/raid1/www/Hosts/bankrupt/TCR_Public/130616.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, June 16, 2013, Vol. 17, No. 165
Headlines
1776 CLO I: Moody's Confirms 'Ba3' Rating on $16.5MM Cl. E Notes
ACA ABS 2004-1: Moody's Raises Class A-2 Notes Rating to 'B3'
ACA CLO 2006-1: Moody's Affirms 'Ba2' Rating on Class D Notes
ACA CLO 2006-2: Moody's Raises Ratings on $10.8MM Notes to 'Ba1'
ACAS CLO 2012-1: S&P Affirms 'BB-' Rating on Class E Notes
ALESCO PREFERRED XIII: Moody's Hikes Rating on A-2 Notes From Ba1
AMERICA MERRILL 2013-C10: Fitch to Rate $16.71MM Cl. H Certs 'B'
AMERICREDIT AUTOMOBILE 2013-3: Fitch to Rate Class E Notes 'BB'
AMERICREDIT AUTOMOBILE 2013-3: Moody's Rates Cl. E Secs. '(P)Ba1'
ATRIUM IV: Moody's Hikes Rating on $3.5MM Cl. D-2 Notes to 'Ba2'
AVIATION CAPITAL: S&P Puts B-1 Notes' BB Rating on Watch Negative
BABSON CLO 2006-I: Moody's Hikes Rating on Class E Notes to 'Ba1'
BALLYROCK CLO 2006-1: Moody's Lifts Cl. E Notes' Rating to Ba2
BANC OF AMERICA 2003-1: Fitch Affirms 'C' Rating on Class O Certs
BATTALION CLO III: S&P Affirms 'BB' Rating on Class D Notes
BEAR STEARNS 2001-TOP4: Moody' Lifts Cl. M Certs Rating to 'Caa1'
BEAR STEARNS 2004-PWR5: Moody's Cuts Rating on Cl. P Certs to 'C'
BEAR STEARNS 2007-BBA8: Moody's Keeps 'Caa2' Rating on 3 Classes
BENEFIT STREET II: S&P Assigns 'BB' Rating on Class D Notes
CARLYLE GLOBAL 2012-4: S&P Affirms 'BB' Rating on Class E Notes
CIFC FUNDING 2013-II: S&P Rates $30.7MM Class B-2L Notes 'BB-'
COBALT CMBS 2007-C2: Moody's Affirms C Ratings on 6 CMBS Classes
COMM 2004-LNB4: S&P Affirms 'CCC-' Rating on Class B Notes
COMM 2013-THL: Fitch to Rate $29MM Class F Certs. at 'B'
COMMERCIAL MORTGAGE 1999-C1: Moody's Ups Cl. L Notes Rating to B1
CPS AUTO 2013-B: S&P Assigns Prelim. 'BB' Rating on Class D Notes
CPS AUTO 2013-B: Moody's Assigns Provisional Ratings to 5 Classes
CREDIT SUISSE 2001-CKN5: Moody's Cuts Rating on 2 Certs to C(sf)
CRF-18 LLC: S&P Raises Rating on Class D Notes to 'BB'
CSAM FUNDING II: Moody's Raises Rating on Class D Notes From Ba1
CWABS 2007-BC3: Moody's Cuts Rating on Cl. 2-A-1 Debt to 'Caa1'
DBUBS 2011-LC2: Moody's Affirms 'B3' Ratings on 2 CMBS Classes
DETROIT: S&P Lowers Ratings on General Obligation Bonds to 'CCC-'
DUANE STREET IV: S&P Affirms 'BB-' Rating on Class E Notes
EATON VANCE VIII: Moody's Affirms 'Ba2' Rating on Class D Notes
FIRST HORIZON 2006-3: Moody's Cuts Ratings on 4 RMBS Tranches
FIRST UNION 2001-C3: S&P Raises Rating on Class L Notes to 'B-'
FOOTHILL/EASTERN TRANSPORTATION.: Moody's Rates 2013B Bonds 'Ba1'
GALAXY VIII: Moody's Lifts Rating on Class E Notes to 'Ba2'
GALAXY XII: S&P Affirms 'BB' Rating on $16-Mil. Class E Notes
GE CAPITAL 2001-3: Fitch Affirms 'C' Rating on Cl. I Certificates
GLG ORE 2013-1: S&P Assigns Prelim. 'BB' Rating on Class E Notes
GOLUB CAPITAL: S&P Affirms 'BB' Rating on Class E Notes
GREENPOINT 2005-HE4: Moody's Ups Rating on 3 Debt Classes to Ba3
GREENWICH CAPITAL: Fitch Affirms 'D' Rating on Class N Certs
GREYLOCK SYNTHETIC 2006: Moody's Raises Ratings on 13 CDO Classes
GSC INVESTMENT: S&P Affirms 'BB' Rating on Class E Notes
HERCULES REDEVELOPMENT: S&P Puts TABs' CC Rating on Watch Neg.
HOMEWARD RESIDENTIAL: Fitch Reviews Realized Losses in RMBS Deals
INDUS PLC: DBRS Cuts Rating on Class C Debt to 'C(sf)'
IRWIN WHOLE 2005-C: Moody's Hikes $5 Million of 2nd Lien RMBS
JAMESTOWN CLO I: S&P Affirms 'BB' Rating on Class D Notes
JAMESTOWN CLO II: S&P Affirms 'BB' Rating on $19.5MM Cl. D Notes
JP MORGAN 2002-CIBC5: Fitch Affirms 'D' Rating on Class M Certs
JP MORGAN 2006-LDP9: Moody's Cuts 2 Certificate Ratings to 'Caa1'
LCM XIII: S&P Affirms 'BB' Rating on Class E Notes
LNR SECURITIES: Rights Transfer No Impact on Moody's Ratings
LSTAR 2011-1: Moody's Affirms B2 Rating on Class F Certificates
MADISON PARK IX: S&P Affirms 'BB' Rating on Class E Notes
MAGNETITE VII: S&P Affirms 'BB' Rating on $28.8MM Class D Notes
MERCER FIELD: S&P Affirms 'BB' Rating on $60.48MM Class E Notes
MERRILL LYNCH 1998-C1-CTL: S&P Affirms BB+ Rating on Cl. E Notes
MILWAUKEE HOUSING: Moody's Cuts Ratings on Rev. Refunding Bonds
ML-CFC 2006-1: S&P Lowers Rating on Class C Notes to 'B-'
ML-CFC 2007-5: Moody's Affirms 'C' Ratings on 7 Classes
ML-CFC 2007-6: Moody's Affirms 'C' Ratings on 10 Cert. Classes
MORGAN STANLEY 2001-IQ: Moody's Hikes Rating on Cl. M Notes to B3
MORGAN STANLEY 2004-TOP13: Moody's Affirms Ratings on 9 Classes
MUIR WOODS: S&P Affirms 'BB' Rating on Class E Notes
NATIONS EQUIPMENT I: Moody's to Rate Class D Notes '(P)Ba2'
NATIONSTAR MORTGAGE: S&P Assigns 'B' Rating on 6 Note Classes
NEWMARK CAPITAL 2013-1: S&P Gives Prelim BB Rating on Cl. E Notes
OCTAGON INVESTMENT: S&P Rates $23.5-Mil. Class E Notes 'BB'
PALISADES CDO: Fitch Hikes Ratings on 2 Note Classes to 'Bsf'
PORTER SQUARE: Fitch Cuts Ratings on 3 Note Classes to 'D'
PORTOLA CLO: S&P Raises Rating on Class E Notes to 'B-(sf)'
POTOMAC SYNTHETIC 2007-1: Moody's Ups Rating on 10B-1 Notes to B2
PREFERRED TERM XXVI: Moody's Hikes Rating on $140MM Notes to Ba1
PREFERRED TERM XXVII: Moody's Ups Rating on $40.5MM Notes to Caa2
REGATTA FUNDING: Moody's Affirms 'Ba2' Rating on Cl. B-2L Notes
SEQUOIA MORTGAGE 2013-8: Fitch Rates Class B-4 Certificates 'BB'
SHACKLETON I CLO: S&P Affirms 'BB' Rating on $20MM Class E Notes
SHINNECOCK CLO 2006-1: Moody's Hikes Rating on Cl. E Notes to Ba1
SLM STUDENT 2006-5: Fitch Upgrades Class B Notes From 'BB'
SPRINGLEAF FUNDING: S&P Assigns Prelim 'BB' Rating on Cl. C Notes
T2 INCOME I: Moody's Lifts Rating on Class E Notes From 'Ba1(sf)'
TAURUS CMBS 2007-1: DBRS Cuts Cl. B Securities Rating to BB(high)
WACHOVIA BANK 2004-C14: S&P Affirms 'BB' Rating on Class H Notes
WACHOVIA BANK 2007-C30: Moody's Keeps 'C' Ratings on 11 Classes
WACHOVIA BANK 2007-C31: Moody's Affirms 'C' Ratings on 11 Certs
WAMU 2007-HE4: Moody's Downgrades $174MM of Subprime RMBS
WFRBS 2012-C7: Moody's Affirms Ratings on 13 Classes
* Fitch Cuts Ratings on 249 Bonds in 155 US RMBS Deals to 'Dsf'
* Fitch Says U.S. CREL CDO Delinquencies Drop 12.7% in April
* Fitch: Lack of CMBS 2.0 Delinquencies Holds Overall Rate Steady
* Moody's Wraps Review of Deutsche Bank-Managed Student Loans
* Moody's Takes Action on 50 Subprime RMBS Tranches From 2001-07
* S&P Lowers 62 Ratings on 16 U.S. RMBS Transactions
* S&P Cuts Ratings on 43 Classes From 15 U.S. RMBS Transactions
* S&P Withdraws Ratings on 73 Classes From 27 CDO Transactions
*********
1776 CLO I: Moody's Confirms 'Ba3' Rating on $16.5MM Cl. E Notes
----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of the following
notes issued by 1776 CLO I, Ltd.:
$33,500,000 Class B Floating Rate Notes Due May 8, 2020,
Upgraded to Aaa (sf); previously on May 9, 2013 Aa1 (sf) Placed
Under Review for Possible Upgrade;
$27,000,000 Class C Floating Rate Notes Due May 8, 2020,
Upgraded to Aa2 (sf); previously on May 9, 2013 A1 (sf) Placed
Under Review for Possible Upgrade;
$35,500,000 Class D Floating Rate Notes Due May 8, 2020,
Upgraded to Baa1 (sf); previously on May 9, 2013 Baa3 (sf)
Placed Under Review for Possible Upgrade;
Moody's also confirmed the ratings of the following notes:
$16,500,000 Class E Floating Rate Notes Due May 8, 2020,
Confirmed at Ba3 (sf); previously on May 9, 2013 Ba3 (sf)
Placed Under Review for Possible Upgrade.
Moody's also affirmed the ratings of the following notes:
$50,000,000 Class A-1 Floating Rate Notes Due May 8, 2012
(current outstanding balance of $33,798,630), Affirmed Aaa
(sf); previously on April 27, 2006 Assigned Aaa (sf);
$296,500,000 Class A-2 Floating Rate Notes Due May 8, 2012
(current outstanding balance of $200,425,875), Affirmed Aaa
(sf); previously on April 27, 2006 Assigned Aaa (sf).
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are a
result of applying revised CLO assumptions described in "Moody's
Global Approach to Rating Collateralized Loan Obligations"
published in May 2013 as well as deleveraging of the senior notes.
In taking the foregoing actions, Moody's also announced that it
had concluded its review of its ratings on the issuer's Class B
Notes, Class C Notes, Class D Notes, and Class E Notes announced
on May 9, 2013.
These actions reflect key changes to modeling assumptions applied
by Moody's in its methodology for rating CLOs, which impact
transactions that have material exposure to collateral other than
first-lien loans. As part of the methodology update, Moody's uses
its corporate family rating, when available, to determine the
default probability of both first-lien loans and other less common
instruments, including senior secured, senior unsecured and
subordinated bonds, senior secured floating rate notes, as well as
second-lien and senior unsecured loans. Moody's also harmonized
its recovery rate treatment of senior secured bonds, second-lien
loans and senior secured floating rate notes as one group, and
senior unsecured loans, senior unsecured bonds and subordinated
bonds as another. In the case of 1776 CLO I, Ltd., the methodology
update resulted in Moody's assuming a lower WARF and higher WARR
in its analysis when compared to the previous methodology.
In addition to the benefit from changes in modeling assumptions,
the deal has experienced deleveraging of its senior notes and an
increase in its overcollateralization ratios since the rating
action in March 2012. Moody's notes that the Class A Notes have
been paid down by approximately 32.4% or $112.3 million since the
last rating action. Based on the latest trustee report dated April
30, 2013, the Class A/B, Class C, Class D and Class E
overcollateralization ratios are reported at 140.5%, 128.4%,
115.4% and 110.2%, respectively versus February 2012 levels of
130.0%, 121.4%, 111.6% and 107.6%, respectively. Moody's also
notes that the trustee reported overcollateralization ratios do
not include the May 8, 2013 payment distribution when $20.2
million of principal proceeds was used to pay down the Class A
Notes.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Global Approach to Rating Collateralized
Loan Obligations" published in May 2013, 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 $375.7 million,
defaulted par of $8.6 million, a weighted average default
probability of 13.32% (implying a WARF of 1925), a weighted
average recovery rate upon default of 43.57%, and a diversity
score of 27. 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.
1776 CLO I, Ltd., issued in April 2006, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans, with a significant exposure to corporate bonds.
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (1540)
Class A-1: 0
Class A-2: 0
Class B: 0
Class C: +1
Class D: +2
Class E: +2
Moody's Adjusted WARF + 20% (2310)
Class A-1: 0
Class A-2: 0
Class B: 0
Class C: -2
Class D: -2
Class E: 0
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:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market and/or
collateral sales by the manager, which may have significant impact
on the notes' ratings. Conversely, deleveraging may decelerate if
the manager continues to participate in a significant number of
amend-to-extend transactions.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
3) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assumes an asset's terminal value upon
liquidation at maturity to be equal to the lower of an assumed
liquidation value (depending on the extent to which the asset's
maturity lags that of the liabilities) and the asset's current
market value. Long-dated assets have increased by $9 million since
the last rating action and currently comprise close to 5% of the
collateral pool.
ACA ABS 2004-1: Moody's Raises Class A-2 Notes Rating to 'B3'
-------------------------------------------------------------
Moody's Investors Service upgraded the rating of the following
notes issued by ACA ABS 2004-1:
$49,500,000 Class A-2 Senior Secured Floating Rate Notes Due
2039 (current balance: $40,213,958), Upgraded to B3 (sf);
previously on September 8, 2011 Downgraded to Caa2 (sf)
Moody's also affirmed the ratings of the following notes:
$47,250,000 Class B Senior Secured Floating Rate Notes Due
2039, Affirmed Ca (sf); previously on May 7, 2010 Downgraded to
Ca (sf)
$18,375,000 Class C-1 Mezzanine Secured Floating Rate Notes Due
2039 (current balance: $15,002,865) , Affirmed C (sf);
previously on May 7, 2010 Downgraded to C (sf)
$3,000,000 Class C-2 Mezzanine Secured Fixed Rate Notes Due
2039 (current balance: $2,449,447), Affirmed C (sf); previously
on May 7, 2010 Downgraded to C (sf)
$13,000,000 Combination Securities Due 2039, Affirmed C (sf);
previously on May 7, 2010 Downgraded to C (sf)
Ratings Rationale:
According to Moody's, the rating action taken on the notes is
primarily a result of deleveraging of the senior notes and an
increase in the Class A-2's overcollateralization ratio since the
rating action in July 2012. Moody's notes that the Class A-1 Notes
have been paid down in full and the Class A-2 Notes have been paid
down by approximately 18% or $9.2 million since the last rating
action. Based on the latest trustee report dated April 30th, 2013
the Moody's calculated Class A-2 overcollateralization ratio is
171.67%, versus July 2012 level of 135.92%.
Notwithstanding benefits of the deleveraging, Moody's notes that
the credit quality of the underlying portfolio has deteriorated
since the last rating action. Based on the April 2013 trustee
report, the weighted average rating factor is currently 2905
compared to 2020 in April 2012.
ACA ABS 2004-1, Ltd., issued in May 2004, is a collateralized debt
obligation issuance backed by a portfolio of primarily Residential
Mortgage-Backed Securities (RMBS).
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in May 2012. The methodology
used in rating the Combination Securities was "Using the
Structured Note Methodology to Rate CDO Combo-Notes" published in
February 2004.
Moody's applied the Monte Carlo simulation framework within
CDOROMv2.8 to model the loss distribution for SF CDOs. Within this
framework, defaults are generated so that they occur with the
frequency indicated by the adjusted default probability pool (the
default probability associated with the current rating multiplied
by the Resecuritization Stress) for each credit in the reference.
Specifically, correlated defaults are simulated using a normal (or
"Gaussian") copula model that applies the asset correlation
framework. Recovery rates for defaulted credits are generated by
applying within the simulation the distributional assumptions,
including correlation between recovery values.
Together, the simulated defaults and recoveries across each of the
Monte Carlo scenarios define the loss distribution for the
reference pool.
Once the loss distribution for the collateral has been calculated,
each collateral loss scenario derived through the CDOROM loss
distribution is associated with the interest and principal
received by the rated liability classes via the CDOEdge cash-flow
model . The cash-flow model takes into account the following:
collateral cash flows, the transaction covenants, the priority of
payments (waterfall) for interest and principal proceeds received
from portfolio assets, reinvestment assumptions, the timing of
defaults, interest-rate scenarios and foreign exchange risk (if
present). The Expected Loss (EL) for each tranche is the weighted
average of losses to each tranche across all the scenarios, where
the weight is the likelihood of the scenario occurring. Moody's
defines the loss as the shortfall in the present value of cash
flows to the tranche relative to the present value of the promised
cash flows. The present values are calculated using the promised
tranche coupon rate as the discount rate. For floating rate
tranches, the discount rate is based on the promised spread over
Libor and the assumed Libor scenario.
Moody's notes that in arriving at its ratings of SF CDOs, there
exist a number of sources of uncertainty, operating both on a
macro level and on a transaction-specific level. Primary sources
of assumption uncertainty are the extent of the slowdown in growth
in the current macroeconomic environment and the commercial and
residential real estate property markets. While commercial real
estate property markets are gaining momentum, a consistent upward
trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. Among the uncertainties in the residential
real estate property market are those surrounding future housing
prices, pace of residential mortgage foreclosures, loan
modification and refinancing, unemployment rate and interest
rates.
Moody's rating action factors in a number of sensitivity analyses
and stress scenarios. Results are shown in terms of the number of
notches' difference versus the current model output, where a
positive difference corresponds to lower expected loss, assuming
that all other factors are held equal:
Moody's Caa assets notched up by 2 rating notches:
Class A-2: +1
Class B: 0
Class C-1: 0
Class C-2: 0
Combination Securities: 0
Moody's Caa assets notched down by 2 rating notches:
Class A-2: -1
Class B: 0
Class C-1: 0
Class C-2: 0
Combination Securities: 0
ACA CLO 2006-1: Moody's Affirms 'Ba2' Rating on Class D Notes
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by ACA CLO 2006-1, Limited:
$22,750,000 Class B Deferrable Floating Rate Notes, Due July 2018,
Upgraded to Aa2 (sf); previously on August 20, 2012 Upgraded to A2
(sf);
$11,375,000 Class C Deferrable Floating Rate Notes, Due July 2018,
Upgraded to Baa1 (sf); previously on August 20, 2012 Upgraded to
Baa2 (sf).
Moody's also affirmed the ratings of the following notes:
$255,500,000 Class A-1 Senior Secured Floating Rate Notes, Due
July 2018 (current balance of $142,519,437), Affirmed Aaa (sf);
previously on August 15, 2011 Upgraded to Aaa (sf);
$21,000,000 Class A-2 Senior Secured Floating Rate Notes, Due July
2018, Affirmed Aaa (sf); previously on August 20, 2012 Upgraded to
Aaa (sf);
$11,375,000 Class D Deferrable Floating Rate Notes, Due July 2018,
Affirmed Ba2 (sf); previously on August 20, 2012 Upgraded to Ba2
(sf).
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the senior notes and an
increase in the transaction's overcollateralization ratios since
the rating action in August 2012. Moody's notes that the Class A-1
Notes have been paid down by approximately 42% or $103 million
since the last rating action. Based on the latest trustee report
dated May 2013, the Class A, Class B, Class C and Class D
overcollateralization ratios are reported at 138.7%, 121.8%,
114.8% and 108.5%, respectively, versus July 2012 levels of
124.0%, 114.2%, 109.9% and 105.9% respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Global Approach to Rating Collateralized
Loan Obligations" published in May 2013, 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 $226 million,
defaulted par of $6.3 million, a weighted average default
probability of 16.74% (implying a WARF of 2651), a weighted
average recovery rate upon default of 49.65%, and a diversity
score of 64. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
ACA CLO 2006-1, Ltd. issued in July 2006, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (2121)
Class A-1: 0
Class A-2: 0
Class B: +2
Class C: +3
Class D: +1
Moody's Adjusted WARF + 20% (3181)
Class A-1: 0
Class A-2: 0
Class B: -2
Class C: -1
Class D: -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:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market and/or
collateral sales by the manager, which may have significant impact
on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
3) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assumes an asset's terminal value upon
liquidation at maturity to be equal to the lower of an assumed
liquidation value (depending on the extent to which the asset's
maturity lags that of the liabilities) and the asset's current
market value.
ACA CLO 2006-2: Moody's Raises Ratings on $10.8MM Notes to 'Ba1'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by ACA CLO 2006-2, Limited:
$18,500,000 Class A-2 Senior Secured Floating Rate Notes Due 2021,
Upgraded to Aaa (sf); previously on September 15, 2011 Upgraded to
Aa1 (sf)
$18,800,000 Class B Deferrable Floating Rate Notes Due 2021,
Upgraded to Aa2 (sf); previously on September 15, 2011 Upgraded to
A3 (sf)
$10,000,000 Class C Deferrable Floating Rate Notes Due 2021,
Upgraded to A3 (sf); previously on September 15, 2011 Upgraded to
Baa3 (sf)
$10,800,000 Class D Deferrable Floating Rate Notes Due 2021,
Upgraded to Ba1 (sf); previously on September 15, 2011 Upgraded to
Ba3 (sf)
Moody's also affirmed the rating of the following notes:
$225,100,000 Class A-1 Senior Secured Floating Rate Notes Due 2021
(current outstanding balance of $173,751,497), Affirmed Aaa (sf);
previously on September 15, 2011 Upgraded to Aaa (sf)
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the senior notes and an
increase in the transaction's overcollateralization ratios since
the rating action in September 2011. Moody's notes that the Class
A-1 Notes have been paid down by approximately 23% or $51 million
since the last rating action. Based on the latest trustee report
dated May 8, 2013, the Class A, Class B, Class C and Class D
overcollateralization ratios are reported at 130.3%, 118.7%,
113.4% and 108.1%, respectively, versus August 2011 levels of
124.6%,115.7%, 111.4% and 107.2%, respectively.
Moody's also notes that the deal has benefited from an improvement
in the credit quality of the underlying portfolio since the last
rating action in September 2011. Based on the May 2013 trustee
report, the weighted average rating factor is currently 2509
compared to 2687 in August 2011.
Moody's notes that the key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor, diversity
score, and weighted average recovery rate, are based on its
published methodology and may be different from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool to have a performing par and principal
proceeds balance of $226 million, defaulted par of $5.8 million, a
weighted average default probability of 16.71% (implying a WARF of
2666), a weighted average recovery rate upon default of 49.4%, and
a diversity score of 60. The default and recovery properties of
the collateral pool are incorporated in cash flow model analysis
where they are subject to stresses as a function of the target
rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
ACA CLO 2006-2, Limited, issued in December 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 Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (2133)
Class A-1: 0
Class A-2: 0
Class B: +2
Class C: +2
Class D: +1
Moody's Adjusted WARF + 20% (3200)
Class A-1: 0
Class A-2: 0
Class B: -2
Class C: -2
Class D: -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:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market and/or
collateral sales by the manager, which may have significant impact
on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. 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.
ACAS CLO 2012-1: S&P Affirms 'BB-' Rating on Class E Notes
----------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on ACAS
CLO 2012-1 Ltd./ACAS CLO 2012-1 LLC's $319.5 million fixed- and
floating-rate notes following the transaction's effective date as
of Jan. 4, 2013.
Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio.
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to S&P.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of its criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect S&P's assumptions about
the transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
"In our published effective date report, we discuss our analysis
of the information provided by the transaction's trustee and
collateral manager in support of their request for effective date
rating affirmation. In most instances, we intend to publish an
effective date report each time we issue an effective date rating
affirmation on a publicly rated U.S. cash flow CLO," S&P added.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as 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
RATINGS AFFIRMED
ACAS CLO 2012-1 Ltd./ACAS CLO 2012-1 LLC
Class Rating Amount
(mil. $)
A-1 AAA (sf) 208.50
A-2 AAA (sf) 10.00
B AA (sf) 48.00
C (deferrable) A (sf) 19.50
D (deferrable) BBB (sf) 17.00
E (deferrable) BB- (sf) 16.50
ALESCO PREFERRED XIII: Moody's Hikes Rating on A-2 Notes From Ba1
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings on the following
notes issued by Alesco Preferred Funding XIII Ltd.:
$7,500,000 Class X First Priority Senior Secured Floating Rate
Notes Due 2016 (current balance of $4,687,500.00), Upgraded to A1
(sf); previously on previously on September 28, 2010 Downgraded to
Baa2 (sf);
$250,800,000 Class A-1 First Priority Senior Secured Floating Rate
Notes Due 2037 (current balance of $197,030,332.44), Upgraded to
A1 (sf); previously on September 28, 2010 Downgraded to Baa2 (sf);
$55,200,000 Class A-2 Second Priority Senior Secured Floating Rate
Notes Due 2037, Upgraded to A3 (sf); previously on March 27, 2009
Downgraded to Ba1 (sf).
Moody's also affirmed the ratings of the following notes:
$80,000,000 Class B Deferrable Third Priority Secured Floating
Rate Notes Due 2037 (current balance of $84,328,701.81), Affirmed
Ca (sf); previously on September 28, 2010 Downgraded to Ca (sf).
$27,000,000 Class C-1 Deferrable Fourth Priority Mezzanine Secured
Floating Rate Notes Due 2037 (current balance of $29,498,765.96),
Affirmed C (sf); previously on September 28, 2010 Downgraded to C
(sf);
$33,000,000 Class C-2 Deferrable Fourth Priority Mezzanine Secured
Fixed/Floating Rate Notes Due 2037 (current balance of
$41,331,591.13), Affirmed C (sf); previously on September 28, 2010
Downgraded to C (sf).
Rationale
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the Class A-1 notes and an
increase in the transaction's overcollateralization ratios as well
as the improvement in the credit quality of the underlying
portfolio since the last rating action in September 2010.
Moody's notes that the Class A-1 notes have been paid down by
approximately 15% or $54 million since the last rating action, due
to diversion of excess interest proceeds and disbursement of
principal proceeds from redemptions of underlying assets. As a
result of this deleveraging, the Class A-1 notes' par coverage
improved to 174.2% from 142.3% since the last rating action, as
calculated by Moody's. Based on the latest trustee report dated
April 30, 2013, the Class A Overcollateralization Ratio, Class B
Overcollateralization Ratio and Class C Overcollateralization
Ratio are reported at 137.3% (limit 142.4%), 102.9% (limit
109.53%) and 85.0% (limit 104.11%), respectively, versus July 2010
levels of 121.6%, 94.6% and 80.3%, respectively. Going forward,
the Class A-1 notes will continue to benefit from the diversion of
excess interest and the proceeds from future redemptions of any
assets in the collateral pool.
Moody's also notes that the deal benefited from an improvement in
the credit quality of the underlying portfolio. Based on Moody's
calculation, the weighted average rating factor (WARF) improved to
1305 compared to 1579 as of the last rating action date. The total
par amount that Moody's treated as defaulted or deferring declined
to $37.2 million compared to $167.7 million as of the last rating
action date. The Moody's cumulative assumed defaulted amount has
declined to $132.2 million from $167.7 million as of the last
rating action date. The decline is due to improvement in the
credit quality and the financial ratios of the banks that issued
the assets that were assumed to be defaulted in the last rating
action.
Due to the impact of revised and updated key assumptions
referenced in its rating methodology, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, Moody's Asset Correlation, 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 of $343.2 million, defaulted/deferring par of
$37.2 million, a weighted average default probability of 28%
(implying a WARF of 1305), Moody's Asset Correlation of 15.3%, and
a weighted average recovery rate upon default of 8.29%. In
addition to the quantitative factors that are explicitly modeled,
qualitative factors are part of rating committee considerations.
Moody's considers the structural protections in the transaction,
the risk of triggering an Event of Default, recent deal
performance under current market conditions, the legal
environment, and specific documentation features. All information
available to rating committees, including macroeconomic forecasts,
inputs from other Moody's analytical groups, market factors, and
judgments regarding the nature and severity of credit stress on
the transactions, may influence the final rating decision.
Alesco Preferred funding XIII Ltd. issued on November 30, 2006, is
a collateralized debt obligation backed by a portfolio of bank and
insurance securities.
The portfolio of this CDO is mainly comprised of trust preferred
securities (TruPS) issued by small to medium sized U.S. community
banks and insurance companies that are generally not publicly
rated by Moody's. To evaluate the credit quality of bank TruPS
without public ratings, Moody's uses RiskCalc model, an
econometric model developed by Moody's KMV, to derive their credit
scores. Moody's evaluation of the credit risk for a majority of
bank obligors in the pool relies on FDIC financial data reported
as of Q4-2012. For insurance TruPS without public ratings, Moody's
relies on the assessment of Moody's Insurance team based on the
credit analysis of the underlying insurance firms' annual
statutory financial reports.
Moody's also evaluates the sensitivity of the rated transaction to
the volatility of the credit estimates, as described in Moody's
Rating Implementation Guidance "Updated Approach to the Usage of
Credit Estimates in Rated Transactions" published in October 2009.
The principal methodology used in this rating was "Moody's
Approach to Rating TRUP CDOs" published in May 2011.
The transaction's portfolio was modeled using CDOROM v.2.8-9 to
develop the default distribution from which the Moody's Asset
Correlation parameter was obtained. This parameter was then used
as an input in a cash flow model using CDOEdge.
Moody's performed a number of sensitivity analyses of the results
to certain key factors driving the ratings. Moody's analyzed the
sensitivity of the model results to changes in the portfolio WARF
(representing an improvement or a deterioration in the credit
quality of the collateral pool), assuming that all other factors
are held equal. If the WARF is increased by 165 points from the
base case of 1305, the model-implied rating of the Class A-1 notes
is one notch worse than the base case result. Similarly, if the
WARF is decreased by 55 points, the model-implied rating of the
Class A-1 notes is one notch better than the base case result.
In addition, Moody's also performed two additional sensitivity
analyses as described in the Special Comment "Sensitivity Analyses
on Deferral Cures and Default Timing for Monitoring TruPS CDOs"
published in August 2012. In the first, Moody's gave par credit to
banks that are deferring interest on their TruPS but satisfy
specific credit criteria and thus have a strong likelihood of
resuming interest payments. Under this sensitivity analysis,
Moody's gave par credit to $7 million of bank TruPS. In the second
sensitivity analysis, Moody's ran alternative default-timing
profile scenarios to reflect the lower likelihood of a large spike
in defaults.
Summary of the impact 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:
Sensitivity Analysis 1:
Class A-1: 0
Class A-2: 0
Class B: +1
Class C-1: 0
Class C-2: 0
Sensitivity Analysis 2:
Class A-1: +1
Class A-2: +1
Class B: +1
Class C-1: 0
Class C-2: 0
Moody's notes that this transaction is still subject to a high
level of macroeconomic uncertainty although its outlook on the
banking sector has changed to stable from negative. The pace of
FDIC bank failures continues to decline in 2013 compared to 2012,
2011, 2010 and 2009, and some of the previously deferring banks
have resumed interest payment on their trust preferred securities.
Moody's continues to have a stable outlook in the insurance
sector, other than the negative outlook on the U.S. life insurance
industry.
AMERICA MERRILL 2013-C10: Fitch to Rate $16.71MM Cl. H Certs 'B'
----------------------------------------------------------------
Fitch Ratings has issued a presale report on Morgan Stanley Bank
of America Merrill Lynch Trust, series 2013-C10 commercial
mortgage trust pass-through certificates.
Fitch expects to rate the transaction and assign Outlooks as
follows:
-- $94,800,000 class A-1 'AAAsf'; Outlook Stable;
-- $34,200,000 class A-2 'AAAsf'; Outlook Stable;
-- $126,500,000 class A-SB 'AAAsf'; Outlook Stable;
-- $150,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $509,537,000 class A-4 'AAAsf'; Outlook Stable;
-- $125,000,000#a class A-3FL 'AAAsf'; Outlook Stable;
-- $0a class A-3FX 'AAAsf'; Outlook Stable;
-- $1,151,469,000* class X-A 'AAAsf'; Outlook Stable;
-- $111,432,000b class A-S 'AAAsf'; Outlook Stable;
-- $100,290,000b class B 'AA-sf'; Outlook Stable;
-- $263,724,000b class PST 'A-sf'; Outlook Stable;
-- $52,002,000b class C 'A-sf'; Outlook Stable;
-- $152,292,000*a class X-B 'A-sf'; Outlook Stable;
-- $53,859,000a class D 'BBB-sf'; Outlook Stable;
-- $22,286,000a class E 'BBB-sf'; Outlook Stable;
-- $16,715,000a class F 'BB+sf'; Outlook Stable;
-- $20,429,000a class G 'BB-sf'; Outlook Stable;
-- $16,715,000a class H 'Bsf'; Outlook Stable.
# Floating rate.
* Notional amount and interest only.
a Privately placed pursuant to Rule 144A.
b Class A-S, class B, and class C certificates may be exchanged
for class PST Certificates, and class PST Certificates may be
exchanged for class A-S, class B and class C certificates.
The expected ratings are based on information provided by the
issuer as of June 6, 2013. Fitch does not expect to rate the
$52,002,641 class J.
The certificates represent the beneficial ownership in the trust,
primary assets of which are 75 loans secured by 87 commercial
properties having an aggregate principal balance of approximately
$1.486 billion as of the cutoff date. The loans were contributed
to the trust by Bank of America, National Association; and Morgan
Stanley Mortgage Capital Holdings LLC; and CIBC Inc.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 78% of the properties by
balance, cash flow analysis of 82.5%, and asset summary reviews on
82.5% of the pool.
Key Rating Drivers
Higher Leverage: The Fitch LTV of 108.4% is above the average
Fitch LTV of 99.6% and 97.2% for transactions rated in first-
quarter 2013 and 2012, respectively. Additionally, the Fitch DSCR
of 1.31x is lower than the first-quarter 2013 average DSCR for
Fitch-rated deals of 1.34x. However, the Fitch DSCR is above the
2012 average Fitch DSCR of 1.24x.
High Quality Assets: Four of the top 10 loans, totaling 25.4% of
the pool, are secured by high-quality assets receiving a Fitch
property quality grade of 'B+' or better.
Hotel Concentration: Hotel properties represent 16.6% of the pool,
which exceeds the 2012 average hotel concentration of 13.5% for
Fitch-rated conduit deals. Additionally, Milford Plaza Fee (7.4%)
is secured by the fee interest in the ground beneath a hotel.
Three other top 15 loans, Hotel Oceana Santa Monica, The Boston
Hotel Portfolio, and Byrd Hospitality Portfolio are secured by
hotel properties.
No Subordinate Debt: No loans in the pool have existing
subordinate debt in place. In addition, only six loans (12.4%)
allow for future subordinate financing.
Rating Sensitivities
For this transaction, Fitch's net cash flow (NCF) was 17.8% below
the most recent reported net operating income (NOI) (for
properties that NOI was provided, excluding properties that were
stabilizing during this period). Unanticipated further declines in
property-level NCF could result in higher defaults and loss
severity on defaulted loans and could result in potential rating
actions on the certificates. Fitch evaluated the sensitivity of
the ratings assigned to MSBAM 2013-C10 certificates and found that
the transaction displays average sensitivity to further declines
in NCF. In a scenario in which NCF declined a further 20% from
Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to
'Asf' could result. In a more severe scenario, in which NCF
declined a further 30% from Fitch's NCF, a downgrade of the junior
'AAAsf' certificates to 'BBB+sf' could result. The presale report
includes a detailed explanation of additional stresses and
sensitivities on pages 70-71.
The Master Servicer and Special Servicer will be Midland Loan
Services, a Division of PNC Bank, National Association, rated
'CMS1' and 'CSS1' by Fitch.
AMERICREDIT AUTOMOBILE 2013-3: Fitch to Rate Class E Notes 'BB'
---------------------------------------------------------------
Fitch Ratings expects to assign the following ratings and Rating
Outlooks to the notes issued by AmeriCredit Automobile Receivables
Trust (AMCAR) 2013-3:
- $151,000,000 class A-1 notes 'F1+sf';
- $316,700,000 class A-2 notes 'AAAsf'; Outlook Stable;
- $242,500,000 class A-3 notes 'AAAsf'; Outlook Stable;
- $76,600,000 class B notes 'AAsf'; Outlook Stable;
- $94,900,000 class C notes 'Asf'; Outlook Stable;
- $93,400,000 class D notes 'BBBsf'; Outlook Stable;
- $24,900,000 class E notes 'BBsf'; Outlook Stable.
Key Rating Drivers
Weaker Credit Quality: The 2013-3 pool has marginally weaker
credit quality than recent transactions, with a 562 weighted
average (WA) Fair Isaac Corp. (FICO) score, a 239 WA internal
credit score and 91.1% 60+ month loan terms (extended term loans).
The pool is consistent with 2013-2, including 48.9% new vehicles,
55% cars and a 109% WA LTV.
Consistent Credit Enhancement Structure: The cash flow
distribution is a sequential-pay structure. Initial hard credit
enhancement (CE) is consistent with the prior five transactions.
The reserve is 2.00% (non-declining), and initial
overcollateralization (OC) is 5.25% growing to a target of 14.25%
of the outstanding pool balance (less the required reserve
amount).
Stronger Portfolio/Securitization Performance: Losses on General
Motors Financial Company, Inc.'s portfolio and 2009 - 2012 AMCAR
securitizations declined to some of its lowest levels, supported
by the gradual economic recovery and strong used vehicle values
supporting higher recovery rates.
Stable Corporate Health: Fitch rates General Motors Company (GM)
'BB+' with a Stable Outlook, and General Motors Financial Company,
Inc. (GM Financial) 'BB'; Rating Watch Positive. GM Financial has
recorded positive corporate financial results since 2010, and the
overall health of GM has also improved.
Consistent Origination/Underwriting/Servicing: AmeriCredit
Financial Services Inc. (AFSI) demonstrates adequate abilities as
originator, underwriter and servicer, as evidenced by historical
portfolio delinquency and loss experience and securitization
performance. Fitch deems AFSI capable of adequately servicing this
series.
Legal Structure Integrity: The legal structure of the transaction
should provide that a bankruptcy of GM Financial would not impair
the timeliness of payments on the securities.
Rating Sensitivity
Unanticipated increases in the frequency of defaults and loss
severity on defaulted receivables could produce loss levels higher
than the base case and could result in potential rating actions on
the notes. Fitch evaluated the sensitivity of the ratings assigned
to each class of AmeriCredit Automobile Receivables Trust 2013-3
to increased losses over the life of the transaction. Fitch's
analysis found that each class of notes displays some sensitivity
to increased defaults and losses, with some classes showing
potential downgrades of up to two rating categories under Fitch's
moderate (1.5x base case loss) scenario. Some classes of notes
could experience downgrades of more than three rating categories
under Fitch's severe (2.5x base case loss) scenario.
AMERICREDIT AUTOMOBILE 2013-3: Moody's Rates Cl. E Secs. '(P)Ba1'
-----------------------------------------------------------------
Moody's Investors Service assigned provisional ratings to the
notes to be issued by AmeriCredit Automobile Receivables Trust
2013-3 (AMCAR 2013-3). This is the third public subprime
transaction of the year for AmeriCredit Financial Services, Inc.
The complete rating actions are as follows:
Issuer: AmeriCredit Automobile Receivables Trust 2013-3
Cl. A-1, Assigned (P)P-1 (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa1 (sf)
Cl. C, Assigned (P)Aa3 (sf)
Cl. D, Assigned (P)Baa1 (sf)
Cl. E, Assigned (P)Ba1 (sf)
Ratings Rationale:
Moody's said the ratings are based on the quality of the
underlying auto loans and their expected performance, the strength
of the structure, the availability of excess spread over the life
of the transaction, and the experience and expertise of
AmeriCredit as servicer.
Moody's median cumulative net loss expectation for the AMCAR 2013-
3 pool is 10.00% and total credit enhancement required to achieve
Aaa rating (i.e. Aaa proxy) is 38.00%. The loss expectation was
based on an analysis of AmeriCredit's portfolio vintage
performance as well as performance of past securitizations, and
current expectations for future economic conditions.
The Assumption Volatility Score for this transaction is Medium
versus a Medium for the sector. 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).
The principal methodology used in this rating was "Moody's
Approach to Rating Auto Loan-Backed ABS," published in May 2013.
Moody's Parameter Sensitivities: If the net loss used in
determining the initial rating were changed to 20%, 25% or 35%,
the initial model output for the Class A notes might change from
Aaa to Aa1, Aa2, and A3, respectively; Class B notes might change
from Aa1 to Baa1, Ba1, and below B3, respectively; Class C notes
might change from Aa3 to Ba2, B3, and below B3, respectively;
Class D notes might change from Baa1 to below B3 in all three
scenarios; and Class E notes might change from Ba1 to below B3 in
all three scenarios.
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.
ATRIUM IV: Moody's Hikes Rating on $3.5MM Cl. D-2 Notes to 'Ba2'
----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of the following
notes issued by Atrium IV:
$28,000,000 Class A-3 Deferrable Floating Rate Notes Due 2019,
Upgraded to Aaa (sf); previously on September 22, 2011 Upgraded to
Aa2 (sf);
$35,000,000 Class B Deferrable Floating Rate Notes Due 2019,
Upgraded to Aa2 (sf); previously on September 22, 2011 Upgraded to
A3 (sf);
$27,500,000 Class C Floating Rate Notes Due 2019, Upgraded to Baa2
(sf); previously on September 22, 2011 Upgraded to Ba1 (sf);
$8,000,000 Class D-1 Floating Rate Notes Due 2019, Upgraded to Ba2
(sf); previously on September 22, 2011 Upgraded to Ba3 (sf);
$3,500,000 Class D-2 Fixed Rate Notes Due 2019, Upgraded to Ba2
(sf); previously on September 22, 2011 Upgraded to Ba3 (sf).
Moody's also affirmed the ratings of the following notes:
$387,000,000 Class A1-a Floating Rate Notes Due 2019 (current
balance of $185,167,509.38), Affirmed Aaa (sf); previously on
September 22, 2011 Upgraded to Aaa (sf);
$7,000,000 Class A1-b Fixed Rate Notes Due 2019 (current balance
of $3,349,283.12), Affirmed Aaa (sf); previously on September 22,
2011 Upgraded to Aaa (sf);
$100,000,000 Class A-2 Delayed Draw Floating Rate Notes Due 2019
(current balance of $47,846,901.64), Affirmed Aaa (sf); previously
on September 22, 2011 Upgraded to Aaa (sf).
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the senior notes and an
increase in the transaction's overcollateralization ratios since
the last rating action in September 2011. Moody's notes that the
Class A-1a Notes, Class A-1b Notes and Class A2 Notes have been
paid down by approximately 50% each; $184.80 million, $3.34
million and $47.75 million, respectively, since the last rating
action. As a result, the overcollateralization ratios of the rated
notes have also improved. Based on the latest trustee report dated
May 28, 2013, the Class A, B, C and D par value tests are reported
at 144.30%, 127.43%, 116.70% and 112.74%, respectively, versus
August 2011 levels of 123.19%, 115.35%, 109.85% and 107.71%
respectively.
Moody's notes that the underlying portfolio includes a number of
investments in securities that mature after the maturity date of
the notes. Based on Moody's calculation, securities that mature
after the maturity date of the notes currently make up
approximately 7.5% of the underlying portfolio. These investments
potentially expose the notes to market risk in the event of
liquidation at the time of the notes' maturity
Due to the impact of revised and updated key assumptions
referenced in "Moody's Global Approach to Rating Collateralized
Loan Obligations" published in May 2013, 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 $372 million,
defaulted par of $ 19.32 million, a weighted average default
probability of 19.58% (implying a WARF of 2792), a weighted
average recovery rate upon default of 49.3%, and a diversity score
of 51.
The default and recovery properties of the collateral pool are
incorporated in cash flow model analysis where they are subject to
stresses as a function of the target rating of each CLO liability
being reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Atrium IV, issued in June of 2005, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (2230)
Class A-1a: 0
Class A-1b: 0
Class A-2: 0
Class A-3: 0
Class B: +3
Class C: +4
Class D-1: +3
Class D-2: +3
Moody's Adjusted WARF + 20% (3350)
Class A-1a: 0
Class A-1b: 0
Class A-2: 0
Class A-3: 0
Class B: -2
Class C: -1
Class D-1: -1
Class D-2: -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
between 2013 and 2015 which may create challenges for issuers to
refinance. CLO notes' performance may also be impacted by 1) the
manager's investment strategy and behavior and 2) divergence in
legal interpretation of CLO documentation by different
transactional parties due to embedded ambiguities.
Sources of additional performance uncertainties:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market and/or
collateral sales by the manager, which may have significant impact
on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
3) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assumes an asset's terminal value upon
liquidation at maturity to be equal to the lower of an assumed
liquidation value (depending on the extent to which the asset's
maturity lags that of the liabilities) and the asset's current
market value. The deal continues to experience an increased
exposure resulted from Amendment and Extend to loan agreements.
AVIATION CAPITAL: S&P Puts B-1 Notes' BB Rating on Watch Negative
-----------------------------------------------------------------
Standard & Poor's Ratings Services placed its 'BBB- (sf)' ratings
on Aviation Capital Group Trust II's Class G-1 and G-2 notes and
'BB (sf)' rating on the Class B-1 notes on CreditWatch with
negative implications. The three classes of notes are
collateralized primarily by the lease revenue and sales proceeds
from a portfolio of commercial aircraft.
The CreditWatch placements reflect S&P's view of this aircraft
portfolio's higher-than-expected decline in aircraft value and the
resulted increased loan-to-value ratio of the rated notes.
The appraised value of the remaining 27 aircraft in the portfolio
declined by approximately 12% in 2012. Boeing 737 classic
aircraft, which make up about 6.87% of the portfolio by value,
suffered the largest decline in value, on average about 30%. The
value decline has caused the Class G-1 and G-2 notes' LTV to rise
to 79% (as of May 2013) from 70% (as of February 2012) and the
Class B-1 notes' LTV to increase to 100% (as of May 2013) from 92%
(as of February 2012).
The remaining 27 aircraft have an average age of 15 years. The
leasing prospects for older aircraft is not favorable. There were
six aircraft not leased as of April 2013 compared with two as of
March 2012.
S&P will resolve the CreditWatch status of these ratings after it
completes a comprehensive cash-flow analysis and a committee
reviews the transaction.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LIST
Ratings Placed On CreditWatch Negative
Aviation Capital Group Trust II
Class To From
G-1 BBB- (sf)/Watch Neg BBB- (sf)
G-2 BBB- (sf)/Watch Neg BBB- (sf)
B-1 BB (sf)/Watch Neg BB (sf)
BABSON CLO 2006-I: Moody's Hikes Rating on Class E Notes to 'Ba1'
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of the following
notes issued by Babson CLO Ltd. 2006-I:
$51,700,000 Class B Notes, Upgraded to Aaa (sf); previously on
August 3, 2012 Upgraded to Aa1 (sf);
$27,600,000 Class C Notes, Upgraded to Aa1 (sf); previously on
August 3, 2012 Upgraded to A3 (sf);
$23,000,000 Class D Notes, Upgraded to Baa1 (sf); previously on
August 3, 2012 Upgraded to Ba1 (sf);
$12,100,000 Class E Notes, Upgraded to Ba1 (sf); previously on
August 3, 2012 Upgraded to Ba2 (sf).
Moody's also affirmed the ratings of the following notes:
$194,600,000 Class A-1 Notes (current outstanding balance of
$66,594,915), Affirmed Aaa (sf); previously on June 13, 2006
Assigned Aaa (sf);
$30,000,000 Class A-2 Notes (current outstanding balance of
$13,631,063), Affirmed Aaa (sf); previously on July 21, 2011
Upgraded to Aaa (sf);
$150,000,000 Class A-2B Notes (current outstanding balance of
$68,155,317), Affirmed Aaa (sf); previously on July 21, 2011
Upgraded to Aaa (sf);
$40,000,000 Class A-3 Notes, Affirmed Aaa (sf); previously on
July 21, 2011 Upgraded to Aaa (sf);
$14,000,000 Class P Notes (rated balance of $10,000,000),
Affirmed Aa2 (sf); previously on July 21, 2011 Downgraded to
Aa2 (sf).
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the senior notes and an
increase in the transaction's overcollateralization ratios since
the rating action in August 2012. Moody's notes that the Class A
Notes have been paid down by approximately 53% or $215 million
since the last rating action. Based on the latest trustee report
dated May 10, 2013, the Senior, Mezzanine, and Junior
overcollateralization ratios are reported at 137.83%, 113.84%, and
109.29%, respectively, versus July 2012 levels of 120.96%,
108.85%, and 106.3%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Global Approach to Rating Collateralized
Loan Obligations" published in May 2013, 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 $327 million,
defaulted par of $8.5 million, a weighted average default
probability of 16.85% (implying a WARF of 2634), a weighted
average recovery rate upon default of 52.16%, and a diversity
score of 48. 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.
Babson CLO Ltd. 2006-I, issued in May 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (2107)
Class A-1: 0
Class A-2: 0
Class A-2B: 0
Class A-3: 0
Class B: 0
Class C: +1
Class D: +3
Class E: +2
Moody's Adjusted WARF + 20% (3161)
Class A-1: 0
Class A-2: 0
Class A-2B: 0
Class A-3: 0
Class B: 0
Class C: -2
Class D: -1
Class E: -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:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market and/or
collateral sales by the manager, which may have significant impact
on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. 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.
BALLYROCK CLO 2006-1: Moody's Lifts Cl. E Notes' Rating to Ba2
--------------------------------------------------------------
Moody's Investors Service upgraded the ratings of the following
notes issued by Ballyrock CLO 2006-1 Ltd.:
$24,000,000 Class B Floating Rate Notes Due August 28, 2019,
Upgraded to Aaa (sf); previously on July 24, 2012 Upgraded to Aa1
(sf);
$18,000,000 Class C Floating Rate Notes Due August 28, 2019,
Upgraded to Aaa (sf); previously on July 24, 2012 Upgraded to A2
(sf);
$27,000,000 Class D Floating Rate Notes Due August 28, 2019,
Upgraded to A3 (sf); previously on August 18, 2011 Upgraded to Ba1
(sf);
$14,000,000 Class E Floating Rate Notes Due August 28, 2019
(current outstanding balance of $11,726,551), Upgraded to Ba2
(sf); previously on August 18, 2011 Upgraded to Ba3 (sf).
Moody's also affirmed the ratings of the following notes:
$288,000,000 Class A Floating Rate Notes Due 2019 (current
outstanding balance of $75,822,290), Affirmed Aaa (sf); previously
on August 18, 2011 Upgraded to Aaa (sf)
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the senior notes and an
increase in the transaction's overcollateralization ratios since
the rating action in July 2012. Moody's notes that the Class A
Notes have been paid down by approximately 73.7% or $212.2 million
since the last rating action. Based on the latest trustee report
dated May 20, 2013, the Class A/B, Class C, Class D and Class E
overcollateralization ratios are reported at 141.1%, 129.2%,
114.7% and 109.3%, respectively, versus June 2012 levels of
126.6%, 119.7%, 110.6% and 107.1%, respectively. Moody's notes
that the trustee reported overcollateralization ratios do not
include the May 20, 2013 payment distribution when $95.6 million
of principal proceeds was used to pay down the Class A Notes.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Global Approach to Rating Collateralized
Loan Obligations" published in May 2013, 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 $171 million,
defaulted par of $9.3 million, a weighted average default
probability of 16.98% (implying a WARF of 2744), a weighted
average recovery rate upon default of 49.84%, and a diversity
score of 33. 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.
Ballyrock CLO 2006-1, issued in August 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans, with some exposure to corporate bonds.
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (2195)
Class A: 0
Class B: 0
Class C: 0
Class D: +2
Class E: +2
Moody's Adjusted WARF + 20% (3293)
Class A: 0
Class B: 0
Class C: 0
Class D: -2
Class E: -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:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market and/or
collateral sales by the manager, which may have significant impact
on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. 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.
BANC OF AMERICA 2003-1: Fitch Affirms 'C' Rating on Class O Certs
-----------------------------------------------------------------
Fitch Ratings has downgraded four and affirmed four classes of
Banc of America Commercial Mortgage Inc. (BACM 2003-1) commercial
mortgage pass-through certificates series 2003-1.
Key Rating Drivers
The downgrades reflect an increase in expected losses primarily
associated with the largest loans in special servicing. The
Negative Outlooks reflect uncertainty related to the expected loss
of the largest specially serviced loan coupled with asset
concentration and adverse selection of the remaining pool.
The pool has experienced $14.2 million (1.3% of the original pool
balance) in realized losses to date. The pool is concentrated with
six loans remaining, five of which are in special servicing
(83.1%).
Rating Sensitivities
Classes G and H are expected to remain stable based on sufficient
credit enhancement and expected paydown from imminent defeasance
proceeds. The assignment of Negative Outlooks reflects the
potential for downgrades given the uncertainty related to expected
losses and ultimate resolution of the largest specially serviced
asset. The distressed classes (those rated below 'Bsf') are
subject to further downgrades as losses are realized or if
realized losses to specially serviced loans exceed Fitch's
expectations.
As of the May 2013 distribution date, the pool's aggregate
principal balance has been reduced by 93.6% to $72.9 million from
$1.13 billion at issuance. Per the servicer reporting, one loan
(16.9% of the pool) is currently defeased. Interest shortfalls are
currently affecting classes J through P.
The largest contributor to expected losses is the specially
serviced 1020 Holcombe Blvd. loan (37.3% of the pool), which is
secured by a 270,227 square foot (sf) office building located in
Houston, TX. The loan transferred to special servicing in May 2012
as a result of the largest tenant stating its intention to vacate
at lease expiration, in December 2014. The tenant currently
represents 46% of the NRA and once vacated, building occupancy
would decline to 29%. The current cash flow is sufficient to
service the debt and is projected to cover debt service until
December 2014. As of February 2013, occupancy for the building was
70% with NOI DSCR of 2.20x. A receiver has been appointed and
there are no active prospects for the vacant space.
The next largest contributor to expected losses is the specially
serviced Ashby Crossing Apartments loan (30.9%), which is secured
by a 288-unit student housing property located in Harrisonburg,
VA. The loan was previously transferred to special servicing in
September 2010 resulting in a modification of the loan in May
2011. The modification was granted in exchange for a capital
contribution applied to the replacement reserve used to renovate
the property. As of April 2013, occupancy for the property was 55%
with a DSCR of 0.78x. The servicer is evaluating various
resolution strategies while in discussion with the borrower.
Fitch downgrades the following classes and assigns Recovery
Estimates (REs) as indicated:
-- $7.7 million class K to 'Bsf' from 'BBsf', Outlook Negative;
-- $6.5 million class L to 'CCCsf' from 'Bsf', RE 20%;
-- $6.5 million class M to 'CCsf' from 'CCCsf', RE 0%;
-- $5.2 million class N to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following classes but revises Rating Outlooks as
indicated:
-- $6.9 million class G at 'AAAsf', Outlook to Stable from
Negative;
-- $10.3 million class H at 'Asf', Outlook to Stable from
Negative.
Fitch affirms the following classes as indicated:
-- $21.9 million class J at 'BBB-sf', Outlook Negative;
-- $3.9 million class O at 'Csf', RE 0%.
Classes A-1, A-2, B, C, D, E, F, ES-A, ES-B, ES-C, ES-D, ES-E, ES-
F, ES-G, ES-H, SB-A, SB-B, SB-C, SB-D, and SB-E have paid in full.
Fitch does not rate the classes P, WB-A, WB-B, WB-C and WB-D
certificates. Fitch previously withdrew the ratings on the
interest-only class XC, XP-1 and XP-2 certificates.
BATTALION CLO III: S&P Affirms 'BB' Rating on Class D Notes
-----------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on
Battalion CLO III Ltd./Battalion CLO III LLC's $368.2 million
floating-rate notes following the transaction's effective date
as of May 7, 2013.
Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio.
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to S&P.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of its criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect its assumptions about the
transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
In S&P's published effective date report, it discusses its
analysis of the information provided by the transaction's trustee
and collateral manager in support of their request for effective
date rating affirmation. In most instances, S&P intends to
publish an effective date report each time it issues an effective
date rating affirmation on a publicly rated U.S. cash flow CLO.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as S&P deems
necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS AFFIRMED
Battalion CLO III Ltd./Battalion CLO III LLC
Class Rating Amount
(mil. $)
A-1 AAA (sf) 252.20
A-2 AA (sf) 45.40
B (deferrable) A (sf) 28.70
C (deferrable) BBB (sf) 19.60
D (deferrable) BB (sf) 2.30
BEAR STEARNS 2001-TOP4: Moody' Lifts Cl. M Certs Rating to 'Caa1'
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of five classes and
affirmed one class of Bear Stearns Commercial Mortgage Securities
Trust 2001-TOP4, Commercial Mortgage Pass-Through Certificates,
Series 2001-TOP4, as follows:
Cl. H, Upgraded to Aaa (sf); previously on Jun 7, 2012 Upgraded to
A1 (sf)
Cl. J, Upgraded to Aaa (sf); previously on Jun 7, 2012 Upgraded to
Ba1 (sf)
Cl. K, Upgraded to Aa3 (sf); previously on Jun 7, 2012 Upgraded to
B1 (sf)
Cl. L, Upgraded to Baa3 (sf); previously on Aug 4, 2011 Upgraded
to Ca (sf)
Cl. M, Upgraded to Caa1 (sf); previously on Dec 2, 2010 Downgraded
to C (sf)
Cl. X-1, Affirmed Caa1 (sf); previously on Feb 22, 2012 Downgraded
to Caa1 (sf)
Ratings Rationale:
The upgrades of the principal classes are due to an increase in
credit support, amortization and paydowns. Since last review, the
deal has paid down 50%. Actual recoveries from specially serviced
and troubled loans were higher than anticipated at last review.
The rating of the IO Class, Class X, is consistent with the
expected credit performance of its referenced classes and thus is
affirmed.
Moody's rating action reflects a base expected loss of 0.9% of the
current balance compared to 10.7% at last review. Moody's base
expected loss plus realized losses is 1.0% of the original
securitized balance, down from 1.3% at last review. Depending on
the timing of loan payoffs and the severity and timing of losses
from specially serviced loans, the credit enhancement level for
rated classes could decline below the current levels. If future
performance materially declines, the expected level of credit
enhancement and the priority in the cash flow waterfall may be
insufficient for the current ratings of these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The methodologies used in this rating were "Moody's Approach to
Rating U.S. CMBS Conduit Transactions" published in September
2000, and "Moody's Approach to Rating CMBS Large Loan/Single
Borrower Transactions" published in July 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 6, the same as at Moody's prior review.
In cases where the Herf falls below 20, Moody's employs the excel-
based Large Loan Model v 8.5 and then reconciles and weights the
results from Conduit and Large Loan models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 7, 2012.
Deal Performance:
As of the May 15, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $18.5
million from $902.5 million at securitization. The Certificates
are collateralized by 13 mortgage loans ranging in size from 3% to
14% of the pool. Five loans, representing 50% of the pool, have
defeased and are collateralized with U.S. Government securities.
One loan, representing 14% of the pool, is on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Nine loans have been liquidated from the pool since
securitization, resulting in an aggregate $8.8 million loss (36%
loss severity on average). There are currently no loans in special
servicing.
Moody's was provided with full year 2011 and 2012 and partial year
2013 operating results for 100% of the pool. Excluding defeased
loans, Moody's weighted average LTV is 34% compared to 47% at last
full review. Moody's net cash flow reflects a weighted average
haircut of 14% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.9%.
Excluding defeased loans, Moody's actual and stressed DSCRs are
1.33X and 3.55X, respectively, compared to 1.29X and 2.84X at last
review. Moody's actual DSCR is based on Moody's net cash flow
(NCF) and the loan's actual debt service. Moody's stressed DSCR is
based on Moody's NCF and a 9.25% stressed rate applied to the loan
balance.
The largest conduit loan is the Hope Mills Crossing Loan ($2.6
million -- 14.2% of the pool), which is secured by a single-tenant
53,000 square foot (SF) single tenant retail property located in
Hope Mills, North Carolina. The loan is on the master servicer's
watchlist because the property is 100% vacant as the tenant, Bi-
Lo, filed for bankruptcy and vacated. The lease is guaranteed by
Koninklijke Ahold, N.V. and the guarantor is expected to continue
paying rent through lease expiration in February 2021. The loan is
fully amortizing and matures in May 2021. Moody's LTV and stressed
DSCR are 53% and 2.16X, respectively, compared to 57% and 1.99X at
last review.
The second largest loan is the Butte Community Employment Center
Loan ($1.5 million -- 7.9% of the pool), which is secured by an
85,000 SF office property located in Oroville, California. The
property is 100% leased to the Department of Health and Social
Services through July 2018. Property performance has improved due
to higher rental rates. The loan is fully amortizing and matures
in June 2016. Moody's LTV and stressed DSCR are 19% and >4.00X,
respectively, compared to 25% and >4.00X at last review.
The third largest loan is the Best Buy Loan ($1.3 million -- 6.9%
of the pool), which is secured by a 46,300 SF single tenant retail
property located in Spokane, Washington. The property is 100%
leased to Best Buy until April 2017. The loan is fully amortizing
and matures in August 2016. Moody's LTV and stressed DSCR are 30%
and 3.47X, respectively, compared to 32% and 3.25X at last review.
BEAR STEARNS 2004-PWR5: Moody's Cuts Rating on Cl. P Certs to 'C'
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of four classes,
downgraded one class, and affirmed 11 classes of Bear Stearns
Commercial Mortgage Securities Trust, Commercial Mortgage Pass-
Through Certificates, Series 2004-PWR5, as follows:
Cl. A-4, Affirmed Aaa (sf); previously on Nov 8, 2004 Definitive
Rating Assigned Aaa (sf)
Cl. A-5, Affirmed Aaa (sf); previously on Nov 8, 2004 Definitive
Rating Assigned Aaa (sf)
Cl. B, Upgraded to Aaa (sf); previously on Nov 8, 2004 Definitive
Rating Assigned Aa2 (sf)
Cl. C, Upgraded to Aa1 (sf); previously on Nov 8, 2004 Definitive
Rating Assigned Aa3 (sf)
Cl. D, Upgraded to A1 (sf); previously on Nov 8, 2004 Definitive
Rating Assigned A2 (sf)
Cl. E, Upgraded to A2 (sf); previously on Nov 8, 2004 Definitive
Rating Assigned A3 (sf)
Cl. F, Affirmed Baa3 (sf); previously on Apr 28, 2010 Downgraded
to Baa3 (sf)
Cl. G, Affirmed Ba1 (sf); previously on Apr 28, 2010 Downgraded to
Ba1 (sf)
Cl. H, Affirmed Ba3 (sf); previously on Apr 28, 2010 Downgraded to
Ba3 (sf)
Cl. J, Affirmed B2 (sf); previously on Apr 28, 2010 Downgraded to
B2 (sf)
Cl. K, Affirmed B3 (sf); previously on Apr 28, 2010 Downgraded to
B3 (sf)
Cl. L, Affirmed Caa1 (sf); previously on Apr 28, 2010 Downgraded
to Caa1 (sf)
Cl. M, Affirmed Caa2 (sf); previously on Apr 28, 2010 Downgraded
to Caa2 (sf)
Cl. N, Affirmed Caa3 (sf); previously on Apr 28, 2010 Downgraded
to Caa3 (sf)
Cl. P, Downgraded to C (sf); previously on Apr 28, 2010 Downgraded
to Ca (sf)
Cl. X-1, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Ratings Rationale:
The upgrades are primarily due to expected paydowns, and reflect
Moody's assumption that many of the maturing loans in the pool are
well-positioned for refinance. Of these higher-quality loans,
approximately $162 million of loan balance (21% of the pool)
consists of defeased loans which mature before the end of 2014.
The downgrade of the lowest rated P&I class reflects higher
expected losses from specially serviced and troubled loans.
The affirmations of seven P&I classes (Classes A4, A5, and Classes
F through K) are due to key parameters, including Moody's loan-to-
value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
The affirmations of classes L through N are due to Moody's
expected loss remaining within a range commensurate with the in-
place ratings.
The rating of the IO Class, Class X-1, is consistent with the
expected credit performance of its referenced classes and thus is
affirmed.
Moody's rating action reflects a base expected loss of
approximately 2.7% of the current deal balance. At last review,
Moody's base expected loss was approximately 2.2%. Moody's base
expected loss plus realized loss figure is 2.7 % of the original,
securitized deal balance compared to 2.4% at Moody's last review.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions" published in
April 2005.
Moody's review incorporated the use of the Excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a pay down analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade underlying ratings is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 34 compared to 35 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 7, 2012.
Deal Performance:
As of the May 13, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 39% to $759 million
from $1.23 billion at securitization. The Certificates are
collateralized by 105 mortgage loans ranging in size from less
than 1% to 9% of the pool, with the top ten loans (excluding
defeasance) representing 28% of the pool. The pool includes one
loan with an investment-grade credit assessment, representing 1%
of the pool. Nine loans, representing approximately 27% of the
pool, are defeased and are collateralized by U.S. Government
securities.
Thirty-five loans, representing 29% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Four loans have liquidated from the pool, resulting in an
aggregate realized loss of $12 million (55% average loan loss
severity). Currently one loan, representing less than 1% of the
pool, is in special servicing. Moody's analysis incorporates a
high loss severity for this loan.
Moody's has assumed a high default probability for ten poorly-
performing loans representing 7% of the pool. Moody's analysis
attributes to these troubled loans an aggregate $9 million loss
(16% expected loss severity based on a 50% probability default).
Moody's was provided with full-year 2011 and partial- or full-year
2012 operating results for 100% and 88% of the pool, respectively.
Excluding troubled and specially-serviced loans, Moody's weighted
average LTV is 78% compared to 79% at last full review. Moody's
net cash flow reflects a weighted average haircut of 12.5% to the
most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.3%.
Excluding troubled and specially-serviced loans, Moody's actual
and stressed DSCRs are 1.44X and 1.46X, respectively, compared to
1.45X and 1.43X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The loan with a credit assessment is the New Castle Marketplace
Loan ($8 million -- 1% of the pool. The loan is secured by an
anchored retail property in New Castle, Delaware. The largest
tenants include BJ's Wholesale Club, Ross Dress for Less, and
Staples. The property is 100% leased, unchanged since Moody's last
review. The loan is fully-amortizing. Moody's credit assessment
and stressed DSCR are Aaa and >4.00X, respectively, compared to
Aaa and 3.71X at last review.
The top three performing conduit loans represent 15% of the pool.
The largest loan is the 2941 Fairview Park Drive Loan ($66 million
-- 9% of the pool), which is secured by a 352,000 square-foot,
Class A office tower in Falls Church, Virginia, a suburb of
Washington, D.C. The building is part of Fairview Office Park, a
200-acre master-planned community. The property was 85% leased as
of year-end 2012 reporting, up from 69% at Moody's last review.
The loan is on the watchlist for low DSCR relative to
underwriting. The property faced significant lease rollover in
2011 and 2012. Nevertheless, new leasing activity at the property
has been healthy: Deloitte, the professional services firm, signed
a new lease in 2012 for approximately 23,000 square feet. Another
large tenant at the property, DPR Construction, recently renewed
its lease for 23,000 square feet for an additional three years.
The DPR lease had been set to expire in May 2013. Property
occupancy is now in line with market averages, and property rents
remain above average relative to the market. Moody's current LTV
and stressed DSCR are 92% and 1.00X, respectively, compared to 96%
and 0.96X at last review.
The second-largest loan is the Liberty Center II Loan ($23 million
-- 3% of the pool). The loan is secured by a 160,000 square foot
office property in Chantilly, Virginia, near Washington Dulles
International Airport. The property is currently occupied by two
tenants. Scitor Corporation (Moody's senior unsecured rating B2,
Stable Outlook), a defense and aerospace firm, currently leases
approximately 131,000 square feet, or 83% of the property's net
rentable area (NRA). The second tenant, TASC, Inc. occupies 17% of
the property NRA, and is expected to vacate the property at lease
expiration on June 30, 2013. Scitor is expected to take over the
TASC space on July 1, and will become the sole tenant at the
property. Property income is expected to drop due to the loss of
TASC coupled with free rent and reduced rent levels stipulated in
the Scitor lease agreements. Future rent steps will partially
mitigate reductions in rental income. Moody's analysis of this
loan incorporates a lit/dark analysis, which considers the higher
credit risk associated with single-tenant properties. The loan
sponsor is Duke Realty (Moody's senior unsecured rating Baa2,
Stable Outlook). Moody's current LTV and stressed DSCR are 105%
and 0.98X, respectively, compared to 66% and 1.56X at last review.
The third-largest loan is the West Bloomfield Medical Building,
($21 million -- 3% of the pool). The loan is secured by a 135,000
square foot medical office property in West Bloomfield, Michigan,
a suburb of Detroit. The property was 96% leased at year-end 2012
reporting, unchanged from Moody's prior review. Moody's current
LTV and stressed DSCR are 82% and, 1.25X respectively, compared to
90% and 1.14X at last review.
BEAR STEARNS 2007-BBA8: Moody's Keeps 'Caa2' Rating on 3 Classes
----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of six pooled
classes and affirmed ten classes, including seven pooled classes
and three non-pooled, or rake, classes of Bear Stearns Commercial
Mortgage Securities Inc. Commercial Mortgage Pass-Through
Certificates, Series 2007-BBA8 as follows:
Cl. A-2, Affirmed Aaa (sf); previously on Apr 26, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Aaa (sf); previously on Aug 23, 2012 Upgraded to
Aaa (sf)
Cl. C, Upgraded to Aaa (sf); previously on Aug 23, 2012 Upgraded
to Aa1 (sf)
Cl. D, Upgraded to Aa2 (sf); previously on Aug 23, 2012 Upgraded
to Aa3 (sf)
Cl. E, Upgraded to A1 (sf); previously on Aug 23, 2012 Upgraded to
A2 (sf)
Cl. F, Upgraded to Baa2 (sf); previously on Aug 23, 2012 Upgraded
to Baa3 (sf)
Cl. G, Upgraded to Ba1 (sf); previously on Aug 23, 2012 Upgraded
to Ba2 (sf)
Cl. H, Upgraded to Ba3 (sf); previously on Dec 3, 2009 Downgraded
to B1 (sf)
Cl. J, Affirmed B3 (sf); previously on Dec 9, 2010 Downgraded to
B3 (sf)
Cl. K, Affirmed Caa2 (sf); previously on Dec 9, 2010 Downgraded to
Caa2 (sf)
Cl. L, Affirmed Caa3 (sf); previously on Dec 9, 2010 Downgraded to
Caa3 (sf)
Cl. PH-1, Affirmed Caa2 (sf); previously on Oct 13, 2011
Downgraded to Caa2 (sf)
Cl. PH-2, Affirmed Caa2 (sf); previously on Oct 13, 2011
Downgraded to Caa2 (sf)
Cl. PH-3, Affirmed Caa3 (sf); previously on Oct 13, 2011
Downgraded to Caa3 (sf)
Cl. X-1B, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Cl. X-2, Affirmed B2 (sf); previously on Feb 22, 2012 Downgraded
to B2 (sf)
Ratings Rationale:
The upgrades of the pooled classes were due to an increase in
credit support since last review resulting from loan pay offs,
partial loan paydowns and amortization. The ratings of interest-
only Class X-1B and Class X-2 are consistent with the expected
credit performance of their referenced classes and thus are
affirmed. The affirmations of the principal classes were due to
key parameters, including Moody's loan to value (LTV) ratios
remaining within acceptable ranges.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000. The methodology used in rating Class X-1B
and Class X-2 was "Moody's Approach to Rating Structured Finance
Interest-Only Securities" published in February 2012.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.5. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations. The model
incorporates the CMBS IO calculator ver1.1 that uses the following
inputs to calculate the proposed IO rating based on the published
methodology: original and current bond ratings and credit
assessments; original and current bond balances grossed up for
losses for all bonds the IO(s) reference(s) within the
transaction; and IO type corresponding to an IO type as defined in
the published methodology. The calculator then returns a
calculated IO rating based on both a target and mid-point . For
example, a target rating basis for a Baa3 (sf) rating is a 610
rating factor. The midpoint rating basis for a Baa3 (sf) rating is
775 (i.e. the simple average of a Baa3 (sf) rating factor of 610
and a Ba1 (sf) rating factor of 940). If the calculated IO rating
factor is 700, the CMBS IO calculator would provide both a Baa3
(sf) and Ba1 (sf) IO indication for consideration by the rating
committee.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and
Remittance Statements. On a periodic basis, Moody's also performs
a full transaction review that involves a rating committee and a
press release. Moody's prior transaction review is summarized in a
press release dated August 23, 2012.
Deal Performance:
As of the May 13, 2013 Payment Date, the transaction's aggregate
certificate balance has decreased by 81% to $332.7 million from
$1.8 billion at securitization. The certificates are
collateralized by six mortgage loans ranging in size from 4% to
26% of the pooled balance, with the top two loans representing 51%
of the pooled balance.
Moody's weighted average loan to value (LTV) ratio is 82% compared
to 86% at last review. Moody's stressed debt service coverage
ratio (DSCR) is 1.48x compared to 1.41x at last review. The pool
has incurred $54,483 in cumulative bond losses, affecting Class L
and Class MS-7 and $69,282 in interest shortfalls, affecting Class
L.
There are currently three loans (46% of the pooled balance) in
special servicing - the Prime Hospitality Portfolio Loan (26%),
the Thanksgiving Tower loan (7%) and the One Riverwalk Place loan
(4%). Thanksgiving Tower became REO in February 2013 and is
currently being marketed for sale.
The largest loan in the pool is the Prime Hospitality Portfolio
Loan ($82.2 million -- 26%) is secured by cross-collateralized and
cross-defaulted mortgages on two full-service and 11 limited-
service hotels with a total of 1,814 rooms. The two full-service
hotels are flagged by Hilton and are located in Hasbrouck Heights,
New Jersey (355-rooms) and Saratoga Springs, New York, (240-
rooms). The remaining 11 hotels have been re-flagged as Wellesley
Inns from La Quinta at securitization. Since securitization four
of the original 17 hotels in the portfolio were released. The loan
was transferred to special servicing on May 7, 2013 due to
imminent maturity default. The loan matures on June 11, 2013. The
outstanding trust balance has declined by 33% since securitization
due to the payment of collateral release premiums, a partial loan
pay down and minimum amortization payments equal to $5.0 million
per annum. Revenue per Available Room (RevPAR) for full-year 2012
was $70, a 3% increase over RevPAR for the trailing 12-month
period ending March 2012. The whole loan balance of $19.4 million
includes a $13.6 million non-pooled component, certificates
Classes PH-1, PH2 and PH-3, and a $23.6 million non-trust
subordinate component. There is also $11.4 million in mezzanine
debt. Moody's LTV ratio for the pooled debt is 89% compared to 96%
at last review. Moody's current credit assessment is Caa1, the
same as last review.
The Ashford MIP Portfolio loan ($79.6 million -- 25%) is secured
by five full-service hotels with a total of 1,447 rooms. The
hotels include two Embassy Suites located in Philadelphia, PA and
Walnut Creek, CA; two Sheratons located in Anchorage, AK and San
Diego, CA; and one Hilton located in Minneapolis, MN. One
property, the Sheraton Iowa City, was released from the mortgage
lien since securitization. The $171.1 million whole loan includes
a $91.6 million non-trust subordinate component. The outstanding
loan balance has decreased 21% since securitization due a partial
pay down, the payment of a collateral release premium and loan
amortization. Portfolio RevPAR for full-year 2012 increased
approximately 5% to $94 from $90 in 2011. Moody's LTV is 63%
compared to 87% at last review. Moody's current credit assessment
is Ba1 compared to Ba3 at last review.
The Westcore Colorado Portfolio loan ($72.7 million -- 23%) is
secured by 13 office and office/R&D buildings with a total of 1.2
million square feet of net rentable area (NRA) located in the
Denver, Colorado MSA. Three buildings had been released from the
mortgage lien, including two buildings located in Colorado
Springs, CO. As of February 2013 the portfolio was 89% leased, the
same occupancy as at securitization. The outstanding loan balance
has paid down 25% since securitization due to the payment of
collateral release premiums and a cash flow sweep after the
payment of debt service and the funding of a reserve for capital
expenses and leasing costs. The $138 million whole loan includes a
$65.6 million non-trust subordinate component. Moody's LTV is 92%
compared to 93% at last review. Moody's current credit assessment
is Caa1 compared to B3 at last review.
The Thanksgiving Tower loan ($52.8 million -- 7%) is secured by a
1.4 million square foot Class A office building located in the
Dallas, Texas Central Business District (CBD). The loan is REO, as
of February 2013, the result of a foreclosure sale. The property
is currently being marketed for sale. Occupancy is 55%, compared
to 57% at securitization. The trust balance has paid down 10%
since last review. The $70.2 million whole loan includes a $17.4
million non-trust subordinate component. Moody's LTV is 98%
compared to 104% at last review. Moody's current credit assessment
is Caa3, the same as last review.
The One Riverwalk Loan (12.1 million -- 4%) is secured by a
261,431 square foot Class A office building located in the San
Antonio, Texas CBD. The loan was transferred to special servicing
in March 2010. The final loan maturity is in July 2013. The
property is currently 68% leased compared to 53% at
securitization. The $22.0 million whole loan includes a $10.0
million non-trust subordinate debt component. Moody's LTV is 83%
compared to 80% at last review. Moody's current credit assessment
is B2, the same as last review.
BENEFIT STREET II: S&P Assigns 'BB' Rating on Class D Notes
-----------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to Benefit
Street Partners CLO II Ltd./Benefit Street Partners CLO II LLC's
$460.0 million floating- and fixed-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 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.
-- S&P's projections regarding the timely interest and
ultimate principal payments on the rated notes, which it
assessed using its cash flow analysis and assumptions
commensurate with the assigned ratings under various
interest-rate scenarios, including LIBOR ranging from 0.27%
to 13.84%.
-- The transaction's overcollateralization and interest
coverage tests, a failure of which will lead to the
diversion of interest and principal proceeds to reduce the
balance of the rated notes outstanding.
-- The transaction's 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.
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/1598.pdf
RATINGS ASSIGNED
Benefit Street Partners CLO II Ltd./Benefit Street Partners CLO II
LLC
Class Rating Amount
(Mil. $)
A-1 AAA (sf) 307.5
A-2A AA (sf) 46.9
A-2B AA (sf) 15.0
B A (sf) 40.0
C BBB (sf) 28.1
D BB (sf) 22.5
CARLYLE GLOBAL 2012-4: S&P Affirms 'BB' Rating on Class E Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on Carlyle
Global Market Strategies CLO 2012-4 Ltd./Carlyle Global Market
Strategies CLO 2012-4 LLC's $558.70 million fixed- and floating-
rate notes following the transaction's effective date as of Feb.
28, 2013.
Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio.
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to S&P.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of its criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect its assumptions about the
transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
"In our published effective date report, we discuss our analysis
of the information provided by the transaction's trustee and
collateral manager in support of their request for effective date
rating affirmation. In most instances, we intend to publish an
effective date report each time we issue an effective date rating
affirmation on a publicly rated U.S. cash flow CLO," S&P added.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as 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
RATINGS AFFIRMED
Carlyle Global Market Strategies CLO 2012-4 Ltd./Carlyle Global
Market
Strategies CLO 2012-4 LLC
Class Rating Amount
(mil. $)
A AAA (sf) 377.50
B-1 AA (sf) 60.50
B-2 AA (sf) 20.00
C (deferrable) A (sf) 46.90
D (deferrable) BBB (sf) 27.80
E (deferrable) BB (sf) 26.00
CIFC FUNDING 2013-II: S&P Rates $30.7MM Class B-2L Notes 'BB-'
--------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to CIFC
Funding 2013-II Ltd./CIFC Funding 2013-II LLC's $593.25 million
class A, B, and X fixed- and floating-rate notes. At the same
time, S&P assigned its rating to the $10.00 million class P notes
issued by CIFC Funding Income Notes 2013-II Ltd., the issuer of
the class P notes as indicated in the transaction documents, and
withdrew its preliminary rating on the class P notes issued by
CIFC Funding 2013-II Ltd.
The CIFC Funding 2013-II Ltd. note issuance is a collateralized
loan obligation securitization backed by a revolving pool
consisting primarily of broadly syndicated senior secured loans.
The class P notes, issued by CIFC Funding Income Notes 2013-II
Ltd., are backed by a zero coupon bond and a portion of the
subordinated notes from CIFC Funding 2013-II Ltd.
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 S&P assessed using its cash flow
analysis and assumptions commensurate with the assigned
ratings under various interest-rate scenarios, including
LIBOR ranging from 0.2739%-12.8133%.
-- The transaction's overcollateralization 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 up
to 50.00% of excess interest proceeds that are available
prior to paying uncapped administrative expenses and fees,
collateral manager incentive fees, and subordinated note
payments to principal proceeds for the purchase of
additional collateral assets during the reinvestment
period.
-- The class P notes are backed by a zero coupon bond co-
issued by BNP Paribas Arbitrage Issuance B.V. and
guaranteed by BNP Paribas; it has a face value of $10
million. The class P notes are also collateralized by
$1.52 million in subordinate notes from CIFC Funding 2013-
II Ltd. S&P's rating on the class P notes addresses the
ultimate principal payment only. S&P did not give credit
to the subordinate notes portion of the class P note
collateral in its analysis.
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/1599.pdf
RATINGS ASSIGNED
CIFC Funding 2013-II Ltd./CIFC Funding 2013-II LLC
Class Rating Amount
(mil. $)
X AAA (sf) 2.500
A-1L AAA (sf) 387.500
A-2L AA (sf) 65.000
A-2F AA (sf) 14.000
A-3L (deferrable) A (sf) 52.750
B-1L (deferrable) BBB (sf) 33.000
B-2L (deferrable) BB- (sf) 30.750
B-3L (deferrable) B (sf) 7.750
Subordinated notes NR 56.395
CIFC Funding Income Notes 2013-II Ltd.
Class Rating Amount
(mil. $)
P(i) A+pNRi (sf) 10.000
PRELIMINARY RATING WITHDRAWN
CIFC Funding 2013-II Ltd./CIFC Funding 2013-II LLC
Class Rating Rating Amount
To From (mil. $)
P(i) NR A+pNRi (sf) 10.000
(i) The class P securities consist of $1.52 million in
subordinated notes and a zero coupon bond due in 2020 that
is being issued by BNP Paribas with a face value of $10.00
million.
NR - Not rated.
COBALT CMBS 2007-C2: Moody's Affirms C Ratings on 6 CMBS Classes
----------------------------------------------------------------
Moody's Investors Service affirmed the ratings of 18 classes of
Cobalt CMBS Commercial Mortgage Trust, Commercial Mortgage Pass-
Through Certificates, Series 2007-C2 as follows:
Cl. A-1A, Affirmed Aaa (sf); previously on Dec 2, 2010 Confirmed
at Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Dec 2, 2010 Confirmed at
Aaa (sf)
Cl. A-AB, Affirmed Aaa (sf); previously on Apr 19, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-JFX, Affirmed Ba3 (sf); previously on Dec 2, 2010 Downgraded
to Ba3 (sf)
Cl. A-MFX, Affirmed A1 (sf); previously on Dec 2, 2010 Downgraded
to A1 (sf)
Cl. B, Affirmed B3 (sf); previously on Dec 2, 2010 Downgraded to
B3 (sf)
Cl. C, Affirmed Caa2 (sf); previously on Dec 2, 2010 Downgraded to
Caa2 (sf)
Cl. D, Affirmed Caa3 (sf); previously on Dec 2, 2010 Downgraded to
Caa3 (sf)
Cl. E, Affirmed Ca (sf); previously on Dec 2, 2010 Downgraded to
Ca (sf)
Cl. F, Affirmed C (sf); previously on Dec 2, 2010 Downgraded to C
(sf)
Cl. A-JFL, Affirmed Ba3 (sf); previously on Dec 2, 2010 Downgraded
to Ba3 (sf)
Cl. A-M, Affirmed A1 (sf); previously on Dec 2, 2010 Downgraded to
A1 (sf)
Cl. G, Affirmed C (sf); previously on Dec 2, 2010 Downgraded to C
(sf)
Cl. H, Affirmed C (sf); previously on Dec 2, 2010 Downgraded to C
(sf)
Cl. J, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. K, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. L, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. X, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded to
Ba3 (sf)
Ratings Rationale:
The affirmations of the principal classes are due to key
parameters, including Moody's loan to value (LTV) ratio, Moody's
stressed debt service coverage ratio (DSCR) and the Herfindahl
Index (Herf), remaining within acceptable ranges. Based on Moody's
current base expected loss, the credit enhancement levels for the
affirmed classes are sufficient to maintain their current ratings.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for rated classes could decline below the
current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The rating of the IO Class, Class X, is consistent with the
expected credit performance of its referenced classes and thus is
affirmed.
Moody's rating action reflects a base expected loss of 10.4% of
the current balance. At last review, Moody's base expected loss
was 11.0%. Realized losses have increased from 2.0% of the
original balance to 2.5% since the prior review. Moody's base
expected loss plus realized losses is now 11.0% of the original
pooled balance compared to 11.2% at last review.
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 given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 22, the same as at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 21, 2012.
Deal Performance:
As of the May 17, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 18% to $2.0 billion
from $2.4 billion at securitization. The Certificates are
collateralized by 120 mortgage loans ranging in size from less
than 1% to 13% of the pool, with the top ten loans representing
49% of the pool. The pool does not contain any defeased loans or
loans with credit assessments.
Forty-nine loans, representing 36% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Twenty-one loans have been liquidated from the pool, resulting in
an aggregate realized loss of $61.7 million (47% loss severity on
average). Thirteen loans, representing 20% of the pool, are
currently in special servicing. The largest specially serviced
loan is the Peter Cooper Village and Stuyvesant Town (PCV/ST)
($250 million -- 12.6% of the pool), which represents a pari-passu
interest in a $3.0 billion first mortgage loan spread among five
separate CMBS deals. There is also $1.4 billion in mezzanine debt
secured by the borrower's interest. The loan is secured by two
adjacent multifamily apartment complexes with 11,229 units located
on the east side of Manhattan. The loan transferred to special
servicing in November 2009 after the Appellate Division, First
Department, in April 2009 reversed an August 2007 decision of the
State Supreme Court, which held that properties receiving tax
benefits, including those pursuant to the J-51 program, be
permitted to decontrol rent stabilized apartments pursuant to New
York State rent stabilization laws. The court's decision
compromised the Borrower's original business plan to convert rent
stabilized apartments to market rental rates and the borrower
agreed to forfeit control rights to the property. As of September
2012, the special servicer engaged CompassRock Real Estate to
manage the property. On April 10, 2013, the New York State Supreme
Court approved a settlement in the tenant's class action lawsuit
regarding improperly deregulated rent-stabilized units. The
special servicer anticipates full implementation of the settlement
will take 18 months. Overall, property performance has improved
since the end of 2010. The property was appraised for $3.2 billion
in September 2012 compared to $3.0 billion in September 2011. The
whole loan currently has over $460 million in cumulative ASER and
P&I advances to date. The special servicer believes that the
settlement's implementation, continued recovery from Hurricane
Sandy and collection of the associated insurance claim are
prerequisites to optimal capital recovery.
The remaining twelve specially serviced loans are secured by a mix
of property types. Moody's estimates an aggregate $113.1 million
loss for the specially serviced loans (28% expected loss on
average).
Moody's has assumed a high default probability for 15 poorly
performing loans representing 11% of the pool and has estimated an
aggregate $40.8 million loss (19% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with partial or full year 2012 operating
results for 85% of the pool. Excluding specially serviced and
troubled loans, Moody's weighted average LTV is 108% compared to
109% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 12% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.1%.
Excluding special serviced and troubled loans, Moody's actual and
stressed DSCRs are 1.36X and 0.96X, respectively, compared to
1.32X and 0.95X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The top three conduit loans represent 25% of the pool. The largest
loan is the 75 Broad Street Loan ($243.5 million -- 12.3% of the
pool), which is secured by a 648,000 square foot (SF) office
telecom building located in the Financial District of New York.
The property was 98% leased as of December 2012, the same as at
last review. The largest tenants include Internap (13% of the new
rentable area (NRA); lease expiration December 2016) and the
Millennium High School (12% of the NRA; lease expiration September
2018). The loan is interest only for its entire ten-year term.
Moody's LTV and stressed DSCR are 122% and 0.78X, respectively,
the same as at last review.
The second largest loan is The Woodies Building Loan ($169.4
million -- 8.6% of the pool) which is secured by two buildings
totaling 484,180 SF with street level retail and office space
above. These properties are located in the East End sub-market of
Washington, D.C. The office component represents 73% of the NRA
and is predominantly leased to government agencies. The largest
office tenants are the Federal Bureau of Investigation (29% of the
NRA; lease expiration in 2015), the National Endowment of
Democracy (13% of the NRA; lease expiration in March 2021) and the
Border Patrol (10% of the NRA; lease expiration in March 2014).
The largest retail tenants are Forever 21, H&M, Madame Tussauds
and Zara. As of December 2012, the property was 99% leased
compared to 96% at the last review. Moody's LTV and stressed DSCR
are 115% and 0.82X, respectively, compared to 122% and 0.77X at
last review.
The third largest loan is One Summer Street Loan ($77.3 million --
3.9% of the pool), which is secured by a 388,000 SF office telecom
building located in Boston, Massachusetts. The largest tenants
include Qwest Communications Corp (17% of the NRA; lease
expiration June 2015) and WiTel Communications LLC (15% of the
NRA; lease expiration April 2020). The property was 74% leased as
of December 2012 compared to 63% at last review. The loan was
interest only for the first 24 months of its ten-year term and is
now amortizing. Moody's LTV and stressed DSCR are 60% and 1.82X,
respectively, compared to 60% and 1.79X at last review.
COMM 2004-LNB4: S&P Affirms 'CCC-' Rating on Class B Notes
----------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on two
classes of commercial mortgage pass-through certificates from COMM
2004-LNB4, a U.S. commercial mortgage-backed securities (CMBS)
transaction. S&P also affirmed its ratings on three other classes
from the same transaction.
S&P's rating actions follow its analysis of the transaction,
primarily using its criteria for rating U.S. and Canadian CMBS.
S&P's analysis included a review of the credit characteristics of
all of the remaining assets in the pool, the transaction
structure, and the liquidity available to the trust.
"The downgrades reflect credit erosion that we anticipate will
occur upon the eventual resolution of the transaction's eight
($84.5 million, 12.2%) specially serviced assets and two loans
($6.0 million, 0.9%) that we determined to be credit-impaired. We
estimated losses on the specially serviced assets based primarily
on revised appraisals dated in 2012 or 2013, arriving at a
weighted-average loss severity of 33.6%. To date, the trust has
incurred losses totaling $85.8 million (7.0% of the original
outstanding trust principal balance). Our analysis also considers
the classes' susceptibility to potential interest shortfalls if
the non-defeased, performing loans scheduled to mature in 2014 (53
loans, $445.1 million, 64.1%) were not able to repay at maturity,"
S&P said.
As of the May 15, 2013, remittance report date, the transaction
experienced net interest shortfalls totaling $186,443, which
included interest recoveries of $23,801. The interest shortfalls
primarily reflect:
-- Interest not advanced ($135,987) on three ($30.2 million,
4.3%) specially serviced assets that the master servicer
has declared to be non-recoverable.
-- Monthly appraisal subordinate entitlement reduction (ASER)
amounts ($28,583) on four ($36.4 million, 5.2%) specially
serviced assets.
-- Loan modification-related interest deferrals ($26,200) on
two ($14.3 million, 2.1%) modified mortgage loans.
-- Monthly special servicing fees ($17,620).
The net interest shortfalls affected Class B and all classes
subordinate to it, reducing the liquidity support available to the
classes senior to this class.
The affirmations of the principal and interest certificates
reflect S&P's expectation that the available credit enhancement
for these classes will be within its estimate of the necessary
credit enhancement for the current ratings. In the case of the
Class A-4 certificates, S&P's analysis also considers the
liquidity support available to the class as well as the likelihood
of the class paying off from loan amortization and loan payoffs.
The ratings on these classes also reflect S&P's review of the
credit characteristics and performance of the remaining assets as
well as the transaction structure.
The affirmation of the Class X-C interest-only (IO) certificate
reflects S&P's current criteria for rating IO securities.
S&P will continue to monitor the performance of the transaction.
If additional interest shortfalls affect the trust, S&P will take
further rating actions as it determines appropriate.
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 17-g7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LIST
Ratings Lowered
COMM 2004-LNB4
Commercial mortgage pass-through certificates
Rating Rating Credit enhancement
Class To From (%)
A-5 BBB- (sf) A+ (sf) 9.86
A-1A BBB- (sf) A+ (sf) 9.86
Ratings Affirmed
COMM 2004-LNB4
Commercial mortgage pass-through certificates
Credit enhancement
Class Rating (%)
A-4 AAA (sf) 9.86
B CCC- (sf) 6.34
X-C AAA (sf) N/A
N/A - Not applicable.
COMM 2013-THL: Fitch to Rate $29MM Class F Certs. at 'B'
--------------------------------------------------------
Fitch Ratings has issued a presale report on COMM 2013-THL
Mortgage Trust Commercial Mortgage Pass Through Certificates,
Series 2013-THL.
Fitch expects to rate the transaction and assign Rating Outlooks
as follows:
- $77,500,000 class A-1 'AAAsf'; Outlook Stable;
- $280,337,000 class A-2 'AAAsf'; Outlook Stable;
- $545,955,000* class X-CP 'BBB-sf'; Outlook Stable;
- $545,955,000* class X-EXT 'BBB-sf'; Outlook Stable;
- $108,148,000 class B 'AAsf'; Outlook Stable;
- $79,033,000 class C 'A-sf'; Outlook Stable;
- $78,437,000 class D 'BBB-sf; Outlook Stable;
- $122,545,000 class E 'BB-sf'; Outlook Stable;
- $29,000,000 class F 'Bsf'; Outlook Stable.
* Interest only and notional amount
The expected ratings are based upon information received by the
issuer as of May 31, 2013.
The certificates in this transaction represent the beneficial
interests in a trust that holds a $775 million mortgage loan
secured by 154 hotel properties located in 32 states across the
U.S. The loan is sponsored by Whitehall Street Global Real Estate
Limited Partnership 2005 and Whitehall Street Global Employee Fund
2005.
Key Rating Drivers
Portfolio Performance: After experiencing more than two years of
year-over-year revenue per available room (RevPAR) declines, the
portfolio's year-over-year RevPAR performance turned positive
beginning in May 2010. Subsequently, RevPAR grew 6.8% in 2011 and
4.9% in 2012.
Diverse and Granular Portfolio: The portfolio exhibits significant
geographic diversity across secondary markets in 32 states. The
largest state exposure is California with 23 hotels representing
15.1% by number of properties. No single hotel contributes more
than 3.2% of net cash flow (NCF). The portfolio is comprised of
six different franchises that are split up among 18 different
flags, with Fairfield Inn, at 21.1% of the flags, the largest.
Experienced Sponsorship: The transaction is sponsored by Whitehall
Street Global Real Estate Limited Partnership 2005 and Whitehall
Street Global Employee Fund 2005 (Whitehall). The Whitehall funds
are a family of opportunistic real estate funds managed by Goldman
Sachs. The funds invest in real estate companies, projects, loan
portfolios, debt recapitalizations and direct property. The
sponsors have more than $432 million in net worth and $154 million
in liquidity as of year-end 2012.
Structural Features: The loan has strong structural features,
including a hard lock box for credit card receipts, up-front
reserves for deferred maintenance, monthly reserves for taxes,
insurance (springing), ground leases, and capital expenditures
(CapEx). If the debt yield falls below 8.0% for two consecutive
quarters, a low cash flow trigger will occur and all excess cash
flow will be trapped in the cash collateral account and held as
additional collateral for the loan.
Rating Sensitivities
Fitch found that the pool could withstand a 61.3% decline in value
and an approximately 62.3% decrease in the most recent actual cash
flow prior to experiencing $1 of loss to any 'AAAsf' rated class.
Fitch evaluated the sensitivity of the ratings of classes A-1 and
A-2 (rated 'AAAsf' by Fitch) and found that a 27.3% decline in
Fitch NCF would result in a one category downgrade, while a 45.6%
decline would result in a downgrade to below investment grade. The
Rating Sensitivity section in the presale report includes a
detailed explanation of additional stresses and sensitivities.
COMMERCIAL MORTGAGE 1999-C1: Moody's Ups Cl. L Notes Rating to B1
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes and
affirmed two classes of Commercial Mortgage Acceptance Corp. 1999-
C1 as follows:
Cl. K, Upgraded to Aa3 (sf); previously on May 24, 2007 Upgraded
to Ba2 (sf)
Cl. L, Upgraded to B1 (sf); previously on Jul 30, 2009 Downgraded
to Caa1 (sf)
Cl. M, Affirmed C (sf); previously on Oct 28, 2010 Downgraded to C
(sf)
Cl. X, Affirmed Caa3 (sf); previously on Feb 22, 2012 Downgraded
to Caa3 (sf)
Ratings Rationale:
The upgrades are due to increased credit support from loan payoffs
and amortization as well as defeasance. The pool has paid down by
16% since Moody's last full review and defeasance represents 21%
of the pool.
The affirmation of Class M is due to key parameters, including
Moody's loan to value (LTV) ratio, Moody's stressed debt service
coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining
within acceptable ranges. The rating of the IO class, Class X, is
consistent with the weighted average rating factor (WARF) of its
referenced classes and thus is affirmed.
Moody's rating action reflects a base expected loss of 10.6% of
the current balance. At last review, Moody's base expected loss
was 11.0%. Moody's base expected loss plus realized losses is now
3.3% of the original pooled balance, essentially the same as at
last review. Depending on the timing of loan payoffs and the
severity and timing of losses from specially serviced loans, the
credit support for the principal classes could decline below their
current levels. If future performance materially declines, credit
support may be insufficient to support the current ratings.
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 given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The methodologies used in this rating were "Moody's Approach to
Rating U.S. CMBS Conduit Transactions" published in September
2000, and "Moody's Approach to Rating CMBS Large Loan/Single
Borrower Transactions" published in July 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including the risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 4 compared to 5 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v8.5 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 15, 2012.
Deal Performance:
As of the May 15, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $18.6
million from $733.8 million at securitization. The Certificates
are collateralized by 15 mortgage loans ranging in size from less
than 1% to 27% of the pool, with the top nine non-defeased loans,
representing approximately 79% of the pool. There are six loans,
representing approximately 21% of the pool, that have defeased and
are secured by U.S. Government securities. Five out of the six
defeased loans, representing $3.2 million, will mature within the
next 12 months.
Four loans, representing 37% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Twenty-one loans have been liquidated from the pool since
securitization, resulting in a realized loss of $21.4 million (35%
loss severity on average). The one loan in special servicing is
the Shoppes of Kenwood Loan ($4.6 million -- 24.9% of the pool).
The loan was transferred to special servicing in January 2009 for
maturity default. The Special Servicer modified the loan in July
2010 and subsequently capitalized approximately $780,000 of
arrears. The collateral consists of a leased fee, multi-tenanted
40,000 square foot (SF) retail center and a 7,508 SF free standing
building which is occupied by Fifth Third Bank through May 2014.
The retail center's largest tenants are GFS Supermarket (16,089
SF; leased through May 2020) and Family Dollar (10,290 SF; leased
through May 2020). As of April 2013, the center was 100% leased.
Borrower and Lender filed a joint Plan of Reorganization which was
approved by the Court. The Plan will result in Lender being paid
in full. Per the Special Servicer, a 6-month maturity extension is
in process to extend until 12/31/2013 due to title issues created
by an imminent domain issue at the front of the parcel years ago.
Moody's does not estimate a loss on this loan at the moment.
Moody's was provided with full year 2011 and 2012 operating
results for 100% of the pool. Moody's weighted average LTV is 96%
compared to 94% at Moody's prior review. Moody's net cash flow
reflects a weighted average haircut of 7% to the most recently
available net operating income. Moody's value reflects a weighted
average capitalization rate of 10.9%.
Moody's actual and stressed DSCRs are 0.96X and 2.01X compared to
1.02X and 1.99X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The top three performing conduit loans represent 44% of the pool.
The largest loan is the Holiday Inn Express and Suites Loan ($5.0
million -- 27.0% of the pool), which is secured by a 120-key,
limited-service hotel in Eagan, Minnesota. The loan was
transferred into special servicing in November 2009 and then
returned to the master servicer in July 2010. The loan has
remained on the master servicer's watchlist due to low DSCR.
However, the loan is current. For 2012, the hotel's revenue per
available room (RevPAR) and occupancy rate were $54.64 and 80%
compared to $55.32 and 74.7% in 2011. The decline in revenue is
partially offset by the loan's 300-month amortization schedule.
Moody's LTV and stressed DSCR are 139% and 0.93X, respectively,
compared to 137% and 0.95X, at last review.
The second largest loan is the Holiday Inn, New Ulm Loan ($2.0.
million -- 10.9% of the pool), which is secured by a 126-key,
limited-service hotel in New Ulm, Minnesota. For 2012, the hotel's
RevPAR and occupancy rate were $46.00 and 48% compared to $44.46
and 47% in 2011. The loan is also benefiting from a 300-month
amortization schedule. Moody's LTV and stressed DSCR are 47% and
2.76X, respectively, compared to 51% and 2.55X at last review.
The third largest loan is the Deon Square Shopping Center Loan
($1.15 million -- 6.2% of the pool), which is secured by a 77,000
SF retail property located in Bristol, Pennsylvania. The loan is
fully amortizing and matures in June 2015. As of April 2013, the
property was 91% leased compared to 100% leased at last review.
Moody's LTV and stressed DSCR are 22% and greater than 4.0X,
respectively, compared to 25% and greater then 4.0X at last
review.
CPS AUTO 2013-B: S&P Assigns Prelim. 'BB' Rating on Class D Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to CPS Auto Receivables Trust 2013-B's $205 million asset-
backed notes.
The note issuance is an asset-backed securities transaction backed
by subprime auto loan receivables.
The preliminary ratings are based on information as of June 7,
2013. Subsequent information may result in the assignment of
final ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The availability of approximately 40.6%, 35.2%, 29.3%,
22.9%, and 21.4% of credit support for the class A, B, C,
D, and E notes, respectively, based on stressed cash flow
scenarios (including excess spread). These credit support
levels provide coverage of 2.8x, 2.3x, 1.75x, 1.5x, and
1.33x our 13.00-13.50% expected cumulative net loss range
for the class A, B, C, D, and E notes, respectively.
-- The expectation that, under a moderate stress scenario of
1.75x S&P's expected net loss level, the rating on the
class A notes will not decline by more than one rating
category during the first year, and the ratings on the
class B and C notes will not decline by more than two
categories during the first year, all else being equal.
This is consistent with S&P's credit stability criteria,
which outline the outer bound of credit deterioration equal
to a one-category downgrade within the first year for 'AA'
rated securities and a two-category downgrade within the
first year for 'A', 'BBB', and 'BB' rated securities.
-- The credit enhancement underlying each of the preliminary
rated notes, which is in the form of subordination,
overcollateralization, a reserve account, and excess spread
for the class A, B, C, D, and E notes.
-- The timely interest and principal payments made to the
preliminary rated notes under S&P's stressed cash flow
modeling scenarios, which it believes are appropriate for
the assigned preliminary ratings.
-- The transaction's payment and credit enhancement
structures, which includes performance triggers.
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/1588.pdf
PRELIMINARY RATINGS ASSIGNED
CPS Auto Receivables Trust 2013-B
Class Rating Type Interest Amount
rate(i) (mil. $)
A AA- (sf) Senior Fixed 158.360
B A (sf) Subordinate Fixed 18.450
C BBB (sf) Subordinate Fixed 12.300
D BB (sf) Subordinate Fixed 10.250
E BB- (sf) Subordinate Fixed 5.640
(i) The actual coupons of these tranches will be determined on
the pricing date.
CPS AUTO 2013-B: Moody's Assigns Provisional Ratings to 5 Classes
-----------------------------------------------------------------
Moody's Investors Service assigned provisional ratings to the
notes to be issued by CPS Auto Receivables Trust 2013-B. This is
the second senior/subordinated transaction of the year for
Consumer Portfolio Services, Inc. (CPS).
The complete rating actions are as follows:
Issuer: CPS Auto Receivables Trust 2013-B
Class A Notes, rated (P) A1 (sf);
Class B Notes, rated (P) A2 (sf);
Class C Notes, rated (P) Baa2(sf);
Class D Notes, rated (P) Ba2 (sf);
Class E Notes, rated (P) B2 (sf);
Ratings Rationale:
Moody's said the ratings are based on the quality of the
underlying auto loans and their expected performance, the strength
of the structure, the availability of excess spread over the life
of the transaction, the experience and expertise of CPS as
servicer, and the backup servicing arrangement with Aa3-rated
Wells Fargo Bank, N.A.
The principal methodology used in this rating was "Moody's
Approach to Rating Auto Loan-Backed ABS," published in May 2013.
Moody's median cumulative net loss expectation for the underlying
pool is 13.5%. The loss expectation was based on an analysis of
CPS' portfolio vintage performance as well as performance of past
securitizations, and current expectations for future economic
conditions.
The Assumption Volatility Score for this transaction is
Medium/High versus a Medium for the sector. This is driven by the
Medium/High assessment for Governance due to the unrated
sponsor/servicer.
Moody's V Scores provide a relative assessment of the quality of
available credit information and the potential variability around
the various inputs to a rating determination. The V Score ranks
transactions by the potential for significant rating changes owing
to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling and the transaction governance that
underlie the ratings. V Scores apply to the entire transaction
(rather than individual tranches).
Moody's Parameter Sensitivities: If the net loss used in
determining the initial rating were changed to 21.0%, 26.5% or
29.5%, the initial model output for the Class A notes might change
from A1 to A2, Baa2, and Ba2, respectively. If the net loss used
in determining the initial rating were changed to 14.5%, 17.0% or
20.5%, the initial model output for the Class B notes might change
from A2 to A3, Baa3, and Ba3, respectively. If the net loss used
in determining the initial rating were changed to 14.0%, 16.5%, or
19.0%, the initial model output for the Class C notes might change
from Baa2 to Baa3, Ba3, and B3, respectively. If the net loss used
in determining the initial rating were changed to 14.0%, 15.5% or
17.0%, the initial model output for the Class D notes might change
from Ba2 to Ba3, B3 and output for the Class E notes might change from B2 to B3,
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.
CREDIT SUISSE 2001-CKN5: Moody's Cuts Rating on 2 Certs to C(sf)
----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of two classes
and affirmed four classes of Credit Suisse First Boston Mortgage
Securities Corp., Commercial Mortgage Pass-Through Certificates,
Series 2001-CKN5 as follows:
Cl. A-X, Affirmed Caa3 (sf); previously on Jul 12, 2012 Downgraded
to Caa3 (sf)
Cl. A-Y, Affirmed Aaa (sf); previously on Mar 9, 2011 Confirmed at
Aaa (sf)
Cl. F, Affirmed B3 (sf); previously on Jul 12, 2012 Downgraded to
B3 (sf)
Cl. G, Affirmed Caa2 (sf); previously on Jul 12, 2012 Downgraded
to Caa2 (sf)
Cl. H, Downgraded to C (sf); previously on Jul 12, 2012 Downgraded
to Caa3 (sf)
Cl. J, Downgraded to C (sf); previously on Jul 12, 2012 Downgraded
to Ca (sf)
Ratings Rationale:
The downgrades are due to the realized and expected losses.
The affirmations of the principal and interest bonds are due to
key parameters, including Moody's loan to value (LTV) ratio,
Moody's stressed debt service coverage ratio (DSCR) and the
Herfindahl Index (Herf), remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings. Depending on the timing of loan payoffs and the
severity and timing of losses from specially serviced loans, the
credit enhancement level for investment grade classes could
decline below the current levels. If future performance materially
declines, the expected level of credit enhancement and the
priority in the cash flow waterfall may be insufficient for the
current ratings of these classes.
The rating of the IO class A-X is consistent with the credit
performance of its referenced classes and thus is affirmed. The
rating of the IO class A-Y is consistent with the credit
performance of its referenced loans (residential co-ops) and thus
is affirmed.
Moody's rating action reflects a base expected loss of 24.5% of
the current balance compared to 66.2% at last review. The actual
realized losses increased to $90.2 million (8.4% of the original
balance) from $24.4 million (2.3% of the original balance) at last
review. Base expected and realized losses are now 9.1% of the
original securitized balance compared to 9.7% at last review.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time to
time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The methodologies used in this rating were "Moody's Approach to
Rating Fusion U.S. CMBS Transactions" published in April 2005, and
"Moody's Approach to Rating CMBS Large Loan/Single Borrower
Transactions" published in July 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 1 compared to 3 at last review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.5 and then reconciles and weights
the results from Conduit and Large Loan models in formulating a
rating recommendation. The large loan model derives credit
enhancement levels based on an aggregation of adjusted loan level
proceeds derived from Moody's loan level LTV ratios. Major
adjustments to determining proceeds include leverage, loan
structure, property type and sponsorship. These aggregated
proceeds are then further adjusted for any pooling benefits
associated with loan level diversity, other concentrations and
correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 12, 2012.
Deal Performance:
As of the May 17, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 97% to $28.9
million from $1.07 billion at securitization. The Certificates are
collateralized by one conduit loan which represents 98% of the
pool and 11 loans which are secured by residential co-ops and have
Aaa credit assessments.
Thirty-two loans have been liquidated from the pool, resulting in
a realized loss of $90.3 million (30% loss severity). There are no
loans on the watchlist or in special servicing.
The remaining conduit loan is the Bayshore Mall Loan ($28.3
million -- 98.0% of the pool), which is secured by a 430,000
square foot regional mall located in Eureka, California.
Originally a GGP sponsored loan, the asset is one of thirty
properties spun off into Rouse Properties. The loan's term was
extended until September 2016 as part of GGP's restructuring. The
property was 79% leased as of December 2012 compared to 69% as of
March 2012. The in-line space was 53% leased as of December 2012
compared to 66% leased at last review. The property's performance
has suffered from higher vacancy along with lower base rents and
expense recoveries. Moody's was provided with full year 2011 and
2012 operating results for this loan. Moody's LTV and stressed
DSCR are 127% and 0.84X, respectively, compared to 126% and 0.86X
at last review. Moody's stressed DSCR is based on Moody's NCF and
a 9.25% stressed rate applied to the loan balance.
CRF-18 LLC: S&P Raises Rating on Class D Notes to 'BB'
------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the Class
B, C, D, and E notes from CRF-18 LLC. CRF-18 LLC is an ABS
transaction backed by a pool of small business development loans.
The upgrades reflect paydowns to the Cass A-3 and B notes and a
leveling off of the cumulative net loss within the transaction.
Since S&P's rating action in November 2011 and as of the April 30,
2013, servicer report, the Class A-3 notes paid down their
remaining balance of $4.6 million, and the Class B notes have paid
down a total of $2.4 million. In addition, since S&P's November
2011 rating action, the cumulative net loss of the transaction has
leveled off, consistently staying at 1.71%. Also, as of the April
30, 2013, servicer report, the transaction held no delinquent
loans.
Currently, the reserve account is at the requisite amount of
$153,482. After paying interest to the notes and replenishing any
requisite amount to the reserve account, the transaction uses the
remaining proceeds to pay down the notes sequentially. The rated
notes also benefit from the credit enhancement provided by the
unrated Class F notes at the bottom of the capital structure.
S&P will continue to review whether, in its view, the ratings
currently assigned to the notes remain consistent with the credit
enhancement available to support them, and it will take further
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 Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LIST
Ratings Raised
CRF-18 LLC
Rating Rating
Class To From
B AA (sf) A (sf)
C A (sf) BBB (sf)
D BB (sf) B+ (sf)
E B (sf) CCC (sf)
CSAM FUNDING II: Moody's Raises Rating on Class D Notes From Ba1
----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of the following
notes issued by CSAM Funding II:
$24,000,000 Class B-1 Fixed Rate Notes Due October 15, 2016,
Upgraded to Aaa (sf); previously on August 2, 2012 Upgraded to Aa1
(sf)
$15,250,000 Class B-2 Floating Rate Notes Due October 15, 2016,
Upgraded to Aaa (sf); previously on August 2, 2012 Upgraded to Aa1
(sf)
$6,000,000 Class C-1 Fixed Rate Notes Due October 15, 2016,
Upgraded to Aaa (sf); previously on August 2, 2012 Upgraded to A3
(sf)
$11,000,000 Class C-2 Floating Rate Notes Due October 15, 2016,
Upgraded to Aaa (sf); previously on August 2, 2012 Upgraded to A3
(sf)
$13,000,000 Class D Fixed Rate Notes Due October 15, 2016,
Upgraded to Baa1 (sf); previously on August 2, 2012 Upgraded to
Ba1 (sf)
Moody's also affirmed the ratings of the following notes:
$346,000,000 Class A Floating Rate Notes Due October 15, 2016
(current outstanding balance of $34,473,043.46), Affirmed Aaa
(sf); previously on September 23, 2011 Upgraded to Aaa (sf)
$10,000,000 Class K Combination Notes Due October 15, 2016
(current rated balance of $5,312,337.35), Affirmed Aaa (sf);
previously on September 23, 2011 Upgraded to Aaa (sf)
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the Class A notes and an
increase in the transaction's overcollateralization ratios since
the rating action in August 2012. Moody's notes that the Class A
Notes have been paid down by approximately 77% or $117.86 million
since the last rating action. Based on the latest trustee report
dated May 7, 2013, the Class A, B, C, and D overcollateralization
ratios are reported at 317.67%, 148.54%, 120.71%, and 105.58%,
respectively, versus July 2012 levels of 148.97%,118.76%, 109.17%,
and 102.82%, respectively.
Moody's notes that the underlying portfolio includes a number of
investments in securities that mature after the maturity date of
the notes. Based on the May 2013 trustee report, securities that
mature after the maturity date of the notes currently make up
approximately 38.3% of the underlying portfolio as compared to
20.2% in July 2012. These investments potentially expose the notes
to market risk in the event of liquidation at the time of the
notes' maturity.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Global Approach to Rating Collateralized
Loan Obligations" published in May 2013, 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 $125.5 million,
defaulted par of $23.4 million, a weighted average default
probability of 10.85% (implying a WARF of 2259), a weighted
average recovery rate upon default of 47.91%, and a diversity
score of 26. 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.
CSAM Funding II, issued in May 2002, is a collateralized loan
obligation backed primarily by a portfolio of senior secured loans
with some exposure to corporate bonds.
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013. The methodology used in rating the Class K Combination
Notes was "Using the Structured Note Methodology to Rate CDO
Combo-Notes" published in February 2004.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (1807)
Class A: 0
Class B-1: 0
Class B-2: 0
Class C-1: 0
Class C-2: 0
Class D: +2
Class K: 0
Moody's Adjusted WARF + 20% (2711)
Class A: 0
Class B-1: 0
Class B-2: 0
Class C-1: 0
Class C-2: 0
Class D: -2
Class K: 0
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:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market and/or
collateral sales by the manager, which may have significant impact
on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
3) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation risk
on those assets. Moody's assumes an asset's terminal value upon
liquidation at maturity to be equal to the lower of an assumed
liquidation value (depending on the extent to which the asset's
maturity lags that of the liabilities) and the asset's current
market value. The deal continues to experience an increased
exposure resulted from Amendment and Extend to loan agreements. In
consideration of the size of the deal's exposure to long-dated
assets, which increases its sensitivity to the liquidation
assumptions used in the rating analysis, Moody's ran different
scenarios considering a range of liquidation value assumptions.
However, actual long-dated asset exposure and prevailing market
prices and conditions at the CLO's maturity will drive the extent
of the deal's realized losses, if any, from long-dated assets.
CWABS 2007-BC3: Moody's Cuts Rating on Cl. 2-A-1 Debt to 'Caa1'
---------------------------------------------------------------
Moody's Investors Service has downgraded the rating of 2-A-1
issued by CWABS Asset-Backed Certificates Trust 2007-BC3, backed
by Subprime mortgage loans.
Issuer: CWABS Asset-Backed Certificates Trust 2007-BC3
Cl. 2-A-1, Downgraded to Caa1 (sf); previously on Apr 14, 2010
Confirmed at B3 (sf)
Ratings Rationale:
The rating action reflects recent performance of the underlying
pools and Moody's updated expected losses on the pools. The Class
2-A-1 has been downgraded to Caa1 as mezzanines have depleted in
this transaction and losses are allocated to seniors.
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.
The approach "2005 -- 2008 US RMBS Surveillance Methodology " is
adjusted slightly when estimating losses on pools left with a
small number of loans to account for the volatile nature of small
pools. Even if a few loans in a small pool become delinquent,
there could be a large increase in the overall pool delinquency
level due to the concentration risk. To project losses on pools
with fewer than 100 loans, Moody's first estimates a "baseline"
average rate of new delinquencies for the pool that is dependent
on the vintage of loan origination (11% for all vintages 2004 and
prior). The baseline rates are higher than the average rate of new
delinquencies for larger pools for the respective vintages.
Once the baseline rate is set, further adjustments are made based
on 1) the number of loans remaining in the pool and 2) the level
of current delinquencies in the pool. The volatility of pool
performance increases as the number of loans remaining in the pool
decreases. Once the loan count in a pool falls below 75, the rate
of delinquency is increased by 1% for every loan less than 75. For
example, for a pool with 74 loans from the 2004 vintage, the
adjusted rate of new delinquency would be 11.11%. In addition, if
current delinquency levels in a small pool is low, future
delinquencies are expected to reflect this trend. To account for
that, the rate is multiplied by a factor ranging from 0.85 to 2.25
for current delinquencies ranging from less than 10% to greater
than 50% respectively. Delinquencies for subsequent years and
ultimate expected losses are projected using the approach
described in the methodology publication.
When assigning the final ratings to senior bonds, in addition to
the methodologies, Moody's considered the volatility of the
projected losses and timeline of the expected defaults. For bonds
backed by small pools, Moody's also considered the current
pipeline composition as well as any specific loss allocation rules
that could preserve or deplete the overcollateralization available
for the senior bonds at different pace.
Moody's also adjusts the methodologies for Moody's current view on
loan modifications. As a result of an extension of the Home
Affordable Modification Program (HAMP) 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 into 2014.
The methodologies only applies to pools with at least 40 loans and
a pool factor of greater than 5%. Moody's may withdraw its rating
when the pool factor drops below 5% and the number of loans in the
pool declines to 40 loans or lower unless specific structural
features allow for a monitoring of the transaction (such as a
credit enhancement floor).
The primary sources of assumption uncertainty are Moody's central
macroeconomic forecast and performance volatility as a result of
servicer-related activity such as modifications. The unemployment
rate fell from 8.2% in May 2012 to 7.6% in May 2013. Moody's
forecasts a unemployment central range of 7.0% to 8.0% for the
2013 year. Moody's expects housing prices to continue to rise in
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.
DBUBS 2011-LC2: Moody's Affirms 'B3' Ratings on 2 CMBS Classes
--------------------------------------------------------------
Moody's Investors Service affirmed the ratings of 15 classes of
DBUBS 2011-LC2 Mortgage Trust, Commercial Mortgage Pass-Through
Certificates as follows:
Cl. A-1, Affirmed Aaa (sf); previously on Jun 29, 2011 Definitive
Rating Assigned Aaa (sf)
Cl. A-1C, Affirmed Aaa (sf); previously on Jun 29, 2011 Assigned
Aaa (sf)
Cl. A-1FL, Affirmed Aaa (sf); previously on Jun 29, 2011
Definitive Rating Assigned Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Jun 29, 2011 Definitive
Rating Assigned Aaa (sf)
Cl. A-3C, Affirmed Aaa (sf); previously on Jun 29, 2011 Assigned
Aaa (sf)
Cl. A-3FL, Affirmed Aaa (sf); previously on Jun 29, 2011
Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Jun 29, 2011 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Aa2 (sf); previously on Jun 29, 2011 Definitive
Rating Assigned Aa2 (sf)
Cl. C, Affirmed A2 (sf); previously on Jun 29, 2011 Definitive
Rating Assigned A2 (sf)
Cl. D, Affirmed Baa3 (sf); previously on Jun 29, 2011 Definitive
Rating Assigned Baa3 (sf)
Cl. E, Affirmed Ba3 (sf); previously on Jun 29, 2011 Definitive
Rating Assigned Ba3 (sf)
Cl. F, Affirmed B3 (sf); previously on Jun 29, 2011 Definitive
Rating Assigned B3 (sf)
Cl. FX, Affirmed B3 (sf); previously on Jun 29, 2011 Definitive
Rating Assigned B3 (sf)
Cl. X-A, Affirmed Aaa (sf); previously on Jun 29, 2011 Definitive
Rating Assigned Aaa (sf)
Cl. X-B, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Ratings Rationale:
The affirmations for the 12 principal and interest classes are due
to key parameters, including Moody's loan to value (LTV) ratio,
Moody's stressed DSCR and the Herfindahl Index (Herf), remaining
within acceptable ranges. Based on Moody's current base expected
loss, the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
The ratings of the three IO Classes, Class X-A, Class X-B, and
Class FX, are consistent with the expected credit performance of
their referenced classes and thus are affirmed.
Moody's rating action reflects a base expected loss of 2.2% of the
current pooled balance, compared to 2.0% at last review. Depending
on the timing of loan payoffs and the severity and timing of
losses from specially serviced loans, the credit enhancement level
for the classes could decline below the current levels. If future
performance materially declines, the expected level of credit
enhancement and the priority in the cash flow waterfall may be
insufficient for the current ratings of these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time to
time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions" published in
April 2005.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 22, the same as last review.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 7, 2012.
Deal Performance:
As of the May 10, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 2% to $2.10 billion
from $2.14 billion at securitization. The Certificates are
collateralized by 67 mortgage loans ranging in size from less than
1% to 10% of the pool, with the top ten loans representing 57% of
the pool. The pool contains one loan with an investment grade
credit assessment, representing 1% of the pool.
There are three loans, representing 1.3% of the pool, on the
master servicer's watchlist. The watchlist includes loans which
meet certain portfolio review guidelines established as part of
the CRE Finance Council (CREFC) monthly reporting package. As part
of its ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
The pool has not experienced any losses. There is one loan,
representing 2.4% of the pool, in special servicing. The Ridgeview
Apartments loan is secured by a 416-unit multifamily property
located in Elmsford, New York. The loan was transferred to special
servicer in August 2012 due to non-compliance with the loan
covenants. Loan modification terms have been approved by the
servicer. The property is 95% occupied. Performance has been
stable. Moody's does not estimate a loss for this loan at this
review.
Moody's was provided with full year 2011 and full or partial year
2012 operating results for 100% of the pool. Moody's weighted
average conduit LTV is 89% compared to 93% at last review. Moody's
net cash flow reflects a weighted average haircut of 11% to the
most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.3%.
Moody's actual and stressed conduit DSCRs are 1.54X and 1.14X,
respectively, compared to 1.50X and 1.1X at last review. Moody's
actual DSCR is based on Moody's net cash flow (NCF) and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's NCF
and a 9.25% stressed rate applied to the loan balance.
The loan with a credit assessment is the Angelica Portfolio Loan
($23.7 million -- 1.1% of the pool), which is secured by 12
industrial facilities located in eight states and 100% occupied by
Angelica Corporation under a 20-year lease which expires in March
2030. The average age of the properties is 23 years. Performance
has remained stable since securitization and Moody's utilized a
Lit/Dark analysis when analyzing these assets. Moody's credit
assessment and stressed DSCR are Baa2 and 1.45X, respectively,
compared to Baa2 and 1.44X at last review.
The top three conduit loans represent 30% of the pool. The largest
conduit loan is the US Steel Tower Loan ($214.4 million -- 10.2%
of the pool), which is secured by a 64-story, Class A office
building located in downtown Pittsburgh, Pennsylvania. The
property serves as the headquarters for US Steel and the
University of Pittsburgh Medical Center (UPMC). The property is
97% leased, essentially the same as last review. Performance has
improved due to higher revenues. Moody's LTV and stressed DSCR are
88% and 1.13X, respectively, compared to 95% and 1.06X at last
review.
The second largest conduit loan is the Willowbrook Mall Loan
($208.7 million -- 9.9% of the pool), which is secured by the
400,466 square foot (SF) in-line component of a 1.4 million SF
regional mall located in Houston, Texas. Anchors include
Dillard's, Macy's, Macy's Men and Furniture, Sears, and J.C.
Penney, all of which own their own improvements and are not part
of the collateral. Occupancy was 97% as of September 2012 compared
to 98% at last review. Performance has been stable. Moody's LTV
and stressed DSCR are 98% and 0.94X, respectively, compared to 99%
and 0.93X at last review.
The third largest conduit loan is the 498 7th Avenue Loan ($200.0
million -- 9.5% of the pool), which is secured by a 25-story
office building located between 36th and 37th Street in the
Garment District of New York City. The largest tenants are GroupM
Worldwide (41% of NRA, lease expiration 11/2018) and LN Holdings
(22%, lease expiration 1/2019). The properly was 94% leased as of
December 2012. Moody's LTV and stressed DSCR are 85% and 1.12X,
respectively, compared to 79% and 1.2X at last review.
DETROIT: S&P Lowers Ratings on General Obligation Bonds to 'CCC-'
-----------------------------------------------------------------
Standard & Poor's Ratings Services has lowered its rating on
Detroit's unlimited- and limited-tax general obligation (GO) bonds
and pension obligation certificates to 'CCC-' from 'B'. The
outlook is negative.
"The downgrade is based on recent announcements from the city's
Emergency Financial Manager that Detroit may take steps to adjust
payments to bondholders, as well as immediate plans to meet with
bondholders to discuss the city's financial condition and
resources," said Standard & Poor's credit analyst Jane Hudson
Ridley.
In March 2013 when the Emergency Manager was appointed, Standard &
Poor's revised its outlook on the bonds to stable from negative.
This was based on S&P's view of the appointment as a positive step
toward Detroit regaining structural balance and improving its
overall financial condition. However, the Emergency Manager's
announced plans to pursue adjustments to debt payments--and last
week's announcement of a meeting with creditors, including
bondholders--significantly reduce what S&P viewed as positive
factors for bondholders provided by the powers of an Emergency
Manager. Standard & Poor's views this as an evolving situation,
and it expects conversations with bondholders and creditors
concerning payments to be ongoing.
Detroit is currently evaluating options to adjust its funded debt
obligations to better fit its projected cash flow profile. These
options may include rescheduling principal amortization without
reduction in principal; permanently reducing the principal amount
of debt outstanding; reducing interest rates, as appropriate, to
achieve targeted cost savings or compensate for lost/extended
principal; and issuing new debt to provide certain cash recoveries
to creditors. While the city has not stated its intent to file
for Chapter 9 bankruptcy, it appears to remain one of the
Emergency Manager's potential outcomes, and the filing is under
his control, with the governor's approval.
A 'CCC-' rating reflects Standard & Poor's view of entities that
have announced an intention to undertake a debt restructuring.
Should Detroit move to restructure its debt with principal
reductions or other changes that negatively affect the full or
timely payment to bondholders--or wherein the investor will
receive less than the promise of the original securities-- S&P
would view this as a selective default. The negative outlook on
the bonds reflects this potential.
The negative outlook reflects S&P's expectation that given the
Emergency Manager's statements regarding debt restructuring and
the existing potential for filing for Chapter 9 bankruptcy, S&P
could downgrade the city in the one-year outlook time horizon.
DUANE STREET IV: S&P Affirms 'BB-' Rating on Class E Notes
----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on three
classes of notes from Duane Street CLO IV Ltd., a collateralized
loan obligation (CLO) transaction that is managed by Napier Park
Global Capital LLC. At the same time, S&P affirmed its ratings on
three classes of notes.
S&P last took rating action on this transaction in June 2011, when
it raised its ratings on all six classes of notes because of
improvements in both credit quality and overcollateralization.
This transaction remains in its reinvestment phase until November
2013. As of the May 2013 trustee report, the class A OC ratio has
increased to 133.87% from 132.60% as of the May 2011 trustee
report, while the class B interest coverage ratio has increased to
1004.67% from 623.37%, respectively. There is currently a
significant balance of assets with LIBOR floor base rates, which
can provide additional credit given a low interest rate
environment. S&P raised its ratings on the class B, C, and D
notes to reflect the increase in credit enhancement available.
S&P affirmed its ratings on the class A and the class E notes.
Despite the increase in OC, the credit enhancement available
currently is insufficient to support a 'AAA' rating for the class
A notes. The balance of defaulted and 'CCC' rated assets together
has increased to $56 million from $32 million during the same time
period. Additionally, most of the 'CCC' rated assets currently
held have negative outlooks.
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 will 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
Duane Street CLO IV Ltd.
Rating
Class To From
A-1R AA+ (sf) AA+ (sf)
A-1T AA+ (sf) AA+ (sf)
B AA- (sf) A+ (sf)
C A- (sf) BBB+ (sf)
D BBB- (sf) BB+ (sf)
E BB- (sf) BB- (sf)
EATON VANCE VIII: Moody's Affirms 'Ba2' Rating on Class D Notes
---------------------------------------------------------------
Moody's Investors Service upgraded the ratings of the following
notes issued by Eaton Vance CDO VIII, Ltd.:
$48,000,000 Class B Second Priority Deferrable Floating Rate Notes
Due August 15, 2022, Upgraded to A1 (sf); previously on July 21,
2011 Upgraded to A2 (sf);
$23,250,000 Class C Third Priority Deferrable Floating Rate Notes
Due August 15, 2022, Upgraded to Baa1 (sf); previously on July 21,
2011 Upgraded to Baa2 (sf);
Moody's also affirmed the ratings of the following notes:
$583,500,000 Class A Senior Secured Floating Rate Notes Due August
15, 2022 (current outstanding balance of $553,500,000), Affirmed
Aaa (sf); previously on July 21, 2011 Upgraded to Aaa (sf);
$33,750,000 Class D Fourth Priority Deferrable Floating Rate Notes
Due August 15, 2022, Affirmed Ba2 (sf); previously on July 21,
2011 Upgraded to Ba2 (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 August 2013. In
consideration of the reinvestment restrictions applicable during
the amortization period, and therefore limited ability to effect
significant changes to the current collateral pool, Moody's
analyzed the deal assuming a higher likelihood that the collateral
pool characteristics will continue to maintain a positive buffer
relative to certain covenant requirements. In particular, the deal
is assumed to benefit from higher spread levels compared to the
levels assumed at the last rating action in July 2011. Moody's
modeled a weighted average spread of 3.41% compared to 2.86% at
the time of the last rating action. However, Moody's took into
consideration that this deal has less restrictive post-
reinvestment trading constraints than other comparable CLOs.
Moody's also notes that the transaction's reported
overcollateralization ratios are stable since the last rating
action.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Global Approach to Rating Collateralized
Loan Obligations" published in May 2013, 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 $699 million,
defaulted par of $10 million, a weighted average default
probability of 18.02% (implying a WARF of 2418), a weighted
average recovery rate upon default of 51.28%, and a diversity
score of 81. 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.
Eaton Vance CDO VIII, Ltd., issued in July 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3.2.1
of the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (1935)
Class A: 0
Class B: +2
Class C: +2
Class D: +1
Moody's Adjusted WARF + 20% (2902)
Class A: 0
Class B: -2
Class C: -2
Class D: -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:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will commence and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market and/or
collateral sales by the manager, which may have significant impact
on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
3) Post-Reinvestment Period Trading: Subject to certain
requirements, the deal is allowed to reinvest certain proceeds
after the end of the reinvestment period, and as such the manager
has the flexibility to deteriorate some collateral quality metrics
to the covenant levels. In particular, Moody's tested for a
possible extension of the actual weighted average life in its
analysis given that the post-reinvestment period reinvesting
criteria has loose restrictions on the weighted average life of
the portfolio. Additionally, given that the post-reinvestment
period reinvesting criteria do not require the reinvestment to
have a Moody's rating equal to or better than the rating of the
security sold or prepaid, Moody's considered the deal's
sensitivity to a portfolio having a higher WARF.
FIRST HORIZON 2006-3: Moody's Cuts Ratings on 4 RMBS Tranches
-------------------------------------------------------------
Moody's Investors Service has downgraded three tranches and
upgraded one tranche from one RMBS transaction issued by First
Horizon Mortgage Pass-Through Trust 2006-3. The collateral backing
this deal primarily consists of first-lien, fixed-rate prime Jumbo
residential mortgages. The actions impact approximately $75
million of RMBS issued in 2006.
Complete rating actions are as follows:
Issuer: First Horizon Mortgage Pass-Through Trust 2006-3
Cl. I-A-12, Downgraded to Caa1 (sf); previously on Mar 26, 2010
Downgraded to B2 (sf)
Cl. I-A-13, Downgraded to Caa1 (sf); previously on Mar 26, 2010
Downgraded to B2 (sf)
Cl. I-A-14, Downgraded to Caa1 (sf); previously on Mar 26, 2010
Downgraded to B2 (sf)
Cl. I-A-15, Upgraded to Ca (sf); previously on Mar 26, 2010
Downgraded to C (sf)
Ratings Rationale:
The actions are a result of the recent performance of the prime
jumbo pools originated from 2005 to 2007 and reflect Moody's
updated loss expectations on these pools. The downgrades are a
result of deteriorating performance and structural features
resulting in higher expected losses for certain bonds than
previously anticipated. The upgrade is due to significant
improvement in collateral performance.
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 for 1) Moody's current view on
loan modifications and 2) small pool volatility
Loan Modifications
As a result of an extension of the Home Affordable Modification
Program (HAMP) 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 2014.
Small Pool Volatility
For pools with loans less than 100, Moody's adjusts its
projections of loss to account for the higher loss volatility of
such pools. For small pools, a few loans becoming delinquent would
greatly increase the pools' delinquency rate. To project losses on
prime jumbo pools with fewer than 100 loans, Moody's first
calculates an annualized delinquency rate based on vintage, number
of loans remaining in the pool and the level of current
delinquencies in the pool. For prime jumbo pools, Moody's first
applies a baseline delinquency rate of 3.5% for 2005, 6.5% for
2006 and 7.5% for 2007. Once the loan count in a pool falls below
76, this rate of delinquency is increased by 1% for every loan
fewer than 76. For example, for a 2005 pool with 75 loans, the
adjusted rate of new delinquency is 3.54%. Further, to account for
the actual rate of delinquencies in a small pool, Moody's
multiplies the rate by a factor ranging from 0.20 to 2.0 for
current delinquencies that range from less than 2.5% to greater
than 50% respectively. Moody's then uses this final adjusted rate
of new delinquency to project delinquencies and losses for the
remaining life of the pool under the approach described in the
methodology publication.
When assigning the final ratings to bonds, Moody's considered the
volatility of the projected losses and timeline of the expected
defaults.
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 8.1% in April 2012 to 7.5% in April 2013. Moody's
forecasts a unemployment central range of 7.0% to 8.0% for the
2013 year. Moody's expects housing prices to continue to rise in
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.
FIRST UNION 2001-C3: S&P Raises Rating on Class L Notes to 'B-'
---------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on two
classes of commercial mortgage pass-through certificates from
First Union National Bank Commercial Mortgage Trust's series 2001-
C3, a U.S. commercial mortgage-backed securities (CMBS)
transaction. In addition, S&P affirmed its 'CCC- (sf)' rating on
class M from the same transaction.
S&P's rating actions reflect its analysis of the transaction
primarily using its criteria for rating U.S. and Canadian CMBS.
S&P's analysis included a review of the credit characteristics and
performance of all of the remaining assets in the pool, the
transaction structure, and the liquidity available to the trust.
The upgrades reflect S&P's expected available credit enhancement
for the affected tranches, which it believes is greater than its
most recent estimate of necessary credit enhancement for the
rating level. The upgrades also reflect S&P's views regarding the
current and future performance of the transaction's collateral, as
well as the deleveraging of the trust balance.
While available credit enhancement levels may suggest further
positive rating movements on the rated classes, S&P's analysis
also considered the limited liquidity support available to each
class. In addition, two ($7.7 million, 35.3%) out of 11 remaining
assets ($21.9 million) are with the special servicer, which
consists of the largest- and fourth-largest assets in the pool.
S&P also considered the potential increase in interest shortfalls,
should the third-largest asset in the pool, the Douglas Landings
Apartments loan (details below), be transferred to special
servicing. Currently, this loan is on the master servicer's
watchlist due to a low reported debt service coverage (DSC). If
this loan is transferred to the special servicer, it could
generate additional interest shortfalls and decrease the liquidity
support available to the trust.
"We affirmed our 'CCC- (sf)' rating on class M because of its
historical shortfalls, and susceptibility to future interest
shortfalls. As of the May 15, 2013, trustee remittance report,
the trust incurred monthly interest shortfalls totaling $23,520,
primarily from special servicing fees of $1,614, workout fees of
$333, and an appraisal subordinate entitlement reduction (ASER)
amount of $21,197. The interest shortfalls this month were offset
by a one-time ASER recovery totaling $185,996 after applying the
suspended funds for the Grove Office Park real estate owned (REO)
asset. Per the special servicer, the $185,996 ASER recovery
appears to be a one-time event and the trust is expected to resume
experiencing monthly interest shortfalls, which likely will affect
class M. Class M currently has no cumulative interest shortfalls
outstanding; however, before the one-time ASER recovery, class M
had incurred interest shortfalls for four consecutive months and
had accumulated interest shortfalls outstanding for seven months.
Since we expect additional interest shortfalls to this class
within the foreseeable future, we affirmed our rating on class M,"
S&P said.
"As of the May 15, 2013, trustee remittance report, the collateral
pool consisted of 10 loans and one REO asset with an aggregate
principal balance of $21.9 million, down from 125 loans with an
aggregate balance of $818.8 million at issuance. One loan
($4.5 million, 20.4%), which matures on June 1, 2018, is defeased.
To date, the transaction experienced losses totaling $28.6 million
(3.5% of the transaction's original pooled certificate balance).
Excluding the two specially serviced assets ($7.7 million, 35.3%)
and the defeased loan, based on the most recent performance data
from the master servicer, Wells Fargo Bank N.A. (Wells Fargo), and
using Standard & Poor's adjusted net cash flow and capitalization
rates, we calculated a weighted average DSC for eight of the
remaining 11 assets of 0.98x and a weighted average loan-to-value
ratio of 59.2%," S&P added.
As of the May 2013 trustee remittance report, excluding the
defeased loan, eight loans are reported as performing loans, with
the largest loan appearing on the master servicer's watchlist.
Details on the three largest nondefeased performing loans are as
follows:
-- The Douglas Landings Apartments loan ($3.7 million, 16.8%)
is secured by a 96-unit multifamily apartment building in
Austin, Texas. As of the year ended Dec. 31, 2012, the
reported DSC and occupancy were 0.94x and 93.8%,
respectively. The loan is currently on the master
servicer's watchlist due to a low reported DSC. According
to Wells Fargo, management plans to improve the property's
performance by increasing its efforts to rent available
units.
-- The CVS 8099 loan ($2.2 million, 10.2%) is secured by a
13,860-sq.-ft. retail property in Midland, Mich. According
to Wells Fargo, the sole tenant was previously CVS Caremark
Corp., but the property is now leased to Dollar Tree Inc.
As of the year ended Dec. 31, 2012, reported DSC and
occupancy were 1.00x and 100.0%, respectively.
-- The CVS Morrisville loan ($1.7 million, 7.8%) is secured by
a 10,125-sq.-ft. retail property in Morrisville, Penn.
According to the April 22, 2013, rent roll, the sole tenant
is CVS Caremark Corp., which occupies the space until
Jan. 31, 2023. As of the year ended Dec. 31, 2012,
reported DSC and occupancy were 1.06x and 100.0%,
respectively.
The remaining five performing loans in aggregate constitute 9.5%
of the pool with a balance of $2.1 million. These five performing
loans have exhibited stable historical performance.
SPECIALLY SERVICED ASSETS
As of the May 15, 2013, trustee remittance report, one loan and
one REO asset ($7.7 million, 35.3%) were with the special
servicer. Details on the two specially serviced assets are as
follows:
-- The Grove Office Park REO asset ($5.3 million, 24.4%), the
largest asset with LNR Partners LLC (LNR), consists of a
104,454-sq.-ft. office property in Wheaton, Ill. The
reported exposure is $5.7 million, and there is a
$1.8 million appraisal reduction amount (ARA) in effect
against the asset. The loan was transferred to special
servicing on Dec. 27, 2010 due to imminent default, and the
property became REO on Oct. 11, 2012. LNR stated that it
is evaluating the asset and all possible workout and
disposition alternatives. S&P expects a moderate loss upon
its eventual resolution.
-- The Schaumburg Tech Center I loan ($2.4 million, 10.9%) is
secured by a 57,825-sq.-ft. office property in Schaumburg,
Ill. The reported exposure is $2.7 million, and there is
an $846,266 ARA in effect. The loan was transferred to
special servicing on June 1, 2011, due to maturity default,
after it matured on May 15, 2011. According to LNR, it was
the successful bidder at the foreclosure sale on May 10,
2013, and there is a motion pending to confirm the sale
scheduled for June 17, 2013. S&P expects a moderate loss
upon its eventual resolution.
As it relates to the above asset resolutions, S&P considered
minimal loss to be less than 25%, moderate loss to be between 26%
and 59%, and significant loss to be 60% or greater.
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 17-g7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS RAISED
First Union National Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2001-C3
Rating
Class To From Credit enhancement (%)
K BBB+ (sf) BB- (sf) 65.48
L B- (sf) CCC (sf) 37.49
RATING AFFIRMED
First Union National Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2001-C3
Class Rating Credit enhancement (%)
M CCC- (sf) 18.82
FOOTHILL/EASTERN TRANSPORTATION.: Moody's Rates 2013B Bonds 'Ba1'
-----------------------------------------------------------------
Moody's Investors Service assigned Baa3 rating to the second
senior lien Series 2013A, 2013C and 2013D bonds and a Ba1 rating
to the junior lien Series 2013B bonds of the Foothill/Eastern
Transportation Corridor Agency (F/ETCA or agency). Moody's also
affirms the Baa3 rating on the outstanding senior series 1995
bonds, which are not being refunded. The rating outlook is stable.
Issue: Junior Lien Toll Road Refunding Revenue Bonds, Series
2013B; Rating: Ba1; Sale Amount: $206,370,000; Expected Sale Date:
06/11/2013; Rating Description: Revenue: Government Enterprise
Issue: Toll Road Refunding Bonds, Series 2013A; Rating: Baa3; Sale
Amount: $1,422,000,000; Expected Sale Date: 06/11/2013; Rating
Description: Revenue: Government Enterprise
Issue: Toll Road Refunding Bonds, Series 2013C; Rating: Baa3; Sale
Amount: $642,855,000; Expected Sale Date: 06/11/2013; Rating
Description: Revenue: Government Enterprise
Issue: Toll Road Refunding Bonds, Series 2013D (Forward Delivery);
Rating: Baa3; Sale Amount: $607,165,000; Expected Sale Date:
06/11/2013; Rating Description: Revenue: Government Enterprise
Rating Rationale:
Despite the agency's very high debt load and deferral of principal
repayment by 13 years, this refunding smoothens the debt service
profile and is forecasted to improve near term debt service
coverage ratios (DSCRs). Traffic appears to be stabilizing as the
Orange County service area steadily emerges from economic
recession. While both traffic and revenue are ahead of the FY 2013
budget, they remain below the 1999 financing forecast. Proactive,
almost annual toll rate increases and increases in related fees;
timely financial reporting; expected continued recovery and
development in the affluent service area and the relief the toll
road provides from traffic congestion supports the investment
grade rating on the Series 2013 second senior bonds, which are
payable after the Series 1995 bonds.
Moody's notes that, while not a legal defeasance, debt service on
the small amount of outstanding senior Series 1995 bonds is
satisfied by irrevocable funds until scheduled principal matures
in 2033 through 2035. The lower Ba1 rating for the junior bonds is
due to their lower standing in the flow of funds; weaker legal
covenants and large amount of senior bonds (91%), though junior
bonds benefit from a dedicated debt service reserve fund (DSRF)
that is the same as for 2013 bonds.
The Orange County/Santa Ana MSA service area has a diverse and
broad economic base that is expected to continue to develop,
albeit more slowly than in the past. Socio-economic indicators and
wealth levels are above national averages and job creation and
housing values have been improving over the last several years,
which should allow room for future toll rate increases necessary
to support steadily escalating debt service.
Residential and commercial development along the Foothill/Eastern
corridor is forecasted to generate stronger than historic traffic
growth, given the availability of large tracts of developable land
at the both north and south end of the corridor, though Moody's
believes the base case traffic and revenue forecast to be
optimistic and therefore reduce forecasted revenue growth by 5%
annually in Moody's base case.
There is the potential for a significant amount of additional debt
for expansion projects that have not yet been approved, and this
adds risk to the agency's credit profile. No plan of finance has
yet been developed.
Outlook
The rating outlook is stable based on recent improvement in
traffic and revenue; maintenance of ample current unrestricted
liquidity levels and Moody's expectation that traffic and revenue
will recover in tandem with the economic recovery in Orange County
and that toll increases will be implemented to maintain the
projected financial profile. Moody's expects that the refunding
will enable the agency to meet debt service requirements and the
1.3 times rate covenant primarily with net revenues, though FYs
2014 to 2018 include small transfers from dedicated reserves.
What Could Change the Rating - UP
Upside potential for the rating would be closely correlated with
accelerated development in the corridor that generates higher than
forecasted growth in traffic and revenues. More clarity regarding
the development of a feasible plan of finance for Foothill South,
without an adverse impact on F/ETCA's financial operations and
DSCRs also could exert positive credit pressure.
What Could Change the Rating - DOWN
The agency's credit rating would be negatively pressured by lower
than forecasted traffic and revenue due to slower organic growth
or failure to implement rate increase as needed to provide the
minimum covenanted 1.3 times DSCR for senior and 1.15 times for
all bonds. The rating also would be pressured by risks related to
substantial additional borrowing for and construction of the
Foothill South extension.
Strengths
- Independent toll raising ability and above average service
area socio-economic indicators should support and future toll
increases and traffic growth
- Ample liquidity levels and cash funded DSRFs
- No current construction risk or ramp up risk, although this
will change if the Foothill South project is undertaken
- Some debt service smoothing and expenditure relief with this
refunding
Challenges
- Annual debt service ramps up steadily and repayment relies on
higher than historic traffic and revenue growth and annual
toll rate increases
- Toll rates are currently among the highest for US toll roads
- Construction of the Foothill South project could pressure
agency finances, depending on the ultimate construction cost
and financial feasibility of that project
* The mitigation agreement with San Joaquin Hills Transportation
Corridor Agency (SJHTCA), including a potential loan of up to
$1.04 billion, may impact the agency's ability to accumulate
cash, though recent amendments and debt restructuring for
SJHTCA make this less likely
The principal methodology used in this rating was Government Owned
Toll Roads published in October 2012.
GALAXY VIII: Moody's Lifts Rating on Class E Notes to 'Ba2'
-----------------------------------------------------------
Moody's Investors Service upgraded the ratings of the following
notes issued by Galaxy VIII CLO, Ltd.:
$33,750,000 Class B Senior Floating Rate Notes Due 2019, Upgraded
to Aaa (sf); previously on March 7, 2013 Upgraded to Aa2 (sf);
$24,400,000 Class C Deferrable Mezzanine Floating Rate Notes Due
2019, Upgraded to A1 (sf); previously on March 7, 2013 Upgraded to
Baa1 (sf);
$18,700,000 Class D Deferrable Mezzanine Floating Rate Notes Due
2019, Upgraded to Baa3 (sf); previously on March 7, 2013 Upgraded
to Ba1 (sf);
$12,500,000 Class E Deferrable Junior Floating Rate Notes Due
2019, Upgraded to Ba2 (sf); previously on March 7, 2013 Upgraded
to Ba3 (sf);
$10,000,000 Class X Combination Notes (current outstanding rated
balance of $2,974,008), Upgraded to A3 (sf); previously on March
7, 2013 Upgraded to Baa1 (sf)
Moody's also affirmed the ratings of the following notes:
$372,500,000 Class A Senior Term Notes Due 2019 (current
outstanding balance of $281,654,889 ), Affirmed Aaa (sf);
previously on March 7, 2013 Upgraded to Aaa (sf).
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the senior notes and an
increase in the transaction's overcollateralization ratios since
the rating action in March 2013. Moody's notes that the Class A
Notes have been paid down by approximately 23.3% or $85.7 million
since the last rating action. Based on Moody's calculation, the
Class A/B, Class C, Class D and Class E overcollateralization
ratios are at 122.5%, 113.7%, 107.8% and 104.2%, respectively,
versus March 2013 levels of 117.5%, 110.8%, 106.1% and 103.2%,
respectively. Moody's also notes that the transaction's reported
collateral quality, as measured by WARF, is stable since the last
rating action.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Global Approach to Rating Collateralized
Loan Obligations" published in May 2013, 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 $381 million,
defaulted par of $11.5 million, a weighted average default
probability of 14.91% (implying a WARF of 2373), a weighted
average recovery rate upon default of 51.27%, and a diversity
score of 62. 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.
Galaxy VIII CLO, Ltd., issued in March 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans, with some exposure to senior unsecured bonds.
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013. The methodology used in rating the Class X Combination
Notes was "Using the Structured Note Methodology to Rate CDO
Combo-Notes" published in February 2004.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (1898)
Class A: 0
Class B: 0
Class C: +2
Class D: +2
Class E: +1
Class X: +3
Moody's Adjusted WARF + 20% (2848)
Class A: 0
Class B: 0
Class C: -2
Class D: -1
Class E: -1
Class X: -2
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of upcoming speculative-grade debt maturities which
may create challenges for issuers to refinance. CLO notes'
performance may also be impacted by 1) the manager's investment
strategy and behavior and 2) divergence in legal interpretation of
CLO documentation by different transactional parties due to
embedded ambiguities.
Sources of additional performance uncertainties:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market and/or
collateral sales by the manager, which may have significant impact
on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. 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.
GALAXY XII: S&P Affirms 'BB' Rating on $16-Mil. Class E Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on Galaxy
XII CLO Ltd./Galaxy XII CLO Inc.'s $369.5 million floating-rate
notes following the transaction's effective date as of Sept. 6,
2012.
Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio (typically referred to as an "effective
date rating affirmation").
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to S&P.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of its criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect its assumptions about the
transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
In S&P's published effective date report, it discusses its
analysis of the information provided by the transaction's trustee
and collateral manager in support of their request for effective
date rating affirmation. In most instances, S&P intends to
publish an effective date report each time it issues an effective
date rating affirmation on a publicly rated U.S. cash flow CLO.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as 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
RATINGS AFFIRMED
Galaxy XII CLO Ltd./Galaxy XII CLO Inc.
Class Rating Amount
(mil. $)
A AAA (sf) 251.5
B AA (sf) 55.0
C (deferrable) A (sf) 28.0
D (deferrable) BBB (sf) 19.0
E (deferrable) BB (sf) 16.0
GE CAPITAL 2001-3: Fitch Affirms 'C' Rating on Cl. I Certificates
-----------------------------------------------------------------
Fitch Ratings has affirmed seven classes of GE Capital Commercial
Mortgage Corporation (GECCMC) commercial mortgage pass-through
certificates series 2001-3 due to stable pool performance.
Key Rating Drivers
The affirmations are due to consistent pool performance and
sufficient credit enhancement on the remaining classes after
consideration of expected losses. The pool has experienced $40.4
million (4.2% of the original pool balance) in realized losses to
date. Fitch has designated seven loans (71.3%) as Fitch Loans of
Concern, which includes six specially serviced assets (66.3%).
As of the May 2013 distribution date, the pool's aggregate
principal balance has been reduced by 94.4% to $54.4 million from
$963.8 million at issuance. Per the servicer reporting, one loan
(2.7% of the pool) is currently defeased. Interest shortfalls are
currently affecting classes I through N.
The largest contributor to expected losses is a specially-serviced
loan secured by a 114,421 square foot (sf) office building located
in Arlington, TX (21.4% of the pool). The loan was transferred to
special servicing in November 2008 and became real-estate owned
(REO) in April 2010. The property was recently sold and the
closing is expected to occur in the near future.
Rating Sensitivities
The rating on class G is expected to be stable as the credit
enhancement remains high as a result of continued pay down and
defeasance. The rating on class H could be downgraded further if
expected losses increase or if additional loans are transferred to
special servicing.
Fitch affirms the following classes and revises Recovery Estimates
(RE) as indicated:
- $8.4 million class I at 'Csf', RE 30%.
Fitch affirms the following classes as indicated:
- $8 million class G at 'BBBsf', Outlook Stable;
- $27.7 million class H at 'CCCsf', RE 100%;
- $7.2 million class J at 'Csf', RE 0%;
- $3 million class K at 'Dsf', RE 0%;
- $0 class L at 'Dsf', RE 0%;
- $0 class M at 'Dsf', RE 0%.
The class A-1, A-2, B, C, D, E and F certificates have paid in
full. Fitch does not rate the class N certificates. Fitch
previously withdrew the ratings on the interest-only class X-1 and
X-2 certificates.
GLG ORE 2013-1: S&P Assigns Prelim. 'BB' Rating on Class E Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to GLG Ore Hill CLO 2013-1's.
The note issuance is a CLO securitization backed by a revolving
pool consisting primarily of broadly syndicated senior secured
loans.
The preliminary ratings are based on information as of June 11,
2013. Subsequent information may result in the assignment of
final ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The credit enhancement provided to the preliminary rated
notes through the subordination of cash flows that are
payable to the subordinated notes.
-- The transaction's credit enhancement, which is sufficient
to withstand the defaults applicable for the supplemental
tests (not counting excess spread), and cash flow
structure, which can withstand the default rate projected
by Standard & Poor's CDO Evaluator model, as assessed by
Standard & Poor's using the assumptions and methods
outlined in its corporate collateralized debt obligation
(CDO) criteria.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
-- The diversified collateral portfolio, which primarily
comprises broadly syndicated speculative-grade senior
secured term loans.
-- The collateral manager's experienced management team.
-- S&P's projections regarding the timely interest and
ultimate principal payments on the preliminary rated notes,
which it assessed using its cash flow analysis and
assumptions commensurate with the assigned preliminary
ratings under various interest-rate scenarios, including
LIBOR ranging from 0.28%-13.84%.
-- The transaction's overcollateralization and interest
coverage tests, a failure of which will lead to the
diversion of interest and principal proceeds to reduce the
balance of the rated notes outstanding.
-- The transaction's interest diversion test, a failure of
which will lead to the reclassification of up to 50% of the
excess interest proceeds that are available prior to paying
uncapped administrative expenses, subordinated and
incentive management fees, and subordinated note payments
into principal proceeds for the purchase of additional
collateral assets during the reinvestment period.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties, and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties, and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1595.pdf
PRELIMINARY RATINGS ASSIGNED
GLG Ore Hill CLO 2013-1, Ltd./GLG Ore Hill CLO 2013-1 LLC
Class Rating Amount
(mil. $)
X-1 AAA(sf) 3.00
X-2 AAA (sf) 3.00
A AAA (sf) 249.00
B-1 AA (sf) 44.50
B-2 AA (sf) 11.00
C-1 A (sf) 18.50
C-2 A (sf) 8.00
D BBB (sf) 21.50
E BB (sf) 17.00
F B (sf) 9.00
GOLUB CAPITAL: S&P Affirms 'BB' Rating on Class E Notes
-------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on Golub
Capital Partners CLO 14 Ltd./Golub Capital Partners CLO 14 LLC's
$446.5 million floating-rate notes following the transaction's
effective date as of Jan. 24, 2013.
Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio (typically referred to as an "effective
date rating affirmation").
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to S&P.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of S&P's criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect S&P's assumptions about
the transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
"In our published effective date report, we discuss our analysis
of the information provided by the transaction's trustee and
collateral manager in support of their request for effective date
rating affirmation. In most instances, we intend to publish an
effective date report each time we issue an effective date rating
affirmation on a publicly rated U.S. cash flow CLO," S&P added.
On an ongoing basis after S&P issues an effective date rating
affirmations, it will periodically review whether, in its view,
the current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as 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
RATINGS AFFIRMED
Golub Capital Partners CLO 14 Ltd./
Golub Capital Partners CLO 14 LLC
Class Rating Amount
(mil. $)
A AAA (sf) 308.00
B AA (sf) 45.00
C (deferrable) A (sf) 40.00
D (deferrable) BBB (sf) 26.50
E (deferrable) BB (sf) 27.00
GREENPOINT 2005-HE4: Moody's Ups Rating on 3 Debt Classes to Ba3
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of three
tranches from Greenpoint Mortgage Funding Trust 2005-HE4, backed
primarily by closed-end second lien mortgage loans and HELOCs.
Complete rating actions are as follows:
Issuer: Greenpoint Mortgage Funding Trust 2005-HE4
Cl. IA-1, Upgraded to Ba3 (sf); previously on Nov 4, 2010
Downgraded to B1 (sf)
Cl. IIA-1a, Upgraded to Ba3 (sf); previously on Nov 4, 2010
Downgraded to B1 (sf)
Cl. IIA-4c, Upgraded to Ba3 (sf); previously on Nov 4, 2010
Downgraded to B1 (sf)
Ratings Rationale:
The upgrades are due to improvement in collateral performance and
the build-up in credit enhancement. The rating action takes into
account the updated pool losses relative to the total credit
enhancement available from subordination, as well as excess spread
and external enhancement such as pool insurance policies, reserve
accounts, and guarantees. In addition, Moody's considered the
volatility of the projected losses and the timing of the expected
defaults.
The methodologies used in this rating were "Moody's Approach to
Rating US Residential Mortgage-Backed Securities" published in
December 2008, and "Second Lien RMBS Loss Projection Methodology:
April 2010" published in April 2010.
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 8.2% in May 2012 to 7.6% in May 2013. Moody's
forecasts a unemployment central range of 7.0% to 8.0% for the
2013 year. Moody's expects housing prices to continue to rise in
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.
GREENWICH CAPITAL: Fitch Affirms 'D' Rating on Class N Certs
------------------------------------------------------------
Fitch Ratings has affirmed Greenwich Capital Commercial Funding
Corporation Commercial Mortgage Trust series 2002-C1, commercial
mortgage pass-through certificates.
Key Rating Drivers
Currently, all five remaining classes have distressed ratings. The
transaction has become highly concentrated with only seven loans
remaining in the pool, including five specially serviced loans
(77.9%) and one defeased loan (17.6%). Fitch modeled losses of
34.6% of the remaining pool; expected losses on the original pool
balance total 5.4%, including losses already incurred. The pool
has experienced $54.5 million (4.6% of the original pool balance)
in realized losses to date.
Rating Sensitivities
The ratings of classes L and M are subject to further downgrades
as losses are realized. Classes N, O and P, rated 'Dsf', have
already experienced realized losses.
As of the June 2013 distribution date, the pool's aggregate
principal balance has been reduced by 97.7% to $26.6 million from
$1.18 billion at issuance. Interest shortfalls are currently
affecting classes M through Q.
The largest contributor to modeled losses is a loan secured by a
266-room limited service hotel located in Daton, OH (22.8% of the
pool). The loan was transferred to special servicing in November
2008 due to imminent default. The borrower filed for bankruptcy in
June 2010 after the special servicer initiated the foreclosure
process. However, the bankruptcy was dismissed by the court and a
receiver has been in place since August 2012. The court continues
to work through the foreclosure process. As of October 2012, the
property was 53% occupied.
The second largest contributor to modeled losses is a loan secured
by a 49,416 square foot (sq ft) mixed-use property in Greenwood
Village, CO (18.7%). The loan was transferred to special servicing
in August 2012 for imminent default. The loan could not refinance
at its November 2012 maturity and remains with the special
servicer. The servicer is working with the borrower on a
resolution. As of February 2013, the property was 65% occupied.
Fitch affirms the following classes as indicated:
-- $13.8 million class L at 'CCCsf', RE 95%;
-- $8.7 million class M at 'Csf', RE 0%;
-- $4 million class N at 'Dsf', RE 0%;
-- $0 class O at 'Dsf', RE 0%;
-- $0 class P at 'Dsf', RE 0%.
The class A-1, A-2, A-3, A-4, B, C, D, E, F, G, H, J, K, the
interest-only classes XPB and XP certificates, have paid in full.
Fitch does not rate the class Q and SWD-B certificates. Fitch
previously withdrew the rating on the interest-only class XC
certificates.
GREYLOCK SYNTHETIC 2006: Moody's Raises Ratings on 13 CDO Classes
-----------------------------------------------------------------
Moody's Investors Service announced the following rating action on
Greylock Synthetic CDO 2006, a synthetic credit collateralized
debt obligation transaction. The CSO references a portfolio of
synthetic corporate senior unsecured and subordinated bonds.
Series 1 $105,000,000 Sub-Class A3-$LMS Notes Due 2014 (current
outstanding balance $20,000,000), Upgraded to Baa3 (sf);
previously on December 4, 2012 Upgraded to Ba2 (sf)
Series 1 $87,000,000 Sub-Class A4-$L Notes Due 2014 (current
outstanding balance $63,560,000), Upgraded to Ba1 (sf); previously
on December 4, 2012 Upgraded to B1 (sf)
Series 1 $2,000,000 Sub-Class B2-$F Notes Due 2014 (current
outstanding balance $750,000), Upgraded to Caa1 (sf); previously
on February 11, 2009 Downgraded to Caa3 (sf)
Series 1 $800,000 Sub-Class B2B-$L Notes Due 2014, Upgraded to
Caa1 (sf); previously on February 11, 2009 Downgraded to Caa3 (sf)
Series 2 $51,000,000 Sub-Class A3-$LMS Notes Due 2017 (current
outstanding balance $45,000,000), Upgraded to Ba3 (sf); previously
on December 4, 2012 Upgraded to B1 (sf)
Series 2 $5,000,000 Sub-Class A3-$FMS Notes Due 2017, Upgraded to
Ba3 (sf); previously on December 4, 2012 Upgraded to B1 (sf)
Series 2 $20,000,000 Sub-Class A3A-$FMS Notes Due 2017, Upgraded
to Ba3 (sf); previously on December 4, 2012 Upgraded to B1 (sf)
Series 2 $20,000,000 Sub-Class A3B-$LMS Notes Due 2017, Upgraded
to Ba3 (sf); previously on December 4, 2012 Upgraded to B1 (sf)
Series 2 $70,000,000 Sub-Class A4-$L Notes Due 2017, Upgraded to
B2 (sf); previously on June 3, 2011 Upgraded to Caa2 (sf)
Series 2 $20,000,000 Sub-Class A4-$F Notes Due 2017, Upgraded to
B2 (sf); previously on June 3, 2011 Upgraded to Caa2 (sf)
Series 2 $13,000,000 Sub-Class A6-$L Notes Due 2017 (current
outstanding balance $5,500,000), Upgraded to Caa2 (sf); previously
on October 16, 2009 Downgraded to Caa3 (sf)
Series 3 EUR 15,000,000 Sub-Class A1-ELMS Notes Due 2014, Upgraded
to Baa1 (sf); previously on December 4, 2012 Upgraded to Baa2 (sf)
Series 6 $100,000,000 Sub-Class A1A-$LMS Notes Due 2014 (current
outstanding balance $12,799,352), Upgraded to Baa1 (sf);
previously on December 4, 2012 Upgraded to Baa2 (sf)
Moody's also affirmed the ratings of the following notes:
Series 2 $2,000,000 Sub-Class B2A-$L Notes Due 2017, Affirmed Caa3
(sf); previously on October 16, 2009 Downgraded to Caa3 (sf)
Series 2 $1,500,000 Sub-Class B2B-$L Notes Due 2017, Affirmed Caa3
(sf); previously on October 16, 2009 Downgraded to Caa3 (sf)
Ratings Rationale:
Moody's rating action is the result of the shortened time to
maturity of the CSO and the level of credit enhancement remaining
in the transaction. In addition to these positive factors is the
stable credit quality of the reference portfolio.
Since the last rating action in December 2012, the ten year
weighted average rating factor (WARF) of the portfolio has
decreased marginally from 925 to 908 currently, excluding settled
credit events. The percentage of investment grade reference
credits increased marginally from 75% in December 2012 to 77.2%,
currently. There are 23 reference entities with a negative outlook
compared to 13 that are positive, and 2 entities on watch for
downgrade compared to none on watch for upgrade. In December 2012,
there were 27 reference entities with a negative outlook compared
to eight that were positive, and four entities on watch for
downgrade compared to two on watch for upgrade.
The portfolio has experienced six credit events, equivalent to
4.2% of the portfolio based on the portfolio notional value at
closing. Since inception, the subordination of the rated tranches
have been reduced by approximately 1.7% due to credit events on
Federal Home Loan Mortgage Corporation, Federal National Mortgage
Association, Lehman Brothers, Station Casinos, CIT Group Inc. and
Ambac Assurance Corp. In addition, the portfolio is exposed to
Clear Channel Communications, Inc. and Harrah's Operating Company,
Inc., neither of which have declared a credit event, but are
nonetheless currently rated Ca.
The CSO has a remaining life of 0.8 years for tranches maturing on
March 20, 2014 and 3.8 years for tranches maturing on March 20,
2017.
The principal methodology used in this rating was "Moody's
Approach to Rating Corporate Collateralized Synthetic Obligations"
published in September 2009.
Moody's analysis for this transaction is based on CDOROM v2.8-9.
Moody's rating action factors in a number of sensitivity analyses
and stress scenarios. Results are given in terms of the number of
notches' difference versus the base case, where higher notches
correspond to lower expected losses, and vice-versa:
- Moody's reviews a scenario consisting of reducing the maturity
of the CSO by six months, keeping all other things equal. For
tranches maturing on March 20, 2014, the results of this run are
between four to seven notches higher than the base case. For
tranches maturing on March 20, 2017, the result of this run is one
notch higher than in the base case.
- Market Implied Ratings ("MIRS") are modeled in place of the
corporate fundamental ratings to derive the default probability of
the reference entities in the portfolio. The gap between an MIR
and a Moody's corporate fundamental rating is an indicator of the
extent of the divergence in credit view between Moody's and the
market. Across all tranches, the results of this run are up to one
notch higher than the base case.
- This transaction has a 3.95% exposure to references in the
Banking, Finance, Insurance and Real estate sector domiciled in
Europe. Moody's conducted a stress scenario by applying a default
probability to these references derived from the subordinated
rating of the issuer and assigning a recovery rate of 90% if the
reference is a senior unsecured bond, or 10% if the reference is a
subordinated bond. Across all tranches, the result of this run is
comparable to the base case.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Corporate Collateralized
Synthetic Obligations", key model inputs used by Moody's in its
analysis may be different from the manager/arranger's reported
numbers. In particular, rating assumptions for all publicly rated
corporate credits in the underlying portfolio have been adjusted
for "Review for Possible Downgrade", "Review for Possible
Upgrade", or "Negative Outlook".
Moody's does not run a separate loss and cash flow analysis other
than the one already done by the CDOROM model.
Moody's analysis of CSOs is subject to uncertainties, the primary
sources of which include complexity, governance and leverage.
Although the CDOROM model captures many of the dynamics of the
Corporate CSO structure, it remains a simplification of the
complex reality. Of greatest concern are (a) variations over time
in default rates for instruments with a given rating, (b)
variations in recovery rates for instruments with particular
seniority/security characteristics and (c) uncertainty about the
default and recovery correlations characteristics of the reference
pool. Similarly on the legal/structural side, the legal analysis
although typically based in part on opinions (and sometimes
interpretations) of legal experts at the time of issuance, is
still subject to potential changes in law, case law and the
interpretations of courts and (in some cases) regulatory
authorities. The performance of this CSO is also dependent on on-
going decisions made by one or several parties, including the
Manager and the Trustee. Although the impact of these decisions is
mitigated by structural constraints, anticipating the quality of
these decisions necessarily introduces some level of uncertainty
in Moody's assumptions. Given the tranched nature of CSO
liabilities, rating transitions in the reference pool may have
leveraged rating implications for the ratings of the CSO
liabilities, thus leading to a high degree of volatility. All else
being equal, the volatility is likely to be higher for more junior
or thinner liabilities.
The base case scenario modeled fits into the central macroeconomic
scenario predicted by Moody's of a sluggish recovery scenario in
the corporate universe. Should macroeconomics conditions evolve,
the CSO ratings will change to reflect the new economic
developments.
GSC INVESTMENT: S&P Affirms 'BB' Rating on Class E Notes
--------------------------------------------------------
Standard & Poor's Ratings Services raised its rating on the Class
B notes from GSC Investment Corp CLO 2007 Ltd., a cash flow
collateralized loan obligation (CLO) transaction managed by
Saratoga Partners. At the same time, S&P affirmed the ratings on
the transaction's Class A, C, D and E notes.
The transaction's reinvestment period ended in January 2013, and
the transaction has commenced paying down the notes. After the
April 2013 paydown, the Class A note balance was $263.9 million,
which is about 89% of its original balance. The transaction is
passing all coverage tests and is performing stably.
The paydown to the Class A notes increased the class A/B
overcollateralization (O/C) ratio. As of the May 20, 2013,
monthly trustee report, the class A/B O/C ratio was 125.98%, up
from 124.92% in January 2012, which S&P used when it last upgraded
the notes in February 2012.
For the purposes of O/C calculation, the trustee haircuts the O/C
numerator as per the transaction documents to adjust for assets
purchased at a discount beyond what was specified in the
indenture; the haircut was $1.73 million in May 2013, down from
$2.4 million in January 2012. This points to a lower level of
discounted assets in the current assets.
However, during this period, defaults have also increased. As per
the May 20, 2013, monthly trustee report, the transaction has
$6.5 million worth of defaults compared with zero defaults in
January 2012. This limited the impact of the paydown and actually
caused a small decline in the Class D and E O/C ratios. For
example, the class E O/C ratio was 107.88% in May 2013 versus
108.55% in January 2012.
In addition, the May 2013 trustee report indicates that the
transaction has 12.24% of its portfolio expected to mature after
the transaction's maturity in January 2020. This is up from 3.63%
in January 2012.
The balance of the Class E note is at 81.64% of its original
balance; the lower balance is because of paydowns in the past
following the failure of the Class E O/C test. The transaction is
structured such that the Class E O/C cure in the interest proceeds
section of the waterfall diverts available interest proceeds--
after payment of any Class E deferred interest--to pay down the
Class E note until the test is cured. Failure of the Class E O/C
test in the past resulted in paydowns to the Class E note; its
balance remains unchanged since our last rating actions in
February 2012.
The upgrade to the Class B note rating stems from the increase in
its credit support. The affirmations of the remaining ratings
reflect the availability of ufficient credit support at the
current rating level.
S&P will continue to review whether, in its view, the ratings
assigned to the notes remain consistent with the credit
enhancement available to support them, and it will take further
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
RATINGS LIST
Rating Raised
GSC Investment Corp CLO 2007 Ltd.
Rating Rating
Class To From
B AA (sf) AA- (sf)
Ratings Affirmed
GSC Investment Corp CLO 2007 Ltd.
Class Rating
A AA+ (sf)
C A (sf)
D BBB- (sf)
E BB (sf)
HERCULES REDEVELOPMENT: S&P Puts TABs' CC Rating on Watch Neg.
--------------------------------------------------------------
Standard & Poor's Ratings Services has placed the following
ratings on CreditWatch with negative implications:
-- Hercules Redevelopment Agency (RDA), Calif.'s series 2005
and 2007A nonhousing tax allocation bonds (TABs; rated
'CC'); and
-- Hercules RDA's series 2007A and 2007B housing TABs (rated
'B')
"The CreditWatch placement reflects our view of the city of
Hercules' lack of a fiscal 2011 audit," said Standard & Poor's
credit analyst Sussan Corson.
Failure to receive financial statements by June 27, 2013, that (in
the opinion of an independent auditor) fairly present the
financial position of the city, will likely result in Standard &
Poor's suspending the affected ratings, preceded by, in accordance
with S&P's policies, any change to the ratings it considers
appropriate given the available information.
Assessed valuation for the merged project area that secures the
RDA's TABs fell another 5% in fiscal 2013, which S&P calculates
reduced nonhousing TABs' maximum annual debt service (MADS)
coverage to about 0.7x by pledged revenue, excluding $1.3 million
in Catellus pass-through payments currently funded with transfers
from a designated account. Housing TABs' MADS coverage fell to
below 0.9x based on 20% of gross property tax increment revenue in
the merged project area. Although in January 2013, successor
agency (SA) officials report that they used $1.3 million to
replenish an August 2012 draw on the Ambac Assurance Corp. surety
reserve for the nonhousing TABs, S&P understands the SA is facing
another $2.9 million shortfall for its August 2013 payment on the
nonhousing TABs. SA officials also report an estimated $546,000
shortfall for the August 2013 housing TABs payment, although the
SA had not previously drawn on the cash-funded debt service
reserves for the housing TABs. As of March 31, 2013, the series
2007A and 2007B housing TABs had more than $1.8 million in cash-
funded debt service reserves held with the trustee.
HOMEWARD RESIDENTIAL: Fitch Reviews Realized Losses in RMBS Deals
-----------------------------------------------------------------
Fitch Ratings has reviewed 92 residential mortgage backed security
(RMBS) transactions previously serviced by Homeward Residential
Inc., and acquired by Ocwen Financial Corp. in December 2012. The
report is titled 'U.S. RMBS Ocwen Forbearance Rating Actions for
June 10, 2013'.
In May 2013, the trusts reported unusually large realized losses
due to a revision in the reporting of principal forbearance
modifications performed prior to July 2012. For Fitch-rated
transactions, the realized loss was approximately $450 million, or
roughly 3% of the affected trusts' outstanding pool balances.
Rating review summary:
- 843 classes affirmed;
- 20 classes downgraded;
- 19 classes on Rating Watch Negative; and
- 1 class paid in full.
The classes placed on Watch Negative are in trusts where the
realized loss reported in May does not appear to fully reflect the
revised loss amount provided by Ocwen to Fitch. A portion of the
revised losses may yet to be realized in all of the trusts.
All downgraded classes were rated 'CCsf' or 'Csf' prior to the
review. All but one class placed on Rating Watch Negative is rated
'CCCsf' or 'CCsf'. The sole class on Watch rated above 'CCCsf' is
currently rated 'Bsf'. 114 classes rated 'Bsf' or higher are
affirmed, including 64 classes with investment-grade ratings.
The ratings of classes in the trusts most affected by the
revisions had generally already experienced significant downgrade
activity. Principal forbearance modification activity is generally
highest among poor performing mortgage pools with large
percentages of underwater borrowers.
Principal forbearance modifications reduce the principal balance
of the loan amount for interest and monthly payment calculations.
Forbearance differs from forgiveness by generally requiring that
the borrower repay the full principal amount in the event of a
property sale or loan refinance. If the loan is still outstanding
at maturity, the forborne principal is generally required to be
repaid as a balloon payment.
Historically, there has been inconsistency in the servicer
reporting of forbearance amounts. Pooling and Servicing Agreements
for transactions issued prior to 2010 generally do not explicitly
address whether servicers are to report the forborne principal as
a loss.
Additionally, the Home Affordable Mortgage Modification Program
(HAMP) introduced in 2009 also did not initially provide guidance
to servicers on how to report forbearance modifications. This was
later clarified by the Treasury Department in June 2010 by
directing servicers to report HAMP forbearance amounts as losses
and trustees to allocate forborne principal as realized losses at
the time of the modification. Any repaid forborne principal will
be distributed to investors as a subsequent recovery.
Subsequent to the Treasury's guidance, servicers and trustees
generally reported forborne principal as a loss for HAMP
modifications, and typically for non-HAMP modifications as well.
However, the treatment varied for forborne principal on previously
completed modifications. Some servicers retroactively reported all
previously modified amounts as losses while other servicers only
revised the reporting on new modifications while leaving the
reporting on prior modifications unchanged.
For Homeward-serviced transactions which Wells Fargo served as the
Master Servicer or the Trustee, Homeward and Wells Fargo began
reporting forborne principal for new modifications in a manner
consistent with the Treasury's guidance in July 2012 but did not
retroactively reclassify the reporting for modifications completed
prior to that date. Upon recently completing the portfolio
transfer to Ocwen as a subservicer for Homeward, Ocwen and Wells
Fargo agreed upon a reclassification of prior forbearance
modifications to maintain consistency with the reporting method
used from July 2012 forward.
Based on feedback provided from servicers, Fitch believes it is
not uncommon for a servicing portfolio to contain loans with
forborne principal not reported as a loss. Servicing acquisitions
could potentially lead to a reclassification of forborne principal
as an immediate realized loss in some cases.
Fitch currently expects that any future reclassifications of
forborne principal will primarily affect bonds with distressed
ratings by accelerating losses which, in many cases, are likely to
eventually occur. Of loans affected by the May reclassification,
Fitch estimates the current weighted average loan-to-value to be
approximately 140% (including the forborne principal). Despite
more than 2/3 of the loans benefitting from more than one
modification (including the forbearance modification), more than
30% of the loans are currently severely delinquent.
Fitch is currently conducting a survey among servicers on this
issue. Fitch intends to provide further commentary as additional
information is gathered.
INDUS PLC: DBRS Cuts Rating on Class C Debt to 'C(sf)'
------------------------------------------------------
DBRS Ratings Limited has downgraded the ratings of INDUS (ECLIPSE
2007-1) plc (Indus) as follows:
-- Class C to C (sf) from CCC (sf)
In addition, DBRS has confirmed the ratings as follows:
-- Class A at BBB (sf)
-- Class B at BB (sf)
-- Class X at AAA (sf)
The ratings on Classes A and B have been placed Under Review with
Positive Implications.
This transaction originally consisted of 14 fixed-rate loans and
five floating-rate loans secured by 366 residential and commercial
properties located in England and Scotland. The original
securitised balance of the pool was œ894,431,744. According to
the April 2013 cash management report, nine of the original 19
loans remain in the pool, with a current securitised balance of
œ286,875,314. The pool has experienced a total collateral
reduction of 67.93% since issuance.
An April 2013 RNS notice reported that the largest loan in the
pool, Adelphi House, repaid in full the outstanding œ212.29
million senior portion of the loan and the super senior swap. The
loan was in special servicing since early 2011 for loan-to-value
(LTV) default and weighted heavily on the outcome and analysis of
the overall deal since that time. Classes A and B have been
placed Under Review with Positive Implications as a result of the
Adelphi loan paying in full and the impending loan maturities of
four loans in 2013.
As of the April 2013 cash management report, there is a total of
five loans on the servicer's watchlist, representing 58.52% of the
current pool balance. Four of these loans, representing 15.56% of
the current pool balance, are on the servicer's watchlist for
upcoming loan maturity and one loan, representing 42.96% of the
current pool balance, is on the servicer's watchlist for breach of
the interest coverage ratio (ICR) cash trap trigger.
The Workspace Portfolio, representing 9.35% of the current pool
balance, is the only loan in special servicing. The collateral
for the loan encompasses a portfolio of eight industrial and
office properties positioned throughout England. The loan was
transferred to special servicing in September 2011 for breach of
the ICR covenant and future payment default. The performance of
the loan began to decline in early 2011 due to several tenants
vacating the property. According to the most recent investor
report, the portfolio is currently 48.43% occupied. The special
servicer appointed strategic advisors in March 2012 to formulate a
business plan to minimize losses. Currently the servicer is
implementing a disposal strategy, which is expected to commence
during the first quarter of 2013. The loan was scheduled to
mature in January 2013 yet failed to refinance at that time. The
portfolio was recently valued in February 2012 at œ15.01 million,
resulting in an LTV of 176.98%, a significant decrease from 2006
when the portfolio was valued at œ38.02 million, implying an LTV
of 69.87%.
In addition to these difficulties, the loan is also accompanied by
a long-dated interest rate swap. The swap currently has a
significant negative mark-to-market value, which ranks senior to
the lenders in the loan waterfall. DBRS assumes that the severity
of the loss in an enforcement or liquidation scenario increases
substantially when the mark-to-market value of the swap is taken
into consideration. As a result of the estimated losses associated
with this loan, DBRS has downgraded Class C.
DBRS has confirmed the rating of Class X at AAA (sf), with a
Stable trend, based on the definition within the transaction
documents that allow for this class to receive the greater of zero
or any excess interest in pari passu priority with Class A.
IRWIN WHOLE 2005-C: Moody's Hikes $5 Million of 2nd Lien RMBS
-------------------------------------------------------------
Moody's Investors Service upgraded the ratings of three tranches
from Irwin Whole Loan Home Equity Trust 2005-C, backed primarily
by closed-end second lien mortgage loans and HELOCs.
Complete rating actions are as follows:
Issuer: Irwin Whole Loan Home Equity Trust 2005-C
Cl. 2M-3, Upgraded to Ba3 (sf); previously on Jun 30, 2010
Confirmed at B1 (sf)
Cl. 2M-4, Upgraded to B1 (sf); previously on Jun 30, 2010
Confirmed at B3 (sf)
Cl. 2B-1, Upgraded to Caa1 (sf); previously on Jun 30, 2010
Confirmed at Caa3 (sf)
Ratings Rationale:
The upgrades are due to improvement in collateral performance and
the build-up in credit enhancement. This rating action takes into
account the updated pool losses relative to the total credit
enhancement available from subordination, as well as excess spread
and external enhancement such as pool insurance policies, reserve
accounts, and guarantees. In addition, Moody's considered the
volatility of the projected losses and the timing of the expected
defaults.
The methodologies used in this rating were "Moody's Approach to
Rating US Residential Mortgage-Backed Securities" published in
December 2008, and "Second Lien RMBS Loss Projection Methodology:
April 2010" published in April 2010.
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 8.2% in May 2012 to 7.6% in May 2013. Moody's
forecasts a unemployment central range of 7.0% to 8.0% for the
2013 year. Moody's expects housing prices to continue to rise in
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.
JAMESTOWN CLO I: S&P Affirms 'BB' Rating on Class D Notes
---------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on
Jamestown CLO I Ltd./Jamestown CLO I Corp.'s $412.25 million
floating-rate notes following the transaction's effective date
as of Feb. 5, 2013.
Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio.
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to them.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of its criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect its assumptions about the
transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
In S&P's published effective date report, it discusses its
analysis of the information provided by the transaction's trustee
and collateral manager in support of their request for effective
date rating affirmation. In most instances, S&P intends to
publish an effective date report each time it issues an effective
date rating affirmation on a publicly rated U.S. cash flow CLO.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as 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
RATINGS AFFIRMED
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
JAMESTOWN CLO II: S&P Affirms 'BB' Rating on $19.5MM Cl. D Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on
Jamestown CLO II Ltd./Jamestown CLO II Corp.'s $460 million fixed-
and floating-rate notes following the transaction's effective date
as of May 3, 2013.
Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio.
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to S&P.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of its criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect its assumptions about the
transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
In S&P's published effective date report, it discusses its
analysis of the information provided by the transaction's trustee
and collateral manager in support of their request for effective
date rating affirmation. In most instances, S&P intends to
publish an effective date report each time it issues an effective
date rating affirmation on a publicly rated U.S. cash flow CLO.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as 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
RATINGS AFFIRMED
Jamestown CLO II Ltd./ Jamestown CLO II Corp.
Fixed- and floating-rate notes
Class Rating Amount
(mil. $)
A-1 AAA(sf) 307.50
A-2A AA(sf) 31.25
A-2B AA(sf) 31.25
B A(sf) 42.50
C BBB(sf) 28.00
D BB(sf) 19.50
JP MORGAN 2002-CIBC5: Fitch Affirms 'D' Rating on Class M Certs
---------------------------------------------------------------
Fitch Ratings has affirmed JP Morgan Chase Commercial Mortgage
Securities Corporation's (JPMC) commercial mortgage pass-through
certificates, series 2002-CIBC5.
Key Rating Drivers
The affirmations are attributed to increased credit enhancement
levels offset by fewer, more concentrated loans (by unpaid
principal balance) remaining in the pool. Based on Fitch's
analysis, some of the remaining loans may have difficulty
refinancing their existing debt.
Fitch modeled losses of 2.2% of the remaining pool; expected
losses on the original pool balance total 2.4%, including losses
already incurred. The pool has experienced $23.2 million (2.3% of
the original pool balance) in realized losses to date. The pool
has become highly concentrated with only 12 loans remaining,
compared to 46 at last review. Fitch has designated three loans
(19.9%) as Fitch Loans of Concern, which includes one specially
serviced asset (5.4%).
Rating Sensitivities
The Stable Rating Outlook on classes G, H and J indicates that
despite increased credit enhancement from principal paydown and
defeasance, upgrades are not likely due to increased concentration
of loans in the pool and the greater risk of adverse selection.
The Negative Outlook on classes M and N indicates that future
downgrades are possible if the collateral performance
deteriorates.
As of the June 2013 distribution date, the pool's aggregate
principal balance has been reduced by 94.3% to $56.9 million from
$1 billion at issuance. Two loans (35.1% of the pool) are
defeased. Interest shortfalls are currently affecting classes M
through NR.
The largest remaining non-defeased loan is secured by a 384,763
industrial property in Las Vegas, NV (26.4% of the pool). The
distribution facility is 100% leased to a single tenant - Southern
Wine & Spirits of America on a triple-net (NNN) lease through
year-end 2020. As of 3rd quarter 2012, the servicer reported DSCR
was 1.47x, in line with performance from issuance.
The second largest remaining non-defeased loan is secured by a
118,298sf retail property in Bedford, TX (23.9%). The center's
anchor, Tom Thumb Grocery, occupies 41% of the NRA until August
2017. All tenants are under NNN leases. As of year-end 2012, the
servicer reported DSCR was 0.88x, compared to 0.80x at YE11 and
1.00x at YE10. The poor performance is due to the weak market. The
borrower has to offer rent concessions to compete in the market
and maintain existing tenancy. As of 1st quarter 2013 rent roll,
the property was 87.9% occupied.
Fitch affirms the following classes and revises the Rating Outlook
as indicated:
-- $12.6 million class J at 'BBB-sf'; Outlook to Stable from
Negative.
In addition, Fitch affirms the following classes:
-- $10.1 million class G at 'AA-sf'; Outlook Stable;
-- $18.8 million class H at 'BBB+sf'; Outlook Stable;
-- $5 million class K at 'BBsf'; Outlook Negative;
-- $5 million class L at 'Bsf'; Outlook Negative;
-- $5.3 million class M at 'Dsf'; RE 0%;
-- $0 class N at 'Dsf'; RE 0%.
The classes A-1, A-2, B, C, D, E, F and the interest only X-2
certificates have paid in full. Fitch does not rate the class NR
certificates. Fitch previously withdrew the rating on the
interest-only class X-1 certificates.
JP MORGAN 2006-LDP9: Moody's Cuts 2 Certificate Ratings to 'Caa1'
-----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of four classes
and affirmed 23 classes of J.P. Morgan Chase Commercial Mortgage
Securities Corp. Commercial Mortgage Pass-Through Certificates
Series 2006-LDP9 as follows:
Cl. A-1A, Affirmed Aa3 (sf); previously on Jun 7, 2012 Confirmed
at Aa3 (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Jan 22, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-2S, Affirmed Aaa (sf); previously on Jan 22, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-2SFL, Affirmed Aaa (sf); previously on Jan 22, 2007 Assigned
Aaa (sf)
Cl. A-2SFX, Affirmed Aaa (sf); previously on Mar 17, 2010 Assigned
Aaa (sf)
Cl. A-3, Affirmed Aa3 (sf); previously on Sep 2, 2010 Downgraded
to Aa3 (sf)
Cl. A-3SFL, Affirmed Aa3 (sf); previously on Sep 2, 2010
Downgraded to Aa3 (sf)
Cl. A-3SFX, Affirmed Aa3 (sf); previously on Feb 15, 2012 Assigned
Aa3 (sf)
Cl. A-J, Downgraded to Caa1 (sf); previously on May 10, 2012
Downgraded to B3 (sf)
Cl. A-JS, Downgraded to Caa1 (sf); previously on May 10, 2012
Downgraded to B3 (sf)
Cl. A-M, Downgraded to Ba1 (sf); previously on May 10, 2012
Downgraded to Baa3 (sf)
Cl. A-MS, Downgraded to Ba1 (sf); previously on May 10, 2012
Downgraded to Baa3 (sf)
Cl. B, Affirmed Caa2 (sf); previously on May 10, 2012 Downgraded
to Caa2 (sf)
Cl. B-S, Affirmed Caa2 (sf); previously on May 10, 2012 Downgraded
to Caa2 (sf)
Cl. C, Affirmed Caa3 (sf); previously on May 10, 2012 Downgraded
to Caa3 (sf)
Cl. C-S, Affirmed Caa3 (sf); previously on May 10, 2012 Downgraded
to Caa3 (sf)
Cl. D, Affirmed C (sf); previously on May 10, 2012 Downgraded to C
(sf)
Cl. D-S, Affirmed C (sf); previously on May 10, 2012 Downgraded to
C (sf)
Cl. E, Affirmed C (sf); previously on May 10, 2012 Downgraded to C
(sf)
Cl. E-S, Affirmed C (sf); previously on May 10, 2012 Downgraded to
C (sf)
Cl. F, Affirmed C (sf); previously on May 10, 2012 Downgraded to C
(sf)
Cl. F-S, Affirmed C (sf); previously on May 10, 2012 Downgraded to
C (sf)
Cl. G, Affirmed C (sf); previously on Sep 2, 2010 Downgraded to C
(sf)
Cl. G-S, Affirmed C (sf); previously on Sep 2, 2010 Downgraded to
C (sf)
Cl. H, Affirmed C (sf); previously on Sep 2, 2010 Downgraded to C
(sf)
Cl. H-S, Affirmed C (sf); previously on Sep 2, 2010 Downgraded to
C (sf)
Cl. X, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded to
Ba3 (sf)
Ratings Rationale:
The downgrades are due to higher than expected realized and
anticipated losses from specially serviced loans along with
concerns about increased interest shortfalls affecting Classes A-M
and A-MS.
The ratings of the investment grade principal and interest classes
are affirmed due to key parameters, including Moody's loan to
value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings. The ratings of the
below investment grade principal and interest classes are
consistent with Moody's expected loss and thus are affirmed. The
rating of the IO Class, Class X, is consistent with the expected
credit performance of its referenced classes and thus is affirmed.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for rated classes could decline below the
current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
Moody's rating action reflects a base expected loss of 14.5% of
the current balance. At last review, Moody's base expected loss
was 12.8%. Realized losses have increased from 2.6% of the
original balance to 3.0% since the prior review. Moody's base
expected loss plus realized losses is now 15.6% of the original
pooled balance compared to 14.2% at last review.
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 given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions" published in
April 2005.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 36 compared to 38 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 7, 2012.
Deal Performance:
As of the May 15, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 13% to $4.2 billion
from $4.8 billion at securitization. The Certificates are
collateralized by 212 mortgage loans ranging in size from less
than 1% to 9% of the pool, with the top ten non-defeased loans
representing 46% of the pool. One loan, representing 0.3% of the
pool, has defeased and is secured by U.S. Government securities.
The pool contains two loans with investment grade credit
assessments, representing 5% of the pool.
Forty-eight loans, representing 24% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Thirty-two loans have been liquidated from the pool, resulting in
an aggregate realized loss of $144.3 million (55% loss severity on
average). Twenty-three loans, representing 20% of the pool, are
currently in special servicing. The largest specially serviced
loan is The Belnord Loan ($375.0 million -- 8.8% of the pool),
which is secured by a 215-unit multifamily building located in the
Upper West Side of Manhattan. The collateral also contains ground-
floor retail space. The loan transferred to special servicing in
June 2011 due to imminent default, but remains current. The loan
was modified in March 12, 2013. Per the modification, the loan has
been extended two years, till November 12, 2018. The Borrower has
agreed to inject $30 million of new equity into the property, $15
million upfront and another $15 million within the next 24 months.
The interest rate dropped to 3% from 5.82% until November 12, 2016
at which time reverts back to the original 5.82% rate, with a
minimum pay rate of 4%, cash flows permitting. The property was
94% occupied compared to 96% at last review.
The second largest specially serviced loan is the Banc of America
Plaza Loan ($100.0 million -- 2.4% of the pool), which represents
a 27.5% pari passu interest in a $363 million first mortgage loan.
The loan is secured by a 1.25 million square foot (SF) Class A
office building located in Atlanta, GA. The property transferred
to special servicing in February 2011 due to monetary default,
with the trust taking title on February 7, 2012. Bank of America
downsized 182,970 from 386,178 of the net rentable area (NRA) in
October 2011. As of May 2013, the property was 51% leased compared
to 63% at last review and 99% at securitization.
The remaining twenty-one specially serviced loans are secured by a
mix of property types. Moody's estimates an aggregate $398.8
million loss for the specially serviced loans (47% expected loss
on average).
Moody's has assumed a high default probability for 34 poorly
performing loans representing 14% of the pool and has estimated an
aggregate $87.0 million loss (15% expected loss based on a 50%
probability default) from these troubled loans.
As of the most recent remittance date, the pool has experienced
cumulative interest shortfalls totaling $30.2 million and
affecting Classes P through A-MS. Moody's anticipates that the
pool will continue to experience interest shortfalls caused by
modifications and specially serviced loans. Interest shortfalls
are caused by special servicing fees, including workout and
liquidation fees, appraisal subordinate entitlement reductions
(ASERs), loan modifications, extraordinary trust expenses and non-
advancing by the master servicer based on a determination of non-
recoverability.
Moody's was provided with partial year 2012 operating results for
80% of the pool's non-specially serviced loans. Excluding
specially serviced and troubled loans, Moody's weighted average
conduit LTV is 110% compared to 116% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 11%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.4%.
Excluding special serviced and troubled loans, Moody's actual and
stressed conduit DSCRs are 1.54X and 0.98X, respectively, compared
to 1.33X and 0.91X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The largest loan with a credit assessment is the Merchandise Mart
Loan ($175.0 million -- 4.1% of the pool), which represents a 50%
pari passu interest in a $350 million first mortgage loan. The
property is also encumbered by a $300 million mezzanine loan. The
loan is secured by a 3.45 million SF office and design showroom
building located in downtown Chicago, Illinois. The sponsor is
Vornado Realty, L.P. Google's Motorola Mobility Unit recently
leased 572,000 SF (17% NRA) with a lease commencement on September
7, 2013. Including Google's lease, the property is 95% leased
compared to 92% at last review. Moody's current credit assessment
and stressed DSCR are Baa3 and 1.45X, respectively, compared to
Baa3 and 1.39X at last review.
The second loan with a credit assessment is the Raytheon LAX Loan
($49.9 million -- 1.2% of the pool), which is secured by two Class
B office buildings, totaling 565,000 SF, located in Los Angeles,
California. The property is 100% leased to two tenants - Raytheon
Company (63% of the NRA; lease expiration December 2018) and
DIRECTV (37% of the NRA; lease expiration September 2027). Moody's
current credit assessment and stressed DSCR are Baa2 and 1.54X,
respectively, compared to Baa2 and 1.43X at last review.
The top three performing conduit loans represent 16% of the pool
balance. The largest loan is the 131 South Dearborn Loan ($236
million -- 7% of the pool), which represents a participation
interest in a $472 million senior mortgage secured by the 37-story
"Citadel Center", a 1.5 million SF office tower in the Central
Loop submarket of Chicago, Illinois. The property is also
encumbered by $50 million of mezzanine debt. The property's lead
tenants are JP Morgan Chase, Citadel, LLC, and Seyfarth Shaw, LLP.
Citadel's current lease (325,000 square feet; 22% of property NRA)
was scheduled to expire at the end of 2013. The firm recently
renewed 224,000 SF for an additional ten years. The space that
will be vacated is already being marketed. Moody's current LTV and
stressed DSCR are 119% and 0.77X, respectively, compared to 113%
and 0.81X at last review.
The second largest loan is the Galleria Towers Loan ($232.0
million -- 5.5% of the pool), which is secured by three Class A
office buildings, totaling 1.43 million SF, located in Dallas,
Texas. The collateral is also encumbered by a $29 million
mezzanine loan. The loan is currently on the master servicer's
watchlist for having a low DSCR. Tenants include FedEx Kinko's,
Inc. (14% of the NRA; lease expiration November 2015) and Ryan &
Company, Inc. (7% of the NRA; lease expiration January 2020). The
property was 81% leased as of December 2012 compared to 88% at
last review. Highland Capital (8% of the NRA) vacated its space in
December 2011. Additionally, 25% of the NRA expires in 2013 and
2014. Moody's LTV and stressed DSCR are 148% and 0.64X,
respectively, compared to 142% and 0.67X at last review.
The third largest loan is the Corporate Woods Portfolio Loan
($220.0 million -- 5.2% of the pool), which is secured by 20
suburban office buildings and one retail center located in an
office park in Overland Park, Kansas. The portfolio was 85% leased
as of February 2013, same at last review. Portfolio performance
has improved due to an increase effective gross income and
decrease in operating expenses. Moody's LTV and stressed DSCR are
122% and 0.80X, respectively, compared to 131% and 0.75X at last
review.
LCM XIII: S&P Affirms 'BB' Rating on Class E Notes
--------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on LCM
XIII L.P./LCM XIII LLC's $467.00 million floating-rate notes
following the transaction's effective date as of March 12, 2013.
Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio (typically referred to as an "effective
date rating affirmation").
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to them.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of its criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect S&P's assumptions about
the transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
"In our published effective date report, we discuss our analysis
of the information provided by the transaction's trustee and
collateral manager in support of their request for effective date
rating affirmation. In most instances, we intend to publish an
effective date report each time we issue an effective date rating
affirmation on a publicly rated U.S. cash flow CLO," S&P added.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as 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
RATINGS AFFIRMED
LCM XIII L.P./LCM XIII LLC
Class Rating Amount
(mil $)
X AAA (sf) 3.25
A AAA (sf) 322.50
B AA (sf) 52.50
C (deferrable) A (sf) 45.00
D (deferrable) BBB (sf) 22.50
E (deferrable) BB (sf) 21.25
Combination notes(i) A- (sf)(pNRi) 20.00(ii)
(i) The combination notes' principal amount comprises $12
million of class C and $8 million of class D note principal.
The 'p' subscript indicates that the rating addresses only
the principal portion of the obligation.
'NRi' indicates that the interest is not rated.
(ii) Each component of the combination note is included in (not
in addition to) the respective principal amount of the class
C and D.
LNR SECURITIES: Rights Transfer No Impact on Moody's Ratings
------------------------------------------------------------
Moody's Investors Service was informed that LNR Securities
Holdings, LLC (LNRSH), as Holder of more than 50% of the
Certificate Balance of the Certificates of the Controlling Class,
has designated LNRSH as the Operating Advisor, which in its
capacity as the Operating Advisor, has directed the Trustee to
terminate C-III Asset Management, LLC (C-III) as the Special
Servicer and LNRSH will appoint LNR Partners, LLC (LNR) as the
successor Special Servicer. The proposed appointment of LNR as
successor Special Servicer will become effective upon satisfaction
of the conditions precedent set forth in the governing documents.
Moody's has reviewed the Proposed Operating Advisor Designation
and Special Servicer Replacement. Moody's has determined that this
proposed designation and special servicing replacement will not,
in and of itself, and at this time, result in a downgrade or
withdrawal of the current ratings to any class of certificates
rated by Moody's for Morgan Stanley Capital I Inc., Commercial
Mortgage Pass-Through Certificates, Series 2006-HQ8 (the
Certificates). Moody's opinion only addresses the credit impact
associated with the proposed designation and transfer of special
servicing rights. Moody's is not expressing any opinion as to
whether this change has, or could have, other non-credit related
effects that may have a detrimental impact on the interests of
note holders and/or counterparties.
The last rating action for MSCI 2006-HQ8 was taken on October 11,
2012.
The methodology used in monitoring this transaction was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000.
Moody's will continue to monitor the ratings. Any change in the
ratings will be publicly disseminated by Moody's through
appropriate media.
On October 11, 2012, Moody's affirmed the ratings of six classes
and downgraded 11 classes of Morgan Stanley Capital I Trust,
Commercial Mortgage Pass-Through Certificates, Series 2006-HQ8 as
follows:
Cl. A-AB, Affirmed at Aaa (sf); previously on Mar 28, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on Mar 28, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on Mar 28, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-M, Affirmed at Aaa (sf); previously on Dec 2, 2010 Confirmed
at Aaa (sf)
Cl. A-J, Downgraded to Baa3 (sf); previously on Dec 2, 2010
Downgraded to A3 (sf)
Cl. B, Downgraded to Ba1 (sf); previously on Dec 2, 2010
Downgraded to Baa1 (sf)
Cl. C, Downgraded to Ba2 (sf); previously on Dec 2, 2010
Downgraded to Baa2 (sf)
Cl. D, Downgraded to B1 (sf); previously on Dec 2, 2010 Downgraded
to Ba1 (sf)
Cl. E, Downgraded to B2 (sf); previously on Dec 2, 2010 Downgraded
to Ba2 (sf)
Cl. F, Downgraded to Caa2 (sf); previously on Dec 2, 2010
Downgraded to B3 (sf)
Cl. G, Downgraded to Caa3 (sf); previously on Dec 2, 2010
Downgraded to Caa1 (sf)
Cl. H, Downgraded to C (sf); previously on Dec 2, 2010 Downgraded
to Caa2 (sf)
Cl. J, Downgraded to C (sf); previously on Dec 2, 2010 Downgraded
to Caa3 (sf)
Cl. K, Downgraded to C (sf); previously on Dec 2, 2010 Downgraded
to Ca (sf)
Cl. L, Downgraded to C (sf); previously on Dec 2, 2010 Downgraded
to Ca (sf)
Cl. M, Affirmed at C (sf); previously on Dec 2, 2010 Downgraded to
C (sf)
Cl. X, Affirmed at Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
LSTAR 2011-1: Moody's Affirms B2 Rating on Class F Certificates
---------------------------------------------------------------
Moody's Investors Service affirmed the ratings of six classes of
LSTAR Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2011-1 as follows:
Cl. A, Affirmed Aaa (sf); previously on Aug 1, 2011 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Aa2 (sf); previously on Aug 1, 2011 Definitive
Rating Assigned Aa2 (sf)
Cl. C, Affirmed A2 (sf); previously on Aug 1, 2011 Definitive
Rating Assigned A2 (sf)
Cl. D, Affirmed Baa3 (sf); previously on Aug 1, 2011 Definitive
Rating Assigned Baa3 (sf)
Cl. E, Affirmed Ba2 (sf); previously on Aug 1, 2011 Definitive
Rating Assigned Ba2 (sf)
Cl. F, Affirmed B2 (sf); previously on Aug 1, 2011 Definitive
Rating Assigned B2 (sf)
Ratings Rationale:
The affirmations are due to key parameters, including Moody's
loan-to-value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
Moody's rating action reflects a base expected loss of
approximately 12.5% of the current deal balance. At last review,
Moody's base expected loss was approximately 15.2%. Moody's base
expected loss plus realized loss is 7.8% of the original,
securitized deal balance, compared to 12.6% at Moody's last
review. Depending on the timing of loan payoffs and the severity
and timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000.
Moody's review incorporated the use of the Excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a pay down analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade underlying ratings is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 82 compared to 79 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Deal Performance:
As of the May 28, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 38% to $233 million
from $359 million at securitization. The Certificates are
collateralized by 112 mortgage loans ranging in size from less
than 1% to 4% of the pool, with the top ten loans representing 23%
of the pool.
Sixty loans, representing 54% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Currently, 12 loans, representing 16% of the pool, are in special
servicing. The largest specially serviced loan is the 201,241 &
245 S. Yale Street Loan ($5 million -- 2% of the pool), which is
secured by a 144 unit multifamily complex located in Hemet,
California. The property was 76% leased as of September 2012. The
servicer is now pursuing foreclosure.
The remaining 11 specially serviced loans are secured by a mix of
multifamily, mixed use, retail, office, and industrial property
types. The servicer has recognized an aggregate $6 million
appraisal reduction on eight of the 12 specially serviced loans.
Moody's estimates an aggregate $10 million loss for all specially
serviced loans.
Moody's has assumed a high default probability for 23 poorly-
performing loans representing 19% of the pool. Moody's analysis
attributes to these troubled loans an aggregate $6 million loss
(14% expected loss severity based on a 50% probability default).
Moody's was provided with full-year 2011 and partial year 2012
operating results for 74% and 57% of the performing pool,
respectively. Excluding troubled and specially-serviced loans,
Moody's weighted average LTV is 108% compared to 128% at last full
review. Moody's net cash flow reflects a weighted average haircut
of 12.1% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.9%.
Excluding troubled and specially-serviced loans, Moody's actual
and stressed DSCRs are 1.19X and 1.04X, respectively, compared to
1.04X and 0.88X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The top three performing conduit loans represent 8% of the pool.
The largest loan is the 8530 North 22nd Avenue Loan ($9 million --
4% of the pool). The loan is secured by a 265 unit multifamlily
complex in Phoenix, Arizona, 11 miles outside the CBD. The
property is also encumbered by a B Note, which is held outside the
trust. Moody's current LTV and stressed DSCR are 100% and 0.97X,
respectively, compared to 109% and 0.90X at last review.
The second largest loan is the 2908 Willowbrook Court Loan ($5
million -- 2% of the pool). The loan is secured by a 86 unit
multifamily apartment complex in Merced, California (6 miles
Northwest of Fresno). The property is 92% leased and is on the
watchlist due to low DSCR. Moody's current LTV and stressed DSCR
are 104% and 0.99X, respectively, compared to 120% and 0.86X at
last review.
The third largest loan is the 930-950 West Centerville Road Loan
($4 million -- 2% of the pool). The loan is secured by a 62,000
square foot retail property located in Garland, Texas. The
property is 96% leased and its largest three tenants are Office
Depot, 99 Cents, and Sprint PCS. Moody's current LTV and stressed
DSCR are 124% and 0.91X respectively, compared to 132% and 0.86X
at last review.
MADISON PARK IX: S&P Affirms 'BB' Rating on Class E Notes
---------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on Madison
Park Funding IX Ltd./Madison Park Funding IX LLC's $462 million
fixed- and floating-rate notes following the transaction's
effective date as of Oct. 31, 2012.
"Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio (typically referred to as an "effective
date rating affirmation")," S&P said.
"An effective date rating affirmation reflects our opinion that
the portfolio collateral purchased by the issuer, as reported to
us by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that we assigned on the transaction's closing
date. The effective date reports provide a summary of certain
information that we used in our analysis and the results of our
review based on the information presented to us," S&P added.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of its criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect its assumptions about the
transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P noted.
In S&P's published effective date report, it discusses its
analysis of the information provided by the transaction's trustee
and collateral manager in support of their request for effective
date rating affirmation. In most instances, S&P intends to
publish an effective date report each time it issues an effective
date rating affirmation on a publicly rated U.S. cash flow CLO.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as 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
RATINGS AFFIRMED
Madison Park Funding IX Ltd./Madison Park Funding IX LLC
Class Rating Amount
(mil. $)
A AAA (sf) 319
B-1 AA (sf) 48
B-2 AA (sf) 8
C-1 (deferrable) A (sf) 14
C-2 (deferrable) A (sf) 22
D (deferrable) BBB (sf) 29
E (deferrable) BB (sf) 22
MAGNETITE VII: S&P Affirms 'BB' Rating on $28.8MM Class D Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services today affirmed its ratings on
Magnetite VII Ltd./Magnetite VII Corp.'s $552.00 million fixed-
and floating-rate notes following the transaction's effective
date as of March 20, 2013.
Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio.
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to S&P.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of S&P's criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect its assumptions about the
transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
In S&P's published effective date report, it discusses its
analysis of the information provided by the transaction's trustee
and collateral manager in support of their request for effective
date rating affirmation. In most instances, S&P intends to
publish an effective date report each time it issues an effective
date rating affirmation on a publicly rated U.S. cash flow CLO.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as 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
RATINGS AFFIRMED
Magnetite VII Ltd./Magnetite VII Corp.
Class Rating Amount
(mil. $)
A-1 senior notes(i) AAA (sf) 0.0
A-1A AAA (sf) 360.0
A-1B AAA (sf) 12.0
A-2A AA (sf) 35.0
A-2B AA (sf) 40.0
B (deferrable) A (sf) 47.4
C (deferrable) BBB (sf) 28.8
D (deferrable) BB (sf) 28.8
(i) The class A-1 senior note will originally be issued with a
principal amount of zero. Upon a class A-1 exchange, the
principal amount of the class A-1 senior notes will be equal
to the aggregate outstanding amount of the class A-1A and
A-1B notes.
MERCER FIELD: S&P Affirms 'BB' Rating on $60.48MM Class E Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on Mercer
Field CLO L.P.'s $915.18 million fixed- and floating-rate notes
following the transaction's effective date as of March 1, 2013.
Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio (typically referred to as an "effective
date rating affirmation").
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to S&P.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of its criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect its assumptions about the
transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
In S&P's published effective date report, it discusses its
analysis of the information provided by the transaction's trustee
and collateral manager in support of their request for effective
date rating affirmation. In most instances, S&P intends to
publish an effective date report each time it issues an effective
date rating affirmation on a publicly rated U.S. cash flow CLO.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as S&P deems
necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS AFFIRMED
Mercer Field CLO L.P.
Class Rating Amount
(mil. $)
A AAA (sf) 556.50
B AA (sf) 154.35
C (deferrable) A (sf) 78.75
D (deferrable) BBB (sf) 65.10
E (deferrable) BB (sf) 60.48
MERRILL LYNCH 1998-C1-CTL: S&P Affirms BB+ Rating on Cl. E Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its rating on the Class
C certificates from Merrill Lynch Mortgage Investors Inc.'s
mortgage pass-through certificates Series 1998-C1-CTL to 'AA+
(sf)' from 'AA- (sf)'. Concurrently, S&P affirmed its ratings on
five other classes from this transaction.
The upgrade primarily reflects the amortization of the transaction
from the underlying credit tenant lease (CTL) loans. The rating
actions also reflect S&P's analysis of the transaction, which
included a review of the credit characteristics of all of the
remaining loans in the pool, the transaction structure, and the
liquidity available to the trust. S&P's analysis incorporated the
use of Standard & Poor's credit lease default model. S&P affirmed
its rating on the class IO interest-only (IO) certificate based on
its current criteria.
While available credit enhancement levels may suggest positive
rating movement on Classes D and E, S&P's analysis also considered
the historical interest shortfalls experienced by the classes.
As of the May 16, 2013, remittance report, the pool consisted of
74 CTL assets $188.5 million, 73.0%) and 10 defeased loans
($69.6 million, 27.0%) with an aggregate principal balance of
$258.1 million, down from $731.3 million at issuance. Of the 74
CTL assets, 69 ($176.4 million, 68.3%) were bondable CTL loans,
while the remaining five ($12.1 million, 4.7%) were triple- and
double-net CTL loans supplemented by a lease enhancement policy
from Chubb Custom Insurance Co. (AA/Stable). Excluding the
defeased loans, 37 assets ($124.8 million, 48.4%) are fully
amortizing, while the remaining 37 assets ($63.7 million, 24.7%)
have balloon maturities with residual value insurance provided by
R.V.I. America Insurance Co. (BBB/Stable).
Four tenants account for more than 5% of the transaction: Rite Aid
Corp. (47 loans, $72.9 million, 28.2%, B-/Stable), Georgia Power
Co. (one loan, $45.2 million, 17.5%, A/Stable), Kroger Co. (three
loans, $23.2 million, 9.0%, BBB/Stable), and 24 Hour Fitness
Worldwide Inc. (six loans, $20.3 million, 7.9%, B/Stable). The
liquidation of 22 assets has resulted in realized losses to the
trust totaling $37.8 million.
The master servicer, Berkadia Commercial Mortgage LLC (Berkadia),
did not report any loans on the watchlist as of the May 2013
report. There are no loans with the special servicer, which is
also Berkadia.
Standard & Poor's analyzed the transaction and its underlying
collateral according to its current criteria. S&P's analysis is
consistent with the raised and affirmed ratings.
RATINGS LIST
Rating Raised
Merrill Lynch Mortgage Investors Inc.
Mortgage Pass-Through Certificates series 1998-C1-CTL
Rating
Class To From Credit enhancement (%)
C AA+ AA- 32.90
Ratings Affirmed
Merrill Lynch Mortgage Investors Inc.
Mortgage Pass-Through Certificates series 1998-C1-CTL
Class Rating Credit enhancement (%)
A3 AAA 60.43
B AAA 45.41
D BBB+ 17.88
E BB+ 14.13
IO AAA N/A
N/A - Not applicable.
MILWAUKEE HOUSING: Moody's Cuts Ratings on Rev. Refunding Bonds
----------------------------------------------------------------
Moody's has downgraded the rating of Housing Authority of the City
of Milwaukee Multi-Family Housing Revenue Refunding Bonds, Series
2002 (Veterans Housing Projects) to Ba1 from Aaa.
The rating was placed under continued review for downgrade in
conjunction with the December 13, 2012 publication of Moody's
methodology US Stand-Alone Housing Bond Programs Secured by Credit
Enhanced Mortgages. This action, which affects $7,590,000 of
outstanding debt, also removes the rating from review for
downgrade.
Rating Rationale
During the review, Moody's reviewed cash flow projections which
demonstrated a shortfall in revenues to cover debt service under a
0% reinvestment rate assumption. The rating on the bonds reflects
the probability of rising interest rates in medium to long term
which would improve the future financial performance of the
program and offset any insufficiencies.
Strengths
- High credit quality of the credit enhanced mortgage
Challenges
- Cash flows demonstrate projected insufficiencies assuming 0%
reinvestment rates
- Bond program performance is dependent upon interest rates
- Performance relies on proper administration and adherence to
mandatory provisions of the trust indenture and financing
agreement by all parties
- Little to no additional security is available from outside the
trust estate
What Could Make The Rating Go Up
- Cash flow projections demonstrate improved performance or
sufficiency
What Could Make The Rating Go Down
- A shorter duration until first insufficiency
- Lower probability that insufficiencies will be mitigated
through improved bond program performance primarily due to
continued low interest rate environment
The principal methodology used in this rating was US Stand-Alone
Housing Bond Programs Secured by Credit Enhanced Mortgages
published in December 2012.
ML-CFC 2006-1: S&P Lowers Rating on Class C Notes to 'B-'
---------------------------------------------------------
Standard & Poor's Ratings Services raised its rating on the class
A-M certificates of commercial mortgage pass-through certificates
from ML-CFC Commercial Mortgage Trust 2006-1, a U.S. commercial
mortgage-backed securities (CMBS) transaction, to 'AA- (sf)'.
Concurrently, S&P lowered its ratings on six classes and affirmed
its ratings on six other classes from the same transaction.
S&P's rating actions follows its analysis of the transaction
primarily using its criteria for rating U.S and Canadian CMBS.
S&P's analysis included a review of the credit characteristics and
performance of the assets in the pool, the transaction structure,
and the liquidity available to the trust.
S&P's raised rating on the class A-M certificates reflects its
expected available credit enhancement for this tranche, which it
believes is greater than its most recent estimate of necessary
credit enhancement for the rating level. The upgrades also
reflect S&P's views regarding the current and future performance
of the transaction's collateral, as well as the deleveraging of
the trust balance.
The downgrades reflect credit support erosion that S&P anticipates
will occur upon the resolution of seven ($64.3 million; 4.9%) of
the 10 ($95.1 million; 7.3%) assets currently with the special
servicer, Midland Loan Services. Based on S&P's valuation, as
well as valuations provided by the special servicer, of these
seven specially serviced assets, S&P expects the trust to incur
losses approximating 1.5% of the original outstanding trust
balance upon the resolution and/or liquidation of these assets.
To date, the trust has incurred losses totaling $83.4 million, or
3.9% of the original outstanding trust balance.
"We lowered our ratings on classes E, F, and G, due to our
expectations of reduced liquidity support available to these
classes. We lowered our ratings on classes F and G to 'D (sf)' to
reflect accumulated interest shortfalls outstanding for eight
months, which we expect will continue for the foreseeable future.
As of the May 13, 2013, trustee remittance report, the trust
experienced monthly interest shortfalls totaling $99,879. The
interest shortfalls this month were offset by a one-time recovery
of an appraisal subordinate entitlement reduction (ASER) totaling
$291,672 for the San Leandro Medical Office specially serviced
asset that was liquidated in May. Excluding the ASER recovery,
the interest shortfalls total $191,794, primarily from ASERs
totaling $83,058 related to five of the 10 loans that are
currently with the special servicer, Midland Loan Services;
interest not advanced of $56,842; interest rate reductions of
$16,098 due to modifications; and special servicing fees of
$17,779," S&P said.
The affirmation of the principal and interest certificates reflect
S&P's expectation that the available credit enhancement for these
classes will be within its estimate of the necessary credit
enhancement required for the current outstanding ratings. The
affirmed ratings on these classes also reflects the credit
characteristics and performance of the remaining loans, as
well as the transaction-level changes.
The affirmation of the interest-only (IO) certificates reflects
S&P's current criteria for rating IO securities.
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 17-g7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATING RAISED
ML-CFC Commercial Mortgage Trust 2006-1
Commercial mortgage pass-through certificates
Rating Rating Credit
Class To From enhancement (%)
A-M AA- (sf) A (sf) 26.56
RATINGS LOWERED
ML-CFC Commercial Mortgage Trust 2006-1
Commercial mortgage pass-through certificates
Rating Rating Credit
Class To From enhancement (%)
B B (sf) BB- (sf) 8.63
C B- (sf) B+ (sf) 6.98
D B- (sf) B (sf) 4.71
E CCC (sf) B- (sf) 3.48
F D (sf) CCC (sf) 1.62
G D (sf) CCC- (sf) 0.38
RATINGS AFFIRMED
ML-CFC Commercial Mortgage Trust 2006-1
Commercial mortgage pass-through certificates
Credit
Class Rating enhancement (%)
A-SB AAA (sf) 43.05
A-4 AAA (sf) 43.05
A-1A AAA (sf) 43.05
A-J BB+ (sf) 12.55
AN-FL BB+ (sf) 12.55
X AAA (sf) N/A
N/A - Not applicable.
ML-CFC 2007-5: Moody's Affirms 'C' Ratings on 7 Classes
-------------------------------------------------------
Moody's Investors Service affirmed the ratings of 17 classes of
ML-CFC Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2007-5 as follows:
Cl. A-1A, Affirmed Aa2 (sf); previously on Dec 3, 2009 Downgraded
to Aa2 (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Mar 9, 2011 Confirmed at
Aaa (sf)
Cl. A-4, Affirmed Aa2 (sf); previously on Dec 3, 2009 Downgraded
to Aa2 (sf)
Cl. A-4FL, Affirmed Aa2 (sf); previously on Dec 3, 2009 Downgraded
to Aa2 (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. AJ, Affirmed Caa1 (sf); previously on Nov 18, 2010 Downgraded
to Caa1 (sf)
Cl. AJ-FL, Affirmed Caa1 (sf); previously on Nov 18, 2010
Downgraded to Caa1 (sf)
Cl. AM, Affirmed Ba1 (sf); previously on Jun 15, 2012 Downgraded
to Ba1 (sf)
Cl. AM-FL, Affirmed Ba1 (sf); previously on Jun 15, 2012
Downgraded to Ba1 (sf)
Cl. B, Affirmed C (sf); previously on Nov 18, 2010 Downgraded to C
(sf)
Cl. C, Affirmed C (sf); previously on Nov 18, 2010 Downgraded to C
(sf)
Cl. D, Affirmed C (sf); previously on Nov 18, 2010 Downgraded to C
(sf)
Cl. E, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. F, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. G, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. H, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. X, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded to
Ba3 (sf)
Ratings Rationale:
The affirmations of the principal classes are due to key
parameters, including Moody's loan to value (LTV) ratio, Moody's
stressed debt service coverage ratio (DSCR) and the Herfindahl
Index (Herf), remaining within acceptable ranges. Based on Moody's
current base expected loss, the credit enhancement levels for the
affirmed classes are sufficient to maintain their current ratings.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for rated classes could decline below the
current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The rating of the IO Class, Class X, is consistent with the
expected credit performance of its referenced classes and thus is
affirmed.
Moody's rating action reflects a base expected loss of 14.2% of
the current balance. At last review, Moody's base expected loss
was 14.0%. Realized losses have increased from 1.6% of the
original balance to 2.4% since the prior review. Moody's base
expected loss plus realized losses is now 15.3% of the original
pooled balance compared to 14.6% at last review.
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 given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions" published in
April 2005.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 21 compared to 22 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 15, 2012.
Deal Performance:
As of the May 14, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 9% to $4.01 billion
from $4.42 billion at securitization. The Certificates are
collateralized by 281 mortgage loans ranging in size from less
than 1% to 20% of the pool, with the top ten loans representing
39% of the pool. One loan, representing less than 1% of the pool,
has defeased and is secured by U.S. Government securities. The
pool contains two loans with investment grade credit assessments,
representing 2% of the pool.
Eighty-four loans, representing 25% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Twenty-nine loans have been liquidated from the pool, resulting in
an aggregate realized loss of $105.7 million (61% loss severity on
average).
Twenty-five loans, representing 33% of the pool, are currently in
special servicing. The largest specially serviced loan is the
Peter Cooper Village and Stuyvesant Town (PCV/ST) ($800 million --
19.9% of the pool), which represents a pari-passu interest in a
$3.0 billion first mortgage loan spread among five separate CMBS
deals. There is also $1.4 billion in mezzanine debt secured by the
borrower's interest. The loan is secured by two adjacent
multifamily apartment complexes with 11,229 units located on the
east side of Manhattan. The loan transferred to special servicing
in November 2009 after the Appellate Division, First Department,
in April 2009 reversed an August 2007 decision of the State
Supreme Court, which held that properties receiving tax benefits,
including those pursuant to the J-51 program, be permitted to
decontrol rent stabilized apartments pursuant to New York State
rent stabilization laws. The court's decision compromised the
Borrower's original business plan to convert rent stabilized
apartments to market rental rates and the borrower agreed to
forfeit control rights to the property. As of September 2012, the
special servicer engaged CompassRock Real Estate to manage the
property. On April 10, 2013, the New York State Supreme Court
approved a settlement in the tenant's class action lawsuit
regarding improperly deregulated rent-stabilized units. The
special servicer anticipates full implementation of the settlement
will take 18 months. Overall, property performance has improved
since the end of 2010. The property was appraised for $3.2 billion
in September 2012, compared to $3.0 billion in September 2011. The
whole loan currently has over $460 million in cumulative ASER and
P&I advances to date. The special servicer believes that the
settlement's implementation, continued recovery from Hurricane
Sandy and collection of the associated insurance claim are
prerequisites to optimal capital recovery.
The second largest specially serviced loan is the Resurgens Plaza
Loan ($80.5 million -- 2.0% of the pool, which is secured by a
393,107 square foot (SF) office property located in the Buckhead
submarket of Atlanta, Georgia. The property was 66% leased as of
December 2012 same as at the prior review. The loan transferred to
special servicing in April 2011 due to imminent monetary default
and was later foreclosed on in December 2011. The special servicer
plans on stabilizing the property over the next two years and
marketing it for sale thereafter. Moody's expects to see
significant advances on this loan in order to lease up the
property to stabilization.
The remaining twenty-four specially serviced loans are secured by
a mix of property types. Moody's estimates an aggregate $418.7
million loss for the specially serviced loans (31% expected loss
on average).
Moody's has assumed a high default probability for 40 poorly
performing loans representing 11% of the pool and has estimated an
aggregate $89.4 million loss (20% expected loss based on a 51%
probability default) from these troubled loans.
Moody's was provided with full year or partial year 2012 operating
results for 84% of the pool. Excluding specially serviced and
troubled loans, Moody's weighted average LTV is 104% compared to
107% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 6% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.5%.
Excluding special serviced and troubled loans, Moody's actual and
stressed DSCRs are 1.40X and 1.05X, respectively, compared to
1.35X and 1.02X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The loans with investment grade credit assessments represent 1.5%
of the pool. The OMNI Senior Living Portfolio Loan ($38.3 million
-- 1.0%) is secured by three senior care facilities located in New
Jersey. Moody's credit assessment and stressed DSCR are A2 and
3.59X, respectively, compared to A3 and 3.16X at the prior review.
The FRIS Chicken Portfolio Loan ($21.2 million -- 0.5%), which
represents a pari-passu interest in a $42.5 million first mortgage
loan, is secured by 192 Church's Chicken restaurants located in 12
states. Moody's credit assessment and stressed DSCR are A3 and
2.59X, respectively, compared to A3 and 2.51X at the prior review.
The top three conduit loans represent 9.2% of the pool. The
largest loan is the Tower 45 Loan ($170.0 million -- 4.2% of the
pool), which is secured by a 443,956 SF office building located in
the Times Square/Theater District submarket in Manhattan. The
property was 79% leased as of December 2012 compared to 87% at
last review. The largest tenant is D.E. Shaw & Company, which has
leases expiring in 2013, 2015, 2017, and 2021. The increase in
vacancy at the property is attributed to D.E. Shaw & Company
vacating over 94,000 SF in 2011. The borrower has been actively
marketing the vacant space for lease. The loan is interest only
for its entire ten-year term. Moody's LTV and stressed DSCR are
109% and 0.84X, respectively, compared to 102% and 0.90X at last
review.
The second largest loan is the Hotel Gansevoort Loan ($118.0
million -- 2.9% of the pool), which is secured by a 187-room full
service boutique hotel located in the Meatpacking District in
Manhattan. The loan is currently on the servicer's watchlist for a
low DSCR. Property performance declined significantly between 2008
and 2009 but started to rebound in 2010 as the hospitality market
in New York improved. Occupancy and RevPAR as of December 2012
were 89% and $351, respectively, compared to 88% and $346 at last
review. Moody's LTV and stressed DSCR are 111% and 1.00X,
respectively, compared to 115% and 0.97X at last review.
The third largest loan is the Renaissance Austin Hotel Loan ($83.0
million -- 2.1% of the pool), which is secured by a 492-room full
service hotel located in Austin, Texas. Property performance has
continued to decline since 2008 due to excess supply in the
market. Despite the excess supply, the hotel has been able to
increase occupancy through increased group business sales.
Occupancy and RevPAR as of November 2012 were 72% and $107,
respectively, compared to 62% and $156 at last review. Moody's LTV
and stressed DSCR are 135% and 0.86X, respectively, compared to
135% and 0.88X at last review.
ML-CFC 2007-6: Moody's Affirms 'C' Ratings on 10 Cert. Classes
--------------------------------------------------------------
Moody's Investors Service affirmed the ratings of 22 classes of
ML-CFC Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2007-6, as follows:
Cl. A-1A, Affirmed Aa3 (sf); previously on Jun 15, 2012 Downgraded
to Aa3 (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Mar 9, 2011 Confirmed at
Aaa (sf)
Cl. A-2FL, Affirmed Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Mar 9, 2011 Confirmed at
Aaa (sf)
Cl. A-4, Affirmed Aa3 (sf); previously on Jun 15, 2012 Downgraded
to Aa3 (sf)
Cl. AJ, Affirmed Caa1 (sf); previously on Jun 15, 2012 Downgraded
to Caa1 (sf)
Cl. AJ-FL, Affirmed Caa1 (sf); previously on Jun 15, 2012
Downgraded to Caa1 (sf)
Cl. AM, Affirmed Ba1 (sf); previously on Jun 15, 2012 Downgraded
to Ba1 (sf)
Cl. B, Affirmed Caa2 (sf); previously on Jun 15, 2012 Downgraded
to Caa2 (sf)
Cl. C, Affirmed Caa3 (sf); previously on Jun 15, 2012 Downgraded
to Caa3 (sf)
Cl. D, Affirmed Ca (sf); previously on Nov 18, 2010 Downgraded to
Ca (sf)
Cl. E, Affirmed C (sf); previously on Nov 18, 2010 Downgraded to C
(sf)
Cl. F, Affirmed C (sf); previously on Nov 18, 2010 Downgraded to C
(sf)
Cl. G, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. H, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. J, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. K, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. L, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. M, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. N, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. P, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. X, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded to
Ba3 (sf)
Ratings Rationale:
The affirmations of the principal and interest classes are due to
key parameters, including Moody's loan to value (LTV) ratio,
Moody's stressed debt service coverage ratio (DSCR) and the
Herfindahl Index (Herf), remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings. Depending on the timing of loan payoffs and the
severity and timing of losses from specially serviced loans, the
credit enhancement level for rated classes could decline below the
current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The rating of the IO Class, Class X, is consistent with the
expected credit performance of its referenced classes and thus is
affirmed.
Moody's rating action reflects a base expected loss of 17.1% of
the current balance. At last review, Moody's base expected loss
was 15.9%. Realized losses have increased from less than 0.1% of
the original balance to 0.4% since the prior review. Moody's base
expected loss plus realized losses is now 15.7% of the original
pooled balance compared to 14.4% at last review.
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 given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 30 compared to 31 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 15, 2012.
Deal Performance:
As of the May 14, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 11% to $1.9 billion
from $2.1 billion at securitization. The Certificates are
collateralized by 136 mortgage loans ranging in size from less
than 1% to 11% of the pool, with the top ten loans representing
46% of the pool. The pool does not contain any defeased loans or
loans with credit assessments.
Thirty-eight loans, representing 25% of the pool, are on the
master servicer's watchlist. The watchlist includes loans which
meet certain portfolio review guidelines established as part of
the CRE Finance Council (CREFC) monthly reporting package. As part
of its ongoing monitoring of a transaction, Moody's reviews the
watchlist to assess which loans have material issues that could
impact performance.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $9.1 million (72% loss severity on
average). Nineteen loans, representing 25% of the pool, are
currently in special servicing. The largest specially serviced
loan is the Peter Cooper Village and Stuyvesant Town (PCV/ST)
($202.3 million -- 10.5% of the pool), which represents a pari-
passu interest in a $3.0 billion first mortgage loan spread among
five separate CMBS deals. There is also $1.4 billion in mezzanine
debt secured by the borrower's interest. The loan is secured by
two adjacent multifamily apartment complexes with 11,229 units
located on the east side of Manhattan. The loan transferred to
special servicing in November 2009 after the Appellate Division,
First Department, in April 2009 reversed an August 2007 decision
of the State Supreme Court, which held that properties receiving
tax benefits, including those pursuant to the J-51 program, be
permitted to decontrol rent stabilized apartments pursuant to New
York State rent stabilization laws. The court's decision
compromised the Borrower's original business plan to convert rent
stabilized apartments to market rental rates and the borrower
agreed to forfeit control rights to the property. As of September
2012, the special servicer engaged CompassRock Real Estate to
manage the property. On April 10, 2013, the New York State Supreme
Court approved a settlement in the tenant's class action lawsuit
regarding improperly deregulated rent-stabilized units. The
special servicer anticipates full implementation of the settlement
will take 18 months. Overall, property performance has improved
since the end of 2010. The property was appraised for $3.2 billion
in September 2012, compared to $3.0 billion in September 2011. The
whole loan currently has over $460 million in cumulative ASER and
P&I advances to date. The special servicer believes that the
settlement's implementation, continued recovery from Hurricane
Sandy and collection of the associated insurance claim are
prerequisites to optimal capital recovery.
The second largest specially serviced loan is the Blackpoint
Puerto Rico Retail Loan ($84.7 million -- 4.4% of the pool) which
is secured by six retail properties located in Puerto Rico. The
properties range in size from 59,000 to 306,000 square feet (SF)
and total 855,000 SF. The portfolio was 76% leased as of December
2012 compared to 76% at the last review and 89% at securitization.
The loan transferred to special servicing in February 2012 due to
imminent maturity default when the borrower was unable to pay off
the loan at maturity. The special servicer is currently assessing
various resolution strategies for the loan.
The remaining 17 specially serviced loans are secured by a mix of
property types. Moody's estimates an aggregate $160.9 million loss
for the specially serviced loans (34% expected loss on average).
Moody's has assumed a high default probability for 25 poorly
performing loans representing 27% of the pool and has estimated an
aggregate $150.6 million loss (29% expected loss based on a 51%
probability default) from these troubled loans.
Moody's was provided with partial or full year 2012 operating
results for 88% of the pool. Excluding specially serviced and
troubled loans, Moody's weighted average LTV is 103% compared to
112% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 10% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.3%.
Excluding special serviced and troubled loans, Moody's actual and
stressed DSCRs are 1.43X and 1.01X, respectively, compared to
1.33X and 0.93X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The top three conduit loans represent 18% of the pool. The largest
loan is the Westfield Southpark Loan ($150.0 million -- 7.8% of
the pool), which is secured by a 1.6 million SF regional mall
(887,000 SF of collateral) located in Strongsville, Ohio. Anchors
include Dillard's, Macy's, Sears and JC Penney. The in-line stores
were 97% leased as of December 2012 compared to 95% at last review
and 82% at securitization. Financial performance improved in 2012
due to higher occupancy and rent bumps on existing tenants. The
loan is interest only for its entire ten-year term. Moody's LTV
and stressed DSCR are 87% and 1.15X, respectively, compared to 94%
and 1.07X at last review.
The second largest conduit loan is the MSKP Retail Portfolio Loan
A ($130,300,000 -- 6.8% of the pool), which is secured by eight
retail properties located throughout Florida. The properties range
in size from 63,000 to 230,000 SF and total 1.3 million SF. The
portfolio was 78% leased as of December 2012 compared to 75% at
the prior review. The loan transferred to special servicing in
March 2011 due to imminent monetary default. The borrower
requested a loan modification since portfolio cash flow was
insufficient to cover debt service payments. In March 2012, the
borrower and special servicer successfully executed a
modification. Terms of the modification include a bifurcation of
the original loan into a $130.3 million A-Note and $93.1 million
B-Note along with an extension of the maturity date by two years
to March 2019. The new B-Note has created ongoing interest
shortfalls to the trust in the amount of approximately $435,000
per month. The loan returned to the master servicer in November
2012. Moody's LTV and stressed DSCR of the A-note are 135% and
0.74X, respectively, compared to 127% and 0.79X at last review.
The third largest conduit loan is the Steuart Industrial Portfolio
Loan ($63.6 million -- 3.3% of the pool), which is secured by ten
industrial buildings located in northern Virginia and suburban
Maryland. The portfolio was 94% leased as of February 2013
compared to 76% at the prior review. Performance has improved and
the loan has approximately four years until maturity. Moody's LTV
and stressed DSCR are 118% and 0.80X, respectively, compared to
136% and 0.70X at last review.
MORGAN STANLEY 2001-IQ: Moody's Hikes Rating on Cl. M Notes to B3
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of three classes
and affirmed two classes of Morgan Stanley Capital I Inc.,
Commercial Mortgage Pass-through Certificates, Series 2001-IQ as
follows:
Cl. K, Upgraded to Aa2 (sf); previously on Jul 7, 2011 Upgraded to
A2 (sf)
Cl. L, Upgraded to Baa1 (sf); previously on Jul 7, 2011 Upgraded
to Ba1 (sf)
Cl. M, Upgraded to B3 (sf); previously on Jul 7, 2011 Upgraded to
Caa1 (sf)
Cl. N, Affirmed Caa3 (sf); previously on Jul 7, 2011 Upgraded to
Caa3 (sf)
Cl. X-1, Affirmed Caa1 (sf); previously on Feb 22, 2012 Downgraded
to Caa1 (sf)
Ratings Rationale:
The upgrades to the three principal and interest classes are due
to increased credit support from amortization and pay downs.
The rating of Class N is consistent with Moody's expected loss and
is thus affirmed. The rating of the IO Class, Class X-1, is
consistent with the weighted average rating factor (WARF) of its
referenced classes and is thus affirmed.
Moody's rating action reflects a base expected loss of 2.6% of the
current balance compared to 2.0% at last review. Base expected
loss plus realized losses to date now totals 0.6% of the original
balance, the same as at last review.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time to
time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a pay down analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 5 compared to 6 at last review.
In cases where the Herf falls below 20, Moody's employs the large
loan/single borrower methodology. This methodology uses the excel-
based Large Loan Model v 8.5. The large loan model derives credit
enhancement levels based on an aggregation of adjusted loan level
proceeds derived from Moody's loan level LTV ratios. Major
adjustments to determining proceeds include leverage, loan
structure, property type, and sponsorship. These aggregated
proceeds are then further adjusted for any pooling benefits
associated with loan level diversity, other concentrations and
correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 15, 2012.
Deal Performance:
As of the May 20, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 98% to $13.9
million from $713.0 million at securitization. The Certificates
are collateralized by six mortgage loans ranging in size from less
than 1% to 32% of the pool.
There are three loans, representing 58% of the pool, on the master
servicer's watchlist. The watchlist also includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Six loans have been liquidated from the pool since securitization
resulting in an aggregate realized loss totaling $3.7 million
(average loss severity of .5%). There are no loans in special
servicing and Moody's has not identified any troubled loans.
Moody's was provided with full year 2011 and full and partial year
2012 operating results for 68% and 50% of the performing pool,
respectively. Moody's weighted average conduit LTV is 55% compared
to 53% at last review. Moody's net cash flow reflects a weighted
average haircut of 10.7% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.7%.
Moody's actual and stressed conduit DSCRs are 1.15X and 3.30X,
respectively, compared to 1.25X and 3.76X, respectively, at last
review. Moody's actual DSCR is based on Moody's net cash flow
(NCF) and the loan's actual debt service. Moody's stressed DSCR is
based on Moody's NCF and a 9.25% stressed rate applied to the loan
balance.
The top three conduit loans represent 70% of the pool balance. The
largest loan is the Providence Office Building ($4.5 million --
32.3% of the pool), which is secured by a 54,597 square foot (SF)
office property located in Charlotte, North Carolina. The property
was 73% leased as of May 2011 compared to 80% at last review. The
loan has amortized 22% since securitization. Moody's LTV and
stressed DSCR are 110% and 0.99 X, respectively, compared to 113%
and 0.95X at last review.
The second largest loan is the Union Square Shopping Center ($3.4
million -- 24.4% of the pool), which is secured by a 267,875 SF
retail property located in New Castle, Pennsylvania, approximately
50 miles northwest of Pittsburgh. As of September 2012, the
property was 99.5% leased, the same as at last review. The three
largest tenants are Wal Mart, Staples and Fashion Bug. Performance
has remained stable. The loan is fully amortizing and has
amortized 70% since securitization. Moody's LTV and stressed DSCR
are 22% and 4.0X, compared to 26% and 3.85X at last review.
The third largest conduit loan is the Grassmere Business Park Loan
($1.8 million -- 12.8% of the pool), which is secured by a 38,030
SF office building in Nashville, Tennessee. The property was 74%
leased as of February 2013, the same at last review. Property
performance increased slightly since last review and the loan
benefits from amortization. Moody's LTV and stressed DSCR are 64%
and 1.7X, respectively, compared to 71% and 1.53X at last review.
MORGAN STANLEY 2004-TOP13: Moody's Affirms Ratings on 9 Classes
---------------------------------------------------------------
Moody's Investors Service upgraded the ratings of six classes and
affirmed nine classes of Morgan Stanley Capital I Trust 2004-TOP
13 as follows:
Cl. A-4, Affirmed Aaa (sf); previously on Feb 6, 2004 Assigned Aaa
(sf)
Cl. B, Affirmed Aaa (sf); previously on Jan 13, 2011 Upgraded to
Aaa (sf)
Cl. C, Upgraded to Aaa (sf); previously on Jan 13, 2011 Upgraded
to Aa1 (sf)
Cl. D, Upgraded to Aa3 (sf); previously on Jan 13, 2011 Upgraded
to A1 (sf)
Cl. E, Upgraded to A2 (sf); previously on Nov 12, 2009 Confirmed
at A3 (sf)
Cl. F, Upgraded to A3 (sf); previously on Nov 12, 2009 Confirmed
at Baa1 (sf)
Cl. G, Upgraded to Baa1 (sf); previously on Nov 12, 2009 Confirmed
at Baa2 (sf)
Cl. H, Upgraded to Baa3 (sf); previously on Jul 26, 2012
Downgraded to Ba1 (sf)
Cl. J, Affirmed Ba2 (sf); previously on Jul 26, 2012 Downgraded to
Ba2 (sf)
Cl. K, Affirmed Ba3 (sf); previously on Jul 26, 2012 Downgraded to
Ba3 (sf)
Cl. L, Affirmed B2 (sf); previously on Jul 26, 2012 Downgraded to
B2 (sf)
Cl. M, Affirmed Caa2 (sf); previously on Jul 26, 2012 Downgraded
to Caa2 (sf)
Cl. N, Affirmed Ca (sf); previously on Jan 13, 2011 Downgraded to
Ca (sf)
Cl. O, Affirmed C (sf); previously on Jan 13, 2011 Downgraded to C
(sf)
Cl. X-1, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Ratings Rationale:
The upgrades are due to increased credit support from paydowns and
amortization, overall improved pool performance and anticipated
paydowns from loans approaching maturity that are well positioned
for refinance.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. The rating of the IO class, Class X-1, is
consistent with the weighted average rating factor (WARF) of its
referenced classes and thus is affirmed.
Moody's rating action reflects a base expected loss of 2.4% of the
current balance. At last review, Moody's base expected loss was
3.6%. Moody's base expected loss plus realized losses is now 2.0%
of the original pooled balance compared to 2.6% at last review.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit support
for the principal classes could decline below their current
levels. If future performance materially declines, credit support
may be insufficient to support the current ratings.
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 given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions" published in
April 2005.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 22 compared to 26 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated July 26, 2012.
Deal Performance:
As of the May 13, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 41% to $709.5
million from $1.21billion at securitization. The Certificates are
collateralized by 135 mortgage loans ranging in size from less
than 1% to 12% of the pool, with the top ten non-defeased loans,
representing approximately 39% of the pool. The pool contains two
loans with investment-grade credit assessments, representing 15%
of the pool. A third loan had a credit assessment at last review
but it was removed due to a decline in performance. Additionally,
there are 17 loans, representing approximately 19% of the pool,
that have defeased and are secured by U.S. Government securities.
Fifteen defeased loans, representing 18% of the pool, are
scheduled to mature within the next seven months.
Twenty-seven loans, representing 14% of the pool, are on the
master servicer's watchlist. The watchlist includes loans which
meet certain portfolio review guidelines established as part of
the CRE Finance Council (CREFC) monthly reporting package. As part
of Moody's ongoing monitoring of a transaction, Moody's reviews
the watchlist to assess which loans have material issues that
could impact performance.
Seven loans have been liquidated from the pool since
securitization, resulting in a realized loss of $6.8 million (45%
loss severity on average). As of the most remittance statement,
there are five specially serviced loans, representing 11% of the
pool. The largest specially serviced loan is the US Bank Tower
Loan ($65.0 million -- 9.2% of the pool), which represents a pari
passu interest in a $260 million first mortgage loan. The loan is
secured by a 72-story, 1.4 million square foot (SF) office tower
and accompanying parking garage in downtown Los Angeles,
California. The loan sponsor is Maguire Properties. The loan was
transferred back into special servicing in December 2012 after the
Borrower reported imminent default prior to the July 2013 maturity
date. As of December 2012, the property was 59% leased compared to
60% at last review and 90% at securitization. The acquisition of
the property by Singapore's Overseas Union Enterprise for $367.5
million, or $258.5 per square foot (SF), was announced in March
2013. The sale is scheduled for June 2013 and the loan is expected
to be paid off in full. The remaining specially serviced loans
consist of retail and industrial properties. Excluding the US Bank
Tower Loan, Moody's estimates an aggregate loss of $4.6 million
(46% expected loss on average) for three specially serviced loans,
representing 1% of the pool.
Additionally, Moody's has assumed a high default probability for
four poorly performing loans, representing approximately 5% of the
pool, and has estimated an aggregate $5.46 million loss (15%
expected loss based on a 50% probability of default) from these
troubled loans.
Moody's was provided with full year 2011 and 2012 operating
results for 100% and 84% of the pool, respectively. Excluding
specially serviced and troubled loans, Moody's weighted average
conduit LTV is 61% compared to 65% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 13%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.7%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed conduit DSCRs are 2.08X and 2.12X compared to 2.03X
and 1.95X at last review. Moody's actual DSCR is based on Moody's
net cash flow (NCF) and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The largest loan with a credit assessment is the GIC Office
Portfolio Loan ($84.9 million -- 12.0% of the pool), which
represents a pari passu interest in a $658.3 million first
mortgage loan. The portfolio is also encumbered by a $117.6
million B-note. The loan is secured by a portfolio of 12 office
properties, totaling 6.4 million SF, located across seven states.
The portfolio's largest geographic concentrations are Illinois
(39%), Pennsylvania (17%) and California (12%). The sponsor is
Prime Plus Investment, which is wholly owned by the Government of
Singapore's Investment Corporation. As of December 2012, the
portfolio was 87% leased, essentially the same as at last review.
Performance has improved to due to higher revenues and the loan is
benefitting from amortization. The loan matures in January 2014.
Moody's credit assessment and stressed DSCR are Baa3 and 1.51X,
respectively, compared to Baa3 and 1.47X at last review.
The second loan with a credit assessment is the Gallup
Headquarters Loan ($18.7 million -- 2.6% of the pool), which is
secured by a 296,000 SF office building located in Omaha,
Nebraska. The property is 100% leased to Gallup, Inc. under a
triple net lease that expires in October 2018. The lease
expiration is co-terminus with the loan maturity and the loan is
fully amortizing. Moody's credit assessment and stressed DSCR are
Aa3 and 2.61X, respectively, compared to Aa3 and 2.36X at last
review.
The third loan that had a credit assessment at last review is the
Hudson Mall Loan ($14.3 million -- 2.0% of the pool), which is
secured by a 362,000 SF retail center located along Route 440 in
Jersey City, New Jersey. As of January 2013, the property was 73%
leased compared to 83% at last review. The largest tenants are
Toys R' US (10% of the net rentable area (NRA); lease expires in
January 2017) and Marshalls (8% of the NRA; lease expires in
January 2020). The asset's overall performance has continued to
decline due to lower revenues. For 2012, the decrease in net
operating income was 24% compared to 15% in the prior year.
Moody's LTV and stressed DSCR are 86% and 1.26X, respectively,
compared to 60% and 1.8X at last review.
The top three performing conduit loans represent approximately 8%
of the pool balance. The largest conduit loan is the Galleria
Plaza Shopping Center Loan ($24.4 million -- 3.4% of the pool),
which is secured by a 168,000 SF shopping center in Dallas, Texas.
As of September 2012, the center was 100% leased, the same as at
last review. The loan matures in December 2013. Moody's LTV and
stressed DSCR are 71% and 1.45X, essentially the same as at last
review.
The second largest conduit loan is the 1101 15th Street NW Loan
($18.0 million -- 2.5% of the pool), which is secured by a 12-
story, 175,000 SF office building in Washington D.C. As of
February 2013, the property was 79% leased compared to 94% in
December 2011. Per CBRE Econometric Advisors, the sub-market
vacancy is approximately 12%. The loan matures in November 2013.
Moody's valuation reflects a stabilized value. Moody's LTV and
stressed DSCR are 74% and 1.31X, respectively, compared to 76% and
1.29X at last review.
The third largest conduit loan is Highlander Plaza ($12.5 million
-- 1.8% of the pool), which is secured by a 165,000 SF, grocery-
anchored retail property in Salem, Massachusetts. The anchor in
Shaw's Supermarket, which leases approximately 39% of the NRA
through February 2016. As of December 2012, the property was 99%
leased, the same as at last review. The property's performance has
steadily improved since securitization. Moody's LTV and stressed
DSCR are 57% and 1.9X, respectively, compared to 60% and 1.7X at
last review.
MUIR WOODS: S&P Affirms 'BB' Rating on Class E Notes
----------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on Muir
Woods CLO Ltd./ Muir Woods CLO Corp.'s $277.00 million floating-
rate notes following the transaction's effective date as of
Nov. 30, 2012.
Most U.S. cash flow collateralized debt obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio.
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
them by the trustee and collateral manager, in combination with
the transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to them.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of its criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect its assumptions about the
transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
In S&P's published effective date report, it discusses its
analysis of the information provided by the transaction's trustee
and collateral manager in support of their request for effective
date rating affirmation. In most instances, S&P intends to
publish an effective date report each time it issues an effective
date rating affirmation on a publicly rated U.S. cash flow CLO.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remain consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, and take rating actions as 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
RATINGS AFFIRMED
Muir Woods CLO Ltd./Muir Woods CLO Corp.
Class Rating Amount
(mil. $)
X AAA (sf) 3.00
A AAA (sf) 188.30
B AA (sf) 31.70
C (deferrable) A (sf) 24.20
D (deferrable) BBB (sf) 12.00
E (deferrable) BB (sf) 12.30
F (deferrable) B (sf) 5.50
NATIONS EQUIPMENT I: Moody's to Rate Class D Notes '(P)Ba2'
-----------------------------------------------------------
Moody's has assigned provisional ratings to the Equipment Contract
Backed Notes, Series 2013-1 to be issued by Nations Equipment
Finance Funding I, LLC.
The transaction is a securitization of equipment loans and leases
sponsored by Nations Equipment Finance, LLC (NEF) which will act
as the servicer. The issuer, Nations Equipment Finance Funding I,
LLC is a wholly-owned subsidiary of NEF Holdings, Inc., (Holdings
or the transferor) an affiliate of the servicer.
The equipment loans and leases were originated by Nations Fund I,
Inc. (the originator), a subsidiary of the transferor and are
backed by collateral including trailers, trucks and various types
of construction and manufacturing equipment.
The complete rating action is as follows:
Issuer: Nations Equipment Finance Funding I, LLC -- Equipment
Contract Backed Notes, Series 2013-1
Class A Notes, rated (P) A2 (sf)
Class B Notes, rated (P) Baa2 (sf)
Class C Notes, rated (P) Ba2 (sf)
Ratings Rationale:
Series 2013-1 is the first securitization sponsored by NEF. NEF
was formed and is owned by a team of professionals led by several
former GECC executives. Holdings is owned by this group and
investment funds affiliated with a private equity firm. The
provisional rating is based on the following (1) historic
performance of Nations' portfolio, with relatively low incidence
of default and low net loss rate since 2010, (2) assessed quality
of the loans in the pool and their generally short tenor, (3)
enhancement including overcollateralization, excess spread and
non-declining reserve account, (4) full turbo structure (5) the
experience and expertise of the servicer (6) US Bank National
Association (rated Aa3) as backup servicer.
Credit support to the notes includes (i) overcollateralization
initially at 11%, and is expected to grow with time as notes pay
down and through the application of excess spread to pay down the
notes, (ii) excess spread- the weighted cash yield of the loans
(6.9%, as of the statistical calculation date) produces an
expected excess spread of approximately 4.0% per annum given the
initial advance rate of 89.0% and, (iii) a reserve fund funded at
1.5% of the initial collateral balance, and (iv) subordination in
the case of the Class A and Class B notes (14.5% and 6.0%
respectively).
The equipment loans and leases backing the notes transaction were
extended to middle market and Fortune 500 obligors and are secured
by various types of equipment including in particular construction
equipment (14.13%), tractors (13.63%), and cranes (11.82%).
The pool consists of 117 contracts with 46 separate obligors and
an initial balance of $172,220,198. The weighted average contract
balance is $1,471,968. The weighted average original and remaining
terms to maturity are 53 and 41 months, respectively. The largest
obligor is 9.6% of the initial pool balance and the top five
obligors comprise 33.0% of the initial pool balance. Nearly all of
the contracts in this deal are fixed interest rate and monthly
pay.
The V Score for this transaction is Medium/High, which is in line
with the score assigned to the U.S. Small Issuer Equipment Lease
and Loan ABS sector. The V Score indicates "medium/high"
uncertainty about critical assumptions. 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). While the overall score is medium/high, significant
deviations from the sector within the individual categories
include the following: Quality of Historical Data for the
Issuer/Sponsor/Originator is medium/high versus medium due to the
limited performance data for the issuer's collateral; Disclosure
of Securitization Collateral Pool Characteristics and Disclosure
of Securitization Performance are low/medium versus medium due to
the extensive amount of loan by loan data that Moody's has
received and will continue to receive for surveillance purposes;
Analytic complexity is medium versus low/medium due to the non-
granular nature of the collateral; market value sensitivity is
medium versus medium/low due to large exposures to individual
obligors and the potential for the need to liquidate large amounts
of equipment; Experience of, Arrangements Among and Oversight of
Transaction Parties is medium/high versus medium due to the
sponsor's limited experience with securitizations; Alignment of
Interests is low/medium versus medium due to the full turbo
structure and significant retained equity of the sponsor.
Moody's Parameter Sensitivities: If the expected recovery rate
used in determining the initial rating were changed to 40%, 30%,
or 20.00% the initial model-indicated rating for the Class A notes
might change from A2 to A2, Baa1, and Baa3, respectively. If the
expected recovery rate used in determining the initial rating were
changed to 45%, 35%, or 25%, the initial model-indicated rating
for the Class B notes might change from Baa2 to Baa3, Ba3, and
determining the initial rating were changed to 50%, 40%, or 30%,
the initial model-indicated rating for the Class C notes might
change from Ba2 to Ba3, B3, and 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.
Principal Methodology
A hybrid approach was used for the lease credit portion of this
transaction. Qualitatively, the methodologies used in rating
traditional equipment lease transactions were, "Moody's Approach
to Rating Securities Backed by Equipment Leases and Loans",
published in March, 2007, and the fleet lease methodology as
described in "Moody's Approach to Rating Fleet Lease-Backed ABS",
published in December, 2011.
The quantitative analysis normally used for equipment lease
transactions was not used as the equipment lease pool in this
transaction is not very granular and has a large portion of leases
with investment grade corporates. In contrast to a traditional
equipment lease pool, but similar to a fleet leasing pool,
incidences of default to date have been relatively few in number
but individual obligor concentrations in this pool are high. As
such, in assessing the adequacy of the credit enhancement in the
transaction, Moody's applied the CDOROM approach as described in
the fleet lease methodology.
NATIONSTAR MORTGAGE: S&P Assigns 'B' Rating on 6 Note Classes
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to
Nationstar Mortgage Advance Receivables Trust's $2.022 billion
receivables-backed notes series 2013-VF1, 2013-VF2, 2013-VF3,
2013-T1, 2013-T2, and 2013-T3.
The note issuance is a residential mortgage-backed securities
transaction backed by servicer advance receivables and deferred
servicing fees.
The ratings reflect S&P's view of:
-- The likelihood that recoveries on the servicer advances
together with a reserve fund and overcollateralization are
sufficient under its 'AAA', 'AA', 'A', 'BBB', 'BB', and 'B'
stresses as outlined in its criteria to meet scheduled
interest and ultimate principal payments due on the
securities according to the obligations' terms; and
-- An operational review of and our ABOVE AVERAGE ranking on
the servicer.
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/1563.pdf
RATINGS ASSIGNED
Nationstar Mortgage Advance Receivables Trust
Series 2013-VF1, 2013-VF2, 2013-VF3, 2013-T1,
2013-T2, and 2013-T3
Series Class Rating Interest Amount
rate (mil. $)
2013-VF1 A-VF1 AAA (sf) One mo. LIBOR + 0.90 378.495
2013-VF2 A-VF2 AAA (sf) One mo. LIBOR + 0.85 336.440
2013-VF3 A-VF3 AAA (sf) One mo. LIBOR + 0.65 126.165
2013-T1 A-T1 AAA (sf) 1.080 322.000
2013-T2 A-T2 AAA (sf) 1.679 319.000
2013-T3 A-T3 AAA (sf) 2.438 271.200
2013-VF1 B-VF1 AA (sf) One mo. LIBOR + 1.25 42.480
2013-VF2 B-VF2 AA (sf) One mo. LIBOR + 1.25 37.760
2013-VF3 B-VF3 AA (sf) One mo. LIBOR + 1.05 14.160
2013-T1 B-T1 AA (sf) 1.379 12.400
2013-T2 B-T2 AA (sf) 1.991 13.500
2013-T3 B-T3 AA (sf) 2.833 12.800
2013-VF1 C-VF1 A (sf) One mo. LIBOR + 2.25 20.925
2013-VF2 C-VF2 A (sf) One mo. LIBOR + 2.25 18.600
2013-VF3 C-VF3 A (sf) One mo. LIBOR + 1.75 6.975
2013-T1 C-T1 A (sf) 1.594 5.900
2013-T2 C-T2 A (sf) 2.190 6.500
2013-T3 C-T3 A (sf) 2.981 6.100
2013-VF1 D-VF1 BBB (sf) One mo. LIBOR + 3.50 8.100
2013-VF2 D-VF2 BBB (sf) One mo. LIBOR + 3.50 7.200
2013-VF3 D-VF3 BBB (sf) One mo. LIBOR + 2.50 2.700
2013-T1 D-T1 BBB (sf) 2.239 4.100
2013-T2 D-T2 BBB (sf) 2.734 4.600
2013-T3 D-T3 BBB (sf) 3.819 4.300
2013-VF1 E-T1 BB (sf) One mo. LIBOR + 4.00 7.425
2013-VF2 E-T2 BB (sf) One mo. LIBOR + 4.00 6.600
2013-VF3 E-T3 BB (sf) One mo. LIBOR + 4.00 2.475
2013-T1 E-T1 BB (sf) 3.721 4.100
2013-T2 E-T2 BB (sf) 4.948 4.400
2013-T3 E-T3 BB (sf) 5.926 3.900
2013-VF1 F-T1 B (sf) One mo. LIBOR + 5.30 2.475
2013-VF2 F-T2 B (sf) One mo. LIBOR + 5.30 2.200
2013-VF3 F-T3 B (sf) One mo. LIBOR + 5.30 0.825
2013-T1 F-T1 B (sf) 4.949 1.500
2013-T2 F-T2 B (sf) 5.682 2.000
2013-T3 F-T3 B (sf) 6.413 1.700
VFN - Variable rate note.
Term - Term note.
NEWMARK CAPITAL 2013-1: S&P Gives Prelim BB Rating on Cl. E Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to NewMark Capital Funding 2013-1 CLO Ltd./NewMark Capital
Funding 2013-1 CLO LLC's $382.00 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 preliminary ratings are based on information as of June 12,
2013. 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 (excluding excess spread), and cash flow structure,
which can withstand the default rate projected by Standard
& Poor's CDO Evaluator model, as assessed by Standard &
Poor's using the assumptions and methods outlined in its
corporate collateralized debt obligation (CDO) criteria.
-- The transaction's legal structure, which is expected to be
bankruptcy-remote.
-- The diversified collateral portfolio, which consists
primarily of broadly syndicated speculative-grade senior
secured term loans.
-- The collateral manager's experienced management team.
-- S&P's projections regarding the timely interest and
ultimate principal payments on the preliminary rated notes,
which it assessed using its cash flow analysis and
assumptions commensurate with the assigned preliminary
ratings under various interest rate scenarios, including
LIBOR ranging from 0.29%-11.57%.
-- 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
rated notes' outstanding balance.
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/1600.pdf
PRELIMINARY RATINGS ASSIGNED
NewMark Capital Funding 2013-1 CLO Ltd./NewMark Capital Funding
2013-1 CLO LLC
Class Rating Amount
(mil. $)
A-1 AAA (sf) 80.00
A-2 AAA (sf) 165.00
A-3 AAA (sf) 10.00
A-X AAA (sf) 3.00
B AA (sf) 50.00
C (deferrable) A (sf) 28.00
D (deferrable) BBB (sf) 19.00
E (deferrable) BB (sf) 19.00
F (deferrable) B (sf) 8.00
Subordinated notes NR 39.00
OCTAGON INVESTMENT: S&P Rates $23.5-Mil. Class E Notes 'BB'
-----------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to Octagon
Investment Partners XVI Ltd./Octagon Investment Partners XVI LLC's
$473.500 million fixed- and 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 (excluding excess spread), and cash flow structure,
which can withstand the default rate projected by Standard
& Poor's CDO Evaluator model, as assessed by Standard &
Poor's using the assumptions and methods outlined in its
corporate collateralized debt obligation 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 rated notes, which it
assessed using its cash flow analysis and assumptions
commensurate with the assigned ratings under various
interest rate scenarios, including LIBOR ranging from
0.2739% to 12.8133%.
-- The transaction's overcollateralization and interest
coverage tests, a failure of which will lead to the
diversion of interest and principal proceeds to reduce the
balance of the rated notes outstanding.
-- The transaction's interest diversion test, a failure of
which will lead to the reclassification of up to 50% (75%
after reinvestment period) of excess interest proceeds that
are available prior to paying uncapped administrative
expenses and fees, subordinated hedge termination payments,
portfolio manager incentive fees, and subordinated note
payments to principal proceeds for the purchase of
additional collateral assets during the reinvestment period
and the reduction of rated notes' outstanding balance after
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/1597.pdf
RATINGS ASSIGNED
Octagon Investment Partners XVI Ltd./
Octagon Investment Partners XVI LLC
Class Rating Amount
(mil. $)
A AAA (sf) 298.50
B-1 AA (sf) 63.00
B-2 AA (sf) 10.00
C-1 (deferrable) A (sf) 27.50
C-2 (deferrable) A (sf) 10.00
D (deferrable) BBB (sf) 27.00
E (deferrable) BB (sf) 23.50
F (deferrable) B (sf) 14.00
Subordinated notes NR 44.00
NR - Not rated.
PALISADES CDO: Fitch Hikes Ratings on 2 Note Classes to 'Bsf'
-------------------------------------------------------------
Fitch Ratings has upgraded two and affirmed five classes and
assigned Outlooks to two classes of notes issued by Palisades CDO,
Ltd. (Palisades CDO), as follows:
-- $85,637,475 class A-1A notes to 'Bsf' from 'CCCsf'; Outlook
Stable;
-- $1,403,893 class A-1B notes to 'Bsf' from 'CCCsf'; Outlook
Stable;
-- $88,500,000 class A-2 notes at 'Csf';
-- $78,000,000 class B-1 notes at 'Csf';
-- $6,000,000 class B-2 notes at 'Csf';
-- $12,844,000 class C-1 notes at 'Csf';
-- $13,266,501 class C-2 notes 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 in its analysis, as
described below, to conclude the ratings for the notes.
Key Rating Drivers
Since Fitch's last rating action in June 2012, the credit quality
of the collateral has deteriorated with approximately 17.8% of the
portfolio downgraded a weighted average of 3.0 notches and 2.6%
upgraded a weighted average of 3.4 notches. Approximately 78.4% of
the current portfolio has a Fitch derived rating below investment
grade and 67.9% has a rating in the 'CCCsf' category or lower,
compared to 76.9% and 68.2%, respectively, at last review.
The upgrade of the class A-1A and A-1B (collectively, the class A-
1) notes is supported by the increase in the credit enhancement
(CE) levels to these notes as a result of the continued
deleveraging of the capital structure. Since the last review, the
two pro-rata classes have collectively received approximately $45
million through principal repayments and excess spread redirected
to cure the failure of the Class A/B Overcollateralization (OC)
Test. This has more than offset the credit deterioration of the
portfolio over the last year according to the improvements in the
modeling results for the notes.
The class A-1 notes are assigned a Stable Outlook to reflect their
cushion above the 'Bsf' rating level in the majority of modeling
scenarios. This cushion is expected to protect the notes from
potential deterioration of the underlying portfolio over the next
one to two years.
The class A-2 have also benefited from the amortization of the
capital structure as their credit enhancement has also increased.
This class continues to receive timely interest payments, but
given the priority of repayment and the amount of class A-1 notes
still outstanding this class is not expected to receive any
principal amortizations until the class A-1 notes are fully
repaid.
While the class B-1 and B-2 (together, the class B) notes continue
to receive their timely interest payments, these notes are
undercollateralized compared to the remaining portfolio balance.
As such, default continues to appear inevitable for the class B
notes at or prior to maturity.
The class C-1 and C-2 (together, class C notes) are no longer
receiving any interest payments and are not expected to do so in
the future. Similar to the class B notes, the class C notes have
experienced a decrease in their CE levels since last review, and
remain significantly undercollateralized. As such, the notes are
affirmed at their current ratings to reflect that default
continues to appear inevitable for these notes at or prior to
maturity.
Rating Sensitivities
Future downgrades could result from a decrease in the underlying
collateral's credit quality beyond what was projected by the SF
PCM.
Palisades CDO is a structured finance collateralized debt
obligation (SF CDO) that closed on July 15, 2004 and is managed by
Western Asset Management Company. As of the April 2013 trustee
report, the portfolio is comprised of residential mortgage backed
securities (88.6%), consumer and commercial asset backed
securities (9.4%), corporate CDOs (1.6%), commercial mortgage
backed securities (0.3%), and SF CDOs (0.1%) primarily from 1997
through 2007 vintage transactions.
PORTER SQUARE: Fitch Cuts Ratings on 3 Note Classes to 'D'
----------------------------------------------------------
Fitch Ratings has downgraded three, affirmed two, and subsequently
withdrawn the ratings on all notes issued by Porter Square CDO
III, Ltd./Inc. (Porter Square III), as follows:
-- $68,171,653 class A-1 notes downgraded to 'Dsf' from 'Csf'
and withdrawn;
-- $56,000,000 class A-2 notes affirmed at 'Dsf' and withdrawn;
-- $48,000,000 class B notes affirmed at 'Dsf' and withdrawn;
-- $16,272,324 class C notes downgraded to 'Dsf' from 'Csf'
and withdrawn;
-- $27,631,161 class D notes downgraded to 'Dsf' from 'Csf'
and withdrawn.
Key Rating Drivers
On Oct. 1, 2009, the transaction entered an Event of Default when
the class A overcollateralization ratio fell below 100%. On Dec.
23, 2009, the majority of the controlling class holders voted to
accelerate the transaction.
The Trustee was subsequently directed to liquidate the portfolio
on Feb. 4, 2013 by a 66 2/3% vote of the class A-1 noteholders, or
the controlling class. The class A-1 notes received $64.2 million
from two liquidation distributions, realizing 51.2% recovery on
the note's par balance immediately prior to the sale.
Approximately $59.6 million of the proceeds from the auction were
distributed on March 27, 2013, while the remaining $4.6 million
was distributed on the final payment date on May 31, 2013. This
was sufficient to cover only a portion of the class A-1 notes'
outstanding balance and there were no funds available to make
payments to the holders of any of the other remaining notes.
PORTOLA CLO: S&P Raises Rating on Class E Notes to 'B-(sf)'
-----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
B-1, B-2, C, D, and E notes from Portola CLO Ltd. At the same
time, Standard & Poor's affirmed its rating on the class A notes.
Portola CLO Ltd. is a collateralized loan obligation (CLO)
transaction managed by Pacific Investment Management Co. LLC that
closed in December 2007.
The Portola CLO Ltd. reinvestment period is scheduled to end in
November 2013. As of the May 3, 2013 trustee report, the
transaction had $51.4 million in eligible investments from
principal proceeds that it can reinvest in new assets. The
transaction is stable, and all coverage tests are above the
minimum requirements.
The upgrades reflect the stability of the transaction and the
seasoning of its portfolio since S&P's rating action in June 2011,
which improved the credit support at the prior rating levels.
Over the same time period, the notes have benefited from an
increase in the weighted average spread of the portfolio and a
decrease in the weighted average life of the assets. As of the
May 3, 2013 trustee report, the weighted average spread was 3.34%,
up from 3.25% as of the May 4, 2011 trustee report, while the
weighted average life was 4.18, down from 4.24.
The affirmation of the class A notes reflects the sufficient
credit support available to the notes at the current rating.
S&P will continue to review whether, in its view, the ratings
assigned to the notes remain consistent with the credit
enhancement available to support them, and S&P will take further
rating actions as it deems necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties, and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties, and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LIST
Ratings Raised
Portola CLO Ltd.
Rating Rating
Class To From
B-1 AA (sf) A+ (sf)
B-2 AA (sf) A+ (sf)
C A (sf) BBB+ (sf)
D BBB- (sf) B+ (sf)
E B- (sf) CCC- (sf)
Ratings Affirmed
Portola CLO Ltd.
Class Rating
A AA+ (sf)
POTOMAC SYNTHETIC 2007-1: Moody's Ups Rating on 10B-1 Notes to B2
-----------------------------------------------------------------
Moody's Investors Service announced the following rating action on
Potomac Synthetic CDO 2007-1, a synthetic credit collateralized
debt obligation transaction. The CSO, issued in 2007, references a
portfolio of senior unsecured and subordinated corporate bonds.
$31,000,000 Class 10B-1 Floating Rate Notes Due 2017 Notes,
Upgraded to B2 (sf); previously on August 6, 2012 Upgraded to Caa1
(sf)
Ratings Rationale:
Moody's rating action is the result of the improving credit
quality of the reference portfolio, shortened time to maturity of
the CSO and the level of credit enhancement remaining in the
transaction.
Since the last rating review in August 2012, the ten year weighted
average rating factor (WARF) of the portfolio decreased from 637
to 604, excluding settled credit events. Fifteen reference
entities have a negative outlook compared to eight that have a
positive outlook, and four reference entities are on watch for
downgrade compared to none on watch for upgrade.
The portfolio has experienced eight credit events, equivalent to
8.5% of the portfolio based on the portfolio notional value at
closing. According to the trustee report from April 2013, the
subordination of the rated tranche have been reduced by 2.9% since
issuance. The portfolio has had credit events on Cemex, S.A.B. de
C.V., CIT Group Inc., Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association, Glitnir banki hf,
Landsbanki Islands hf, Lehman Brothers Holdings Inc. and
Washington Mutual, Inc.
The CSO has a remaining life of 4.04 years.
The principal methodology used in this rating was "Moody's
Approach to Rating Corporate Collateralized Synthetic Obligations"
published in September 2009.
Moody's analysis for this transaction is based on CDOROM v 2.8-9
Moody's rating action factors in a number of sensitivity analyses
and stress scenarios. Results are given in terms of the number of
notches' difference versus the base case, where higher notches
correspond to lower expected losses, and vice-versa:
- Moody's reviews a scenario consisting of reducing the maturity
of the CSO by six months, keeping all other things equal. The
result of this run is one notch above the base case.
- Market Implied Ratings ("MIRS") are modeled in place of the
corporate fundamental ratings to derive the default
probability of the reference entities in the portfolio. The
gap between an MIR and a Moody's corporate fundamental rating
is an indicator of the extent of the divergence in credit view
between Moody's and the market. The result of this run is one
notch lower than in the base case.
- This transaction has a 4.92% exposure to references in the
Banking, Finance, Insurance and Real Estate sector domiciled
in Europe. Moody's conducted a stress scenario by applying a
default probability to these references derived from the
subordinated rating of the issuer and assigning a recovery
rate of 90% if the reference is a senior unsecured bond, or
10% if the reference is a subordinated bond. The result of
this run is comparable to the base case.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Corporate Collateralized
Synthetic Obligations", key model inputs used by Moody's in its
analysis may be different from the manager/arranger's reported
numbers. In particular, rating assumptions for all publicly rated
corporate credits in the underlying portfolio have been adjusted
for "Review for Possible Downgrade", "Review for Possible
Upgrade", or "Negative Outlook".
Moody's does not run a separate loss and cash flow analysis other
than the one already done by the CDOROM model.
Moody's analysis of CSOs is subject to uncertainties, the primary
sources of which include complexity, governance and leverage.
Although the CDOROM model captures many of the dynamics of the
Corporate CSO structure, it remains a simplification of the
complex reality. Of greatest concern are (a) variations over time
in default rates for instruments with a given rating, (b)
variations in recovery rates for instruments with particular
seniority/security characteristics and (c) uncertainty about the
default and recovery correlations characteristics of the reference
pool. Similarly on the legal/structural side, the legal analysis
although typically based in part on opinions (and sometimes
interpretations) of legal experts at the time of issuance, is
still subject to potential changes in law, case law and the
interpretations of courts and (in some cases) regulatory
authorities. The performance of this CSO is also dependent on on-
going decisions made by one or several parties, including the
Manager and the Trustee. Although the impact of these decisions is
mitigated by structural constraints, anticipating the quality of
these decisions necessarily introduces some level of uncertainty
in Moody's assumptions. Given the tranched nature of CSO
liabilities, rating transitions in the reference pool may have
leveraged rating implications for the ratings of the CSO
liabilities, thus leading to a high degree of volatility. All else
being equal, the volatility is likely to be higher for more junior
or thinner liabilities.
The base case scenario modeled fits into the central macroeconomic
scenario predicted by Moody's of a sluggish recovery scenario in
the corporate universe. Should macroeconomics conditions evolve,
the CSO ratings will change to reflect the new economic
developments.
PREFERRED TERM XXVI: Moody's Hikes Rating on $140MM Notes to Ba1
----------------------------------------------------------------
Moody's Investors Service upgraded the rating of the following
notes issued by Preferred Term Securities XXVI, Ltd.:
$530,250,000 Floating Rate Class A-1 Senior Notes Due September
22, 2037 (current balance of $373,611,526.71), Upgraded to A3
(sf); previously on December 22, 2009 Downgraded to Ba1 (sf);
$140,250,000 Floating Rate Class A-2 Senior Notes Due September
22, 2037 (current balance of $137,798,230.26), Upgraded to
Ba1(sf); previously on December 22, 2009 Downgraded to B1 (sf).
Moody's also affirmed the ratings on the following notes:
$59,900,000 Floating Rate Class B-1 Mezzanine Notes Due September
22, 2037 (current balance of $61,276,845.26, including deferred
interest), Affirmed Ca (sf); previously on December 22, 2009
Downgraded to Ca (sf);
$37,500,000 Fixed/Floating Rate Class B-2 Mezzanine Notes Due
September 22, 2037 (current balance of $45,312,109.60, including
deferred interest), Affirmed Ca (sf); previously on December 22,
2009 Downgraded to Ca (sf);
$71,500,000 Floating Rate Class C-1 Mezzanine Notes Due September
22, 2037 (current balance of $74,741,511.52, including deferred
interest), Affirmed C (sf); previously on December 22, 2009
Downgraded to C (sf);
$39,500,000 Fixed/Floating Rate Class C-2 Mezzanine Notes Due
September 22, 2037 (current balance of $49,195,147.48, including
deferred interest), Affirmed C (sf); previously on December 22,
2009 Downgraded to C (sf).
In addition, Moody's also affirmed the ratings on the following
combination notes linked to Preferred Term Securities XXVI, Ltd.:
Issuer: PreTSL Combination Series P XXVI-1 Trust
PreTSL $500,000 Combination Series P XXVI-1 Certificates (current
rated balance of $378,052.87), Affirmed A1 (sf); previously on
November 10, 2010 Downgraded to A1 (sf);
Issuer: PreTSL Combination Series P XXVI-2 Trust
PreTSL $11,500,000 Combination Series P XXVI-2 Certificates
(current rated balance of $1,342,262.35), Affirmed C (sf);
previously on November 10, 2010 Downgraded to C (sf).
Ratings Rationale:
According to Moody's, the upgrade rating actions taken on the
notes are primarily a result of the deleveraging of the Class A-1
notes and an increase in the transaction's overcollateralization
ratios since the last rating action in December 2009.
Moody's notes that the Class A-1 notes have been paid down by
approximately 26.8% or $136.6 million since the last rating
action, due to diversion of excess interest proceeds and
disbursement of principal proceeds from redemptions and sales of
underlying assets. As a result of this deleveraging, the Class A-1
notes' par coverage improved to 166.00% from 136.35% since the
last rating action, as calculated by Moody's. Based on the latest
trustee note valuation report dated March 22, 2013, the Senior
Coverage, Class B Mezzanine Coverage and Class C Mezzanine
Coverage ratios are reported at 121.95% (limit 128.00%), 100.92%
(limit 115.00%) and 84.06% (limit 105.40%), respectively, versus
September 22, 2009 levels of 119.41%, 103.82% and 90.21%,
respectively. Going forward, the senior notes will continue to
benefit from the diversion of excess interest and the proceeds
from future redemptions of any assets in the collateral pool.
Due to the impact of revised and updated key assumptions
referenced in Moody's rating methodology, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, Moody's Asset Correlation, and weighted average recovery
rate, may be different from the trustee's reported numbers. In its
base case, Moody's analyzed the underlying collateral pool to have
a performing par balance of $620.2 million (including the accreted
value of the Reserve Account Strip), defaulted/deferring par of
$259 million, a weighted average default probability of 31.56%
(implying a WARF of 1569), Moody's Asset Correlation of 12.68%,
and a weighted average recovery rate upon default of 8.34%. In
addition to the quantitative factors that are explicitly modeled,
qualitative factors are part of rating committee considerations.
Moody's considers the structural protections in the transaction,
the risk of triggering an Event of Default, recent deal
performance under current market conditions, the legal
environment, and specific documentation features. All information
available to rating committees, including macroeconomic forecasts,
inputs from other Moody's analytical groups, market factors, and
judgments regarding the nature and severity of credit stress on
the transactions, may influence the final rating decision.
Preferred Term Securities XXVI, Ltd., issued in June 2007, is a
collateralized debt obligation backed by a portfolio of bank and
insurance trust preferred securities. PreTSL Combination Series P
XXVI-1 Trust and PreTSL Combination Series P XXVI-2 Trust, issued
in June 2007, are combination note securities whose ratings are
based primarily on the credit quality of the underlying securities
and the legal structure of the transaction.
The portfolio of this CDO is mainly comprised of trust preferred
securities (TruPS) issued by small to medium sized U.S. community
banks and insurance companies that are generally not publicly
rated by Moody's. To evaluate the credit quality of bank TruPS
without public ratings, Moody's uses RiskCalc model, an
econometric model developed by Moody's KMV, to derive their credit
scores. Moody's evaluation of the credit risk for a majority of
bank obligors in the pool relies on FDIC financial data received
as of Q4-2012. For insurance TruPS without public ratings, Moody's
relies on the insurance team and the underlying insurance firms'
annual financial reporting to assess their credit quality.
Moody's also evaluates the sensitivity of the rated transaction to
the volatility of the credit estimates, as described in Moody's
Rating Implementation Guidance "Updated Approach to the Usage of
Credit Estimates in Rated Transactions" published in October 2009.
The principal methodology used in this rating was "Moody's
Approach to Rating TRUP CDOs" published in May 2011. The
methodology used in rating the combination notes was "Using the
Structured Note Methodology to Rate CDO Combo-Notes" published in
February 2004.
The transaction's portfolio was modeled using CDOROM v.2.8.9 to
develop the default distribution from which the Moody's Asset
Correlation parameter was obtained. This parameter was then used
as an input in a cash flow model using CDOEdge.
Moody's performed a number of sensitivity analyses of the results
to certain key factors driving the ratings. Moody's analyzed the
sensitivity of the model results to changes in the portfolio WARF
(representing an improvement or a deterioration in the credit
quality of the collateral pool), assuming that all other factors
are held equal. If the WARF is increased by 260 points from the
base case of 1569, the model-implied rating of the Class A-1 notes
is one notch worse than the base case result. Similarly, if the
WARF is decreased by 160 points, the model-implied rating of the
Class A-1 notes is one notch better than the base case result.
In addition, Moody's also performed two additional sensitivity
analyses as described in the Special Comment "Sensitivity Analyses
on Deferral Cures and Default Timing for Monitoring TruPS CDOs"
published in August 2012. In the first, Moody's gave par credit to
banks that are deferring interest on their TruPS but satisfy
specific credit criteria and thus have a strong likelihood of
resuming interest payments. Under this sensitivity analysis,
Moody's gave par credit to $10 million of bank TruPS. In the
second sensitivity analysis, Moody's ran alternative default-
timing profile scenarios to reflect the lower likelihood of a
large spike in defaults.
Summary of the impact 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:
Sensitivity Analysis 1:
Class A-1: +1
Class A-2: 0
Class B-1: +1
Class B-2: +1
Class C-1: 0
Class C-2: 0
Sensitivity Analysis 2:
Class A-1: +2
Class A-2: +1
Class B-1: +2
Class B-2: +2
Class C-1: 0
Class C-2: 0
Moody's notes that this transaction is still subject to a high
level of macroeconomic uncertainty although its outlook on the
banking sector has changed to stable from negative. The pace of
FDIC bank failures continues to decline in 2013 compared to 2012,
2011, 2010 and 2009, and some of the previously deferring banks
have resumed interest payment on their trust preferred securities.
Moody's continues to have a stable outlook in the insurance
sector, other than the negative outlook on the U.S. life insurance
industry.
PREFERRED TERM XXVII: Moody's Ups Rating on $40.5MM Notes to Caa2
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of the following
notes issued by Preferred Term Securities XXVII, Ltd.:
$171,000,000 Floating Rate Class A-1 Senior Notes due December 22,
2037 (current balance of $142,422,831.60), Upgraded to A2 (sf);
previously on October 22, 2010 Downgraded to Baa3 (sf);
$40,000,000 Floating Rate Class A-2 Senior Note due December 22,
2037 (current balance of $39,548,356.56), Upgraded to Baa2 (sf);
previously on October 22, 2010 Downgraded to Ba2 (sf);
$40,500,000 Floating Rate Class B Mezzanine Notes due December 22,
2037 (current balance of $41,557,777.33, including deferred
interest), Upgraded to Caa3 (sf); previously on October 22, 2010
Downgraded to Ca (sf);
Moody's also affirmed the ratings of the following notes:
$24,000,000 Floating Rate Class C-1 Notes due December 22, 2037
(current balance of $25,170,794.00, including deferred interest),
Affirmed C (sf); previously on October 22, 2010 Downgraded to C
(sf);
$18,000,000 Fixed/Floating Rate Class C-2 Mezzanine Notes due
December 22, 2037 (current balance of $21,952,378.24, including
deferred interest), Affirmed C (sf); previously on October 22,
2010 Downgraded to C (sf).
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of the deleveraging of the Class A-1 notes and
an increase in the transaction's overcollateralization ratios as
well as the improvement in the credit quality of the underlying
portfolio since the last rating action in October 2010.
Moody's notes that the Class A-1 notes have been paid down by
approximately 13.7% or $22.5 million since the last rating action,
due to diversion of excess interest proceeds and disbursement of
principal proceeds from redemptions and sales of underlying
assets. As a result of this deleveraging, the Class A-1 notes' par
coverage improved to 162.92% from 140.18% since the last rating
action, as calculated by Moody's. Based on the latest trustee note
valuation report dated March 22, 2013, the Senior Coverage, Class
B Mezzanine Coverage and Class C Mezzanine Coverage ratios are
reported at 127.51% (limit 128.00%), 103.80% (limit 115.00%) and
85.73% (limit 106.20%), respectively, versus September 22, 2010
levels of 113.07%, 94.36% and 80.04%, respectively. Going forward,
the senior notes will continue to benefit from the diversion of
excess interest and the proceeds from future redemptions of any
assets in the collateral pool.
Moody's also notes that the deal benefited from an improvement in
the credit quality of the underlying portfolio. Based on Moody's
calculation, the weighted average rating factor (WARF) improved to
1126 compared to 1493 as of the last rating action date. The
Moody's cumulative assumed defaulted amount has declined to $81.8
million from $95.8 million as of the last rating action date.
In addition, Moody's notes that the Class B notes are currently
deferring interest due to the failure of the Senior Coverage test.
However, the test has shown gradual improvement since the last
rating action and it is expected that the Class B notes will begin
to receive their accrued interest, including deferred interest, in
the next few payment periods.
Due to the impact of revised and updated key assumptions
referenced in Moody's rating methodology, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, Moody's Asset Correlation, and weighted average recovery
rate, may be different from the trustee's reported numbers. In its
base case, Moody's analyzed the underlying collateral pool to have
a performing par balance of $232.0 million (including the accreted
value of the Reserve Account Strip), defaulted/deferring par of
$81.8 million, a weighted average default probability of 25.7%
(implying a WARF of 1126), Moody's Asset Correlation of 18.85%,
and a weighted average recovery rate upon default of 8.3%. In
addition to the quantitative factors that are explicitly modeled,
qualitative factors are part of rating committee considerations.
Moody's considers the structural protections in the transaction,
the risk of triggering an Event of Default, recent deal
performance under current market conditions, the legal
environment, and specific documentation features. All information
available to rating committees, including macroeconomic forecasts,
inputs from other Moody's analytical groups, market factors, and
judgments regarding the nature and severity of credit stress on
the transactions, may influence the final rating decision.
Preferred Term Securities XXVII, Ltd., issued in September 2007,
is a collateralized debt obligation backed by a portfolio of bank
and insurance trust preferred securities.
The portfolio of this CDO is mainly comprised of trust preferred
securities (TruPS) issued by small to medium sized U.S. community
banks and insurance companies that are generally not publicly
rated by Moody's. To evaluate the credit quality of bank TruPS
without public ratings, Moody's uses RiskCalc model, an
econometric model developed by Moody's KMV, to derive their credit
scores. Moody's evaluation of the credit risk for a majority of
bank obligors in the pool relies on FDIC financial data received
as of Q4-2012. For insurance TruPS without public ratings, Moody's
relies on the insurance team and the underlying insurance firms'
annual financial reporting to assess their credit quality.
Moody's also evaluates the sensitivity of the rated transaction to
the volatility of the credit estimates, as described in Moody's
Rating Implementation Guidance "Updated Approach to the Usage of
Credit Estimates in Rated Transactions" published in October 2009.
The principal methodology used in this rating was "Moody's
Approach to Rating TRUP CDOs" published in May 2011.
The transaction's portfolio was modeled using CDOROM v.2.8.9 to
develop the default distribution from which the Moody's Asset
Correlation parameter was obtained. This parameter was then used
as an input in a cash flow model using CDOEdge.
Moody's performed a number of sensitivity analyses of the results
to certain key factors driving the ratings. Moody's analyzed the
sensitivity of the model results to changes in the portfolio WARF
(representing an improvement or a deterioration in the credit
quality of the collateral pool), assuming that all other factors
are held equal. If the WARF is increased by 240 points from the
base case of 1126, the model-implied rating of the Class A-1 notes
is one notch worse than the base case result. Similarly, if the
WARF is decreased by 130 points, the model-implied rating of the
Class A-1 notes is one notch better than the base case result.
In addition, Moody's also performed two additional sensitivity
analyses as described in the Special Comment "Sensitivity Analyses
on Deferral Cures and Default Timing for Monitoring TruPS CDOs"
published in August 2012. In the first, Moody's gave par credit to
banks that are deferring interest on their TruPS but satisfy
specific credit criteria and thus have a strong likelihood of
resuming interest payments. Under this sensitivity analysis,
Moody's gave par credit to $24 million of bank TruPS. In the
second sensitivity analysis, Moody's ran alternative default-
timing profile scenarios to reflect the lower likelihood of a
large spike in defaults.
Summary of the impact 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:
Sensitivity Analysis 1:
Class A-1: +2
Class A-2: +1
Class B: +2
Class C-1: 0
Class C-2: 0
Sensitivity Analysis 2:
Class A-1: +2
Class A-2: +1
Class B: +2
Class C-1: 0
Class C-2: 0
Moody's notes that this transaction is still subject to a high
level of macroeconomic uncertainty although its outlook on the
banking sector has changed to stable from negative. The pace of
FDIC bank failures continues to decline in 2013 compared to 2012,
2011, 2010 and 2009, and some of the previously deferring banks
have resumed interest payment on their trust preferred securities.
Moody's continues to have a stable outlook in the insurance
sector, other than the negative outlook on the U.S. life insurance
industry.
REGATTA FUNDING: Moody's Affirms 'Ba2' Rating on Cl. B-2L Notes
---------------------------------------------------------------
Moody's Investors Service upgraded the ratings of the following
notes issued by Regatta Funding, Ltd.:
$31,000,000 Class A-2L Floating Rate Notes Due June 15, 2020,
Upgraded to Aa1 (sf); previously on September 21, 2011 Confirmed
at Aa3 (sf);
$32,000,000 Class A-3L Floating Rate Notes Due June 15, 2020,
Upgraded to A2 (sf); previously on September 21, 2011 Upgraded to
Baa1 (sf);
$19,500,000 Class B-1L Floating Rate Notes Due June 15, 2020,
Upgraded to Baa3 (sf); previously on September 21, 2011 Upgraded
to Ba1 (sf);
Moody's also affirmed the ratings of the following notes:
$331,000,000 Class A-1L Floating Rate Notes Due 2020, Affirmed Aaa
(sf); previously on March 30, 2007 Assigned Aaa (sf);
$60,000,000 Class A-1LV Floating Rate Revolving Notes Due 2020,
Affirmed Aaa (sf); previously on March 30, 2007 Assigned Aaa (sf);
$14,000,000 Class B-2L Floating Rate Notes Due 2020, Affirmed Ba2
(sf); previously on September 21, 2011 Upgraded to Ba2 (sf);
$7,675,000 Class X Floating Rate Notes Due 2020 (current
outstanding balance $383,750), Affirmed Aaa (sf); previously on
March 30, 2007 Assigned Aaa (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 June 2013. In
consideration of the reinvestment restrictions applicable during
the amortization period, and therefore limited ability to effect
significant changes to the current collateral pool, Moody's
analyzed the deal assuming a higher likelihood that the collateral
pool characteristics will continue to maintain a positive buffer
relative to certain covenant requirements. In particular, the deal
is assumed to benefit from lower WARF, higher spread and coupon
levels compared to the levels assumed at the last rating action in
September 2011. Moody's modeled a WARF of 2593 compared to 2700 at
the time of the last rating action. Spread and coupon are modeled
at 3.52% and 8.12% respectively compared to 2.9% and 7.5% at the
time of the last rating action.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Global Approach to Rating Collateralized
Loan Obligations" published in May 2013, 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 $514.75 million,
defaulted par of $8.50 million, a weighted average default
probability of 18.68% (implying a WARF of 2593), a weighted
average recovery rate upon default of 51.05%, and a diversity
score of 60. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are
subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability is derived from
the credit quality of the collateral pool and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Regatta Funding, Ltd., issued in March 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (2074)
Class X: 0
Class A-1LV: 0
Class A-1L: 0
Class A-2L: +1
Class A-3L: +3
Class B-1L: +2
Class B-2L: +1
Moody's Adjusted WARF + 20% (3112)
Class X: 0
Class A-1LV: 0
Class A-1L: 0
Class A-2L: -1
Class A-3L: -1
Class B-1L: -1
Class B-2L: -1
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of upcoming speculative-grade debt maturities which
may create challenges for issuers to refinance. CLO notes'
performance may also be impacted by 1) the manager's investment
strategy and behavior and 2) divergence in legal interpretation of
CLO documentation by different transactional parties due to
embedded ambiguities.
Sources of additional performance uncertainties:
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.
SEQUOIA MORTGAGE 2013-8: Fitch Rates Class B-4 Certificates 'BB'
----------------------------------------------------------------
Fitch Ratings assigns the following ratings to Sequoia Mortgage
Trust 2013-8, mortgage pass-through certificates, series 2013-8
(SEMT 2013-8):
-- $393,959,000 class A-1 certificate 'AAAsf'; Outlook Stable;
-- $23,528,000 class A-2 certificate 'AAAsf'; Outlook Stable;
-- $10,000,000 class A-3 certificate 'AAAsf'; Outlook Stable;
-- $23,528,000 class A-IO1 notional certificate 'AAAsf'; Outlook
Stable;
-- $427,487,000 class A-IO2 notional certificate 'AAAsf';
Outlook Stable;
-- $9,663,000 class B-1 certificate 'AAsf'; Outlook Stable;
-- $7,593,000 class B-2 certificate 'Asf'; Outlook Stable;
-- $6,902,000 class B-3 certificate 'BBBsf'; Outlook Stable;
-- $3,681,000 non-offered class B-4 certificate 'BBsf'; Outlook
Stable.
The 'AAAsf' rating on the senior certificates reflects the 7.10%
subordination provided by the 2.10% class B-1, 1.65% by class B-2,
1.50% by class B-3, 0.80% by non-offered class B-4 and 1.05% by
non-offered class B-5. The $4,832,464 non-offered class B-5
certificates will not be rated by Fitch.
Fitch's ratings reflect the high quality of the underlying
collateral, the clear capital structure and the high percentage of
loans reviewed by third party underwriters. In addition,
CitiMortgage, Inc. will act as the master servicer and Wilmington
Trust will act as the Trustee for the transaction. For federal
income tax purposes, elections will be made to treat the trust as
one or more real estate mortgage investment conduits (REMICs).
SEMT 2013-8 will be Redwood Residential Acquisition Corporation's
eighth transaction of prime residential mortgages in 2013. The
certificates are supported by a pool of prime fixed rate mortgage
loans. All of the loans are fully amortizing. The aggregate pool
included loans originated from George Mason (6.4%), Cole Taylor
Bank (6.1%), WJ Bradley Mortgage Capital (6.1%), and PrimeLending
(5.9%). The remainder of the mortgage loans was originated by
various mortgage lending institutions, each of which contributed
less than 5% to the transaction.
As of the cut-off date, the aggregate pool consisted of 603 loans
with a total balance of $460,158,464; an average balance of
$763,115; a weighted average original combined loan-to-value ratio
(CLTV) of 67.5%, and a weighted average coupon (WAC) of 3.8%.
Rate/Term and cash out refinances account for 54.7% and 7.6% of
the loans, respectively. The weighted average original FICO credit
score of the pool is 771. Owner-occupied properties comprise 96.8%
of the loans. The states that represent the largest geographic
concentration are California (41.7%), Texas (7.3%) and
Massachusetts (7.0%).
Key Rating Drivers
High-Quality Mortgage Pool: The collateral pool consists primarily
of 30-year fixed-rate fully documented loans to borrowers with
strong credit profiles, low leverage, and substantial liquid
reserves. All of the loans are fully amortizing. Third-party loan-
level due diligence was conducted on 99.5% of the overall pool,
and Fitch believes the results of the review generally indicate
strong underwriting controls.
Originators with Limited Performance History: The majority of the
pool was originated by lenders with limited non-agency performance
history. While the significant contribution of loans from these
originators is a concern, Fitch believes the lack of performance
history is partially mitigated by the 100% third-party diligence
conducted on these loans that resulted in immaterial findings.
Fitch also considers the credit enhancement (CE) on this
transaction sufficient to mitigate the originator risk.
Geographically Diverse Pool: The collateral pool is geographically
diverse. The percentage in the top three metropolitan statistical
areas (MSAs) is 22.2% and concentration in California is 41.7%
which is similar compared to recent SEMT transactions. The agency
did not apply a default penalty to the pool due to the low
geographic concentration risk.
Transaction Provisions Enhance Performance: As in other recent
SEMT transactions rated by Fitch, SEMT 2013-8 contains binding
arbitration provisions that may serve to provide timely resolution
to representation and warranty disputes. In addition, all loans
that become 120 days or more delinquent will be reviewed for
breaches of representations and warranties.
Rating Sensitivities
Fitch's analysis incorporates sensitivity analyses to demonstrate
how the ratings would react to steeper market value declines
(MVDs) than assumed at both the metropolitan statistical area
(MSA) and national levels. The implied rating sensitivities are
only an indication of some of the potential outcomes and do not
consider other risk factors that the transaction may become
exposed to or be considered in the surveillance of the
transaction.
Fitch conducted sensitivity analysis on areas where the model
projected lower home price declines than that of the overall
collateral pool. The model currently projects sustainable MVDs
(sMVDs) at the MSA level. For one of the top 10 regions, Fitch's
SHP model does not project declines in home prices. This region is
Chicago-Joliet-Naperville in Illinois (3.5%). Fitch conducted
sensitivity analysis assuming sMVDs of 10%, 15%, and 20% compared
with those projected by Fitch's SHP model for this region. The
sensitivity analysis indicated no impact on ratings for all bonds
in each scenario.
In its analysis, Fitch considered placing a greater emphasis on
recent economic performance in determining market value declines.
While Fitch's current loan loss model looks to three years of
historical data and one year of projections, this does not
incorporate recent notable economic improvement. To reflect the
more recent economic environment, a sensitivity analysis was
performed using two years of historical economic data and two
years of projections. The result of this sensitivity analysis was
included in the consideration of the loss expectations for this
transaction. This sensitivity analysis resulted in a base sMVD of
13.8%, slightly less than the 14.6% base sMVD projected in the
current model.
Another sensitivity analysis was focused on determining how the
ratings would react to steeper MVDs at the national level. The
analysis assumes MVDs of 10%, 20%, and 30%, in addition to the
model projected 14.6% for this pool. The analysis indicates there
is some potential rating migration with higher MVDs, compared with
the model projection.
SHACKLETON I CLO: S&P Affirms 'BB' Rating on $20MM Class E Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on
Shackleton I CLO Ltd./Shackleton I CLO Corp.'s $367.00 million
fixed- and floating-rate notes following the transaction's
effective date as of Jan. 10, 2013.
Most U.S. cash flow collateralized loan obligations (CLOs) close
before purchasing the full amount of their targeted level of
portfolio collateral. On the closing date, the collateral manager
typically covenants to purchase the remaining collateral within
the guidelines specified in the transaction documents to reach the
target level of portfolio collateral. Typically, the CLO
transaction documents specify a date by which the targeted level
of portfolio collateral must be reached. The "effective date" for
a CLO transaction is usually the earlier of the date on which the
transaction acquires the target level of portfolio collateral, or
the date defined in the transaction documents. Most transaction
documents contain provisions directing the trustee to request the
rating agencies that have issued ratings upon closing to affirm
the ratings issued on the closing date after reviewing the
effective date portfolio (typically referred to as an "effective
date rating affirmation").
An effective date rating affirmation reflects S&P's opinion that
the portfolio collateral purchased by the issuer, as reported to
S&P by the trustee and collateral manager, in combination with the
transaction's structure, provides sufficient credit support to
maintain the ratings that S&P assigned on the transaction's
closing date. The effective date reports provide a summary of
certain information that S&P used in its analysis and the results
of its review based on the information presented to S&P.
S&P believes the transaction may see some benefit from allowing a
window of time after the closing date for the collateral manager
to acquire the remaining assets for a CLO transaction. This
window of time is typically referred to as a "ramp-up period."
Because some CLO transactions may acquire most of their assets
from the new issue leveraged loan market, the ramp-up period may
give collateral managers the flexibility to acquire a more diverse
portfolio of assets.
For a CLO that has not purchased its full target level of
portfolio collateral by the closing date, S&P's ratings on the
closing date and prior to its effective date review are generally
based on the application of S&P's criteria to a combination of
purchased collateral, collateral committed to be purchased, and
the indicative portfolio of assets provided to S&P by the
collateral manager, and may also reflect its assumptions about the
transaction's investment guidelines. This is because not all
assets in the portfolio have been purchased.
"When we receive a request to issue an effective date rating
affirmation, we perform quantitative and qualitative analysis of
the transaction in accordance with our criteria to assess whether
the initial ratings remain consistent with the credit enhancement
based on the effective date collateral portfolio. Our analysis
relies on the use of CDO Evaluator to estimate a scenario default
rate at each rating level based on the effective date portfolio,
full cash flow modeling to determine the appropriate percentile
break-even default rate at each rating level, the application of
our supplemental tests, and the analytical judgment of a rating
committee," S&P said.
"In our published effective date report, we discuss our analysis
of the information provided by the transaction's trustee and
collateral manager in support of their request for effective date
rating affirmation. In most instances, we intend to publish an
effective date report each time we issue an effective date rating
affirmation on a publicly rated U.S. cash flow CLO," S&P added.
On an ongoing basis after S&P issues an effective date rating
affirmation, it will periodically review whether, in its view, the
current ratings on the notes remains consistent with the credit
quality of the assets, the credit enhancement available to support
the notes, and other factors, 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
RATINGS AFFIRMED
Shackleton I CLO Ltd./Shackleton I CLO Corp.
Class Rating Amount
(mil. $)
A-1 AAA (sf) 255.00
A-X AAA (sf) 5.00
B1 AA (sf) 17.00
B2 AA (sf) 25.00
C (deferrable) A (sf) 24.00
D (deferrable) BBB (sf) 21.00
E (deferrable) BB (sf) 20.00
SHINNECOCK CLO 2006-1: Moody's Hikes Rating on Cl. E Notes to Ba1
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of the following
notes issued by Shinnecock CLO 2006-1, Ltd.:
$24,000,000 Class B Senior Floating Rate Notes Due July 15, 2018,
Upgraded to Aaa (sf); previously on September 5, 2012 Upgraded to
Aa2 (sf)
$14,000,000 Class C Deferrable Mezzanine Floating Rate Notes Due
July 15, 2018, Upgraded to A1 (sf); previously on September 5,
2012 Upgraded to Baa1 (sf)
$12,000,000 Class D Deferrable Mezzanine Floating Rate Notes Due
July 15, 2018, Upgraded to Baa3 (sf); previously on August 29,
2011 Upgraded to Ba2 (sf)
$7,500,000 Class E Deferrable Junior Floating Rate Notes Due July
15, 2018, Upgraded to Ba1 (sf); previously on August 29, 2011
Upgraded to Ba3 (sf)
Moody's also affirmed the ratings of the following notes:
$198,000,000 Class A-1 Senior Floating Rate Notes Due July 15,
2018 (current outstanding balance of $141,373,645.44), Affirmed
Aaa (sf); previously on September 28, 2006 Assigned Aaa (sf)
$22,000,000 Class A-2 Senior Floating Rate Notes Due July 15,
2018, Affirmed Aaa (sf); previously on September 5, 2012 Upgraded
to Aaa (sf)
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the senior notes and an
increase in the transaction's overcollateralization ratios since
the rating action in September 2012. Moody's notes that the Class
A-1Notes have been paid down by approximately 25.6% or $50.6
million since the last rating action. Based on the latest trustee
report dated May 10, 2013, the Senior overcollateralization,
Mezzanine overcollateralization and Class E overcollateralization
ratios are reported at 127.1%, 111.6% and 107.9%, respectively,
versus July 2012 levels of 121.6%, 109.6% and 106.6%,
respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Global Approach to Rating Collateralized
Loan Obligations" published in May 2013, 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 $233.6 million,
defaulted par of $5.2 million, a weighted average default
probability of 14.68% (implying a WARF of 2354), a weighted
average recovery rate upon default of 48.77%, and a diversity
score of 48. 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.
Shinnecock CLO 2006-1, 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 Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.
Moody's modeled the transaction using a cash flow model based on
the Binomial Expansion Technique, as described in Section 2.3 of
the "Moody's Global Approach to Rating Collateralized Loan
Obligations" rating methodology published in May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (1883)
Class A-1: 0
Class A-2: 0
Class B: 0
Class C: +2
Class D: +3
Class E: +1
Moody's Adjusted WARF + 20% (2825)
Class A-1: 0
Class A-2: 0
Class B: -1
Class C: -2
Class D: -2
Class E: -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:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging may
accelerate due to high prepayment levels in the loan market and
collateral sales by the manager, which may have significant impact
on the notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to be
defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus sell defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
3) Subject to certain requirements, the deal is allowed to
reinvest certain proceeds after the end of the reinvestment
period, and as such the manager has the flexibility to deteriorate
some collateral quality metrics to the covenant levels. In
particular, Moody's tested for a possible extension of the actual
weighted average life in its analysis given that the post-
reinvestment period reinvesting criteria has loose restrictions on
the weighted average life of the portfolio.
SLM STUDENT 2006-5: Fitch Upgrades Class B Notes From 'BB'
----------------------------------------------------------
Fitch Ratings affirms the senior and upgrades the subordinate
student loan notes issued by SLM Student Loan Trust Series 2006-5
and 2006-7. The Rating Outlook on the senior notes, which is tied
to the sovereign rating of the U.S. government, remains Negative,
while the Rating Outlook on the subordinate notes is Stable. Fitch
used its 'Global Structured Finance Rating Criteria', and 'Rating
U.S. Federal Family Education Loan Program Student Loan ABS' to
review the ratings.
Key Rating Drivers
The ratings on the senior notes are affirmed and the ratings on
the subordinate notes are upgraded based on stable trust
performance and the sufficient level of credit enhancement to
cover the applicable risk factor stresses. Credit enhancement for
the senior and subordinate notes consists of overcollateralization
and future excess spread, while the senior notes also benefit from
subordination provided by the class B note. Senior parities have
remained above 104% for the Series 2006-5 and 2005-7 trusts and
total parities have consistently remained at the release levels of
100.00%.
Rating Sensitivities
Since FFELP student loan ABS rely on the U.S. government to
reimburse defaults, 'AAAsf' FFELP ABS ratings will likely move in
tandem with the 'AAA' U.S. sovereign rating. Aside from the U.S.
sovereign rating, defaults and basis risk account for the majority
of the risk embedded in FFELP student loan transactions.
Additional defaults and basis shock beyond Fitch's published
stresses could result in future downgrades. Likewise, a buildup of
credit enhancement driven by positive excess spread given
favorable basis factor conditions could lead to future upgrades.
Fitch has affirmed the senior notes and upgraded the subordinate
notes for the following SLM Student Loan Trusts:
SLM Student Loan Trust 2006-5 notes:
-- Class A-4 at 'AAAsf'; Outlook Negative;
-- Class A-5 at 'AAAsf'; Outlook Negative;
-- Class A-6A at 'AAAsf'; Outlook Negative;
-- Class A-6B at 'AAAsf'; Outlook Negative;
-- Class A-6C at 'AAAsf'; Outlook Negative;
-- Class B upgraded to 'Asf' from 'BBB-sf'; Outlook Stable.
SLM Student Loan Trust 2006-7 notes:
-- Class A-4 at 'AAAsf'; Outlook Negative;
-- Class A-5 at 'AAAsf'; Outlook Negative;
-- Class A-6A at 'AAAsf'; Outlook Negative;
-- Class A-6B at 'AAAsf'; Outlook Negative;
-- Class A-6C at 'AAAsf'; Outlook Negative;
-- Class B upgraded to 'Asf' from 'BBsf'; Rating Watch Positive
Removed; Outlook Stable assigned.
SPRINGLEAF FUNDING: S&P Assigns Prelim 'BB' Rating on Cl. C Notes
-----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Springleaf Funding Trust 2013-B's $400.00 million
personal consumer loan-backed notes series 2013-B.
The note issuance is an asset-backed securities transaction backed
by personal consumer loan receivables.
The preliminary ratings are based on information as of June 7,
2013. Subsequent information may result in the assignment of
final ratings that differ from the preliminary ratings.
The preliminary ratings reflect S&P's view of:
-- The availability of approximately 34.7%, 29.2%, 26.5%, and
23.5% credit support to the class A, B, C, and D notes,
respectively, in the form of subordination,
overcollateralization, a reserve account, and excess
spread. These credit support levels are sufficient to
withstand stresses commensurate with the ratings on the
notes based on S&P's stressed cash flow scenarios.
-- S&P's expectation that under a moderate, or 'BBB', stress
scenario, the ratings on the class A, B, and C notes would
remain within two rating categories of its preliminary 'A
(sf)', 'BBB (sf)', and 'BB (sf)' ratings. These potential
rating movements are consistent with S&P's credit stability
criteria, which outline the outer bounds of credit
deterioration equal to a two-category downgrade within the
first year for 'A (sf)' through 'BB (sf)' rated securities
under moderate stress conditions.
-- The timely interest and full principal payments expected to
be made under stressed cash flow modeling scenarios
appropriate to the assigned preliminary ratings.
-- The characteristics of the pool being securitized.
-- The operational risks associated with Springleaf Finance
Corp.'s decentralized business model.
-- The transaction's payment and legal structures.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1587.pdf
PRELIMINARY RATINGS ASSIGNED
Springleaf Funding Trust 2013-B
Class Rating Type Interest Amount
rate (mil. $)(i)
A A (sf) Senior Fixed 342.55
B BBB (sf) Subordinate Fixed 27.62
C BB (sf) Subordinate Fixed 13.26
D B (sf) Subordinate Fixed 16.57
(i) The actual size of these tranches will be determined on the
pricing date.
T2 INCOME I: Moody's Lifts Rating on Class E Notes From 'Ba1(sf)'
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of the following
notes issued by T2 Income Fund CLO I, Ltd.:
$30,000,000 Class B Second Priority Senior Notes Due 2019,
Upgraded to Aaa (sf); previously on November 6, 2011 Confirmed at
Aa2 (sf);
$22,000,000 Class C Third Priority Subordinated Deferrable Notes
Due 2019, Upgraded to Aa3 (sf); previously on November 6, 2011
Upgraded to A2 (sf);
$9,000,000 Class D Fourth Priority Subordinated Deferrable Notes
Due 2019, Upgraded to A3 (sf); previously on November 6, 2011
Upgraded to Baa2 (sf);
$12,000,000 Class E Fifth Priority Subordinated Deferrable Notes
Due 2019, Upgraded to Baa2 (sf); previously on November 6, 2011
Upgraded to Ba1 (sf).
Moody's also affirmed the ratings of the following notes:
$176,250,000 Class A First Priority Senior Notes Due 2019 (current
balance: $175,870,128), Affirmed Aaa (sf); previously on August
30, 2007 Assigned Aaa (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 July 2013. In
consideration of the reinvestment restrictions applicable during
the amortization period, and therefore limited ability to effect
significant changes to the current collateral pool, Moody's
analyzed the deal assuming a higher likelihood that the collateral
pool characteristics will continue to maintain a positive buffer
relative to certain covenant requirements. In particular, the deal
is assumed to benefit from lower WARF and higher spread levels
compared to the levels assumed at the last rating action in
November 2011. Moody's modeled a WARF of 3090 compared to 3599 and
a spread of 4.99% compared to 3.92% at the time of the last rating
action. Moody's also notes that the transaction's reported
overcollateralization ratios are stable since the last rating
action.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Global Approach to Rating Collateralized
Loan Obligations" published in May 2013, 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 $302 million,
defaulted par of $3.2 million, a weighted average default
probability of 22.73% (implying a WARF of 3090), a weighted
average recovery rate upon default of 47.15%, and a diversity
score of 28. 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.
T2 Income Fund CLO I issued in July 2007, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.
In addition to the base case analysis, Moody's also performed
sensitivity analyses to test the impact on all rated notes of
various default probabilities.
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% (2472)
Class A: 0
Class B: 0
Class C: +2
Class D: +2
Class E:+2
Moody's Adjusted WARF + 20% (3708)
Class A: 0
Class B: -1
Class C: -2
Class D: -2
Class E: -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:
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.
TAURUS CMBS 2007-1: DBRS Cuts Cl. B Securities Rating to BB(high)
-----------------------------------------------------------------
DBRS has downgraded the following ratings of Taurus CMBS (Pan-
Europe) 2007-1 Limited (Taurus):
-- Class A1 to A (low) (sf) from AA (sf)
-- Class A2 to BBB (sf) from A (sf)
-- Class B to BB (high) (sf) from BBB (sf)
-- Class C to B (sf) from BB (sf)
In addition, DBRS has confirmed the ratings of the following five
classes of Taurus:
-- Class X1 at AAA (sf)
-- Class X2 at AAA (sf)
-- Class D at CCC (sf)
-- Class E at C (sf)
-- Class F at C (sf)
The trends on Classes A1, A2, B, C, X1 and X2 are Stable. No
trends are assigned to Classes D, E and F.
This transaction originally consisted of one fixed-rate loan and
12 floating-rate loans secured by 57 residential and commercial
properties located in Switzerland, Germany and France. The
original securitised balance of the pool was EUR 549,891,408.
According to the May 2013 Distribution Date Statement, six of the
original 13 loans remain in the pool, with a securitised balance
of EUR 234,212,905. The pool has had a total collateral reduction
of 57%, since issuance, with only 34 properties remaining. The
pool has become more concentrated over the life of the
transaction, with all remaining collateral being located in
Germany and France.
As of the May 2013 Deal Summary Report, there are no loans on the
servicer's watchlist, and one loan, representing 7.16% of the
current pool, is in special servicing. Four of the remaining
loans, representing 90.41% of the current pool balance, are
scheduled to mature in 2014, and one loan, representing 2.43% of
the current pool balance, is scheduled to mature in 2017.
The Leipzig Portfolio loan was transferred to special servicing
when the borrower was not able to repay the loan at maturity in
January 2013. The loan is secured by an office property located
in Leipzig, Germany, and is fully leased to a European banking
group. The tenant has occupied the building since 1996 and is on
a lease through September 2016 with two four-year extension
options. The borrower and special servicer are currently in a
temporary standstill agreement until July 2013 and continue to
discuss resolution options. The property was recently valued in
February 2013 at EUR 12.6 million, implying a 54.5% value decline
compared to EUR 27.7 million at issuance. The recent drop in
property value results in a whole loan-to-value ratio of 175.92%,
which will amplify the borrower's difficulties when securing
takeout financing.
In general, the collateral securing the loans in this transaction
have been subject to the overall deflation in property values in
the greater European commercial real estate market. When taking
the market decline into account, the capacity of debt, on a loan-
by-loan basis, in the DBRS analysis, has decreased substantially
since issuance.
DBRS has downgraded the above mentioned classes as a result of the
increase in pool concentration, the uncertainty with the 2014 loan
maturities and the refinance risk associated with those loans. In
addition, the servicer did not provide additional clarification on
a number of questions DBRS had on the individual loans, as well as
the transaction in general. As a result, DBRS used conservative
modelling assumptions, absent these clarifications, which further
supports the downgrades.
WACHOVIA BANK 2004-C14: S&P Affirms 'BB' Rating on Class H Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its rating on the Class
B commercial mortgage pass-through certificates from Wachovia Bank
Commercial Mortgage Trust's Series 2004-C14, a U.S. commercial
mortgage-backed securities (CMBS) transaction. Concurrently, S&P
affirmed its ratings on 16 other classes and withdrew its 'D (sf)'
rating of the class PP nonpooled raked certificates from the same
transaction.
S&P's rating actions follow its analysis of the transaction,
primarily using its criteria for rating U.S. and Canadian CMBS.
S&P's analysis included a review of the credit characteristics and
performance of the remaining assets in the pool, the transaction
structure, and the liquidity available to the trust.
S&P upgraded Class B to 'AA+ (sf)' to reflect its expected
available credit enhancement for the class, which S&P believes is
greater than its most recent estimate of necessary credit
enhancement for the most recent rating level; S&P's review
regarding the current and future performance of the collateral
support the transaction; and the deleveraging of the trust
balance.
The affirmations of S&P's ratings on the principal and interest
paying certificates reflect its expectation that the available
credit enhancement for these classes will be within its estimate
of the necessary credit enhancement required for the current
outstanding ratings. The affirmations also reflect S&P's review
of the credit characteristics and performance of the remaining
assets as well as the transaction-level changes.
While available credit enhancement levels may suggest positive
rating movements, S&P's analysis also considered the liquidity
available to the trust and the risk of additional interest
shortfalls in the future. Specifically, S&P considered the future
impact of workout fees associated with three loans totaling $56.2
million (9.7%) that were previously with the special servicer, one
of which ($37.3 million, 6.4%) has an Aug. 11, 2013, anticipated
repayment date. S&P also considered that 48 performing loans
($438.0 million, 75.3% of the pooled trust balance) have
anticipated repayment dates or final maturities
in 2014.
The affirmation of S&P's 'AAA (sf)' rating on the Class X-C
interest-only (IO) certificates reflects its current criteria for
rating IO securities.
The affirmation of S&P's 'AA+ (sf)' rating on the Class MAD raked
certificates reflects its analysis of the 11 Madison Avenue loan.
These certificates derive 100% of their cash flow from the
subordinate non-pooled component of the 11 Madison Avenue loan.
The loan is currently secured by defeasance collateral consisting
of U.S. government obligations. S&P affirmed the rating based on
its current criteria for rating U.S. CMBS transactions backed by
defeasance collateral.
S&P withdrew its 'D (sf)' rating of the Class PP raked
certificates due to the payoff of the Park Place Mall loan. The
Class PP raked certificates had derived 100% of its cash flow from
the subordinate nonpooled component of the loan.
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 17-g7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LIST
Rating Raised
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2004-C14
Rating Rating Credit
Class To From enhancement (%)
B AA+ (sf) AA- (sf) 20.44
Ratings Affirmed
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2004-C14
Class Rating Credit
enhancement (%)
A-3 AAA (sf) 25.39
A-4 AAA (sf) 25.39
A-1A AAA (sf) 25.39
C A+ (sf) 18.09
D A- (sf) 15.02
E BBB+ (sf) 13.14
F BBB (sf) 11.02
G BBB- (sf) 8.90
H BB (sf) 6.30
J BB- (sf) 5.83
K B+ (sf) 5.13
L B (sf) 3.95
M CCC+ (sf) 3.48
N CCC- (sf) 3.01
X-C AAA (sf) N/A
MAD AA+ (sf) N/A
N/A - Not applicable.
Rating Withdrawn
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2004-C14
Rating Rating
Class To From
PP NR D (sf)
NR - Not rated.
WACHOVIA BANK 2007-C30: Moody's Keeps 'C' Ratings on 11 Classes
---------------------------------------------------------------
Moody's Investors Service affirmed the ratings of 26 classes of
Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-
Through Certificates, Series 2007-C30, as follows:
Cl. A-1A, Affirmed Aa3 (sf); previously on Dec 2, 2010 Downgraded
to Aa3 (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Jul 9, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Jul 9, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-5, Affirmed Aa3 (sf); previously on Dec 2, 2010 Downgraded
to Aa3 (sf)
Cl. A-J, Affirmed B3 (sf); previously on Dec 2, 2010 Downgraded to
B3 (sf)
Cl. A-M, Affirmed Baa1 (sf); previously on Dec 2, 2010 Downgraded
to Baa1 (sf)
Cl. A-MFL, Affirmed Baa1 (sf); previously on Dec 2, 2010
Downgraded to Baa1 (sf)
Cl. A-PB, Affirmed Aaa (sf); previously on Jul 9, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Caa1 (sf); previously on Jun 15, 2012 Upgraded to
Caa1 (sf)
Cl. C, Affirmed Caa2 (sf); previously on Jun 15, 2012 Upgraded to
Caa2 (sf)
Cl. D, Affirmed Caa3 (sf); previously on Jun 15, 2012 Upgraded to
Caa3 (sf)
Cl. E, Affirmed C (sf); previously on Dec 2, 2010 Downgraded to C
(sf)
Cl. F, Affirmed C (sf); previously on Dec 2, 2010 Downgraded to C
(sf)
Cl. G, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. H, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. J, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. K, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. L, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. M, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. N, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. O, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. P, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. Q, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. X-C, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Cl. X-P, Affirmed Aa3 (sf); previously on Feb 22, 2012 Downgraded
to Aa3 (sf)
Cl. X-W, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Ratings Rationale:
The affirmations of the principal and interest classes are due to
key parameters, including Moody's loan to value (LTV) ratio,
Moody's stressed debt service coverage ratio (DSCR) and the
Herfindahl Index (Herf), remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings. Depending on the timing of loan payoffs and the
severity and timing of losses from specially serviced loans, the
credit enhancement level for rated classes could decline below the
current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The rating of the IO Classes, Classes X-P, X-C, and X-W, are
consistent with the expected credit performance of their
referenced classes and thus are affirmed.
Moody's rating action reflects a base expected loss of 13.4% of
the current balance. At last review, Moody's base expected loss
was 11.6%. Realized losses have increased from 0.8% of the
original balance to 1.0% since the prior review. Moody's base
expected loss plus realized losses is now 12.7% of the original
pooled balance compared to 11.1% at last review.
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 given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
conduit has a Herf of 21 compared to 27 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 15, 2012.
Deal Performance:
As of the May 17, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 12% to $6.9 billion
from $7.9 billion at securitization. The Certificates are
collateralized by 236 mortgage loans ranging in size from less
than 1% to 22% of the pool, with the top ten loans representing
54% of the pool. The pool does not contain any defeased loans or
loans with credit assessments.
Fifty loans, representing 19% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Nineteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $77.9 million (37% loss severity on
average). Thirty-eight loans, representing 38% of the pool, are
currently in special servicing. The largest specially serviced
loan is the Peter Cooper Village and Stuyvesant Town (PCV/ST)
($1.5 billion -- 21.6% of the pool), which represents a pari-passu
interest in a $3.0 billion first mortgage loan spread among five
separate CMBS deals. There is also $1.4 billion in mezzanine debt
secured by the borrower's interest. The loan is secured by two
adjacent multifamily apartment complexes with 11,229 units located
on the east side of Manhattan. The loan transferred to special
servicing in November 2009 after the Appellate Division, First
Department, in April 2009 reversed an August 2007 decision of the
State Supreme Court, which held that properties receiving tax
benefits, including those pursuant to the J-51 program, be
permitted to decontrol rent stabilized apartments pursuant to New
York State rent stabilization laws. The court's decision
compromised the Borrower's original business plan to convert rent
stabilized apartments to market rental rates and the borrower
agreed to forfeit control rights to the property. As of September
2012, the special servicer engaged CompassRock Real Estate to
manage the property. On April 10, 2013, the New York State Supreme
Court approved a settlement in the tenant's class action lawsuit
regarding improperly deregulated rent-stabilized units. The
special servicer anticipates full implementation of the settlement
will take 18 months. Overall, property performance has improved
since the end of 2010. The property was appraised for $3.2 billion
in September 2012, compared to $3.0 billion in September 2011. The
whole loan currently has over $460 million in cumulative ASER and
P&I advances to date. The special servicer believes that the
settlement's implementation, continued recovery from Hurricane
Sandy and collection of the associated insurance claim are
prerequisites to optimal capital recovery.
The second largest specially serviced loan is the One Congress
Street Loan ($190.0 million -- 2.7% of the pool) which is secured
by a mixed use property (282,856 square feet (SF) office/retail)
containing a 2,310-space parking garage located in Boston,
Massachusetts. The loan transferred to special servicing in
November 2011 due to imminent monetary default after reserves were
depleted. A modification occurred in March 2013, extending the
maturity two years to February 2016 from March 2014. The loan is
in the process of being returned to the master servicer. The sole
office tenant, the U.S. Environmental Protection Agency (EPA),
vacated the building at lease maturity in January 2010. As of
December 2012, the office/retail component was 71% leased compared
to 72% at last review. Although the office/retail component has
performed poorly since the EPA vacated, the parking garage has
continued to perform very well since securitization.
The third largest specially serviced loan is the Park Hyatt Aviara
Resort ($186.5 million -- 2.7% of the pool) which is secured by a
329-key premier resort hotel located in Carlsbad, California. The
loan transferred to special servicing in April 2013 for imminent
monetary default. Previously, the loan was in special servicing
from January to May 2011 when a modification was executed which
allowed for deferred interest, an extended maturity date (to
February 2017) and added additional required reserves. As the loan
recently transferred to special servicing, the special servicer is
still evaluating a workout strategy going forward.
The remaining thirty-five specially serviced loans are secured by
a mix of property types. Moody's estimates an aggregate $661.9
million loss for the specially serviced loans (25% expected loss
on average).
Moody's has assumed a high default probability for 35 poorly
performing loans representing 8% of the pool and has estimated an
aggregate $111.8 million loss (21% expected loss based on a 44%
probability default) from these troubled loans.
Moody's was provided with partial or full year 2012 operating
results for 85% of the pool. Excluding specially serviced and
troubled loans, Moody's weighted average LTV is 120% compared to
119% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 7% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 8.8%.
Excluding special serviced and troubled loans, Moody's actual and
stressed DSCRs are 1.23X and 0.82X, respectively, compared to
1.23X and 0.83X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The top three conduit loans represent 18% of the pool. The largest
loan is the Five Times Square Loan ($536.0 million -- 7.7% of the
pool), which represents a 50% pari-passu interest in a $1.07
billion first mortgage loan. The loan is secured by a 1.1 million
SF Class A office building located in Midtown Manhattan, New York.
The property has maintained 100% occupancy since securitization.
The office component represents 97% of the total building's net
rentable area (NRA) of which is leased to Ernst and Young through
May 2022 and serves as its U.S. Headquarters. Property performance
has been stable. The loan is on the servicer's watchlist due to a
low DSCR. The loan is interest only for the full ten-year term.
Moody's LTV and stressed DSCR are 136% and 0.63X, respectively,
compared to 143% and 0.61X at last review.
The second largest loan is the State Street Financial Center Loan
($387.5 million -- 5.6% of the pool), which represents a 50% pari-
passu interest in a $775.0 million first mortgage loan. The loan
is secured by a 1.0 million SF Class A office building located in
the Financial District of Boston, Massachusetts. The property is
100% leased to State Street Corporation (Moody's senior unsecured
rating A1, stable outlook) through September 2023 and serves as
its headquarters. The loan is interest only for its entire ten-
year term. Moody's LTV and stressed DSCR are 130% and 0.73X,
respectively, compared to 136% and 0.70X at last review.
The third largest loan is the 485 Lexington Avenue Loan ($315.0
million -- 4.5% of the pool), which represents a 70% pari-passu
interest in a $450.0 million first mortgage loan. The loan is
secured by a 915,000 million SF Class A office building located
near Grand Central Station in Manhattan. The property was 100%
leased as of December 2012 compared to 90% at the prior review.
The loan is interest only for its entire ten-year term. Moody's
LTV and stressed DSCR are 129% and 0.67X, respectively, same as at
last review.
WACHOVIA BANK 2007-C31: Moody's Affirms 'C' Ratings on 11 Certs
---------------------------------------------------------------
Moody's Investors Service affirmed the ratings of 24 classes of
Wachovia Bank Commercial Mortgage Trust, Commercial Mortgage Pass-
Through Certificates, Series 2007-C31, as follows:
Cl. A-2, Affirmed Aaa (sf); previously on May 29, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on May 29, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aa2 (sf); previously on Dec 2, 2010 Downgraded
to Aa2 (sf)
Cl. A-5, Affirmed Aa2 (sf); previously on Dec 2, 2010 Downgraded
to Aa2 (sf)
Cl. A-5FL, Affirmed Aa2 (sf); previously on Dec 2, 2010 Downgraded
to Aa2 (sf)
Cl. A-1A, Affirmed Aa2 (sf); previously on Dec 2, 2010 Downgraded
to Aa2 (sf)
Cl. A-PB, Affirmed Aaa (sf); previously on May 29, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-J, Affirmed B2 (sf); previously on Dec 2, 2010 Downgraded to
B2 (sf)
Cl. A-M, Affirmed Baa2 (sf); previously on Dec 2, 2010 Downgraded
to Baa2 (sf)
Cl. B, Affirmed Caa1 (sf); previously on Dec 2, 2010 Downgraded to
Caa1 (sf)
Cl. C, Affirmed Caa3 (sf); previously on Dec 2, 2010 Downgraded to
Caa3 (sf)
Cl. D, Affirmed Ca (sf); previously on Dec 2, 2010 Downgraded to
Ca (sf)
Cl. E, Affirmed C (sf); previously on Dec 2, 2010 Downgraded to C
(sf)
Cl. F, Affirmed C (sf); previously on Dec 2, 2010 Downgraded to C
(sf)
Cl. G, Affirmed C (sf); previously on Dec 2, 2010 Downgraded to C
(sf)
Cl. H, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. J, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. K, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. L, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. M, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. N, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. O, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. P, Affirmed C (sf); previously on Dec 3, 2009 Downgraded to C
(sf)
Cl. IO, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Ratings Rationale:
The affirmations of the principal and interest classes are due to
key parameters, including Moody's loan to value (LTV) ratio,
Moody's stressed debt service coverage ratio (DSCR) and the
Herfindahl Index (Herf), remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings. Depending on the timing of loan payoffs and the
severity and timing of losses from specially serviced loans, the
credit enhancement level for rated classes could decline below the
current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
The rating of the IO Class, Class IO, is consistent with the
expected credit performance of its referenced classes and thus is
affirmed.
Moody's rating action reflects a base expected loss of 12.3% of
the current balance. At last review, Moody's base expected loss
was 13.0%. Realized losses have increased from less than 0.1% of
the original balance to 1.6% since the prior review. Moody's base
expected loss plus realized losses is now 12.3% of the original
pooled balance compared to 13.0% at last review.
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 given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 34 compared to 32 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. Moody's prior transaction
review is summarized in a press release dated June 21, 2012.
Deal Performance:
As of the May 17, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 12% to $5.1 billion
from $5.8 billion at securitization. The Certificates are
collateralized by 156 mortgage loans ranging in size from less
than 1% to 10% of the pool, with the top ten loans representing
40% of the pool. The pool contains no loans with investment grade
credit assessments, but previously contained one credit assessed
loan representing 3% of the pool.
Thirty-six loans, representing 36% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Twenty-three loans have been liquidated from the pool, resulting
in an aggregate realized loss of $94.7 million (45% loss severity
on average). Twenty-three loans, representing 12% of the pool, are
currently in special servicing. The largest specially serviced
loan is the Peter Cooper Village and Stuyvesant Town (PCV/ST)
($247.7 million -- 4.8% of the pool), which represents a pari-
passu interest in a $3.0 billion first mortgage loan spread among
five separate CMBS deals. There is also $1.4 billion in mezzanine
debt secured by the borrower's interest. The loan is secured by
two adjacent multifamily apartment complexes with 11,229 units
located on the east side of Manhattan. The loan transferred to
special servicing in November 2009 after the Appellate Division,
First Department, in April 2009 reversed an August 2007 decision
of the State Supreme Court, which held that properties receiving
tax benefits, including those pursuant to the J-51 program, be
permitted to decontrol rent stabilized apartments pursuant to New
York State rent stabilization laws. The court's decision
compromised the Borrower's original business plan to convert rent
stabilized apartments to market rental rates and the borrower
agreed to forfeit control rights to the property. As of September
2012, the special servicer engaged CompassRock Real Estate to
manage the property. On April 10, 2013, the New York State Supreme
Court approved a settlement in the tenant's class action lawsuit
regarding improperly deregulated rent-stabilized units. The
special servicer anticipates full implementation of the settlement
will take 18 months. Overall, property performance has improved
since the end of 2010. The property was appraised for $3.2 billion
in September 2012, compared to $3.0 billion in September 2011. The
whole loan currently has over $460 million in cumulative ASER and
P&I advances to date. The special servicer believes that the
settlement's implementation, continued recovery from Hurricane
Sandy and collection of the associated insurance claim are
prerequisites to optimal capital recovery.
The remaining twenty-two specially serviced loans are secured by a
mix of property types. Moody's estimates an aggregate $194.7
million loss for the specially serviced loans (31% expected loss
on average).
Moody's has assumed a high default probability for 31 poorly
performing loans representing 27% of the pool and has estimated an
aggregate $279.3 million loss (20% expected loss based on a 49%
probability default) from these troubled loans.
Moody's was provided with partial or full year 2012 operating
results for 79% of the pool. Excluding specially serviced and
troubled loans, Moody's weighted average LTV is 121% compared to
124% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 8% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 8.8%.
Excluding special serviced and troubled loans, Moody's actual and
stressed DSCRs are 1.33X and 0.83X, respectively, compared to
1.34X and 0.80X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The loan that previously had a credit assessment is the Hyatt
Regency Grand Cypress Loan ($171.0 million -- 3.3% of the total
pool), which is secured by a 712-key resort hotel property located
in Orlando, Florida. The property is 100% leased to a subsidiary
of Hyatt Hotels Corporation (senior unsecured rating Baa2, stable
outlook) under a 30-year triple-net (NNN) lease. Moody's is not
provided information about the performance of the property.
Moody's removed the credit assessment due to upcoming maturity in
April 2014 and concerns about the Orlando hotel market.
The top three loans represent 23% of the pool. The largest loan is
the Five Times Square Loan ($536.0 million -- 10.4% of the pool),
which represents a 50% pari-passu interest in a $1.07 billion
first mortgage loan. The loan is secured by a 1.1 million SF Class
A office building located in Midtown Manhattan, New York. The
property has maintained 100% occupancy since securitization. The
office component represents 97% of the total building's net
rentable area (NRA) which is leased to Ernst and Young through May
2022 and serves as its U.S. Headquarters. Property performance has
been stable. The loan is on the servicer's watchlist due to a low
DSCR. The loan is interest only for the full ten-year term.
Moody's LTV and stressed DSCR are 136% and 0.63X, respectively,
compared to 143% and 0.61X at last review.
The second largest conduit loan is the 666 Fifth Avenue Loan
($357.6 million -- 7.0% of the pool), which represents a 33% pari-
passu interest in a $1.2 billion first mortgage loan (original
loan prior to loan modification). The loan is secured by a 1.5
million SF Class A office building located in Midtown Manhattan,
New York. The property was 82% leased as of September 2012
compared to 77% at year-end 2011 and 98% at securitization. The
loan transferred to special servicing in March 2010 due to
imminent monetary default. The borrower requested a loan
modification after exhausting its $100 million reserve. In
December 2011, the borrower and special servicer successfully
executed a modification. Terms of the modification include a
bifurcation of the original loan into a $1.15 billion A-Note and
$115 million B-Note, interest reduction on the A-Note, $110
million equity infusion that is senior in payment priority to the
B-Note, and an extension of the maturity date by two years. Based
on the new structure, the interest rate reduction has created
interest shortfalls in the amount of approximately $441,000 per
month in 2013 and will create approximately $347,000 in interest
shortfalls per month in 2014. The loan returned to the master
servicer in March 2012 and is performing under the modified terms.
Moody's LTV and stressed DSCR for the modified A note are 134% and
0.64X, respectively compared to 148% and 0.59X at last review.
The third largest loan is the Mall at Rockingham Park Loan ($260.0
million -- 5.1% of the total pool), which is secured by a 382,012
SF anchored retail center located in Salem, New Hampshire. The
property was 97% leased as of September 2012 compared to 95% at
the last review. Anchor tenants include Sears, Macy's and J.C.
Penney. Financial performance has been stable. The loan is
interest only for its entire ten-year term. Moody's LTV and
stressed DSCR are 107% and 0.86X, respectively, compared to 109%
and 0.84X at last review.
WAMU 2007-HE4: Moody's Downgrades $174MM of Subprime RMBS
---------------------------------------------------------
Moody's Investors Service has downgraded the ratings of two
tranches from one transaction, backed by Subprime mortgage loans
issued by WaMu Asset-Backed Certificates, WaMu Series 2007-HE4
Trust.
Complete rating actions are as follows:
Issuer: WaMu Asset-Backed Certificates, WaMu Series 2007-HE4 Trust
Cl. I-A, Downgraded to Caa3 (sf); previously on Aug 13, 2010
Confirmed at Caa2 (sf)
Cl. II-A-2, Downgraded to Ca (sf); previously on Aug 13, 2010
Confirmed at Caa2 (sf)
Ratings Rationale:
The rating action reflects recent performance of the underlying
pools and Moody's updated expected losses on the pools. The
downgrades reflect the crossover to pro-rata pay for the senior
classes after mezzanine classes are depleted.
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.
The approach "2005-2008 US RMBS Surveillance Methodology " is
adjusted slightly when estimating losses on pools left with a
small number of loans to account for the volatile nature of small
pools. Even if a few loans in a small pool become delinquent,
there could be a large increase in the overall pool delinquency
level due to the concentration risk. To project losses on pools
with fewer than 100 loans, Moody's first estimates a "baseline"
average rate of new delinquencies for the pool that is dependent
on the vintage of loan origination (11% for all vintages 2004 and
prior). The baseline rates are higher than the average rate of new
delinquencies for larger pools for the respective vintages.
Once the baseline rate is set, further adjustments are made based
on (1) the number of loans remaining in the pool and (2) the level
of current delinquencies in the pool. The volatility of pool
performance increases as the number of loans remaining in the pool
decreases. Once the loan count in a pool falls below 75, the rate
of delinquency is increased by 1% for every loan less than 75. For
example, for a pool with 74 loans from the 2004 vintage, the
adjusted rate of new delinquency would be 11.11%. In addition, if
current delinquency levels in a small pool is low, future
delinquencies are expected to reflect this trend. To account for
that, the rate is multiplied by a factor ranging from 0.85 to 2.25
for current delinquencies ranging from less than 10% to greater
than 50% respectively. Delinquencies for subsequent years and
ultimate expected losses are projected using the approach
described in the methodology publication.
When assigning the final ratings to senior bonds, in addition to
the methodologies, Moody's considered the volatility of the
projected losses and timeline of the expected defaults. For bonds
backed by small pools, Moody's also considered the current
pipeline composition as well as any specific loss allocation rules
that could preserve or deplete the overcollateralization available
for the senior bonds at different pace.
Moody's also adjusts the methodologies for Moody's current view on
loan modifications. As a result of an extension of the Home
Affordable Modification Program (HAMP) 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 into 2014.
The methodologies only apply to pools with at least 40 loans and a
pool factor of greater than 5%. Moody's may withdraw its rating
when the pool factor drops below 5% and the number of loans in the
pool declines to 40 loans or lower unless specific structural
features allow for a monitoring of the transaction (such as a
credit enhancement floor).
The primary sources of assumption uncertainty are Moody's central
macroeconomic forecast and performance volatility as a result of
servicer-related activity such as modifications. The unemployment
rate fell from 8.2% in May 2012 to 7.6% in May 2013. Moody's
forecasts a unemployment central range of 7.0% to 8.0% for the
2013 year. Moody's expects housing prices to continue to rise in
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.
WFRBS 2012-C7: Moody's Affirms Ratings on 13 Classes
----------------------------------------------------
Moody's Investors Service affirmed the ratings of 13 classes of
WFRBS Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2012-C7:
Cl. A-1, Affirmed Aaa (sf); previously on Jun 29, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Jun 29, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Jun 29, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Aa2 (sf); previously on Jun 29, 2012 Definitive
Rating Assigned Aa2 (sf)
Cl. C, Affirmed A2 (sf); previously on Jun 29, 2012 Definitive
Rating Assigned A2 (sf)
Cl. A-FL, Affirmed Aaa (sf); previously on Jun 29, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. A-FX*, Affirmed Aaa (sf); previously on Jun 29, 2012
Definitive Rating Assigned Aaa (sf)
Cl. D, Affirmed Baa1 (sf); previously on Jun 29, 2012 Definitive
Rating Assigned Baa1 (sf)
Cl. E, Affirmed Baa3 (sf); previously on Jun 29, 2012 Definitive
Rating Assigned Baa3 (sf)
Cl. F, Affirmed Ba2 (sf); previously on Jun 29, 2012 Definitive
Rating Assigned Ba2 (sf)
Cl. G, Affirmed B2 (sf); previously on Jun 29, 2012 Definitive
Rating Assigned B2 (sf)
Cl. X-A, Affirmed Aaa (sf); previously on Jun 29, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. X-B, Affirmed Ba3 (sf); previously on Jun 29, 2012 Definitive
Rating Assigned Ba3 (sf)
*Represents exchangeable certificates. Certificates may be
exchanged for Class A-FL Certificates of like balance.
Ratings Rationale:
The affirmations of the principal and interest classes are due to
key parameters, including Moody's loan to value (LTV) ratio,
Moody's stressed debt service coverage ratio (DSCR) and the
Herfindahl Index (Herf), remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings. The rating of the two interest only (IO) Classes,
Class X-A and X-B, are consistent with the expected credit
performance of their referenced classes and thus are affirmed.
Moody's rating action reflects a base expected loss of 2.2% of the
current balance.
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 given the weak pace of
recovery in the commercial real estate property markets.
Commercial real estate property values are continuing to move in a
modestly positive direction along with a rise in investment
activity and stabilization in core property type performance.
Limited new construction and moderate job growth have aided this
improvement. However, a consistent upward trend will not be
evident until the volume of investment activity steadily increases
for a significant period, non-performing properties are cleared
from the pipeline, and fears of a Euro area recession are abated.
The methodologies used in this rating were "Moody's Approach to
Rating Fusion U.S. CMBS Transactions" published in April 2005, and
"Moody's Approach to Rating CMBS Large Loan/Single Borrower
Transactions" published in July 2000.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.62 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) level are
driven by property type, Moody's actual and stressed DSCR, and
Moody's property quality grade (which reflects the capitalization
rate used by Moody's to estimate Moody's value). Conduit model
results at the B2 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
the remaining conduit classes are either interpolated between
these two data points or determined based on a multiple or ratio
of either of these two data points. For fusion deals, the credit
enhancement for loans with investment-grade credit assessments is
melded with the conduit model credit enhancement into an overall
model result. Fusion loan credit enhancement is based on the
credit assessment of the loan which corresponds to a range of
credit enhancement levels. Actual fusion credit enhancement levels
are selected based on loan level diversity, pool leverage and
other concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the credit assessment
level, is incorporated for loans with similar credit assessments
in the same transaction.
Moody's uses a variation of Herf to measure diversity of loan
size, where a higher number represents greater diversity. Loan
concentration has an important bearing on potential rating
volatility, including risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 17, the same as at securization.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.5 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through a review
utilizing MOST (Moody's Surveillance Trends) Reports and a
proprietary program that highlights significant credit changes
that have occurred in the last month as well as cumulative changes
since the last full transaction review. On a periodic basis,
Moody's also performs a full transaction review that involves a
rating committee and a press release. This is Moody's first full
review of WFRBS 2012-C7. The initial Pre-Sale Report was released
on June 4, 2012.
Deal Performance:
As of the May 17, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 1% to $1.09 billion
from $1.10 billion at securitization. The Certificates are
collateralized by 61 mortgage loans ranging in size from less than
1% to 14% of the pool, with the top ten loans representing 63% of
the pool. The pool contains one loan with an investment grade
credit assessment, representing 3% of the pool.
Three loans, representing 9% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
The pool does not contain any specially serviced loans and has not
experienced any losses.
Moody's was provided with full or partial year 2012 operating
results for 85% of the pool's loans. Moody's weighted average
conduit LTV is 96%, the same as at securitization. Moody's net
cash flow reflects a weighted average haircut of 11% to the most
recently available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.8%.
Moody's actual and stressed conduit DSCRs are 1.61X and 1.11X,
respectively, compared to 1.66X and 1.11X at last review. Moody's
actual DSCR is based on Moody's net cash flow (NCF) and the loan's
actual debt service. Moody's stressed DSCR is based on Moody's NCF
and a 9.25% stressed rate applied to the loan balance.
The loan with a credit assessment is the 167 East 61st Street Loan
($35.5 million -- 3.2% of the pool), which is secured by a 150-
unit multifamily cooperative building located in Manhattan, New
York. The property was 100% leased as of September 2012, the same
as at securitization. The collateral also includes ground floor
retail, two neighboring townhouses, a laundry facility and a below
grade parking garage, which are all subject to a long-term lease
to the Trump Corporation. The borrower's interest in the land
consists of a leasehold interest pursuant to a ground lease that
expires in 2082. Moody's underlying rating and stressed DSCR are
A3 and 1.48X, respectively, the same as at securitization.
The top three conduit loans represent 34% of the pool. The largest
conduit loan is the Northridge Fashion Center Loan ($155.3 million
-- 14.2% of the pool), which is secured by the borrower's interest
in a 644,000 square foot (SF) portion of a 1.5 million SF super
regional mall in Northridge, California. The loan represents a
63.7% pari-passu interest in a $243.6 million loan. The property
was originally built in 1971 then rebuilt after the 1994
Northridge earthquake and expanded in 1998. The property is
anchored by Macy's, Macy's Men and Home, Sears and JC Penney (none
of which are part of the collateral). The largest collateral
tenants are the Sports Authority and a ten- screen movie theater.
As of December 2012 the collateral was 90% leased, virtually the
same as at securitization. Moody's LTV and stressed DSCR are 98%
and 0.99X, respectively, compared to 99% and 0.98X at
securitization.
The second largest conduit loan is the Town Center at Cobb Loan
($130.0 million -- 11.9% of the pool), which is secured by the
borrower's interest in a 600,000 SF portion of a 1.28 million SF
super regional mall located in Kennesaw, Georgia. The loan
represents a 65.0% pari-passu interest in a $200.0 million loan.
The property was built in 1985 and most recently renovated in
2011. As of December 2012 the collateral was 90% leased compared
to 87% at securitization. The property is anchored by Macy's,
Macy's Furniture, Belk, Sears and JC Penney. Only Belk and a
31,000 SF portion of JC Penney are included in the collateral.
Moody's LTV and stressed DSCR are 96% and 0.99X, respectively, the
same as at securitization.
The third largest conduit loan is the Florence Mall Loan ($90.0
million -- 8.2% of the pool), which is secured by the borrower's
interest in a 384,000 SF portion of a 957,000 SF regional mall
located in Florence, Kentucky. The property is anchored by Macy's,
Macy's Home, Sears and JC Penney (none of which are part of the
collateral). The largest collateral tenant is a 14-screen movie
theater. As of December 2012, the collateral was 83% leased,
virtually the same as at securitization. Moody's LTV and stressed
DSCR are 79% and 1.27X, respectively, compared to 77% and 1.30X at
securitization.
* Fitch Cuts Ratings on 249 Bonds in 155 US RMBS Deals to 'Dsf'
---------------------------------------------------------------
Fitch Ratings has downgraded 249 distressed bonds in 155 U.S. RMBS
transactions to 'Dsf'. The downgrades indicate that the bonds have
incurred a principal write-down. Of the bonds downgraded to 'Dsf',
all classes were previously rated 'Csf'. All ratings below 'CCCsf'
indicate a default is expected.
As part of this review, the Recovery Estimates (REs) of the
defaulted bonds were not revised. Additionally, the review focused
only on the bonds which defaulted and did not include any other
bonds in the affected transactions.
Of the 249 classes affected by these downgrades, 152 are Prime, 52
are Subprime, and 34 are Alt-A. The remaining transaction types
are other sectors. Approximately, 51% of the bonds have an RE of
50%-100%, which indicates that the bonds will recover 50%-100% of
the current outstanding balance, while 34% have an RE of 0%.
A spreadsheet detailing Fitch's rating actions can be found at
'www.fitchratings.com' by performing a title search for 'Fitch
Downgrades 249 Distressed Bonds to 'Dsf' in 155 U.S. RMBS
Transactions'. These actions were reviewed by a committee of Fitch
analysts. The spreadsheet provides the contact information for the
performance analyst.
The spreadsheet also details Fitch's assignment of REs to the
transactions. The Recovery Estimate scale is based upon the
expected relative recovery characteristics of an obligation. For
structured finance, REs are designed to estimate recoveries on a
forward-looking basis.
* Fitch Says U.S. CREL CDO Delinquencies Drop 12.7% in April
------------------------------------------------------------
U.S. CREL CDO delinquencies fell last month to 12.7% from 13.2% in
April, according to the latest index results from Fitch Ratings.
Only three new delinquencies were reported in the month, including
a matured balloon loan, a newly credit impaired security, and a
credit risk mezzanine loan that was repurchased at par by the
asset manager.
Seven assets were removed from the Index. These assets included
four whole loans that were modified and extended, and three assets
that were disposed of at significant to full losses. All four
modified and extended loans were modeled with losses in Fitch's
prior review of the respective CDOs. That said, extensions could
allow CREL CDO properties time to bring below market occupancies
in line with their respective markets and stabilize property cash
flows going forward.
In May, asset managers reported approximately $94 million in
realized principal losses from the disposal of nine assets. The
largest single loss was related to the disposal of senior and
subordinate interests in a failed resort development located in
southwestern Montana that were contributed to the same CREL CDO.
The borrower was in Chapter 7 bankruptcy and only 12% of the
entire CDO debt was recovered as part of the bankruptcy trustee's
liquidation of the property.
* Fitch: Lack of CMBS 2.0 Delinquencies Holds Overall Rate Steady
-----------------------------------------------------------------
Delinquencies for U.S. CMBS 2.0 remain virtually nonexistent,
which helped to keep the overall rate of late-pays steady,
according to the latest index results from Fitch Ratings.
CMBS late-pays declined seven basis points (bps) in May to 7.37%
from 7.44% a month earlier. Meanwhile, delinquencies for
transactions issued post-2009 (CMBS 2.0) stood at just 0.03%. The
tighter post-recession credit environment coupled with still-low
interest rates is helping to keep newer CMBS delinquencies
hovering near zero. Conversely, the peak vintage (2006-2008)
delinquency rate remained high at 11.60%, compared with 6.75% for
transactions issued in 2005 and prior.
Fitch is also closely monitoring several other underperforming
loans in 2.0 deals including two that may enter the index in the
coming months (both of which were 30-days delinquent as of last
month): a $13 million multifamily loan (WFRBS 2011-C3), which has
fallen one-month late in payments twice since the start of the
year; and a $7 million multifamily loan (FREMF 2011-K10), which
has been late every month since January.
In May, resolutions of $1.01 billion fell just shy of new
additions to the index of $1.02 billion. However, strong Fitch-
rated new issuance volume of $5.4 billion outpaced runoff of $1.9
billion, thus causing an increase in the index denominator.
Current and previous delinquency rates are as follows:
- Industrial: 10.81% (from 9.82% in April);
- Office: 8.35% (from 8.39%);
- Multifamily: 7.91% (from 8.38%);
- Hotel: 7.70% (from 8.01%);
- Retail: 6.92% (from 7.10%).
* Moody's Wraps Review of Deutsche Bank-Managed Student Loans
-------------------------------------------------------------
Moody's Investors Service downgraded nine classes and confirmed
two classes of certificates in two Student Loan ABS Repackaging
Trusts, which are administered by Deutsche Bank Trust Company
Americas.
Ratings Rationale:
The downgrades of the certificates issued by the Student Loan ABS
Repackaging Trust, Series 2007-1 (Repackaging Trust, Series 2007-
1), were prompted by downgrades of certain underlying securities
issued in the National Collegiate Student Loan Trust
securitizations, to which the ratings of the certificates are
directly linked. In addition, the rating action reflects the
correction of an error made in November 2010 when the ratings of
the Class II-A-3 and Class II-A-IO notes issued in the underlying
KeyCorp Student Loan Trust 2003-A securitization were downgraded
to Aa1 from Aaa, but the associated ratings of Classes 2-A-1 and
2-A-IO issued by the Repackaging Trust, Series 2007-1 were not
downgraded accordingly by one notch. Moody's also corrected
calculations of the weighted average life pertaining to the Class
1-A-IO and Class 2-A-IO certificates of the Repackaging Trust,
Series 2007-1, which had been improperly calculated in connection
with the last rating action in February, 2012. The correction of
the weighted average life does not impact the ratings of the
certificates in Repackaging Trust, Series 2007-1.
Because Student Loan ABS Repackaging Trust, Series 2007-2
(Repackaging Trust, Series 2007-2) is a resecuritization of the IO
certificates issued by the Repackaging Trust, Series 2007-1, the
rating of the Class IO in the Repackaging Trust, Series 2007-2
reflects the weighted average rating of the underlying IO
certificates of the Repackaging Trust, Series 2007-1. As a result,
these downgrades of the ratings on Class 2-A-IO, Class 3-A-IO,
Class 4-A-IO, Class 5-A-IO and Class 6-A-IO certificates issued in
the Repackaging Trust, Series 2007-1, prompted the downgrade of
the rating of the Class IO certificate issued in the Repackaging
Trust, Series 2007-2. Additionally the corrections of the errors
as to the Repackaging Trust, Series 2007-1 also had an impact on
the rating of the Class IO certificate issued by Repackaging
Trust, Series 2007-2.
The methodology used in rating the certificates issued by the
Student Loan Repackaging Trust, Series 2007-1 considered the
higher of the pass-through rating of the underlying groups of
securities and the guarantors' rating for the underlying
securities within the Repackaging Trust, Series 2007-1, that
benefit from any financial guarantee. The methodology used in
rating the Class IO certificate from the Repackaging Trust, Series
2007-2, consisted of mapping the ratings of the underlying IO
certificates from the Repackaging Trust, Series 2007-1, to Moody's
idealized expected loss rate corresponding to each IO's respective
weighted average remaining life. Then the average idealized loss
and remaining average life was calculated for the Class IO from
the Repackaging Trust, Series 2007-2, both weighted by outstanding
notional amount of the tranches, and used to determine the rating.
Moody's idealized expected loss rates table was published in the
methodology report "Moody's Approach to Rating SF CDOs" rating
methodology, published on August 14th, 2009.
For Student Loan Repackaging Trust, Series 2007-1, the primary
sources of uncertainty with regard to the ratings are the ratings
of underlying securities in reference and the ratings of the
financial guarantors. For Student Loan Repackaging Trust, Series
2007-2, the primary sources of uncertainty with regard to the
rating are the ratings of the referenced underlying IO
certificates issued by Series 2007-1, as well as their
corresponding weighted average lives and notional balances.
The ratings of certificates issued under both the Series 2007-1
and the Series 2007-2 could be downgraded or upgraded if the
underlying securities referenced in both trusts are downgraded or
upgraded
The principal methodologies used in these ratings were "Moody's
Approach to Rating U.S. Private Student Loan-Backed Securities"
published on January 2010 and "Moody's Approach to Rating
Structured Finance Interest-Only Securities" published on February
22 2012.
The complete rating actions are as follows:
Issuer: Student Loan ABS Repackaging Trust, Series 2007-1
Cl. 2-A-1, Downgraded to Aa1 (sf); previously on Apr 13, 2007
Assigned Aaa (sf)
Cl. 2-A-IO, Downgraded to Aa1 (sf); previously on Apr 13, 2007
Assigned Aaa (sf)
Cl. 3-A-1, Downgraded to Caa2 (sf); previously on Nov 20, 2012
Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 3-A-IO, Downgraded to Caa2 (sf); previously on Nov 20, 2012
Caa1 (sf) Placed Under Review for Possible Downgrade
Cl. 4-A-1, Downgraded to C (sf); previously on Nov 20, 2012 Caa2
(sf) Placed Under Review for Possible Downgrade
Cl. 4-A-IO, Downgraded to C (sf); previously on Nov 20, 2012 Caa2
(sf) Placed Under Review for Possible Downgrade
Cl. 5-A-1, Confirmed at Ba1 (sf); previously on Nov 20, 2012 Ba1
(sf) Placed Under Review for Possible Downgrade
Cl. 5-A-IO, Confirmed at Ba1 (sf); previously on Nov 20, 2012 Ba1
(sf) Placed Under Review for Possible Downgrade
Cl. 6-A-1, Downgraded to B1 (sf); previously on Nov 20, 2012 Ba1
(sf) Placed Under Review for Possible Downgrade
Cl. 6-A-IO, Downgraded to B1 (sf); previously on Nov 20, 2012 Ba1
(sf) Placed Under Review for Possible Downgrade
Issuer: Student Loan ABS Repackaging Trust, Series 2007-2
Cl. IO, Downgraded to Caa1 (sf); previously on Nov 20, 2012 B2
(sf) Placed Under Review for Possible Downgrade
* Moody's Takes Action on 50 Subprime RMBS Tranches From 2001-07
----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 28
tranches, upgraded the ratings of two tranches and confirmed the
ratings of 20 tranches from 18 transactions issued by Renaissance
Home Equity Loan Trust and Delta Funding, backed by subprime
mortgage loans.
Complete rating actions are as follows:
Issuer: DFC HELTrust 2001-2
Cl. M-1, Confirmed at B1 (sf); previously on Mar 22, 2013 B1 (sf)
Placed Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2003-1
A, Current Rating A2 (sf); previously on Jan 18, 2013 Downgraded
to A2 (sf)
Underlying Rating: Confirmed at Baa1 (sf); previously on Mar 19,
2013 Baa1 (sf) Placed Under Review for Possible Downgrade
Financial Guarantor: Assured Guaranty Municipal Corp (Downgraded
to A2, Outlook Stable on Jan 17, 2013)
Issuer: Renaissance Home Equity Loan Trust 2003-2
A, Confirmed at Baa1 (sf); previously on Mar 19, 2013 Baa1 (sf)
Placed Under Review for Possible Downgrade
M-1, Upgraded to B1 (sf); previously on Apr 9, 2012 Upgraded to B3
(sf)
Issuer: Renaissance Home Equity Loan Trust 2003-3
A, Confirmed at A2 (sf); previously on Mar 19, 2013 A2 (sf) Placed
Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2004-1
AV-1, Confirmed at A3 (sf); previously on Mar 19, 2013 A3 (sf)
Placed Under Review for Possible Downgrade
AV-3, Confirmed at A3 (sf); previously on Mar 19, 2013 A3 (sf)
Placed Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2004-2
Cl. AV-3, Downgraded to A1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Underlying Rating: Downgraded to A1 (sf); previously on Mar 19,
2013 Aaa (sf) Placed Under Review for Possible Downgrade
Financial Guarantor: Assured Guaranty Municipal Corp (Downgraded
to A2, Outlook Stable on Jan 17, 2013)
Cl. AF-4, Confirmed at Aa3 (sf); previously on Mar 19, 2013 Aa3
(sf) Remained On Review for Possible Downgrade
Underlying Rating: Confirmed at Aa3 (sf); previously on Mar 19,
2013 Aa3 (sf) Placed Under Review for Possible Downgrade
Financial Guarantor: Assured Guaranty Municipal Corp (Downgraded
to A2, Outlook Stable on Jan 17, 2013)
Cl. AF-5, Current Rating A2 (sf); previously on Jan 18, 2013
Downgraded to A2 (sf)
Underlying Rating: Confirmed at Ba1 (sf); previously on Mar 22,
2013 Ba1 (sf) Placed Under Review for Possible Downgrade
Financial Guarantor: Assured Guaranty Municipal Corp (Downgraded
to A2, Outlook Stable on Jan 17, 2013)
Cl. AF-6, Current Rating A2 (sf); previously on Jan 18, 2013
Downgraded to A2 (sf)
Underlying Rating: Confirmed at A3 (sf); previously on Mar 19,
2013 A3 (sf) Placed Under Review for Possible Downgrade
Financial Guarantor: Assured Guaranty Municipal Corp (Downgraded
to A2, Outlook Stable on Jan 17, 2013)
Issuer: Renaissance Home Equity Loan Trust 2004-3
Cl. AV-1, Downgraded to A2 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AV-2B, Downgraded to Baa1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AF-4, Confirmed at A1 (sf); previously on Jan 18, 2013
Downgraded to A1 (sf) and Remained On Review for Possible
Downgrade
Underlying Rating: Confirmed at A1 (sf); previously on Jan 10,
2013 A1 (sf) Placed Under Review for Possible Downgrade
Financial Guarantor: Assured Guaranty Municipal Corp (Downgraded
to A2, Outlook Stable on Jan 17, 2013)
Cl. AF-6, Current Rating A2 (sf); previously on Jan 18, 2013
Downgraded to A2 (sf)
Underlying Rating: Confirmed at Baa3 (sf); previously on Mar 19,
2013 Baa3 (sf) Placed Under Review for Possible Downgrade
Financial Guarantor: Assured Guaranty Municipal Corp (Downgraded
to A2, Outlook Stable on Jan 17, 2013)
Cl. M-1, Upgraded to Caa1 (sf); previously on Apr 9, 2012
Downgraded to Caa3 (sf)
Issuer: Renaissance Home Equity Loan Trust 2004-4
Cl. AF-4, Confirmed at A1 (sf); previously on Mar 19, 2013 A1 (sf)
Placed Under Review for Possible Downgrade
Cl. AF-5, Confirmed at B2 (sf); previously on Mar 22, 2013 B2 (sf)
Placed Under Review for Possible Downgrade
Cl. AF-6, Downgraded to Baa2 (sf); previously on Mar 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. MV-1, Downgraded to B3 (sf); previously on Apr 9, 2012
Downgraded to B2 (sf)
Issuer: Renaissance Home Equity Loan Trust 2005-1
Cl. AV-3, Downgraded to Ba1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AF-4, Confirmed at B2 (sf); previously on Mar 22, 2013 B2 (sf)
Placed Under Review for Possible Downgrade
Cl. AF-5, Confirmed at B2 (sf); previously on Mar 22, 2013 B2 (sf)
Placed Under Review for Possible Downgrade
Cl. AF-6, Confirmed at B1 (sf); previously on Mar 22, 2013 B1 (sf)
Placed Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2005-2
Cl. AV-3, Downgraded to Ba1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AF-3, Confirmed at Ba2 (sf); previously on Mar 19, 2013 Ba2
(sf) Placed Under Review for Possible Downgrade
Cl. AF-4, Confirmed at Ba3 (sf); previously on Mar 19, 2013 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. AF-5, Confirmed at Ba3 (sf); previously on Mar 19, 2013 Ba3
(sf) Placed Under Review for Possible Downgrade
Cl. AF-6, Confirmed at Ba2 (sf); previously on Mar 19, 2013 Ba2
(sf) Placed Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2005-3
Cl. AV-3, Downgraded to Ba2 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AF-3, Confirmed at B1 (sf); previously on Mar 22, 2013 B1 (sf)
Placed Under Review for Possible Downgrade
Cl. AF-4, Confirmed at Caa2 (sf); previously on Mar 22, 2013 Caa2
(sf) Placed Under Review for Possible Downgrade
Cl. AF-5, Confirmed at Caa2 (sf); previously on Mar 22, 2013 Caa2
(sf) Placed Under Review for Possible Downgrade
Cl. AF-6, Confirmed at B2 (sf); previously on Mar 22, 2013 B2 (sf)
Placed Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2006-1
Cl. AV-3, Downgraded to Caa1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2006-2
Cl. AV-2, Downgraded to Caa1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AV-3, Downgraded to Caa1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AF-2, Downgraded to Ca (sf); previously on Mar 22, 2013 Caa1
(sf) Placed Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2006-3
Cl. AV-2, Downgraded to Caa1 (sf); previously on Jan 10, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AV-3, Downgraded to Caa1 (sf); previously on Jan 10, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2006-4
Cl. AV-2, Downgraded to Caa1 (sf); previously on Jan 10, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AV-3, Downgraded to Caa1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2007-1
Cl. AV-2, Downgraded to Caa1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AV-3, Downgraded to Caa1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AF-1, Downgraded to Ca (sf); previously on Mar 22, 2013 Caa3
(sf) Placed Under Review for Possible Downgrade
Cl. AF-1A, Downgraded to Ca (sf); previously on Mar 22, 2013 Caa2
(sf) Placed Under Review for Possible Downgrade
Cl. AF-1B, Downgraded to C (sf); previously on Jul 15, 2011
Downgraded to Ca (sf)
Cl. AF-1Z, Downgraded to Ca (sf); previously on Mar 22, 2013 Caa3
(sf) Placed Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2007-2
Cl. AV-2, Downgraded to Caa1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AV-3, Downgraded to Caa1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AF-1, Downgraded to Ca (sf); previously on Mar 22, 2013 Caa3
(sf) Placed Under Review for Possible Downgrade
Issuer: Renaissance Home Equity Loan Trust 2007-3
Cl. AV-2, Downgraded to Caa1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AV-3, Downgraded to Caa1 (sf); previously on Mar 19, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. AF-1, Downgraded to Ca (sf); previously on Mar 22, 2013 Caa2
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale:
The rating action concludes the review actions announced in March
2013 relating to the existence of errors in the Structured Finance
Workstation (SFW) cash flow models used in rating these
transactions. The rating action also reflects recent performance
of the underlying pools and Moody's updated expected losses on the
pools.
In the impacted deals, all collected principal and interest is
commingled into one payment waterfall to pay all promised interest
due on bonds first, then to pay scheduled principal from the
remaining funds. The cash flow models used in previous rating
actions, which mistakenly applied separate interest and principal
waterfalls, have been corrected, and the rating action reflects
the commingled payment waterfall.
In certain of the deals, some bonds accrue interest at a fixed
rate without any interest rate caps based on collateral WAC or
interest collections (net WAC or available funds rate). When the
interest accrual amounts on the bonds are not capped by the
interest collections from the underlying collateral, the interest
accrued on these fixed-rate bonds could be higher than that
generated by the collateral. With the commingling of funds,
principal proceeds will then be used to pay accrued interest,
which could result in reduced principal recovery for bonds
outstanding.
For all of the transactions, because losses are not allocated to
the senior bonds, the disparity between the amount of interest
collected on the collateral and the larger amount of interest
accrued on the bond face balances widens after subordinate
certificates have been written down completely. This leads to a
further accelerated erosion of principal. In 12 transactions, the
principal balance of the fixed-rate mortgages provide credit
support to the variable-rate notes. Due to the quick erosion of
collateral principal, the credit support is expected to decline
steadily.
In Renaissance Home Equity Loan Trust 2003-3, in addition to the
funds commingling issue, the calculation of the senior and
subordinate target amount has also been corrected. This target
amount is used to determine the amount of principal that should be
allocated to seniors after the transaction steps down. Due to
incorrect target amount calculation, the model used in prior
rating actions allocated less principal to the senior tranches
than specified in the deal documents. The rating action reflects
the corrected calculation.
In Renaissance Home Equity Loan Trust 2005-2, in addition to the
funds commingling issue, the interest payments to fixed-rate
senior tranches were incorrectly capped in the prior modeling.
This has been corrected, and the rating action reflects the
change. In the absence of interest-rate caps, more principal
collection will be directed to pay interest on the fixed-rate
seniors, reducing the final principal recovery for certain
tranches.
This rating action also concludes the watch action announced in
January regarding possible interest shortfalls on Class AF-4 from
Renaissance Home Equity Loan Trust 2004-3, Classes AV-2 and AV-3
from Renaissance Home Equity Loan Trust 2006-3 and Class AV-2 from
Renaissance Home Equity Loan Trust 2006-4. There was no impact on
the rating of Class AF-4, and the interest shortfall on the
remaining three tranches are reflected in their revised ratings.
The methodologies used in these ratings were "Moody's Approach to
Rating US Residential Mortgage-Backed Securities" published in
December 2008, "Pre - 2005 US RMBS Surveillance Methodology"
published in January 2012, and "2005 - 2008 US RMBS Surveillance
Methodology" published in July 2011.
In applying these methodologies Moody's also consider additional
factors, such as pools left with a small number of loans and loan
modifications. Even if a few loans in a small pool become
delinquent, there could be a large increase in the overall pool
delinquency level due to the concentration risk. To project losses
on pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (11% for all vintages
2004 and prior). The baseline rates are higher than the average
rate of new delinquencies for larger pools for the respective
vintages.
Once the baseline rate is set, further adjustments are made based
on 1) the number of loans remaining in the pool and 2) the level
of current delinquencies in the pool. The volatility of pool
performance increases as the number of loans remaining in the pool
decreases. Once the loan count in a pool falls below 75, the rate
of delinquency is increased by 1% for every loan less than 75. For
example, for a pool with 74 loans from the 2004 vintage, the
adjusted rate of new delinquency would be 11.11%. In addition, if
current delinquency levels in a small pool is low, future
delinquencies are expected to reflect this trend. To account for
that, the rate is multiplied by a factor ranging from 0.85 to 2.25
for current delinquencies ranging from less than 10% to greater
than 50% respectively. Delinquencies for subsequent years and
ultimate expected losses are projected using the approach
described in the methodology publication.
When assigning the final ratings to senior bonds, in addition to
the methodologies, Moody's considered the volatility of the
projected losses and timeline of the expected defaults. For bonds
backed by small pools, Moody's also considered the current
pipeline composition as well as any specific loss allocation rules
that could preserve or deplete the overcollateralization available
for the senior bonds at different pace.
Moody's also incorporates into the analysis its current view on
loan modifications. As a result of an extension of the Home
Affordable Modification Program (HAMP) 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.
Moody's now assumes that the loan modifications will continue at
current levels into 2014.
These methodologies only applies to pools with at least 40 loans
and a pool factor of greater than 5%. Moody's may withdraw its
rating when the pool factor drops below 5% and the number of loans
in the pool declines to 40 loans or lower unless specific
structural features allow for a monitoring of the transaction
(such as a credit enhancement floor).
The primary source of assumption uncertainty is the uncertainty in
Moody's central macroeconomic forecast and performance volatility
due to servicer-related issues. The unemployment rate fell from
8.1% in April 2012 to 7.5% in April 2013. Moody's forecasts an
unemployment central range of 7.0% to 8.0% for the 2013 year.
Moody's expects house prices to continue to rise in 2013.
Performance of RMBS continues to remain highly dependent on
servicer procedures. Any change resulting from servicing transfers
or other policy or regulatory change can impact the performance of
these transactions.
* S&P Lowers 62 Ratings on 16 U.S. RMBS Transactions
----------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 62
classes from 16 U.S. residential mortgage-backed securities (RMBS)
transactions. S&P subsequently withdrew seven of the lowered
ratings because of its view of the potential for performance
volatility associated with collateral groups that contain a small
number of loans. S&P also affirmed its ratings on 151 classes
from each of the 18 transactions reviewed.
Of the 24 structures reviewed, 22 are backed by prime jumbo
collateral, and two are backed by Alt-A loans. The transactions
in this review were issued between 2002 and 2008 and are primarily
backed by adjustable- and fixed-rate mortgage loans secured
primarily by first liens on one- to four-family residential
properties.
These transactions have generally experienced increases in
projected losses, primarily due to an increase in delinquencies, a
decrease in the amount of credit enhancement provided to the
classes, and large loan delinquency shifts (a high-balance loan
within the transaction moving into the 90-plus-days delinquent
bucket from 30 days delinquent since the last review).
Standard & Poor's believes that the liquidation of one or more of
the loans in transactions with a small number of remaining loans
could have an adverse effect on the credit support for the
remaining loans. This potential tail risk to the rated classes
results from one or more of the following factors:
-- Shifting-interest payment structures increase the
possibility of volatile credit performance. The cash-flow
mechanics within these transactions allow unscheduled
principal to be paid 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 that S&P currently rates '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)'.
When a structure contained fewer than 100 loans or was approaching
100 loans remaining, S&P addressed tail risk by conducting
additional loan-level analysis that stresses the loan
concentration risk within the specific pool. S&P may calculate
loss severities at the loan level using assumptions, such as
market-value declines published in our 2009 RMBS criteria, instead
of using pool-level assumptions. The final rating assigned to
each class will be the lower of the rating derived by applying
S&P's revised surveillance criteria and the rating derived by
applying its tail risk criteria. Five ratings from two deals were
downgraded based on the tail risk analysis.
In the case of the GSR Mortgage Loan Trust 2004-4 transaction,with
32 loans remaining in the pool and each of the four groups
containing 20 or fewer loans, the ability to assign a stable
rating became increasingly difficult. This resulted in the
lowering and subsequent withdrawal of the ratings in this
transaction. Moreover, this transaction experienced a 94.7%
increase in cumulative losses since the transaction's last review
in December 2012.
In addition, 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 might allow for
an increasing percentage of unscheduled principal to be paid
to the subordinate classes if they begin passing their delinquency
triggers again. In these instances, according to S&P's criteria,
it affirmed these ratings at 'AA+ (sf)' even though some of these
classes pass its 'AAA (sf)' stress scenario.
Of the 62 downgrades, S&P lowered its ratings on 13 classes to
speculative-grade from investment-grade, lowering its ratings to
between 'BB+ (sf)' and 'B- (sf)' on each. In addition, 24 of the
lowered ratings remain at investment-grade. The remaining 25
downgraded classes already had speculative-grade ratings before
the downgrades.
Of the 151 affirmed ratings, S&P affirmed 70 in investment-grade
categories of 'AA+ (sf)', 'A+ (sf)', 'BBB+ (sf)' and 'BBB (sf)'
while S&P affirmed its ratings on 81 classes in the 'B- (sf)',
'CCC (sf)' or 'CC (sf)' categories. S&P believes that the
projected credit support for the 'CCC (sf)' and 'CC (sf)' rated
classes will remain insufficient to cover the revised base-case
projected losses to these classes.
In accordance with S&P's counterparty criteria, it considered any
applicable hedges related to these securities when performing
these rating actions.
Credit support is generally provided by subordination for the
prime jumbo transactions reviewed while overcollateralization
(prior to its depletion) and excess spread, when applicable,
provide support for additional structures reviewed.
ECONOMIC OUTLOOK
When analyzing U.S. RMBS collateral pools to form S&P's opinion of
their relative credit quality and the potential impact on rated
securities, the degree of remaining losses stems, to a certain
extent, from S&P's outlook regarding the behavior of such loans in
conjunction with expected economic conditions. Overall, Standard
& Poor's baseline macroeconomic outlook assumptions for variables
that we believe could affect residential mortgage performance are
as follows:
-- S&P's unemployment rate forecast is 7.4% for 2013 and 6.7%
for 2014 compared with the actual 8.1% rate in 2012.
-- Home prices will increase 8% in 2013, using the S&P Case-
Shiller 20-city index.
-- Real GDP growth will be 2.5% in 2013 and 3.2% in 2014.
-- The 30-year mortgage rate will average 3.4% for 2013 and
reach slightly higher levels in 2014.
-- Inflation will be 1.4% in 2013 and 1.8% in 2014.
Recent RMBS collateral performance has shown signs of improvement.
Overall, total delinquencies for seasoned pools, as a percentage
of the outstanding balance, have been declining over the last
several years. Although S&P has been tracking this behavior for
some time, volatility in housing prices has limited its ability to
discern a prevailing trend. The increase in home prices
nationally over the past 12-16 months, however, has provided a
positive outlook for housing fundamentals, which can soften
delinquency levels. Under S&P's expected-case outlook, it is
forecasting the average price of existing home sales to move to
$232,000 in 2013 and 2014 from roughly $226,000. In terms of
softening delinquency levels, however, S&P also notes that such
percentage declines can be largely supported by loan
modifications, a number of which could be repeat modifications.
As a result, loans that return to a current pay status could mask
a portion of the delinquency declines, depending on the re-default
rates of such loans. Contrary to the extent of loans that
potentially default, the data do show an overall decline in loss
severity over the last year. This overall decline is largely a
function of home-price changes but can be influenced by other
factors as well. Loss severity levels, however, are still highly
elevated compared with historical norms.
"Overall, our outlook for RMBS is stable. Although we view
housing fundamentals overall as positive, we believe the
fundamentals of RMBS still hinge on additional factors, such as
the ultimate fate of modified loans, the propensity of servicers
to advance on delinquent loans, and liquidation timelines. These
factors can affect the degree of cash flow that is allocated to
RMBS and, as such, we apply various methodologies and assumptions
when evaluating most RMBS," S&P said.
"While these factors affect the integrity of RMBS cash flows, a
number of macroeconomic factors influence the collateral
performance of the mortgage loans backing such securities. The
chief variables include home prices (willingness to pay) and
unemployment (capacity to pay). Because we expect a gradual
decline in unemployment rates and positive annual home-price
appreciation, we believe these variables could improve collateral
performance. Other macroeconomic factors--such as inflation, GDP,
and mortgage rates--can also influence collateral performance,
whether directly or indirectly, based on overall economic
conditions," S&P addded.
"Although we expect the U.S. economic recovery to continue, our
economists believe there is a 10%-15% chance that the U.S. will
enter another recession. If there is another recession, however,
we don't expect it to be as severe as the Great Recession of 2008-
2009. Overall, under our baseline economic assumptions, we expect
RMBS collateral quality to improve mildly. However, if a downside
scenario were to occur in the U.S. in line with Standard & Poor's
forecast, we believe that the credit quality of U.S. RMBS would
weaken," S&P added. S&P's downside scenario incorporates the
following key assumptions:
-- Home prices once again decline as a result of higher
defaults, additional shadow inventory, and less purchase
activity.
-- Total unemployment increases modestly in 2013 to 8.6% but
rises to 9% in 2014; job growth would slow to almost zero
in 2013 and 2014.
-- Downward pressure causes GDP growth of less than 1% in 2013
and 2014, fueled by increased unemployment levels.
-- Thirty-year fixed mortgage rates fall below 3% in 2013, but
capitalizing on such lower rates could be hampered by
limited access to credit and pressure on home prices.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LIST
Rating Actions
Banc of America Alternative Loan Trust 2003-2
Rating Rating
Class CUSIP To From
NC-WIO 05948KBH1 AA+ (sf) AAA (sf)
B-1 05948KBK4 B (sf) BB- (sf)
Chase Mortgage Finance Trust Series 2003-S14
Rating Rating
Class CUSIP To From
IA-1 16162WDM8 AA- (sf) AA+ (sf)
IA-2 16162WDN6 BB+ (sf) BBB+ (sf)
IA-5 16162WDR7 BBB+ (sf) A+ (sf)
IIA-8 16162WDZ9 BBB (sf) A+ (sf)
IIA-9 16162WEA3 A+ (sf) AA+ (sf)
IIA-10 16162WEB1 BB+ (sf) A+ (sf)
IIIA-8 16162WEK1 BBB (sf) A+ (sf)
IIIA-9 16162WEL9 A (sf) AA+ (sf)
IIIA-10 16162WEM7 BB+ (sf) A+ (sf)
A-P 16162WEN5 BB+ (sf) A+ (sf)
A-X 16162WEP0 AA+ (sf) AAA (sf)
M 16162WER6 B- (sf) BB+ (sf)
CHL Mortgage Pass-Through Trust 2002-31
Rating Rating
Class CUSIP To From
M 12669DMH8 BB (sf) BBB (sf)
B-1 12669DMJ4 B- (sf) B (sf)
B-2 12669DMK1 CCC (sf) B- (sf)
Credit Suisse First Boston Mortgage Securities Corp.
Series 2002-22
Rating Rating
Class CUSIP To From
IV-A-1 22541NBQ1 B- (sf) BB (sf)
IV-P 22541NBS7 B- (sf) BB (sf)
Credit Suisse First Boston Mortgage Securities Corp.
Series 2004-4
Rating Rating
Class CUSIP To From
I-A-4 22541STN8 A- (sf) A+ (sf)
I-A-6 22541STQ1 A- (sf) A+ (sf)
I-A-7 22541STR9 A- (sf) A+ (sf)
I-A-13 22541STX6 A (sf) A+ (sf)
III-A-4 22541SUQ9 AA (sf) AA+ (sf)
A-X 22541SVE5 AA+ (sf) AAA (sf)
C-B-1 22541SVL9 CCC (sf) B- (sf)
D-B-1 22541SVP0 BBB (sf) BBB+ (sf)
D-B-2 22541SVQ8 B- (sf) B+ (sf)
D-B-3 22541SVR6 CCC (sf) B- (sf)
GSR Mortgage Loan Trust 2004-4
Rating Rating Rating
Class CUSIP To Interim From
1A1 36228FD29 NR BB+ (sf) BBB- (sf)
2A1 36228FD37 NR CCC (sf) BB+ (sf)
2A2 36228FD45 NR CCC (sf) BB+ (sf)
2A4 36228FD60 NR CCC (sf) BB+ (sf)
3A1 36228FD86 NR B- (sf) BBB+ (sf)
3A2 36228FD94 NR B- (sf) BBB+ (sf)
4A1 36228FE36 NR BB+ (sf) BBB+ (sf)
HarborView Mortgage Loan Trust 2003-2
Rating Rating
Class CUSIP To From
B-1 41161PCD3 BBB (sf) BBB+ (sf)
B-2 41161PCE1 B- (sf) BB- (sf)
National City Mortgage Capital Trust 2008-1
Rating Rating
Class CUSIP To From
2-A-1 635419AE4 CCC (sf) B- (sf)
2-A-4 635419AH7 B- (sf) BB- (sf)
2-A-5 635419AJ3 CCC (sf) B- (sf)
RAMP Series 2002-SL1 Trust
Rating Rating
Class CUSIP To From
M-I-1 760985LK5 B (sf) BBB+ (sf)
M-I-2 760985LL3 CCC (sf) B- (sf)
RFMSI Series 2003-S4 Trust
Rating Rating
Class CUSIP To From
A-3 76111JU44 AA- (sf) AA+ (sf)
A-3A 76111JW91 AA- (sf) AA+ (sf)
A-4 76111JU51 AA- (sf) AA+ (sf)
A-P 76111JV76 AA- (sf) AA+ (sf)
A-V 76111JV84 AA- (sf) AA+ (sf)
M-1 76111JW34 B- (sf) B+ (sf)
RFSC Series 2003-RM1 Trust
Rating Rating
Class CUSIP To From
M-1 760985TN1 B+ (sf) BB+ (sf)
M-2 760985TP6 CCC (sf) B- (sf)
Salomon Brothers Mortgage Securities VII Inc. Series 2003-1
Rating Rating
Class CUSIP To From
A-1 79549AYP8 B- (sf) BB+ (sf)
A-2 79549AYQ6 B- (sf) BB+ (sf)
PO 79549AYT0 B- (sf) BB+ (sf)
Thornburg Mortgage Securities Trust 2002-3
Rating Rating
Class CUSIP To From
B-1 885220BU6 B- (sf) B+ (sf)
WaMu Mortgage Pass-Through Certificates Series 2002-AR6 Trust
Rating Rating
Class CUSIP To From
B-1 929227QC3 BBB- (sf) BBB+ (sf)
Wells Fargo Mortgage Backed Securities 2003-G Trust
Rating Rating
Class CUSIP To From
A-1 94979WAA7 BBB+ (sf) A+ (sf)
B-1 94979WAE9 B- (sf) B+ (sf)
Wells Fargo Mortgage Backed Securities 2007-14 Trust
Rating Rating
Class CUSIP To From
II-A-1 949834CM5 B+ (sf) BBB- (sf)
II-A-2 949834CN3 BBB (sf) BBB+ (sf)
II-A-3 949834CP8 B+ (sf) BBB- (sf)
II-A-PO 949834CQ6 B+ (sf) BBB- (sf)
Ratings Affirmed
Banc of America Alternative Loan Trust 2003-2
Class CUSIP Rating
CB-1 05948KAS8 A+ (sf)
CB-2 05948KAT6 AA+ (sf)
CB-3 05948KAU3 A+ (sf)
CB-4 05948KAV1 A+ (sf)
CB-5 05948KAW9 AA+ (sf)
CB-6 05948KAX7 AA+ (sf)
CB-WIO 05948KBB4 AA+ (sf)
NC-2 05948KBD0 AA+ (sf)
NC-3 05948KBE8 AA+ (sf)
PO 05948KBJ7 A+ (sf)
B-2 05948KBL2 CCC (sf)
B-3 05948KBM0 CCC (sf)
B-4 05948KBP3 CC (sf)
Chase Mortgage Finance Trust Series 2003-S14
Class CUSIP Rating
IIIA-7 16162WEJ4 AA+ (sf)
B-1 16162WES4 CCC (sf)
B-2 16162WET2 CCC (sf)
B-3 16162WEU9 CC (sf)
B-4 16162WEV7 CC (sf)
CHL Mortgage Pass-Through Trust 2002-31
Class CUSIP Rating
A-1 12669DLR7 AA+ (sf)
A-13 12669DMD7 A+ (sf)
PO 12669DMF2 A+ (sf)
Credit Suisse First Boston Mortgage Securities Corp.
Series 2002-22
Class CUSIP Rating
II-M-1 22541NBV0 AA+ (sf)
II-M-2 22541NBW8 A+ (sf)
II-B-1 22541NCL1 CCC (sf)
Credit Suisse First Boston Mortgage Securities Corp.
Series 2004-4
Class CUSIP Rating
I-A-3 22541STM0 A+ (sf)
I-A-5 22541STP3 BBB+ (sf)
I-A-9 22541STT5 A+ (sf)
I-A-11 22541STV0 AA+ (sf)
I-A-12 22541STW8 A+ (sf)
I-A-14 22541STY4 AA+ (sf)
I-A-15 22541STZ1 AA+ (sf)
I-X 22541SVD7 AA+ (sf)
II-A-4 22541SUD8 AA+ (sf)
II-A-6 22541SUF3 A+ (sf)
II-A-7 22541SUG1 BBB+ (sf)
II-A-9 22541SUJ5 BBB+ (sf)
II-A-10 22541SUK2 AA+ (sf)
II-A-11 22541SUL0 BBB+ (sf)
III-A-7 22541SUT3 BBB+ (sf)
III-A-11 22541SUX4 A+ (sf)
IV-A-1 22541SUY2 AA+ (sf)
V-A-1 22541SUZ9 AA+ (sf)
V-A-2 22541SVA3 AA+ (sf)
V-A-3 22541SVB1 AA+ (sf)
V-A-4 22541SVC9 AA+ (sf)
D-X 22541SVF2 AA+ (sf)
A-P 22541SVG0 BBB+ (sf)
I-B-1 22541SVH8 CC (sf)
I-B-2 22541SVJ4 CC (sf)
C-B-2 22541SVM7 CCC (sf)
C-B-3 22541SVN5 CC (sf)
D-B-5 22541SWB0 CC (sf)
C-B-4 22541SVX3 CC (sf)
D-B-4 22541SWA2 CC (sf)
GSR Mortgage Loan Trust 2003-2F
Class CUSIP Rating
IA-1 36228FMM5 AA+ (sf)
IA-2 36228FMN3 AA+ (sf)
IIA-4 36228FMV5 AA+ (sf)
IIA-5 36228FMW3 AA+ (sf)
IIIA-1 36228FNB8 AA+ (sf)
HarborView Mortgage Loan Trust 2003-2
Class CUSIP Rating
1-A 41161PBV4 AA+ (sf)
2-A-1 41161PBX0 AA+ (sf)
2-A-2 41161PBY8 AA+ (sf)
3-A 41161PCB7 AA+ (sf)
B-3 41161PCF8 CCC (sf)
B-4 41161PCG6 CC (sf)
National City Mortgage Capital Trust 2008-1
Class CUSIP Rating
1-A-1 635419AA2 CCC (sf)
1-A-2 635419AB0 CCC (sf)
2-A-2 635419AF1 CCC (sf)
2-PO 635419AL8 CCC (sf)
RAMP Series 2002-SL1 Trust
Class CUSIP Rating
A-I-3 760985LC3 AA+ (sf)
A-I-IO 760985LD1 AA+ (sf)
M-I-3 760985LM1 CCC (sf)
A-II-1 760985LF6 AA+ (sf)
A-II-2 760985LG4 AA+ (sf)
A-II-3 760985LH2 BBB+ (sf)
A-II-4 760985LJ8 A+ (sf)
RFMSI Series 2003-S4 Trust
Series 2003-S4
Class CUSIP Rating
M-2 76111JW42 CCC (sf)
M-3 76111JW59 CCC (sf)
B-1 76111JW67 CC (sf)
RFSC Series 2003-RM1 Trust
Class CUSIP Rating
A-2 760985SW2 AA+ (sf)
A-4 760985SY8 AA+ (sf)
A-5 760985SZ5 AA+ (sf)
A-7 760985TB7 AA+ (sf)
A-8 760985TC5 A+ (sf)
A-8A 760985TD3 A+ (sf)
A-P 760985TJ0 A+ (sf)
A-V 760985TK7 AA+ (sf)
M-3 760985TQ4 CCC (sf)
B-1 760985TR2 CCC (sf)
B-2 760985TS0 CC (sf)
Salomon Brothers Mortgage Securities VII Inc.
Series 2003-1
Class CUSIP Rating
B-1 79549AYU7 CCC (sf)
Thornburg Mortgage Securities Trust 2002-3
Class CUSIP Rating
A-1 885220BP7 BBB+ (sf)
A-2 885220BQ5 BBB+ (sf)
A-3 885220BR3 BBB+ (sf)
A-4 885220BS1 BBB+ (sf)
B-2 885220BV4 CCC (sf)
B-3 885220BW2 CC (sf)
WaMu Mortgage Pass-Through Certificates Series 2002-AR6 Trust
Class CUSIP Rating
A 929227QB5 AA+ (sf)
B-2 929227QD1 CCC (sf)
B-3 929227QE9 CC (sf)
Washington Mutual MSC Mortgage Pass-Through Certificates Series
2003-MS6 Trust
Class CUSIP Rating
III-A-6 939336ZK2 A+ (sf)
III-A-8 939336ZM8 BBB (sf)
III-P 939336ZR7 BBB (sf)
III-B-1 939336ZV8 B- (sf)
III-B-2 939336ZW6 CCC (sf)
III-B-3 939336ZX4 CCC (sf)
III-B-4 939336YZ0 CC (sf)
III-B-5 939336ZA4 CC (sf)
Wells Fargo Mortgage Backed Securities 2003-G Trust
Class CUSIP Rating
B-2 94979WAF6 CCC (sf)
B-3 94979WAG4 CCC (sf)
Wells Fargo Mortgage Backed Securities 2007-14 Trust
Class CUSIP Rating
I-A-1 949834AA3 CCC (sf)
I-A-2 949834AB1 CCC (sf)
I-A-3 949834AC9 CCC (sf)
I-A-5 949834AE5 CCC (sf)
I-A-9 949834AJ4 CCC (sf)
I-A-11 949834AL9 CCC (sf)
I-A-12 949834AM7 CCC (sf)
I-A-14 949834AP0 CCC (sf)
I-A-15 949834AQ8 CCC (sf)
I-A-17 949834AS4 CCC (sf)
I-A-21 949834AW5 CCC (sf)
I-A-23 949834AY1 CCC (sf)
I-A-24 949834AZ8 CCC (sf)
I-A-26 949834BB0 CCC (sf)
I-A-27 949834BC8 CCC (sf)
I-A-28 949834BD6 CCC (sf)
I-A-29 949834BE4 CCC (sf)
I-A-30 949834BF1 CCC (sf)
I-A-34 949834BK0 CCC (sf)
I-A-36 949834BM6 CCC (sf)
I-A-37 949834BN4 CCC (sf)
I-A-38 949834BP9 CCC (sf)
I-A-39 949834BQ7 CCC (sf)
I-A-40 949834BR5 CCC (sf)
I-A-41 949834BS3 CCC (sf)
I-A-42 949834BT1 CCC (sf)
I-A-43 949834BU8 CCC (sf)
I-A-44 949834BV6 CCC (sf)
I-A-45 949834BW4 CCC (sf)
I-A-46 949834BX2 CCC (sf)
I-A-47 949834BY0 CCC (sf)
I-A-48 949834BZ7 CCC (sf)
I-A-52 949834CD5 CCC (sf)
I-A-53 949834CE3 CCC (sf)
I-A-54 949834CF0 CCC (sf)
I-A-55 949834CG8 CCC (sf)
I-A-56 949834CH6 CCC (sf)
I-A-57 949834CJ2 CCC (sf)
I-A-PO 949834CL7 CCC (sf)
II-B-1 9498349A5 CCC (sf)
I-A-35 949834BL8 CCC (sf)
* S&P Cuts Ratings on 43 Classes From 15 U.S. RMBS Transactions
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 43
classes from 15 U.S. residential mortgage-backed securities (RMBS)
transactions, and removed one of them from CreditWatch with
negative implications. S&P subsequently withdrew one of the
lowered ratings because of its view of the potential for
performance volatility associated with collateral pools that
contain a small number of loans. S&P also affirmed its ratings on
71 classes from 14 transactions and removed one of them from
CreditWatch negative.
The transactions in this review were issued between 2001 and 2006
and are backed primarily by adjustable- and fixed-rate Alt-A,
high-LTV, and Neg-am mortgage loans secured mainly by first liens
on one- to four-family residential properties.
No. deals/
structures
Shelf name reviewed
---------- ----------
Banc of America Alternative Loan Trust (BAA0) 1/1
Chevy Chase Funding LLC (CCF0) 1/1
CSAB Mortgage-Backed Trust (CSAB) 1/1
Credit Suisse First Boston Mtg Sec. Corp. (CSF0) 2/6
Deutsche Alt-A Securities Inc. Mtg Loan Tr (DAA0) 1/1
IndyMac INDX Mortgage Loan Trust (INX0) 2/2
Nomura Asset Acceptance Corporation (NAA0) 1/1
RALI/RAMP Trust (RFC0) 8/8
Shelf # IG # SG # IG to # Down
Name Affirmed Affirmed SG >3 notches
BAA0 6 2 1 0
CCF0 3 2 0 0
CSAB 0 0 0 1
CSF0 3 0 1 2
DAA0 2 1 0 0
INX0 0 11 1 0
NAA0 1 8 1 0
RFC0 21 11 9 10
IG - Investment grade.
SG - Speculative grade.
Of the 43 lowered ratings, S&P downgraded 13 classes out of
investment-grade. Five ratings remain at investment-grade after
being lowered. The remaining downgraded classes already had
speculative-grade ratings prior to the actions. Senior tranches
accounted for 31 of the lowered ratings.
The downgrades stemmed primarily from increased loss projections
due to a changing delinquency pipeline as well as an increase in
actual prepayment speeds. The increase in prepayment speeds
resulted in increased payments to subordinate bonds, decreasing
credit support for the bonds they support. For example, group 6
in IndyMac INDX Mortgage Loan Trust 2004-AR6 had a 12-month
constant prepayment rate of 8.16 in October 2012 compared with
18.80 in April 2013. From November 2011 through October 2012, the
group averaged principal prepayments of about $51,021 per month.
In December 2012, however, the group experienced a principal
prepayment of $1,540,867. The 6-A-1 and 6-A-2 classes in this
group get paid principal pro rata, with 6-A-2 providing credit
support for 6-A-1. Between November 2011 and October 2012, the 6-
A-2 class averaged principal payments of $6,837, in turn reducing
the credit support available for 6-A-1 by that amount. But due to
the large prepayment in December 2012, the 6-A-2 class received
$39,770, further reducing the credit support available for 6-A-1.
The loss of this credit support in addition to increased
projections of prepayment speeds that further deteriorated
projected credit support resulted in a downgrade of the rating on
class 6-A-1 to 'BB- (sf)' from 'BBB- (sf)'.
S&P lowered its rating on Class I-A from Nomura Asset Acceptance
Corp., Alternative Loan Trust, Series 2005-AR4 to 'BB (sf)' from
'BBB (sf)' due to tail risk associated with the loan group of the
respective class. S&P addresses tail risk in transactions that
are backed by mortgage pools approaching 100 loans by conducting
additional loan-level analysis that stresses the risk associated
with shrinking mortgage pools.
S&P lowered its rating on Class A-2 from CSAB Mortgage-Backed
Trust 2006-1 to 'D (sf)' from 'BB+ (sf)' and removed it from
CreditWatch negative due to the interest shortfall cap determined
by applying S&P's interest shortfall criteria.
S&P downgraded its rating on Class III-M-1 from Credit Suisse
First Boston Mortgage Securities Corp. Series 2001-11 to 'BBB+
(sf)' from 'A+ (sf)' and subsequently withdrew its rating due to a
small number of loans and potential for performance volatility.
The rating withdrawal follows the application of S&P's criteria
for the withdrawal of ratings.
S&P affirmed its ratings on 71 classes from 14 transactions. Of
these, 22 classes are rated 'CCC (sf)' or 'CC (sf)'. S&P believes
that the projected credit support for these classes will remain
insufficient to cover the revised projected losses. Conversely,
the affirmations for classes with ratings above 'CCC' reflect
S&P's opinion that the credit support for these classes will
remain sufficient to cover the revised projected losses.
In accordance with S&P's counterparty criteria, it considered any
applicable hedges related to these securities when performing
these rating actions.
Subordination, overcollateralization (when available), and excess
interest as applicable generally provide credit support for these
transactions. Some classes might also benefit from bond
insurance. In these cases, the long-term rating on the class
reflects the higher of the rating on the bond insurer and the
underlying credit rating on the security without the benefit of
such bond insurance.
ECONOMIC OUTLOOK
When analyzing U.S. RMBS collateral pools to form S&P's opinion of
their relative credit quality and the potential impact on rated
securities, the degree of remaining losses stems, to a certain
extent, from S&P's outlook regarding the behavior of such loans in
conjunction with expected economic conditions. Overall, Standard
& Poor's baseline macroeconomic outlook assumptions for variables
that it believes could affect residential mortgage performance are
as follows:
-- S&P's unemployment rate forecast is 7.4% for 2013 and 6.7%
for 2014 compared with the actual 8.1% rate in 2012.
-- Home prices will increase 8% in 2013, using the S&P Case-
Shiller 20-city index.
-- Real GDP growth will be 2.5% in 2013 and 3.2% in 2014.
-- The 30-year mortgage rate will average 3.4% for 2013 and
reach slightly higher levels in 2014.
-- Inflation will be 1.4% in 2013 and 1.8% in 2014.
Overall, S&P's outlook for RMBS is stable. Although S&P views
housing fundamentals overall as positive, it believes the
fundamentals of RMBS still hinges on additional factors, such as
the ultimate fate of modified loans, the propensity of servicers
to advance on delinquent loans, and liquidation timelines.
Under S&P's baseline economic assumptions, it expects RMBS
collateral quality to improve mildly. However, if a downside
scenario were to occur in the U.S. in line with Standard & Poor's
forecast, it believes that the credit quality of U.S. RMBS would
weaken. S&P's downside scenario incorporates the following key
assumptions:
-- Home prices once again decline as a result of higher
defaults, additional shadow inventory, and less purchase
activity.
-- Total unemployment increases modestly in 2013 to 8.6% but
rises to 9% in 2014; job growth would slow to almost zero
in 2013 and 2014.
-- Downward pressure causes GDP growth of less than 1% in 2013
and 2014, fueled by increased unemployment levels.
-- Thirty-year fixed mortgage rates fall below 3% in 2013, but
capitalizing on such lower rates could be hampered by
limited access to credit and pressure on home prices.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS LIST
Banc of America Alternative Loan Trust 2003-1
Series 2003-1
Rating
Class CUSIP To From
B-1 05948KAL3 BB- (sf) BBB- (sf)
Chevy Chase Funding LLC
Series 2004-4
Rating
Class CUSIP To From
A-2 16678RCD7 BBB+ (sf) BBB+ (sf)/Watch Neg
Credit Suisse First Boston Mortgage Securities Corp.
Series 2001-11
Rating
Class CUSIP To Interim From
III-M-1 22540AY44 NR BBB+ (sf) A+ (sf)
Credit Suisse First Boston Mortgage Securities Corp.
Series 2002-26
Rating
Class CUSIP To From
IV-B-1 22541NMA4 BB+ (sf) AA+ (sf)
IV-B-2 22541NMB2 CCC (sf) BB (sf)
CSAB Mortgage-Backed Trust 2006-1
Series 2006-1
Rating
Class CUSIP To From
A-2 22943HAC0 D (sf) BB+ (sf)/Watch Neg
A-3 22943HAD8 D (sf) CCC (sf)
A-4 22943HAE6 D (sf) CCC (sf)
A-5 22943HAF3 D (sf) CCC (sf)
A-6-A 22943HAG1 D (sf) CCC (sf)
A-6-B 22943HAH9 D (sf) CCC (sf)
IndyMac INDX Mortgage Loan Trust 2004-AR13
Series 2004-AR13
Rating
Class CUSIP To From
1-A-1 45660N7J8 CCC (sf) B- (sf)
2-A-1 45660N7K5 B- (sf) BB- (sf)
2-A-2 45660N7L3 B- (sf) BB- (sf)
IndyMac INDX Mortgage Loan Trust 2004-AR6
Series 2004-AR6
Rating
Class CUSIP To From
6-A-1 45660NY25 BB- (sf) BBB- (sf)
Nomura Asset Acceptance Corporation, Alternative Loan Trust,
Series 2005-AR4
Rating
Class CUSIP To From
I-A 65535VMV7 BB (sf) BBB (sf)
RALI Series 2002-QS11 Trust
Series 2002-QS11
Rating
Class CUSIP To From
A-V 76110GJ51 AA+ (sf) AAA (sf)
M-1 76110GJ85 B (sf) BB+ (sf)
RALI Series 2002-QS14 Trust
Series 2002-QS14
Rating
Class CUSIP To From
M-1 76110GV40 BB- (sf) BBB+ (sf)
M-3 76110GV65 CC (sf) CCC (sf)
RALI Series 2002-QS3 Trust
Series 2002-QS3
Rating
Class CUSIP To From
M-1 76110GXE6 BB+ (sf) BBB+ (sf)
RALI Series 2002-QS7 Trust
Series 2002-QS7
Rating
Class CUSIP To From
M-2 76110GE31 B (sf) BB+ (sf)
RALI Series 2003-QS11 Trust
Series 2003-QS11
Rating
Class CUSIP To From
A-1 76110HEH8 BB- (sf) BB+ (sf)
A-2 76110HEJ4 BB- (sf) BB+ (sf)
A-4 76110HEL9 BB- (sf) BB+ (sf)
A-5 76110HEM7 BB- (sf) BB+ (sf)
A-8 76110HEQ8 B (sf) BB+ (sf)
A-9 76110HER6 B+ (sf) BB+ (sf)
A-11 76110HET2 B+ (sf) BB+ (sf)
A-13 76110HEV7 B (sf) BB+ (sf)
A-14 76110HEW5 BB- (sf) BB+ (sf)
A-P 76110HEX3 B (sf) BB+ (sf)
RALI Series 2003-QS22 Trust
Series 2003-QS22
Rating
Class CUSIP To From
A-2 76110HMW6 BB (sf) BBB- (sf)
A-4 76110HMY2 BB (sf) BBB- (sf)
A-5 76110HMZ9 BB (sf) BBB (sf)
A-6 76110HNA3 BB (sf) BBB (sf)
A-11 76110HNF2 BB (sf) BBB (sf)
A-13 76110HNH8 BBB (sf) BBB+ (sf)
A-14 76110HNJ4 B+ (sf) BBB- (sf)
A-P 76110HNK1 B+ (sf) BBB- (sf)
RAMP Series 2002-RZ3 Trust
Series 2002-RZ3
Rating
Class CUSIP To From
M-2 760985ND9 B- (sf) BB (sf)
RAMP Series 2003-RZ2 Trust
Series 2003-RZ2
Rating
Class CUSIP To From
A-1 760985SH5 A+ (sf) AA+ (sf)
M-1 760985SK8 BBB- (sf) BBB+ (sf)
M-2 760985SL6 B (sf) BB+ (sf)
RATINGS AFFIRMED
Banc of America Alternative Loan Trust 2003-1
Series 2003-1
Class CUSIP Rating
A-1 05948KAA7 A+ (sf)
A-2 05948KAB5 A+ (sf)
A-3 05948KAC3 A+ (sf)
A-5 05948KAE9 A+ (sf)
A-6 05948KAF6 A+ (sf)
A-PO 05948KAK5 A+ (sf)
B-2 05948KAM1 CCC (sf)
B-3 05948KAN9 CC (sf)
Chevy Chase Funding LLC
Series 2004-4
Class CUSIP Rating
A-1 16678RCC9 BBB+ (sf)
A-NA 16678R9K4 BBB+ (sf)
B-1 16678RCE5 CCC (sf)
B-2 16678RCF2 CC (sf)
Credit Suisse First Boston Mortgage Securities Corp.
Series 2002-26
Class CUSIP Rating
IV-A-1 22541NLG2 AA+ (sf)
IV-P 22541NLP2 AA+ (sf)
IV-X 22541NLL1 AA+ (sf)
Deutsche Alt-A Securities Inc. Mortgage Loan Trust Series 2003-4XS
Series 2003-4XS
Class CUSIP Rating
A-5 251510CF8 B- (sf)
A-6A 251510CG6 BBB+ (sf)
A-6B 251510CT8 BBB+ (sf)
IndyMac INDX Mortgage Loan Trust 2004-AR13
Series 2004-AR13
Class CUSIP Rating
2-A-3 45660N7M1 CCC (sf)
IndyMac INDX Mortgage Loan Trust 2004-AR6
Series 2004-AR6
Class CUSIP Rating
1-A 45660NX26 B- (sf)
2-A 45660NX34 B- (sf)
3-A-1 45660NX42 B- (sf)
3-A-2 45660NX59 B- (sf)
3-A-3 45660NX67 B- (sf)
4-A 45660NX75 B- (sf)
5-A-1 45660NX83 B- (sf)
5-A-2 45660NX91 B- (sf)
6-A-2 45660NY33 B- (sf)
B-1 45660NY58 CCC (sf)
Nomura Asset Acceptance Corporation, Alternative Loan Trust,
Series 2005-AR4
Class CUSIP Rating
II-A 65535VMW5 BB+ (sf)
III-A-1 65535VMX3 B- (sf)
III-A-2 65535VNN4 CC (sf)
IV-A-1 65535VMY1 CCC (sf)
IV-A-2 65535VMZ8 CC (sf)
V-A-1 65535VNA2 BBB+ (sf)
V-A-2 65535VNB0 CCC (sf)
V-A-3 65535VNL8 CCC (sf)
V-A-4 65535VNM6 CC (sf)
RALI Series 2002-QS11 Trust
Series 2002-QS11
Class CUSIP Rating
A-5 76110GH87 AA+ (sf)
A-P 76110GJ44 AA+ (sf)
M-2 76110GJ93 CCC (sf)
RALI Series 2002-QS14 Trust
Series 2002-QS14
Class CUSIP Rating
A-10 76110GU58 AA+ (sf)
A-11 76110GU66 AA+ (sf)
A-12 76110GU74 AA+ (sf)
A-P 76110GU82 AA+ (sf)
A-V 76110GU90 AA+ (sf)
M-2 76110GV57 CCC (sf)
RALI Series 2002-QS3 Trust
Series 2002-QS3
Class CUSIP Rating
A-4 76110GWQ0 AA+ (sf)
A-5 76110GWR8 AA+ (sf)
A-12 76110GWZ0 AA+ (sf)
A-P 76110GXA4 AA+ (sf)
A-V 76110GXB2 AA+ (sf)
M-2 76110GXF3 CCC (sf)
M-3 76110GXG1 CC (sf)
RALI Series 2002-QS7 Trust
Series 2002-QS7
Class CUSIP Rating
A-7 76110GC41 AA+ (sf)
A-8 76110GC58 AA+ (sf)
A-16 76110GD57 AA+ (sf)
A-P 76110GD65 AA+ (sf)
A-V 76110GD73 AA+ (sf)
M-1 76110GE23 AA+ (sf)
M-3 76110GE49 CCC (sf)
B-1 76110GE56 CCC (sf)
RALI Series 2003-QS11 Trust
Series 2003-QS11
Class CUSIP Rating
A-12 76110HEU9 BBB+ (sf)
M-1 76110HFB0 CCC (sf)
M-2 76110HFC8 CC (sf)
RALI Series 2003-QS22 Trust
Series 2003-QS22
Class CUSIP Rating
A-1 76110HMV8 A+ (sf)
A-3 76110HMX4 A+ (sf)
M-1 76110HNP0 CCC (sf)
M-2 76110HNQ8 CCC (sf)
RAMP Series 2003-RZ2 Trust
Series 2003-RZ2
Class CUSIP Rating
M-3 760985SM4 B- (sf)
* S&P Withdraws Ratings on 73 Classes From 27 CDO Transactions
--------------------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on 73
classes of notes from 24 collateralized loan obligation (CLO)
transactions, two collateralized debt transactions backed by
commercial mortgage-backed securities, and one corporate-backed
hybrid CLO transaction.
The withdrawals follow the complete paydown of the notes on their
most recent payment dates.
The following transactions redeemed their classes in full after
providing notice to S&P that the equity noteholders directed
optional redemptions:
-- Ares XIX CLO Ltd.
-- Atlantis Funding Ltd.
-- Cumberland II CLO Ltd.
-- Granite Ventures III Ltd.
-- Lafayette Square CDO Ltd.
-- LightPoint CLO 2004-1 Ltd.
-- Northwoods Capital IV Ltd.
-- N-Star Real Estate CDO II Ltd.
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 WITHDRAWN
ACAS Business Loan Trust 2007-1
Rating Rating
Class To From
D NR BB+ (sf)
ALM VII Ltd.
Rating Rating
Class To From
X NR AAA (sf)
Ares XIX CLO Ltd.
Rating Rating
Class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
B NR AA+ (sf)
C-1 NR BBB+ (sf)
C-2 NR BBB+ (sf)
D NR B+ (sf)
Atlantis Funding Ltd.
Rating
Class To From
B NR AAA (sf)
C NR A+ (sf)
Avenue CLO Fund Ltd.
Rating Rating
Class To From
A-1L NR AAA (sf)
Boston Harbor CLO 2004-1 Ltd.
Rating Rating
Class To From
C NR AAA (sf)
Crest 2002-IG Ltd.
Rating Rating
Class To From
B NR AA+ (sf)
Cumberland II CLO Ltd.
Rating Rating
Class To From
A NR AAA (sf)
B NR AA- (sf)
C NR BBB+ (sf)
FM Leveraged Capital Fund II
Rating Rating
Class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
Galaxy III CLO Ltd.
Rating Rating
Class To From
E-1 NR B (sf)
E-2 NR B (sf)
E-3 NR B (sf)
Gallatin CLO III 2007-1 Ltd.
Rating Rating
Class To From
X NR AAA (sf)
Granite Ventures III Ltd.
Rating Rating
Class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
B NR AA+ (sf)
C NR BBB+ (sf)
D NR B+ (sf)
Grayston CLO II 2004-1 Ltd.
Rating Rating
Class To From
A-3L NR A+ (sf)
B-1LA NR CCC+ (sf)
GSC Partners CDO Fund V Ltd.
Rating Rating
Class To From
A-1 NR AAA (sf)
GSC Partners CDO Fund VI Ltd.
Rating
Class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
Gulf Stream-Compass CLO 2005-1 Ltd.
Rating Rating
Class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
Highland Loan Funding V Ltd.
Rating Rating
Class To From
A-1 NR AAA (sf)
Lafayette Square CDO Ltd.
Rating Rating
Class To From
A-1A NR AAA (sf)
A-1B NR AAA (sf)
A-2 NR AAA (sf)
A-3 NR AAA (sf)
B1 NR AA+ (sf)
B2 NR AA+ (sf)
C1 NR A- (sf)
C2 NR A- (sf)
LightPoint CLO 2004-1 Ltd.
Rating Rating
Class To From
E NR BB (sf)
Madison Park Funding X Ltd.
Rating Rating
Class To From
X NR AAA (sf)
Navigator CDO 2003 Ltd.
Rating Rating
Class To From
D NR BB+ (sf)
Northwoods Capital IV Ltd.
Rating Rating
Class To From
A-1a NR AAA (sf)
A-1b NR AAA (sf)
A-2 NR AA+ (sf)
B NR A+ (sf)
C-1 NR BB+ (sf)
C-2 NR BB+ (sf)
C-3 NR BB+ (sf)
Type II NR BB+ (sf)
Type IV NR BB+ (sf)
N-Star Real Estate CDO II Ltd.
Rating Rating
Class To From
A-1 NR AA+ (sf)
A-2A NR A- (sf)
A-2B NR A- (sf)
B-1 NR BBB+ (sf)
B-2 NR BBB- (sf)
C-1 NR B+ (sf)
C-2A NR CCC- (sf)
C-2B NR CCC- (sf)
D NR CC (sf)
NYLIM Flatiron CLO 2005-1 Ltd.
Rating Rating
Class To From
A-1 NR AAA (sf)
A-2 NR AAA (sf)
A-3 NR AAA (sf)
B NR AAA (sf)
C NR AA+ (sf)
Plymouth Rock CLO Ltd.
Rating Rating
Class To From
A NR AAA (sf)
Silver Creek Funding Ltd.
Rating Rating
Class To From
A-1 NR AA+ (sf)
A-2 NR AA+ (sf)
Venture IV CDO Ltd.
Rating Rating
Class To From
A-1 NR AAA (sf)
NR - Not rated.
*********
Monday's edition of the TCR delivers a list of indicative prices
for bond issues that reportedly trade well below par. Prices are
obtained by TCR editors from a variety of outside sources during
the prior week we think are reliable. Those sources may not,
however, be complete or accurate. The Monday Bond Pricing table
is compiled on the Friday prior to publication. Prices reported
are not intended to reflect actual trades. Prices for actual
trades are probably different. Our objective is to share
information, not make markets in publicly traded securities.
Nothing in the TCR constitutes an offer or solicitation to buy or
sell any security of any kind. It is likely that some entity
affiliated with a TCR editor holds some position in the issuers"
public debt and equity securities about which we report.
Each Tuesday edition of the TCR contains a list of companies with
insolvent balance sheets whose shares trade higher than $3 per
share in public markets. At first glance, this list may look like
the definitive compilation of stocks that are ideal to sell short.
Don't be fooled. Assets, for example, reported at historical cost
net of depreciation may understate the true value of a firm's
assets. A company may establish reserves on its balance sheet for
liabilities that may never materialize. The prices at which
equity securities trade in public market are determined by more
than a balance sheet solvency test.
A list of Meetings, Conferences and Seminars appears in each
Wednesday's edition of the TCR. Submissions about insolvency-
related conferences are encouraged. Send announcements to
conferences@bankrupt.com/
On Thursdays, the TCR delivers a list of recently filed
Chapter 11 cases involving less than $1,000,000 in assets and
liabilities delivered to nation's bankruptcy courts. The list
includes links to freely downloadable images of these small-dollar
petitions in Acrobat PDF format.
Each Friday's edition of the TCR includes a review about a book of
interest to troubled company professionals. All titles are
available at your local bookstore or through Amazon.com. Go to
http://www.bankrupt.com/books/to order any title today.
Monthly Operating Reports are summarized in every Saturday edition
of the TCR.
The Sunday TCR delivers securitization rating news from the week
then-ending.
For copies of court documents filed in the District of Delaware,
please contact Vito at Parcels, Inc., at 302-658-9911. For
bankruptcy documents filed in cases pending outside the District
of Delaware, contact Ken Troubh at Nationwide Research &
Consulting at 207/791-2852.
*********
S U B S C R I P T I O N I N F O R M A T I O N
Troubled Company Reporter is a daily newsletter co-published
by Bankruptcy Creditors" Service, Inc., Fairless Hills,
Pennsylvania, USA, and Beard Group, Inc., Washington, D.C., USA.
Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine
Tumanda, Howard C. Tolentino, Carmel Paderog, Meriam Fernandez,
Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl
Joy P. Olano, Ivy B. Magdadaro, Carlo Fernandez, Christopher G.
Patalinghug, and Peter A. Chapman, Editors.
Copyright 2013. All rights reserved. ISSN: 1520-9474.
This material is copyrighted and any commercial use, resale or
publication in any form (including e-mail forwarding, electronic
re-mailing and photocopying) is strictly prohibited without prior
written permission of the publishers. Information contained
herein is obtained from sources believed to be reliable, but is
not guaranteed.
The TCR subscription rate is $975 for 6 months delivered via
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firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Peter A.
Chapman at 215-945-7000 or Nina Novak at 202-241-8200.
*** End of Transmission ***