/raid1/www/Hosts/bankrupt/TCR_Public/121111.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, November 11, 2012, Vol. 16, No. 314
Headlines
ALM VII: S&P Gives 'B' Rating on Class E Deferrable Notes
BAYVIEW FIN'L: Fitch Drops Rating Due to Lack of Investor Interest
BEAR STEARNS 2007-TOP26: S&P Lowers Rating on E Certs. to 'CCC-'
C-BASS CBO VI: Fitch Affirms Junk Rating on Two Note Classes
CAPITAL TRUST 2004-1: S&P Affirms 'CCC-' Ratings on 3 Debt Classes
CARLYLE MCLAREN: S&P Raises Rating on Class B-2L Notes to 'CCC+'
CBA COMMERCIAL 2007-1: S&P Cuts Rating on Class A Certs to 'D'
COMM 2012-CCRE4: Fitch to Keep Rating on 11 Certificate Classes
GE COMMERCIAL 2004-C2: DBRS Confirms 'B' Rating on Class J Certs
DIAMOND LAKE: Moody's Raises Rating on Class B-2L Notes to 'Ba3'
FIRST FRANKLIN: Moody's Lowers Ratings on Two Tranches to 'Ca'
FREMF MORTGAGE 2012-KF01: Moody's Assigns Ba3 Rating to X Certs.
GALLATIN CLO IV: S&P Gives Prelim 'B' Rating on Class F Notes
GMAC 1998-C2: S&P Raises Rating on Class F Certificates From 'B'
GRAMERCY REAL: Moody's Affirms Caa3 Ratings on Two Note Classes
GOLUB CAPITAL 14: S&P Gives 'BB' Rating on Class E Def Notes
HARTFORD MEZZANINE: Fitch Affirms CCC Ratings on 2 Debt Classes
JAMESTOWN CLO I: S&P Gives 'BB' Rating on $24.75 Class D Notes
MARATHON REAL 2006-1: Moody's Affirms Caa3 Rating on Cl. K Notes
MERRILL LYNCH 2006-HE4: Moody's Cuts Rating on A-2B Tranche to C
OHA CREDIT VII: S&P Gives 'BB' Rating on Class E Deferrable Notes
RACE POINT VII: S&P Gives 'BB-' Rating on Class E Deferrable Notes
RESIDENTIAL RE 2011-1: S&P Puts 'BB-' Class 5 Note Rating on Watch
RESIDENTIAL RE 2012-II: S&P Gives 'BB+' Rating on Class 1 Notes
SARGAS CLO II: Fitch Lifts Rating on Class E Notes From 'BBsf'
WEST CLO 2012-1: S&P Gives 'BB' Rating on $19.80 Class D Notes
WRIGHTWOOD CAPITAL: Moody's Cuts 2 Note Class Ratings to 'Caa3'
WRIGHTWOOD CAPITAL 2005-1: S&P Cuts Ratings on 5 Classes to 'CCC-'
* S&P Raises Ratings on 22 Tranches From 19 CDO Transactions
* S&P Puts Ratings on 23 Tranches From 11 US CDOs on Watch Pos
* S&P Lowers Ratings on 783 Classes From 116 US RMBS Transactions
*********
ALM VII: S&P Gives 'B' Rating on Class E Deferrable Notes
---------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to ALM VII
Ltd./ALM VII LLC's $669.4 million floating-rate notes.
The transaction is a cash flow collateralized loan obligation
securitization of a revolving pool consisting primarily of broadly
syndicated senior secured loans.
The ratings reflect S&P's assessment of:
The credit enhancement provided to the rated notes through the
subordination of cash flows that are payable to the
subordinated notes.
The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting excess spread), and cash flow structure, which
can withstand the default rate projected by Standard & Poor's
CDO Evaluator model, as assessed by Standard & Poor's using
the assumptions and methods outlined in its corporate
collateralized debt obligation criteria.
The transaction's legal structure, which is expected to be
bankruptcy remote.
The diversified collateral portfolio, which consists primarily
of broadly syndicated speculative-grade senior secured term
loans.
The asset manager's experienced management team.
"Our projections regarding the timely interest and ultimate
principal payments on the rated notes, which we assessed using
our cash flow analysis and assumptions commensurate with the
assigned ratings under various interest-rate scenarios,
including LIBOR ranging from 0.34%-13.84%," S&P said.
The transaction's overcollateralization and interest coverage
tests, a failure of which will lead to the diversion of
interest and principal proceeds to reduce the balance of the
rated notes outstanding.
The transaction's reinvestment overcollateralization test, a
failure of which will lead to the reclassification of excess
interest proceeds that are available prior to paying uncapped
administrative expenses and fees, subordinated hedge and
synthetic security termination payments, portfolio manager
subordinated and incentive fees, and subordinated note
payments to principal proceeds for the purchase of additional
collateral assets during the reinvestment period.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1026.pdf
RATINGS ASSIGNED
ALM VII Ltd./ALM VII LLC
Class Rating Amount (mil. $)
X AAA (sf) 2.625
A-1 AAA (sf) 446.25
A-2 AA (sf) 78.75
B A (sf) 58.625
C (deferrable) BBB (sf) 34.125
D (deferrable) BB (sf) 29.75
E (deferrable) B (sf) 19.25
Subordinated notes NR 52.50
NR - Not rated.
BAYVIEW FIN'L: Fitch Drops Rating Due to Lack of Investor Interest
------------------------------------------------------------------
Fitch Ratings has affirmed and subsequently withdrawn the ratings
on 16 classes of Bayview Financial Revolving Asset Trust (BFAT)
2005-A and 2005-E due to lack of investor interest.
Fitch's rating actions are as follows:
Bayview Financial Revolving Asset Trust 2005-A
-- Class A1 (073250BM3) affirmed at 'CCCsf/RE NC' and withdrawn;
-- Class A2A (073250BN1) affirmed at 'CCCsf/RE NC' and
withdrawn;
-- Class A2B (073250BP6) affirmed at 'CCsf/RE NC' and withdrawn;
-- Class M1 (073250BQ4) affirmed at 'Csf/RE NC' and withdrawn;
-- Class M2 (073250BR2) affirmed at 'Csf/RE NC' and withdrawn;
-- Class M3 (073250BS0) affirmed at 'Csf/RE NC' and withdrawn;
-- Class B1 (073250BT8) affirmed at 'Csf/RE NC' and withdrawn;
-- Class B2 (073250BU5) affirmed at 'Csf/RE NC' and withdrawn.
Bayview Financial Revolving Asset Trust 2005-E
-- Class A1 (073250BV3) affirmed at 'CCCsf/RE NC' and withdrawn;
-- Class A2A (073250CB6) affirmed at 'CCCsf/RE NC' and
withdrawn;
-- Class A2B (073250CC4) affirmed at 'CCsf/RE NC' and withdrawn;
-- Class M1 (073250BW1) affirmed at 'Csf/RE NC' and withdrawn;
-- Class M2 (073250BX9) affirmed at 'Csf/RE NC' and withdrawn;
-- Class M3 (073250BY7) affirmed at 'Csf/RE NC' and withdrawn;
-- Class B1 (073250BZ4) affirmed at 'Csf/RE NC' and withdrawn;
-- Class B2 (073250CA8) affirmed at 'Csf/RE NC' and withdrawn.
These actions were reviewed by a committee of Fitch analysts.
BEAR STEARNS 2007-TOP26: S&P Lowers Rating on E Certs. to 'CCC-'
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its rating on class A-M
from Bear Stearns Commercial Mortgage Securities Trust 2007-TOP26
(BSCMS 2007-TOP26) to 'AA (sf)' and removed it from CreditWatch
with positive implications. "Concurrently, we lowered our ratings
on six classes from BSCMS 2007-TOP26 and Wachovia Bank Commercial
Mortgage Trust's series 2007-WHALE8 (WBCMT 2007-WHALE8) and
removed five of them from CreditWatch with negative implications.
In addition, we affirmed our 'A+ (sf)' rating on class A-1 from
WBCMT 2007-WHALE8 and removed it from CreditWatch with negative
implications. The CreditWatch resolutions are related to
CreditWatch placements that we initiated on Sept. 5, 2012," S&P
said.
"The upgrade reflects Standard & Poor's expected available credit
enhancement for the affected tranche, which we believe is greater
than our most recent estimate of necessary credit enhancement for
the most recent rating levels. The upgrade also reflects our views
regarding the current and future performance of the collateral
supporting the respective transaction," S&P said.
"The downgrades reflect our expected available credit enhancement
for the affected tranches, which we believe is less than our most
recent estimate of necessary credit enhancement for the most
recent rating levels. The downgrades also reflect our views
regarding the current and future performance of the collateral
supporting the respective transactions," S&P said.
"The affirmation reflects our expected available credit
enhancement for the affected tranche, which we believe is greater
than our most recent estimate of necessary credit enhancement for
the most recent rating level. The affirmation of the rating on
class A-1 in WBCMT 2007-WHALE8 also considers our views
regarding the current and future performance of the collateral
supporting the respective transaction as well as our expectation
that the class should receive its full repayment of principal. It
is our view that the underlying collateral value supports the
affirmed rating on class A-1," S&P said.
"Our rating actions on WBCMT 2007-WHALE8 also considered that
Wells Fargo Bank N.A., the master servicer, deemed the Four
Seasons Nevis asset nonrecoverable in April 2012," S&P said.
"The rating actions follow a detailed review of the performance of
the collateral supporting the relevant securities and transaction
structures. This review was similar to the review we conducted
before placing 744 U.S. and Canadian CMBS ratings on CreditWatch
following the release of our updated ratings criteria for these
transactions, but was more detailed with respect to collateral and
transaction performance," S&P said.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATING ACTIONS AND CREDITWATCH ACTIONS
Bear Stearns Commercial Mortgage Securities Trust 2007-TOP26
Commercial mortgage pass-through certificates
Rating
Class To From Credit enhancement (%)
A-M AA(sf) A(sf)/Watch Pos 17.93
A-J BB+(sf) BBB-(sf)/Watch Neg 8.99
B B+(sf) BB(sf)/Watch Neg 6.64
C B-(sf) BB-(sf)/Watch Neg 5.61
D CCC(sf) B(sf)/Watch Neg 4.00
E CCC-(sf) B-(sf) 3.12
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2007-WHALE8
Class To From Credit enhancement (%)
A-1 A+(sf) A+(sf)/Watch Neg 57.99
A-2 B-(sf) B+(sf)/Watch Neg 30.32
C-BASS CBO VI: Fitch Affirms Junk Rating on Two Note Classes
------------------------------------------------------------
Fitch Ratings has upgraded two and affirmed two classes of notes
issued by C-BASS CBO VI, Ltd. (C-BASS VI) as follows:
-- $782,797 class B notes upgraded to 'AAAsf' from 'Asf';
Outlook Stable;
-- $5,000,000 class C notes upgraded to 'Asf' from 'BBBsf';
Outlook revised to Stable from Negative;
-- $21,874,396 class D notes affirmed at 'CCsf'.
-- $3,000,000 class E notes affirmed at 'Csf'.
This review was conducted under the framework described in the
report 'Global Rating Criteria for Structured Finance CDOs' using
the Structured Finance Portfolio Credit Model (SF PCM) for
projecting future default levels for the underlying portfolio.
These default levels were then compared to the breakeven levels
generated by Fitch's cash flow model of the CDO under various
default timing and interest rate stress scenarios, as described in
the report 'Global Criteria for Cash Flow Analysis in CDOs'.
Fitch also considered additional qualitative factors into its
analysis to conclude the rating actions for the rated notes.
Since Fitch's last rating action in November 2011, the credit
quality of the collateral has deteriorated with approximately
37.4% of the portfolio being downgraded a weighted average of 3.9
notches. Currently, 81.9% of the portfolio has a Fitch-derived
rating below investment grade and 71.7% is rated in the 'CCC'
category or lower, compared to 74.8% and 52%, respectively, at
last rating action.
Over this time, the class A notes paid-in-full and the class B
notes received approximately $5.4 million or 87.3% of their prior
review balance in paydowns. The class B notes current balance of
$782,797 is fully covered by the proceeds available in the
principal collection account and is expected to be paid in full at
the next payment date in November. The breakeven rates in Fitch's
cash flow model for the notes are generally consistent with the
rating assigned above. Fitch maintains its Stable Outlook on the
class B notes.
The upgrade for the class C notes is attributable to the increase
in credit enhancement resulting from the amortization of the class
A and B notes. This has more than offset the deterioration of the
underlying portfolio over this past year. Although the notes are
passing at ratings higher than 'Asf' based on the cash flow
modeling results, potential concentration risk and adverse
selection remain a concern as the portfolio continues to amortize.
The Outlook on the class C notes is revised to Stable from
Negative, to reflect Fitch's view that the performance of the
notes will remain stable as the class B notes pay in full at the
next payment date, and the class C notes begin to amortize in
succession.
Breakeven levels for the class D and E notes were below SF PCM's
'CCC' default level, the lowest level of defaults projected by SF
PCM. The class D notes began to receive their full interest
distribution upon expiration of the swap in May 2011; however, the
notes still have roughly $259,730 of deferred interest still
outstanding. Excess spread is currently used to cure the failing
class D coverage test, the step above repayment of deferred
interest for class D in the interest waterfall. The class E notes
are currently not receiving any interest distributions and are not
expected to receive interest distributions in the future. Default
remains inevitable for the class E notes.
C-BASS VI is cash structured finance (SF) collateralized debt
obligation (CDO) that closed on April 15, 2003 and is monitored by
NIC Management LLC. As of the Sept. 30, 2012 trustee report, the
portfolio is comprised of 86.6% residential mortgage backed
securities (RMBS), 11.1% Structured Finance CDOs (SF CDOs) and
2.3% commercial asset backed securities (ABS), from the 2003 and
earlier vintage transactions.
CAPITAL TRUST 2004-1: S&P Affirms 'CCC-' Ratings on 3 Debt Classes
------------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on five
classes from Capital Trust Re CDO 2004-1 Ltd., a commercial real
estate collateralized debt obligation (CRE CDO) transaction, and
removed them from CreditWatch with negative implications.
"The affirmations reflect our analysis of the transaction's
liability structure and the credit characteristics of the
underlying collateral using our criteria for global CDOs of pooled
structured finance assets. We also considered the amount of
defaulted assets in the transaction and their expected recoveries
in our analysis," S&P said.
"According to the Oct. 18, 2012, trustee report, the transaction's
collateral totaled $122.3 million and the transaction's
liabilities totaled $245.6 million, including upaid interest on
classes F and below. The liability balance at issuance was
originally $324.1 million. The transaction's current asset pool
consists of seven subordinate loans and two commercial mortgage-
backed securities (CMBS)," S&P said.
"The trustee report noted five defaulted loans ($60.4 million,
49.4%) and two defaulted CMBS ($14.9 million, 12.2%). Standard &
Poor's estimated asset-specific recovery rates for the defaulted
loan assets. We expect minimal recoveries on the defaulted loan
assets upon resolutions. We based the recovery rates on
information provided by the collateral manager, special servicer,
and third-party data providers. The defaulted loan assets are" S&P
said:
Marriott Waikiki subordinate loan ($30 million, 24.6%);
Resorts International subordinate loan ($10.5 million, 8.6%);
Embassy Suites LBV subordinate loan ($7.5 million, 6.1%);
Arapaho Business Park subordinate loan ($6.5 million, 5.3%);
and
Liberty Properties subordinate loan ($5.9 million, 4.8%).
"We applied asset specific recovery rates in our analysis of the
two performing loans, 1111 Marcus subordinate loan and DRA/Crocker
Office Portfolio subordinate loan ($47 million, 38.4%), using our
updated methodology and assumptions for rating U.S. and Canadian
CMBS and our global property evaluation methodology, both
published Sept. 5, 2012. We also considered qualitative factors
such as the near-term maturities of the loans and refinancing
prospects of the assets in the pool," S&P said.
"According to the trustee report, the deal is failing the class
C/D/E principal coverage test while passing the class A/B
principal coverage test. It is passing both interest coverage
tests," S&P said.
Standard & Poor's will continue to review whether, in its view,
the ratings assigned to the notes remain consistent with the
credit enhancement available to support them and take rating
actions as it determines necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS AFFIRMED AND REMOVED FROM CREDITWATCH
Capital Trust Re CDO 2004-1 Ltd.
Rating
Class To From
A-2 BB- (sf) BB- (sf)/Watch Neg
B CCC+ (sf) CCC+ (sf)/Watch Neg
C CCC- (sf) CCC- (sf)/Watch Neg
D CCC- (sf) CCC- (sf)/Watch Neg
E CCC- (sf) CCC- (sf)/Watch Neg
CARLYLE MCLAREN: S&P Raises Rating on Class B-2L Notes to 'CCC+'
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A-2L, A-3L, B-1L, and B-2L notes from Carlyle McLaren CLO Ltd., a
U.S. collateralized loan obligation (CLO) transaction managed by
Carlyle Investment Management LLC. "In addition, we affirmed our
ratings on the class A-1L, A-1LV, and X notes," S&P said.
"The upgrades reflect improvement in the credit quality of the
underlying assets since our last rating action in December 2011.
The affirmations reflect our belief that the credit support
available is commensurate with the current rating levels," S&P
said.
"According to the Aug. 16, 2012, trustee report, the transaction
held $14.81 million in 'CCC' rated collateral, down from $16.45
million noted in the Dec. 15, 2011, trustee report. In addition,
the transaction is currently passing its Additional Collateral
Deposit Requirement (ACDR), which is a slightly modified B-2L O/C
test in the interest section of the payment waterfall. The
transaction is structured such that if it fails this test during
reinvestment period, the test will divert 35% of the ACDR amount
to paydown class B-2L and 65% to purchase additional collateral
after paying down class B-2L's cumulative deferred interest
amount. Base on the Aug. 16, 2012, trustee report, the ACDR is
102.46%, which is above the required minimum of 101.00%," S&P
said.
"In addition, the application of the largest obligor default test,
a supplemental stress test we introduced as part of our September
2009 corporate criteria update, drives our rating on class B-2L,"
S&P said.
Standard & Poor's will continue to review whether, in its view,
the ratings on the notes remain consistent with the credit
enhancement available to support them and take rating actions as
it deems necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATING ACTIONS
Carlyle McLaren CLO Ltd.
Rating
Class To From
X AAA (sf) AAA (sf)
A-1L AA+ (sf) AA+ (sf)
A-1LV AA+ (sf) AA+ (sf)
A-2L AA (sf) A+ (sf)
A-3L A (sf) BBB+ (sf)
B-1L BBB (sf) BB+ (sf)
B-2L CCC+ (sf) CCC- (sf)
CBA COMMERCIAL 2007-1: S&P Cuts Rating on Class A Certs to 'D'
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on three
classes of commercial mortgage pass-through certificates from two
U.S. commercial mortgage-backed securities (CMBS) transactions due
to principal losses, as well as current and potential nterest
shortfalls.
S&P lowered its rating on class A to 'D (sf)' from CBA Commercial
Assets LLC's series 2007-1 because of principal losses that this
class incurred. It also lowered its ratings on two classes from
Commercial Mortgage Asset Trust's series 1999-C1 due to current
and potential interest shortfalls. Class E had accumulated
interest shortfalls outstanding for one month and class F for four
consecutive months. The recurring interest shortfalls for the
respective certificates are primarily due to one or more of these
factors:
-- Appraisal subordinate entitlement reduction (ASER) amounts in
effect for specially serviced assets; and
-- Special servicing fees.
"Standard & Poor's analysis primarily considered the ASER amounts
based on appraisal reduction amounts (ARAs) calculated using
recent Member of the Appraisal Institute (MAI) appraisals. We also
considered special servicing fees 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 respective transaction's terms. Typically,
these terms call for the automatic implementation of an ARA equal
to 25% of the stated principal balance of a loan when a loan is 60
days past due and an appraisal or other valuation is not available
within a specified timeframe," S&P said.
We detail the three downgraded classes from the two U.S. CMBS
transactions.
CBA Commercial Assets LLC's Series 2007-1
"We lowered our rating on the class A certificate to 'D (sf)' to
reflect a $221,979 principal loss. The class had a current
outstanding principal balance of $73.9 million as of the Oct. 25,
2012, trustee remittance report. The class M-1 certificate also
experienced a principal loss this period that reduced the class'
current outstanding principal balance to zero. We previously
lowered our rating on class M-1 to 'D (sf)'," S&P said.
Commercial Mortgage Asset Trust's Series 1999-C1
"We lowered our rating on class E to 'BB- (sf)' due to accumulated
interest shortfalls that we expect will remain outstanding for an
extended period of time. We lowered our ratings on classes E and F
because of increased susceptibility to future interest shortfalls
due to the reduced liquidity support available to these
certificates. As of the Oct. 17, 2012, trustee remittance report,
ARAs totaling $126.8 million were in effect for three ($179.7
million, 21.7%) of the transaction's four ($175.1 million, 21.9%)
specially serviced assets. The current interest shortfalls
primarily resulted from ASER amounts and special servicing fees.
The total reported ASER amount for current period is $840,997. The
reported cumulative ASER amount was $10.3 million. Standard &
Poor's considered the three ASER amounts, which were based
on MAI appraisals, as well as current special servicing fees
($36,501) in determining its rating actions. The reported monthly
interest shortfalls totaled $1,012,053, affected all of the
classes subordinate to and including class E," S&P said.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 s included in this
credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LOWERED
CBA Commercial Assets LLC
Commercial mortgage pass-through certificates series 2007-1
Reported
Rating Rating Credit Interest shortfalls
Class To From enhcmt(%) Current Accumulated
A D(sf) CCC-(sf) 0 183,095 310,044
Commercial Mortgage Asset Trust
Commercial mortgage pass-through certificates series 1999-C1
Reported
Rating Credit interest shortfalls
Class To From enhcmt(%) Current Accumulated
E BB-(sf) A(sf) 22.00 95,491 95,491
F CCC-(sf) CCC+(sf) 15.32 278,318 927,209
COMM 2012-CCRE4: Fitch to Keep Rating on 11 Certificate Classes
---------------------------------------------------------------
Fitch Ratings expects to rate the previously non-rated class X-B
of Deutsche Bank Securities, Inc.'s COMM 2012-CCRE4 Commercial
Mortgage Pass-Through Certificates, as follows:
-- $104,156,000b class X-B 'A-sf'; Outlook Stable.
b Notional amount and interest only.
The expected ratings on the remaining classes will remain as
published in the rating action commentary titled 'Fitch to Rate
COMM 2012-CCRE4 Commercial Mortgage Pass-Through Certificates;
Presale Issued,' (Oct. 25, 2012).
-- $59,118,000 class A-1 'AAAsf'; Outlook Stable;
-- $148,657,000 class A-2 'AAAsf'; Outlook Stable;
-- $70,571,000 class A-SB 'AAAsf'; Outlook Stable;
-- $499,354,000 class A-3 'AAAsf'; Outlook Stable;
-- $888,800,000b class X-A 'AAAsf'; Outlook Stable;
-- $111,100,000a class A-M 'AAAsf'; Outlook Stable;
-- $65,271,000a class B 'AA-sf'; Outlook Stable;
-- $38,885,000a class C 'A-sf'; Outlook Stable;
-- $45,829,000a class D 'BBB-sf'; Outlook Stable;
-- $19,442,000a class E 'BBsf'; Outlook Stable;
-- $18,054,000a class F 'Bsf'; Outlook Stable;
a Privately placed pursuant to Rule 144A.
b Notional amount and interest only.
The expected ratings are based on information provided by the
issuer as of Oct. 19, 2012. Fitch does not expect to rate the
$34,719,345 class G.
GE COMMERCIAL 2004-C2: DBRS Confirms 'B' Rating on Class J Certs
----------------------------------------------------------------
DBRS has upgraded four classes of the GE Commercial Mortgage
Corporation, Series 2004-C2 Commercial Mortgage Pass-Through
Certificates as follows:
-- Class C to AAA (sf) from AA (high) (sf)
-- Class D to AA (high) (sf) from AA (sf)
-- Class E to AA (low) (sf) from A (sf)
-- Class F to A (sf) from A (low) (sf)
DBRS has also confirmed the ratings of 13 classes as follows:
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-1A at AAA (sf)
-- Class B at AAA (sf)
-- Class X-1 at AAA (sf)
-- Class G at BBB (high) (sf)
-- Class H at BBB (low) (sf)
-- Class J at BB (sf)
-- Class K at B (sf)
-- Class L at B (low) (sf)
-- Class M at CCC (sf)
-- Class N at CCC (sf)
-- Class O at CCC (sf)
All trends are Stable.
These ratings actions reflect the overall strong performance of
the pool with a weighted-average debt service coverage ratio
(DSCR) of 1.55 times (x) and a weighted-average debt yield of
11.77%, as calculated on the outstanding whole loan balances as of
the October 2012 remittance report and the most recent year-end
NCF figures for each loan in the trust. There are 95 of the 119
original loans remaining in the pool with a collateral reduction
of 31.31%. There are 13 defeased loans, representing 2.56% of the
outstanding pool balance. The performance of the largest 15 loans
in the pool is quite strong with a weighted-average DSCR of 1.88x
and a weighted-average debt yield of 14.00%, as calculated on the
outstanding whole loan balances and the most recent year-end NCF
figures for each loan.
As of the October 2012 remittance, there are 19 loans on the
servicer's watchlist, representing 24.93% of the pool balance. Of
these loans, eight individually represent more than 1.00% of the
pool balance, six of which are in the top 15 loans in the
transaction. The loans on the watchlist have a weighted-average
NCF decline since issuance of 22.74%, with a weighted-average DSCR
of 1.01x.
There is one loan in special servicing, representing 0.81% of the
current pool balance. Prospectus ID #51, Shops at Borders, is
secured by an 80,126 sf strip retail center in Marlton, New
Jersey, approximately 15 miles east of Philadelphia. The
property, at issuance, was anchored by Borders, which filed for
bankruptcy and vacated the property in early 2011. The absence of
an anchor tenant and the vacancy of large space have negatively
impacted occupancy at the property and is 53% occupied, as of the
May 2012 rent roll. The immediate area is oversaturated with
retail development, contributing to increased tenant concessions
and lower submarket rents over the past few years. The loan was
transferred to special servicing in February 2012 when the
borrower requested relief due to declining cash flows at the
property. The loan is due for the January 2012 payment and all
scheduled payments due thereafter. The April 2012 appraisal
valued the property at $8.1 million, down from $13.4 million at
issuance. The special servicer filed for foreclosure in October
2012, but may not take title of the property from to one to two
years due to New Jersey law. Based on the April 2012 appraisal
value, DBRS currently projects a 10.46% loss severity for this
loan in a liquidation scenario.
There are a total of four loans shadow-rated investment grade by
DBRS remaining in the pool, representing a combined 21.29% of the
outstanding pool balance.
DIAMOND LAKE: Moody's Raises Rating on Class B-2L Notes to 'Ba3'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Diamond Lake CLO, Ltd.:
U.S.$18,000,000 Class A-2L Floating Rate Notes Due December
2019, Upgraded to Aa1 (sf); previously on August 24, 2011
Upgraded to Aa2 (sf);
U.S.$16,000,000 Class A-3L Floating Rate Deferrable Notes Due
December 2019, Upgraded to A1 (sf); previously on August 24,
2011 Upgraded to A2 (sf);
U.S.$14,000,000 Class B-1L Floating Rate Notes Due December
2019, Upgraded to Baa2 (sf); previously on August 24, 2011
Upgraded to Baa3 (sf);
U.S.$14,750,000 Class B-2L Floating Rate Notes Due December
2019, Upgraded to Ba3 (sf); previously on August 24, 2011
Upgraded to B1 (sf).
Ratings Rationale
According to Moody's, the rating actions taken on the notes
reflect the benefit of the short period of time remaining before
the end of the deal's reinvestment period in December 2012. In
consideration of the reinvestment restrictions applicable during
the amortization period, and therefore limited ability to effect
significant changes to the current collateral pool, Moody's
analyzed the deal assuming a higher likelihood that the collateral
pool characteristics will continue to maintain a positive buffer
relative to certain covenant requirements. In particular, the deal
is assumed to benefit from higher spread levels compared to the
levels assumed at the last rating action in August 2011. Moody's
modeled a weighted average spread of 3.92% compared to 2.94% at
the time of the last rating action. Moody's also notes that the
transaction's reported collateral quality and
overcollateralization ratios are relatively stable since the last
rating action.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, diversity score, and weighted average recovery rate, may
be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par and principal proceeds balance of $312.4 million,
defaulted par of $10.4 million, a weighted average default
probability of 18.82% (implying a WARF of 2645), a weighted
average recovery rate upon default of 49.40%, and a diversity
score of 66. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Diamond Lake CLO, Ltd., issued in September 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Approach to Rating Collateralized Loan Obligations"
rating methodology published in June 2011.
In addition to the base case analysis described above, Moody's
also performed sensitivity analyses to test the impact on all
rated notes of various default probabilities. Below is a summary
of the impact of different default probabilities (expressed in
terms of WARF levels) on all rated notes (shown in terms of the
number of notches' difference versus the current model output,
where a positive difference corresponds to lower expected loss),
assuming that all other factors are held equal:
Moody's Adjusted WARF -- 20% (2116)
Class X: 0
Class A-1L: 0
Class A-1LR: 0
Class A-2L: 0
Class A-3L: +2
Class B-1L: +3
Class B-2L: +1
Moody's Adjusted WARF + 20% (3174)
Class X: 0
Class A-1L: 0
Class A-1LR: 0
Class A-2L: -2
Class A-3L: -2
Class B-1L: -1
Class B-2L: -1
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of upcoming speculative-grade debt maturities which
may create challenges for issuers to refinance. CLO notes'
performance may also be impacted by 1) the manager's investment
strategy and behavior and 2) divergence in legal interpretation of
CLO documentation by different transactional parties due to
embedded ambiguities.
Sources of additional performance uncertainties are described
below:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will commence and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market and/or
collateral sales by the manager, which may have significant impact
on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
FIRST FRANKLIN: Moody's Lowers Ratings on Two Tranches to 'Ca'
--------------------------------------------------------------
Moody's Investors Service (Moody's) has downgraded the ratings on
2 tranche from First Franklin Mortgage Loan Trust 2006-FF18. The
collateral backing these transactions are subprime residential
mortgage loans.
Complete rating actions are as follows:
Issuer: First Franklin Mortgage Loan Trust 2006-FF18
Cl. A-1, Downgraded to Ca (sf); previously on Apr 6, 2010
Downgraded to Caa3 (sf)
Cl. A-2B, Downgraded to Ca (sf); previously on Apr 6, 2010
Downgraded to Caa3 (sf)
Ratings Rationale
The actions are a result of the recent performance of Subprime
pools originated after 2005 and reflect Moody's updated loss
expectations on these pools. The downgrade in the rating action is
a result of deteriorating performance and/or structural features
resulting in higher expected losses for the bond than previously
anticipated.
The methodologies used in this rating were "Moody's Approach to
Rating US Residential Mortgage-Backed Securities" published in
December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology"
published in July 2011.
Moody's adjusts the methodologies noted above for Moody's current
view on loan modifications As a result of an extension of the Home
Affordable Modification Program (HAMP) to 2013 and an increased
use of private modifications, Moody's is extending its previous
view that loan modifications will only occur through the end of
2012. It is now assuming that the loan modifications will continue
at current levels until the end of 2013.
To assess the rating implications of the updated loss levels on
subprime RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R) (SFW), the cash
flow model developed by Moody's Wall Street Analytics. This
individual pool level analysis incorporates performance variances
across the different pools and the structural features of the
transaction including priorities of payment distribution among the
different tranches, average life of the tranches, current balances
of the tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different combinations
comprising of six loss levels, four loss timing curves and four
prepayment curves. The volatility in losses experienced by a
tranche due to extended foreclosure timelines by servicers is
taken into consideration when assigning ratings.
The primary sources of assumption uncertainty are Moody's central
macroeconomic forecast and performance volatility as a result of
servicer-related activity such as modifications. The unemployment
rate fell from 9.0% in September 2011 to 7.8% in September 2012.
Moody's expects unemployment rate to stay between 7.5% to 8.5% in
2013. Moody's expects housing prices to remain stable through the
remainder of 2012 before gradually rising towards the end of 2013.
Performance of RMBS continues to remain highly dependent on
servicer activity such as modification-related principal
forgiveness and interest rate reductions. Any change resulting
from servicing transfers or other policy or regulatory change can
also impact the performance of these transactions.
A list of these actions including CUSIP identifiers may be found
at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF305536
A list of updated estimated pool losses, sensitivity analysis, and
tranche recovery details is being posted on an ongoing basis for
the duration of this review period and may be found at:
http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689
FREMF MORTGAGE 2012-KF01: Moody's Assigns Ba3 Rating to X Certs.
----------------------------------------------------------------
Moody's Investors Service has assigned ratings to four classes of
CMBS securities, issued by FREMF Mortgage Trust, Multifamily
Mortgage Pass-Through Certificates, Series 2012-KF01.
CMBS Classes
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned A3 (sf)
Cl. C, Definitive Rating Assigned Baa3 (sf)
Cl. X, Definitive Rating Assigned Ba3 (sf)
Ratings were also assigned to two related classes of Freddie Mac
Structured Pass-Through Certificates (SPCs), Series K-F01.
Cl. A, Definitive Rating Assigned Aaa (sf)
Cl. X, Definitive Rating Assigned Ba3 (sf)
* SPC Class represents a pass-through interest from its
associated CMBS Class. CMBS Class A is a pass-through interest
to SPC Class A, and CMBS Class X is a pass-through interest to
SPC Class X. Ratings of the SPCs did not take into account the
Freddie Mac guarantee.
Ratings Rationale
The Certificates are collateralized by 80 floating rate loans
secured by 80 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.
For FREMF 2012-KF01 the Moody's actual DSCR is 1.68X which is
higher than the 2007 conduit/fusion transaction average of 1.31X.
The Moody's Stressed DSCR of 0.88X is lower than the 2007
conduit/fusion transaction average of 0.92X. Moody's Trust LTV
ratio of 110.4% is lower than the 2007 conduit/fusion transaction
average of 110.6%.
Moody's also considers both loan level diversity and property
level diversity when selecting a ratings approach.
With respect to loan level diversity, the pool's loan level
Herfindahl Index is 49. 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 49.
The transaction's loan and property diversity profile is higher
than what was observed in most multi-borrower transactions issued
since 2009.
Moody's also grades properties on a scale of 1 to 5 (best to
worst) and considers those grades when assessing the likelihood of
debt payment. The factors considered include property age, quality
of construction, location, market, and tenancy. The pool's
weighted average property quality grade is 2.38, which is better
than the indices calculated in most multi-borrower transactions
since 2009.
The principal methodologies used in this rating were "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000, and "Moody's Approach to Rating Structured Finance
Interest-Only Securities" published in February 2012.
Moody's analysis employs the excel-based CMBS Conduit Model v2.61
which derives credit enhancement levels based on an aggregation of
adjusted loan level proceeds derived from Moody's loan level DSCR
and LTV ratios. Major adjustments to determining proceeds include
loan structure, property type, sponsorship and diversity. Moody's
analysis also uses the CMBS IO calculator ver1.0 which references
the following inputs to calculate the proposed IO rating based on
the published methodology: original and current bond ratings and
credit estimates; original and current bond balances grossed up
for losses for all bonds the IO(s) reference(s) within the
transaction; and IO type corresponding to an IO type as defined in
the published methodology.
The V Score for this transaction is assessed as Low/Medium, the
same as the V score assigned to the U.S. Conduit and CMBS sector.
This reflects typical volatility with respect to the critical
assumptions used in the rating process as well as an average
disclosure of securitization collateral and ongoing performance.
Moody's V Scores provide a relative assessment of the quality of
available credit information and the potential variability around
the various inputs to a rating determination. The V Score ranks
transactions by the potential for significant rating changes owing
to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling, and the transaction governance that
underlie the ratings. V Scores apply to the entire transaction
(rather than individual tranches).
Moody's Parameter Sensitivities: If Moody's value of the
collateral used in determining the initial rating were decreased
by 5%, 15%, or 24%, the model-indicated rating for the currently
rated Aaa classes would be Aa1, Aa2, A1, respectively. Parameter
Sensitivities are not intended to measure how the rating of the
security might migrate over time; rather they are designed to
provide a quantitative calculation of how the initial rating might
change if key input parameters used in the initial rating process
differed. The analysis assumes that the deal has not aged.
Parameter Sensitivities only reflect the ratings impact of each
scenario from a quantitative/model-indicated standpoint.
Qualitative factors are also taken into consideration in the
ratings process, so the actual ratings that would be assigned in
each case could vary from the information presented in the
Parameter Sensitivity analysis.
These ratings: (a) are based solely on information in the public
domain and/or information communicated to Moody's by the issuer at
the date it was prepared and such information has not been
independently verified by Moody's; (b) must be construed solely as
a statement of opinion and not a statement of fact or an offer,
invitation, inducement or recommendation to purchase, sell or hold
any securities or otherwise act in relation to the issuer or any
other entity or in connection with any other matter. Moody's does
not guarantee or make any representation or warranty as to the
correctness of any information, rating or communication relating
to the issuer. Moody's shall not be liable in contract, tort,
statutory duty or otherwise to the issuer or any other third party
for any loss, injury or cost caused to the issuer or any other
third party, in whole or in part, including by any negligence (but
excluding fraud, dishonesty and/or willful misconduct or any other
type of liability that by law cannot be excluded) on the part of,
or any contingency beyond the control of, Moody's, or any of its
employees or agents, including any losses arising from or in
connection with the procurement, compilation, analysis,
interpretation, communication, dissemination, or delivery of any
information or rating relating to the issuer.
GALLATIN CLO IV: S&P Gives Prelim 'B' Rating on Class F Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Gallatin CLO IV 2012-1 Ltd./Gallatin CLO IV 2012-1
LLC's $283.50 million floating-rate notes.
The note issuance is a collateralized loan obligation
securitization backed by a revolving pool consisting primarily of
broadly syndicated senior secured loans.
The preliminary ratings are based on information as of Nov. 7,
2012. Subsequent information may result in the assignment of final
ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The credit enhancement provided to the preliminary rated notes
through the subordination of cash flows that are payable to
the subordinated notes.
-- The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting excess spread), and cash flow structure, which
can withstand the default rate projected by Standard & Poor's
CDO Evaluator model, as assessed by Standard & Poor's using
the assumptions and methods outlined in its corporate
collateralized debt obligation (CDO) criteria.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
-- The diversified collateral portfolio, which consists primarily
of broadly syndicated speculative-grade senior secured term
loans.
-- The portfolio manager's experienced management team.
-- S&P's projections regarding the timely interest and ultimate
principal payments on the preliminary rated notes, which we
assessed using our cash flow analysis and assumptions
commensurate with the assigned preliminary ratings under
various interest-rate scenarios, including LIBOR ranging from
0.3439%-12.6500%.
-- The transaction's overcollateralization and interest coverage
tests, a failure of which will lead to the diversion of
interest and principal proceeds to reduce the balance of the
rated notes outstanding.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 included in this credit rating
report is available at:
http://standardandpoorsdisclosure-17g7.com/1082.pdf
PRELIMINARY RATINGS ASSIGNED
Gallatin CLO IV 2012-1 Ltd./Gallatin CLO IV 2012-1 LLC
Class Rating Amount
(mil. $)
A AAA (sf) 189.00
B AA (sf) 39.00
C (deferrable) A (sf) 24.00
D (deferrable) BBB (sf) 12.00
E (deferrable) BB (sf) 14.00
F (deferrable) B (sf) 5.50
Subordinated notes NR 31.70
NR - Not rated.
GMAC 1998-C2: S&P Raises Rating on Class F Certificates From 'B'
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its rating on the
class F commercial mortgage pass-through certificates to
'AA+ (sf)' from 'B (sf)' from GMAC Commercial Mortgage Securities
Inc.'s series 1998-C2, a U.S. commercial mortgage-backed
securities (CMBS) transaction.
"The upgrade primarily reflects our analysis of the credit
characteristics of the remaining collateral, the transaction
structure, and liquidity available to the trust. In addition, our
analysis factored in the magnitude of loans for which the
collateral has been defeased ($78.4 million, 44.4%) and fully
amortizing loans ($50.4 million, 28.5%) with maturities ranging
between 2013 and 2023," S&P said.
TRANSACTION SUMMARY
"As of the Oct. 15, 2012, trustee remittance report, the
collateral pool balance was $176.7 million, which is 7.0% of the
balance at issuance. The pool includes 61 loans and one real
estate owned (REO) asset, down from 404 loans at issuance. The
transaction has experienced $62.4 million in principal losses
from 40 assets to date. Six loans ($28.8 million, 16.3%) in the
pool are on the master servicer's watchlist," S&P said.
SUMMARY OF TOP 10 NONDEFEASED ASSETS
"The top 10 nondefeased assets have an aggregate outstanding
balance of $55.6 million (31.5%). Two of the top 10 assets ($9.7
million, 5.5%) are with the special servicer while three of the
top 10 assets ($25.0 million, 14.1%) are on the master servicer's
watchlist," S&P said.
"The D'Amato Portfolio loan ($18.6 million, 10.5%), the largest
nondefeased asset in the pool, is secured by a portfolio of nine
retail properties and 28 industrial properties totaling 719,972
sq. ft. in Connecticut and Rhode Island. The loan was placed on
the master servicer's watchlist due to deferred maintenance from
storm damage on several properties in the portfolio. The master
servicer, Berkadia Commercial Mortgage LLC (Berkadia), indicated
that the borrower is remedying the deferred maintenance items. The
reported DSC and occupancy were 1.17x and 90.6%, for the six
months ended June 30, 2012," S&P said.
"The Hickory Manor Apartments loan, the fifth-largest nondefeased
asset in the pool ($3.8 million, 2.1%), is secured by a 152-unit
multifamily complex in Antioch, Tenn. The loan was placed on
Berkadia's watchlist due to a low reported DSC, which was 1.07x
for the six months ended June 30, 2012. Reported occupancy was
92.1% for the same period," S&P said.
"The Stratford House loan, the 10th-largest nondefeased asset in
the pool ($2.6 million, 1.5%), is secured by a 127-bed skilled
nursing home in Chattanooga, Tenn. The loan is on the master
servicer's watchlist due to a non-compliant state survey. The
reported DSC and occupancy for the trailing 12-months ended Sept.
30, 2011, were 3.55x and 94.0%," S&P said.
CREDIT CONSIDERATIONS
"As of the Oct. 15, 2012, trustee remittance report, two assets
($9.7 million, 5.5%) in the pool were with the special servicer,
also Berkadia. The payment status of the specially serviced
assets, as reported in the October 2012 trustee remittance report,
is: one is REO ($4.4 million, 2.5%) and one is a nonperforming
matured balloon loan ($5.3 million, 3.0%). Details of the two
assets are," S&P said:
"The Georgetown Plaza Shopping Center loan ($5.3 million, 3.0%),
the largest of the two assets with Berkadia, is the third-largest
nondefeased asset in the pool. The nonperforming matured balloon
loan is secured by a 109,800-sq.-ft. retail shopping center in
Indianapolis, Ind., and has a total reported trust exposure of
$6.3 million. The loan was transferred to the special servicer on
April 29, 2008, due to imminent maturity default. According to
Berkadia, it is currently working on environmental and litigation
issues. The reported net cash flow is insufficient to support debt
service and the property is currently 68.0% occupied. Based on an
updated May 2012 appraisal value, we expect a moderate loss upon
the eventual resolution of this loan," S&P said.
"The 7277 World Communications Drive (Sitel Corp.) asset, the
fourth-largest nondefeased asset in the pool, has a trust balance
of $4.4 million (2.5%) and a total reported trust exposure of $5.0
million. The 42,131-sq.-ft. office building in Omaha, Neb., was
transferred to Berkadia on Jan. 22, 2010, and became REO on Aug.
10, 2010. Berkadia stated that the 100% vacant property is under
contract for sale and is expected to close in November 2012. We
expect a significant loss upon the eventual resolution of the
asset," S&P said.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
GRAMERCY REAL: Moody's Affirms Caa3 Ratings on Two Note Classes
---------------------------------------------------------------
Moody's Investors Service has affirmed the ratings of all classes
of Notes issued by Gramercy Real Estate CDO 2005-1, Ltd. The
affirmations are due to key transaction parameters performing
within levels commensurate with the existing ratings levels. The
rating action is the result of Moody's on-going surveillance of
commercial real estate collateralized debt obligation and
collateralized loan obligation (CRE CDO CLO) transactions.
Moody's rating action is as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on Apr 7, 2009 Confirmed
at Aaa (sf)
Cl. A-2, Affirmed at Aaa (sf); previously on Apr 7, 2009 Confirmed
at Aaa (sf)
Cl. B, Affirmed at Aa2 (sf); previously on Nov 15, 2011 Upgraded
to Aa2 (sf)
Cl. C, Affirmed at Baa1 (sf); previously on Nov 15, 2011 Upgraded
to Baa1 (sf)
Cl. D, Affirmed at Ba1 (sf); previously on Nov 17, 2010 Downgraded
to Ba1 (sf)
Cl. E, Affirmed at Ba2 (sf); previously on Nov 17, 2010 Downgraded
to Ba2 (sf)
Cl. F, Affirmed at B1 (sf); previously on Nov 17, 2010 Downgraded
to B1 (sf)
Cl. G, Affirmed at B3 (sf); previously on Nov 17, 2010 Downgraded
to B3 (sf)
Cl. H, Affirmed at Caa2 (sf); previously on Nov 17, 2010
Downgraded to Caa2 (sf)
Cl. J, Affirmed at Caa3 (sf); previously on Nov 17, 2010
Downgraded to Caa3 (sf)
Cl. K, Affirmed at Caa3 (sf); previously on Apr 7, 2009 Downgraded
to Caa3 (sf)
Ratings Rationale
Gramercy Real Estate CDO 2005-1, Ltd. is a static (the
reinvestment period ended in July 2010) cash transaction backed by
a portfolio of whole loans (53.1% of the pool balance), commercial
mortgage backed securities (CMBS) including rake bonds (29.8%),
mezzanine loans (9.7%), and B-Notes (7.4%). As of the September
28, 2012 trustee report, the aggregate Note balance of the
transaction, including Preference Shares, has decreased to $760.7
million from $1.0 billion at issuance, as a result of the
combination of the junior notes cancellation to Class E, Class F,
Class G, and Class H Notes and of the paydown directed to the
Class A-1 Notes from regular amortization of collateral,
resolution and sales of defaulted collateral, and interest
proceeds paid as principal proceeds as a result of failing the par
value tests. In general, holding all key parameters static, the
junior note cancellations results in slightly higher expected
losses and longer weighted average lives on the senior Notes,
while producing slightly lower expected losses on the mezzanine
and junior Notes. However, this does not cause, in and of itself,
a downgrade or upgrade of any outstanding classes of Notes. The
transaction is failing its two par value tests while passing all
of its interest coverage tests. Currently, the transaction is
over-collateralized by $39.2 million (including cash principal
available for regular distribution).
There are nine assets with par balance of $243.1 million (30.9% of
the current pool balance) that are considered defaulted securities
as of the September 28, 2012 trustee report, compared to three
defaulted securities totaling $151.9 million par amount (16.8%) at
last review. Moody's does expect moderate to significant losses to
occur from these defaulted securities once they are realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has completed updated assessments for the non-Moody's
rated collateral. The bottom-dollar WARF is a measure of the
default probability within a collateral pool. Moody's modeled a
bottom-dollar WARF of 5,572 compared to 5,007 at last review. The
current distribution of Moody's rated collateral and assessments
for non-Moody's rated collateral is as follows: Aaa-Aa3 (10.4%
compared to 11.2%), A1-A3 (4.0% compared to 6.7%),Baa1-Baa3 (5.4%
compared to 2.1% at last review), Ba1-Ba3 (9.6% compared to 14.3%
at last review), B1-B3 (6.6% compared to 10.1% at last review),
and Caa1-Ca/C (64.0% compared to 55.6% at last review).
Moody's modeled to a WAL of 3.0 years, the same as that at last
review. The current WAL is based on the assumption about
extensions.
Moody's modeled a fixed 37.6% WARR, compared to 39.7% at last
review.
Moody's modeled a MAC of 8.4%, compared to 7.3% at last review.
Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO
rating models, which was released on March 22, 2012.
The cash flow model, CDOEdge(R) v3.2.1.2, was used to analyze the
cash flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. In general, the rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 37.6% to 27.6% or up to 47.6% would result in modeled
rating movement on the rated Notes of 0 to 6 notches downward and
0 to 7 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment and commercial real
estate property markets. Commercial real estate property values
are continuing to move in a positive direction along with a rise
in investment activity and stabilization in core property type
performance. Limited new construction and moderate job growth have
aided this improvement. However, a consistent upward trend will
not be evident until the volume of investment activity steadily
increases for a significant period, non-performing properties are
cleared from the pipeline, and fears of a Euro area recession are
abated.
The hotel sector is performing strongly with eight straight
quarters of growth and the multifamily sector continues to show
increases in demand with a growing renter base and declining home
ownership. Slow recovery in the office sector continues with
minimal additions to supply. However, office demand is closely
tied to employment, where growth remains slow and employers are
considering decreases in the leased space per employee. Also,
primary urban markets are outperforming secondary suburban
markets. Performance in the retail sector continues to be mixed
with retail rents declining for the past four years, weak demand
for new space and lackluster sales driven by discounting and
promotions. However, rising wages and reduced unemployment, along
with increased consumer confidence, is helping to spur consumer
spending resulting in increased sales. Across all property
sectors, the availability of debt capital continues to improve
with robust securitization activity of commercial real estate
loans supported by a monetary policy of low interest rates.
Moody's central global macroeconomic scenario maintains its
forecast of relatively robust growth in the US and an expectation
of a mild recession in the euro area for 2012. Downside risks
remain significant, and elevated downside risks and their
materialization could pose a serious threat to the outlook. Major
downside risks include: a deeper than expected recession in the
euro area; the potential for a hard landing in major emerging
markets; an oil supply shock; and material fiscal tightening in
the US given recent political gridlock. Healthy but below-trend
growth in GDP is expected through the rest of this year and next
with risks trending to the downside.
The methodologies used in this rating were "Moody's Approach to
Rating SF CDOs" published in May 2012, and "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
GOLUB CAPITAL 14: S&P Gives 'BB' Rating on Class E Def Notes
------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to Golub
Capital Partners CLO 14 Ltd./Golub Capital Partners CLO 14 LLC's
$446.5 million floating-rate notes.
The transaction is a cash flow collateralized loan obligation
securitization of a revolving pool consisting primarily of broadly
syndicated senior secured loans.
The ratings reflect S&P's assessment of:
The credit enhancement provided to the rated notes through the
subordination of cash flows that are payable to the
subordinated notes.
The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting excess spread), and cash flow structure, which
can withstand the default rate projected by Standard & Poor's
CDO Evaluator model, as assessed by Standard & Poor's using
the assumptions and methods outlined in its corporate
collateralized debt obligation criteria.
The transaction's legal structure, which is expected to be
bankruptcy remote.
The diversified collateral portfolio, which consists primarily
of broadly syndicated speculative-grade senior secured term
loans.
The asset manager's experienced management team.
"Our projections regarding the timely interest and ultimate
principal payments on the rated notes, which we assessed using
our cash flow analysis and assumptions commensurate with the
assigned ratings under various interest-rate scenarios,
including LIBOR ranging from 0.34%-12.26%," S&P said.
The transaction's overcollateralization and interest coverage
tests, a failure of which will lead to the diversion of
interest and principal proceeds to reduce the balance of the
rated notes outstanding.
The transaction's interest reinvestment test, a failure of
which during the reinvestment period will lead to the
reclassification of excess interest proceeds that are
available prior to paying subordinated management fees,
uncapped administrative expenses, and subordinated note
payments into principal proceeds for the purchase of
collateral assets.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1050.pdf
RATINGS ASSIGNED
Golub Capital Partners CLO 14 Ltd./
Golub Capital Partners CLO 14 LLC
Class Rating Amount (mil. $)
A AAA (sf) 308.0
B AA (sf) 45.0
C (deferrable) A (sf) 40.0
D (deferrable) BBB (sf) 26.5
E (deferrable) BB (sf) 27.0
Sub. notes NR 68.408
NR - Not rated.
HARTFORD MEZZANINE: Fitch Affirms CCC Ratings on 2 Debt Classes
---------------------------------------------------------------
Fitch Ratings has upgraded five classes and affirmed five classes
of Hartford Mezzanine Investors I CRE CDO 2007-1 (HMI I 2007-1)
reflecting Fitch's base case loss expectation of 29.7%. Fitch's
performance expectation incorporates prospective views regarding
commercial real estate market value and cash flow declines.
The upgrades to classes A-3 through E reflect significantly
improved credit enhancement to the classes. The CDO exited its
reinvestment period in August 2012 . Since Fitch's last rating
action, the CDO liabilities have been paid down by an additional
$147 million, generally, from uninvested principal proceeds that
totaled over $106 million at last review and from the full payoff
of three loans. Classes A-1 and A-2 have paid in full while class
A-3 has been paid down to its current balance of $2.7 million.
The CDO is concentrated with only 13 assets remaining. As of the
September 2012 trustee report and per Fitch categorizations, the
collateral pool consists of 68.7% whole loans and A-notes, 4.9% B-
notes, 22% mezzanine debt, and 4.4% CMBS. The combined percentage
of defaulted assets and Fitch loans of concern totals 42.6%
compared to 34% at last review. The CDO is undercollateralized by
$36.5 million.
HMI I 2007-1 is co-managed by Hartford Investment Management
Company (HIMCO) and KeyBank Real Estate Equity Capital Inc. As of
the September 2012 trustee report, all par value and interest
coverage test were in compliance.
Under Fitch's methodology, approximately 73.8% of the portfolio is
modeled to default in the base case stress scenario, defined as
the 'B' stress. In this scenario, the modeled average cash flow
decline is 11.8% from, generally, trailing 12-month first or
second quarter 2012. Modeled recoveries are above average at
59.7% due to the significant percentage of senior debt.
The largest component of Fitch's base case loss expectation is
related to a B-note (4.9% of the pool) secured by five office
properties located in Kansas City, MO and Overland Park, KS.
Portfolio performance has been below expectations due to lost
leasing and market conditions. Fitch modeled a term default with
a full loss in the base case scenario on this overleveraged
position.
The next largest component of Fitch's base case loss expectation
is related to a defaulted A-note (6.1%) secured by a 3,675-acre
resort development located in southwestern Montana. The borrower
is in Chapter 7 bankruptcy and the plan is for the trustee to
liquidate the property. Fitch modeled a significant loss in the
base case scenario.
The third largest component of Fitch's base case loss expectation
is related to a whole loan (14.2%) secured by a 220,000 sf office
property located in Costa Mesa, CA. As of June 2012, occupancy
was 94%; however, the largest tenant (33% of NRA) is expected to
vacate at year end. Fitch modeled a term default with a
significant loss in its base case scenario.
This transaction was analyzed according to the 'Surveillance
Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate
Transactions', which applies stresses to property cash flows and
debt service coverage ratio tests to project future default levels
for the underlying portfolio. Recoveries are based on stressed
cash flows and Fitch's long-term capitalization rates. The
default levels were then compared to the breakeven levels
generated by Fitch's cash flow model of the CDO under the various
default timing and interest rate stress scenarios, as described in
the report 'Global Criteria for Cash Flow Analysis in CDOs'. The
breakeven rates for classes A-3 through G are generally consistent
with the ratings listed below.
The Stable Outlooks on classes A-3 through G generally reflect the
class's cushion in the modeling.
The ratings for classes H through K are based on a deterministic
analysis that considers Fitch's base case loss expectation for the
pool and the current percentage of defaulted assets and Fitch
Loans of Concern factoring in anticipated recoveries relative to
each classes credit enhancement.
Fitch upgrades the following classes and revises Outlooks as
indicated:
-- $2,732,124 class A-3 to 'Asf' from 'BBBsf'; Outlook Stable;
-- $35,000,000 class B to 'BBBsf' from 'BBsf'; Outlook Stable;
-- $10,000,000 class C to 'BBBsf' from 'BBsf'; Outlook Stable;
-- $10,000,000 class D to 'BBBsf' from 'BBsf'; Outlook to Stable
from Negative;
-- $15,000,000 class E to 'BBBsf' from 'BBsf'; Outlook to Stable
from Negative.
Fitch affirms the following classes and revises Outlooks as
indicated:
-- $25,000,000 class F at 'BBsf'; Outlook to Stable from
Negative;
-- $20,000,000 class G at 'Bsf''; Outlook to Stable from
Negative;
-- $21,250,000 class H at 'CCCsf'; RE 100%;
-- $23,750,000 class J at 'CCCsf'; RE 90%
-- $38,750,000 class K at 'CCsf'; RE 0%.
JAMESTOWN CLO I: S&P Gives 'BB' Rating on $24.75 Class D Notes
--------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to
Jamestown CLO I Ltd./Jamestown CLO I Corp.'s $412.25 million
floating-rate notes.
The note issuance is a collateralized loan obligation
securitization backed by a revolving pool consisting primarily of
broadly syndicated senior secured loans.
The ratings reflect S&P's view of:
The credit enhancement provided to the rated notes through the
subordination of cash flows that are payable to the
subordinated notes.
The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting excess spread), and cash flow structure, which
can withstand the default rate projected by Standard & Poor's
CDO Evaluator model, as assessed by Standard & Poor's using
the assumptions and methods outlined in its corporate
collateralized debt obligation criteria.
The transaction's legal structure, which is expected to be
bankruptcy remote.
The diversified collateral portfolio, which consists primarily
of broadly syndicated speculative-grade senior secured term
loans.
The collateral manager's experienced management team.
"Our projections regarding the timely interest and ultimate
principal payments on the rated notes, which we assessed using
our cash flow analysis and assumptions commensurate with the
assigned ratings under various interest-rate scenarios,
including LIBOR ranging from 0.3439%-12.6500%," S&P said.
The transaction's overcollateralization and interest coverage
tests, a failure of which will lead to the diversion of
interest and principal proceeds to reduce the balance of the
rated notes outstanding.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1084.pdf
RATINGS ASSIGNED
Jamestown CLO I Ltd./Jamestown CLO I Corp.
Class Rating Amount
(mil. $)
A-1 AAA (sf) 293.00
A-2 AA (sf) 40.50
B (deferrable) A (sf) 36.00
C (deferrable) BBB (sf) 18.00
D (deferrable) BB (sf) 24.75
Subordinated notes NR 48.95
NR-Not rated.
MARATHON REAL 2006-1: Moody's Affirms Caa3 Rating on Cl. K Notes
----------------------------------------------------------------
Moody's Investors Service has affirmed the ratings of all classes
of Notes issued by Marathon Real Estate CDO 2006-1, Ltd. The
affirmations are due to key transaction parameters performing
within levels commensurate with the existing ratings levels. The
rating action is the result of Moody's on-going surveillance of
commercial real estate collateralized debt obligation and
collateralized loan obligation (CRE CDO CLO) transactions.
Moody's rating action is as follows:
Cl. A-1, Affirmed at Aaa (sf); previously on Mar 19, 2009
Confirmed at Aaa (sf)
Cl. A-2, Affirmed at Aa2 (sf); previously on Mar 19, 2009
Downgraded to Aa2 (sf)
Cl. B, Affirmed at A1 (sf); previously on Mar 19, 2009 Downgraded
to A1 (sf)
Cl. C, Affirmed at Baa1 (sf); previously on Mar 19, 2009
Downgraded to Baa1 (sf)
Cl. D, Affirmed at Baa3 (sf); previously on Dec 1, 2010 Downgraded
to Baa3 (sf)
Cl. E, Affirmed at Ba1 (sf); previously on Dec 1, 2010 Downgraded
to Ba1 (sf)
Cl. F, Affirmed at Ba3 (sf); previously on Dec 1, 2010 Downgraded
to Ba3 (sf)
Cl. G, Affirmed at B2 (sf); previously on Dec 1, 2010 Downgraded
to B2 (sf)
Cl. H, Affirmed at Caa1 (sf); previously on Dec 1, 2010 Downgraded
to Caa1 (sf)
Cl. J, Affirmed at Caa2 (sf); previously on Dec 1, 2010 Downgraded
to Caa2 (sf)
Cl. K, Affirmed at Caa3 (sf); previously on Dec 1, 2010 Downgraded
to Caa3 (sf)
Ratings Rationale
Marathon Real Estate CDO 2006-1, Ltd. is a static (the
reinvestment period ended in May 2011) cash transaction backed by
a portfolio of whole loans (42.6% of the pool balance), commercial
mortgage backed securities (CMBS) including rake bonds (26.2%), B-
Notes (12.6%), CRE CDO debt (9.2%), mezzanine loans (4.3%), real
estate investment trust (REIT) debt and term loans (2.1%),
corporate bank loan (1.5%), and asset backed securities (ABS)
(1.5%). As of the September 25, 2012 Note Valuation report, the
aggregate Note balance of the transaction, including Preference
Shares, has decreased to $893.8 million from $1.0 billion at
issuance, as a result of the paydown directed to the Class A-1
Notes from principal repayment of collateral, and resolution and
sales of defaulted collateral. The transaction is passing all of
its par value and interest coverage tests. Currently, the
transaction is over-collateralized by $55.3 million.
There are six assets with par balance of $22.9 million (2.4% of
the current pool balance) that are considered defaulted assets as
of the September 25, 2012 Note Valuation report, compared to three
defaulted assets totaling $23.7 million par amount (2.2%) at last
review. Moody's does expect meaningful recovery to occur from
these defaulted 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 assessments for the non-Moody's
rated collateral. The bottom-dollar WARF is a measure of the
default probability within a collateral pool. Moody's modeled a
bottom-dollar WARF of 4,550 compared to 4,686 at last review. The
current distribution of Moody's rated collateral and assessments
for non-Moody's rated collateral is as follows: Aaa-Aa3 (3.6%
compared to 4.8%), A1-A3 (9.3% compared to 11.9%),Baa1-Baa3 (9.7%
compared to 9.2% at last review), Ba1-Ba3 (7.0% compared to 7.3%
at last review), B1-B3 (15.9% compared to 10.9% at last review),
and Caa1-Ca/C (54.5% compared to 55.9% at last review).
Moody's modeled to a WAL of 4.8 years, compared to 3.1 years at
last review. The current WAL is based on the assumption about
extensions.
Moody's modeled a fixed 33.8% WARR, compared to 34.7% at last
review.
Moody's modeled a MAC of 8.3%, compared to 6.4% at last review.
Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO
rating models, which was released on March 22, 2012.
The cash flow model, CDOEdge(R) v3.2.1.2, was used to analyze the
cash flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. In general, the rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 33.8% to 23.8% or up to 43.8% would result in modeled
rating movement on the rated Notes of 0 to 5 notches downward and
0 to 7 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment and commercial real
estate property markets. Commercial real estate property values
are continuing to move in a positive direction along with a rise
in investment activity and stabilization in core property type
performance. Limited new construction and moderate job growth have
aided this improvement. However, a consistent upward trend will
not be evident until the volume of investment activity steadily
increases for a significant period, non-performing properties are
cleared from the pipeline, and fears of a Euro area recession are
abated.
The hotel sector is performing strongly with eight straight
quarters of growth and the multifamily sector continues to show
increases in demand with a growing renter base and declining home
ownership. Slow recovery in the office sector continues with
minimal additions to supply. However, office demand is closely
tied to employment, where growth remains slow and employers are
considering decreases in the leased space per employee. Also,
primary urban markets are outperforming secondary suburban
markets. Performance in the retail sector continues to be mixed
with retail rents declining for the past four years, weak demand
for new space and lackluster sales driven by discounting and
promotions. However, rising wages and reduced unemployment, along
with increased consumer confidence, is helping to spur consumer
spending resulting in increased sales. Across all property
sectors, the availability of debt capital continues to improve
with robust securitization activity of commercial real estate
loans supported by a monetary policy of low interest rates.
Moody's central global macroeconomic scenario maintains its
forecast of relatively robust growth in the US and an expectation
of a mild recession in the euro area for 2012. Downside risks
remain significant, and elevated downside risks and their
materialization could pose a serious threat to the outlook. Major
downside risks include: a deeper than expected recession in the
euro area; the potential for a hard landing in major emerging
markets; an oil supply shock; and material fiscal tightening in
the US given recent political gridlock. Healthy but below-trend
growth in GDP is expected through the rest of this year and next
with risks trending to the downside.
The methodologies used in this rating were "Moody's Approach to
Rating SF CDOs" published in May 2012, and "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
MERRILL LYNCH 2006-HE4: Moody's Cuts Rating on A-2B Tranche to C
----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings on two
tranches from two subprime RMBS transactions issued by Merrill
Lynch. The collateral backing these transactions are subprime
residential mortgage loans.
Complete rating actions are as follows:
Issuer: Merrill Lynch Mortgage Investors Trust Series 2006-HE4
Cl. A-2B, Downgraded to C (sf); previously on Jul 19, 2010
Downgraded to Ca (sf)
Issuer: Merrill Lynch Mortgage Investors Trust Series 2006-HE6
Cl. A-2A, Downgraded to Ca (sf); previously on Jul 19, 2010
Downgraded to Caa3 (sf)
Ratings Rationale
The actions are a result of the recent performance of Subprime
pools originated after 2005 and reflect Moody's updated loss
expectations on these pools. The downgrade in the rating action is
a result of deteriorating performance and/or structural features
resulting in higher expected losses for the bond than previously
anticipated.
The methodologies used in these ratings were "Moody's Approach to
Rating US Residential Mortgage-Backed Securities" published in
December 2008, and "2005 -- 2008 US RMBS Surveillance Methodology"
published in July 2011.
Moody's adjusts the methodologies noted above for Moody's current
view on loan modifications As a result of an extension of the Home
Affordable Modification Program (HAMP) to 2013 and an increased
use of private modifications, Moody's is extending its previous
view that loan modifications will only occur through the end of
2012. It is now assuming that the loan modifications will continue
at current levels until the end of 2013.
To assess the rating implications of the updated loss levels on
subprime RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R) (SFW), the cash
flow model developed by Moody's Wall Street Analytics. This
individual pool level analysis incorporates performance variances
across the different pools and the structural features of the
transaction including priorities of payment distribution among the
different tranches, average life of the tranches, current balances
of the tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different combinations
comprising of six loss levels, four loss timing curves and four
prepayment curves. The volatility in losses experienced by a
tranche due to extended foreclosure timelines by servicers is
taken into consideration when assigning ratings.
The primary sources of assumption uncertainty are Moody's central
macroeconomic forecast and performance volatility as a result of
servicer-related activity such as modifications. The unemployment
rate fell from 9.0% in September 2011 to 7.8% in September 2012.
Moody's expects unemployment rate to stay between 7.5% to 8.5% in
2013. Moody's expects housing prices to remain stable through the
remainder of 2012 before gradually rising towards the end of 2013.
Performance of RMBS continues to remain highly dependent on
servicer activity such as modification-related principal
forgiveness and interest rate reductions. Any change resulting
from servicing transfers or other policy or regulatory change can
also impact the performance of these transactions.
A list of these actions including CUSIP identifiers may be found
at http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF305535
A list of updated estimated pool losses, sensitivity analysis, and
tranche recovery details is being posted on an ongoing basis for
the duration of this review period and may be found at:
http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_SF198689
OHA CREDIT VII: S&P Gives 'BB' Rating on Class E Deferrable Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to OHA
Credit Partners VII Ltd./OHA Credit Partners VII Inc.'s $696
million floating- and fixed-rate notes.
The note issuance is a collateralized loan obligation
securitization backed by a revolving pool consisting primarily of
broadly syndicated senior secured loans.
The ratings reflect S&P's view of:
The credit enhancement provided to the rated notes through the
subordination of cash flows that are payable to the
subordinated notes.
The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting excess spread), and cash flow structure, which
can withstand the default rate projected by Standard & Poor's
CDO Evaluator model, as assessed by Standard & Poor's using
the assumptions and methods outlined in its corporate
collateralized debt obligation (CDO) criteria.
The transaction's legal structure, which is expected to be
bankruptcy remote.
The diversified collateral portfolio, which consists primarily
of broadly syndicated speculative-grade senior secured term
loans.
The collateral manager's experienced management team.
"Our projections regarding the timely interest and ultimate
principal payments on the rated notes, which we assessed using
our cash flow analysis and assumptions commensurate with the
assigned ratings under various interest-rate scenarios,
including LIBOR ranging from 0.3143%-13.8391%," S&P said.
The transaction's overcollateralization and interest coverage
tests, a failure of which will lead to the diversion of
interest and principal proceeds to reduce the balance of the
rated notes outstanding.
The transaction's interest diversion test, a failure of which
during the reinvestment period will lead to the
reclassification of up to 50% of excess interest proceeds that
are available (before paying subordinated and incentive
collateral management fees, uncapped administrative expenses
and hedge amounts, subordinated note payments, and expenses
related to a refinancing) to principal proceeds for the
purchase of additional collateral assets or, after the noncall
period, to pay the notes sequentially, at the election of the
collateral manager.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1085.pdf
RATINGS ASSIGNED
OHA Credit Partners VII Ltd./OHA Credit Partners VII Inc.
Class Rating Amount
(mil. $)
X AAA (sf) 4.5
A AAA (sf) 461.0
B-1 AA (sf) 87.0
B-2 AA (sf) 15.0
C-1 (deferrable) A (sf) 34.0
C-2 (deferrable) A (sf) 20.0
D (deferrable) BBB (sf) 38.5
E (deferrable) BB (sf) 36.0
Subordinated notes NR 74.0
NR-Not rated.
RACE POINT VII: S&P Gives 'BB-' Rating on Class E Deferrable Notes
------------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to Race
Point VII CLO Ltd./Race Point VII CLO Corp.'s floating-rate notes.
The note issuance is a CLO securitization backed by a revolving
pool consisting primarily of broadly syndicated senior secured
loans.
The ratings reflect S&P's view of:
The credit enhancement provided to the rated notes through the
subordination of cash flows that are payable to the
subordinated notes;
The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting excess spread), and cash flow structure, which
can withstand the default rate projected by Standard & Poor's
CDO Evaluator model, as assessed by Standard & Poor's using
the assumptions and methods outlined in its corporate
collateralized debt obligation (CDO) criteria;
The transaction's legal structure, which is expected to be
bankruptcy remote;
The diversified collateral portfolio, which consists primarily
of broadly syndicated, speculative-grade, senior secured term
loans;
The asset manager's experienced management team;
"The timely interest and ultimate principal payments on the
rated notes, which we assessed using our cash flow analysis
and assumptions commensurate with the assigned ratings under
various interest-rate scenarios, including LIBOR ranging from
0.34% to 12.26%," S&P said;
The transaction's overcollateralization and interest coverage
tests, a failure of which will lead to the diversion of
interest and principal proceeds to reduce the balance of the
rated notes outstanding; and
The transaction's interest reinvestment test, a failure of
which during the reinvestment period would lead to the
reclassification of excess interest proceeds that are
available prior to paying subordinated management fees,
uncapped administrative expenses, and subordinated note
payments into principal proceeds for the purchase of
collateral assets.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1083.pdf
RATINGS ASSIGNED
Race Point VII CLO Ltd./Race Point VII CLO Corp.
Class Rating Interest Amount
rate (mil. $)
X AAA (sf) Three-month LIBOR plus 1.00% 4.5
A AAA (sf) Three-month LIBOR plus 1.42% 381.0
B AA (sf) Three-month LIBOR plus 2.25% 72.0
C (deferrable) A (sf) Three-month LIBOR plus 3.00% 45.0
D (deferrable) BBB (sf) Three-month LIBOR plus 4.25% 0.0
E (deferrable) BB- (sf) Three-month LIBOR plus 5.00% 28.5
Subordinated NR N/A 63.5
NR-Not rated.
N/A-Not applicable.
RESIDENTIAL RE 2011-1: S&P Puts 'BB-' Class 5 Note Rating on Watch
------------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'BB-(sf)' rating on
Residential Reinsurance 2011 Ltd. Series 2011-1 Class 5 notes and
'BB(sf)' rating on Residential Reinsurance 2012 Ltd. Series 2012-1
Class 5 notes on CreditWatch with negative implications.
"Residential Reinsurance is an ongoing natural peril catastrophe
bond program (since 1997) sponsored by United Services Automobile
Assn. (USAA; AA+/Negative/--). Each class of notes covers annual
losses from hurricane, earthquake, severe thunderstorm, winter
storm, and wildfire on an aggregate basis. The current risk period
began on June 1, 2012, and ends May 31, 2013," S&P said.
"We placed the ratings on CreditWatch due to a loss estimate
notice related to Catastrophe Series 90 (Hurricane Sandy)
submitted by USAA to Residential Reinsurance 2011 and 2012. The
estimates of ultimate net losses range from $129 million to $363
million, with a point estimate of $291 million," S&P said.
"So far there have been two covered events for the current risk
period, Catastrophe Series 77 (a central and northeast U.S. wind
and hail tornado on June 6) and Catastrophe Series 83 (a central
and northeast U.S. wind and hail tornado on June 28) that have
generated estimated ultimate net losses of $187 million. These
events, plus the losses from Hurricane Sandy, decrease the
amount of future losses necessary to trigger an event payment and,
in our view, increase the risk associated with these bonds," S&P
said.
"We have asked AIR Worldwide Corp., the reset and calculation
agent, to recalculate the probability of attachment for the
remaining risk period, using each of the above lost estimates.
Once we receive those results, we will update the status of the
CreditWatch within 10 days," S&P said.
"In October 2012, we received an updated probability of attachment
for reflecting the losses from Catastrophe Series 77 and 83, and
the time remaining in the current risk period. Based on this
information, we do not anticipate that the ratings on either class
of notes would be lowered by more than one notch. There is the
potential for no rating action to be taken as well--at that point,
we would remove the ratings from CreditWatch," S&P said.
"To the extent losses accrue through the risk period but do not
reach the attachment point, the attachment point will be reset on
June 1, 2013, the risk period starts anew and all losses from the
previous risk period will not count for the current risk period,"
S&P said.
RATINGS LIST
Ratings On CreditWatch
To From
Residential Reinsurance 2011 Ltd.
Series 2011-1 Class 5 BB-(sf)/Watch Neg BB-(sf)
Residential Reinsurance 2012 Ltd.
Series 2012-1 Class 5 BB(sf)/Watch Neg BB(sf)
RESIDENTIAL RE 2012-II: S&P Gives 'BB+' Rating on Class 1 Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services assigned its 'BB+(sf)' and
'BB(sf)' preliminary ratings to the Series 2012-II Class 1 and
Class 2 notes to be issued by Residential Reinsurance 2012 Ltd.
(Res Re 2012). The notes cover losses in the covered area from
hurricane, earthquake, severe thunderstorm, winter storm, and
wildfire on a per-occurrence basis.
"The Class 1 notes will cover losses between the attachment point
of $3.650 billion and the exhaustion point of $4.175 billion, and
the Class 2 notes will cover losses between the attachment point
of $2.800 billion and the exhaustion point of $3.650 billion," S&P
said.
"The preliminary ratings are based on the lower of the following:
the rating on the catastrophe risk ('BB+' for the Class 1 and 'BB'
for the Class 2 notes), the rating on the assets in the
reinsurance trust account ('AAAm' for each class of notes), and
the risk of nonpayment by the ceding insurer (AA+). The cedants
will be United Services Automobile Assn., a reciprocal
interinsurance exchange organized under the laws of Texas; USAA
Casualty Insurance Co., a Texas corporation; USAA Texas Lloyd's
Co., a Texas Lloyd's plan insurer; USAA General Indemnity Co., a
Texas-domiciled stock insurance company; Garrison Property and
Casualty Insurance Co.; and other affiliates. They will be
responsible for the quarterly payment due under the reinsurance
agreement with Res Re 2012," S&P said.
"We have previously rated Residential Reinsurance 2012 Ltd. Notes.
Series 2012-I Class 3 and Class 5 notes were both issued in May
2012. The Series 2012-1 Class 3 notes have an attachment point of
$2 billion and are rated 'BB-(sf)'. The Class 5 notes have an
attachment point of $1.571 billion, and are rated 'BB(sf)'," S&P
said.
RATINGS LIST
Residential Reinsurance 2012 Ltd.
Series 2012-II Class 1 notes BB+(sf)
Series 2012-II Class 2 notes BB(sf)
SARGAS CLO II: Fitch Lifts Rating on Class E Notes From 'BBsf'
--------------------------------------------------------------
Fitch Ratings has upgraded one class of notes issued by Sargas CLO
II Ltd./LLC as follows:
-- $11,684,663 class E notes to 'Asf' from 'BBsf'; Outlook
Stable.
The upgrade reflects the significant amortization and stable
performance of the underlying loan portfolio that has occurred
since Fitch's last rating action in December 2011 while accounting
for the highly concentrated and relatively low-rated nature of the
remaining portfolio.
The underlying loan portfolio has continued to amortize since
Fitch's last rating action without experiencing significant
deterioration. Only one of the remaining obligors has been
downgraded over this time, to 'CC' from 'CCC', while no additional
defaults have occurred. Fitch considers the average credit
quality of the portfolio to remain in the 'B-/CCC+' range. The
class C and class D notes, which together had approximately $21.7
million of par outstanding at Fitch's last review, have since been
paid in full. The class E notes now represent the senior-most
class of notes and received approximately $7.5 million of
principal in addition to their ordinary interest and an accrued
payable of almost $139 thousand at the Oct. 22, 2012 payment date.
The class E notes now benefit from an increased degree of credit
enhancement as a result of the amortization of the capital
structure.
As of the Oct. 5, 2012 trustee report, Fitch considers the
performing loan portfolio to consist of approximately $40.1
million of par from nine unique obligors generally rated in the
'CCC' and 'B' rating categories. In order to account for the
portfolio's concentration risk, Fitch modeled the transaction
using the Obligor Concentration Uplift (OCU) feature in its
Portfolio Credit Model (PCM) as the base case scenario. The
default and recovery level outputs from PCM 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'. While Fitch's cash flow analysis
indicated higher passing rating levels for the class E notes, the
extent of the upgrade captures the improvement in credit
enhancement while accounting for the obligor concentration risk in
the remaining portfolio. In accordance with its 'Criteria for
Rating Caps in Global Structured Finance Transactions', Fitch is
capping the rating at 'Asf' due to the degree of obligor
concentration in the underlying portfolio.
Sargas CLO II is a collateralized debt obligation (CDO) that
closed on Aug. 16, 2006 and was originally named De Meer Middle
Market CLO 2006-1 Ltd./LLC. Fortress Investment Group purchased
the management contract for the transaction from Pangaea Asset
Management in December 2010. The transaction's substitution
period ended in March 2009. According to the most recent trustee
report the underlying loan portfolio consists of 52.9% broadly
syndicated loans and 47.1% middle market loans.
WEST CLO 2012-1: S&P Gives 'BB' Rating on $19.80 Class D Notes
--------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to West
CLO 2012-1 Ltd./West CLO 2012-1 LLC's $412.9 million floating-rate
notes.
The note issuance is a collateralized loan obligation
securitization backed by a revolving pool consisting primarily of
broadly syndicated senior-secured loans.
The ratings reflect S&P's view of:
The credit enhancement provided to the rated notes through the
subordination of cash flows that are payable to the
subordinated notes.
The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting the excess spread), and cash flow structure,
which can withstand the default rate projected by Standard &
Poor's CDO Evaluator model, as assessed by Standard & Poor's
using the assumptions and methods outlined in its corporate
collateralized debt obligation (CDO) criteria.
The transaction's legal structure, which is expected to be
bankruptcy remote.
The diversified collateral portfolio, which primarily
comprises broadly syndicated speculative-grade senior-secured
term loans.
The collateral manager's experienced management team.
"Our projections regarding the timely interest and ultimate
principal payments on the rated notes, which we assessed using
our cash flow analysis and assumptions commensurate with the
assigned ratings under various interest-rate scenarios,
including LIBOR ranging from 0.3439% to 13.8391%," S&P said.
The transaction's overcollateralization and interest coverage
tests, a failure of which will lead to the diversion of
interest and principal proceeds to reduce the balance of the
rated notes outstanding," S&P said.
The transaction's interest diversion test, a failure of which
will lead to the reclassification of excess interest proceeds
that are available prior to paying uncapped administrative
expenses, incentive management fees, and subordinated note
payments into principal proceeds for the purchase of
additional collateral assets during the reinvestment period,"
S&P said.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1081.pdf
RATINGS ASSIGNED
West CLO 2012-1 Ltd./West CLO 2012-1 LLC
Class Rating Amount
(mil. $)
A-1 AAA (sf) 292.50
A-2 AA (sf) 42.75
B (deferrable) A (sf) 37.30
C (deferrable) BBB (sf) 20.55
D (deferrable) BB (sf) 19.80
Subordinated notes NR 46.70
NR-Not rated.
WRIGHTWOOD CAPITAL: Moody's Cuts 2 Note Class Ratings to 'Caa3'
---------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of two
classes and affirmed the ratings of seven classes of Notes issued
by Wrightwood Capital Real Estate CDO 2005-1, Ltd. The downgrades
are due to deterioration in the underlying collateral as evidenced
by the Moody's weighted average rating factor (WARF) and property
type composition changes away from multifamily since last review.
The affirmations are due to key transaction parameters performing
within levels commensurate with the existing ratings levels. The
rating action is the result of Moody's on-going surveillance of
commercial real estate collateralized debt obligation and
collateralized loan obligation (CRE CDO CLO) transactions.
Cl. A-1, Affirmed at Aa3 (sf); previously on Apr 15, 2009
Downgraded to Aa3 (sf)
Cl. A-R, Affirmed at Aa3 (sf); previously on Apr 15, 2009
Downgraded to Aa3 (sf)
Cl. B, Affirmed at Ba3 (sf); previously on Dec 9, 2010 Downgraded
to Ba3 (sf)
Cl. C, Affirmed at B2 (sf); previously on Dec 9, 2010 Downgraded
to B2 (sf)
Cl. D, Affirmed at B3 (sf); previously on Dec 9, 2010 Downgraded
to B3 (sf)
Cl. E, Downgraded to Caa3 (sf); previously on Apr 15, 2009
Downgraded to Caa1 (sf)
Cl. F, Downgraded to Caa3 (sf); previously on Apr 15, 2009
Downgraded to Caa2 (sf)
Cl. G, Affirmed at Caa3 (sf); previously on Apr 15, 2009
Downgraded to Caa3 (sf)
Cl. H, Affirmed at Caa3 (sf); previously on Apr 15, 2009
Downgraded to Caa3 (sf)
Ratings Rationale
Wrightwood Capital Real Estate CDO 2005-1, Ltd. is a transaction
backed by a portfolio of A-Notes and whole loans (100% of the pool
balance). As of the September 28, 2012 Trustee report, the
aggregate Note balance of the transaction, including preferred
shares is $622.7 million, down from $630.5 million at issuance,
with the paydown directed to Class A-1 and Class A-R Notes, as a
result of regular amortization of the underlying collateral. There
is an undrawn balance Class A-R of approximately $19.5 million
which, if drawn, would increase the aggregate Note balance of the
transaction to $642.2 million.
There is one asset with a par balance of $13.0 million (2.2% of
the current pool balance) that is considered defaulted interest as
of the September 28, 2012 Trustee report. Moody's expects
significant loss from this defaulted interest to occur once it is
realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: 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 assessments for the non-Moody's
rated collateral.
Moody's modeled a bottom-dollar WARF of 7,546, compared to 6,808
at last review. The current distribution of Moody's rated
collateral and assessments for non-Moody's rated collateral is as
follows: Ba1-Ba3 (0.7% compared to 2.7% at last review) and Caa1-C
(99.3% compared to 97.3% at last review).
Moody's modeled a WAL of 3.3 years, compared to 2.5 years at last
review. The current WAL is based on the assumption about
extensions.
Moody's modeled a fixed WARR, excluding defaulted interests, of
56.1% compared to 56.5% at last review.
Moody's modeled a MAC of 100.0% compared to 25.7% at last review.
Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO
rating models, which was released on March 22, 2012.
The cash flow model, CDOEdge(R) v3.2.1.2, was used to analyze the
cash flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
56.1% to 46.1% or up to 66.1% would result in modeled rating
movements on the rated Notes of 0 to 3 notches downward and 0 to 6
notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment and commercial real
estate property markets. Commercial real estate property values
are continuing to move in a positive direction along with a rise
in investment activity and stabilization in core property type
performance. Limited new construction and moderate job growth have
aided this improvement. However, a consistent upward trend will
not be evident until the volume of investment activity steadily
increases for a significant period, non-performing properties are
cleared from the pipeline, and fears of a Euro area recession are
abated.
The hotel sector is performing strongly with eight straight
quarters of growth and the multifamily sector continues to show
increases in demand with a growing renter base and declining home
ownership. Slow recovery in the office sector continues with
minimal additions to supply. However, office demand is closely
tied to employment, where growth remains slow and employers are
considering decreases in the leased space per employee. Also,
primary urban markets are outperforming secondary suburban
markets. Performance in the retail sector continues to be mixed
with retail rents declining for the past four years, weak demand
for new space and lackluster sales driven by discounting and
promotions. However, rising wages and reduced unemployment, along
with increased consumer confidence, is helping to spur consumer
spending resulting in increased sales. Across all property
sectors, the availability of debt capital continues to improve
with robust securitization activity of commercial real estate
loans supported by a monetary policy of low interest rates.
Moody's central global macroeconomic scenario maintains its
forecast of relatively robust growth in the US and an expectation
of a mild recession in the euro area for 2012. Downside risks
remain significant, and elevated downside risks and their
materialization could pose a serious threat to the outlook. Major
downside risks include: a deeper than expected recession in the
euro area; the potential for a hard landing in major emerging
markets; an oil supply shock; and material fiscal tightening in
the US given recent political gridlock. Healthy but below-trend
growth in GDP is expected through the rest of this year and next
with risks trending to the downside.
The methodologies used in this rating were "Moody's Approach to
Rating SF CDOs" published in May 2012, and "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
WRIGHTWOOD CAPITAL 2005-1: S&P Cuts Ratings on 5 Classes to 'CCC-'
------------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on eight
classes from Wrightwood Capital Real Estate CDO 2005-1 Ltd., a
commercial real estate collateralized debt obligation (CRE CDO)
transaction, and removed them from CreditWatch with negative
implications. "At the same time, we affirmed our 'CCC- (sf)'
rating on class H and removed it from CreditWatch with negative
implications," S&P said.
"The downgrades and affirmation reflect our analysis of the
transaction's liability structure and the credit characteristics
of the underlying collateral using our criteria for global CDOs of
pooled structured finance assets. We also considered the amount of
defaulted assets in the transactions and their expected recoveries
in our analysis," S&P said.
"The global CDOs of pooled structured finance assets criteria,
which we published on Feb. 21, 2012, include revisions to our
assumptions on correlations, recovery rates, and default patterns
and timings of the collateral. The criteria also include
supplemental stress tests (largest obligor default test and
largest industry default test) in our analysis," S&P said.
"According to the Sept. 28, 2012, trustee report, the
transaction's collateral totaled $614.3 million, which includes
$16.9 million of unfunded future advances and $22.3 million of
principal proceeds. The transaction's liabilities totaled $642.2
million, which includes $19.5 million of undrawn proceeds from
class A-R. The liability balance at issuance was originally
$650.0 million. The transaction's current asset pool consists of
40 whole loans," S&P said.
"The trustee report noted one defaulted loan, Arrowpoint and
Atrium ($13.0 million, 2.2%), in the collateral pool. In addition,
we determined two additional assets, Renaissance Square ($16.6
million, 2.8%) and Sanctuary Centre ($6.4 million, 1.1%), to be
credit impaired. Standard & Poor's estimated asset-specific
recovery rates ranging from 37% to 71%, with a weighted average
recovery rate of 45%. We based our recovery analysis on
information provided by the collateral manager, special servicer,
and third-party data providers," S&P said.
"We applied asset specific recovery rates in our analysis of the
37 performing loans ($556.1 million, 93.9%) using our updated
methodology and assumptions for rating U.S. and Canadian CMBS and
our global property evaluation methodology, both published Sept.
5, 2012. We also considered qualitative factors such as the near-
term maturities of the loans, refinancing prospects, and loans
modifications," S&P said.
According to the trustee report, the deal is passing all three
principal coverage tests, as well as all three interest coverage
tests.
Standard & Poor's will continue to review whether, in its view,
the ratings assigned to the notes remain consistent with the
credit enhancement available to support them and take rating
actions as it determines necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LOWERED AND REMOVED FROM CREDITWATCH
Wrightwood Capital Real Estate CDO 2005-1 Ltd.
Rating
Class To From
A-1 B- (sf) BB (sf)/Watch Neg
A-R B- (sf) BB (sf)/Watch Neg
B CCC (sf) B+ (sf)/Watch Neg
C CCC- (sf) B+ (sf)/Watch Neg
D CCC- (sf) B (sf)/Watch Neg
E CCC- (sf) CCC+ (sf)/Watch Neg
F CCC- (sf) CCC+ (sf)/Watch Neg
G CCC- (sf) CCC (sf)/Watch Neg
RATING AFFIRMED AND REMOVED FROM CREDITWATCH
Wrightwood Capital Real Estate CDO 2005-1 Ltd.
Rating Rating
Class To From
H CCC- (sf) CCC- (sf)/Watch Neg
* S&P Raises Ratings on 22 Tranches From 19 CDO Transactions
------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on 22
tranches from 19 corporate-backed synthetic CDO transactions and
removed them from CreditWatch with positive implications.
"The upgrades are from synthetic CDOs that experienced a
combination of upward rating migration in their underlying
reference portfolios, seasoning of the underlying reference names
and an increase in the synthetic rated overcollateralization
(SROC) ratios above 100% at higher rating levels as of the October
review and at our projection of the SROC ratios in 90 days
assuming no credit migration," S&P said.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATING ACTIONS
Athenee CDO PLC
EUR25 mil tranche B Hunter Valley CDO II floating rate notes due
June 30, 2014
series 2007-4
Rating Rating
Class To From
Tranche B BB (sf) BB- (sf)/Watch Pos
Athenee CDO PLC
EUR40 mil tranche B Hunter Valley CDO II floating-rate notes due
June 30, 2014
series 2007-14
Rating Rating
Class To From
Tranche B BB (sf) BB- (sf)/Watch Pos
Corsair (Jersey) No. 4 Ltd.
Series I
Rating Rating
Class To From
Def Fx Rt BBB (sf) BBB- (sf)/Watch Pos
Credit Default Swap
US$500 mil Credit Default Swap - CRA700386
Rating Rating
Class To From
Swap AAAsrp (sf) AA+srp (sf)/Watch Pos
Credit Default Swap
US$500 mil Credit Default Swap - CRA700396
Rating Rating
Class To From
Swap AAAsrp (sf) AA+srp (sf)/Watch Pos
Infinity SPC Limited
US$25 mil Class B Floating Rate Notes (CPORTS POTOMAC 2007-1)
Rating Rating
Class To From
B B (sf) B- (sf)/Watch Pos
Jupiter Finance Ltd.
2007-002
Rating Rating
Class To From
Port CrLkd BB+ (sf) BB (sf)/Watch Pos
Lorally CDO Limited Series 2006-2
Rating Rating
Class To From
2006-2 A+ (sf) A (sf)/Watch Pos
Lorally CDO Limited Series 2006-4
Rating Rating
Class To From
2006-4 A+ (sf) A (sf)/Watch Pos
Morgan Stanley ACES SPC
Series 2005-12
Rating Rating
Class To From
Fltg Rt Nt BB+ (sf) BB (sf)/Watch Pos
Morgan Stanley ACES SPC
Series 2006-13
Rating Rating
Class To From
A A- (sf) BBB (sf)/Watch Pos
Morgan Stanley ACES SPC
Series 2007-8
Rating Rating
Class To From
Senior A- (sf) BB+ (sf)/Watch Pos
A2 BBB- (sf) B- (sf)/Watch Pos
Morgan Stanley Managed ACES SPC
Series 2005-1
Rating Rating
Class To From
Jr Sup Sr AA+ (sf) AA (sf)/Watch Pos
NOAJ CDO Ltd.
Series 1
Rating Rating
Class To From
Series 1 BB+ (sf) BB (sf)/Watch Pos
ORSO Portfolio Tranche Index Certificates
Rating Rating
Class To From
CL AA- (sf) A+ (sf)/Watch Pos
Repacs Trust Series: Bayshore I
Rating Rating
Class To From
A BBB- (sf) BB+ (sf)/Watch Pos
Rutland Rated Investments
EUR5 mil, US$197 mil Dryden XII - IG Synthetic CDO 2006-1
Rating Rating
Class To From
A3-$LS BBB+ (sf) BBB (sf)/Watch Pos
A3B-$LS BBB+ (sf) BBB (sf)/Watch Pos
A3C-$LS BBB+ (sf) BBB (sf)/Watch Pos
STARTS (Cayman) Ltd.
Series 2006-5
Rating Rating
Class To From
A2-D2 A- (sf) BBB (sf)/Watch Pos
STARTS (Ireland) PLC
US$50 mil Maple Hill II Managed Synthetic CDO series 2007-31
Rating Rating
Class To From
A2-D2 BBB- (sf) BB+ (sf)/Watch Pos
* S&P Puts Ratings on 23 Tranches From 11 US CDOs on Watch Pos
--------------------------------------------------------------
Standard & Poor's Ratings Services placed its ratings on 23
tranches from 11 U.S. cash flow trust preferred collateralized
debt obligation (CDO) transactions on CreditWatch with positive
implications.
The affected tranches are from transactions backed by trust
preferred securities issued by banks and insurance companies.
"The CreditWatch placements reflect improved coverage ratios as a
result of paydowns the transactions have made to the notes,
predominantly to the senior parts of each CDO's capital structure.
The paydowns have accelerated in the last few months because of an
increase in the redemption of the underlying trust preferred
securities. We believe that many of the transactions' documents
contain call provisions that may be triggered by changes in the
regulatory treatment of trust preferred securities. The Federal
Reserve's June 7, 2012, notice of proposed rulemaking (the Fed
Notice) may have triggered such provisions in many trust preferred
documents. The Fed Notice includes a proposal to phase out Tier 1
capital credit for trust preferred securities over a 10-year
period for a broader range of U.S. banks than what was previously
generally considered," S&P said.
"We will resolve the CreditWatch placements after we complete a
comprehensive cash flow analysis and committee review for each of
the affected transactions. We expect to resolve these CreditWatch
placements within 90 days. We will continue to monitor the CDO
transactions we rate and take rating actions, including
CreditWatch placements, as we deem appropriate," S&P said.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 s included in this
credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS PLACED ON CREDITWATCH POSITIVE
Alesco Preferred Funding XI Ltd.
Rating
Class To From
A-1A BBB- (sf)/Watch Pos BBB- (sf)
A-1B BBB- (sf)/Watch Pos BBB- (sf)
Alesco Preferred Funding XIII Ltd.
Rating
Class To From
A-1 B- (sf)/Watch Pos B- (sf)
ICONS Ltd
Rating
Class To From
A A- (sf)/Watch Pos A- (sf)
B BBB (sf)/Watch Pos BBB (sf)
C-1 B (sf)/Watch Pos B (sf)
C-2 B (sf)/Watch Pos B (sf)
C-3 B (sf)/Watch Pos B (sf)
D B- (sf)/Watch Pos B- (sf)
MM Community Funding IX Ltd.
Rating
Class To From
A-1 B (sf)/Watch Pos B (sf)
Preferred Term Securities VIII Ltd.
Rating
Class To From
A-1 B+ (sf)/Watch Pos B+ (sf)
Preferred Term Securities IX Ltd.
Rating
Class To From
A-1 BB+ (sf)/Watch Pos BB+ (sf)
A-2 CCC+ (sf)/Watch Pos CCC+ (sf)
A-3 CCC+ (sf)/Watch Pos CCC+ (sf)
Preferred Term Securities X Ltd.
Rating
Class To From
A-1 B+ (sf)/Watch Pos B+ (sf)
Preferred Term Securities XII Ltd.
Rating
Class To From
A-1 BB+ (sf)/Watch Pos BB+ (sf)
A-2 B (sf)/Watch Pos B (sf)
A-3 B (sf)/Watch Pos B (sf)
A-4 B (sf)/Watch Pos B (sf)
TPref Funding III Ltd.
Rating
Class To From
A-2 BB+ (sf)/Watch Pos BB+ (sf)
Trapeza CDO III LLC
Rating
Class To From
A1A BBB- (sf)/Watch Pos BBB- (sf)
A1B B+ (sf)/Watch Pos B+ (sf)
Tropic CDO III Ltd.
Rating
Class To From
A-1L B+ (sf)/Watch Pos B+ (sf)
* S&P Lowers Ratings on 783 Classes From 116 US RMBS Transactions
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 783
classes from 116 U.S. residential mortgage-backed securities
(RMBS) transactions and removed 660 of them from CreditWatch with
negative implications, 79 from CreditWatch with developing
implications, and six from CreditWatch with positive implications
following our updated analysis on loss severity. "We also raised
our ratings on 160 classes and removed 61 of them from CreditWatch
positive, 58 from CreditWatch developing, and eight from
CreditWatch negative because we obtained additional loan-level
information that was not available at the time of the CreditWatch
placements. We also affirmed our ratings on 502 classes from 123
transactions and removed 33 of them from CreditWatch negative, 66
from CreditWatch developing, and 10 from CreditWatch positive. We
subsequently withdrew nine of the lowered ratings, 26 of the
affirmed ratings, and two of the raised ratings because of our
view of the potential for performance volatility associated with
pools with fewer than 20 loans. In addition, we withdrew our
ratings on 43 classes from 32 transactions, 40 of which were on
CreditWatch negative, one on CreditWatch developing, and one on
CreditWatch positive. We withdrew 40 of these ratings in
accordance with our current interest-only criteria and three
of them because they have been paid in full," S&P said.
"The transactions in this review were issued between 1989 and 2008
and are backed by adjustable- and fixed-rate prime jumbo mortgage
loans secured rimarily by first liens on one- to four-family
residential properties," S&P said.
"On Aug. 15, 2012, we placed our ratings on 1,023 classes from 138
of these transactions on CreditWatch negative, positive, or
developing, along with ratings from a group of other RMBS
securities due to the implementation of our recently revised
criteria for surveilling pre-2009 U.S. RMBS ratings. CreditWatch
negative placements accounted for approximately 72% of the
resolved CreditWatch actions in this review, CreditWatch
developing placements accounted for approximately 20%, and
CreditWatch positive placements accounted for approximately 8%. We
completed our review on these transactions using the revised
assumptions, and these rating actions resolve some of the
CreditWatch placements," S&P said.
3 or fewer More than 3
From Affirmations notches notches
Up Down Up Down
Watch Pos 10 18 4 43 2
Watch Neg 33 6 315 2 345
Watch Dev 66 45 64 13 15
"The high percentage of CreditWatch negative placements reflected
our projection that remaining losses for a majority of the prime
jumbo transactions will increase. We may have placed our ratings
on CreditWatch negative for certain structures that had reduced
forecasted losses due to an increased multiple of loss coverage
for certain investment-grade rated tranches as set forth in our
revised criteria," S&P said.
The increased projected losses resulted from one or more of these
factors:
-- An increase in our default and loss multiples at higher
investment-grade rating levels;
-- An increased portion of nondelinquent loans (generally between
1% and 8%) are now categorized as reperforming (many of these
loans have been modified) and have a default frequency of 25%
or 30%; and
-- S&P extended liquidation curves that eroded projected credit
support prior to when it would be needed.
Shelf # Deals
/Structures
Name Reviewed
Banc of America Funding Trust (BAF) 6/7
Banc of America Mortgage Trust (BAM) 24/40
CHL Mortgage Pass Through Trust (CHL) 29/30
DLJ Mortgage Acceptance Corp. (DLJ) 2/3
First Horizon Mortgage Pass Through Trust (FHM) 4/4
Guardian S&L Assn (GRD) 1/1
IndyMac ARM Trust (IND) 1/1
JPMorgan Mortgage Trust (JPM) 7/11
Merrill Lynch Mortgage Investors Inc. (MLMI) 23/23
Morgan Stanley Mortgage Loan Trust (MSM) 9/10
Salomon Brothers Mortgage Securities (SAL) 2/2
Structured ARM Loan Trust (SARM) 5/5
Structured Asset Mortgage Investment Trust (SAMI) 13/14
Structured Asset Securities Corp. (SAS) 3/4
Structured Mortgage Asset Residential Trust (SMA) 1/2
Thornburg Mortgage Securities Trust (THR) 14/14
The tables detail information on each reviewed shelf as of
September 2012.
Losses And Delinquencies*
Shelf Avg. Pool Cum. Loss Serious DQ Total DQ
Name Factor (%) Avg. (%) Avg. (%) Avg. (%)
BAF 21.44 0.58 6.08 8.72
BAM 18.59 0.73 7.08 9.07
CHL 17.02 0.91 10.98 13.35
DLJ 0.23 0.14 37.77 59.22
FHM 32.65 3.46 9.30 11.33
GRD 0.20 9.48 34.89 34.89
IND 0.68 0.50 28.93 33.28
JPM 22.02 1.18 8.94 11.94
MLMI 20.51 0.81 7.16 9.66
MSM 20.77 1.08 10.03 14.00
SAL 1.02 1.97 27.77 36.21
SARM 17.37 0.86 7.46 13.43
SAMI 9.37 0.93 12.19 16.50
SAS 0.67 0.60 14.99 24.48
SMA 0.06 0.01 0.00 45.36
THR 26.73 2.35 9.18 11.56
* Cumulative losses represent the percentage of the original pool
balance, and total and severe delinquencies represent the
percentage of the current pool balance.
Shelf # IG # Non-IG # IG to # Down/Up
Name Affirmed Affirmed Non-IG >3 notches
BAF 6 16 7 24/19
BAM 13 156 37 108/20
CHL 25 106 18 79/2
DLJ 0 4 0 0/0
FHM 0 14 0 0/6
IND 0 4 0 0/0
JPM 10 30 3 24/14
MLMI 5 37 16 40/12
MSM 8 15 3 43/5
SAL 2 0 0 0/0
SARM 0 11 3 26/0
SAMI 1 6 1 3/1
SAS 2 4 0 0/0
SMA 1 0 0 0/0
THR 1 25 9 15/0
IG - Investment grade.
"In addition, some of the reviewed transactions or respective
structures within a transaction are backed by a small remaining
population of mortgage loans. Standard & Poor's believes that the
liquidation of one of more of the loans in transactions with a
small number of remaining loans may have an adverse effect on
credit. This potential 'tail risk' to the rated classes resulted
from one or more of these factors," S&P said:
Shifting-interest payment structures increase the possibility
of volatile credit performance. The cash flow mechanics within
these transactions allow unscheduled principal to be repaid to
subordinate classes while more senior classes remain
outstanding if certain performance triggers are met. This
decreases the actual dollar amount of credit enhancement
available to cover losses;
The lack of optional terminations ("clean-up" calls) in which
a designated participant can purchase the remaining loans
within a trust when the pool factor declines to a defined
percentage, effectively retiring the securities;
The lack of credit enhancement floors that could add
additional protection to the classes within a structure.
Securities currently rated 'AAA (sf)' in transactions that
have shifting-interest pay mechanisms and do not benefit from
a credit enhancement floor or an equivalent functional
mechanism will be rated no higher than 'AA+ (sf)'.
"In cases where a structure contained fewer than 100 loans or is
approaching 100 loans remaining, we addressed tail risk by
conducting additional loan-level analysis that stresses the loan
concentration risk within the specific pool. We may calculate loss
severities at the loan level using assumptions, such as market-
value declines published in the 2009 RMBS criteria, instead of
using pool-level assumptions. Because we developed our loss
severity assumptions using an aggregate sample set of data, we
applied a 1.2x adjustment factor to the loss severity assumption
for each loan when calculating loan-level loss severities to
account for potential variation between actual and calculated loss
severities when a loan is liquidated. The loss severity we used in
our analysis is equal to the higher of the calculated loss
severity and 20%. We use a 20% minimum loss severity to mitigate
potential information risk differences between the actual property
profile and condition and the reported estimated value using a
housing price index. Finally, we apply a 50% minimum loss severity
to the largest remaining loan balance if the calculated amount is
lower. The final rating assigned to each class will be the lower
of the rating derived by applying our revised surveillance
criteria and the rating derived by applying our tail risk
criteria," S&P said.
"We reviewed and subsequently withdrew our ratings on 37 classes
from 16 transactions because these pools contained fewer than 20
loans. If any of the remaining loans in this pool were to default,
the resulting loss could have a greater effect on the pool's
performance than if the pool consisted of a larger number of
loans. Because this performance volatility may have an adverse
effect on the stability of our outstanding ratings, we
subsequently withdrew nine of the lowered ratings, 26 of the
affirmed ratings and two of the raised ratings due to the small
number of loans remaining," S&P said.
"Some of the transactions in this review have failed their current
delinquency triggers, which can affect the allocation of principal
to their classes. However, the payment priority of the deals that
failed these triggers may allow for additional allocation of
principal to the subordinate classes if they begin passing their
delinquency triggers again. In these instances, according to our
criteria, we lowered the ratings to 'AA+ (sf)' even though some of
these classes pass our 'AAA (sf)' stress scenario," S&P said.
"Of the downgraded classes, we lowered our ratings on 97 classes
to speculative-grade from investment-grade. Of these classes, we
lowered 90 to ratings between 'BB+ (sf)' and 'B- (sf)' and lowered
seven to 'CCC (sf)' or 'CC (sf)'. Additionally, 552 of the lowered
ratings remain at investment-grade. The remaining 134 downgraded
classes already had speculative-grade ratings prior to the
downgrades," S&P said.
"We affirmed our ratings on 388 classes in the 'CCC (sf)' or 'CC
(sf)' categories. We believe that the projected credit support for
these classes will remain insufficient to cover the revised base-
case projected losses to these classes," S&P said.
"In addition to 37 classes withdrawn due to the related pool
containing fewer than 20 loans, we withdrew our ratings on 43
classes from 32 transactions. We withdrew 40 of these ratings in
accordance with our IO criteria because the referenced classes no
longer sustained ratings above 'A+ (sf)' and we withdrew three
ratings because the classes have been paid in full," S&P said.
"In accordance with our counterparty criteria, we considered any
applicable hedges related to these securities when performing
these rating actions and resolving the CreditWatch placements,"
S&P said.
Subordination generally provides credit support for these prime
jumbo transactions.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
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then-ending.
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*********
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
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