included the release of the bulk of
the Ontario properties included in the portfolio; all funds from
the paydown were applied to the A-note. The servicer advised in
August 2011 that the borrower is exploring several options for
repaying the remainder of the loan. In March 2011, the largest
tenant in the portfolio, Priszm, filed for bankruptcy protection.
The borrower is reportedly taking advantage of the filing as an
opportunity to secure stronger tenants for the remaining
properties on the loan. DBRS has removed the investment-grade
shadow rating on this loan, due to Priszm's bankruptcy and the
potential impact that has on the collateral cash flows in the near
term.
As of the August 2011 remittance report, there were two loans in
special servicing, representing 2.63% of the pool balance. One
loan was in special servicing at the time of the last DBRS review
in December 2010, Prospectus ID#14, Duncan Mill Road, comprising
2.13% of the current pool balance as of the August 2011 remittance
report. The outlook for this loan had declined substantially
since its initial transfer to special servicing in June 2010.
Duncan Mill Road is a 173,000 sf Class B office building located
in suburban northeast Toronto. The loan transferred to special
servicing because of outstanding real estate taxes, reserve
payments in arrears and property maintenance issues. In August
2009, an exterior panel on the building became detached and fell
to the ground below, resulting in the Toronto police declaring the
building unsafe. These and other structural issues were reported
to have been corrected by the borrower at YE2010, but an
Engineering Report received by the servicer in March 2010
indicated that work completed does not sufficiently address the
issues at the property. Furthermore, at the time of inspection,
the engineer noted several safety hazards, including a playground
that was exposed to falling debris from the building generated
during the repair work. The servicer reported in August 2011 that
the borrower had addressed these issues and that the daycare
center using the playground was no longer operating at the
property. The borrower has slated approximately $100,000 for
repairs to be completed by YE2011. Any outstanding issues
remaining after YE2011 will be addressed in the spring of 2012 due
to weather impairments. The Engineer's Report estimated the full
cost of repairs and remediation for the property to cost nearly
$5 million over the next eight years.
Property performance has been on the decline since 2008 when the
DSCR was at 0.91x; by YE2010, the DSCR had fallen to 0.21x. The
performance decline is due to a significant drop in occupancy from
issuance, when it was 90% occupied. In July 2011, occupancy was
reported to be 46%. Occupancy began declining in 2008, when it
was at 68.7% at year-end; the servicer's September 2009 site
inspection noted that several tenants had vacated in the previous
twelve months, including tenants that had moved out in the night
without providing notice to the property management. The current
loan per square foot is $54 and the loan is full-recourse to the
sponsor.
The loan is current and the special servicer reported in August
2011 that forbearance negotiations were underway as part of a
strategy to remedy the outstanding structural issues at the
property. There is a TI/LC reserve in-place with an approximate
balance of $450,000. The special servicer is working with the
borrower to apply those funds toward repairs at the property.
Based on offers received by the special servicer to purchase the
property in May 2011, the special servicer had previously
estimated the property's as-is value to be $12 million. However,
those offers have since been withdrawn and it is anticipated a
formal appraisal would represent a significant decline from the
original value of $16.7 million at issuance given the structural
issues and related performance decline at the property. The
special servicer is not required to obtain an updated appraisal
until the loan becomes 90 days delinquent, according to the
transaction documents. Based on the NCF figures for the property
at June 30, 2011, DBRS anticipates the as-is value to be well
below the $9.1 million outstanding loan balance, as of the August
2011 remittance report. As such, a significant loss to the trust
could be realized if workout efforts are not successful and the
loan is liquidated.
The other loan in special servicing is Prospectus ID#65, Emerald,
which represents 0.50% of the current pool balance as of the
August 2011 remittance report.
This loan is secured by a 67-unit low-rise multifamily property
located in C“te Saint-Luc, Qu‚bec, a suburb of Montr‚al located
southwest of the CBD. The property was constructed in the 1960's
and was found in Fair overall condition at the time of the
servicer's September 2010 site inspection, which noted that the
borrower was in the process of converting the property into "mini
condos", with upgrades to the unit bathrooms and kitchens, as well
as improvements to common areas in stairwells, elevators and the
property lobby. Exterior upgrades in window replacement and
balcony repairs were noted to have improved the property's curb
appeal significantly.
The loan transferred to the special servicer in March 2011 because
of outstanding utility payments at the property resulting in the
property being subject to a rent seizure by GazMetro.
Furthermore, the property transferred ownership in late 2010 when
the borrower completed an unauthorized sale of its interest in the
asset. The borrower has been communicating with the special
servicer's counsel since May 2011 and the utility payments have
been brought current. The special servicer advised in August 2011
that the condo conversion was halted and the property is operating
as a multifamily community with renovations ongoing. The special
servicer advised that the goal was to have the original borrower
and property owner repay the trust loan and pay the associated
fees to the trust for special servicing and early payoff. If an
early payoff cannot be achieved, the special servicer has advised
the loan will not be released at maturity unless all fees and
costs are included in the payout. The T-12 DSCR, as June 30,
2011, was 0.47x with property occupancy at 67%. The current
leverage is reasonable, at $34,300 per unit. The loan is current.
DBRS will continue to monitor the loan's performance and the
special servicer's efforts to achieve resolution.
DBRS shadow-rates eight loans in the pool, representing 20.25% of
the current pool balance as of the August 2011 remittance report,
investment grade. As a part of this review, one shadow rating was
removed, Prospectus ID#1, SRI Portfolio, for reasons previously
discussed. For the remaining seven loans, the respective property
performance of the underlying collateral continues to be strong
and the shadow ratings have been confirmed by DBRS.
DBRS continues to monitor this transaction on a monthly basis in
the Monthly CMBS Surveillance Report, which can provide more
detailed information on the individual loans in the pool.
SAGAMORE CLO: S&P Affirms Ratings on 2 Classes of Notes at 'B-'
--------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the
class A-1, A-2, A-3, and B notes from Sagamore CLO Ltd., a U.S.
collateralized loan obligation (CLO) transaction managed by
Invesco Senior Secured Management Inc. "At the same time, we
removed three of these ratings from CreditWatch with positive
implications. We affirmed our ratings on the class C-1 and C-2
notes from the same transaction," S&P related.
The upgrades mainly reflect an improvement in the
overcollateralization (O/C) available to support the rated notes.
The trustee reported these ratios in the Aug. 5, 2011 monthly
report:
The class A O/C ratio was 154.7%, compared with a reported
ratio of 127.5% in October 2010;
The class B O/C ratio was 127.6%, compared with a reported
ratio of 114.6% in October 2010; and
The class C O/C ratio was 109.9%, compared with a reported
ratio of 104.9% in October 2010.
"The transaction has also benefited from a slight improvement in
the performance of the transaction's underlying asset portfolio.
As of the August 2011 trustee report, the transaction had $4.3
million of defaulted assets. This was down from the $8.5 million
defaulted assets noted in the October 2010 trustee report, which
we referenced for our November 2010 rating actions. Furthermore,
the trustee reported $24.1 million in assets from obligors rated
in the 'CCC' category in August 2011, compared with $29.7 million
in October 2010," S&P stated.
The affirmations of the ratings on the class C-1 and C-2 notes
reflect the availability of credit support at the current rating
levels.
"We will continue to review our ratings on the notes and assess
whether, in our view, the ratings remain consistent with the
credit enhancement available to support them and take rating
actions as we deem necessary," S&P said.
Rating and CreditWatch Actions
Sagamore CLO Ltd.
Rating
Class To From
A-1 AAA (sf) AA+ (sf)/Watch Pos
A-2 AAA (sf) AA+ (sf)/Watch Pos
A-3 AAA (sf) AA+ (sf)/Watch Pos
B BBB- (sf) BB+ (sf)
Ratings Affirmed
Sagamore CLO Ltd.
Class Rating
C-1 B- (sf)
C-2 B- (sf)
SASCO FHA/VA: Moody's Confirms Rating of Class A Notes at 'Caa1'
----------------------------------------------------------------
The September 6, 2011 press release omitted the confirmation of
the ratings on the following three tranches: SASCO FHA/VA, Series
1998-RF1, A; Structured Asset Securities Corp 2006-RF3, Cl. 1-AP;
and Structured Asset Securities Corp 2006-RF4, Cl. 2-AP Revised
release follows.
New York, September 6, 2011: Moody's Investors Service has
downgraded the rating of 27 tranches and confirmed the rating of
three tranches from eight deals issued by Structured Asset
Securities Corp. The collateral backing these transactions
consists primarily of first-lien, fixed, and adjustable rate,
mortgage loans insured by the Federal Housing Administration (FHA)
an agency of the U.S. Department of Urban Development (HUD) or
guaranteed by the Veterans Administration (VA).
Complete rating actions are:
Issuer: SASCO FHA/VA, Series 1998-RF1
A, Confirmed at Caa1 (sf); previously on Jul 27, 2011 Caa1 (sf)
Placed Under Review for Possible Downgrade
Issuer: SASCO FHA/VA, Series 1999-RF1
A, Downgraded to B2 (sf); previously on Jul 27, 2011 Ba3 (sf)
Placed Under Review for Possible Downgrade
Issuer: Structured Asset Securities Corp 2005-RF1
Cl. A, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Cl. AIO, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Issuer: Structured Asset Securities Corp 2006-RF3
Cl. 1-AP, Confirmed at Caa1 (sf); previously on Jul 27, 2011 Caa1
(sf) Placed Under Review for Possible Downgrade
Cl. B1-I, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B2-I, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Issuer: Structured Asset Securities Corp 2006-RF4
Cl. 2-A1, Downgraded to B2 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. 2-AP, Confirmed at Caa1 (sf); previously on Jul 27, 2011 Caa1
(sf) Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B2, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B3, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B4, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Issuer: Structured Asset Securities Corp. 2005-RF3
Cl. 1-A, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Cl. 1-AIO, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Cl. 2-A, Downgraded to B3 (sf); previously on Jul 28, 2009
Downgraded to B1 (sf)
Issuer: Structured Asset Securities Corp. 2005-RF5
Cl. 1-A, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. 1-AIO, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. 2-A, Downgraded to B3 (sf); previously on Jul 27, 2011 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Caa3 (sf)
Cl. B2, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B3, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B4, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. 1-X, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to B3 (sf)
Issuer: Structured Asset Securities Corp. 2005-RF6
Cl. A, Downgraded to B3 (sf); previously on Jul 27, 2011 B1 (sf)
Placed Under Review for Possible Downgrade
Cl. AIO, Downgraded to B3 (sf); previously on Jul 27, 2011 B1 (sf)
Placed Under Review for Possible Downgrade
Cl. B1, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B2, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B3, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
Cl. B4, Downgraded to C (sf); previously on Jul 28, 2009
Downgraded to Ca (sf)
RATINGS RATIONALE
The actions are a result of Moody's updated loss projection for
the RMBS FHA-VA portfolio. The updated projection accounts for
higher potential pool losses due to self-curtailment of claims by
servicers whereby they pass expenses as deemed reasonable to the
trusts instead of submitting them to HUD, and continued weaknesses
in the macro economy and the housing market.
A FHA guarantee covers 100% of a loan's outstanding principal and
a large portion of its outstanding interest and foreclosure-
related expenses in the event that the loan defaults. A VA
guarantee covers only a portion of the principal based on the
lesser of either the sum of the current loan amount, accrued and
unpaid interest, and foreclosure expenses, or the original loan
amount. HUD usually pays claims on defaulted FHA loans when
servicers submit the claims, but can impose significant penalties
on servicers if it finds irregularities in the claim process later
during the servicer audits. This can prompt servicers to push more
expenses to the trust that they deem reasonably incurred than
submit them to HUD and face significant penalty. The rating
actions consider the portion of a defaulted loan normally not
covered by the FHA or VA guarantee and other servicer expenses
they deemed reasonably incurred and passed on to the trust.
FHA/VA borrowers, in Moody's-rated transactions, are typically low
income borrowers with poor credit history who have been affected
by the weak economy and housing market. Moody's expects
delinquencies to remain high for this sector at 40%, 35%, and 30%
for the 2004, 2005, and 2006 vintages, respectively as house
prices continue to decline and unemployment rates remain high.
FHA/VA RMBS transactions have had very low losses to date (less
than 1%) despite high delinquency levels due to the FHA and VA
guarantees. However, Moody's expects this trend to change due to
the higher level of self-curtailments by the servicers.
Moody's final rating actions are based on current levels of credit
enhancement, collateral performance and updated pool-level loss
expectations. Moody's took into account credit enhancement
provided by seniority, and other structural features within the
senior note waterfalls.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment levels remain
high, and weakness persists in the housing market. Moody's now
projects house price index to reach a bottom in the first quarter
of 2012, with a 2% remaining decline between the first quarter of
2011 and 2012, and unemployment rate to start declining by fourth
quarter of 2011.
The principal methodology used in these ratings is described in
the Monitoring and Performance Review section in "Moody's Approach
to Rating US Residential Mortgage-Backed Securities" published in
December 2008. Other methodologies and factors used in this rating
are described in "FHA VA US RMBS Surveillance Methodology", and
"2005 -- 2008 US RMBS Surveillance Methodology", published in July
2011.
SIERRA CLO: Moody's Upgrades Rating of Class B-2L Notes to 'Ba2'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Sierra CLO II Ltd.:
US$264,000,000 Class A-1L Floating Rate Notes Due January 2021
(current balance of $252,498,862), Upgraded to Aaa (sf);
previously on June 22, 2011 Aa1 (sf) Placed Under Review for
Possible Upgrade;
US$40,000,000 Class A-1LV Floating Rate Revolving Notes Due
January 2021 (current balance of $38,257,403), Upgraded to Aaa
(sf); previously on June 22, 2011 Aa1 (sf) Placed Under Review for
Possible Upgrade;
US$34,000,000 Class A-2L Floating Rate Notes Due January 2021,
Upgraded to Aa1 (sf); previously on June 22, 2011 A3 (sf) Placed
Under Review for Possible Upgrade;
US$23,000,000 Class A-3L Floating Rate Notes Due January 2021,
Upgraded to A2 (sf); previously on June 22, 2011 Ba1 (sf) Placed
Under Review for Possible Upgrade;
US$15,500,000 Class B-1L Floating Rate Notes Due January 2021,
Upgraded to Baa3 (sf); previously on June 22, 2011 B2 (sf) Placed
Under Review for Possible Upgrade;
US$16,000,000 Class B-2L Floating Rate Notes Due January 2021,
Upgraded to Ba2 (sf); previously on June 22, 2011 Caa3 (sf) Placed
Under Review for Possible Upgrade;
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $398.8 million,
defaulted par of $3 million, a weighted average default
probability of 19.21% (implying a WARF of 2526), a weighted
average recovery rate upon default of 48.11%, and a diversity
score of 69. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Sierra CLO II Ltd., issued on November 21, 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor,
weighted average spread, weighted average coupon, and diversity
score. However, as part of the base case, Moody's considered
spread levels higher than the covenant levels due to the large
difference between the reported and covenant levels.
SLM STUDENT 2008-1: Fitch Holds Rating on Class B Notes at 'BBsf'
-----------------------------------------------------------------
Fitch Ratings affirms the senior notes at 'AAAsf' and subordinate
student loan note at 'BBsf' issued by SLM Student Loan Trust
series 2008-1. The Rating Outlook remains Stable for both the
senior and subordinate bonds.
The ratings on the senior and subordinate notes are affirmed based
on the sufficient level of credit enhancement to cover the
applicable basis factor stress.
Credit enhancement for class B consists of projected excess
spread. Class A notes benefit from subordination provided by the
lower priority notes.
The loans are serviced and originated by SLM Corp. SLM Corp. which
is rated 'BBB-/F3' by Fitch.
SLM Student Loan Trust Series 2008-1:
-- Class A-2 affirmed at 'AAAsf; Outlook Stable;
-- Class A-3 affirmed at 'AAAsf; Outlook Stable;
-- Class A-4 affirmed at 'AAAsf; Outlook Stable;
-- Class B affirmed at 'BBsf; Outlook Stable.
SLM STUDENT 2008-2: Fitch Holds Rating on Class B Notes at 'BBsf'
-----------------------------------------------------------------
Fitch Ratings affirms the senior notes at 'AAAsf' and subordinate
student loan note at 'BBsf' issued by SLM Student Loan Trust
series 2008-2. The Rating Outlook remains Stable for both the
senior and subordinate bonds.
The ratings on the senior and subordinate notes are affirmed based
on the sufficient level of credit enhancement to cover the
applicable basis factor stress.
Credit enhancement for class B consists of projected excess
spread. Class A notes benefit from subordination provided by the
lower priority notes.
The loans are serviced and originated by SLM Corp. SLM Corp.,
which is rated 'BBB-/F3' by Fitch.
SLM Student Loan Trust Series 2008-2:
-- Class A-1 affirmed at 'AAAsf; Outlook Stable;
-- Class A-2 affirmed at 'AAAsf; Outlook Stable;
-- Class A-3 affirmed at 'AAAsf; Outlook Stable;
-- Class B affirmed at 'BBsf; Outlook Stable.
STONE TOWER: Moody's Upgrades Rating of Class C-1 Notes to Ba1
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Stone Tower CLO V Ltd.:
US$60,000,000 Class A-1 Floating Rate Notes Due 2020, Upgraded to
Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed on Review
for Possible Upgrade;
US$54,500,000 Class A-2b Floating Rate Notes Due 2020, Upgraded to
Aa1 (sf); previously on June 22, 2011 Aa3 (sf) Placed on Review
for Possible Upgrade;
US$43,000,000 Class A-3 Floating Rate Notes Due 2020, Upgraded to
Aa3 (sf); previously on June 22, 2011 A3 (sf) Placed on Review for
Possible Upgrade;
US$36,000,000 Class B Deferrable Floating Rate Notes Due 2020,
Upgraded to A3 (sf); previously on June 22, 2011 Baa3 (sf) Placed
on Review for Possible Upgrade;
US$29,000,000 Class C-1 Floating Rate Notes Due 2020, Upgraded to
Ba1 (sf); previously on June 22, 2011 B1 (sf) Placed on Review for
Possible Upgrade;
US$2,500,000 Class C-2 Fixed Rate Notes Due 2020, Upgraded to Ba1
(sf); previously on June 22, 2011 B1 (sf) Placed on Review for
Possible Upgrade;
US$24,000,000 Class D Floating Rate Notes Due 2020, Upgraded to B1
(sf); previously on June 22, 2011 Caa3 (sf) Placed on Review for
Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of an increase in the
transaction's overcollateralization ratios as calculated by
Moody's since the rating action in October 2009.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $765.6 million,
defaulted par of $3.5 million, a weighted average default
probability of 18.86% (implying a WARF of 2485), a weighted
average recovery rate upon default of 48.60%, and a diversity
score of 75. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Stone Tower CLO V Ltd., issued in August 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011. Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor,
weighted average spread, weighted average coupon, and diversity
score. However, as part of the base case, Moody's considered
spread levels higher than the covenant levels due to the large
difference between the reported and covenant levels.
STONEY LANE: Moody's Uprades Rating of Class C Notes to 'Ba1'
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Stoney Lane Funding I Ltd.:
US$369,900,000 Class A-1 Senior Secured Floating Rate Notes due
2022 (current outstanding balance of $363,381,411), Upgraded to
Aaa (sf); previously on June 22, 2011 Aa2 (sf) Placed Under Review
for Possible Upgrade;
US$24,500,000 Class A-2 Senior Secured Floating Rate Notes due
2022, Upgraded to Aa3 (sf); previously on June 22, 2011 A2 (sf)
Placed Under Review for Possible Upgrade;
US$25,000,000 Class B Senior Secured Deferrable Floating Rate
Notes Due 2022, Upgraded to Baa1 (sf); previously on June 22, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade;
US$25,000,000 Class C Senior Secured Deferrable Floating Rate
Notes Due 2022, Upgraded to Ba1 (sf); previously on June 22, 2011
Ba3 (sf) Placed Under Review for Possible Upgrade; and
US$18,250,000 Class D Secured Deferrable Floating Rate Notes Due
2022 (current balance of $15,769,410), Upgraded to B1 (sf);
previously on June 22, 2011 Caa3 (sf) Placed Under Review for
Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect the consideration of an increase in the
transaction's overcollateralization ratios since the rating action
in May 2010. Based on the latest trustee report dated August 5,
2011, the Class A, Class B, Class C, and Class D
overcollateralization ratios are reported at 122.89%, 115.45%,
108.86%, and 105.07%, respectively, versus April 2010 levels of
120.88%, 113.56%, 107.07%, and 103.35%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $475.6 million,
defaulted par of $2.4 million, a weighted average default
probability of 21.32% (implying a WARF of 2632), a weighted
average recovery rate upon default of 51.4%, and a diversity score
of 60. These default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Stoney Lane Funding I Ltd., issued in March 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming the
worse of reported and covenanted values for weighted average
rating factor, weighted average coupon, and diversity score.
However, as part of the base case, Moody's considered spread
levels higher than the covenant levels due to the large
difference between the reported and covenant levels.
SYMPHONY CLO II: Moody's Upgrades Ratings of Class C Notes to Ba1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Symphony CLO II, Ltd.:
US$40,000,000 Class A-1 Senior Revolving Notes Due 2020, Upgraded
to Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed Under
Review for Possible Upgrade
US$51,000,000 Class A-2b Senior Notes Due 2020, Upgraded to Aa1
(sf); previously on June 22, 2011 Aa2 (sf) Placed Under Review for
Possible Upgrade
US$33,000,000 Class A-3 Senior Notes Due 2020, Upgraded to A1
(sf); previously on June 22, 2011 A2 (sf) Placed Under Review for
Possible Upgrade
US$22,000,000 Class B Deferrable Mezzanine Notes Due 2020,
Upgraded to Baa1 (sf); previously on June 22, 2011 Ba1 (sf) Placed
Under Review for Possible Upgrade
US$16,600,000 Class C Deferrable Mezzanine Notes Due 2020,
Upgraded to Ba1 (sf); previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade
US$14,000,000 Class D Deferrable Mezzanine Notes Due 2020,
Upgraded to Ba3 (sf); previously on June 22, 2011 Caa2 (sf) Placed
Under Review for Possible Upgrade
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The action also reflects consideration of an increase in the
transaction's overcollateralization ratios since the rating
action in August 2009. Based on the latest trustee report
dated August 17, 2011, the Class A, Class B, Class C and Class D
overcollateralization ratios are reported at 123.9%, 116.2%,
110.9% and 106.9%, respectively, versus July 2009 levels of
119.6%, 112.1%, 107.1% and 103.2%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $406.96 million,
defaulted par of $2.2 million, a weighted average default
probability of 23.50% (implying a WARF of 2907), a weighted
average recovery rate upon default of 48.07%, and a diversity
score of 65. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Symphony CLO II, Ltd., issued in November 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor,
weighted average spread, weighted average coupon, and diversity
score. However, as part of the base case, Moody's considered
spread and coupon levels higher than the covenant levels due to
the large difference between the reported and covenant levels.
SYMPHONY CLO IV: Moody's Upgrades Rating of Class D Notes to 'Ba1'
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Symphony CLO IV, Ltd.:
US$32,000,000 Class B Senior Notes Due 2021, Upgraded to A1 (sf);
Previously on June 22, 2011 A3 (sf) Placed Under Review for
Possible Upgrade;
US$24,000,000 Class C Deferrable Mezzanine Notes Due 2021,
Upgraded to Baa2 (sf); Previously on June 22, 2011 Ba1 (sf) Placed
Under Review for Possible Upgrade;
US$12,500,000 Class D Deferrable Mezzanine Notes Due 2021,
Upgraded to Ba1 (sf); Previously on June 22, 2011 B1 (sf) Placed
Under Review for Possible Upgrade;
US$13,000,000 Class E Deferrable Junior Notes Due 2021, Upgraded
to Ba3 (sf); Previously on June 22, 2011 Caa2 (sf) Placed Under
Review for Possible Upgrade.
In addition, Moody's confirmed the rating of these notes:
US$300,000,000 Class A Senior Notes Due 2021 Confirmed at Aa1
(sf); Previously on June 22, 2011 Aa1 (sf) Placed Under Review for
Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The actions reflect key
changes to the modeling assumptions, which incorporate (1) a
removal of the temporary 30% default probability macro stress
implemented in February 2009 as well as (2) increased BET
liability stress factors and increased recovery rate assumptions.
The actions also reflect an improvement in the credit quality of
the underlying portfolio since the rating action in August 2009.
The Class A/B, Class C, Class D and Class E overcollateralization
ratios are reported at 123.1%, 114.8%, 110.9% and 107.1%,
respectively, versus July 2009 levels of 118.6%, 110.6%, 106.9%
and 103.2%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $408.0 million,
defaulted par of $2.7 million, a weighted average default
probability of 24.9% (implying a WARF of 3000), a weighted average
recovery rate upon default of 48.7%, and a diversity score of 59.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Symphony CLO IV, Ltd., issued in August 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011. Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior, 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor
and weighted average coupon. However, as part of the base case,
Moody's considered spread and diversity levels higher than the
covenant levels due to the large difference between the reported
and covenant levels.
SYMPHONY CLO V: Moody's Upgrades Rating of Class C Note to 'Ba1'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Symphony CLO V, Ltd.:
US$311,300,000 Class A-1 Senior Secured Floating Rate Notes due
2024, Upgraded to Aa1 (sf); Previously on June 22, 2011 A1 (sf)
Placed Under Review for Possible Upgrade;
US$25,000,000 Class A-2 Senior Secured Floating Rate Notes due
2024, Upgraded to A2 (sf); Previously on June 22, 2011 Baa1 (sf)
Placed Under Review for Possible Upgrade;
US$16,000,000 Class B Senior Secured Deferrable Floating Rate
Notes due 2024, Upgraded to Baa2 (sf); Previously on June 22, 2011
Baa3 (sf) Placed Under Review for Possible Upgrade;
US$14,000,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2024, Upgraded to Ba1 (sf); Previously on June 22, 2011
Ba3 (sf) Placed Under Review for Possible Upgrade;
US$12,240,000 Class D Secured Deferrable Floating Rate Notes due
2024, Upgraded to Ba3 (sf); Previously on June 22, 2011 Caa2 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The actions reflect key
changes to the modeling assumptions, which incorporate (1) a
removal of the temporary 30% default probability macro stress
implemented in February 2009 as well as (2) increased BET
liability stress factors and increased recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $417.9 million,
defaulted par of $2.4 million, a weighted average default
probability of 23.7% (implying a WARF of 3025), a weighted average
recovery rate upon default of 48.7%, and a diversity score of 65.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Symphony CLO V, Ltd., issued in December 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior, 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor,
weighted average coupon, and diversity score. However, as part of
the base case, Moody's considered spread levels higher than the
covenant levels due to the large difference between the reported
and covenant levels.
SYMPHONY CLO VI: Moody's Raises Rating of Cl. D Note to 'Ba2'
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Symphony CLO VI Ltd.:
US$285,000,000 Cl. A-1 Senior Secured Floating Rate Notes due
2019, Upgraded to Aaa (sf); Previously on June 22, 2011 Aa3 (sf)
Placed Under Review for Possible Upgrade;
US$24,800,000 Cl. A-2 Senior Secured Floating Rate Notes due 2019,
Upgraded to Aa3 (sf); Previously on June 22, 2011 A3 (sf) Placed
Under Review for Possible Upgrade;
US$23,100,000 Cl. B Senior Secured Deferrable Floating Rate Notes
due 2019, Upgraded to A3 (sf); Previously on June 22, 2011 Baa3
(sf) Placed Under Review for Possible Upgrade;
US$8,000,000 Cl. C Senior Secured Deferrable Floating Rate Notes
due 2019, Upgraded to Baa3 (sf); Previously on June 22, 2011 Ba3
(sf) Placed Under Review for Possible Upgrade;
US$14,000,000 Cl. D Senior Secured Deferrable Floating Rate Notes
due 2019, Upgraded to Ba2 (sf); Previously on June 22, 2011 Caa1
(sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The actions reflect key
changes to the modeling assumptions, which incorporate (1) a
removal of the temporary 30% default probability macro stress
implemented in February 2009 as well as (2) increased BET
liability stress factors and increased recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $403.4 million,
defaulted par of $2.4 million, a weighted average default
probability of 22.7% (implying a WARF of 3329), a weighted average
recovery rate upon default of 51.9%, and a diversity score of 60.
These default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Symphony CLO VI Ltd., issued in August 2008, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior, 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor
and diversity score. However, as part of the base case, Moody's
considered spread levels higher than the covenant levels due to
the large difference between the reported and covenant levels.
TRALEE CDO: Moody's Upgrades Ratings of Class D Notes to 'Ba2'
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Tralee CDO I Ltd.:
US$273,200,000 Class A-1 Senior Secured Floating Rate Notes Due
April 16, 2022 (current outstanding balance of $260,925,634),
Upgraded to Aaa (sf); previously on June 22, 2011 Aa1 (sf) Placed
Under Review for Possible Upgrade;
U US$17,900,000 Class A-2a Senior Secured Floating Rate Notes Due
April 16, 2022, Upgraded to Aa2 (sf); previously on June 22, 2011
A1 (sf) Placed Under Review for Possible Upgrade;
US$3,500,000 Class A-2b Senior Secured Fixed Rate Notes Due
April 16, 2022, Upgraded to Aa2 (sf); previously on June 22, 2011
A1 (sf) Placed Under Review for Possible Upgrade;
US$18,800,000 Class B Senior Secured Deferrable Floating Rate
Notes Due April 16, 2022, Upgraded to A2 (sf); previously on
June 22, 2011 Baa2 (sf) Placed Under Review for Possible Upgrade;
US$19,000,000 Class C Senior Secured Deferrable Floating Rate
Notes Due April 16, 2022, Upgraded to Baa3 (sf); previously on
June 22, 2011 Ba3 (sf) Placed Under Review for Possible Upgrade;
US$13,400,000 Class D Secured Deferrable Floating Rate Notes Due
April 16, 2022, Upgraded to Ba2 (sf); previously on June 22, 2011
Caa2 (sf) Placed Under Review for Possible Upgrade;
US$5,500,000 Type I Composite Notes Due April 16, 2022 (current
rated balance of $3,436,769), Upgraded to Aa1 (sf); previously on
June 22, 2011 A1 (sf) Placed Under Review for Possible Upgrade;
US$8,500,000 Type II Composite Notes Due April 16, 2022 (current
rated balance of $6,517,048), Upgraded to Aa1 (sf); previously on
June 22, 2011 A1 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $349.9 million,
defaulted par of $8.2 million, a weighted average default
probability of 21.00% (implying a WARF of 2651), a weighted
average recovery rate upon default of 48.92%, and a diversity
score of 57. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Tralee CDO I Ltd., issued in March 2007, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Another methodology used in this rating was "Using the Structured
Note Methodology to Rate CDO Combo-Notes" published in February
2004.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor,
weighted average coupon and diversity score. However, as part of
the base case, Moody's considered a spread level higher than the
covenant level due to the large difference between the reported
and covenant levels.
TRIBECA PARK: Moody's Raises Rating of Class D Notes to Ba2 (sf)
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Tribeca Park CLO Ltd.:
US$25,000,000 Class A-2 Senior Secured Floating Rate Notes due
2020, Upgraded to Aa2 (sf); previously on June 22, 2011 Aa3 (sf)
Placed Under Review for Possible Upgrade;
US$15,000,000 Class B Senior Secured Deferrable Floating Rate
Notes due 2020, Upgraded to A3 (sf); previously on June 22, 2011
Baa2 (sf) Placed Under Review for Possible Upgrade;
US$12,500,000 Class C Senior Secured Deferrable Floating Rate
Notes due 2020, Upgraded to Baa3 (sf); previously on June 22, 2011
Ba1 (sf) Placed Under Review for Possible Upgrade;
US$10,000,000 Class D Secured Deferrable Floating Rate Notes due
2020, Upgraded to Ba2 (sf); previously on June 22, 2011 B1 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $393.1 million,
defaulted par of $0.5 million, a weighted average default
probability of 24.81% (implying a WARF of 3019), a weighted
average recovery rate upon default of 50.13%, and a diversity
score of 60. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Tribeca Park CLO Ltd., issued in May of 2008, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
2) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor,
weighted average spread, weighted average coupon, and diversity
score. However, as part of the base case, Moody's considered
spread levels higher than the covenant levels due to the large
difference between the reported and covenant levels.
VELOCITY CLO: S&P Withdraws 'BB+' Rating on Class D Notes
---------------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on 23
classes of notes from 12 U.S. collateralized debt obligation (CDO)
transactions.
Ten of the 12 transactions are collateralized loan obligations
(CLOs) and two are collateralized bond obligations (CBOs).
The withdrawals follow the complete paydown of the notes on their
most recent payment dates.
505 CLO II Ltd. is a cash flow CLO managed by CIT Asset Management
LLC. The transaction paid the class B and C notes down in full on
the Aug. 10, 2011, payment date, from outstanding balances of
$32.72 million and $55.00 million.
505 CLO III Ltd. is a cash flow CLO managed by CIT Asset
Management LLC. The transaction paid the class A-1 and A-2 notes
down in full on the Aug. 22, 2011, payment date, from outstanding
balances of $10.70 million each.
505 CLO IV Ltd. is a cash flow CLO managed by CIT Asset Management
LLC. The transaction paid the class A-1 and A-2 notes down in full
on the Aug. 22, 2011, payment date, from s outstandings balance of
$11.29 million, each.
ACAS Business Loan Trust 2005-1 is a cash flow CLO managed by
American Capital Ltd. The transaction paid the class A-2A notes
down in full on the July 25, 2011, payment date, from an
outstanding balance of $2.07 million.
"Ballyrock CLO II Ltd. is a cash flow CLO managed by Ballyrock
Investment Advisors LLC. The transaction paid the class A, B, C,
D-1, and D-2 notes down in full following a notice of optional
redemption, which we received on July 29, 2011. The transaction
paid the class A, B, C, D-1, and D-2 notes down in full on the
Aug. 22, 2011 payment date, from outstanding balances of
$85.13 million, $18.00 million, $20.00 million, $17.51 million,
and $8.75 million," S&P related.
CapitalSource Commercial Loan Trust 2007-1 is cash flow CLO
managed by CapitalSource Finance LLC. The transaction paid the
class A notes down in full on the Aug. 22, 2011, payment date,
from an outstanding balance of $0.39 million.
LightPoint CLO 2004-1 Ltd. is a cash flow CLO managed by Neuberger
Berman Inc. The transaction paid the class A-1B notes down in full
on the Aug. 15, 2011, payment date, from an outstanding balance of
$16.92 million.
Navigator CDO 2003 Ltd. is cash flow CLO managed by GE Capital
Debt Advisors LLC. The transaction paid the class A-2 note down in
full on the Aug. 15, 2011, payment date, from an outstanding
balance of $11.68 million.
Nicholas Applegate CBO I Ltd. is a cash flow CBO managed by
Nicholas Applegate Capital Management. The transaction paid
the class B-1 and B-2 notes down in full on the Aug. 24, 2011
payment date, from outstanding balances of $1.28 million and
$0.13 million.
Olympic CLO I Ltd. is cash flow CLO managed by Apidos Capital
Management LLC. The transaction paid the class A-1La note down in
full on the Aug. 15, 2011, payment date, from an outstanding
balance of $7.14 million.
Robeco CDO II Ltd. is a cash flow CBO managed by Deerfield Capital
Management LLC. The transaction paid the class A-2L note down in
full on the Aug. 30, 2011, payment date, from an outstanding
balance of $7.48 million.
"Velocity CLO Ltd. is cash flow CLO managed by Crescent Capital
Group LP. The transaction paid the class A, B, C, and D notes
down in full following a notice of optional redemption, which we
received on July 23, 2011. The transaction paid the class A, B,
C, and D notes down in full on the Aug. 22, 2011 payment date,
from outstanding balances of $90.84 million, $22.00 million,
$14.00 million, and $4.48 million," S&P said.
Ratings Withdrawn
505 CLO II Ltd.
Rating
Class To From
B NR AAA (sf)
C NR AAA (sf)
505 CLO III Ltd.
Rating
Class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
505 CLO IV Ltd.
Rating
Class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
ACAS Business Loan Trust 2005-1
Rating
Class To From
A-2A NR AAA (sf)
Ballyrock CLO II Ltd.
Rating
Class To From
A NR AAA (sf)
B NR AAA (sf)
C NR AA+ (sf)
D-1 NR BBB+ (sf)
D-2 NR BBB+ (sf)
CapitalSource Commercial Loan Trust 2007-1
Rating
Class To From
A NR A+ (sf)
LightPoint CLO 2004-1 Ltd.
Rating
Class To From
A-1B NR AA+ (sf)
Navigator CDO 2003 Ltd.
Rating
Class To From
A-2 NR AAA (sf)
Nicholas Applegate CBO I Ltd.
Rating
Class To From
B-1 NR BBB (sf)
B-2 NR BBB (sf)
Olympic CLO I Ltd.
Rating
Class To From
A-1La NR AAA (sf)
Robeco CDO II Ltd.
Rating
Class To From
A-2L NR AA+ (sf)
Velocity CLO Ltd.
Rating
Class To From
A NR AAA (sf)
B NR AA- (sf)
C NR BBB- (sf)
D NR BB+ (sf)
NR -- Not rated.
VENTURE VI: Moody's Ugrades Class C Notes Rating to 'Ba1'
---------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Venture VI CDO Limited:
US$240,000,000 Class A-1 Senior Secured Floating Rate Notes Due
August 3, 2020, Upgraded to Aaa (sf); previously on June 22, 2011
Aa2 (sf) Placed Under Review for Possible Upgrade;
US$5,600,000 Class A-1-J Senior Secured Floating Rate Notes Due
August 3, 2020, Upgraded to Aa1 (sf); previously on June 22, 2011
A1 (sf) Placed Under Review for Possible Upgrade;
US$17,000,000 Class A-2 Senior Secured Floating Rate Notes Due
August 3, 2020, Upgraded to Aa2 (sf); previously on June 22, 2011
A3 (sf) Placed Under Review for Possible Upgrade;
US$21,000,000 Class B Senior Secured Deferrable Floating Rate
Notes Due August 3, 2020, Upgraded to A3 (sf); previously on
June 22, 2011 Ba1 (sf) Placed Under Review for Possible Upgrade;
US$19,000,000 Class C Senior Secured Deferrable Floating Rate
Notes Due August 3, 2020, Upgraded to Ba1 (sf); previously on
June 22, 2011 B2 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of credit improvement of
the underlying portfolio and an increase in the transaction's
overcollateralization ratios since the rating action in September
2009. Based on the July 2011 trustee report, the weighted average
rating factor is currently 2624 compared to 2778 in July 2009. In
addition, the Class A, Class B and Class C overcollateralization
ratios are reported at 121.33%, 113.70%, and 107.58%,
respectively, versus July 2009 levels of 117.37%, 109.99%, and
104.07%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $377.6 million,
defaulted par of $12.2 million, a weighted average default
probability of 20.88% (implying a WARF of 2708), a weighted
average recovery rate upon default of 48.13%, and a diversity
score of 85. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Venture VI CDO Limited, issued in August 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor,
weighted average spread, weighted average coupon, and diversity
score. However, as part of the base case, Moody's considered
spread and coupon levels higher than the covenant levels due to
the large difference between the reported and covenant levels.
VENTURE VIII: Moody's Upgrades Rating of Class D Notes to 'Ba2'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Venture VIII CDO, Limited:
US$4,500,000 Class A-1B Senior Notes Due July 22, 2021, Upgraded
to Aa1 (sf); previously on June 22, 2011 Aa2 (sf) Placed Under
Review for Possible Upgrade;
US$47,675,000 Class A-2B Senior Notes Due July 22, 2021, Upgraded
to Aa1 (sf); previously on June 22, 2011 Aa2 (sf) Placed Under
Review for Possible Upgrade;
US$46,500,000 Class B Senior Notes Due July 22, 2021, Upgraded to
A1 (sf); previously on June 22, 2011 A2 (sf) Placed Under Review
for Possible Upgrade;
US$50,000,000 Class C Deferrable Mezzanine Notes Due July 22,
2021, Upgraded to Baa2 (sf); previously on June 22, 2011 Baa3 (sf)
Placed Under Review for Possible Upgrade;
US$32,500,000 Class D Deferrable Mezzanine Notes Due July 22,
2021, Upgraded to Ba2 (sf); previously on June 22, 2011 B1 (sf)
Placed Under Review for Possible Upgrade;
US$24,000,000 Class E Deferrable Junior Notes Due July 22, 2021,
Upgraded to B1 (sf); previously on June 22, 2011 Caa3 (sf) Placed
Under Review for Possible Upgrade.
In addition, Moody's confirmed the rating of these notes:
US$50,000,000 Class A-3 Senior Notes Due July 22, 2021, Confirmed
at Aa1 (sf); previously on June 22, 2011 Aa1 (sf) Placed Under
Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of an increase in the
transaction's overcollateralization ratios since the rating action
in September 2009. Based on the latest trustee report dated August
10, 2011, the Class A/B, Class C and Class D overcollateralization
ratios are reported at 120.18%, 112.00% and 107.25%, respectively,
versus August 2009 levels of 116.96%, 108.99%, and 104.37%,
respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $817.9 million,
defaulted par of $16.4 million, a weighted average default
probability of 24.65% (implying a WARF of 2984), a weighted
average recovery rate upon default of 48.20%, and a diversity
score of 91. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Venture VIII CDO, Limited, issued in June 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the reported value
for weighted average coupon, and the worse of reported and
covenanted values for weighted average rating factor, weighted
average spread, and diversity score. However, as part of the base
case, Moody's considered spread and diversity levels higher than
the covenant levels due to the large difference between the
reported and covenant levels.
VENTURE IX: Moody's Upgrades Rating of Class D Notes to 'Ba2'
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Venture IX CDO, Limited:
US$370,000,000 Class A Senior Notes Due October 10, 2021, Upgraded
to Aa1 (sf); previously on June 22, 2011 Aa2 (sf) Placed Under
Review for Possible Upgrade;
US$35,000,000 Class B Senior Notes Due October 10, 2021, Upgraded
to A2 (sf); previously on June 22, 2011 A3 (sf) Placed Under
Review for Possible Upgrade;
US$25,000,000 Class C Deferrable Mezzanine Notes Due October 10,
2021, Upgraded to Baa3 (sf); previously on June 22, 2011 Ba1 (sf)
Placed Under Review for Possible Upgrade;
US$16,000,000 Class D Deferrable Mezzanine Notes Due October 10,
2021, Upgraded to Ba2 (sf); previously on June 22, 2011 B1 (sf)
Placed Under Review for Possible Upgrade;
US$14,000,000 Class E Deferrable Junior Notes Due October 10,
2021, Upgraded to B1 (sf); previously on June 22, 2011 Caa3 (sf)
Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of applying Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
The actions also reflect consideration of an increase in the
transaction's overcollateralization ratios since the rating action
in September 2009. The Class A/B, Class C and Class D
overcollateralization ratios are reported at 119.84%, 112.88%, and
108.83%, respectively, versus July 2009 levels of 117.54%,
110.70%, and 106.73%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $480.4 million,
defaulted par of $12.9 million, a weighted average default
probability of 25.46% (implying a WARF of 3079), a weighted
average recovery rate upon default of 48.42%, and a diversity
score of 90. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Venture IX CDO, Limited, issued in September 2007, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2013 and
2015 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new issue
loans or other loans with longer maturities and/or participate in
amend-to-extend offerings. Moody's tested for a possible extension
of the actual weighted average life in its analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the covenant
levels. Moody's analyzed the impact of assuming the worse of
reported and covenanted values for weighted average rating factor,
weighted average spread, weighted average coupon, and diversity
score. However, as part of the base case, Moody's considered
spread and coupon levels higher than the covenant levels due to
the large difference between the reported and covenant levels.
WACHOVIA BANK: Moody's Lowers Rating of Class B Notes to 'Ba3'
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Moody's Investors Service (Moody's) downgraded the ratings of six
classes and affirmed 13 classes of Wachovia Bank Commercial
Mortgage Trust, Commercial Mortgage Pass-Through Certificates,
Series 2006-C27 as follows:
Cl. A-2, Affirmed at Aaa (sf); previously on Aug 14, 2006 Assigned
Aaa (sf)
Cl. A-PB, Affirmed at Aaa (sf); previously on Aug 14, 2006
Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on Aug 14, 2006 Assigned
Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on Aug 14, 2006
Assigned Aaa (sf)
Cl. A-J, Downgraded to Baa3 (sf); previously on Dec 2, 2010
Downgraded to Baa2 (sf)
Cl. B, Downgraded to Ba3 (sf); previously on Dec 2, 2010
Downgraded to Ba1 (sf)
Cl. C, Downgraded to B2 (sf); previously on Dec 2, 2010 Downgraded
to Ba3 (sf)
Cl. D, Downgraded to B3 (sf); previously on Dec 2, 2010 Downgraded
to B1 (sf)
Cl. E, Downgraded to Caa1 (sf); previously on Dec 2, 2010
Downgraded to B3 (sf)
Cl. F, Downgraded to Caa2 (sf); previously on Dec 2, 2010
Downgraded to Caa1 (sf)
Cl. A-M, Affirmed at Aa2 (sf); previously on Dec 2, 2010
Downgraded to Aa2 (sf)
Cl. G, Affirmed at Caa3 (sf); previously on Dec 2, 2010 Downgraded
to Caa3 (sf)
Cl. H, Affirmed at Ca (sf); previously on Dec 2, 2010 Downgraded
to Ca (sf)
Cl. J, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to
C (sf)
Cl. K, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to
C (sf)
Cl. L, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to
C (sf)
Cl. M, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to
C (sf)
Cl. X-P, Affirmed at Aaa (sf); previously on Aug 14, 2006 Assigned
Aaa (sf)
Cl. X-C, Affirmed at Aaa (sf); previously on Aug 14, 2006 Assigned
Aaa (sf)
RATINGS RATIONALE
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. Realized losses have increased by
$16 million since last review. The deal's exposure to specially
serviced and watchlisted loans has increased to 45% from 27% at
last review.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
8.4% of the current pooled balance as compared to 7.6% at last
review. Moody's stressed scenario loss is 20.3% of the current
pooled balance. Depending on the timing of loan payoffs and the
severity and timing of losses from specially serviced loans, the
credit enhancement level for investment grade classes could
decline below the current levels. If future performance materially
declines, the expected level of credit enhancement and the
priority in the cash flow waterfall may be insufficient for the
current ratings of these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the current sluggish
macroeconomic environment and performance in the commercial real
estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation
rebounds. The hotel and multifamily sectors are continuing to show
signs of recovery through the first half of 2011, while recovery
in the non-core office and retail sectors are tied to the pace of
the recovery of the broader economy. Core office markets are
showing signs of recovery through lending and leasing activity.
The availability of debt capital continues to improve with terms
returning toward market norms. Moody's central global
macroeconomic scenario reflects an overall sluggish recovery as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The primary methodology used in this rating was "Moody's Approach
to Rating U.S. CMBS Conduit Transactions," published in September
2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit estimates is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit estimate of the loan which corresponds to a range of credit
enhancement levels. Actual fusion credit enhancement levels are
selected based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative pooling,
or adding credit enhancement at the credit estimate level, is
incorporated for loans with similar credit estimates in the same
transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The pool has a Herf of 41, which is the
same as at last review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated December 2, 2010.
DEAL PERFORMANCE
As of the August 17, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 19% to $2.5 billion
from $3.1 billion at securitization. The Certificates are
collateralized by 139 mortgage loans ranging in size from less
than 1% to 6% of the pool, with the top ten loans representing 42%
of the pool. The pool does not contain any loans with credit
estimates or any defeased loans.
Thirty-three loans, representing 28% of the pool, are on the
master servicer's watchlist. Twenty-one percent of the pool was on
the watchlist at last review. 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.
Nine loans have been liquidated from the pool, resulting in an
aggregate realized loss of $79 million (43% average loss
severity). Twenty-three loans, representing 18% of the pool, are
currently in special servicing. Only 6% of the pool was in special
servicing at last review. The largest specially serviced loan is
the BlueLinx Holdings Pool Loan ($124 million -- 4.9%). The loan
represents a pari passu interest in a $247 million first mortgage.
The loan is secured by 57 industrial and one office property
located in 36 states. Although the loan is secured by a
geographically diverse portfolio of assets, all of the properties
are master leased to one company, BlueLinx. The North American
residential and commercial building products distributor has been
adversely affected by the decline in new residential and
commercial construction. The loan is current, but was transferred
to special servicing in June 2011 when the borrower requested a
loan modification. The borrower was permitted to use funds from a
Lease-to-Cost reserve account to paydown the loan's principal
without incurring a prepayment penalty. Consequently, the first
mortgage was paid down by $38.35 million and this deal's pari
passu piece was paid down by $19.17 million.
The remaining specially serviced loans are secured by a mix of
commercial and multifamily property types. The master servicer has
recognized an aggregate $66 million appraisal reduction for 15 of
the 22 specially serviced loans. Moody's has estimated an
aggregate $97 million loss (26% expected loss based on a 75%
probability of default) for the specially serviced loans.
Moody's has assumed a high default probability for 18 poorly
performing loans representing 16% of the pool and has estimated a
$71 million loss (18% expected loss based on a 50% probability
default) from these troubled loans.
Based on the most recent remittance statement, Classes G through
Q have experienced cumulative interest shortfalls totaling
$3.9 million. Moody's anticipates that the pool will continue to
experience interest shortfalls because of the high exposure to
specially serviced and troubled loans. Interest shortfalls are
caused by special servicing fees, including workout and
liquidation fees, appraisal subordinate entitlement reductions
(ASERs) and extraordinary trust expenses.
Moody's was provided full year 2010 operating results for 98% of
the conduit loans. The conduit portion of the pool excludes
specially serviced and troubled loans. Moody's weighted average
conduit LTV is 109% compared to 107% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 13%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.0%.
Moody's actual and stressed conduit DSCRs are 1.22X and .92X,
respectively, compared to 1.25X and .93X at last review. Moody's
actual DSCR is based on Moody's net cash flow (NCF) and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's NCF
and a 9.25% stressed rate applied to the loan balance.
The top three performing conduit loans represent 17% of the pool.
The largest loan is the One Illinois Center Loan ($148 million --
5.9%), which is secured by a one million SF office building
located in the East Loop of downtown Chicago, Illinois. The
property wa 97% leased as of June 21, 2011 compared to 95% at last
review. The property's largest tenant, Health Care Service Corp.
(23% of the property's net rentable area (NRA)) , recently paid an
early termination fee and exercised its early termination option.
Health Care Service Corp is the parent company of Blue Cross Blue
Shield and will be relocating to its recently expanded
headquarters at 300 E. Randolph also in Chicago. Moody's stressed
the property's cash flow to account for the upcoming vacancy.
Moody's LTV and stressed DSCR are 95% and 1.0X, respectively,
compared to 99% and .95X at last review.
The second largest loan is the Simon Property Group Premium
Outlets Pool II Loan ($144 million -- 5.7%), which represents a
50% pari passu interest in a first mortgage loan. The loan is
secured by three factory outlet centers totaling 1.5 million SF.
The centers are located in Williamsburg, Virginia, Hagerstown,
Maryland and Birch Run, Michigan. The portfolio is 93% leased,
which is the same as at last review. Simon Property Group acquired
the three subject properties as part of its August 2010 aquisition
of 21 Prime Outlet Malls. Moody's LTV and stressed DSCR are 87%
and 1.11X, respectively, compared to 99% and 1.04X at last review.
The third largest loan is the RLJ Hotel Pool ($144 million --
5.7%), which represents a 29% pari passu interest in a first
mortgage loan. The loan is secured by 43 full, limited and
extended stay hotels that are located in eight states. The largest
geographical concentrations are in Texas and Indiana, which each
have 11 of the collateral properties. While still underperforming
expectations at securitization, the portfolio has improved since
last review. 2010 revenue per available room (RevPAR) increased by
5% to $66 from $63. Most of the hotels in the portfolio are
competitive in their respective markets. A review of December 2010
Smith Travel Research (STR) Reports indicates that 35 of the 43
hotels have a RevPAR penetration rate in excess of 100. Moody's
LTV and stressed DSCR are 142% and 0.82X as compared to 179% and
0.68X.
WACHOVIA BANK: S&P Lowers Ratings on 6 Classes of Certs. to 'D'
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Standard & Poor's Ratings Services lowered its ratings on 16
classes of commercial mortgage pass-through certificates from
Wachovia Bank Commercial Mortgage Trust's series 2007-C32, a
U.S. commercial mortgage-backed securities (CMBS) transaction.
"Concurrently, we affirmed our ratings on three other classes from
this transaction," S&P stated.
"Our rating actions follow our analysis of the transaction
primarily using our U.S. conduit and fusion CMBS criteria. Our
downgrades reflect credit support erosion that we anticipate will
occur following the resolution of 16 (445.6 million, 12.1%) of the
18 assets ($799.0 million, 21.6%) with the special servicer and
one loan ($89.3 million, 2.4%) that we have determined to be
credit impaired. We also considered the monthly interest
shortfalls that are affecting the trust. We lowered our ratings on
six classes to 'D (sf)' because we expect interest shortfalls to
continue and the accumulated interest shortfalls to remain
outstanding for the foreseeable future," S&P related.
"The affirmed ratings on the principal and interest certificates
reflect subordination and liquidity support levels that are
consistent with our outstanding ratings. We affirmed our 'AAA
(sf)' rating on the class IO interest-only (IO) certificate based
on our current criteria," S&P said.
"Using servicer-provided financial information, we calculated an
adjusted debt service coverage (DSC) of 1.20x and a loan-to-value
(LTV) ratio of 150.0%. We further stressed the loans' cash flows
under our 'AAA' scenario to yield a weighted average DSC of 0.65x
and an LTV ratio of 220.9%. The implied defaults and loss severity
under the 'AAA' scenario were 97.4% and 55.0%. The DSC and LTV
calculations noted above exclude the 16 ($445.6 million, 12.1%) of
the 18 assets ($799.0 million, 21.6%) with the special servicer
and one loan ($89.3 million, 2.4%) that we have determined to be
credit impaired. We separately estimated losses for these
specially serviced loans and included them in our 'AAA' scenario
implied default and loss severity figures," S&P stated.
As of the Aug. 17, 2011, trustee remittance report, the trust
experienced monthly interest shortfalls totaling $2.2 million,
primarily related to appraisal subordinate entitlement reduction
(ASER) amounts of $885,101, special servicing fees of $172,757,
and interest shortfalls due to rate modifications of $740,203. The
interest shortfalls affected all classes subordinate to and
including class C. "Classes G through M experienced cumulative
interest shortfalls for at least two months, and we expect these
interest shortfalls will continue in the near term. Consequently,
we lowered our ratings on these classes to 'D (sf)'," S&P stated.
Credit Considerations
As of the Aug. 17, 2011, trustee remittance report, 18 assets
($799.0 million, 21.6%) in the pool were with the special
servicers, CWCapital Asset Management LLC (CWCapital) and C-III
Asset Management LLC (C-III). The reported payment status of the
specially serviced assets is: six ($89.8 million, 2.4%) are real-
estate owned (REO), nine are in foreclosure ($336.1 million,
9.1%), two are 30-days delinquent ($65.7 million, 1.8%), and one
is current ($307.3 million, 8.3%). "Appraisal reduction amounts
(ARAs) totaling $258.8 million are in effect against 17 assets.
Details of the two top 10 loans with the special servicer and one
additional loan ($89.3 million, 2.4%) that we consider to be
credit impaired are disclosed," S&P said.
The Beacon D.C. & Seattle Portfolio loan is the largest loan in
the pool and the largest specially serviced loan. As of the August
2011 remittance report, the loan has a trust balance of $307.3
million (8.3%) and a whole-loan balance of $2.0 billion. The loan
was originally secured by 16 cross-collateralized and cross-
defaulted office properties, the pledge of a mortgage on one
office property (and the related cash flows), and a covenant to
deposit cash flows from three office properties that totaled 9.8
million sq. ft. of space. According to the special servicer, C-
III, the loan payment status is current under modified terms
including an extension of the loan's maturity date, modified
pay/accrual rate feature, and potential principal repayment from
the release of properties (see '36 Ratings On Five CMBS
Transactions Put On Watch Neg Due To Beacon Loan Modification; 4
Ratings Cut To 'D (sf)',' published Jan. 5, 2011, and '23 Ratings
Lowered On Five U.S. CMBS Transactions With Beacon Loan Exposure
Due To Interest Shortfalls,' published April 4, 2011).
As of year-end 2010 and the six months ended June 30, 2011, the
reported DSC was 0.91x and 0.98x, and occupancy was 87.3% and
84.4%.
The Westin Casuarina Resort & Spa - Cayman Islands
($135.8 million, 3.7%) is the fifth-largest loan in the pool
and the second-largest loan with the special servicer. The
loan transferred to the special servicer in February 2010 and
is currently in foreclosure. The loan is secured by the leasehold
interest in a 343-room full-service hotel located on the western
side of West Bay Road in Georgetown, Grand Cayman. The reported
DSC was 0.64x for the 12 months ended March 30, 2010. Standard &
Poor's expects a significant loss upon the resolution of this
asset.
The 16 remaining specially serviced assets have individual
balances representing less then 1.25% of the pool trust balance.
"We estimated losses on 15 of these 16 remaining loans, arriving
at a weighted-average loss severity of 58.8%. According to the
special servicer, the remaining loan is expected to be returned to
the master servicer," S&P stated.
The Centerside II loan is the 10th-largest loan in the pool and is
currently on the master servicer's watchlist. The loan is current
and has a trust balance of $89.3 million (2.4%) and a whole-loan
balance of $119.3 million. "The loan is on the watchlist for low
occupancy and slow leasing activity was noted by the master
servicer. There is no recent reported financial data available.
Given the occupancy issues, we consider this loan to be at
increased risk of default and loss and determined the loan to be
credit-impaired," S&P stated.
Transaction Summary
As of the Aug. 17, 2011, trustee remittance report, the collateral
pool balance was $3.7 billion, which is 96.7% of the balance at
issuance. The pool includes 136 loans and six REO assets, compared
to 142 loans at issuance. The master servicer, Wells Fargo Bank
N.A. (Wells Fargo), provided financial information for 91.3% of
the loans in the pool, 83.3% of which was partial- or full-year
2010 data, and the remainder was partial- or full-year 2009 data.
"We calculated a weighted average DSC of 1.19x for the loans in
the pool based on the servicer-reported figures. Our adjusted DSC
and LTV ratios were 1.20x and 150.0%. Our adjusted DSC and LTV
figures exclude 16 ($445.6 million, 12.1%) of the specially
serviced assets and the Centerside II loan ($89.3 million, 2.4%)
that we determined to be credit impaired. Including nine of the 16
specially serviced assets that are reporting financials, our
adjusted DSC would be 1.17x. We separately estimated losses for
the 16 specially serviced loans and included them in our 'AAA'
scenario implied default and loss severity figures. The
transaction has experienced $4.9 million in principal losses on
two assets to date. Forty loans ($979.4 million, 26.5%) in the
pool are on the master servicer's watchlist. Thirty loans ($1.03
billion, 27.9%) have a reported DSC of less than 1.00x, and 13
loans ($244.9 million, 6.6%) have a reported DSC between 1.00x and
1.10x," S&P related.
Summary of Top 10 Loans
The top 10 loans have an aggregate outstanding balance of $1.64
billion (44.3%). "Using servicer-reported numbers, we calculated a
weighted average DSC of 1.13x for the top 10 loans. Our adjusted
DSC and LTV ratios for eight of the top 10 loans, excluding one
specially serviced loan and the credit impaired loan, were 1.11x
and 175.5%. Two of the top 10 loans ($443.2 million, 12.0%) are
with the special servicer, and three ($285.6 million, 7.7%) are on
the master servicer's watchlist. The two specially serviced and
one of the watchlist top 10 loans are discussed while details on
the remaining two loans are noted," S&P stated.
The Ashford Hospitality Pool 4 loan ($103.9 million, 2.8%) is the
largest loan on the watchlist and the seventh-largest loan in the
pool. The loan is secured by a five-asset hotel pool containing a
total of 1,396 rooms located in Florida, Georgia, and New Jersey.
The loan appears on the watchlist due to a low reported DSC. As of
year-end 2010, the reported pool DSC was 1.10x, down from 1.36x at
issuance.
The Rockvale Square loan ($92.4 million, 2.5%) is the second-
largest loan on the watchlist and ninth-largest loan in the pool.
The loan is secured by a 539,691-sq.-ft. regional outlet center
consisting of 17 single-story buildings completed between 1984 and
1991 in Lancaster, Pa. The loan appears on the watchlist due to a
low reported DSC. As of year-end 2010, the reported DSC was
1.05x, down from 1.11x as of year-end 2009.
"Standard & Poor's stressed the collateral in the pool according
to its current criteria. The resultant credit enhancement levels
are consistent with our lowered and affirmed ratings," S&P stated.
Ratings Lowered
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2007-C32
Rating
Class To From Credit enhancement (%)
A-3 BBB- (sf) BBB+ (sf) 30.89
A-4FL BBB- (sf) BBB+ (sf) 30.89
A-1A BBB- (sf) BBB+ (sf) 30.89
A-MFL BB- (sf) BB+ (Sf) 20.55
A-J B (sf) BB- (sf) 13.70
B CCC+ (sf) B+ (sf) 12.53
C CCC- (sf) B+ (sf) 11.24
D CCC- (sf) B (sf) 10.47
E CCC- (sf) B (sf) 9.69
F CCC- (sf) CCC+ (sf) 8.66
G D (sf) CCC- (sf) 7.49
H D (sf) CCC- (sf) 6.20
J D (sf) CCC- (sf) 4.78
K D (sf) CCC- (sf) 3.87
L D (sf) CCC- (sf) 3.36
M D (sf) CCC- (sf) 3.10
Ratings Affirmed
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2007-C32
Class Rating Credit enhancement (%)
A-2 AAA (sf) 30.89
A-PB AAA (sf) 30.89
IO AAA (sf) N/A
N/A -- Not applicable.
WACHOVIA BANK: S&P Withdraws 'CCC-' Ratings on 2 Classes of Certs.
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Standard & Poor's Ratings Services withdrew its ratings on 54
classes from 39 commercial mortgage-backed securities (CMBS) and
commercial real estate collateralized debt obligation (CRE CDO)
transactions.
"We withdrew our ratings on 45 classes from 33 CMBS and CRE CDO
transactions following the repayment of each class' principal
balance, as noted in each transaction's trustee remittance report.
We withdrew our ratings on eight interest-only (IO) classes from
six additional transactions following the reduction of the
classes' notional balances as noted in each transaction's
trustee remittance reports," S&P related.
"We also withdrew our rating on one additional IO class
following the repayment of all principal and interest paying
classes rated 'AA- (sf)' or higher from the CMBS transaction,
in accordance with our criteria for rating IO securities. For
further details, see 'Global Methodology For Rating Interest-
Only Securities,' on RatingsDirect on the Global Credit Portal,
at www.globalcreditportal.com," S&P stated.
Ratings Withdrawn Following Repayment or Reduction of Notional
Balance
Banc of America Commercial Mortgage Inc.
Commercial mortgage pass-through certificates series 2001-PB1
Rating
Class To From
D NR AAA (sf)
Banc of America Large Loan Inc.
Commercial mortgage pass-through certificates series 2006-BIX1
Rating
Class To From
A-2 NR AAA (sf)
B NR AAA (sf)
J-CA NR BB+ (sf)
K-CA NR BB+ (sf)
L-CA NR BB (sf)
Bank of America N.A.-First Union National Bank Commercial Mortgage
Trust
Commercial mortgage pass-through certificates series 2001-3
Rating
Class To From
A-2 NR AAA (sf)
A-2F NR AAA (sf)
Bear Stearns Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates series 2001-TOP4
Rating
Class To From
A-3 NR AAA (sf)
B NR AAA (sf)
Citigroup Commercial Mortgage Trust, Series 2006-FL2
Commercial mortgage pass-through certificates series 2006-FL2
Rating
Class To From
CAC-1 NR BB+ (sf)
CAC-2 NR BB+ (sf)
CAC-3 NR BB (sf)
Cobalt CMBS Commercial Mortgage Trust 2007-C3
Commercial mortgage pass-through certificates series 2007-C3
Rating
Class To From
A-1 NR AAA (sf)
COMM 2000-C1 Mortgage Trust
Commercial mortgage pass-through certificates series 2000-C1
Rating
Class To From
E NR A (sf)
COMM 2006-FL12
Commercial mortgage pass-through certificates series 2006-FL12
Rating
Class To From
CA2 NR BB+ (sf)
Credit Suisse Commercial Mortgage Trust, Series 2007-C5
Commercial mortgage pass-through certificates series 2007-C5
Rating
Class To From
A-1 NR AAA (sf)
Credit Suisse First Boston Mortgage Securities Corp.
Commercial mortgage pass-through certificates series 2001-CKN5
Rating
Class To From
A-4 NR AAA (sf)
Credit Suisse First Boston Mortgage Securities Corp.
Commercial mortgage pass-through certificates series 2001-CP4
Rating
Class To From
B NR AAA (sf)
Credit Suisse First Boston Mortgage Securities Corp.
Commercial mortgage pass-through certificates series 2005-C5
Rating
Class To From
A-2 NR AAA (sf)
CT CDO III Ltd.
Collateralized debt obligations
Rating
Class To From
A-1 NR A (sf)
First Union National Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2001-C2
Rating
Class To From
L NR BBB- (sf)
First Union National Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2001-C3
Rating
Class To From
G NR AA (sf)
H NR A (sf)
I0-II NR AAA (sf)
FMC Real Estate CDO 2005-1 Ltd.
collateralized debt obligations series 2005-1
Rating
Class To From
A-1 NR A+ (sf)
GE Commercial Mortgage Corp.
Commercial mortgage pass-through certificates series 2003-C1
Rating
Class To From
A-3 NR AAA (sf)
GMAC Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates series 2004-C2
Rating
Class To From
X-2 NR AAA (sf)
Greenwich Capital Commercial Funding Corp.
Commercial mortgage pass-through certificates series 2004-GG1
Rating
Class To From
A-5 NR AAA (sf)
GS Mortgage Securities Corp. II
Commercial mortgage pass-through certificates series 2004-GG2
Rating
Class To From
A-3 NR AAA (sf)
X-P NR AAA (sf)
JPMorgan Chase Commercial Mortgage Securities Corp.
Commercial mortgage pass-through certificates series 2004CIBC10
Rating
Class To From
A-3 NR AAA (sf)
JPMorgan Chase Commercial Mortgage Securities Corp.
Commercial mortgage pass-through certificates series 2004-LN2
Rating
Class To From
X-2 NR AAA (sf)
JPMorgan Chase Commercial Mortgage Securities Trust 2006-CIBC16
Commercial mortgage pass-through certificates series 2006-CIBC16
Rating
Class To From
A-2 NR AAA (sf)
JPMorgan Chase Commercial Mortgage Securities Trust 2006-LDP6
Commercial mortgage pass-through certificates series 2006-LDP6
Rating
Class To From
A-2 NR AAA (sf)
JPMorgan Chase Commercial Mortgage Securities Trust 2007-LDP12
Commercial mortgage pass-through certificates series 2007-LDP12
Rating
Class To From
A-1 NR AAA (sf)
LB-UBS Commercial Mortgage Trust 2001-C7
Commercial mortgage pass-through certificates series 2001-C7
Rating
Class To From
A-5 NR AAA (sf)
LB-UBS Commercial Mortgage Trust 2004-C6
Commercial mortgage pass-through certificates series 2004-C6
Rating
Class To From
X-CP NR AAA (sf)
LB-UBS Commercial Mortgage Trust 2004-C7
Commercial mortgage pass-through certificates series 2004-C7
Rating
Class To From
A-3 NR AAA (sf)
LB-UBS Commercial Mortgage Trust 2006-C7
Commercial mortgage pass-through certificates series 2006-C7
Rating
Class To From
A-1 NR AAA (sf)
Merrill Lynch Financial Assets Inc.
Commercial mortgage pass-through certificates series 2000CAN4
Rating
Class To From
F NR BB+ (sf)
G NR BB (sf)
H NR B (sf)
Merrill Lynch Floating Trust
Commercial mortgage pass-through certificates series 2006-1
Rating
Class To From
A-1 NR AAA (sf)
Morgan Stanley Capital I Trust 2003-TOP11
Commercial mortgage pass-through certificates series 2003-TOP11
Rating
Class To From
X-2 NR AAA (sf)
Morgan Stanley Capital I Trust 2004-IQ8
Commercial mortgage pass-through certificates series 2004-IQ8
Rating
Class To From
X-2 NR AAA (sf)
Morgan Stanley Capital I Trust 2006-IQ12
Commercial mortgage pass-through certificates series 2006-IQ12
Rating
Class To From
A-2 NR AAA (sf)
PNC Mortgage Acceptance Corp.
Commercial mortgage pass-through certificates series 2000-C2
Rating
Class To From
E NR AAA (sf)
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2004-C14
Rating
Class To From
X-P NR AAA (sf)
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2006-WHALE 7
Rating
Class To From
WB NR CCC- (sf)
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2007-C34
Rating
Class To From
A-1 NR AAA (sf)
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2007-WHALE8
Rating
Class To From
HH-1 NR CCC- (sf)
HH-2 NR CCC- (sf)
Ratings Withdrawn Following Application of Criteria for IO
Securities
First Union National Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2001-C3
Rating
Class To From
IO-I NR AAA (sf)
* S&P Lowers Ratings on 11 Classes of Certificates to 'D'
---------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 23
classes of commercial mortgage pass-through certificates from four
U.S. commercial mortgage-backed securities (CMBS) transactions due
to interest shortfalls.
"The downgrades reflect current and potential interest shortfalls.
We lowered our ratings on 11 of these classes to 'D (sf)' because
we expect the accumulated interest shortfalls to remain
outstanding for the foreseeable future. The 11 classes that we
downgraded to 'D (sf)' had accumulated interest shortfalls
outstanding between one and six months," S&P said. The recurring
interest shortfalls for the certificates are primarily due to one
or more of these factors:
Appraisal subordinate entitlement reduction (ASER) amounts in
effect for specially serviced assets;
The lack of servicer advancing for assets where the servicer
has made nonrecoverable advance declarations;
Special servicing fees; and
Interest rate reductions or deferrals resulting from loan
modifications.
Standard & Poor's analysis primarily considered the ASER amounts
based on appraisal reduction amounts (ARAs) calculated using
recent Member of the Appraisal Institute (MAI) appraisals. "We
also considered servicer nonrecoverable advance declarations,
special servicing fees, and interest rate reductions and deferrals
resulting from loan modifications that are likely, in our view, to
cause recurring interest shortfalls," S&P said.
The servicer implements ARAs and resulting ASER amounts in
accordance with each transaction's terms. Typically, these terms
call for the automatic implementation of an ARA equal to 25% of
the stated principal balance of a loan when it is 60 days past due
and an appraisal, or other valuation, is not available within a
specified timeframe. "We primarily considered ASER amounts based
on ARAs calculated from MAI appraisals when deciding which classes
from the affected transactions to downgrade to 'D (sf)'. This is
because ARAs based on a principal balance haircut are highly
subject to change, or even reversal, once the special servicer
obtains the MAI appraisals," S&P related.
Servicer nonrecoverable advance declarations can prompt shortfalls
due to a lack of debt service advancing, the recovery of
previously made advances deemed nonrecoverable, or the failure to
advance trust expenses when nonrecoverable declarations have been
determined. Trust expenses may include, but are not limited to,
property operating expenses, property taxes, insurance payments,
and legal expenses.
"We detail the 23 downgraded classes from the Four U.S. CMBS
transactions," S&P said.
LB-UBS Commercial Mortgage Trust 2003-C7
"We lowered our ratings on the class G, H, J, K, L, M, N, P,
Q, and S certificates from LB-UBS Commercial Mortgage Trust 2003-
C7. We lowered our rating on the class Q and S certificates to
'D (sf)' to reflect accumulated interest shortfalls outstanding
for two months due primarily to ASER amounts related to three
($48.2 million, 6.1%) of the four ($138.2 million, 17.5%) loans
that are currently with the special servicer, Torchlight Loan
Services LLC, as well as special servicing and workout fees. We
downgraded the class G, H, and J certificates due to reduced
liquidity support available to these classes. We lowered the class
K, L, M, N, and P certificates due to the potential for these
classes to experience interest shortfalls in the future relating
to the specially serviced assets. As of the Aug. 17, 2011, trustee
remittance report, ARAs totaling $46.0 million were in effect for
four loans, and the total reported monthly ASER amount on these
assets was $97,747. The reported monthly interest shortfalls
totaled $122,468 and have affected all of the classes subordinate
to and including class Q," S&P stated.
LB-UBS Commercial Mortgage Trust 2006-C7
"We lowered our ratings on the class C, D, E, F, and G
certificates from LB-UBS Commercial Mortgage Trust 2006-C7. We
lowered our ratings on the class E, F, and G certificates to 'D
(sf)' to reflect accumulated interest shortfalls outstanding for
one month that we believe will remain outstanding for the
foreseeable future. The trust experienced total interest
shortfalls of $2.5 million, primarily due to $1.9 million
liquidation fees on the Extendicare Portfolio ($145.7 million,
5.1%) related to the release of 14 properties in the loan,
$397,488 ASER amounts related to 11 ($136.5 million, 4.8%) of the
18 ($357.7 million, 12.6%) assets that are currently with the
special servicer, CWCapital Asset Management LLC, as well as
$149,111 special servicing fees," S&P stated.
An ASER recovery of $96,108 offset the total interest shortfalls
during this period. "We downgraded the class C and D certificates
due to reduced liquidity support available to these classes
following continued interest shortfalls," S&P said.
As of the Aug. 17, 2011 trustee remittance report, the master
servicer, Wells Fargo Bank N.A., made a nonrecoverability
determination on one asset that had reported ARAs totaling
$5.3 million. ARAs totaling $112.7 million were in effect for 15
assets, and the total reported monthly ASER amount of these
assets was $397,488. The reported monthly interest shortfalls
totaling $2.5 million affected all of the classes subordinate to
and including class A-J.
Wachovia Bank Commercial Mortgage Trust 2006-C24
"We lowered our ratings on the class F, G, H, J, and K
certificates from Wachovia Bank Commercial Mortgage Trust 2006-
C24. We lowered our ratings on the class H, J, and K certificates
to 'D (sf)' because these classes have had accumulated interest
shortfalls outstanding for two months, primarily due to ASER
amounts related to the 13 loans ($164.4 million, 10.7%) that are
currently with the special servicer, LNR Partners Inc., as well as
special servicing and workout fees, and a nonrecoverable advance
amount related to one asset ($5.1 million, 1.0%). We lowered our
ratings on the class F and G certificates due to reduced liquidity
support available to these classes following continued interest
shortfalls. As of the Aug. 17, 2011, trustee remittance report,
the master servicer, Wells Fargo Bank N.A., made a
nonrecoverability determination on one asset that had reported
ARAs totaling $14.4 million. ARAs totaling $92.5 million were in
effect for 14 assets, and the total reported monthly ASER amount
on these loans was $342,481. The reported monthly interest
shortfalls totaled $504,152 and have affected all of the classes
subordinate to and including class H," S&P stated.
Wachovia Bank Commercial Mortgage Trust 2007-C34
"We lowered our ratings on the class O, P, and Q certificates from
Wachovia Bank Commercial Mortgage Trust 2007-C34 to 'D (sf)'
because these classes have had accumulated interest shortfalls
outstanding between two and six months, primarily due to ASER
amounts related to the seven loans ($55.3 million, 3.8%) that are
currently with the special servicer, CWCapital Asset Management
LLC, as well as special servicing and workout fees. As of the
Aug. 17, 2011, trustee remittance report, ARAs totaling
$31.1 million were in effect for seven assets, and the total
reported monthly ASER amount on these loans was $131,628. The
reported monthly interest shortfalls totaled $153,431 and have
affected all of the classes subordinate to and including class O,"
S&P noted.
Ratings Lowered
LB-UBS Commercial Mortgage Trust 2003-C7
Commercial mortgage pass-through certificates
Credit Reported
Rating enhancement interest shortfalls ($)
Class To From (%) Current Accumulated
G A (sf) AA- (sf) 13.42 0 0
H BBB+ (sf) A (sf) 10.67 0 0
J BB+ (sf) BBB+ (sf) 8.84 0 0
K B+ (sf) BBB (sf) 7.01 0 0
L CCC+ (sf) BB+ (sf) 5.41 0 0
M CCC (sf) BB(sf) 4.50 0 0
N CCC- (sf) BB- (sf) 4.04 0 0
P CCC- (sf) B+ (sf) 3.58 (906) 283
Q D (sf) B (sf) 3.13 15,750 31,171
S D (sf) B- (sf) 2.67 15,750 31,171
LB-UBS Commercial Mortgage Trust 2006-C7
Commercial mortgage pass-through certificates
Credit Reported
Rating enhancement interest shortfalls ($)
Class To From (%) Current Accumulated
C CCC+ (sf) B (sf) 8.14 137,824 137,824
D CCC- (sf) B- (sf) 7.08 138,302 138,302
E D (sf) CCC+ (sf) 6.15 121,453 121,453
F D (sf) CCC (sf) 5.23 122,114 122,114
G D (sf) CCC- (sf) 4.30 123,831 123,831
Wachovia Bank Commercial Mortgage Trust 2006-C24
Commercial mortgage pass-through certificates
Credit Reported
Rating enhancement interest shortfalls ($)
Class To From (%) Current Accumulated
F CCC- (sf) B+ (sf) 8.34 0 0
G CCC- (sf) B+ (sf) 7.04 0 0
H D (sf) B- (sf) 5.41 111,906 213,420
J D (sf) CCC (sf) 3.30 159,310 313,462
K D (sf) CCC- (sf) 2.00 98,042 192,908
Wachovia Bank Commercial Mortgage Trust 2007-C34
Commercial mortgage pass-through certificates
Credit Reported
Rating enhancement interest shortfalls ($)
Class To From (%) Current Accumulated
O D (sf) CCC- (sf) 2.41 11,155 21,292
P D (sf) CCC- (sf) 2.15 14,978 29,956
Q D (sf) CCC- (sf) 1.77 22,461 88,505
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers"
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
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A list of Meetings, Conferences and Seminars appears in each
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related conferences are encouraged. Send announcements to
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On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
The Sunday TCR delivers securitization rating news from the week
then-ending.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors" Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland,
USA. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine
Tumanda, Howard C. Tolentino, Joseph Medel C. Martirez, Denise
Marie Varquez, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R.
Villacampa, Sheryl Joy P. Olano, Carlo Fernandez, Christopher G.
Patalinghug, and Peter A. Chapman, Editors.
Copyright 2011. All rights reserved. ISSN: 1520-9474.
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*** End of Transmission ***