/raid1/www/Hosts/bankrupt/TCR_Public/130825.mbx
T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, August 25, 2013, Vol. 17, No. 235
Headlines
ALAMEDA RDA: Moody's Lifts Rating on TABs From 'Ba1'
ALESCO PREFERRED IV: Moody's Lifts Ratings on 2 Notes From 'B1'
AMERICREDIT AUTOMOBILE 2013-4: Moody's Rates Class E Notes 'Ba1'
APIDOS CDO III: Moody's Ups Rating on $6MM Class D Notes to 'Ba2'
ASSET BACKED 2005-HE1: Moody's Takes Action on Two RMBS Tranches
AVENUE CLO II: S&P Affirms 'BB' Rating on Class B-2L Notes
BABSON CLO 2005-III: Moody's Affirms Ba2 Rating on Cl. E Notes
BALLYROCK CLO 2006-2: Moody's Hikes Ratings on Cl. E Notes to Ba1
BAMLL 2012-CLRN: Moody's Affirms Ba3 Rating on X-2A Certificates
BANC OF AMERICA 2006-1: Defeasance No Impact on Moody's Ratings
BEAR STEARNS 2005-PWR7: Fitch Cuts 2 Cert. Classes Rating to 'C'
CABELAS CREDIT 2013-II: DBRS Assigns 'BB' Rating on Cl. D Notes
CALLIDUS DEBT IV: Moody's Raises Rating on Class D Notes to Ba1
CALLIDUS DEBT VII: Moody's Ups Rating on $25MM Cl. E Notes to Ba1
CAPITAL AUTO 2013-3: S&P Assigns 'BB' Rating on Class E Notes
CAPMARK VII: Moody's Hikes Rating on Class A-2 Notes to 'Ba1'
CETUS ABS 2006-1: Moody's Keeps Ratings After Supp. Indenture
CIFC FUNDING 2006-I: Moody's Keeps Ba2 Rating on Cl. B-2L Notes
COMM 2013-CCRE10: Moody's Rates Class F Certificates 'B2'
COMMERCIAL MORTGAGE 1999-C1: Moody's Cuts X Certs Rating to Caa2
CONSECO FINANCE: Moody's Takes Action on $106MM of Subprime RMBS
CREDIT SUISSE 2007-C3: Moody's Lowers Ratings on Two Cert Classes
CREST 2002-1: Moody's Affirms 'Caa2' Ratings on Two Note Classes
DEL MAR I: Moody's Affirms 'Ba3' Rating on $13MM Class E Notes
DENALI CAPITAL VI: Moody's Affirms 'Ba3' Rating on Cl. B-2L Notes
EMERSON PARK: S&P Assigns 'BB' Rating on Class E Notes
FALCON FRANCHISE: Moody's Takes Action on 4 Certs in ABS Deals
FIRST FRANKLIN 2006-FF16: Rights Transfer No Impact on Ratings
FIRST UNION 1999-C2: Moody's Hikes Rating on Cl. L Certs to Ba2
GALE FORCE 2: Moody's Lifts Rating on $20MM Cl. E Notes From Ba1
GECMC 2005-C4: Rights Transfer No Impact on Moody's Ratings
GMAC COMMERCIAL 1998-C1: Moody's Affirms Caa3 Rating on X Certs
GS MORTGAGE 2011-GC5: Moody's Affirms B2 Rating on Cl. F Certs
GS MORTGAGE 2013-GCJ14: Moody's Rates Class G Certs '(P)B3'
GULF STREAM 2005-II: S&P Raises Rating on Class D Notes to BB+
HARCH CLO II: Moody's Cuts Rating on $10MM Cl. E Notes to B3
HIGHLAND CREDIT: Moody's Keeps Ba2 Ratings After Debt Amendments
I-PREFERRED TERM III: A.M. Best Affirms 'b' Rating on $24MM Notes
I-PREFERRED TERM IV: Moody's Affirms Ba2 Ratings on 2 CDO Notes
INDYMAC: Moody's Takes Action on 13 Subprime RMBS Tranches
JP MORGAN 2013-C14: Fitch Rates Class G Certificates 'B'
JP MORGAN 2013-C14: Moody's Assigns 'B2' Rating on Cl. G Certs
LB-UBS COMMERCIAL 2006-C6: Moody's Affirms C Rating on 2 Certs
LEHMAN BROTHERS-UBS 2006-C3: Moody's Cuts Ratings on 4 Certs
LIGHTPOINT CLO VIII: Moody's Raises Class E Notes' Rating to Ba2
MADISON PARK XI: Moody's Rates $14MM Class F Notes '(P)B2(sf)'
MAYPORT CLO: Moody's Affirms Ba3 Rating to $20MM Class B-2L Notes
MORGAN STANLEY 2006-IQ12: Fitch Cuts Rating on 2 Cert. Classes
MORGAN STANLEY 2007-HQ11: Moody's Affirms Ratings on 20 Classes
MORGAN STANLEY 2007-IQ13: Fitch Cuts Rating on Cl. D Certs to Csf
MORGAN STANLEY 2007-TOP27: Fitch Cuts Class F Cert. Rating to 'C'
MORGAN STANLEY 2013-C11: Moody's Assigns B2 Rating to Cl. G Certs
MSIM PECONIC: Moody's Affirms 'B1' Rating on Class E Notes
NANTUCKET CLO I: Moody's Keeps Ba3 Rating on $12.6MM Cl. E Notes
NEWCASTLE CDO IX: Moody's Hikes Rating on 2 Note Classes to Ca
OCEAN TRAILS IV: S&P Assigns Prelim 'BB' Rating on Class E Notes
OCTAGON INVESTMENT VIII: Moody's Ups Cl. D Notes Rating From Ba2
PALMER SQUARE 2013-1: S&P Affirms 'BB' Rating on Class D Notes
RALI TRUST: Moody's Takes Action on $594MM RMBS Issued 2003-2007
RESIDENTIAL FUNDING: Moody's Takes Action on $382-Mil. of RMBS
ROSEDALE CLO: Moody's Lifts Ratings on 2 Note Classes From 'Ba1'
SCHOONER TRUST 2007-7: Moody's Affirms Ratings on 12 Certificates
SDART 2013-A: S&P Assigns 'BB+' Rating on Class E Notes
SILVERADO CLO 2006-II: Moody's Lifts Rating on Cl. D Notes to Ba3
SOLEDAD RDA SUCCESSOR: Moody's Cuts Rating on 1998 TABs to B1
SOUTHFORK CLO: Moody's Hikes Rating on Class C Notes to 'Ba1'
STONE TOWER V: Moody's Hikes Rating on $24MM Cl. D Notes to Ba3
STRUCTURED ASSET 2005-15: Moody's Cuts Ratings on 3 Secs. to Caa1
UBS-BARCLAYS 2012-C3: DBRS Confirms 'BB' Rating on Cl. E Certs
UBS-BACRLAYS 2012-C3: Moody's Keeps Ba3 Rating on X-B Securities
US CAPITAL I: Moody's Affirms Caa1 Ratings on 2 TruPS CDO Notes
US CAPITAL II: S&P Raises Rating on Class A-2 Notes to BB+
US EDUCATION III: Moody's Ups Rating on Cl. 2004B Notes from Ba1
WACHOVIA BANK 2004-C10: Moody's Keeps Rating on 13 Cert. Classes
WFRBS COMMERCIAL 2013-C15: Fitch Assigns 'B' Rating to Cl. F Certs
WHITTIER PUBLIC: Moody's Confirms Ba1 Rating on Series A Bonds
* Fitch: RMBS, Regional Lending at Risk in Eminent Domain Plans
* Fitch Says US CREL CDO Delinquency Rate Remains Stable
* Fitch: TruPS CDOs Defaults/Deferrals Dip to 27.6% in July
* Moody's Takes Action on $342MM of RMBS Issued 2002 to 2004
* S&P Lowers Ratings on 31 Classes Ratings From 19 RMBS Deals
* S&P Lowers 27 Ratings From 9 U.S. RMBS Transactions
*********
ALAMEDA RDA: Moody's Lifts Rating on TABs From 'Ba1'
----------------------------------------------------
Moody's Investors Service has upgraded to Baa2 from Ba1 the rating
on the Successor Agency to the Alameda County Redevelopment
Agency's (RDA) Series 2006A Tax Allocation Bonds (TABs). The bonds
were previously on review for downgrade.
Rating Rationale
The upgrade reflects the ample semi-annual debt service coverage
provided by the total incremental revenues available to the
successor agency for tax increment debt service coverage. The
actual 2013 debt service coverage for Series 2006A bonds range
from 4.1x to 8.9x, after payment of pass through obligations. Also
contributing to the upgrade is the large total acreage of the
project area securing the debt; the very large incremental
assessed valuation (AV); and the high income levels in the county.
However, a low incremental AV to total AV ratio, which can lead to
revenue volatility, and the high concentration in the top ten tax
payers weigh on the rating.
Key Strengths
- Strong coverage on semi-annual and annual basis
- Large project area, in acreage and AV
- Strong local economy and income levels
Key Challenges
- Low increment to total AV ratio
- High tax payer concentration
What could move the ratings-UP
- Significant and sustained increase in assessed valuation which
would increase incremental AV/total AV ratio and debt service
coverage levels
- Decrease in tax payer concentration
What could move the rating-DOWN
- Increase in tax payer concentration
- Decrease incremental the AV/total AV ratio
The principal methodology used in this rating was Moody's Analytic
Approach To Rating California Tax Allocation Bonds published in
December 2003.
ALESCO PREFERRED IV: Moody's Lifts Ratings on 2 Notes From 'B1'
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Alesco Preferred Funding IV, Ltd.
$195,000,000 Class A-1 First Priority Senior Secured Floating Rate
Notes Due 2034 (current balance of $118,533,384.15), Upgraded to
A1 (sf); previously on August 5, 2013, Baa1 (sf) Placed on Review
for Possible Upgrade
$63,000,000 Class A-2 Second Priority Senior Secured Floating Rate
Notes Due 2034, Upgraded to Baa3 (sf); previously on August 5,
2013, B1 (sf) Placed on Review for Possible Upgrade
$7,000,000 Class A-3 Second Priority Senior Secured Fixed/Floating
Rate Notes Due 2034, Upgraded to Baa3 (sf); previously on August
5, 2013, B1 (sf) Placed on Review for Possible Upgrade
Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of Class A-1 Notes and an
increase in the transaction's overcollateralization ratios
underlying portfolio since the last rating action in October 2012.
The Class A-1 Notes have been paid down by approximately $16
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
186.53% from 140.02% since the last rating action, as calculated
by Moody's. Based on the latest trustee report dated in July 2013,
the Class A OC has improved to 117.60% compared to 93.90% in
September 2012. 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 since the last rating action the total par
amount that Moody's treated as defaulted or deferring declined to
$35.5 million compared to $77.33 million. Since October 2012, five
previously deferring banks with a total par of $35.5 million have
resumed interest payments while one asset with a total par of $6
million was redeemed at par.
In taking the foregoing actions, Moody's also announced that it
has concluded its review of its ratings on the issuer's Class A-1,
Class A-2 and Class A-3 Notes announced on August 5, 2013. At that
time, Moody's said that it had upgraded and placed certain of the
issuer's ratings on review primarily as a result of substantial
deleveraging of senior notes and increases in
overcollateralization (OC) ratios.
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 $221 million,
defaulted/deferring par of $35.5 million, a weighted average
default probability of 22.72% (implying a WARF of 1116). Moody's
Asset Correlation of 17.85%, and a weighted average recovery rate
upon default of 10%. In addition to the quantitative factors that
are explicitly modeled, qualitative factors are part of rating
committee considerations. Moody's considers the structural
protections in the transaction, the risk of triggering an Event of
Default, recent deal performance under current market conditions,
the legal environment, and specific documentation features. All
information available to rating committees, including
macroeconomic forecasts, inputs from other Moody's analytical
groups, market factors, and judgments regarding the nature and
severity of credit stress on the transactions, may influence the
final rating decision.
Alesco Preferred Funding IV, Ltd. issued on May 18, 2004, is a
collateralized debt obligation backed by a portfolio of bank trust
preferred securities (TruPS).
The portfolio of this CDO is mainly comprised of trust preferred
securities (TruPS) issued by small to medium sized U.S. community
banks 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 Q1-2013.
Moody's also evaluates the sensitivity of the rated transaction to
the volatility of the credit estimates, as described in Moody's
Cross Sector Rating Methodology "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 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 to1450 points from the
base case of 1116 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 to 1000 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 $19 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: +1
Class A-3: +1
Class B-1: 0
Class B-2: 0
Class B-3: 0
Sensitivity Analysis 2:
Class A-1: +1
Class A-2: +1
Class A-3: +1
Class B-1: 0
Class B-2: 0
Class B-3: 0
Moody's notes that this transaction is still subject to a high
level of macroeconomic uncertainty although Moody's outlook on the
banking sector has changed to stable from negative. The pace of
FDIC bank failures continues to decline in 2013 compared to the
last few years, and some of the previously deferring banks have
resumed interest payment on their trust preferred securities.
AMERICREDIT AUTOMOBILE 2013-4: Moody's Rates Class E Notes 'Ba1'
----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
notes issued by AmeriCredit Automobile Receivables Trust 2013-4
(AMCAR 2013-4). This is the fourth public subprime transaction of
the year for AmeriCredit Financial Services, Inc. (AmeriCredit).
The complete rating actions are as follows:
Issuer: AmeriCredit Automobile Receivables Trust 2013-4
$168,000,000, 0.25%, Class A-1 Notes, Definitive Rating
Assigned P-1 (sf)
$279,000,000, 0.74%, Class A-2 Notes, Definitive Rating
Assigned Aaa (sf)
$192,260,000, 0.96%, Class A-3 Notes, Definitive Rating
Assigned Aaa (sf)
$68,870,000, 1.66%, Class B Notes, Definitive Rating Assigned
Aa1 (sf)
$85,480,000, 2.72%, Class C Notes, Definitive Rating Assigned
Aa3 (sf)
$84,060,000, 3.31%, Class D Notes, Definitive Rating Assigned
Baa1 (sf)
$22,330,000, 4.01%, Class E Notes, Definitive Rating Assigned
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-
4 pool is 10.00% and total credit enhancement required to achieve
Aaa rating is 36.50%. 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 Baa1, respectively; Class B notes might
change from Aa1 to Baa1, Ba1, and below B3, respectively; Class C
notes might change from Aa3 to Ba3, 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.
APIDOS CDO III: Moody's Ups Rating on $6MM Class D Notes to 'Ba2'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Apidos CDO III Ltd.:
$15,000,000 Class B Mezzanine Notes Due 2020, Upgraded to Aa3
(sf); previously on July 15, 2013 A3 (sf) Placed Under Review for
Possible Upgrade;
$10,500,000 Class C Mezzanine Notes Due 2020, Upgraded to Baa2
(sf); previously on April 27, 2012 Upgraded to Ba1 (sf); and
$6,000,000 Class D Mezzanine Notes Due 2020, Upgraded to Ba2 (sf);
previously on April 27, 2012 Upgraded to Ba3 (sf).
Moody's also affirmed the ratings of the following notes:
$212,000,000 Class A-1 Senior Notes Due 2020 (current outstanding
balance of $108,262,806), Affirmed Aaa (sf); previously on August
25, 2011 Upgraded to Aaa (sf); and
$19,000,000 Class A-2 Senior Notes Due 2020, Affirmed Aaa (sf);
previously on July 15, 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 Class A-1 notes and an
increase in the transaction's overcollateralization ratios since
August 2012. Moody's notes that the Class A-1 notes have been paid
down by approximately 44% or $86 million since August 2012. Based
on the trustee report dated July 18 2013, the Class A, Class B,
Class C, and Class D overcollateralization ratios are reported at
134.7%, 120.5%, 112.2%, and 108.0%, respectively, versus August
2012 levels of 119.9%, 112.6%, 108.0%, and 105.5%, respectively.
In taking these actions, Moody's announced that it had concluded
its review of its rating on the issuer's Class B Notes announced
on July 15, 2013. At that time, Moody's said that it had upgraded
and placed certain of the issuer's ratings on review primarily as
a result of substantial deleveraging of the senior notes and
increases in OC ratios resulting from high rates of loan
collateral prepayments during the first half of 2013.
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 $169 million, defaulted par of $4.0 million, a
weighted average default probability of 16.69% (implying a WARF of
2541), a weighted average recovery rate upon default of 50.74%,
and a diversity score of 55. The default and recovery properties
of the collateral pool are incorporated in cash flow model
analysis where they are subject to stresses as a function of the
target rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Apidos CDO III, issued in March 2006, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's 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% (2033)
Class A-1: 0
Class A-2: 0
Class B: +2
Class C: +2
Class D: +1
Moody's Adjusted WARF + 20% (3050)
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.
ASSET BACKED 2005-HE1: Moody's Takes Action on Two RMBS Tranches
----------------------------------------------------------------
Moody's Investors Service has downgraded the rating of one tranche
and upgraded the rating of one tranche backed by subprime loans
issued by Asset Backed Securities Corporation Home Equity Loan
Trust 2005-HE1. Complete rating actions are as follows:
Issuer: Asset Backed Securities Corporation Home Equity Loan Trust
2005-HE1
Cl. M1, Downgraded to B1 (sf); previously on Sep 4, 2012 Confirmed
at Baa2 (sf)
Cl. M2, Upgraded to Caa1 (sf); previously on Jul 12, 2010
Downgraded to Caa2 (sf)
Ratings Rationale:
The actions are a result of recent performance review of these
transaction and reflect Moody's updated loss expectations on these
pools. Class M-1 was downgraded primarily due to the tranche's
existing interest shortfalls. Class M-2 was upgraded primarily as
a result of improving performance to the related pools and
building credit enhancement on the tranche.
The principal methodology used in this rating was "US RMBS
Surveillance Methodology" published in June 2013.
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
8.2% in July 2012 to 7.4% in July 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.
AVENUE CLO II: S&P Affirms 'BB' Rating on Class B-2L Notes
----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on two
classes of notes from Avenue CLO II Ltd., a cash flow
collateralized loan obligation (CLO) transaction, and removed them
from CreditWatch with positive implications, where S&P had placed
them on May 17, 2013. S&P also raised the rating on a third class
of notes that had not been on CreditWatch. At the same time, S&P
affirmed its ratings on two other classes of notes.
The transaction is currently in its amortization phase and has
commenced the paydown of the notes. The upgrades largely reflect
paydowns of $180.56 million to the class A-1L notes since S&P's
August 2012 rating actions. Because of this, the
overcollateralization (O/C) ratios increased for each class of
notes:
-- The senior class A-1L O/C increased to 154.75%, up from
136.33% in July 2012.
-- The class A-2L and A-3L O/C ratio is 132.58%, up from
117.78% in July 2012.
-- The class B-1L O/C ratio is 118.10%, up from 111.02% in
July 2012.
-- The class B-2L O/C ratio is 107.14%, up from 105.29% in
July 2012.
The affirmation of the class A-1L notes reflects the sufficient
credit support available to the notes at the current 'AAA (sf)'
rating level.
S&P's rating on the class B-1L notes is limited by its largest
obligor default test, which intends to address the potential
concentration of exposure to obligors in the transaction's
portfolio. Based on S&P's review, the top two assets constitute
almost 9% of the total performing portfolio.
The rating assigned to the class B-2L notes was also limited by
the application of the largest obligor default test, which
indicated a lower rating than the one currently assigned.
However, in analyzing the tranche, S&P considered the portfolio's
overall diversification and the increase in overcollateralization,
and affirmed the 'BB (sf)' rating on the notes.
S&P will continue to review whether the ratings currently assigned
to the notes remain consistent with the credit enhancement
available to support them and take rating actions as it deems
necessary.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties, and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties, and enforcement mechanisms in issuances of
similar securities. The Rule applies to in-scope securities
initially rated (including preliminary ratings) on or after
Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
RATINGS RAISED, REMOVED FROM CREDITWATCH
Avenue CLO II Ltd.
Rating
Class To From
A-2L AAA (sf) AA+ (sf)/Watch Pos
A-3L AAA (sf) AA- (sf)/Watch Pos
RATING RAISED
Avenue CLO II Ltd.
Rating
Class To From
B-1L A+ (sf) BBB+ (sf)
RATINGS AFFIRMED
Avenue CLO II Ltd.
Class Rating
A-1L AAA (sf)
B-2L BB (sf)
BABSON CLO 2005-III: Moody's Affirms Ba2 Rating on Cl. E Notes
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Babson CLO Ltd. 2005-III:
$38,500,000 Class C Deferrable Mezzanine Senior Notes Due November
10, 2019, Upgraded to A3 (sf); previously on July 15, 2013 Baa1
(sf) Placed Under Review for Possible Upgrade;
$15,000,000 Class Q Combination Notes Due November 10, 2019
(current rated balance of $4,495,542), Upgraded to Aa1 (sf);
previously on August 30, 2012 Upgraded to Aa3 (sf).
Moody's also affirmed the ratings of the following notes:
$425,000,000 Class A Senior Notes Due November 10, 2019 (current
outstanding balance of $271,696,253), Affirmed Aaa (sf);
previously on August 30, 2012 Upgraded to Aaa (sf);
$22,000,000 Class B Senior Notes Due November 10, 2019, Affirmed
Aaa (sf); previously on July 15, 2013 Upgraded to Aaa (sf);
$22,000,000 Class D Deferrable Mezzanine Notes Due November 10,
2019, Affirmed Ba1 (sf); previously on August 30, 2012 Upgraded to
Ba1 (sf);
$12,500,000 Class E Deferrable Mezzanine Notes Due November 10,
2019, Affirmed Ba2 (sf); previously on August 30, 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
Notes have been paid down by approximately 34% or $139.3 million
since the last rating action. Based on the latest trustee report
dated July 31, 2013, the Class A/B, Class C, Class D, and Class E
overcollateralization ratios are reported at 130.43%, 116.94%,
110.41% and 107.55%, respectively, versus August 2012 levels of
124.34%, 114.19%, 109.10% and 106.83%, respectively. Moody's notes
that the July trustee-reported overcollateralization ratios do not
reflect the payment of $40 million to the Class A Notes on the
August 10, 2013 payment date.
Moody's also notes that the rated balance of the Class Q
Combination Notes has delevered by 26% or $1.5 mm since the last
action in August 2012 due to ongoing distributions to the Class C
Notes and Income Notes.
Notwithstanding benefits of the deleveraging, Moody's notes that
the weighted average spread of the underlying portfolio has
declined since the last rating action. Based on the July 2013
trustee report, the weighted average spread is currently 3.97%
compared to 4.54% in August 2012.
In taking the foregoing actions, Moody's also announced that it
had concluded its review of its rating on the issuer's Class C
Notes announced on July 15, 2013. At that time, Moody's said that
it had upgraded and placed certain of the issuer's ratings on
review primarily as a result of substantial deleveraging of the
senior notes and increases in OC ratios resulting from high rates
of loan collateral prepayments during the first half of 2013.
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 $390.2 million, defaulted par of $13.7
million, a weighted average default probability of 21.41%
(implying a WARF of 3018), a weighted average recovery rate upon
default of 51.29%, and a diversity score of 63. 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. 2005-III, issued in November 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. The methodology used in rating the Class Q 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% (2414)
Class A: 0
Class B: 0
Class C: +2
Class D: +1
Class E: +1
Class Q: +1
Moody's Adjusted WARF + 20% (3621)
Class A: 0
Class B: -1
Class C: -2
Class D: -1
Class E: -1
Class Q: -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.
BALLYROCK CLO 2006-2: Moody's Hikes Ratings on Cl. E Notes to Ba1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Ballyrock CLO 2006-2 Ltd.:
$30,000,000 Class C Deferrable Floating Rate Notes, Due 2020,
Upgraded to Aa1 (sf); previously on July 15, 2013 Upgraded to A2
(sf) and Placed Under Review for Possible Upgrade;
$33,600,000 Class D Deferrable Floating Rate Notes, Due 2020,
Upgraded to Baa1 (sf); previously on July 15, 2013 Ba1 (sf) Placed
Under Review for Possible Upgrade;
$21,000,000 Class E Deferrable Floating Rate Notes, Due 2020
(current outstanding balance of $16,574,414), Upgraded to Ba1
(sf); previously on July 15, 2013 Ba3 (sf) Placed Under Review for
Possible Upgrade.
Moody's also affirmed the ratings of the following notes:
$446,900,000 Class A Floating Rate Notes, Due 2020 (current
outstanding balance of $205,793,009), Affirmed Aaa (sf);
previously on August 8, 2011 Upgraded to Aaa (sf);
$25,000,000 Class B Floating Rate Notes, Due 2020, Affirmed Aaa
(sf); previously on July 15, 2013 Upgraded to Aaa (sf).
BAMLL 2012-CLRN: Moody's Affirms Ba3 Rating on X-2A Certificates
----------------------------------------------------------------
Moody's Investors Service affirmed the rating of eight classes of
BAMLL Commercial Mortgage Securities Trust 2012-CLRN, Commercial
Mortgage Pass-Through Certificates, Series 2012-CLRN. Moody's
rating action is as follows:
Cl. A, Affirmed Aaa (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Aa2 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Aa2 (sf)
Cl. C, Affirmed A2 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned A2 (sf)
Cl. D, Affirmed Baa1 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Baa1 (sf)
Cl. E, Affirmed Baa3 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Baa3 (sf)
Cl. F, Affirmed Ba3 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Ba3 (sf)
Cl. X-1A, Affirmed Aaa (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. X-2A, Affirmed Ba3 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Ba3 (sf)
Ratings Rationale:
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio and Moody's stressed debt service coverage
ratio (DSCR) remaining within acceptable ranges.
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.
The principal methodology used in this rating was "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 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
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
presale report dated September 6, 2012.
Deal Performance:
As of the July 15, 2013 payment date, the transaction's aggregate
certificate balance remains unchanged from securitization at $335
million. The transaction is secured by a floating rate mortgage
loan on a portfolio of extended-stay hotels totaling 47 properties
(including one leasehold property) located across 18 states. The
loan is interest only during the term and its initial maturity
date is in August 2014 (plus three successive one-year extension
options). The sponsors of the loan are Clarion Lion Properties
Fund Holdings, LP, Lion Value Fund Holdings, LLC, and Henley
Holding Company. There is additional debt in the form of a
mezzanine loan.
The portfolio is comprised 32 Residence Inns by Marriott and 15
Homewood Suites by Hilton. Hotels located in California account
for approximately 40% of the pool balance based on allocated loan
amount. No properties reported a Seismic Probable Maximum Loss
(PML) higher than 11%. All of the properties in the pool were
built between 1984 and 2000.
The portfolio's NCF for the trailing twelve month period ending
March 2013 was $50.7 million, up slightly from $49.7 million
achieved during the trailing twelve month period ending June 2012.
Moody's stabilized Net Cash Flow is $47.6 million, and the
stabilized Moody's value is $445 million, the same as at
securitization. Moody's trust LTV ratio is 75%, the same as at
securitization. Moody's stressed DSCR for the trust is at 1.54X,
the same as at securitization. The trust has not experienced any
losses or interest shortfalls since securitization.
BANC OF AMERICA 2006-1: Defeasance No Impact on Moody's Ratings
---------------------------------------------------------------
Moody's Investors Service was informed that Boulevard Invest LLC,
the Borrower for the Desert Passage mortgage loan, has elected to
defease the loan with U.S. Government Securities. The proposed
defeasance will become effective upon satisfaction of the
conditions precedent set forth in the governing documents.
Moody's has reviewed the defeasance transaction. Moody's has
determined that this proposed defeasance 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 Banc of America Commercial Mortgage Inc., Commercial Pass-
Through Certificates, Series 2006-1.
Moody's opinion only addresses the credit impact associated with
the proposed defeasance. Moody's is not expressing any opinion as
to whether this change has, or could have, other noncredit related
effects that may have a detrimental impact on the interests of
note holders and/or counterparties.
The last rating action for Banc of America Commercial Mortgage
Inc., Commercial Pass-Through Certificates, Series 2006-1 was
taken on May 23, 2013. The principal methodology used in this
rating was "Moody's Approach to Rating Fusion U.S. CMBS
Transactions" published in April 2005.
On May 23, 2013 Moody's affirmed the ratings of 16 classes of Banc
of America 2006-1 as follows:
Cl. A-1A, Affirmed Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. A-3A, Affirmed Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. A-3B, Affirmed Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Mar 9, 2011 Confirmed at
Aaa (sf)
Cl. A-M, Affirmed Aa1 (sf); previously on Nov 4, 2010 Downgraded
to Aa1 (sf)
Cl. A-J, Affirmed Baa1 (sf); previously on Nov 4, 2010 Downgraded
to Baa1 (sf)
Cl. A-SBFL, Affirmed Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. B, Affirmed Baa2 (sf); previously on Nov 4, 2010 Downgraded to
Baa2 (sf)
Cl. C, Affirmed Ba1 (sf); previously on Nov 4, 2010 Downgraded to
Ba1 (sf)
Cl. D, Affirmed B3 (sf); previously on Nov 4, 2010 Downgraded to
B3 (sf)
Cl. E, Affirmed Caa1 (sf); previously on Nov 4, 2010 Downgraded to
Caa1 (sf)
Cl. F, Affirmed Caa2 (sf); previously on Nov 4, 2010 Downgraded to
Caa2 (sf)
Cl. G, Affirmed Ca (sf); previously on Nov 4, 2010 Downgraded to
Ca (sf)
Cl. H, Affirmed C (sf); previously on Nov 4, 2010 Downgraded to C
(sf)
Cl. J, Affirmed C (sf); previously on Nov 4, 2010 Downgraded to C
(sf)
Cl. XC, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
BEAR STEARNS 2005-PWR7: Fitch Cuts 2 Cert. Classes Rating to 'C'
----------------------------------------------------------------
Fitch Ratings has removed five classes from Rating Watch Negative,
downgraded eight classes and affirmed nine classes of Bear Stearns
Commercial Mortgage Securities Trust (BSCMS) commercial mortgage
pass-through certificates series 2005-PWR7 due to an increase in
expected losses.
Key Rating Drivers
Fitch placed five classes on Rating Watch Negative in May 2013
following the transfer of the Quintard Mall to special servicing.
The removal of Rating Watch Negative and downgrades are due to an
increase in modeled losses. Fitch modeled losses of 9% of the
remaining pool; expected losses on the original pool balance total
8.6%, including $28.7 million (2.6% of the original pool balance)
in realized losses to date. Fitch has designated 17 loans (22%) as
Fitch Loans of Concern, which includes one specially serviced
asset (4.2%).
As of the July 2013 distribution date, the pool's aggregate
principal balance has been reduced by 32.1% to $763.7 million from
$1.12 billion at issuance. Per the servicer reporting, nine loans
(10.8% of the pool) are defeased. Interest shortfalls are
currently affecting classes E through Q.
The largest contributor to expected losses is the Marquis
Apartments loan (5.4% of the pool), which is secured by a 641-unit
apartment complex in King of Prussia, PA. Occupancy declined
significantly from 71% as of year- end (YE) 2011 to 42% as of YE
2012 due to part to the property being vacated to address severe
maintenance issues. Debt service coverage ratio (DSCR) increased
from 0.59x to 0.65x during the same period. Fitch is modeling a
significant loss on this asset. The loan remains with the master
servicer.
The next largest contributor to expected losses is the specially-
serviced Quintard Mall loan (4.2%), which is secured by 375,486
square foot (sf) of a 621,752sf regional mall located in Oxford,
AL, approximately 60 miles east of Birmingham. The property is
anchored by JC Penny (32% of the net rentable area [NRA]) with a
lease expiring in August 2014, with three five- year extension
options remaining. Non-collateral anchors include Dillards
(126,000sf) and Sears (120,266sf), which have operating agreements
in place that expire in 2050 and 2020. Servicer reported occupancy
as of June 2013 was 88%. The loan transferred to special servicing
in May 2013 based on a monetary default after the loan became 60
days delinquent. According to the servicing reporting the loan has
been unable to cover debt service with YE 2011 DSCR at 0.97x and
YE 2012 at 0.94x. The special servicer is proceeding with the
foreclosure process.
The third largest contributor to expected losses is the Shops at
Boca Park loan (6.7%), which was originally secured by 140,415
square feet (sf) of retail space and a 139,000sf ground lease
anchor pad within a lifestyle center located in Summerlin, NV,
northwest of Las Vegas. The property is shadow anchored by Target
Greatland and Vons. The loan transferred out of special servicing
in June 2013, following the November 2012 loan modification, which
extended the term 48 periods and reduced the interest rate from
5.25% to 4.75%.
Rating Sensitivity
Rating Outlooks on classes A-2, A-AB, and A-3 remain Stable due to
increasing credit enhancement and continued paydown. Rating
Outlooks on classes A-J through C are Negative and may be subject
to further downgrades if there is further deterioration of the
pool's cash flow performance and/or decrease in value of the
specially serviced loan. Additional downgrades to the distressed
classes (those rated below 'B') are expected as losses are
realized.
Fitch downgrades, removes from Rating Watch Negative, and assigns
Ratings Outlooks or Recovery Estimates (REs) for the following
classes:
-- $85.7 million class A-J to 'Asf' from 'AAsf'; Outlook Negative
-- $33.7 million class B to 'Bsf' from 'BBBsf'; Outlook Negative
-- $8.4 million class C to 'B-sf' from 'BBB-sf'; Outlook Negative
-- $15.5 million class D to 'CCCsf' from 'BBsf'; RE 30%;
-- $11.2 million class E to 'CCsf' from 'Bsf'; RE 0%;
Fitch downgrades the following classes and assigns REs as
indicated:
-- $11.2 million class F to 'CCsf' from 'CCCsf'; RE 0%;
-- $9.8 million class G to 'Csf' from 'CCsf'; RE 0%;
-- $12.7 million class H to 'Csf' from 'CCsf'; RE 0%.
Fitch affirms the following classes as indicated:
-- $11 million class A-2 at 'AAAsf'; Outlook Stable;
-- $28.8 million class A-AB at 'AAAsf'; Outlook Stable;
-- $527.7 million class A-3 at 'AAAsf'; Outlook Stable;
-- $4.2 million class J at 'Csf'; RE 0%;
-- $3.7 million class K at 'Dsf'; RE 0%;
-- $0 class L at 'Dsf'; RE 0%;
-- $0 class M at 'Dsf'; RE 0%;
-- $0 class N at 'Dsf'; RE 0%;
-- $0 class P at 'Dsf'; RE 0%.
The class A-1 certificates have paid in full. Fitch does not rate
the class Q certificates. Fitch previously withdrew the ratings on
the interest-only class X-1 and X-2 certificates.
CABELAS CREDIT 2013-II: DBRS Assigns 'BB' Rating on Cl. D Notes
---------------------------------------------------------------
DBRS Inc. has assigned final ratings to the following classes
issued by Cabela's Credit Card Master Note Trust Series 2013-II:
Series 2013-2 Notes, Class A-1 rated AAA (sf)
Series 2013-2 Notes, Class A-2 rated AAA (sf)
Series 2013-2 Notes, Class B rated 'A' (high) (sf)
Series 2013-2 Notes, Class C rated BBB (sf)
Series 2013-2 Notes, Class D rated BB (sf)
CALLIDUS DEBT IV: Moody's Raises Rating on Class D Notes to Ba1
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Callidus Debt Partners CLO Fund IV,
Ltd.:
$26,500,000 Class B Senior Secured Deferrable Floating Rate Notes
Due 2020, Upgraded to Aaa (sf); previously on July 15, 2013
Upgraded to Aa2 (sf) and Placed Under Review for Possible Upgrade
$25,000,000 Class C Senior Secured Deferrable Floating Rate Notes
Due 2020, Upgraded to A3 (sf); previously on July 15, 2013
Upgraded to Baa2 (sf) and Placed Under Review for Possible Upgrade
$16,000,000 Class D Senior Secured Deferrable Floating Rate Notes
Due 2020, Upgraded to Ba1 (sf); previously on July 15, 2013 Ba3
(sf) Placed Under Review for Possible Upgrade
Moody's also affirmed the ratings of the following notes:
$50,000,000 Class A-1A Revolving Senior Secured Floating Rate
Notes Due 2020 (current outstanding balance of $17,133,926),
Affirmed Aaa (sf); previously on August 25, 2011 Upgraded to Aaa
(sf)
$327,000,000 Class A-1B Senior Secured Floating Rate Notes Due
2020 (current outstanding balance of $112,740,951), Affirmed Aaa
(sf); previously on August 25, 2011 Upgraded to Aaa (sf)
$25,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2020,
Affirmed Aaa (sf); previously on July 15, 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 Class A-1A and A-1B
Notes and an increase in the transaction's overcollateralization
ratios since the September 2012. Moody's notes that the Class A-1A
and A-1B Notes have been paid down by approximately 62% or $215
million since September 2012. Based on the latest trustee report
dated July 7, 2013, the Class A, Class B, Class C and Class D
overcollateralization ratios are reported at 150.3%, 131.9%,
118.3% and 110.9%, respectively, versus September 2012 levels of
126.2%, 117.7%, 110.7% and 106.7%, respectively. Moody's notes
that the July 2013 trustee-reported overcollateralization ratios
do not reflect the payment of $35 million to the Class A-1A and A-
1B notes on the July 17, 2013 payment date.
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 July 2013 trustee
report, the weighted average rating factor is currently 2642
compared to 2565 in September 2012.
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 and Class D Notes announced on July 15, 2013.
At that time, Moody's said that it had upgraded and placed certain
of the issuer's ratings on review primarily as a result of
substantial deleveraging of the senior notes and increases in OC
ratios resulting from high rates of loan collateral prepayments
during the first half of 2013.
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 $245 million, defaulted par of $4.8 million, a
weighted average default probability of 18.11% (implying a WARF of
2633), a weighted average recovery rate upon default of 51.21%,
and a diversity score of 46. 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.
Callidus Debt Partners CLO Fund IV, Ltd., issued in April 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-1A: 0
Class A-1B: 0
Class A-2: 0
Class B: 0
Class C: +2
Class D: +1
Moody's Adjusted WARF + 20% (3160)
Class A-1A: 0
Class A-1B: 0
Class A-2: 0
Class B: -1
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.
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.
CALLIDUS DEBT VII: Moody's Ups Rating on $25MM Cl. E Notes to Ba1
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Callidus Debt Partners CLO Fund VII,
Ltd.:
$24,000,000 Class B Senior Secured Floating Rate Notes Due 2021,
Upgraded to Aaa (sf); previously on July 15, 2013 Upgraded to Aa1
(sf) and Placed Under Review for Possible Upgrade
$33,000,000 Class C Senior Secured Deferrable Floating Rate Notes
Due 2021, Upgraded to Aa3 (sf); previously on July 15, 2013
Upgraded to A2 (sf) and Placed Under Review for Possible Upgrade
$19,500,000 Class D Senior Secured Deferrable Floating Rate Notes
Due 2021, Upgraded to Baa1 (sf); previously on July 15, 2013 Baa3
(sf) Placed Under Review for Possible Upgrade
$25,500,000 Class E Senior Secured Deferrable Floating Rate Notes
Due 2021 (current balance of $21,461,438), Upgraded to Ba1 (sf);
previously on July 15, 2013 Ba2 (sf) Placed Under Review for
Possible Upgrade
Moody's also affirmed the rating of the following notes:
$443,000,000 Class A Senior Secured Floating Rate Notes Due 2021
(current balance of $238,729,214), Affirmed Aaa (sf); previously
on December 20, 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
December 2012. Moody's notes that the Class A Notes have been paid
down by approximately 46% or $203.3 million since December 2012.
Based on Moody's calculations, the Class A/B, Class C, Class D,
and Class E overcollateralization ratios are currently 142.4%,
126.5%, 118.7% and 111.1%, respectively, versus December 2012
levels of 124.1%, 115.9%, 111.6% and 107.1%, respectively.
Moody's also announced that it had concluded its review of its
ratings on the issuer's Class B, Class C, Class D and Class E
Notes announced on July 15, 2013. At that time, Moody's said that
it had upgraded and placed certain of the issuer's ratings on
review for upgrade primarily as a result of substantial
deleveraging of the senior notes and increases in OC ratios
resulting from high rates of loan collateral prepayments during
the first half of 2013.
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 $371 million, defaulted par of $7.4 million, a
weighted average default probability of 17.53% (implying a WARF of
2574), a weighted average recovery rate upon default of 50.33%,
and a diversity score of 47. The default and recovery properties
of the collateral pool are incorporated in cash flow model
analysis where they are subject to stresses as a function of the
target rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Callidus Debt Partners CLO Fund VII, Ltd., issued in November
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% (2059)
Class A: 0
Class B: 0
Class C: +2
Class D: +3
Class E: +1
Moody's Adjusted WARF + 20% (3089)
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 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.
CAPITAL AUTO 2013-3: S&P Assigns 'BB' Rating on Class E Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to Capital
Auto Receivables Asset Trust 2013-3's $1.04 billion asset-backed
notes.
The note issuance is an asset-backed securities transaction backed
by nonprime, fixed-rate retail vehicle installment sales contracts
that are secured by new and used vehicles indirectly originated by
Ally Financial Inc. (f/k/a GMAC Inc.).
The ratings reflect S&P's view of:
-- The availability of approximately 25.0%, 20.7%, 16.7%,
13.2%, and 11.3% credit support, including excess spread,
(as a percentage of the initial aggregate receivables
principal balance) for the class A, B, C, D, and E notes,
respectively, based on stressed cash flow scenarios. These
credit support levels provide approximately 4.5x, 3.7x,
2.8x, 2.0x, and 1.5x its expected net loss ranges under
these stressed cash flow scenarios to the class A, B, C, D,
and E notes, respectively.
-- The timely interest and principal payments made under
stressed cash flow modeling scenarios that are appropriate
to the assigned rating categories.
-- Its expectation that during the amortization phase, under a
moderate ('BBB') stress scenario, our ratings on the class A
and B notes will remain within one rating category of the
assigned ratings and our ratings on the class C and D notes
will remain within two rating categories of the assigned
ratings. This is within the one-category rating tolerance
for the 'AAA (sf)' and 'AA (sf)' rated securities, and
within the two-category tolerance for the 'A (sf)' and
'BBB (sf)' rated securities, as outlined in S&P's credit
stability criteria.
-- The credit enhancement in the form of subordination,
overcollateralization, a reserve account, and excess spread.
During the amortization period, the nonamortizing
overcollateralization and reserve account amount will result
in increased credit enhancement for the notes.
-- The characteristics of the collateral pool being
securitized.
-- 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/1722.pdf
RATINGS ASSIGNED
Capital Auto Receivables Asset Trust 2013-3
Class Rating Type Interest Amount
rate (mil. $)
A-1a AAA (sf) Senior Fixed 95.00
A-1b AAA (sf) Senior Floating 166.00
A-2 AAA (sf) Senior Fixed 266.00
A-3 AAA (sf) Senior Fixed 260.00
A-4 AAA (sf) Senior Fixed 73.01
B AA (sf) Subordinate Fixed 51.06
C A (sf) Subordinate Fixed 48.38
D BBB (sf) Subordinate Fixed 43.00
E(i) BB (sf) Subordinate Fixed 37.63
(i)The class E notes will be retained initially by the depositor.
CAPMARK VII: Moody's Hikes Rating on Class A-2 Notes to 'Ba1'
-------------------------------------------------------------
Moody's has upgraded the ratings of one class and affirmed the
ratings of nine classes of Notes issued by Capmark VII -- CRE Ltd.
The upgrades are due to rapid amortization as a result of greater
than expected recoveries on defaulted assets. The affirmations are
due to the key transaction parameters performing within levels
commensurate with the existing ratings levels. The rating action
is the result of Moody's on-going surveillance of commercial real
estate collateralized debt obligation (CRE CDO CLO) transactions.
Moody's rating action is as follows:
Cl. A-2, Upgraded to Ba1 (sf); previously on Sep 30, 2010
Downgraded to B1 (sf)
Cl. B, Affirmed Caa2 (sf); previously on Sep 30, 2010 Downgraded
to Caa2 (sf)
Cl. C, Affirmed Caa3 (sf); previously on Sep 30, 2010 Downgraded
to Caa3 (sf)
Cl. D, Affirmed Ca (sf); previously on Aug 22, 2012 Downgraded to
Ca (sf)
Cl. E, Affirmed C (sf); previously on Aug 22, 2012 Downgraded to C
(sf)
Cl. F, Affirmed C (sf); previously on Sep 30, 2010 Downgraded to C
(sf)
Cl. G, Affirmed C (sf); previously on Sep 30, 2010 Downgraded to C
(sf)
Cl. H, Affirmed C (sf); previously on Sep 30, 2010 Downgraded to C
(sf)
Cl. J, Affirmed C (sf); previously on Sep 30, 2010 Downgraded to C
(sf)
Cl. K, Affirmed C (sf); previously on Sep 30, 2010 Downgraded to C
(sf)
Ratings Rationale:
Capmark VII -- CRE Ltd. is a static (the reinvestment period ended
in August, 2011) cash CRE CDO transaction backed by a portfolio of
whole loans (100.0% of the pool balance). As of the August 15,
2013 Trustee report, the aggregate note balance of the
transaction, including preferred shares, has decreased to $467.9
million from $1.0 billion at issuance, with the paydown currently
directed to the Class A-2 Notes, as a result of regular
amortization; payments from defaulted asset sales; and from
interest reclassified as principal due to the failure of certain
par value tests.
There are five assets with a par balance of $87.3 million (28.9%
of the current pool balance) that are considered defaulted
securities as of the August 15, 2013 Trustee report. While there
have been limited realized losses on the underlying collateral to
date, Moody's does expect moderate losses to occur once they are
realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has completed updated assessments for the non-Moody's
rated collateral. Moody's modeled a bottom-dollar WARF of 6,173
compared to 6,618 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Baa1-Baa3 (0.0% compared to 0.8% at last
review), Ba1-Ba3 (9.2% compared to 0.0% at last review), B1-B3
(0.0% compared to 9.1% at last review), and Caa1-C (90.8% compared
to 90.1% at last review).
Moody's modeled a WAL of 3.1 years compared to 3.9 years at last
review.
Moody's modeled a fixed WARR of 53.3% compared to 53.6% at last
review.
Moody's modeled a MAC of 30.4% compared to 100.0% at last review.
Moody's review incorporated CDOROM v2.8, one of Moody's CDO rating
models, which was released on March 25, 2013.
The cash flow model, CDOEdge v3.2.1.2, which was released on May
16, 2013, was used to analyze the cash flow waterfall and its
effect on the capital structure of the deal.
Moody's analysis encompasses the assessment of stress scenarios.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
53.3% to 43.3% or up to 63.3% would result in a modeled rating
movement on the rated tranches of 0 to 5 notches downward and 0 to
3 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment 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 hotel sector continues to exhibit growth albeit at a slightly
slower pace. The multifamily sector should remain stable with
moderate growth. Gradual recovery in the office sector continues
and will be assisted in the next quarter when absorption is likely
to outpace completions. However, since office demand is closely
tied to employment, Moody's expects regional employment growth to
provide market differentiation. CBD markets continue to outperform
secondary suburban markets. The retail sector exhibited a slight
reduction in vacancies in the first quarter; the largest drop
since 2005. However, consumers continue to be cautious as
evidenced by sales growth continuing below historical trends.
Across all property sectors, the availability of debt capital
continues to improve with robust securitization activity of
commercial real estate loans supported by a monetary policy of low
interest rates.
Moody's central global macroeconomic outlook indicates the global
economy has lost momentum over the past quarter as it tries to
recover. US GDP growth for 2013 is likely to remain close to 2%,
however US sequestration cuts that came into effect in March may
create a drag on the positive growth in the US private sector.
While the broad economic impact in unclear, the direct effect is
likely to shave 0.4% off US GDP growth in 2013. Continuing from
the previous quarter, Moody's believes that the three most
immediate risks are: i) the risk of an even deeper than currently
expected recession in the euro area, accompanied by deeper credit
contraction, potentially triggered by a further intensification of
the sovereign debt crisis; ii) slower-than-expected recovery in
major emerging markets following the recent slowdown; and iii) an
escalation of geopolitical tensions, resulting in adverse economic
developments.
The methodologies used in this rating were "Moody's Approach to
Rating SF CDOs" published in May 2012, and "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
CETUS ABS 2006-1: Moody's Keeps Ratings After Supp. Indenture
-------------------------------------------------------------
Moody's Investors Service has determined that the entry into a
Supplemental Indenture dated August 20, 2013, by Cetus ABS CDO
2006-1, Ltd. and performance of the activities contemplated
therein will not in and of itself and at this time result in the
withdrawal, reduction or other adverse action with respect to any
current rating (including any private or confidential ratings) by
Moody's of any Class of Notes issued by the Issuer. Moody's does
not express an opinion as to whether the entry into the
Supplemental Indenture could have non-credit-related effects.
The Supplemental Indenture will allow the Collateral Manager, on
behalf of the Issuer, to exercise its enforcement rights to
terminate the Credit Default Swap Agreement in effect between the
Issuer and Citibank N.A., the Credit Default Swap Counterparty. In
reaching its conclusion as to the possible effects of entry into
the Supplemental Indenture on the current Moody's ratings of the
Notes Moody's considered, among other factors, the current and
future interest and principal amounts likely to be paid to
noteholders.
The principal methodology used in reaching its conclusion and in
monitoring the ratings of the Notes issued by the Issuer is
"Moody's Approach to Rating SF CDOs", published in May 2012.
Other methodologies and factors that may have been considered in
the process of rating the Notes issued by the Issuer can also be
found in the Rating Methodologies sub-directory on Moody's
website. Moody's Investors Service did not receive or take into
account a third-party due diligence report on the underlying asset
or financial instruments related to the monitoring of the
transaction in the past six months.
Moody's carries these ratings for Cetus ABS 2006-1:
$100,000,000 Class A-1 Floating Rate Senior Secured Notes Due
2046; C
$30,000,000 Class D Floating Rate Deferrable Junior Subordinate
Secured Notes Due 2046; C
$40,000,000 Class C Floating Rate Deferrable Junior Subordinate
Secured Notes Due 2046; C
$50,000,000 Class A-2 Floating Rate Senior Secured Notes Due 2046;
C
$55,000,000 Class B Floating Rate Deferrable Subordinate Secured
Notes Due 2046; C
CIFC FUNDING 2006-I: Moody's Keeps Ba2 Rating on Cl. B-2L Notes
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by CIFC Funding 2006-I, Ltd.:
$30,500,000 Class A-3L Floating Rate Notes Due 2020, Upgraded to
Aa2 (sf); previously on July 15, 2013 A2 (sf) Placed Under Review
for Possible Upgrade
$20,000,000 Class B-1L Floating Rate Notes Due 2020, Upgraded to
Baa1 (sf); previously on September 11, 2012 Upgraded to Baa3 (sf)
Moody's also affirmed the ratings of the following notes:
$100,000,000 Class A-1LR Variable Funding Notes Due 2020 (current
outstanding balance of $50,944,714), Affirmed Aaa (sf); previously
on September 11, 2012 Upgraded to Aaa (sf)
$293,000,000 Class A-1L Floating Rate Due 2020 (current
outstanding balance of $151,878,758), Affirmed Aaa (sf);
previously on September 11, 2012 Upgraded to Aaa (sf)
$26,500,000 Class A-2L Floating Rate Due 2020, Affirmed Aaa (sf);
previously on July 15, 2013 Upgraded to Aaa (sf)
$23,000,000 Class B-2L Floating Rate Due 2020 (current outstanding
balance of $21,966,922), Affirmed Ba2 (sf); previously on
September 11, 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 Class A-1LR and A-1L
Notes and an increase in the transaction's overcollateralization
ratios since the rating action in September 2012. Moody's notes
that the Class A-1LR and A-1L Notes have been paid down by
approximately 48% or 186 million since September 2012. Based on
the latest trustee report dated July 10, 2013, the Senior Class A,
Class A, Class B-1L and Class B-2L overcollateralization ratios
are reported at 132.03%, 119.67%, 112.75% and 106.01%,
respectively, versus August 2012 levels of 123.40, 115.04%,
110.14% and 105.23%, respectively. Moody's notes that the July
trustee-reported overcollateralization ratios do not reflect the
payment of $66 million to the Class A-1LR and A-1L Notes on the
July 22, 2013 payment date.
In taking the foregoing actions, Moody's also announced that it
had concluded its review of its rating on the issuer's Class A-3L
Notes announced on July 15, 2013. At that time, Moody's said that
it had upgraded and placed certain of the issuer's ratings on
review primarily as a result of substantial deleveraging of the
senior notes and increases in OC ratios resulting from high rates
of loan collateral prepayments during the first half of 2013.
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 $318 million, defaulted par of $8.3 million, a
weighted average default probability of 20.52% (implying a WARF of
3013), a weighted average recovery rate upon default of 50.73%,
and a diversity score of 66. The default and recovery properties
of the collateral pool are incorporated in cash flow model
analysis where they are subject to stresses as a function of the
target rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
CIFC Funding 2006-I, Ltd. issued in August 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans, with significant exposure to middle market
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.
Moody's also notes that a material proportion of the collateral
pool includes debt obligations whose credit quality has been
assessed through Moody's Credit Estimates ("CEs"). Moody's
analysis reflects the application of certain adjustments with
respect to the default probabilities associated with CEs.
Specifically, Moody's assumed an equivalent of Caa3 for assets
with CEs that were not updated within the last 15 months, which
represent approximately 0.9% of the collateral pool.
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% (2411)
Class A-1LR: 0
Class A-1L: 0
Class A-2L: 0
Class A-3L: +2
Class B-1L: +2
Class B-2L: 0
Moody's Adjusted WARF + 20% (3616)
Class A-1LR: 0
Class A-1L: 0
Class A-2L: 0
Class A-3L: -2
Class B-1L: -2
Class B-2L: -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.
3) Exposure to credit estimates: The deal is exposed to a large
number of securities whose default probabilities are assessed
through credit estimates. In the event that Moody's is not
provided the necessary information to update the credit estimates
in a timely fashion, the transaction may be impacted by any
default probability adjustments Moody's may assume in lieu of
updated credit estimates.
COMM 2013-CCRE10: Moody's Rates Class F Certificates 'B2'
---------------------------------------------------------
Moody's Investors Service has assigned ratings to fifteen classes
of CMBS securities, issued by COMM 2013-CCRE10 Mortgage Trust,
Commercial Mortgage Pass-Through Certificates:
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Definitive Rating Assigned Aaa (sf)
Cl. X-A, Definitive Rating Assigned Aaa (sf)
Cl. A-3FL, Definitive Rating Assigned Aaa (sf)
Cl. A-3FX, Definitive Rating Assigned Aaa (sf)
Cl. A-M, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. PEZ, Definitive Rating Assigned A1 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba2 (sf)
Cl. F, Definitive Rating Assigned B2 (sf)
Ratings Rationale:
The Certificates are collateralized by 59 fixed rate loans secured
by 87 properties. The ratings are based on the collateral and the
structure of the transaction.
Moody's CMBS ratings methodology combines both commercial real
estate and structured finance analysis. Based on commercial real
estate analysis, Moody's determines the credit quality of each
mortgage loan and calculates an expected loss on a loan specific
basis. Under structured finance, the credit enhancement for each
certificate typically depends on the expected frequency, severity,
and timing of future losses. Moody's also considers a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors:
1) Moody's assessment of the probability of default, which is
largely driven by each loan's DSCR, and 2) Moody's assessment of
the severity of loss upon a default, which is largely driven by
each loan's LTV ratio.
The Moody's Actual DSCR of 1.71X (1.48X excluding credit assessed
loans) is greater than the 2007 conduit/fusion transaction average
of 1.31X. The Moody's Stressed DSCR of 1.11X (1.04X excluding
credit assessed loans) is greater than the 2007 conduit/fusion
transaction average of 0.92X.
Moody's Trust LTV ratio of 97.5% (102.9% excluding credit assessed
loans) is lower than the 2007 conduit/fusion transaction average
of 110.6%.
Moody's also considers both loan level diversity and property
level diversity when selecting a ratings approach. With respect to
loan level diversity, the pool's loan level (includes cross
collateralized and cross defaulted loans) Herfindahl Index is 29
(33 excluding credit assessed loans). The transaction's loan level
diversity is better than Herfindahl scores found in most multi-
borrower transactions issued since 2009. With respect to property
level diversity, the pool's property level Herfindahl Index is 35
(43 excluding credit assessed loans). The transaction's property
diversity profile is better than the indices calculated in most
multi-borrower transactions issued since 2009.
This deal has a super-senior Aaa class with 30% credit
enhancement. Although the additional enhancement offered to the
senior most certificate holders provides additional protection
against pool loss, the super-senior structure is credit negative
for the certificate that supports the super-senior class. If the
support certificate were to take a loss, the loss would have the
potential to be quite large on a percentage basis. Thin tranches
need more subordination to reduce the probability of default in
recognition that their loss-given default is higher. This
adjustment helps keep expected loss in balance and consistent
across deals. The transaction was structured with additional
subordination at class A-M to mitigate the potential increased
severity to class A-M.
Moody's also grades properties on a scale of 1 to 5 (best to
worst) and considers those grades when assessing the likelihood of
debt payment. The factors considered include property age, quality
of construction, location, market, and tenancy. The pool's
weighted average property quality grade is 2.29 which is lower
than the indices calculated in most multi-borrower transactions
since 2009.
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 Fusion U.S. CMBS
Transactions" published in April 2005. The methodology used in
rating Classes X-A, and X-B was "Moody's Approach to Rating
Structured Finance Interest-Only Securities" published in February
2012.
Moody's analysis employs the excel-based CMBS Conduit Model v2.62
which derives credit enhancement levels based on an aggregation of
adjusted loan level proceeds derived from Moody's loan level DSCR
and LTV ratios. Major adjustments to determining proceeds include
loan structure, property type, sponsorship and diversity. Moody's
analysis also uses the CMBS IO calculator version 1.1 which
references the following inputs to calculate the proposed IO
rating based on the published methodology: original and current
bond ratings and credit estimates; original and current bond
balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
The V Score for this transaction is assessed as Low/Medium, the
same as the V score assigned to the U.S. Conduit and CMBS sector.
This reflects typical volatility with respect to the critical
assumptions used in the rating process as well as an average
disclosure of securitization collateral and ongoing performance.
Moody's V Scores provide a relative assessment of the quality of
available credit information and the potential variability around
the various inputs to a rating determination. The V Score ranks
transactions by the potential for significant rating changes owing
to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling, and the transaction governance that
underlie the ratings. V Scores apply to the entire transaction
(rather than individual tranches).
Moody's Parameter Sensitivities: If Moody's value of the
collateral used in determining the initial rating were decreased
by 5.0%, 14.5%, and 23%, the model-indicated rating for the
currently rated junior Aaa class would be Aa1, Aa2, Aa2,
respectively. Parameter Sensitivities are not intended to measure
how the rating of the security might migrate over time; rather
they are designed to provide a quantitative calculation of how the
initial rating might change if key input parameters used in the
initial rating process differed. The analysis assumes that the
deal has not aged. Parameter Sensitivities only reflect the
ratings impact of each scenario from a quantitative/model-
indicated standpoint. Qualitative factors are also taken into
consideration in the ratings process, so the actual ratings that
would be assigned in each case could vary from the information
presented in the Parameter Sensitivity analysis.
COMMERCIAL MORTGAGE 1999-C1: Moody's Cuts X Certs Rating to Caa2
----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of one class and
affirmed eight classes of Commercial Mortgage Asset Trust ,
Commercial Mortgage Pass-Through Certificates, Series 1999-C1 as
follows:
Cl. C, Affirmed Aaa (sf); previously on Jan 28, 2013 Affirmed Aaa
(sf)
Cl. D, Affirmed Baa3 (sf); previously on Jan 28, 2013 Downgraded
to Baa3 (sf)
Cl. E, Affirmed B1 (sf); previously on Jan 28, 2013 Downgraded to
B1 (sf)
Cl. F, Affirmed Ca (sf); previously on Jan 28, 2013 Downgraded to
Ca (sf)
Cl. G, Affirmed C (sf); previously on Jan 28, 2013 Downgraded to C
(sf)
Cl. H, Affirmed C (sf); previously on Jan 28, 2013 Affirmed C (sf)
Cl. J, Affirmed C (sf); previously on Jan 28, 2013 Affirmed C (sf)
Cl. K, Affirmed C (sf); previously on Jan 28, 2013 Affirmed C (sf)
Cl. X, Downgraded to Caa2 (sf); previously on Jan 28, 2013
Downgraded to B3 (sf)
Ratings Rationale:
The downgrade of the IO Class, Class X, is a result of the decline
in the weighted average rating factor (WARF) of its referenced
classes.
The affirmations of classes C, D and E 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
ratings of Classes F through K are consistent with Moody's
expected loss and thus are 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 39.7% of
the current balance. At last review, Moody's base expected loss
was 21.4%. Realized losses have remained the same at 3.8% of the
original balance since the prior review. Moody's base expected
loss plus realized losses is now 11.0% of the original pooled
balance compared to 10.3% 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 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 currently uses a Gaussian copula model to evaluate pools
of credit tenant loans (CTLs) within CMBS transactions. Moody's
public CDO rating model CDOROMv2.8-9 is used to generate a
portfolio loss distribution to assess the ratings. Under Moody's
CTL approach, the rating of a transaction's certificates is
primarily based on the senior unsecured debt rating (or the
corporate family rating) of the tenant, usually an investment
grade rated company, leasing the real estate collateral supporting
the bonds. This tenant's credit rating is the key factor in
determining the probability of default on the underlying lease.
The lease generally is "bondable", which means it is an absolute
net lease, yielding fixed rent paid to the trust through a lock-
box, sufficient under all circumstances to pay in full all
interest and principal of the loan. The leased property should be
owned by a bankruptcy-remote, special purpose borrower, which
grants a first lien mortgage and assignment of rents to the
securitization trust. The dark value of the collateral, which
assumes the property is vacant or "dark", is then examined to
determine a recovery rate upon a loan's default. Moody's also
considers the overall structure and legal integrity of the
transaction.
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 compared to 12 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 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. Moody's prior transaction
review is summarized in a press release dated January 28, 2013.
Deal Performance:
As of the July 17, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 82% to $425.1
million from $2.4 billion at securitization. The Certificates are
collateralized by 55 mortgage loans ranging in size from less than
1% to 29% of the pool, with the top ten non-defeased loans
representing 58% of the pool. Eleven loans, representing 24% of
the pool, have defeased and are secured by U.S. Government
securities. The pool has no loans with investment grade credit
assessments.
Fourteen loans, representing 11% 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-eight loans have been liquidated from the pool, resulting
in an aggregate realized loss of $91.1 million (45% loss severity
on average). Five loans, representing 41% of the pool, are
currently in special servicing. The largest specially serviced
loan is The Source Loan ($124 million -- 29.2% of the pool), which
is secured by a 521,000 square foot (SF) regional mall located in
Westbury, New York. The center, located on Long Island and known
as "The Mall at The Source", was formerly anchored by Fortunoff, a
high-end department store specializing in the sale of house wares
and jewelry. As was reported at prior Moody's reviews, the
departure of the anchor and unfavorable economic conditions have
precipitated the departure of other major retailers at the mall.
Two of the largest tenants, Saks Fifth Avenue Off 5th and
Nordstrom Rack, also vacated the property and opened stores at a
nearby power center. The mall's inline space was 57% leased as of
June 2013. The loan transferred to special servicing in January
2009 for imminent default, which occurred in March 2009. Title to
the property was obtained in August 2012. The special servicer is
currently evaluating sales strategies. The servicer has recognized
a $93.8 million appraisal reduction.
The second-largest specially-serviced loan is the Baldwin Complex
Loan ($39.6 million -- 9.3% share of the pool), which is secured
by a 455,000 SF office property located in the Cincinnati, Ohio
CBD. The loan was transferred to special servicing in October 2010
due to imminent default and a receiver was appointed in February
2012. As of January 2013, the property was 50% leased. The
property's second largest tenant, Christ Hospital, currently
occupies 31,580 SF (7% of Net Rentable Area) and is vacating at
its lease expiration of December 31, 2014. The servicer has
recognized a $38.5 million appraisal reduction.
The third-largest specially-serviced loan is Centerpark One Office
Building Loan ($9.1 million -- 2.1% share of the pool), which is
secured by a 120,000 SF office property located in Calverton,
Maryland. Moody's assumed an aggregate $163 million estimated loss
(93% expected loss overall) for the specially serviced loans.
Moody's has assumed a high default probability for two poorly
performing loans representing 1.5% of the pool and has estimated
an aggregate $964,000 loss (15% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2012 operating results for 85%
of the pool's non-specially serviced and non-defeased loans.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 57% compared to 60% 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 10%.
Excluding special serviced and troubled loans, Moody's actual and
stressed DSCRs are 1.73X and 2.24X, respectively, compared to
1.64X and 2.15X 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 11.5% of the pool. The
largest conduit loan is the Airport Plaza Loan ($22.0 million --
5.2% of the pool), which is secured by a 195,363 SF office
building located in Crystal City, Virginia. Tenants include
Lockheed Martin and Northrop Grumman. As of June 2013, property
was 84% leased. The loan benefits from amortization. Moody's LTV
and stressed DSCR are 77% and 1.48X, respectively, compared to 96%
and 1.18X at last review.
The second largest conduit loan is the Robertson Plaza Loan ($19.4
million -- 4.6% of the pool), which is secured by a 168,285 SF
office building located in Los Angeles, California. As of June
2013, property was 99% leased compared to 94% at securitization.
The loan continues to improve and benefits from amortization.
Borrower has not indicated a pay down for this loan. Moody's LTV
and stressed DSCR are 39% and 2.75X, respectively, compared to 41%
and 2.66X at last review.
The third largest conduit loan is the Spring Properties, Inc. Loan
($7.4 million -- 1.7% of the pool), which is secured by two
properties, Symantec Buildings which has two office buildings and
Planning Mill which has six mixed-use buildings, located in
Eugene, Oregon. As of March 2013, weighted average occupancy was
80%. Borrower has not indicated a pay down for this loan. Moody's
LTV and stressed DSCR are 74% and 1.47X, respectively, compared to
87% and 1.24X at last review.
The CTL component includes nine loans secured by properties leased
under bondable leases. Moody's provides ratings for 84% of the CTL
component and has updated its internal credit assessments for the
remaining corporate credits. The CTL component includes R.R.
Donnelley & Sons Company (56% of the CTL component, Moody's Senior
Unsecured Rating Ba2 -- negative outlook), Interface, Inc. (28% of
the CTL component, Moody's Senior Unsecured Rating Ba3 -- stable
outlook) and Dairy Mart Convenience Stores, Inc. (16% of the CTL
component).
CONSECO FINANCE: Moody's Takes Action on $106MM of Subprime RMBS
----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of eight
tranches, confirmed the ratings of eight tranches, and upgraded
the ratings of seven tranches backed by subprime RMBS loans,
issued by Conseco Finance Home Equity Loan Trust.
Complete rating actions are as follows:
Issuer: Conseco Finance Home Equity Loan Trust 2001-C
Cl. A-5, Downgraded to A3 (sf); previously on Jan 10, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. M-1, Downgraded to A3 (sf); previously on Jan 10, 2013 A1 (sf)
Placed Under Review for Possible Downgrade
Cl. M-2, Upgraded to Baa2 (sf); previously on May 2, 2012
Confirmed at Ba1 (sf)
Cl. B-1, Upgraded to Ba2 (sf); previously on May 2, 2012 Confirmed
at B3 (sf)
Cl. B-2, Upgraded to B3 (sf); previously on May 2, 2012 Confirmed
at Ca (sf)
Issuer: Conseco Finance Home Equity Loan Trust 2001-D
Cl. A-5, Confirmed at Aaa (sf); previously on Jan 10, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. M-1, Downgraded to A3 (sf); previously on Jan 10, 2013 A2 (sf)
Placed Under Review for Possible Downgrade
Cl. M-2, Upgraded to B2 (sf); previously on May 14, 2013 Caa1 (sf)
Placed Under Review Direction Uncertain
Issuer: Conseco Finance Home Equity Loan Trust 2002-A
Cl. A-5, Downgraded to A3 (sf); previously on Jan 10, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. M-1, Downgraded to A3 (sf); previously on Jan 10, 2013 A2 (sf)
Placed Under Review for Possible Downgrade
Cl. M-2, Upgraded to Ba1 (sf); previously on May 25, 2012
Confirmed at B1 (sf)
Cl. B-1, Upgraded to Caa3 (sf); previously on Mar 30, 2011
Downgraded to Ca (sf)
Issuer: Conseco Finance Home Equity Loan Trust 2002-B
Cl. A-3, Downgraded to A1 (sf); previously on Jan 10, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. M-1, Downgraded to A3 (sf); previously on Jan 10, 2013 A1 (sf)
Placed Under Review for Possible Downgrade
Cl. M-2, Confirmed at Ba3 (sf); previously on May 14, 2013 Ba3
(sf) Placed Under Review Direction Uncertain
Cl. B-1, Confirmed at Caa3 (sf); previously on May 14, 2013 Caa3
(sf) Placed Under Review Direction Uncertain
Issuer: Conseco Finance Home Equity Loan Trust 2002-C
Cl. AV-1, Confirmed at Aaa (sf); previously on Jan 10, 2013 Aaa
(sf) Placed Under Review for Possible Downgrade
Cl. MV-1, Downgraded to A3 (sf); previously on Jan 10, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. MV-2, Confirmed at Baa3 (sf); previously on May 14, 2013 Baa3
(sf) Placed Under Review Direction Uncertain
Cl. BF-1, Confirmed at A3 (sf); previously on May 14, 2013 A3 (sf)
Placed Under Review Direction Uncertain
Cl. BF-2, Upgraded to Baa3 (sf); previously on May 14, 2013 Ba2
(sf) Placed Under Review Direction Uncertain
Cl. BV-1, Confirmed at B2 (sf); previously on May 14, 2013 B2 (sf)
Placed Under Review Direction Uncertain
Cl. BV-2, Confirmed at B3 (sf); previously on May 14, 2013 B3 (sf)
Placed Under Review Direction Uncertain
Ratings Rationale:
The actions are a result of the recent performance of the
underlying pools and reflect Moody's updated loss expectations on
the pools. The downgrades are a result of weak interest shortfall
reimbursement mechanism. The upgrades are due to improvement in
collateral performance and/ or build-up in credit enhancement. The
rating actions on Conseco 2001-D, 2002-B, and 2002-C also reflect
correction of errors in the Structured Finance Workstation (SFW)
cash flow models previously used by Moody's in rating these
transactions.
The rating actions for Conseco 2002-A and 2002-B deals take into
account that they are undercollateralized. The junior most bond,
B2, is expected to absorb the losses on the underlying collateral.
The bond administrator is reporting class B-2 balances both
adjusted and not-adjusted for the underlying losses. However, till
date, the bond administrator has calculated interest payments to
the B2 class on the balance not adjusted for losses. As a result,
the other bonds in these two deals are negatively impacted as a
larger share of the cash collections is diverted to pay interest
on class B-2.
The cash flow models used in the previous rating actions for
Conseco 2001-D, 2002-B, and 2002-C had incorrectly applied
separate interest and principal waterfalls. In the impacted deals,
all collected principal and interest is now commingled into one
payment waterfall to pay all interest due on bonds first, and then
to pay principal in accordance with the Pooling and Servicing
Agreement. With the commingling of funds, principal proceeds can
be used to pay accrued interest, which could result in reduced
principal recovery for the bonds outstanding. Due to the discovery
of these errors, eight tranches from these deals were placed on
review on May 14, 2013. The errors have now been corrected, and
these rating actions reflect the changes.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in June 2013.
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
8.2% in July 2012 to 7.4% in July 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.
CREDIT SUISSE 2007-C3: Moody's Lowers Ratings on Two Cert Classes
-----------------------------------------------------------------
Moody's affirmed eleven classes and downgraded two classes of
Credit Suisse Commercial Mortgage Trust, Commercial Mortgage Pass-
Through Certificates, Series 2007-C3 as follows:
Cl. A-1-A1, Affirmed Aa2 (sf); previously on Nov 4, 2010
Downgraded to Aa2 (sf)
Cl. A-1-A2, Affirmed Aa2 (sf); previously on Nov 4, 2010
Downgraded to Aa2 (sf)
Cl. A-AB, Affirmed Aa2 (sf); previously on Nov 4, 2010 Downgraded
to Aa2 (sf)
Cl. A-4, Affirmed Aa2 (sf); previously on Nov 4, 2010 Downgraded
to Aa2 (sf)
Cl. A-M, Downgraded to Ba1 (sf); previously on Sep 6, 2012
Downgraded to Baa2 (sf)
Cl. A-J, Affirmed Caa2 (sf); previously on Sep 6, 2012 Downgraded
to Caa2 (sf)
Cl. B, Affirmed Caa3 (sf); previously on Sep 6, 2012 Downgraded to
Caa3 (sf)
Cl. C, Affirmed C (sf); previously on Sep 6, 2012 Downgraded to C
(sf)
Cl. D, Affirmed C (sf); previously on Sep 6, 2012 Downgraded to C
(sf)
Cl. E, Affirmed C (sf); previously on Nov 4, 2010 Downgraded to C
(sf)
Cl. F, Affirmed C (sf); previously on Nov 4, 2010 Downgraded to C
(sf)
Cl. G, Affirmed C (sf); previously on Nov 4, 2010 Downgraded to C
(sf)
Cl. A-X, Downgraded to B2 (sf); previously on Sep 6, 2012
Downgraded to B1 (sf)
Ratings Rationale:
The affirmations of the four investment grade principal and
interest classes are due to stable credit support from pay downs
and amortization. The affirmations of the seven below investment
grade principal and interest classes are due to Moody's expected
loss remaining in line with last review. The downgrade of one
principal and interest class is due to concerns about future
interest shortfalls and anticipated losses from loans in special
servicing and on the servicer's watchlist. Interest shortfalls now
total $23.8 million and are impacting Classes A-J through T.
The downgrade of the one IO Class, Class A-X, is due to the
indicated WARF for the reference classes.
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 14.6% of
the current balance. At last review, Moody's base expected loss
was 11.2%. Moody's base expected loss plus realized losses is now
16.9% of the original pooled balance compared to 15.3% 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 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 51 compared to 53 at last review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through 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 September 6, 2012.
Deal Performance:
As of the July 17, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 34% to $1.8 billion
from $2.7 billion at securitization. The Certificates are
collateralized by 187 mortgage loans ranging in size from less
than 1% to 9% of the pool. Two loans, representing 0.3% of the
pool, have defeased and are backed by U.S. Government securities.
There are no loans with credit assessments.
Fifty-one loans, representing 29.3% 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.
Forty-four loans have been liquidated from the pool, resulting in
an aggregate realized loss of $193.6 million (28% loss severity).
Currently 21 loans, representing 15% of the pool, are in special
servicing. The specially serviced loans are represented by a mix
of property types. Moody's has estimated an aggregate $93.7
million loss (41% expected loss on average) for 20 of the
specially serviced loans.
Moody's has assumed a high default probability for 50 poorly
performing loans representing 30.7% of the pool and has estimated
an aggregate $130.8 million loss (24% expected loss based on a 54%
probability default) from these troubled loans.
Moody's was provided with full year 2012 and partial year 2013
operating results for 93% and 52% of the performing pool
respectively. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 107% compared to 112% at last full
review. Moody's net cash flow reflects a weighted average haircut
of 10.5% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.1%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.32X and 0.97X, respectively, compared to
1.31X and 0.91X, respectively, at last full 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 is the Main Plaza Loan ($160.7 million -- 9% of
the pool), which is secured by two 12-story office buildings
located in Irvine, California. The two buildings total 583,000 SF.
As of March 2012, the properties were 84% leased compared to 81%
at last review. In July 2010 the loan had been transferred into
special servicing for imminent default when the borrower requested
a loan modification. The borrower subsequently withdrew the
modification request and the loan returned to the master servicer
in June 2011 and has remained current. Due to ongoing weak
property performance, Moody's has recognized this loan as a
troubled loan. Moody's LTV and stressed DSCR are 184% and 0.53X,
the same as at last review.
The second largest loan is the Ardenwood Corporate Park ($52.5
million -- 3% of the pool), which is secured by a research and
development property located in Fremont, California. As of Spring
2013, the property was only 52% leased compared to 100% leased at
last review. The lease for the largest tenant, Logitech (26% of
the net rentable area (NRA), expired March 2013 and they did not
renew. Moody's stressed the cash flow to reflect the leasing
challenge facing this property. Moody's LTV and stressed DSCR are
114% and 0.9X, respectively, compared to 96% and 1.07X at last
review.
The third largest loan is the Wedgewood South Loan ($50.0 million
-- 3% of the pool), which is secured by a 463,846 SF industrial
property located in Frederick, Maryland. Current occupancy is 87%
compared to 100% as of year-end 2012 and financial performance
improved between 2011 and 2012. Moody's LTV and stressed DSCR are
106% and 0.87X, respectively, compared to 110% and 0.84X at last
review.
CREST 2002-1: Moody's Affirms 'Caa2' Ratings on Two Note Classes
----------------------------------------------------------------
Moody's has affirmed the ratings of two classes of Notes issued by
Crest 2002-1, Ltd. due to the key transaction parameters
performing within levels commensurate with existing ratings
levels. The increase in undercollateralization since last review
was offset by a combination of regular amortization and the
redirection of interest as principal as a result of the failure of
certain par value coverage tests. The rating action is the result
of Moody's on-going surveillance of commercial real estate
collateralized debt obligation (CRE CDO and Re-REMIC)
transactions.
Moody's rating action is as follows:
Class B-1 Second Priority Fixed Rate Term Notes, Affirmed Caa2
(sf); previously on Sep 26, 2012 Downgraded to Caa2 (sf)
Class B-2 Second Priority Floating Rate Term Notes, Affirmed Caa2
(sf); previously on Sep 26, 2012 Downgraded to Caa2 (sf)
Ratings Rationale:
Crest 2002-1, Ltd. is a static cash transaction backed by a
portfolio of commercial mortgage backed securities (CMBS) (80.0%
of the pool balance) and real estate investment trust (REIT) debt
(20.0%). As of the July 31, 2013 Trustee report, the aggregate
Note balance of the transaction, including preferred shares, was
$158 million down from $500 million at issuance, with the paydown
directed to the Class B Notes, as a result of amortization of the
underlying collateral combined with the failure of certain par
value coverage tests.
There are six assets with a par balance of $20.2 million (23.9% of
the current pool balance) that are considered defaulted securities
as of the July 31, 2013 Trustee report. All of these assets (100%
of the defaulted balance) are CMBS. While there have been no
realized losses to the deal, Moody's does expect moderate implied
losses to occur once they are realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has completed updated assessments for the non-Moody's
rated collateral. Moody's modeled a bottom-dollar WARF of 5,136
compared to 5,787 at last review. The current distribution of
Moody's rated collateral and assessments for non-Moody's rated
collateral is as follows: Aaa-Aa3 (0.0% the same as at last
review), A1-A3 (2.1% compared to 2.0% at last review), Baa1-Baa3
(22.2% compared to 25.9% at last review), Ba1-Ba3 (5.4% compared
to 3.7% at last review), B1-B3 (15.0% compared to 17.6% at last
review), and Caa1-C (55.2% compared to 50.8% at last review).
Moody's modeled a WAL of 3.6 years compared to 3.3 years at last
review. The current WAL is based upon assumptions made on
extensions.
Moody's modeled a fixed WARR of 11.6% compared to 12.6% at last
review.
Moody's modeled a MAC of 16.4% compared to 12.7% at last review.
Moody's review incorporated CDOROM v2.8, one of Moody's CDO rating
models, which was released on March 25, 2013.
The cash flow model, CDOEdge v3.2.1.2, which was released on May
16, 2013, was used to analyze the cash flow waterfall and its
effect on the capital structure of the deal.
Moody's analysis encompasses the assessment of stress scenarios.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption down from
11.6% to 1.6% or up to 21.6% would result in a modeled rating
movement on the rated tranches of 0 notches downward and 1 notch
upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment 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 hotel sector continues to exhibit growth albeit at a slightly
slower pace. The multifamily sector should remain stable with
moderate growth. Gradual recovery in the office sector continues
and will be assisted in the next quarter when absorption is likely
to outpace completions. However, since office demand is closely
tied to employment, Moody's expects regional employment growth to
provide market differentiation. CBD markets continue to outperform
secondary suburban markets. The retail sector exhibited a slight
reduction in vacancies in the first quarter; the largest drop
since 2005. However, consumers continue to be cautious as
evidenced by sales growth continuing below historical trends.
Across all property sectors, the availability of debt capital
continues to improve with robust securitization activity of
commercial real estate loans supported by a monetary policy of low
interest rates.
Moody's central global macroeconomic outlook indicates the global
economy has lost momentum over the past quarter as it tries to
recover. US GDP growth for 2013 is likely to remain close to 2%,
however US sequestration cuts that came into effect in March may
create a drag on the positive growth in the US private sector.
While the broad economic impact is unclear, the direct effect is
likely to shave 0.4% off US GDP growth in 2013. Continuing from
the previous quarter, Moody's believes that the three most
immediate risks are: i) the risk of an even deeper than currently
expected recession in the euro area, accompanied by deeper credit
contraction, potentially triggered by a further intensification of
the sovereign debt crisis; ii) slower-than-expected recovery in
major emerging markets following the recent slowdown; and iii) an
escalation of geopolitical tensions, resulting in adverse economic
developments.
The methodologies used in this rating were "Moody's Approach to
Rating SF CDOs" published in May 2012, and "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
DEL MAR I: Moody's Affirms 'Ba3' Rating on $13MM Class E Notes
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Del Mar CLO I, Ltd.:
$15,575,000 Class C Deferrable Floating Rate Notes Due 2018,
Upgraded to Aa1 (sf); previously on July 15, 2013 Upgraded to Aa3
(sf) and Placed Under Review for Possible Upgrade
Moody's also affirmed the ratings of the following notes:
$75,000,000 Class A-1 Floating Rate Notes Due 2018 (current
outstanding balance of $19,702,249.72), Affirmed Aaa (sf);
previously on August 22, 2011 Upgraded to Aaa (sf)
$250,000 Class A-2 Floating Rate Notes Due 2018 (current
outstanding balance of $65,249.72), Affirmed Aaa (sf); previously
on August 22, 2011 Upgraded to Aaa (sf)
$180,250,000 Class A-3 Floating Rate Notes Due 2018 (current
outstanding balance of $47,351,073.46), Affirmed Aaa (sf);
previously on August 22, 2011 Upgraded to Aaa (sf)
$23,625,000 Class B Floating Rate Notes Due 2018, Affirmed Aaa
(sf); previously on July 15, 2013 Upgraded to Aaa (sf)
$13,125,000 Class E Deferrable Floating Rate Notes Due 2018
(current outstanding balance of $12,020,463.72), Affirmed Ba3
(sf); previously on August 22, 2011 Upgraded to Ba3 (sf)
Lastly, Moody's confirmed the rating of the following notes:
$15,050,000 Class D Deferrable Floating Rate Notes Due 2018,
Confirmed at Baa3 (sf); previously on July 15, 2013 Upgraded to
Baa3 (sf) and Placed Under Review for Possible Upgrade
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
July 2012. Moody's notes that the Class A Notes have been paid
down by approximately 65% or $126 million since July 2012. Based
on the latest trustee report dated July 24, 2013, the Class A/B,
Class C, Class D and Class E overcollateralization ratios are
reported at 146.2%, 128.2%, 114.6% and 105.7%, respectively,
versus July 2012 levels of 124.1%, 115.7%, 108.7% and 103.7%,
respectively. Moody's notes the reported July
overcollateralization ratios do not reflect the August 1, 2013
payment of $20.4 million to the Class A Notes.
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 July 2013 trustee
report, the weighted average rating factor is currently 2715
compared to 2523 in July 2012. Despite the increase in the
overcollateralization ratio of the Class D Notes, Moody's
confirmed the rating of the Class D Notes due to deterioration in
the credit quality of the portfolio.
In taking these actions, Moody's also announced that it had
concluded its review of its ratings on the issuer's Class C Notes
and Class D Notes announced on July 15, 2013. At that time,
Moody's said that it had upgraded and placed certain of the
issuer's ratings on review primarily as a result of substantial
deleveraging of the senior notes and increases in OC ratios
resulting from high rates of loan collateral prepayments during
the first half of 2013.
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 balance of
$135.2 million, defaulted par of $9.6 million, a weighted average
default probability of 17.61% (implying a WARF of 2687), a
weighted average recovery rate upon default of 49.28%, and a
diversity score of 34. 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.
Del Mar CLO I, 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% (2149)
Class A-1: 0
Class A-3: 0
Class A-3: 0
Class B: 0
Class C: +1
Class D: +3
Class E: +1
Moody's Adjusted WARF + 20% (3224)
Class A-1: 0
Class A-3: 0
Class A-3: 0
Class B: 0
Class C: -3
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
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.
DENALI CAPITAL VI: Moody's Affirms 'Ba3' Rating on Cl. B-2L Notes
-----------------------------------------------------------------
Moody's Investors Service has confirmed the ratings of the
following notes:
$24,000,000 Class A-3L Floating Rate Notes, Confirmed at Aa1 (sf);
previously on July 15, 2013 Upgraded to Aa1 (sf) and Placed Under
Review for Possible Upgrade
$19,000,000 Class B-1L Floating Rate Notes, Confirmed at Baa1
(sf); previously on July 15, 2013 Baa1 (sf) Placed Under Review
for Possible Upgrade
Moody's also affirmed the ratings of the following notes:
$277,000,000 Class A-1L Floating Rate Notes (current outstanding
balance of $62,485,757), Affirmed Aaa (sf); previously on April 4,
2013 Affirmed Aaa (sf)
$100,000,000 Class A-1LR Variable Funding Notes (current
outstanding balance of $22,558,035), Affirmed Aaa (sf); previously
on April 4, 2013 Affirmed Aaa (sf)
$27,000,000 Class A-2L Floating Rate Notes, Affirmed Aaa (sf);
previously on April 4, 2013 Upgraded to Aaa (sf)
$14,000,000 Class B-2L Floating Rate Notes, Affirmed Ba3 (sf);
previously on April 4, 2013 Affirmed Ba3 (sf)
$16,000,000 Class C-1 Combination Notes (current outstanding
balance of $6,763,226), Affirmed Aaa (sf); previously on April 4,
2013 Upgraded to Aaa (sf)
Ratings Rationale:
According to Moody's, the rating actions taken on the notes
primarily reflect deleveraging of the senior notes and an increase
in the transaction's overcollateralization ratios since the rating
action in April 2013. Moody's notes that the Class A-1L and A-1LR
Notes have been paid down by approximately 65.8%, or $163.9
million, since April 2013. Based on the latest trustee report from
July 2013, the Senior Class A, Class A, B-1L and B-2L
overcollateralization ratios are reported at 139.9%, 121.9%,
110.6%, and 103.6%, respectively, versus March 2013 levels of
124.5%, 114.5%, 107.7% and 103.2%, respectively.
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 Moody's calculations, the
weighted average rating factor is currently 3248 compared to 2871
in March 2013.
In taking the foregoing actions, Moody's also notes that it has
concluded its review of its ratings on the issuer's Class A-3L and
B-1L Notes announced on July 15, 2013. At that time, Moody's said
that it had upgraded and placed certain of the issuer's ratings on
review primarily as a result of substantial deleveraging of the
senior notes and increases in OC ratios resulting from high rates
of loan collateral prepayments during the first half of 2013.
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 $175.9 million, defaulted par of $5.5 million,
a weighted average default probability of 22.6% (implying a WARF
of 3248), a weighted average recovery rate upon default of 51.7%,
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.
Denali Capital CLO VI, Ltd., issued in March 2006, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans, with significant exposure to middle market
loans.
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 C-1 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.
Moody's also notes that a material proportion of the collateral
pool includes debt obligations whose credit quality has been
assessed through Moody's Credit Estimates ("CEs"). Moody's
analysis reflects the application of certain adjustments with
respect to the default probabilities associated with CEs.
Specifically, Moody's assumed an equivalent of Caa3 for assets
with CEs that were not updated within the last 15 months, which
represent approximately 3.5% of the collateral pool.
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% (2598)
Class A-1L: 0
Class A-1LR: 0
Class A-2L: 0
Class A-3L: +1
Class B-1L: +2
Class B-2L: +1
Class C-1: 0
Moody's Adjusted WARF + 20% (3897)
Class A-1L: 0
Class A-1LR: 0
Class A-2L: 0
Class A-3L: -2
Class B-1L: -2
Class B-2L: 0
Class C-1: 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) Exposure to credit estimates: The deal is exposed to a large
number of securities whose default probabilities are assessed
through credit estimates. In the event that Moody's is not
provided the necessary information to update the credit estimates
in a timely fashion, the transaction may be impacted by any
default probability adjustments Moody's may assume in lieu of
updated credit estimates.
EMERSON PARK: S&P Assigns 'BB' Rating on Class E Notes
------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to Emerson
Park CLO Ltd./Emerson Park CLO Corp.'s $470.50 million floating-
and fixed-rate notes.
The note issuance is a collateralized loan obligation
securitization backed by a revolving pool consisting primarily of
broadly syndicated senior secured loans.
The ratings reflect S&P's view of:
-- The credit enhancement provided to the rated notes through
the subordination of cash flows that are payable to the
subordinated notes.
-- The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting excess spread), and cash flow structure, which
can withstand the default rate projected by Standard &
Poor's CDO Evaluator model, as assessed by Standard & Poor's
using the assumptions and methods outlined in its corporate
collateralized debt obligation (CDO) criteria.
-- The transaction's legal structure, which is expected to be
bankruptcy remote.
-- The diversified collateral portfolio, which consists
primarily of broadly syndicated speculative-grade senior
secured term loans.
-- The collateral manager's experienced management team.
-- 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 0.28%-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
balance of the rated notes outstanding.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1743.pdf
RATINGS ASSIGNED
Emerson Park CLO Ltd./Emerson Park CLO Corp.
Class Rating Amount
(mil. $)
A-1A AAA (sf) 210.70
A-1B AAA (sf) 14.30
A-2 AAA (sf) 90.00
B-1 AA (sf) 49.50
B-2 AA (sf) 8.00
C-1 (deferrable) A (sf) 30.00
C-2 (deferrable) A (sf) 12.00
D (deferrable) BBB (sf) 26.50
E (deferrable) BB (sf) 23.50
F (deferrable) B (sf) 6.00
Subordinated notes NR 48.50
NR--Not rated.
FALCON FRANCHISE: Moody's Takes Action on 4 Certs in ABS Deals
--------------------------------------------------------------
Moody's upgraded the ratings of two tranches and downgraded the
ratings of two tranches issued in two securitizations of loans to
the owners of franchised car, truck, and motorcycle dealerships.
The complete rating actions are as follows:
Issuer: Falcon Franchise Loan Trust 2000-1
Class D, Upgraded to Ba1 (sf); previously on Jun 1, 2012 Confirmed
at B3 (sf)
Class E, Upgraded to Caa1 (sf); previously on Jun 1, 2012
Confirmed at Ca (sf)
Issuer: Falcon Auto Dealership LLC, Series 2003-1
Class A-2, Downgraded to Ca (sf); previously on Oct 8, 2012
Downgraded to Caa2 (sf)
Class IO, Downgraded to Ca (sf); previously on Jun 1, 2012
Downgraded to Caa2 (sf)
Ratings Rationale:
For the Falcon 2000-1 securitization, the rating actions are
prompted by an increase in credit enhancement primarily due to
prepayments. Because of the sequential payment waterfall, large
prepayments allow for rapid build-up of subordination. The
securitization benefited from approximately $10.3 million in
prepayments from the largest borrower.
As of the August 2013 distribution date for the Falcon 2000-1
securitization, credit enhancement consisting of subordination and
overcollateralization totaled 81% and 36% of the outstanding pool
balance for the Class D and Class E certificates, respectively.
Additionally, there were no delinquent loans.
For the Falcon 2003-1 securitization, the total certificate
balance exceeded the collateral balance by approximately $38.2
million as of the August 2013 distribution date. The Class A-2
balance was $15.5 million while the collateral balance was $8.3
million. As a result, the Class A-2 balance exceeded the
collateral balance by approximately $7.2 million or 46% of the
outstanding tranche balance. There were no delinquent loans.
The methodology is described as follows.
Moody's determines a range of loss given defaults of the non-
performing obligors and also estimates future losses on the
performing portion of the collateral. In evaluating the
nonperforming loans, key factors include collateral valuations and
expected recovery rates, volatility around those recovery rates,
historical obligor performance, time until recovery or liquidation
on defaulted obligors, concessions due to restructuring which may
negatively impact the overall cash flow of the trust and/or the
collateral, and future industry expectations.
The range of expected net losses is then evaluated against the
available credit enhancement. Sufficiency of coverage is
considered in light of remaining borrower concentrations and
concepts, remaining bond maturities, and economic outlook.
Moody's also considers the potential volatility associated with
the small number of remaining borrowers, seven borrowers for the
Falcon 2000-1 securitization and five borrowers for the Falcon
2003-1 securitization.
Moody's rated the interest-only bonds in accordance with "Moody's
Approach to Rating Structured Finance Interest-Only Securities."
The primary sources of uncertainty in the performance of these
transactions are the successfulness of workout strategies for
loans requiring special servicing, as well as the current
macroeconomic environment and its impact on the auto-dealership
industry.
For the Falcon 2000-1 securitization, if delinquencies increase to
30% of the outstanding pool balance, the tranches may be
downgraded. For the Falcon 2003-1 securitization, if the Class A-2
tranche balance exceeds the collateral balance by 65% of the
outstanding tranche balance, the Class A-2 rating may be further
downgraded.
FIRST FRANKLIN 2006-FF16: Rights Transfer No Impact on Ratings
--------------------------------------------------------------
Moody's Investors Service stated that the transfer of servicing
from Bank of America, N.A. of approximately 1,679 loans from one
RMBS transaction to Specialized Loan Servicing, LLC will not, in
and of itself and at this time, result in a reduction or
withdrawal of the current ratings on the securities issued by
these transactions.
BOA requested that Moody's provide its opinion on whether the
ratings on the securities issued by the affected transactions
would be downgraded or withdrawn as a result of each of the
transactions having its loan servicing transferred to SLS from BOA
by way of the mortgage servicing right ("MSR") sale. After the MSR
sale, SLS will service and own the servicing rights to these
approximately 1,679 loans. The transfer of these loans is
scheduled for October 31, 2013.
Moody's view on the servicing transfer is based primarily on its
opinion that: i) SLS' servicing strategy will not negatively
impact the performance of the loans in the affected transaction;
ii) SLS is adequately prepared to handle the transfer and
continued servicing of the loans in the affected transaction and
iii) the low ratings of the bonds adequately reflect the expected
default status of the securities. SLS is assessed SQ3+ as a
primary servicer of subprime residential mortgage loans and as a
special servicer of residential mortgage loans. BOA is assessed
SQ3+ as a primary servicer of subprime residential mortgage loans
and as a special servicer of residential mortgage loans.
Moody's opinion addresses only the current impact on its ratings,
and it does not express an opinion as to whether the transfer of
servicing rights has or could have any other effects that
investors may or may not view positively.
The determination was made without regard to any applicable
Certificate Insurance Policy, with respect to Insured
Certificates.
The methodology used in assessing the credit impact of the
servicing transfer was "US RMBS Surveillance Methodology"
published in June 2013. Other methodology includes "Moody's
Methodology For Assessing RMBS Servicer Quality (SQ)" published in
January 2013.
Affected Transactions:
Subprime Collateral
First Franklin Mortgage Loan Trust 2006-FF16
Moody's carries these ratings for First Franklin Mortgage Loan
Trust 2006-FF16:
Cl. I-A1, Downgraded to Caa3; previously on Jan 13, 2010 Caa1
Placed Under Review for Possible Downgrade
Cl. II-A2, Downgraded to Caa2; previously on Jan 13, 2010 B3
Placed Under Review for Possible Downgrade
Cl. II-A3, Confirmed at Caa3; previously on Jan 13, 2010 Caa3
Placed Under Review for Possible Downgrade
Cl. II-A4, Confirmed at Caa3; previously on Jan 13, 2010 Caa3
Placed Under Review for Possible Downgrade
FIRST UNION 1999-C2: Moody's Hikes Rating on Cl. L Certs to Ba2
---------------------------------------------------------------
Moody's Investors Service upgraded the ratings of three classes
and affirmed three classes of First Union National Bank-Chase
Manhattan Bank Commercial Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 1999-C2 as follows:
Cl. H, Affirmed Aaa (sf); previously on Mar 14, 2013 Affirmed Aaa
(sf)
Cl. J, Upgraded to Aaa (sf); previously on Mar 14, 2013 Upgraded
to Aa1 (sf)
Cl. K, Upgraded to A2 (sf); previously on Mar 14, 2013 Upgraded to
Baa3 (sf)
Cl. L, Upgraded to Ba2 (sf); previously on Mar 14, 2013 Affirmed
B2 (sf)
Cl. M, Affirmed C (sf); previously on Mar 14, 2013 Affirmed C (sf)
Cl. IO, Affirmed Caa1 (sf); previously on Mar 14, 2013 Affirmed
Caa1 (sf)
Ratings Rationale:
The upgrades are due to overall improved pool financial
performance and increased credit support due to loan payoffs and
amortization.
The affirmation of Class H 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 Class M is consistent with
realized losses from liquidated loans experienced by this class as
well as Moody's current base expected loss and thus is affirmed.
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 8.4% of the
current balance. At last review, Moody's base expected loss was
18.0%. Realized losses have increased from 1.7% of the original
balance to 2.0% since the prior review. Moody's base expected loss
plus realized losses is now 2.4% of the original pooled balance
compared to 2.5% 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.
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 2 compared to 3 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 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.
In rating this transaction, Moody's also used its credit-tenant
lease (CTL) financing methodology approach (CTL approach) . Under
Moody's CTL approach, the rating of the CTL component is primarily
based on the senior unsecured debt rating (or the corporate family
rating) of the tenant, usually an investment grade rated company,
leasing the real estate collateral supporting the bonds. This
tenant's credit rating is the key factor in determining the
probability of default on the underlying lease. The lease
generally is "bondable", which means it is an absolute net lease,
yielding fixed rent paid to the trust through a lock-box,
sufficient under all circumstances to pay in full all interest and
principal of the loan. The leased property should be owned by a
bankruptcy-remote, special purpose borrower, which grants a first
lien mortgage and assignment of rents to the securitization trust.
The dark value of the collateral, which assumes the property is
vacant or "dark", is then examined to determine a recovery rate
upon a loan's default. Moody's also considers the overall
structure and legal integrity of the transaction. For deals that
include a pool of credit tenant loans, Moody's currently uses a
Gaussian copula model, incorporated in its public CDO rating model
CDOROMv2.8-9 to generate a portfolio loss distribution to assess
the ratings.
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 March 14, 2013.
Deal Performance:
As of the July 17, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 96% to $46.7
million from $1.2 billion at securitization. The Certificates are
collateralized by 31 mortgage loans ranging in size from less than
1% to 9% of the pool. The CTL component of the pool includes 11
loans, representing 31% of the pool. Fourteen loans, representing
46% of the pool, have defeased and are secured by U.S. Government
securities.
Six loans, representing 18% 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.
Fifty loans have been liquidated from the pool, resulting in an
aggregate realized loss of $23.8 million (18% loss severity on
average). Currently, there are no loans in special servicing.
Moody's has assumed a high default probability for one poorly
performing loan representing 1% of the pool and expects a minimal
loss from this troubled loan.
Moody's was provided with full year 2012 operating results for
100% of the pool's non-defeased loans. Moody's conduit pool
excludes defeased, troubled and CTL loans. Moody's weighted
average conduit LTV is 51% compared to 64% 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
11.4%.
Moody's actual and stressed conduit DSCRs are 1.14X and 3.08X,
respectively, compared to 0.96X and 2.39X 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 two conduit exposures represent 22% of the pool. The
largest exposure is a hotel portfolio ($6.0 million -- 12.9% of
the pool), consisting of three cross-collateralized loans. The
loans are secured by two hotels located in Alexandria, Virginia
and one hotel located in Shreveport, Louisiana. The portfolio
originally included six hotel loans. Two loans have previously
defeased and the borrower prepaid one loan in June 2013. All three
loans in the portfolio are currently on the watchlist due to poor
performance of the Days Inn -- Shreveport, which had negative net
operating income (NOI) in 2011 and 2012. The remaining two hotels,
a Days Inn and a Comfort Inn, are located in the Washington, DC
regional market and together represent the positive year-end 2011
and 2012 NOI. Portfolio performance has declined in 2012 due a
decrease in revenue per available room (RevPAR) at each property,
but the portfolio DSCR remains above 1.0X. The portfolio is fully
amortizing and matures in March 2020. Moody's current LTV and
stressed DSCR are 63% and 2.16X, respectively, compared to 78% and
1.74X at last review.
The second largest loan is the Whitehall Estates Loan ($4.1
million -- 8.9% of the pool). The loan is secured by a 252-unit
multifamily property in Charlotte, North Carolina. The property
was built in 1997 and was 94% leased as of July 2013 compared to
96% at Moody's last review. The loan is fully amortizing and
matures in August 2018. Moody's current LTV and stressed DSCR are
33% and 3.12X respectively, compared to 41% and 2.49X at last
review.
The CTL component includes 11 loans secured by properties leased
under bondable leases. Moody's provides ratings for 100% of the
CTL component. The largest CTL exposures include Rite Aid
Corporation (54% of the CTL component, Moody's senior unsecured
rating of Caa2 -- stable outlook), Walgreen Co. (30%; Moody's
senior unsecured rating Baa1 -- negative outlook), and
CVS/Caremark Corp. (9%; Moody's senior unsecured rating Baa2 --
positive outlook). The current weighted average rating factor
(WARF) is 3,894 compared to 3,811 at last review.
GALE FORCE 2: Moody's Lifts Rating on $20MM Cl. E Notes From Ba1
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Gale Force 2 CLO, Ltd.:
$25,000,000 Class D Fourth Priority Mezzanine Deferrable Floating
Rate Notes due 2018, Upgraded to Aa1 (sf); previously on July 15,
2013 Upgraded to Aa2 (sf) and Placed Under Review for Possible
Upgrade
$20,000,000 Class E Fifth Priority Mezzanine Deferrable Floating
Rate Notes due 2018, Upgraded to Baa3 (sf); previously on July 15,
2013 Upgraded to Ba1 (sf) and Placed Under Review for Possible
Upgrade
$3,000,000 Class II Combination Notes due 2018 (current rated
balance of $1,840,864), Upgraded to A1 (sf); previously on July
15, 2013 A3 (sf) Placed Under Review for Possible Upgrade
Moody's also affirmed the ratings of the following notes:
$366,000,000 Class A First Priority Senior Secured Floating Rate
Notes due 2018 (current outstanding balance of $24,091,381),
Affirmed Aaa (sf); previously on April 22, 2013 Affirmed Aaa (sf)
$25,000,000 Class B Second Priority Senior Secured Floating Rate
Notes due 2018, Affirmed Aaa (sf); previously on April 22, 2013
Upgraded to Aaa (sf)
$28,800,000 Class C Third Priority Senior Secured Deferrable
Floating Rate Notes due 2018, Affirmed Aaa (sf); previously on
April 22, 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 Class A Notes and an
increase in the transaction's overcollateralization ratios since
the rating action in April 2013. Moody's notes that the Class A
Notes have been paid down by approximately 79% or $91 million
since April 2013. Based on the latest trustee report dated July 9,
2013, the Class A/B, Class C, Class D, and Class E
overcollateralization ratios are reported at 165.6%, 137.4%,
119.7% and 108.5%%, respectively, versus April 2013 levels of
132.0%, 120.1%, 111.3% and 105.2%, respectively. Moody's notes
that the July 2013 trustee reported overcollateralization ratios
do not include the $91 million amortization of the Class A notes
on the July 15th payment date.
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 Moody's calculation, the
weighted average rating factor is currently 2989 compared to 2727
in April 2013.
In taking the foregoing actions, Moody's also announced that it
had concluded its review of the rating on the issuer's Class D,
Class E and Class II Combination notes announced on July 15, 2013.
At that time, Moody's said that it had upgraded and placed certain
of the issuer's ratings on review primarily as a result of
substantial deleveraging of the senior notes and increases in OC
ratios resulting from high rates of loan collateral prepayments
during the first half of 2013.
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 $136.0 million, defaulted par of $12.2
million, a weighted average default probability of 19.05%
(implying a WARF of 2989), a weighted average recovery rate upon
default of 50.4%, and a diversity score of 30. 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.
Gale Force 2 CLO, Ltd., issued in June 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. The methodology used in rating the Class II 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% (2391)
Class A: 0
Class B: 0
Class C: 0
Class D: +1
Class E: +2
Class II Combo: +3
Moody's Adjusted WARF + 20% (3587)
Class A: 0
Class B: 0
Class C: 0
Class D: -2
Class E: -1
Class II Combo: -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.
GECMC 2005-C4: Rights Transfer No Impact on Moody's Ratings
-----------------------------------------------------------
Moody's Investors Service was informed that the Directing Holder
intends to replace LNR Partners, LLC as the Special Servicer and
to appoint C-III Asset Management LLC as the successor Special
Servicer (the "Proposed Special Servicer Replacement") for the 123
North Wacker Loan. The Proposed Special Servicer Replacement will
become effective upon satisfaction of the conditions precedent set
forth in the governing documents.
Moody's has reviewed the Proposed Special Servicer Replacement. At
this time, the proposed transfer will not, in and of itself,
result in a downgrade or withdrawal of the current ratings to any
class of certificates rated by Moody's for GE Commercial Mortgage
Corporation Commercial Mortgage Pass-Through Certificates, Series
2005-C4. Moody's ratings address only the credit risks associated
with the proposed transfer of special servicing rights. Other non-
credit risks have not been addressed, but may have significant
effect on yield and/or other payments to investors. This action
should not be taken to imply that there will be no adverse
consequence for investors since in some cases such consequences
will not impact the rating.
The last rating action for GECMC 2005-C4 was taken on January 25,
2013. In that action, Moody's downgraded the ratings of eight
classes and affirmed ten classes of GE Commercial Mortgage
Corporation, Commercial Mortgage Pass-Through Certificates, Series
2005-C4 as follows:
Cl. A-1A, Affirmed Aaa (sf); previously on Dec 16, 2005 Definitive
Rating Assigned Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Dec 16, 2005 Definitive
Rating Assigned Aaa (sf)
Cl. A-3A, Affirmed Aaa (sf); previously on Dec 16, 2005 Definitive
Rating Assigned Aaa (sf)
Cl. A-3B, Affirmed Aaa (sf); previously on Dec 16, 2005 Assigned
Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Dec 16, 2005 Definitive
Rating Assigned Aaa (sf)
Cl. A-SB, Affirmed Aaa (sf); previously on Dec 16, 2005 Definitive
Rating Assigned Aaa (sf)
Cl. A-M, Downgraded to A1 (sf); previously on Feb 9, 2011
Confirmed at Aa1 (sf)
Cl. A-J, Downgraded to Ba3 (sf); previously on Jan 20, 2012
Downgraded to Baa2 (sf)
Cl. B, Downgraded to B2 (sf); previously on Jan 20, 2012
Downgraded to Ba1 (sf)
Cl. C, Downgraded to Caa1 (sf); previously on Jan 20, 2012
Downgraded to Ba3 (sf)
Cl. D, Downgraded to Caa2 (sf); previously on Jan 20, 2012
Downgraded to B2 (sf)
Cl. E, Downgraded to Caa3 (sf); previously on Jan 20, 2012
Downgraded to Caa2 (sf)
Cl. F, Downgraded to C (sf); previously on Feb 9, 2011 Downgraded
to Ca (sf)
Cl. G, Downgraded to C (sf); previously on Feb 9, 2011 Downgraded
to Ca (sf)
Cl. H, Affirmed C (sf); previously on Feb 9, 2011 Downgraded to C
(sf)
Cl. J, Affirmed C (sf); previously on Mar 18, 2010 Downgraded to C
(sf)
Cl. K, Affirmed C (sf); previously on Mar 18, 2010 Downgraded to C
(sf)
Cl. X-W, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
GMAC COMMERCIAL 1998-C1: Moody's Affirms Caa3 Rating on X Certs
---------------------------------------------------------------
Moody's Investors Service affirmed the rating of one interest-only
class of GMAC Commercial Mortgage Securities, Inc., Mortgage Pass-
Through Certificates, Series 1998-C1 as follows:
Cl. X, Affirmed Caa3 (sf); previously on Feb 22, 2012 Downgraded
to Caa3 (sf)
Ratings Rationale:
The rating of the IO Class, Class X, is consistent with the
expected credit performance of its referenced classes and thus is
affirmed. The IO class is the only outstanding Moody's rated class
in this transaction.
Moody's rating action reflects a base expected loss of 92% of the
current balance. At last review, Moody's base expected loss was
46%. Moody's base expected loss plus realized losses is now 8.6%
of the original pooled balance compared to 6.0% 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.
The principal methodology used in this rating was "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 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.
Since over 90% of the pool is in special servicing, Moody's also
utilized a loss and recovery approach in rating this deal. In this
approach, Moody's determines a probability of default for each
specially serviced loan and determines a most probable loss given
default based information from the special servicer and available
market data. The loss given default for each loan also takes into
consideration servicer advances to date and estimated future
advances and closing costs. Translating the probability of default
and loss given default into an expected loss estimate, Moody's
then applies the aggregate loss from specially serviced loans to
the most junior classes and the recovery as a pay down of
principal to the most senior class.
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 October 11, 2012.
Deal Performance:
As of the July 15, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 91% to $124.5
million from $1.4 billion at securitization. The Certificates are
collateralized by 3 mortgage loans.
No loans are currently on the master servicer's watchlist.
Thirteen loans have been liquidated from the pool since
securitization, resulting in an aggregate $7.8 million loss (11%
loss severity on average). An additional $0.9 million loss is a
result of a loan modification, resulting in a total certificate
loss of $8.8 million.
Currently two loans, representing 93% of the pool, are in special
servicing. The largest specially serviced loan is the Senior
Living Properties (SLP) Portfolio Loan ($112 million -- 90.0% of
the pool), which is secured by a portfolio of 42 skilled nursing
facilities located throughout Texas. The loan was transferred to
the special servicing in October 2001 due to a decline in
performance resulting from changes in Medicare and Medicaid
reimbursement rates. Although the portfolio's net cash flow has
been insufficient to cover operating expenses and debt service
payments for years, the deficit was covered during the original
loan term by an insurance surety bond issued by ZC Specialty
Insurance Company (ZC). The loan matured on February 1, 2008 and
the remaining balance of the surety bond, approximately $70.0
million, was applied to reduce the outstanding balance of the
loan. The portfolio originally consisted of 74 properties, but 31
were liquidated in 2005 and 2006 and one additional property was
released in 2012. The special servicer entered into a modification
with the borrower which converted the loan to interest only
payments and extended the maturity date to August 2008. The
maturity has been further extended to August 2013. The remaining
specially serviced loan, representing approximately 3% of the
pool, is secured by a 57,000 square foot office property located
in Rocky Mount, North Carolina.
The master servicer has deemed both specially serviced loans non-
recoverable. Moody's expects significant losses from the two loans
in special servicing.
The sole performing loan is the Nickelodeon Studio Center Loan
($9.3 million -- 7.5% of the pool), which is secured by a 72,000
square foot office building located in the Burbank submarket of
Los Angeles, California. The property is 100% leased to Viacom
Inc. through January 2018. Moody's valuation of this loan is based
on a dark/lit analysis. Moody's LTV and stressed DSCR are 70% and
1.54X, respectively, compared to 53% and 2.04X at last review.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
GS MORTGAGE 2011-GC5: Moody's Affirms B2 Rating on Cl. F Certs
--------------------------------------------------------------
Moody's Investors Service affirmed the ratings of 12 classes of GS
Mortgage Securities Trust 2011-GC5, Commercial Mortgage Pass-
Through Certificates, Series 2011-GC5 as follows:
Cl. A-1, Affirmed Aaa (sf); previously on Oct 13, 2011 Definitive
Rating Assigned Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Oct 13, 2011 Definitive
Rating Assigned Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Oct 13, 2011 Definitive
Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Oct 13, 2011 Definitive
Rating Assigned Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Oct 13, 2011 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Oct 13, 2011 Definitive
Rating Assigned Aa3 (sf)
Cl. C, Affirmed A3 (sf); previously on Oct 13, 2011 Definitive
Rating Assigned A3 (sf)
Cl. D, Affirmed Baa3 (sf); previously on Oct 13, 2011 Definitive
Rating Assigned Baa3 (sf)
Cl. E, Affirmed Ba3 (sf); previously on Oct 13, 2011 Definitive
Rating Assigned Ba3 (sf)
Cl. F, Affirmed B2 (sf); previously on Oct 13, 2011 Definitive
Rating Assigned B2 (sf)
Cl. X-A, Affirmed Aaa (sf); previously on Oct 13, 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 of the 10 principal 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 two interest-only classes, Classes X-A and X-B,
are consistent with the expected credit performance of their
referenced classes and thus are affirmed.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
Moody's rating action reflects a cumulative base expected loss of
2.8% of the current balance, compared to 2.4% 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 and commercial real estate property markets. Commercial
real estate property values are continuing to move in a modestly
positive direction along with a rise in investment activity and
stabilization in core property type performance. Limited new
construction and moderate job growth have aided this improvement.
However, a consistent upward trend will not be evident until the
volume of investment activity steadily increases for a significant
period, non-performing properties are cleared from the pipeline,
and fears of a Euro area recession 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 23, the same as at last review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through 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 August 17, 2012.
Deal Performance:
As of the July 12, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 1% to $1.71 billion
from $1.75 billion at securitization. The Certificates are
collateralized by 74 mortgage loans ranging in size from less than
1% to 11% of the pool, with the top ten loans representing 54% of
the pool. Three loans, representing 5% of the pool, have
investment grade credit assessments.
The pool does not contain any defeased or liquidated loans.
Currently one loan, The Hills Loan ($15.1 million -- 1% of the
pool), is in special servicing. This loan was secured by a complex
of office/flex buildings located in North Richland Hills, Texas.
The loan transferred to special servicing on April 29, 2013 due to
imminent default. The subjects largest tenant, ATI Enterprises
(44% of the GLA), defaulted and vacated the site without notice in
February of 2013 and the borrower has filed a lawsuit against ATI.
Effective July 2, 2013, the Trust SPE took title to the property
through a non-judicial foreclosure. The Trust SPE was the
successful bidder with a credit bid of $7.5 million.
Two loans, representing 2% 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.
Moody's was provided with full year 2012 and partial year 2013
operating results for 99% and 49% of the conduit, respectively.
The conduit portion of the pool excludes the three loans with
credit assessments. Moody's weighted average conduit LTV is 88%,
which is the same as 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 1.62X and 1.16X,
respectively, compared to 1.56X 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 largest loan with a credit assessment is the Museum Square
Loan ($58.4 million -- 3% of the pool), which is secured by a
553,000 square foot (SF) class B+ office located in the Miracle
Mile submarket of Los Angeles, California. The property was 89%
leased as of March 2013 compared to 86% in March 2012. The
property's average occupancy over the past five years is 89%.
Moody's credit assessment and stressed DSCR are Baa1 and 1.70X,
respectively, compared to Baa1 and 1.73X at last review.
The other two loans with credit assessments, the ARCT Wal-Mart &
Sam's Portfolio Loan and the Alhambra Renaissance Center Loan,
each represent less than 1% of the pool. Both have a Baa3 credit
assessment, the same as at last review.
The top three conduit loans represent 29% of the pool balance. The
largest conduit loan is the Park Place Mall Loan ($194 million --
11% of the pool), which is secured by the borrower's interest in a
1.06 million SF dominant super-regional mall in Tucson, Arizona.
Sears, Dillard's and Macy's anchor the mall and own their own
spaces. The largest collateral tenant is an 18-screen movie
theatre. As of March 2013, total mall and in-line occupancy were
97% and 96%, respectively, compared to 97% and 92% in March 2012.
In-line sales for the trailing twelve months (TTM) ending March
2013 were $426 PSF compared to $462 PSF for TTM March 2012.
Moody's LTV and stressed DSCR are 93% and 0.99X, respectively,
compared to 95% and 0.97X at last review.
The second largest conduit loan is the 1551 Broadway Loan ($180
million -- 11% of the pool), which is secured by a 26,000 SF
single tenant retail property and a 15,000 SF LED sign located in
the Bow Tie area of Manhattan's Times Square district. The
property and LED sign are leased to AE Outfitters, Inc. a fully
owned subsidiary of American Eagle Outfitters, Inc. through
February 2024. Moody's LTV and stressed DSCR are 88% and 0.96X
compared to 90% and 0.93X at last review.
The third largest conduit loan is the Copper Beech Portfolio Loan
($117 million -- 7% of the pool), which is secured by four cross-
defaulted and cross-collateralized student housing complexes in
Virginia, West Virginia, Texas and Pennsylvania. The collateral
consists of 3,052 beds in 1,063 units (2.87 beds per unit on
average). The average monthly rent is $1,362 per unit or $475 per
bed as of March 2013. Moody's LTV and stressed DSCR are 86% and
1.10X compared to 88% and 1.08X at last review.
GS MORTGAGE 2013-GCJ14: Moody's Rates Class G Certs '(P)B3'
-----------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
sixteen classes of CMBS securities, issued by GS Mortgage
Securities Trust 2013-GCJ14, Commercial Mortgage Pass-Through
Certificates, Series 2013-GCJ14.
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-4, Assigned (P)Aaa (sf)
Cl. A-5, Assigned (P)Aaa (sf)
Cl. A-AB, Assigned (P)Aaa (sf)
Cl. A-S, Assigned (P)Aaa (sf)
Cl. X-A*, Assigned (P)Aaa (sf)
Cl. X-B*, Assigned (P)Ba3 (sf)
Cl. B, Assigned (P)Aa3 (sf)
Cl. PEZ**, Assigned (P)A2 (sf)
Cl. C, Assigned (P)A3 (sf)
Cl. D, Assigned (P)Baa3 (sf)
Cl. E, Assigned (P)Ba2 (sf)
Cl. F, Assigned (P)Ba3 (sf)
Cl. G, Assigned (P)B3 (sf)
* Interest Only Class
** Reflects Exchangeable Certificates
Ratings Rationale:
The Certificates are collateralized by 84 fixed rate loans secured
by 132 properties. The ratings are based on the collateral and the
structure of the transaction.
Moody's CMBS ratings methodology combines both commercial real
estate and structured finance analysis. Based on commercial real
estate analysis, Moody's determines the credit quality of each
mortgage loan and calculates an expected loss on a loan specific
basis. Under structured finance, the credit enhancement for each
certificate typically depends on the expected frequency, severity,
and timing of future losses. Moody's also considers a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors:
1) Moody's assessment of the probability of default, which is
largely driven by each loan's DSCR, and 2) Moody's assessment of
the severity of loss upon a default, which is largely driven by
each loan's LTV ratio.
The Moody's Actual DSCR of 1.57X is greater than the 2007
conduit/fusion transaction average of 1.31X. The Moody's Stressed
DSCR of 1.04X is greater than the 2007 conduit/fusion transaction
average of 0.92X.
Moody's Trust LTV ratio of 102.5% is lower than the 2007
conduit/fusion transaction average of 110.6%. Moody's Total LTV
ratio (inclusive of subordinated, mezzanine and debt-like
preferred equity financing) of 105.8% is also considered when
analyzing various stress scenarios for the rated debt.
Moody's also grades properties on a scale of 1 to 5 (best to
worst) and considers those grades when assessing the likelihood of
debt payment. The factors considered include property age, quality
of construction, location, market, and tenancy. The pool's
weighted average property quality grade is 2.39, which is higher
than the indices calculated in most multi-borrower transactions
since 2009. The high weighted average grade is indicative of the
below average market composition of the pool and the stability of
the cash flows underlying the assets.
The pool's small market percentage is 29.6%, which is slightly
above other multi-borrower deals rated by Moody's since the
financial crisis and implies that the assets in the pool are
generally in major markets. Properties situated in major markets
tend to exhibit more cash flow and capitalization rate stability
over time compared to assets located in smaller or tertiary
markets.
Moody's also considers both loan level diversity and property
level diversity when selecting a ratings approach. With respect to
loan level diversity, the pool's loan level (includes cross
collateralized and cross defaulted loans) Herfindahl Index is
25.1. The transaction's loan level diversity is in-line with
Herfindahl scores found in most multi-borrower transactions issued
since 2009. With respect to property level diversity, the pool's
property level Herfindahl Index is 34.3. The transaction's
property diversity profile is in line with the indices calculated
in most multi-borrower transactions issued since 2009.
This deal has a super-senior Aaa classes with 30% credit
enhancement. Although the additional enhancement offered to the
senior most certificate holders provides additional protection
against pool loss, the super-senior structure is credit negative
for the certificate that supports the super-senior class. If the
support certificate were to take a loss, the loss would have the
potential to be quite large on a percentage basis. Thin tranches
need more subordination to reduce the probability of default in
recognition that their loss-given default is higher. This
adjustment helps keep expected loss in balance and consistent
across deals. The transaction was structured with additional
subordination at class A-S to mitigate the potential increased
severity to class A-S.
In terms of waterfall structure, the transaction contains a group
of exchangeable certificates. Classes A-S ((P) Aaa (sf)), B ((P)
Aa3 (sf)) and C ((P) A3 (sf)) may be exchanged for Class PEZ ((P)
A2 (sf)) certificates and Class PEZ may be exchanged for the
Classes A-S, B and C. The PEZ certificates will be entitled to
receive the sum of interest and principal distributable on the
Classes A-S, B and C certificates that are exchanged for such PEZ
certificates. The initial certificate balance of the Class PEZ
certificates is equal to the aggregate of the initial certificate
balances of the Class A-S, B and C and represent the maximum
certificate balance of the PEZ certificates that may be issued in
an exchange.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000. The methodology used in rating Classes X-A and X-B
was "Moody's Approach to Rating Structured Finance Interest-Only
Securities" published in February 2012.
Moody's analysis employs the excel-based CMBS Conduit Model v2.62
which derives credit enhancement levels based on an aggregation of
adjusted loan level proceeds derived from Moody's loan level DSCR
and LTV ratios. Major adjustments to determining proceeds include
loan structure, property type, sponsorship, and diversity. Moody's
analysis also uses the CMBS IO calculator ver1.1, which references
the following inputs to calculate the proposed IO rating based on
the published methodology: original and current bond ratings and
credit estimates; original and current bond balances grossed up
for losses for all bonds the IO(s) reference(s) within the
transaction; and IO type corresponding to an IO type as defined in
the published methodology.
The V Score for this transaction is assessed as Low/Medium, the
same as the V score assigned to the U.S. Conduit and CMBS sector.
This reflects typical volatility with respect to the critical
assumptions used in the rating process as well as an average
disclosure of securitization collateral and ongoing performance.
Moody's V Scores provide a relative assessment of the quality of
available credit information and the potential variability around
the various inputs to a rating determination. The V Score ranks
transactions by the potential for significant rating changes owing
to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling, and the transaction governance that
underlie the ratings. V Scores apply to the entire transaction
(rather than individual tranches).
Moody's Parameter Sensitivities: If Moody's value of the
collateral used in determining the initial rating were decreased
by 5%, 14%, and 23%, the model-indicated rating for the currently
rated Aaa Super Senior class would be Aaa, Aaa, and Aa1,
respectively; for the most junior Aaa rated class A-S would be
Aa1, Aa2, and Aa3, respectively. Parameter Sensitivities are not
intended to measure how the rating of the security might migrate
over time; rather they are designed to provide a quantitative
calculation of how the initial rating might change if key input
parameters used in the initial rating process differed. The
analysis assumes that the deal has not aged. Parameter
Sensitivities only reflect the ratings impact of each scenario
from a quantitative/model-indicated standpoint. Qualitative
factors are also taken into consideration in the ratings process,
so the actual ratings that would be assigned in each case could
vary from the information presented in the Parameter Sensitivity
analysis.
These ratings: (a) are based solely on information in the public
domain and/or information communicated to Moody's by the issuer at
the date it was prepared and such information has not been
independently verified by Moody's; (b) must be construed solely as
a statement of opinion and not a statement of fact or an offer,
invitation, inducement or recommendation to purchase, sell or hold
any securities or otherwise act in relation to the issuer or any
other entity or in connection with any other matter. Moody's does
not guarantee or make any representation or warranty as to the
correctness of any information, rating or communication relating
to the issuer. Moody's shall not be liable in contract, tort,
statutory duty or otherwise to the issuer or any other third party
for any loss, injury or cost caused to the issuer or any other
third party, in whole or in part, including by any negligence (but
excluding fraud, dishonesty and/or willful misconduct or any other
type of liability that by law cannot be excluded) on the part of,
or any contingency beyond the control of Moody's, or any of its
employees or agents, including any losses arising from or in
connection with the procurement, compilation, analysis,
interpretation, communication, dissemination, or delivery of any
information or rating relating to the issuer.
GULF STREAM 2005-II: S&P Raises Rating on Class D Notes to BB+
--------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
B, C, and D notes from Gulf Stream-Compass CLO 2005-II Ltd., a
collateralized loan obligation transaction currently managed by
GSAM Apollo Holdings LLC, and removed them from CreditWatch with
positive implications. At the same time, S&P affirmed its ratings
on the class A-1 and A-2 notes from the same transaction.
The rating actions follow S&P's performance review of Gulf Stream-
Compass CLO 2005-II Ltd. and reflect the $197.4 million in
paydowns to the class A-1 and A-2 notes over the four payment
dates since S&P's October 2012 rating actions, when it raised its
ratings on four classes of notes.
The class A-1 and A-2 notes have paid down to 17.9% of their
original balances, leading to an increase in overcollateralization
available to support the notes. The transaction has benefited
from the receipt of principal proceeds from prepayments and sales
of defaulted assets. For S&P's analysis, it observed
$0.34 million in defaulted assets, down from $2.81 million noted
in the September 2012 trustee report, which S&P referenced for its
October 2012 rating actions. S&P also observed that assets from
obligors rated in the 'CCC' category were reported at
$9.03 million in July 2013, compared with $17.07 million in
September 2012.
"Our review of this transaction included a cash flow analysis,
based on the portfolio and transaction reflected in the
aforementioned trustee report, to estimate future performance. In
line with our criteria, our cash flow scenarios applied forward-
looking assumptions on the expected timing and pattern of defaults
and recoveries upon default, under various interest-rate and
macroeconomic scenarios. In addition, our analysis considered the
transaction's ability to pay timely interest and ultimate
principal to each of the rated tranches. The results
demonstrated, in our view, that all of the rated outstanding
classes have adequate credit enhancement available at the new
rating levels," S&P said.
S&P will continue to review its ratings on the notes and assess
whether, in its view, the ratings 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 RAISED AND REMOVED FROM CREDITWATCH
Gulf Stream-Compass CLO 2005-II Ltd.
Rating
Class To From
B AAA (sf) AA+ (sf)/Watch Pos
C AA+ (sf) A+ (sf)/Watch Pos
D BB+ (sf) B+ (sf)/Watch Pos
RATINGS AFFIRMED
Gulf Stream-Compass CLO 2005-II Ltd.
Class Rating
A-1 AAA (sf)
A-2 AAA (sf)
HARCH CLO II: Moody's Cuts Rating on $10MM Cl. E Notes to B3
------------------------------------------------------------
Moody's Investors Service has upgraded the rating of the following
notes issued by Harch CLO II Limited:
$26,000,000 Class D Deferrable Floating Rate Notes Due October 22,
2017, Upgraded to Baa3 (sf); previously on July 15, 2013 Ba1 (sf)
Placed Under Review for Possible Upgrade.
Moody's also downgraded the rating of the following notes:
$10,000,000 Class E Deferrable Floating Rate Notes Due October 22,
2017 (current outstanding balance of $7,060,555), Downgraded to B3
(sf); previously on March 21, 2013 Affirmed B1 (sf).
Additionally, Moody's affirmed the ratings of the following notes:
$38,000,000 Class B Floating Rate Notes Due October 22, 2017
(current outstanding balance of $28,405,313), Affirmed Aaa (sf);
previously on March 21, 2013 Affirmed Aaa (sf);
$14,000,000 Class C Deferrable Floating Rate Notes Due October 22,
2017, Affirmed Aaa (sf); previously on July 15, 2013 Upgraded to
Aaa (sf).
Ratings Rationale:
According to Moody's the rating action taken on Class D Notes is
primarily a result of the improvement in the transaction's
overcollateralization ratios since the rating action in March
2013. Moody's notes the Class B, Class C, and Class D Notes
continue to benefit from the deleveraging of the senior notes.
According to the latest trustee report, dated July 2013, the Class
A/B, Class C and Class D overcollateralization ratios are reported
at 201.5%, 155.1% and 108.6%, respectively, versus February 2013
levels of 146.4%, 129.4% and 106.3%, respectively.
Notwithstanding benefits of deleveraging, Moody's noted a number
of credit concerns that resulted in the rating action taken on the
Class E Notes. In particular, Moody's observed a reduction in the
transaction's excess interest since the rating action in March
2013. A high level of loan prepayments and collateral sales in the
past six months have reduced the amount of excess interest
proceeds that can be diverted to amortize the Class E Notes in
case the Class E Par Value Test is not satisfied. As a result, the
credit enhancement benefit that Class E Notes can expect to
receive from this "turbo" structural feature has declined. In
addition, the Class E overcollateralization ratio has deteriorated
since February 2013. The Class E Par Value Test is reported at
100.0% in the July 2013 trustee report compared to the February
2013 level of 101.2%. Based on its calculation, Moody's also notes
that the diversity score has declined to 22 compared to 36 at the
time of the rating action in March 2013.
Moody's also announced that it has concluded its review of its
ratings on the issuer's Class D Notes announced on July 15, 2013.
At that time, Moody's said that it had upgraded and placed certain
of the issuer's ratings on review primarily as a result of
substantial deleveraging of the senior notes and increases in OC
ratios resulting from high rates of loan collateral prepayments
during the first half of 2013.
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 $71.9 million, defaulted par of $9.7 million,
a weighted average default probability of 12.46% (implying a WARF
of 2357), a weighted average recovery rate upon default of 48.39%,
and a diversity score of 22. 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.
Harch CLO II Limited, issued in November 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% (1886)
Class B: 0
Class C: 0
Class D: +2
Class C: +3
Moody's Adjusted WARF + 20% (2829)
Class B: 0
Class C: 0
Class D: -1
Class C: -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 the
deal's sensitivity to various recovery rates assumed for current
holdings of defaulted (or assumed to be defaulted) assets,
including with respect to a position in a Ca-rated security
representing 2.5% of total par.
HIGHLAND CREDIT: Moody's Keeps Ba2 Ratings After Debt Amendments
----------------------------------------------------------------
Moody's Investors Service has determined that entry by Highland
Credit Opportunities CDO Ltd. (the "Issuer") into the Amendment
No. 1 to Indenture Supplement dated as of August 15, 2013 that
amends the Indenture Supplement between the Issuer, Highland
Credit Opportunities CDO, Inc. as Co-issuer and The Bank of New
York Mellon Trust Company, National Association, as Trustee dated
as of November 2, 2006 (the "Amendment") and performance of the
activities contemplated therein will not in and of themselves and
at this time result in the immediate withdrawal or reduction with
respect to Moody's current rating of any Class of Notes issued by
the Issuer. Moody's does not express an opinion as to whether the
Amendment could have non-credit-related effects.
Moody's explained that the Amendment allows the Notes issued by
the Issuer to be redeemed pursuant to an Optional Redemption on a
business day other than a Quarterly Payment Date. Currently, the
Notes may be redeemed pursuant to an Optional Redemption on a
Quarterly Payment Date. The Amendment also provides that if the
Notes are redeemed pursuant to an Optional Redemption, the
Redemption Price of the Class C Notes will be calculated inclusive
of interest to the Stated Maturity on November 1, 2013. Since any
Optional Redemption would be made in order of Note seniority,
Moody's determined that its ratings of the Notes issued by the
Issuer are unaffected by the Amendment.
The Issuer is a market value collateralized loan obligation
transaction whose Notes are backed primarily by a portfolio of
senior secured loans.
The principal methodology used in reaching its conclusion and in
monitoring the ratings of the Notes issued by the Issuer is
"Moody's Approach to Rating Market Value Collateralized Loan
Obligations (MV CLOs)", published in October 2011.
On November 24, 2009, Moody's upgraded its ratings on two classes
of notes issued by Highland Credit Opportunities CDO Ltd.:
$225,000,000 Class A-1 First Priority Floating Rate Revolving
Notes Due 2013 (current balance of $110,000,000), Upgraded to Ba2;
previously on July 21, 2009 upgraded to B1;
$613,000,000 Class A-2 First Priority Floating Rate Term Notes Due
2013, Upgraded to Ba2; previously on July 21, 2009 upgraded to B1.
I-PREFERRED TERM III: A.M. Best Affirms 'b' Rating on $24MM Notes
-----------------------------------------------------------------
A.M. Best Co. has affirmed the debt ratings on a multi-tranche
collateralized debt obligation (CDO) co-issued by two bankruptcy
remote special purpose vehicles: I-Preferred Term Securities III,
Ltd. (Cayman Islands) and I-Preferred Term Securities III, Inc.
(Delaware) (collectively known as I-Preferred Term Securities III
and issuers). The outlook for all ratings is stable.
The principal balance of the rated notes are collateralized by a
pool of trust preferred securities, surplus notes and secondary
market securities (collectively, the capital securities),
primarily issued by small- to medium-sized insurance companies.
The capital securities are pledged as security to the notes.
Interest paid by the issuers of the capital securities are the
primary source of funds to pay operating expenses of the issuers
and interest on the notes. Repayment of the note principal is
primarily funded from the redemption of the capital securities.
These rating actions primarily reflect: (1) the current issuer
credit ratings (ICR) of the remaining issuers of the capital
securities and the number of terminated capital securities; (2) a
stress of up to 250% on the assumed marginal default rates of
insurers (derived from Best's Idealized Default Rates of
Insurers); (3) the amount of capital securities considered to be
in distress; (4) recoveries of 0% after the default of the capital
securities; and (5) qualitative factors such as the effect of
interest rate pikes; subordination level associated with each
rated debt tranche; the adjacency of very high investment grade
ratings to very low non-investment grade ratings in the
transaction's capital structure; and the possibility that
additional redemptions of highly-rated entities will leave lower-
rated companies in the collateral pool.
The debt ratings could be upgraded or downgraded and/or the
outlook revised if there are material changes in the ICR of the
remaining insurance carriers, an increase in the number of
defaulted capital securities or significant termination of the
number of existing capital securities.
The following debt ratings have been affirmed:
I-Preferred Term Securities III
-- "aaa" on $251.50 million Floating Rate Class A-1 Senior Notes
Due November 5, 2033
-- "aaa" on $40.00 million Floating Rate Class A-2 Senior Notes
Due November 5, 2033
-- "aaa" on $15.00 million Fixed/Floating Rate Class A-3 Senior
Notes Due November 5, 2033
-- "aaa" on $10.00 million Fixed/Floating Rate Class A-3 Senior
Notes Due November 5, 2033
-- "bb+" on $51.00 million Floating Class B-1 Mezzanine Notes
Due November 5, 2033
-- "bb+" on $27.69 million Fixed/Floating Class B-2 Mezzanine
Notes Due November 5, 2033
-- "bb+" on $57.50 million Fixed/Floating Class B-3 Mezzanine
Notes Due November 5, 2033
-- "b" on $24.50 million Floating Rate Class C Mezzanine Notes
Due November 5, 2033
These are structured finance ratings.
I-PREFERRED TERM IV: Moody's Affirms Ba2 Ratings on 2 CDO Notes
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by I-Preferred Term Securities IV, Ltd.:
$162,500,000 Floating Rate Class A-1 Senior Notes Due June 24,
2034 (current balance of $44,363,781.08), Upgraded to Aaa (sf);
previously on March 27, 2009 Downgraded to Aa2 (sf);
$37,000,000 Floating Rate Class A-2 Senior Notes Due June 24,
2034, Upgraded to Aa2 (sf); previously on February 24, 2012
Upgraded to A1 (sf);
$13,900,000 Fixed/Floating Rate Class A-3 Senior Notes Due June
24, 2034, Upgraded to Aa2 (sf); previously on February 24, 2012
Upgraded to A1 (sf).
Moody's also affirmed the ratings of the following notes:
$54,650,000 Floating Rate Class B-1 Mezzanine Notes Due June 24,
2034, Affirmed Ba2 (sf); previously on March 27, 2009 Downgraded
to Ba2 (sf);
$25,500,000 Fixed/Floating Rate Class B-2 Mezzanine Notes Due June
24, 2034, Affirmed Ba2 (sf); previously on March 27, 2009
Downgraded to Ba2 (sf);
$12,450,000 Floating Rate Class C Mezzanine Notes Due June 24,
2034, Affirmed Caa1 (sf); previously on March 27, 2009 Downgraded
to Caa1 (sf);
$6,200,000 Floating Rate Class D Subordinate Notes Due June 24,
2034, Affirmed Caa2 (sf); previously on March 27, 2009 Downgraded
to Caa2 (sf).
Ratings 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 since
September 2012.
Moody's notes that the Class A-1 Notes have been paid down by
approximately 49.5% or $43.4 million since September 2012, due to
disbursement of principal proceeds from redemptions of underlying
assets and diversion of excess interest proceeds. Since September
2012, the transaction has received $40.8 million from the
redemption or sale of eight assets. As a result of this
deleveraging, the Class A-1 notes' par coverage improved to 449%
based on Moody's calculation. According to the latest trustee
report dated June 28, 2013, the Senior, Class B and Class C
overcollateralization ratios are reported at 209.08% (limit 128%),
113.55% (limit 106%) and 106.02% (limit 103.5%), respectively,
versus September 2012 levels of 168.98%, 107.09% and 101.32%,
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
1433 compared to 1242 in Feb 2012.
Moody's notes that the key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor, and
weighted average recovery rate are based on its published
methodology and may be different from the trustee's reported
numbers. In its base case, Moody's analyzed the underlying
collateral pool to have a performing par of $199 million,
defaulted/deferring par of $23 million, a weighted average default
probability of 24.33% (implying a WARF of 1433), Moody's Asset
Correlation of 19.65%, and a weighted average recovery rate upon
default of 6.5%. 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.
I-Preferred Term Securities IV, Ltd., issued in May 2004, is a
collateralized debt obligation backed by a portfolio of insurance
and bank trust preferred securities.
The portfolio of this CDO is mainly comprised of trust preferred
securities (TruPS) issued by small to medium sized insurance
companies and U.S. community banks that are generally not publicly
rated by Moody's. 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. 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 Q1-2013.
The principal methodology used in this rating was "Moody's
Approach to Rating TRUP CDOs" published in May 2011. Moody's also
evaluates the sensitivity of the rated transaction to the
volatility of the credit estimates, as described in Moody's Cross
Sector Rating Methodology "Updated Approach to the Usage of Credit
Estimates in Rated Transactions" published in October 2009.
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 537 points from the
base case of 1433, the model-implied rating of the A-1 notes is
one notch worse than the base case result.
In addition, Moody's also performed one additional sensitivity
analysis as described in the Special Comment "Sensitivity Analyses
on Deferral Cures and Default Timing for Monitoring TruPS CDOs"
published in August 2012. In the 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:
Class A-1: 0
Class A-2: 0
Class A-3: 0
Class B-1: +1
Class B-2: +1
Class C: +1
Class D: +1
Moody's notes that this transaction is still subject to a high
level of macroeconomic uncertainty although Moody's continues to
have a stable outlook on the insurance sector, other than the
negative outlook on the U.S. life insurance industry. Moody's
outlook on the banking sector has changed to stable from negative.
The pace of FDIC bank failures continues to decline in 2013
compared to the last four years, and some of the previously
deferring banks have resumed interest payment on their trust
preferred securities.
INDYMAC: Moody's Takes Action on 13 Subprime RMBS Tranches
----------------------------------------------------------
Moody's Investors Service has confirmed the ratings of 12 tranches
and downgraded the rating of one tranche from six transactions
issued by IndyMac Home Equity Mortgage Loan Asset-Backed Trust,
backed by subprime mortgage loans.
Complete rating actions are as follows:
Issuer: Home Equity Mortgage Loan Asset-Backed Trust, Series SPMD
2001-C
Cl. AF-A, Confirmed at Baa3 (sf); previously on May 14, 2013 Baa3
(sf) Placed Under Review Direction Uncertain
Cl. M-2, Confirmed at Caa2 (sf); previously on May 14, 2013 Caa2
(sf) Placed Under Review Direction Uncertain
Issuer: Home Equity Mortgage Loan Asset-Backed Trust, Series SPMD
2002-A
Cl. AF-4, Downgraded to Baa1 (sf); previously on May 14, 2013 A3
(sf) Placed Under Review Direction Uncertain
Cl. M-1, Confirmed at Caa2 (sf); previously on May 14, 2013 Caa2
(sf) Placed Under Review Direction Uncertain
Issuer: IndyMac Home Equity Mortgage Loan Asset-Backed Trust,
Series SPMD 2000-C
Cl. AF-5, Confirmed at Caa3 (sf); previously on May 14, 2013 Caa3
(sf) Placed Under Review Direction Uncertain
Cl. AF-6, Confirmed at B3 (sf); previously on May 14, 2013 B3 (sf)
Placed Under Review Direction Uncertain
Cl. AV, Confirmed at B2 (sf); previously on May 14, 2013 B2 (sf)
Placed Under Review Direction Uncertain
Issuer: IndyMac Home Equity Mortgage Loan Asset-Backed Trust,
Series SPMD 2001-B
Cl. MF-1, Confirmed at Caa3 (sf); previously on May 14, 2013 Caa3
(sf) Placed Under Review Direction Uncertain
Issuer: IndyMac Home Equity Mortgage Loan Asset-Backed Trust,
Series SPMD 2002-B
Cl. AF, Confirmed at A1 (sf); previously on May 14, 2013 A1 (sf)
Placed Under Review Direction Uncertain
Cl. M-1, Confirmed at Ba3 (sf); previously on May 14, 2013 Ba3
(sf) Placed Under Review Direction Uncertain
Issuer: IndyMac Home Equity Mortgage Loan Asset-Backed Trust, SPMD
2001-A
AF-5, Confirmed at Caa3 (sf); previously on May 14, 2013 Caa3 (sf)
Placed Under Review Direction Uncertain
AF-6, Confirmed at B3 (sf); previously on May 14, 2013 B3 (sf)
Placed Under Review Direction Uncertain
AV, Confirmed at Caa1 (sf); previously on May 14, 2013 Caa1 (sf)
Placed Under Review Direction Uncertain
Ratings Rationale:
The rating actions reflect the recent performance of the
underlying pools and Moody's updated expected pool losses. The
rating actions also reflect correction of errors in the Structured
Finance Workstation (SFW) cash flow models previously used by
Moody's in rating these transactions.
The cash flow models used in the previous rating actions for these
transactions had incorrectly applied separate interest and
principal waterfalls. In the impacted deals, all collected
principal and interest is now commingled into one payment
waterfall to pay all interest due on bonds first, and then to pay
principal in accordance with the Pooling and Servicing Agreement.
With the commingling of funds, principal proceeds can be used to
pay accrued interest, which could result in reduced principal
recovery for the bonds outstanding. Due to the discovery of these
errors, these tranches were placed on review on May 14, 2013. The
errors have now been corrected, and these rating actions reflect
the changes.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in June 2013.
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 July 2012 to 7.4% in July 2013. Moody's
forecasts an unemployment central range of 7.0% to 8.0% for 2013.
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.
JP MORGAN 2013-C14: Fitch Rates Class G Certificates 'B'
--------------------------------------------------------
Fitch rates J.P. Morgan Chase Commercial Mortgage Securities Trust
(JPMBB), series 2013-C14 commercial mortgage pass-through
certificates as follows:
-- $80,032,000 class A-1 'AAAsf'; Outlook Stable;
-- $278,327,000 class A-2 'AAAsf'; Outlook Stable;
-- $75,000,000 class A-3 'AAAsf'; Outlook Stable;
-- $288,526,000 class A-4 'AAAsf'; Outlook Stable;
-- $81,821,000 class A-SB 'AAAsf'; Outlook Stable;
-- $80,371,000 class A-S 'AAAsf'; Outlook Stable;
-- $884,077,000b class X-A 'AAAsf'; Outlook Stable;
-- $121,991,000b class X-B 'A-sf'; Outlook Stable;
-- $76,065,000 class B 'AA-sf'; Outlook Stable;
-- $45,926,000 class C 'A-sf'; Outlook Stable;
-- $53,102,000a class D 'BBB-sf'; Outlook Stable;
-- $11,482,000a class E 'BBB-sf'; Outlook Stable;
-- $12,916,000a class F 'BB+sf'; Outlook Stable;
-- $22,963,000a class G 'Bsf'; Outlook Stable;
a Privately placed pursuant to Rule 144A.
b Notional amount and interest only.
The ratings are based on information provided by the issuer as of
July 26, 2013. Fitch does not rate the $41,620,829 class NR or the
$77,499,829 class X-C.
The certificates represent the beneficial ownership in the trust,
primary assets of which are 45 loans secured by 89 commercial
properties having an aggregate principal balance of approximately
$1.148 billion as of the cutoff date. The loans were contributed
to the trust by JPMorgan Chase Bank, National Association and
Barclays Bank PLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 71.5% of the properties
by balance, cash flow analysis of 87.8%, and asset summary reviews
on 87.8% of the pool.
The transaction has a Fitch stressed debt service coverage ratio
(DSCR) of 1.28x, a Fitch stressed loan-to-value (LTV) of 99.8%,
and a Fitch debt yield of 9.33%. Fitch's aggregate net cash flow
represents a variance of 5.72% to issuer cash flows.
Key Rating Drivers
Pool Concentration: The pool is more concentrated by loan size and
sponsor than average transactions from 2013, as evidenced by a
loan concentration index (LCI) of 484 and sponsor concentration
index (SCI) of 486. Also, the top 10 loans represent 61.4% of the
pool, which is higher than for 2013 transactions (at 54.3%).
High Retail Concentration: Retail properties represent the largest
concentration at 43.3% of the pool. This is higher than the 2012
and 2013 average retail concentration of 35.9% and 31.6%,
respectively. The next largest property type concentrations are
for hotel (14.7%), mixed use (14.1%), office (12.0%) and
industrial (11.1%).
Fitch Leverage: The transaction trust leverage is in line with the
average across 2013 conduit transactions, with a Fitch DSCR of
1.28x and Fitch LTV of 99.8%. The average DSCR and LTV for 2013
transactions are 1.36x and 99.8%, respectively.
Single-Tenant Properties/Increased Refinance Risk: Properties with
single or multiple but related tenants comprise 16.9% of the pool,
including two of the top 11 loans. Tenants occupying the two
larger loans have leases expiring during the term, creating
increased refinance risk.
Rating Sensitivities
Fitch performed two model-based break-even analyses to determine
the level of cash flow and value deterioration the pool could
withstand prior to $1 of loss being experienced by the 'BBB-sf'
and 'AAAsf' rated classes. Fitch found that the JPMCC 2013-C14
pool could withstand a 47.95% decline in value (based on appraised
values at issuance) and an approximately 34.06% decrease to the
most recent actual cash flow prior to experiencing $1 of loss to
the 'BBB-sf' rated class. Additionally, Fitch found that the pool
could withstand a 51.49% decline in value and an approximately
38.55% decrease in the most recent actual cash flow prior to
experiencing $1 of loss to any 'AAAsf' rated class.
Key Rating Drivers and Rating Sensitivities are further described
in the accompanying pre-sale report.
The Master Servicer and Special Servicer will be Midland Loan
Services, Inc., rated 'CMS1' and 'CSS1', respectively, by Fitch.
JP MORGAN 2013-C14: Moody's Assigns 'B2' Rating on Cl. G Certs
--------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to
thirteen classes of CMBS securities, issued by JPMBB 2013-C14,
Commercial Mortgage Pass-Through Certificates, Series 2013-C14.
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Definitive Rating Assigned Aaa (sf)
Cl. X-A*, Definitive Rating Assigned Aaa (sf)
Cl. A-S, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba2 (sf)
Cl. F, Definitive Rating Assigned Ba3 (sf)
Cl. G, Definitive Rating Assigned B2 (sf)
* Reflects Interest Only Class
Ratings Rationale:
The Certificates are collateralized by 45 fixed rate loans secured
by 89 properties. The ratings are based on the collateral and the
structure of the transaction.
Moody's CMBS ratings methodology combines both commercial real
estate and structured finance analysis. Based on commercial real
estate analysis, Moody's determines the credit quality of each
mortgage loan and calculates an expected loss on a loan specific
basis. Under structured finance, the credit enhancement for each
certificate typically depends on the expected frequency, severity,
and timing of future losses. Moody's also considers a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors:
1) Moody's assessment of the probability of default, which is
largely driven by each loan's DSCR; and 2) Moody's assessment of
the severity of loss upon a default, which is largely driven by
each loan's LTV ratio.
The Moody's Actual DSCR of 1.59X is greater than the 2007
conduit/fusion transaction average of 1.31X. The Moody's Stressed
DSCR of 1.02X is greater than the 2007 conduit/fusion transaction
average of 0.92X.
Moody's Trust LTV ratio of 103.3% is lower than the 2007
conduit/fusion transaction average of 110.6%.
Moody's also considers both loan level diversity and property
level diversity when selecting a ratings approach. With respect to
loan level diversity, the pool's loan level (includes cross
collateralized and cross defaulted loans) Herfindahl Index is
20.7, which is slightly below the Herfindahl scores found in most
multi-borrower transactions issued since 2009. With respect to
property level diversity, the pool's property level Herfindahl
Index is 27.1, which is in-line with the indices calculated in
most multi-borrower transactions issued since 2009.
Moody's grades properties on a scale of 1 to 5 (best to worst) and
considers those grades when assessing the likelihood of debt
payment. The factors considered include property age, quality of
construction, location, market, and tenancy. The pool's weighted
average property quality grade is 2.38, which is slightly weaker
than the indices calculated in most multi-borrower transactions
since 2009.
This deal is structured with a super-senior Aaa class having 30%
credit enhancement. Although the additional enhancement offered to
the senior most certificate holders provides additional protection
against pool loss, the super-senior structure is credit negative
for the certificate that supports the super-senior class. If the
support certificate were to take a loss, the loss would have the
potential to be quite large on a percentage basis. Thin tranches
need more subordination to reduce the probability of default in
recognition that their loss-given default is higher. This
adjustment helps keep expected loss in balance and consistent
across deals. The transaction was structured with additional
subordination at class A-S to mitigate the potential increased
severity to class A-S.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000. The methodology used in rating Class X-A was
"Moody's Approach to Rating Structured Finance Interest-Only
Securities" published in February 2012.
Moody's analysis employs the excel-based CMBS Conduit Model v2.62
which derives credit enhancement levels based on an aggregation of
adjusted loan level proceeds derived from Moody's loan level DSCR
and LTV ratios. Major adjustments to determining proceeds include
loan structure, property type, sponsorship, and diversity. Moody's
analysis also uses the CMBS IO calculator ver_1.1, which
references the following inputs to calculate the proposed IO
rating based on the published methodology: original and current
bond ratings and credit estimates; original and current bond
balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
The V Score for this transaction is assessed as Low/Medium, the
same as the V score assigned to the U.S. Conduit and CMBS sector.
This reflects typical volatility with respect to the critical
assumptions used in the rating process as well as an average
disclosure of securitization collateral and ongoing performance.
Moody's V Scores provide a relative assessment of the quality of
available credit information and the potential variability around
the various inputs to a rating determination. The V Score ranks
transactions by the potential for significant rating changes owing
to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling, and the transaction governance that
underlie the ratings. V Scores apply to the entire transaction
(rather than individual tranches).
Moody's Parameter Sensitivities: If Moody's value of the
collateral used in determining the initial rating were decreased
by 5%, 15%, and 23%, the model-indicated rating for the currently
rated Aaa Super Senior class would be (Aaa (sf)), (Aaa (sf)), and
(Aa1 (sf)), respectively; for the most junior Aaa rated class A-S
would be (Aa1 (sf)), (Aa2 (sf)), and (A1 (sf)), respectively.
Parameter Sensitivities are not intended to measure how the rating
of the security might migrate over time; rather they are designed
to provide a quantitative calculation of how the initial rating
might change if key input parameters used in the initial rating
process differed. The analysis assumes that the deal has not aged.
Parameter Sensitivities only reflect the ratings impact of each
scenario from a quantitative/model-indicated standpoint.
Qualitative factors are also taken into consideration in the
ratings process, so the actual ratings that would be assigned in
each case could vary from the information presented in the
Parameter Sensitivity analysis.
LB-UBS COMMERCIAL 2006-C6: Moody's Affirms C Rating on 2 Certs
--------------------------------------------------------------
Moody's affirmed seventeen classes of LB-UBS Commercial Mortgage
Trust 2006-C6, Commercial Mortgage Pass-Through Certificates,
Series 2006-C6 as follows:
Cl. A-1A, Affirmed Aaa (sf); previously on Oct 6, 2006 Assigned
Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Oct 6, 2006 Assigned Aaa
(sf)
Cl. A-4, Affirmed Aaa (sf); previously on Oct 6, 2006 Assigned Aaa
(sf)
Cl. A-AB, Affirmed Aaa (sf); previously on Oct 6, 2006 Assigned
Aaa (sf)
Cl. A-M, Affirmed Aa1 (sf); previously on Nov 17, 2010 Downgraded
to Aa1 (sf)
Cl. A-J, Affirmed Baa2 (sf); previously on Nov 17, 2010 Downgraded
to Baa2 (sf)
Cl. B, Affirmed Ba1 (sf); previously on Aug 30, 2012 Downgraded to
Ba1 (sf)
Cl. C, Affirmed B1 (sf); previously on Aug 30, 2012 Downgraded to
B1 (sf)
Cl. D, Affirmed B3 (sf); previously on Aug 30, 2012 Downgraded to
B3 (sf)
Cl. E, Affirmed Caa1 (sf); previously on Aug 30, 2012 Downgraded
to Caa1 (sf)
Cl. F, Affirmed Caa2 (sf); previously on Aug 30, 2012 Downgraded
to Caa2 (sf)
Cl. G, Affirmed Caa3 (sf); previously on Aug 30, 2012 Downgraded
to Caa3 (sf)
Cl. H, Affirmed Ca (sf); previously on Aug 30, 2012 Downgraded to
Ca (sf)
Cl. J, Affirmed C (sf); previously on Aug 30, 2012 Downgraded to C
(sf)
Cl. K, Affirmed C (sf); previously on Aug 30, 2012 Downgraded to C
(sf)
Cl. X-CL, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Cl. X-CP, Affirmed Aaa (sf); previously on Oct 6, 2006 Assigned
Aaa (sf)
Ratings Rationale:
The affirmations of the six investment grade principal and
interest classes are due to stable credit support from pay downs
and amortization. The affirmations of the nine below investment
grade principal and interest classes are due to Moody's expected
loss remaining in line with last review.
The affirmations of the two IO Classes, Class XCL and XCP, are due
to the indicated WARF for their reference classes.
Moody's rating action reflects a base expected loss of 7.6% of the
current balance, the same as at last review. Moody's base expected
loss plus realized losses is now 9.4% of the original pooled
balance compared to 9.3% 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 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 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 16, the same as 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 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 August 30, 2012.
Deal Performance:
As of the July 17, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 19% to $2.5 billion
from $3.0 billion at securitization. The Certificates are
collateralized by 134 mortgage loans ranging in size from less
than 1% to 16% of the pool, with the top ten loans representing
61% of the pool. One loan, representing 0.7% of the pool, has
defeased and is secured by U.S. Government securities. Three
loans, representing 3.5% of the pool, have investment grade credit
assessments.
Forty-four loans, representing 39% 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 $101.0 million (44% loss severity on
average). Ten loans, representing 4% of the pool, are currently in
special servicing. The largest specially serviced loan is the
LeCraw Portfolio Loan ($44.3 million -- 1.8% of the pool), which
is currently secured by one apartment property located in Georgia.
The loan was originally secured by five properties, however, two
properties were sold in April 2012 and two properties were sold in
August 2012 with the proceeds from all four sales being passed
through to the trust. The special servicer has indicated that it
will begin marketing the fifth and final property. Certificate
losses will not be realized until the last property in the
portfolio is sold. The remaining nine specially serviced loans are
secured by a mix of property types. Moody's estimates an aggregate
$59.2 million loss for the specially serviced loans (63% expected
loss on average).
Moody's has assumed a high default probability for 26 poorly
performing loans representing 22% of the pool and has estimated an
aggregate $80.1 million loss (15% expected loss on average) from
these troubled loans.
Moody's was provided with full year 2012 and partial year 2013
operating results for 99% and 15%, respectively, of the pool's
non-specially serviced and non-defeased loans, Excluding specially
serviced and troubled loans, Moody's weighted average LTV is 94%
compared to 103% at Moody's prior review. Moody's net cash flow
reflects a weighted average haircut of 4% 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 1.36X and 1.03X, respectively, compared to
1.32X and 0.97X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The largest loan with a credit assessment is the Park Square
Building Loan ($71.2 million -- 2.9% of the pool), which is
secured by a 495,708 square foot (SF) Class A office building
located in the Back Bay submarket of Boston, Massachusetts. The
largest tenant is First Marblehead Corp. (27% of the net rentable
area (NRA); lease expiration April 2014). As of March 2013 the
property was 80% leased compared to 93% at last review.
Performance had declined due to lower occupancy but recent leasing
activity will bolster future occupancy. Moody's current credit
assessment and stressed DSCR are Baa3 and 1.41X, respectively,
compared to Baa3 and 1.39X at last review.
The remaining two loans with credit assessments comprise 0.6% of
the pool. The Naples Walk I, II, & III Loan ($9.1 million -- 0.4%)
is secured by a 126,490 SF retail anchored property located in
Naples, Florida. The property was 88% leased as of December 2012
compared to 80% in December 2011. Recent leasing activity will
bolster financial performance. Its current credit assessment and
stressed DSCR are Baa2 and 1.57X compared to Baa2 and 1.55X at
last review.
The 1155 Avenue of the Americas Loan ($3.9 million -- 0.2%) is a
pari-passu interest in a $34.9 million first mortgage loan secured
by a 739,261 SF office property located in Manhattan, New York.
Based on improved financial performance, its credit assessment and
stressed DSCR are Aa1 and 4.0X, respectively, compared to Aa2 and
3.12X at last review.
The top three conduit loans represent 37.3% of the pool. The 1211
Avenue of the Americas Loan ($400.0 million -- 15.8%), which is a
pari-passu interest in a $675.0 million first mortgage loan, is
secured by 1.9 million SF Class A office property built in 1973,
renovated in 2006 and located in midtown Manhattan, New York. The
largest tenants are News America Publishing Inc. (55% of the NRA;
lease expiration November 2020) and Ropes & Gray LLP (14% of the
NRA; lease expiration March 2027). The building was 89% leased as
of March 2013 compared to 91% leased as of March 2012 and 99% at
securitization. Property performance declined from prior review
due to a decrease in base rent and expense reimbursements. The
loan is interest-only during its entire 10-year term maturing in
September 2016. Moody's LTV and stressed DSCR are 80% and 1.12X,
respectively, compared to 79% and 1.14X at last review.
The second largest loan is the 125 High Street Loan ($340.0
million -- 13.8%), which is secured by a 1.5 million SF Class A
office building and parking garage located in downtown Boston,
Massachusetts. The property was 75% leased in June 2013 compared
to 81% at last review. The loan is interest only throughout its
entire 10-year term maturing in August 2016. Performance has
declined since last review due to lower occupancy. However, the
borrower has recently executed a new lease for 11% of the NRA and
the tenant is expected to take possession during the second
quarter of 2013. Moody's LTV and stressed DSCR are 92% and 0.97X,
respectively, compared to 96% and 0.93X at last review.
The third largest loan is The Shops at Las Americas Loan ($179.7
million -- 7.3%), which is secured by a 561,426 SF outlet mall
located in San Diego, California. The mall's major tenants include
Nike Factory Store, Old Navy and the Gap Outlet. The property was
99% leased as of December 2012 compared to 94% leased as of June
2012. Property performance has improved in concert with occupancy.
The loan is now amortizing on a 360-month schedule and matures in
June 2016. Moody's LTV and stressed DSCR are 85% and 1.12X,
respectively, compared to 99% and 0.96X at last review.
LEHMAN BROTHERS-UBS 2006-C3: Moody's Cuts Ratings on 4 Certs
------------------------------------------------------------
Moody's Investors Service downgraded the ratings of four classes,
upgraded four classes, and affirmed 15 CMBS classes of Lehman
Brothers-UBS Commercial Mortgage Inc., Commercial Pass-Through
Certificates, Series 2006-C3 as follows:
Cl. A-3, Affirmed Aaa (sf); previously on Apr 13, 2006 Definitive
Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Nov 4, 2010 Confirmed at
Aaa (sf)
Cl. A-1A, Affirmed Aaa (sf); previously on Nov 4, 2010 Confirmed
at Aaa (sf)
Cl. A-AB, Affirmed Aaa (sf); previously on Apr 13, 2006 Definitive
Rating Assigned Aaa (sf)
Cl. A-M, Affirmed Aa3 (sf); previously on Aug 16, 2012 Downgraded
to Aa3 (sf)
Cl. A-J, Affirmed Ba1 (sf); previously on Aug 16, 2012 Downgraded
to Ba1 (sf)
Cl. B, Affirmed Ba2 (sf); previously on Aug 16, 2012 Downgraded to
Ba2 (sf)
Cl. C, Affirmed B1 (sf); previously on Aug 16, 2012 Downgraded to
B1 (sf)
Cl. D, Downgraded to Caa1 (sf); previously on Aug 16, 2012
Downgraded to B3 (sf)
Cl. E, Downgraded to Caa2 (sf); previously on Aug 16, 2012
Downgraded to Caa1 (sf)
Cl. F, Downgraded to Caa3 (sf); previously on Aug 16, 2012
Downgraded to Caa2 (sf)
Cl. G, Downgraded to C (sf); previously on Aug 16, 2012 Downgraded
to Caa3 (sf)
Cl. H, Affirmed C (sf); previously on Aug 16, 2012 Downgraded to C
(sf)
Cl. J, Affirmed C (sf); previously on Nov 4, 2010 Downgraded to C
(sf)
Cl. K, Affirmed C (sf); previously on Nov 4, 2010 Downgraded to C
(sf)
Cl. L, Affirmed C (sf); previously on Nov 4, 2010 Downgraded to C
(sf)
Cl. M, Affirmed C (sf); previously on Nov 4, 2010 Downgraded to C
(sf)
Cl. N, Affirmed C (sf); previously on Nov 4, 2010 Downgraded to C
(sf)
Cl. FTH-1, Upgraded to A2 (sf); previously on Sep 8, 2011 Upgraded
to A3 (sf)
Cl. FTH-2, Upgraded to Baa3 (sf); previously on Sep 8, 2011
Upgraded to Ba1 (sf)
Cl. FTH-3, Upgraded to Ba3 (sf); previously on Sep 8, 2011
Upgraded to B1 (sf)
Cl. FTH-4, Upgraded to B1 (sf); previously on Sep 8, 2011 Upgraded
to B2 (sf)
Cl. X-CL, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Ratings Rationale:
The downgrades are due primarily to higher expected losses from
specially-serviced and troubled loans. A major driver of the
downgrades is the declining performance of Eastpoint Mall, a
struggling regional mall in Baltimore, Maryland, which presents a
concentrated, and potentially high-impact risk to the pool.
Eastpoint Mall, an REO property held by the servicer on behalf of
the trust.
The upgrades of the rake bond classes FTH1, FTH2, FTH3, and FTH4
are driven by an improvement in credit quality of the underlying
loan, 623 Fifth Avenue.
The affirmations of the P&I classes A1 through C 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 the C-rated classes are due to Moody's
expected loss remaining within a range commensurate with the in-
place rating.
The rating of the IO Class, Class X-CL, 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 investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
Moody's rating action reflects a base expected loss of
approximately 11.6% of the current deal balance. At last review,
Moody's base expected loss was approximately 10.8%. Moody's base
expected loss plus realized loss figure was 11.8% of the original,
securitized deal balance, compared to 11.2% at Moody's 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 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 27, compared to a Herf of 28 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 August 16, 2012.
Deal Performance:
As of the July 17, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 22% to $1.35
billion from $1.74 billion at securitization. The total pooled
balance, excluding rake bonds, was $1.31 billion as of the most
recent distribution date. The Certificates are collateralized by
100 mortgage loans ranging in size from less than 1% to 11% of the
pool, with the top ten loans (excluding defeasance) representing
50% of the pool. The pool includes two loans with investment-grade
credit assessments, representing 11% of the pool. One loan,
representing less than 1% of the pool, is defeased and is
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.
Sixteen loans have liquidated from the pool, contributing to an
aggregate realized loss to the trust of $48 million. Loans that
were liquidated from the pool averaged a 21% loss severity.
Currently, six loans, representing 13% of the pool, are in special
servicing. The largest specially serviced asset is the Eastpoint
Mall Loan ($89 million -- 7% of the pool). The loan, which became
REO in August 2012, is secured by a 677,000 square-foot portion of
an 844,000 square foot regional mall in Baltimore, Maryland.
Originally constructed as an open-air center in the 1950s, the
mall is now enclosed, and counts as its anchors Sears, Burlington,
Value City Furniture, and JC Penney. The JC Penney space is not
part of the loan collateral. The mall has suffered steady declines
in performance in recent years, with inline occupancy dropping to
45% as of July 2013 reporting. The mall includes several
outparcels, which are 70% leased. Several key, national, inline
retailers have leases up for renewal in 2014. Jones Lang LaSalle
is managing and leasing the property.
The second loan in special servicing is the Time Hotel Loan ($54
million -- 4% of the pool), which is secured by a leasehold
interest in a 193-room hotel in Midtown Manhattan. The loan
transferred to special servicing on January 30, 2012 for imminent
default. Foreclosure was filed on July 13, 2012, and a foreclosure
sale is being scheduled. Trailing-twelve month occupancy for June
2013 was 89%, higher than the hotel's competitive set, and higher
than the New York City average. Nevertheless, this figure
represented a decline on the prior year's performance and the
hotel has experienced steady declines in net operating income
since 2010.
The remaining four specially serviced loans are secured by a mix
of commercial, retail and self-storage property types. Moody's
estimates an aggregate $100 million loss (61% expected loss) for
all specially serviced loans.
Moody's has assumed a high default probability for twelve poorly-
performing loans representing 15% of the pool. Moody's analysis
attributes to these troubled loans an aggregate $33 million loss
(17% expected loss severity based on a 50% probability default).
Moody's was provided with full-year 2012 and partial year 2013
operating results for 97% and 39% of the performing pool,
respectively. Excluding troubled and specially-serviced loans,
Moody's weighted average LTV is 91%, compared to 100% at last full
review. Moody's net cash flow reflects a weighted average haircut
of 10.1% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
8.8%.
Excluding troubled and specially-serviced loans, Moody's actual
and stressed DSCRs are 1.43X and 1.11X, respectively, compared to
1.37X and 1.03X 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 Station Place II
Loan ($97 million -- 7% of the pool), which is secured by a Class
A, built-to-suit office property in the Capitol Hill section of
Washington, DC. The property is directly adjacent to Washington's
Union Station and enjoys a direct pedestrian connection to the
station concourse. The property is 100% leased to the United
States Securities and Exchange Commission through January 2020.
The loan's anticipated repayment date is in February 2016. The
loan sponsor is a joint venture between the Louis Dreyfus Property
Group and Fisher Brothers. Moody's credit assessment and stressed
DSCR are A3 and 1.05X, respectively, compared to A3 and 1.03X at
last review.
The second-largest loan with a credit assessment is the 623 Fifth
Avenue Loan ($52 million -- 4% of the pool), which is secured by
an office tower in Midtown Manhattan. The property was 94% leased
as of year-end 2012 reporting, up from 85% leased the prior year.
The largest tenants include UBS Securities, Doral Financial
Corporation, and Depfa Bank, with the largest tenant, UBS,
occupying 12% of the property's net rentable area (NRA). The
property is also encumbered by a $35.8 million subordinate, non-
pooled, B-Note which is held in the trust and secures rake classes
FTH-1, FTH-2, FTH-3, FTH-4 and FTH-5. Both the A-Note and the B-
Note benefit from amortization. Moody's current credit assessment
and stressed DSCR are A1 and 1.97X, respectively, compared to A2
and 1.89X at last review.
The top three performing conduit loans represent 20% of the pool.
The largest loan is the 888 Seventh Avenue Loan ($146 million --
11% of the pool), which represents a participation interest in a
$292 million senior mortgage loan. The loan is secured by the
leasehold interest in a 46-story, 908,000 square foot office
property in Midtown Manhattan near Central Park. The property was
95% leased as of year-end 2012 reporting, compared to 91% leased
as of March 2012. New leases at the property include the second-
largest tenant TPG Axon, which occupies 9% of property NRA through
March 2022. Property performance has improved substantially since
securitization, mirroring improvements in Manhattan's West Side
office submarket in recent years. The property serves as the
headquarters for the loan sponsor, Vornado Realty Trust. Moody's
current LTV and stressed DSCR are 80% and 1.16X, respectively,
compared to 81% and 1.14X at last review.
The second-largest loan is the Marriott Hotel -- Orlando Airport
Loan ($57 million -- 4% of the pool), which is secured by a 486-
room full-service hotel in Orlando, Florida. The loan has been on
the watchlist for low DSCR since May 2011. The hotel's financial
performance has improved slightly for the last two years, but has
lagged gains experienced in the larger Orlando hotel sector over
the same period. 2012 ADR at the subject property was up to $104
from $97 in 2010, however occupancy dropped slightly over the same
period, to 72% from 73%. The loan sponsor is Diamond Rock
Hospitality Company. Moody's has identified this as a troubled
loan. Moody's current LTV and stressed DSCR are 137% and 0.85X,
respectively, compared to 126% and 0.92X at last review.
The third-largest loan is the 1 Allen Bradley Drive Loan ($53
million -- 4% of the pool). The loan is secured by a 462,000
square foot office property in Mayfield Heights, Ohio. The
property is 100% leased to Rockwell Automation, Inc. (Moody's
senior unsecured rating A3, stable outlook) until November 2020.
Moody's current LTV and stressed DSCR are 120% and, 0.81X
respectively, compared to 139% and 0.70X at last review.
LIGHTPOINT CLO VIII: Moody's Raises Class E Notes' Rating to Ba2
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Lightpoint CLO VIII, Ltd.:
$24,500,000 Class C Floating Rate Deferrable Notes Due 2018,
Upgraded to Aa1 (sf); previously on July 15, 2013 Upgraded to A1
(sf) and Placed Under Review for Possible Upgrade
$25,000,000 Class D Floating Rate Deferrable Notes Due 2018,
Upgraded to Baa1 (sf); previously on July 15, 2013 Upgraded to
Baa3 (sf) and Placed Under Review for Possible Upgrade
$19,250,000 Class E Floating Rate Deferrable Notes Due 2018,
Upgraded to Ba2 (sf); previously on August 31, 2012 Upgraded to
Ba3 (sf)
Moody's also affirmed the ratings of the following notes:
$299,000,000 Class A-1-A Floating Rate Notes Due 2018 (current
outstanding balance of $86,734,078), Affirmed Aaa (sf); previously
on September 27, 2007 Assigned Aaa (sf)
$74,750,000 Class A-1-B Floating Rate Notes Due 2018, Affirmed Aaa
(sf); previously on August 31, 2012 Upgraded to Aaa (sf)
$18,750,000 Class B Floating Rate Notes Due 2018, Affirmed Aaa
(sf); previously on July 15, 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,
particularly since October 2012. Moody's notes that the Class A-1-
A Notes have been paid down by approximately 71% or $212 million
since January 2013. Based on the latest trustee report dated July
3, 2013 the Class A/B, Class C, Class D, and Class E
overcollateralization ratios are reported at 134.41%, 122.6%,
112.52%, and 105.82%, respectively, versus July 2012 levels of
122.89%, 115.67%, 109.13%, and 104.58%, respectively. The July 3,
2013 trustee-reported OC ratios do not reflect the July 15 payment
distribution, when $74.3 million of principal proceeds were used
to pay down the Class A-1-A Notes. In taking the foregoing
actions, Moody's also announced that it had concluded its review
of its ratings on the issuer's Class C Notes and Class D notes
announced on July 15, 2013. At that time, Moody's said that it had
upgraded and placed certain of the issuer's ratings on review
primarily as a result of substantial deleveraging of the senior
notes and increases in OC ratios resulting from high rates of loan
collateral prepayments during the first half of 2013.
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 $266.4 million, no defaulted par, a weighted
average default probability of 16.42% (implying a WARF of 2587), a
weighted average recovery rate upon default of 51.73%, and a
diversity score of 47. The default and recovery properties of the
collateral pool are incorporated in cash flow model analysis where
they are subject to stresses as a function of the target rating of
each CLO liability being reviewed. The default probability is
derived from the credit quality of the collateral pool and Moody's
expectation of the remaining life of the collateral pool. The
average recovery rate to be realized on future defaults is based
primarily on the seniority of the assets in the collateral pool.
In each case, historical and market performance trends and
collateral manager latitude for trading the collateral are also
factors.
Lightpoint CLO VIII, Ltd., issued on August 28, 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% (2070)
Class A-1-A: 0
Class A-1-B: 0
Class B: 0
Class C: +1
Class D: +3
Class E: +1
Moody's Adjusted WARF + 20% (3104)
Class A-1-A: 0
Class A-1-B: 0
Class B: 0
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/or
collateral sales by the manager, which may have significant impact
on the notes' ratings.
MADISON PARK XI: Moody's Rates $14MM Class F Notes '(P)B2(sf)'
--------------------------------------------------------------
Moody's Investors Service has assigned the following provisional
ratings to notes to be issued by Madison Park Funding XI, Ltd.:
$190,500,000 Class A-1A Senior Secured Floating Rate Notes due
2025 (the "Class A-1A Notes"), Assigned (P)Aaa (sf)
$17,000,000 Class A-1B Senior Secured Floating Rate Notes due 2025
(the "Class A-1B Notes"), Assigned (P)Aaa (sf)
$103,000,000 Class A-2 Senior Secured Floating Rate Notes due 2025
(the "Class A-2 Notes"), Assigned (P)Aaa (sf)
$50,000,000Class B-1 Floating Rate Notes due 2025 (the "Class B-1
Notes"), Assigned (P)Aa2 (sf)
$25,000,000 Class B-2 Fixed Rate Notes due 2025 (the "Class B-2
Notes"), Assigned (P)Aa2 (sf)
$23,000,000 Class C Deferrable Floating Rate Notes due 2025 (the
"Class C Notes"), Assigned (P)A2 (sf)
$30,000,000 Class D Deferrable Floating Rate Notes due 2025 (the
"Class D Notes"), Assigned (P)Baa3 (sf)
$22,000,000 Class E Deferrable Floating Rate Notes due 2025 (the
"Class E Notes"), Assigned (P)Ba3 (sf)
$14,000,000 Class F Deferrable Floating Rate Notes due 2025 (the
"Class F Notes"), Assigned (P)B2 (sf)
Moody's issues provisional ratings in advance of the final sale of
financial instruments, but these ratings only represent Moody's
preliminary credit opinions. Upon a conclusive review of a
transaction and associated documentation, Moody's will endeavor to
assign definitive ratings. A definitive rating (if any) may differ
from a provisional rating.
Ratings Rationale:
Moody's provisional ratings of the notes address the expected
losses posed to noteholders. The provisional ratings reflect the
risks due to defaults on the underlying portfolio of loans, the
transaction's legal structure, and the characteristics of the
underlying assets.
Madison Park XI is a managed cash flow CLO. The issued notes will
be collateralized primarily by broadly syndicated first lien
senior secured corporate loans. At least 90% of the portfolio must
be invested in senior secured loans (including participation
interests with respect to senior secured loans) and up to 10% of
the portfolio may consist of second lien loans, bonds, unsecured
loans and senior secured floating rate notes. The underlying
collateral pool is expected to be approximately 60% ramped as of
the closing date.
Credit Suisse Asset Management, LLC will direct the selection,
acquisition and disposition of collateral on behalf of the Issuer
and may engage in trading activity, including discretionary
trading, during the transaction's four year reinvestment period.
Thereafter, purchases are permitted using principal proceeds from
unscheduled principal payments and proceeds from sales of credit
risk obligations, and are subject to certain restrictions.
In addition to the notes rated by Moody's, the Issuer will issue
one additional tranche of subordinated notes. The transaction
incorporates interest and par coverage tests which, if triggered,
divert interest and principal proceeds to pay down the notes in
sequential order of priority.
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.
For modeling purposes, Moody's used the following base-case
assumptions:
Par amount of $500,000,000
Diversity of 50
WARF of 2500
Weighted Average Spread of 3.70%
Weighted Average Coupon of 7.50%
Weighted Average Recovery Rate of 43%
Weighted Average Life of 8 years
The notes' performance is subject to uncertainty. The notes'
performance is sensitive to the performance of the underlying
portfolio, which in turn depends on economic and credit conditions
that may change. The Manager's investment decisions and management
of the transaction will also affect the notes' performance.
Together with the set of modeling assumptions, Moody's conducted
an additional sensitivity analysis, which was an important
component in determining the ratings assigned to the notes. This
sensitivity analysis includes increased default probability
relative to the base case.
Summary of the impact of an increase in default probability
(expressed in terms of WARF level) on the notes (shown in terms of
the number of notch difference versus the current model output,
whereby a negative difference corresponds to higher expected
losses), assuming that all other factors are held equal:
Percentage Change in WARF Impact in Rating Notches
WARF + 15% (2500 to 2875)
Class A-1A Notes: 0
Class A-1B Notes: -1
Class A-2 Notes: 0
Class B-1 Notes: -2
Class B-2 Notes: -2
Class C Notes: -2
Class D Notes: -1
Class E Notes: 0
Class F Notes: 0
WARF + 30% (2500 to 3250)
Class A-1A Notes: 0
Class A-1B Notes: -1
Class A-2 Notes: -1
Class B-1 Notes: -3
Class B-2 Notes: -3
Class C Notes: -4
Class D Notes: -2
Class E Notes: -1
Class F Notes: -2
The V Score for this transaction is Medium/High. This V Score has
been assigned in a manner similar to the Medium/High V Score
assigned for the global cash flow CLO sector, as described in the
special report titled "V Scores and Parameter Sensitivities in the
Global Cash Flow CLO Sector," dated July 6, 2009.
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 Global
Approach to Rating Collateralized Loan Obligations" published in
May 2013.
MAYPORT CLO: Moody's Affirms Ba3 Rating to $20MM Class B-2L Notes
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Mayport CLO Ltd.:
$25,000,000 Class A-3L Deferrable Floating Rate Notes Due February
22, 2020, Upgraded to Aa2 (sf); previously on July 15, 2013
Upgraded to Aa3 (sf) and Placed Under Review for Possible Upgrade;
$19,500,000 Class B-1L Floating Rate Notes Due February 22, 2020,
Upgraded to Baa2 (sf); previously on July 15, 2013 Baa3 (sf)
Placed Under Review for Possible Upgrade.
Moody's also affirmed the ratings of the following notes:
$250,000,000 Class A-1L Floating Rate Notes Due February 22, 2020
(current outstanding balance of $166,189,846.39), Affirmed Aaa
(sf); previously on April 23, 2013 Affirmed Aaa (sf);
$60,000,000 Class A-1LV Floating Rate Revolving Notes Due February
22, 2020 (current outstanding balance of $39,885,563.14), Affirmed
Aaa (sf); previously on April 23, 2013 Affirmed Aaa (sf);
$26,000,000 Class A-2L Floating Rate Notes Due February 22, 2020,
Affirmed Aaa (sf); previously on April 23, 2013 Upgraded to Aaa
(sf);
$20,000,000 Class B-2L Floating Rate Notes Due February 22, 2020
(current outstanding balance of $19,262,292.40), Affirmed Ba3
(sf); previously on April 23, 2013 Affirmed Ba3 (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 April 2013. Moody's notes that the Class A-1L
Notes and Class A-1LV Notes have been paid down by approximately
31.9% or $96.7 million since the last rating action. Based on the
latest trustee report dated July 10, 2013, the Senior Class A,
Class A, Class B-1L and Class B-2L overcollateralization ratios
are reported at 131.4%, 118.6%, 110.3% and 103.1%, respectively,
versus April 2013 levels of 121.9%, 113.3%,107.4% and 102.2%,
respectively.
In taking the foregoing actions, Moody's also announced that it
had concluded its review of its ratings on the issuer's Class A-3L
Notes and Class B-1L Notes announced on July 15, 2013. At that
time, Moody's said that it had upgraded and placed certain of the
issuer's ratings on review primarily as a result of substantial
deleveraging of the senior notes and increases in OC ratios
resulting from high rates of loan collateral prepayments during
the first half of 2013.
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 $302.8 million, defaulted par of $7.0 million,
a weighted average default probability of 17.79% (implying a WARF
of 2677), a weighted average recovery rate upon default of 51.16%,
and a diversity score of 49. 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.
Mayport CLO Ltd., 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% (2141)
Class A-1L: 0
Class A-1LV: 0
Class A-2L: 0
Class A-3L: +2
Class B-1L: +3
Class B-2L: +1
Moody's Adjusted WARF + 20% (3212)
Class A-1L: 0
Class A-1LV: 0
Class A-2L: 0
Class A-3L: -2
Class B-1L: -1
Class B-2L: -1
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of upcoming speculative-grade debt maturities which
may create challenges for issuers to refinance. CLO notes'
performance may also be impacted by 1) the manager's investment
strategy and behavior and 2) divergence in legal interpretation of
CLO documentation by different transactional parties due to
embedded ambiguities.
Sources of additional performance uncertainties:
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.
MORGAN STANLEY 2006-IQ12: Fitch Cuts Rating on 2 Cert. Classes
--------------------------------------------------------------
Fitch Ratings has downgraded two classes and affirmed 16 classes
of Morgan Stanley Capital I Trust (MSCI), series 2006-IQ12
commercial mortgage pass-through certificates.
Key Rating Drivers
The downgrades are a result of a greater certainty of expected
losses and eroding credit enhancement since Fitch's last rating
action. Fitch modeled losses of 5.9% of the remaining pool;
expected losses on the original pool balance total 12.3%,
including $236.6 million (8.4% of the original pool balance) in
realized losses to date. Fitch has designated 47 loans (17.4%) as
Fitch Loans of Concern, which includes 12 specially serviced
assets (6.9%).
As of the July 2013 distribution date, the pool's aggregate
principal balance has been reduced by 32.5% to $1.91 billion from
$2.83 billion at issuance. Per the servicer reporting, one loan
(0.1% of the pool) is defeased. Interest shortfalls are currently
affecting classes E through S.
The largest contributor to expected losses is the specially-
serviced Harbour Centre loan (2.7% of the pool), which is secured
by a 217,056 square foot office property located in Aventura, FL,
northeast of Miami International Airport. The loan was transferred
to special servicing for the second time in June 2013 due to
monetary default regarding the deferred interest due. The DSCR per
the March 31, 2013 analysis was 0.73x and decreased compared to
the same period in the prior year of 0.93x. As of March 2013 the
property was 88.86% occupied with average rent at $25 per square
foot (psf). There is 26% rollover in 2014. The special servicer
has ordered an updated appraisal which has not been received yet.
The next largest contributor to expected losses is the specially-
serviced Meridian Plaza loan (1.4%), which is secured by a 305,122
sf office building located in Carmel, IN and renovated in 2002.
The loan was transferred to special servicing in January 2012 due
to imminent monetary default. The property suffered declines in
occupancy due to several tenant vacancies during 2010 and 2011.
The loan was cash managed, but due to decreased occupancy the
property was unable to generate enough income to cover operating
expenses and debt service. A Receiver was appointed to the
property in August 2012. The foreclosure sale was temporarily
postponed. However, the special servicer continues to pursue
foreclosure.
Rating Sensitivity
Rating Outlooks on classes A-1A, A-B, and A-4 remain Stable due to
sufficient credit enhancement and continued paydown. Rating
Outlooks on classes A-M and A-MFX remain Negative due to several
of the larger loans in the pool with high Fitch LTVs and upcoming
lease rollover.
Fitch downgrades the following classes:
-- $242.3 million class A-J to 'CCsf' from 'CCCsf'; RE 85%;;
-- $17.1 million class B to 'Csf' from 'CCsf'; RE 0%.
Fitch affirms the following classes:
-- $404 million class A-1A at 'AAAsf'; Outlook Stable;
-- $17.3 million class A-AB at 'AAAsf'; Outlook Stable;
-- $897.6 million class A-4 at 'AAAsf'; Outlook Stable;
-- $173 million class A-M at 'AAAsf'; Outlook Negative;
-- $100 million class A-MFX at 'AAAsf'; Outlook Negative;
-- $44.4 million class C at 'Csf'; RE 0%;
-- $14.1 million class D at 'Dsf'; RE 0%;
-- $0 class E at 'Dsf'; RE 0%;
-- $0 class F at 'Dsf'; RE 0%;
-- $0 class G at 'Dsf'; RE 0%;
-- $0 class H at 'Dsf'; RE 0%;
-- $0 class J at 'Dsf'; RE 0%;
-- $0 class K at 'Dsf'; RE 0%;
-- $0 class L at 'Dsf'; RE 0%;
-- $0 class M at 'Dsf'; RE 0%;
-- $0 class N at 'Dsf'; RE 0%.
The class A-1, A-2, A-NM and A-3 certificates have paid in full.
Fitch does not rate the class O, P, Q and S certificates. Fitch
previously withdrew the ratings on the interest-only class X-1, X-
2, X-W and A-MFL certificates.
MORGAN STANLEY 2007-HQ11: Moody's Affirms Ratings on 20 Classes
---------------------------------------------------------------
Moody's Investors Service affirmed the ratings of 20 classes of
Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through
Certificates, Series 2007-HQ11 as follows:
Cl. A-3-1, Affirmed Aaa (sf); previously on Feb 28, 2007
Definitive Rating Assigned Aaa (sf)
Cl. A-3-2, Affirmed Aaa (sf); previously on Feb 28, 2007 Assigned
Aaa (sf)
Cl. A-AB, Affirmed Aaa (sf); previously on Feb 28, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Feb 28, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-4-FL, Affirmed Aaa (sf); previously on Feb 28, 2007 Assigned
Aaa (sf)
Cl. A-1A, Affirmed Aaa (sf); previously on Feb 28, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-M, Affirmed Aa2 (sf); previously on Nov 18, 2010 Downgraded
to Aa2 (sf)
Cl. A-MFL, Affirmed Aa2 (sf); previously on Nov 18, 2010
Downgraded to Aa2 (sf)
Cl. A-J, Affirmed Baa3 (sf); previously on Nov 18, 2010 Downgraded
to Baa3 (sf)
Cl. B, Affirmed Ba1 (sf); previously on Nov 18, 2010 Downgraded to
Ba1 (sf)
Cl. C, Affirmed B2 (sf); previously on Nov 18, 2010 Downgraded to
B2 (sf)
Cl. D, Affirmed Caa1 (sf); previously on Nov 18, 2010 Downgraded
to Caa1 (sf)
Cl. E, Affirmed Caa2 (sf); previously on Nov 18, 2010 Downgraded
to Caa2 (sf)
Cl. F, Affirmed Caa3 (sf); previously on Nov 18, 2010 Downgraded
to Caa3 (sf)
Cl. G, Affirmed Ca (sf); previously on Nov 18, 2010 Downgraded to
Ca (sf)
Cl. H, Affirmed Ca (sf); previously on Nov 18, 2010 Downgraded to
Ca (sf)
Cl. J, Affirmed Ca (sf); previously on Nov 18, 2010 Downgraded to
Ca (sf)
Cl. K, Affirmed C (sf); previously on Nov 18, 2010 Downgraded to C
(sf)
Cl. L, Affirmed C (sf); previously on Nov 18, 2010 Downgraded to C
(sf)
Cl. X, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded to
Ba3 (sf)
Ratings Rationale:
The affirmations of the investment grade P&I classes are due to
key parameters, including Moody's loan to value (LTV) ratio,
Moody's stressed debt service coverage ratio (DSCR) and the
Herfindahl Index (Herf), remaining within acceptable ranges. The
ratings of the below-investment grade P&I classes are consistent
with Moody's expected loss and thus are affirmed. 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 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 rating of the interest-only class is consistent with the
credit performance of its referenced classes and thus is affirmed.
Moody's rating action reflects a base expected loss of 8.2% of the
current balance compared to 9.0% at Moody's prior full review.
Moody's base expected loss plus realized losses is now 9.2% of the
original pooled balance compared to 9.6% 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.
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 24 compared to 27 at Moody's prior full 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 last review and full
transaction review are summarized in press releases dated August
23, 2012.
Deal Performance:
As of the July 12, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 23% to $1.87
billion from $2.4 billion at securitization. The Certificates are
collateralized by 142 mortgage loans ranging in size from less
than 1% to 12% of the pool, with the top ten loans representing
53% of the pool.
Forty-one loans, representing 28% 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 loans have been liquidated from the pool, resulting in an
aggregate realized loss of $67.1 million (22% loss severity on
average). However, excluding two loans that liquidated with less
than a 2.0% loss severity, the pool's average loss severity is
51.2%. Currently, nine loans, representing 3.2% of the pool, are
in special servicing. The largest specially serviced loan is the
East Bay Retail Loan ($20.0 million -- 1.1% of the pool), which is
secured by 177,000 square foot (SF) retail property in Provo,
Utah. The loan transferred to special servicing in October 2011
due to imminent default. A loan modification was approved in
February 2013; however, the Borrower has defaulted on the post-
modification obligations. As of March 2013, the property was 74%
leased. Moody's estimates an aggregate $26.1 million loss for the
specially serviced loans (43% expected loss on average).
Moody's has assumed a high default probability for 17 poorly
performing loans, representing 17% of the pool, and has estimated
an aggregate $71.1 million loss (22% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2011 and 2012 operating
results for 90% and 97% of the pool's non-specially serviced
loans, respectively. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 107% compared to 108% 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 DSCRs are 1.44X and 0.99X, respectively, compared to
1.47X and 0.98X 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 loans represent 28% of the pool. The
largest loan is the One Seaport Plaza Loan ($225.0 million --
12.0% of the pool), which is secured by a 1.0 million square foot
Class A office building located in one block away from the South
Street Seaport in Manhattan's Financial District. The loan is
interest only for the entire term and matures in 2017.
Additionally, there is a $15.0 million B-note held outside the
trust. As of July 2013, the property was 93% leased compared to
98% at last review. The largest tenants are Wells Fargo (44% of
the net rentable area (NRA); lease expiration in December 2014;
AON Corporation (19% of the NRA; lease expiration in September
2018) and The Legal Aid Society (11% of the NRA; lease expiration
in October 2023). Prior to securitization, Wells Fargo sub-leased
its space to multiple tenants. The Borrower is actively marketing
the current vacant space and working to convert the sub-lessees to
direct tenants. The sponsor is Jack Resnick & Sons, the property's
developer and owner. Moody's LTV and stressed DSCR are 89% and
1.06X, respectively, compared to 83% and 1.14X at last review.
The second largest loan is the 525 Seventh Avenue Loan ($172.0
million -- 9.2% of the pool), which is secured by a 505,488 square
foot office building located in the Garment District submarket of
Manhattan. The loan is interest only for the entire term, and
matures in 2017. As of April 2013, the property was 98% leased,
essentially the same as at last review. The largest tenants are
Jones Apparel (approximately 13% of the NRA; lease expiration in
December 2019); Kobra International (7% of the NRA; lease
expiration in June 2017). Approximately 35% of the NRA will roll
in the next 16 months. Financial performance improved since last
review due to 5.8% increase in base rents. The loan sponsors are
Olmstead Properties and Enterprise AM. Moody's LTV and stressed
DSCR are 126% and 0.78X, respectively, compared to 130% and 0.75X
at last review.
The third largest loan is the 485 Lexington Avenue Loan ($135.0
million -- 7.2% of the pool), which is secured by a 930,558 square
foot Class A office building located near Grand Central Station in
Manhattan. The loan represents a 30% pari-passu interest in a
$450.0 million loan. The loan is interest only for the entire term
and matures in 2017. As of March 2013, the property was 99.5%
leased compared to 90% leased at the prior review and 90% at
securitization. The largest tenants are Citibank, N.A. (31% of the
NRA; lease expiration in February 2017) and Travelers Indemnity
Company (approximately 19% of the NRA; lease expiration in August
2016). The property's financial performance has been stable.
Tenants with investment-grade credit assessments account for more
the 50% of the tenant base. The sponsor is SL Green. Moody's LTV
and stressed DSCR are 134% and 0.68X, respectively, compared to
137% and 0.67X, at last review.
MORGAN STANLEY 2007-IQ13: Fitch Cuts Rating on Cl. D Certs to Csf
-----------------------------------------------------------------
Fitch Ratings has downgraded one class and affirmed 17 classes of
Morgan Stanley Capital I Trust (MSC 2007-IQ13) commercial mortgage
pass-through certificates series 2007-IQ13.
Key Rating Drivers
The affirmations reflect sufficient credit enhancement of the
remaining classes relative to Fitch's expected losses. The
downgrade is a result of higher expected losses primarily
associated with loans in special servicing. Fitch modeled losses
of 12.7% of the remaining pool; expected losses on the original
pool balance total 13.4%, including $57.4 million (3.5% of the
original pool balance) in realized losses to date. Fitch has
designated 34 loans (33.8%) as Fitch Loans of Concern, which
includes 11 specially serviced assets (11.6%).
As of the August 2013 distribution date, the pool's aggregate
principal balance has been reduced by 21.4% to $1.29 billion from
$1.64 billion at issuance. Per the servicer reporting, three loans
(4.9% of the pool) are defeased. Interest shortfalls are currently
affecting classes B through P. Loans secured by cooperative
properties represent 9.4% of the pool.
The largest contributor to expected losses is the 75-101 Federal
Street loan (16.3% of the pool), which is secured by two
interconnected, class A office buildings composed of 811,687
square feet (sf) in Boston's financial district. As of June 2013,
occupancy for the building has reached 84%, an improvement from
82% at year-end (YE) 2012 and 79% at YE 2010. Despite the
improvement in occupancy, net operating income (NOI) is just
sufficient to service the debt with NOI debt service coverage
ratio (DSCR) of 1.0x at YE 2012 and 1.05x at YE 2011. The loan is
current as of the August 2013 remittance date.
The next largest contributor to expected losses is a specially-
serviced 1.2 million-sf, outlet mall (6.3%) in Hazelwood, MO, a
suburb of St. Louis. The loan transferred to special servicing in
October 2011 due to the borrower's inability to secure financing
by the loan's maturity date. A deed-in-lieu of foreclosure was
signed in August 2012. As of YE 2012, servicer reported occupancy
for the property was 86%. The mall continues to face increased
competition with the opening of two outlet malls in nearby
Chesterfield, MO.
The third largest contributor to expected losses is a specially-
serviced suburban office property (1.1%) in Annapolis, MD totaling
72,052 sf. The loan transferred to special servicing in January
2010 due to imminent default and became real-estate owned (REO) in
October 2011. The largest tenant occupying 39% of the NRA renewed
their lease until 2016. The property is 92% occupied as of June
2013. The servicer is working to complete deferred maintenance
items prior to disposition.
Rating Sensitivity
Rating Outlooks on the investment grade rated classes remain
Stable due to increasing credit enhancement and continued paydown
of the classes. The 'AA' rated class, while expected to remain
stable may be subject to further downgrade based on the
performance and recovery prospects of REO assets in special
servicing. The distressed classes (those rated below 'B-sf') are
subject to further downgrades as losses are realized.
Fitch downgrades the following class as indicated:
-- $16.4 million class D to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following class and revises the RE as indicated:
-- $149.6 million class A-J at 'CCCsf', RE 70%.
Fitch affirms the following classes as indicated:
-- $279.3 million class A-1A at 'AAAsf', Outlook Stable;
-- $62 million class A-2 at 'AAAsf', Outlook Stable;
-- $64 million class A-3 at 'AAAsf', Outlook Stable;
-- $448.8 million class A-4 at 'AAAsf', Outlook Stable;
-- $163.9 million class A-M at 'AAsf', Outlook Stable;
-- $32.8 million class B at 'CCCsf', RE 0%;
-- $16.4 million class C at 'CCsf', RE 0%;
-- $14.3 million class E at 'Csf', RE 0%;
-- $18.4 million class F at 'Csf', RE 0%;
-- $14.3 million class G at 'Csf', RE 0%;
-- $8.2 million class H at 'Dsf', RE 0%;
-- $0 class J at 'Dsf', RE 0%;
-- $0 class K at 'Dsf', RE 0%;
-- $0 class L at 'Dsf', RE 0%;
-- $0 class M at 'Dsf', RE 0%;
-- $0 class N at 'Dsf', RE 0%.
Fitch does not rate the class O and P certificates. Class A-1 is
paid in full. Fitch previously withdrew the ratings on the
interest-only class X and X-Y certificates.
MORGAN STANLEY 2007-TOP27: Fitch Cuts Class F Cert. Rating to 'C'
-----------------------------------------------------------------
Fitch Ratings has downgraded four classes and affirmed 18 classes
of Morgan Stanley Capital I Trust, commercial mortgage pass-
through certificates, series 2007-TOP27 (MSCI 2007-TOP27).
Key Rating Drivers
The downgrades are due to an increase in expected losses for the
pool. Fitch modeled losses of 4.9% of the remaining pool; expected
losses on the original pool balance total 6.6%, including $75.7
million (2.7% of the original pool balance) in realized losses to
date. Fitch has designated 46 loans (20.2%) as Fitch Loans of
Concern, which includes six specially serviced assets (5.8%).
As of the July 2013 distribution date, the pool's aggregate
principal balance has been reduced by 18.8% to $2.25 billion from
$2.77 billion at issuance. No loans are defeased. Interest
shortfalls are currently affecting classes G through P.
The largest contributor to expected losses is the specially-
serviced loan (1.3% of the pool is secured by a 138,132 square
foot (sf) office property in Boca Raton, FL. The loan transferred
to special servicing in February 2013 due to imminent payment
default. The borrower had failed to pay the required reserve
payment that was triggered in December 2012 due to the largest
tenant's failure to renew its lease 24 months prior to expiration
as required by the loan documents. Legal counsel demanded and
accelerated the loan in April 2013 and the special servicer is
pursuing foreclosure. The largest tenant (65% NRA) is expected to
vacate in December 2014.
The next largest contributor to expected losses is a specially-
serviced portfolio (0.6%), which was initially secured by three
grocery anchored retail properties with 193,566 sf located in
Aurora, Bridgeview, and Joliet IL. The loan was transferred to the
special servicer in March 2009 due to payment default and the
asset became real estate owned (REO) in December 2010. The Aurora
property was sold in July 2012 and the two remaining properties
are 100% vacant. Bridgeview is currently under contract with a
buyer who intends to use the property as a grocery store and the
Joliet property has received and offer where the buyer intends to
use the property as storage.
The third largest contributor to expected losses are two hotels
(1.7%) that are attached by a walkway, have a total of 428 rooms
and are located in Springfield, IL. The loan was transferred to
the special servicer in October 2011 for imminent default and the
property became REO in April 2013. The special servicer is
currently evaluating the disposition strategy.
Rating Sensitivity
Rating Outlooks on classes A-1A through A-MFL remain Stable due to
increasing credit enhancement and continued pay down. Rating
Outlooks on classes A-J, B, and C are Negative and may be subject
to further downgrades if there is further deterioration of the
pool's cash flow performance and/or decrease in value of the
specially serviced loans. Additional downgrades to the distressed
classes (those rated below 'B') are expected as losses are
realized on specially serviced loans.
Fitch downgrades the following classes and assigns Recovery
Estimates (REs) as indicated:
-- $190.6 million class A-J to 'BBBsf' from 'Asf', Outlook
Negative;
-- $54.5 million class B to 'BBsf' from 'BBB-sf', Outlook
Negative;
-- $23.8 million class E to 'CCsf' from 'CCCsf', RE 0%;
-- $23.8 million class F to 'Csf' from 'CCsf', RE 0%.
Fitch affirms the following classes as indicated:
-- $256.1 million class A-1A at 'AAAsf', Outlook Stable;
-- $3.3 million class A-2 at 'AAAsf', Outlook Stable;
-- $137.4 million class A-3 at 'AAAsf', Outlook Stable;
-- $69.1 million class A-AB at 'AAAsf', Outlook Stable;
-- $1.1 billion class A-4 at 'AAAsf', Outlook Stable;
-- $172.3 million class A-M at 'AAAsf', Outlook Stable;
-- $100 million class A-MFL at 'AAAsf', Outlook Stable;
-- $30.6 million class C at 'Bsf', Outlook Negative;
-- $30.6 million class D at 'CCCsf', RE 50%.
-- $30.6 million class G at 'Csf', RE 0%;
-- $2.7 million class H at 'Dsf', RE 0%;
-- $0 class J at 'Dsf', RE 0%;
-- $0 class K at 'Dsf', RE 0%;
-- $0 class L at 'Dsf', RE 0%;
-- $0 class M at 'Dsf', RE 0%;
-- $0 class N at 'Dsf', RE 0%;
-- $0 class O at 'Dsf', RE 0%;
-- $50.2 million class AW34 at 'AAAsf', Outlook Stable.
Fitch does not rate the class P certificates. Fitch previously
withdrew the rating on the interest-only class X certificates.
MORGAN STANLEY 2013-C11: Moody's Assigns B2 Rating to Cl. G Certs
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to
fourteen classes of CMBS securities, issued by Morgan Stanley Bank
of America Merrill Lynch Trust 2013-C11 Commercial Mortgage Pass-
Through Certificates.
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-AB, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-4, Definitive Rating Assigned Aaa (sf)
Cl. X-A**, Definitive Rating Assigned Aaa (sf)
Cl. A-S*, Definitive Rating Assigned Aaa (sf)
Cl. B*, Definitive Rating Assigned Aa3 (sf)
Cl. PST*, Definitive Rating Assigned A2 (sf)
Cl. C*, Definitive Rating Assigned A3 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba2 (sf)
Cl. F, Definitive Rating Assigned Ba3 (sf)
Cl. G, Definitive Rating Assigned B2 (sf)
* Reflects Exchangeable Certificates
** Reflects Interest Only Class
Ratings Rationale:
The Certificates are collateralized by38 fixed rate loans secured
by 72 properties. The ratings are based on the collateral and the
structure of the transaction.
Moody's CMBS ratings methodology combines both commercial real
estate and structured finance analysis. Based on commercial real
estate analysis, Moody's determines the credit quality of each
mortgage loan and calculates an expected loss on a loan specific
basis. Under structured finance, the credit enhancement for each
certificate typically depends on the expected frequency, severity,
and timing of future losses. Moody's also considers a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors:
1) Moody's assessment of the probability of default, which is
largely driven by each loan's DSCR, and 2) Moody's assessment of
the severity of loss upon a default, which is largely driven by
each loan's LTV ratio.
The Moody's Actual DSCR of 1.59X is greater than the 2007
conduit/fusion transaction average of 1.31X. The Moody's Stressed
DSCR of 1.05X is greater than the 2007 conduit/fusion transaction
average of 0.92X.
Moody's Trust LTV ratio of 101.7% is lower than the 2007
conduit/fusion transaction average of 110.6%. The LTV ratio
excludes the credit assessed loan University Towers CoOp Loan
(2.3% of balance). University Towers CoOp was credit assessed at
Aaa. When University Towers is included the total pool LTV drops
to 99.7% LTV.
Moody's also considers both loan level diversity and property
level diversity when selecting a ratings approach. With respect to
loan level diversity, the pool's loan level (includes cross
collateralized and cross defaulted loans) Herfindahl Index is 16.
The transaction's loan level diversity is much lower compared to
Herfindahl scores found in most multi-borrower transactions issued
since 2009. With respect to property level diversity, the pool's
property level Herfindahl Index is 17. The transaction's property
diversity profile is also much lower than the indices calculated
in most multi-borrower transactions issued since 2009.
Moody's also grades properties on a scale of 1 to 5 (best to
worst) and considers those grades when assessing the likelihood of
debt payment. The factors considered include property age, quality
of construction, location, market, and tenancy. The pool's
weighted average property quality grade is 2.37, which is higher
than the indices calculated in most multi-borrower transactions
since 2009.
This deal has a super-senior Aaa class with 30% credit
enhancement. Although the additional enhancement offered to the
senior most certificate holders provides additional protection
against pool loss, the super-senior structure is credit negative
for the certificate that supports the super-senior class. If the
support certificate were to take a loss, the loss would have the
potential to be quite large on a percentage basis. Thin tranches
need more subordination to reduce the probability of default in
recognition that their loss-given default is higher. This
adjustment helps keep expected loss in balance and consistent
across deals. The transaction was structured with additional
subordination at class A-S to mitigate the potential increased
severity to class A-S.
In terms of waterfall structure, the transaction contains a unique
group of exchangeable certificates. Classes A-S (Aaa (sf)), B (Aa3
(sf)) and C (A3 (sf)) may be exchanged for Class PST (A2 (sf))
certificates and Class PST may be exchanged for the Classes A-S, B
and C. The PST certificates will be entitled to receive the sum of
interest distributable on the Classes A-S, B and C certificates
that are exchanged for such PST certificates. The initial
certificate balance of the Class PST certificates is equal to the
aggregate of the initial certificate balances of the Class A-S, B
and C and represent the maximum certificate balance of the PST
certificates that may be issued in an exchange.
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 Fusion U.S. CMBS
Transactions" published in April 2005. The methodology used in
rating Class X-A was "Moody's Approach to Rating Structured
Finance Interest-Only Securities" published in February 2012.
Moody's analysis employs the excel-based CMBS Conduit Model v2.62
which derives credit enhancement levels based on an aggregation of
adjusted loan level proceeds derived from Moody's loan level DSCR
and LTV ratios. Major adjustments to determining proceeds include
loan structure, property type, sponsorship and diversity. Moody's
analysis also uses the CMBS IO calculator version 1.0 which
references the following inputs to calculate the proposed IO
rating based on the published methodology: original and current
bond ratings and credit estimates; original and current bond
balances grossed up for losses for all bonds the IO(s)
reference(s) within the transaction; and IO type corresponding to
an IO type as defined in the published methodology.
The V Score for this transaction is assessed as Low/Medium, the
same as the V score assigned to the U.S. Conduit and CMBS sector.
This reflects typical volatility with respect to the critical
assumptions used in the rating process as well as an average
disclosure of securitization collateral and ongoing performance.
Moody's V Scores provide a relative assessment of the quality of
available credit information and the potential variability around
the various inputs to a rating determination. The V Score ranks
transactions by the potential for significant rating changes owing
to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling, and the transaction governance that
underlie the ratings. V Scores apply to the entire transaction
(rather than individual tranches).
MSIM PECONIC: Moody's Affirms 'B1' Rating on Class E Notes
----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by MSIM Peconic Bay, Ltd.:
$14,000,000 Class B Floating Rate Notes Due 2019, Upgraded to Aaa
(sf); previously on July 15, 2013 Upgraded to Aa1 (sf) and Placed
Under Review for Possible Upgrade
$19,500,000 Class C Floating Rate Deferrable Notes Due 2019,
Upgraded to A1 (sf); previously on July 15, 2013 Upgraded to A2
(sf) and Placed Under Review for Possible Upgrade
Moody's also affirmed the ratings of the following notes:
$240,000,000 Class A-1-A Floating Rate Notes Due 2019 (current
outstanding balance of $92,536,954.96), Affirmed Aaa (sf);
previously on August 30, 2007 Assigned Aaa (sf)
$60,000,000 Class A-1-B Floating Rate Notes Due 2019, Affirmed Aaa
(sf); previously on June 15, 2012 Upgraded to Aaa (sf)
$20,000,000 Class D Floating Rate Deferrable Notes Due 2019,
Affirmed Ba2 (sf); previously on August 22, 2011 Upgraded to Ba2
(sf)
$16,000,000 Class E Floating Rate Deferrable Notes Due 2019
(current outstanding balance of $10,417,286.23), Affirmed B1 (sf);
previously on August 22, 2011 Upgraded to B1 (sf)
Ratings Rationale:
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging of the Class A-1-A Notes and an
increase in the transaction's overcollateralization ratios since
the end of the reinvestment period in July 2012. Moody's notes
that the Class A-1-A Notes have been paid down by approximately
61.4% or $147.5 million since July 2012. Based on the latest
trustee report dated July 10, 2013, the Class A/B, Class C, Class
D and Class E overcollateralization ratios are reported at 128.8%,
117.6%, 108.0% and 103.6%, respectively, versus July 2012 levels
of 119.6%, 112.6%, 106.3% and 103.2%, respectively. Moody's notes
the reported July overcollateralization ratios do not reflect the
July 22, 2013 payment of $38.3 million to the Class A-1-A 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 and Class C Notes announced on July 15, 2013. At that time,
Moody's said that it had upgraded and placed certain of the
issuer's ratings on review primarily as a result of substantial
deleveraging of the senior notes and increases in OC ratios
resulting from high rates of loan collateral prepayments during
the first half of 2013.
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 balance of
$221.3 million, defaulted par of $7.8 million, a weighted average
default probability of 20.22% (implying a WARF of 2827), a
weighted average recovery rate upon default of 52.05%, and a
diversity score of 59. The default and recovery properties of the
collateral pool are incorporated in cash flow model analysis where
they are subject to stresses as a function of the target rating of
each CLO liability being reviewed. The default probability is
derived from the credit quality of the collateral pool and Moody's
expectation of the remaining life of the collateral pool. The
average recovery rate to be realized on future defaults is based
primarily on the seniority of the assets in the collateral pool.
In each case, historical and market performance trends and
collateral manager latitude for trading the collateral are also
factors.
MSIM Peconic Bay, Ltd., issued in August 2007, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's 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% (2262)
Class A-1-A: 0
Class A-1-B: 0
Class B: 0
Class C: +3
Class D: +2
Class E: 0
Moody's Adjusted WARF + 20% (3392)
Class A-1-A: 0
Class A-1-B: 0
Class B: -1
Class C: -1
Class D: 0
Class E: -3
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) 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.
NANTUCKET CLO I: Moody's Keeps Ba3 Rating on $12.6MM Cl. E Notes
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Nantucket CLO I Ltd.:
$18,000,000 Class C Senior Secured Deferrable Floating Rate Notes,
Due 2020, Upgraded to Aa2 (sf); previously on July 15, 2013 A1
(sf) Placed Under Review for Possible Upgrade
$15,600,000 Class D Secured Deferrable Floating Rate Notes, Due
2020, Upgraded to Baa2 (sf); previously on August 20, 2012
Upgraded to Baa3 (sf)
Moody's also affirmed the ratings of the following notes:
$215,700,000 Class A Senior Secured Floating Rate Notes, Due 2020
(current outstanding balance of $172,339,640), Affirmed Aaa (sf);
previously on June 30, 2011 Upgraded to Aaa (sf)
$15,000,000 Class B Senior Secured Floating Rate Notes, Due 2020,
Affirmed Aaa (sf); previously on July 15, 2013 Upgraded to Aaa
(sf)
$12,600,000 Class E Secured Deferrable Floating Rate Notes, Due
2020, Affirmed Ba3 (sf); previously on August 20, 2012 Upgraded to
Ba3 (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,
particularly since November 2012. Moody's notes that the Class A
Notes have been paid down by approximately 20% or $42.7 million
since November 2012. Based on the latest trustee report dated July
1, 2013 the Class A/B, Class C, Class D, and Class E
overcollateralization ratios are reported at 130.22%, 118.8%,
110.42%, and 104.46%, respectively, versus July 2012 levels of
124.80%, 115.74%, 108.89%, and 103.93%, respectively. In taking
the foregoing actions, Moody's also announced that it had
concluded its review of its ratings on the issuer's Class C Notes
announced on July 15, 2013. At that time, Moody's said that it had
upgraded and placed certain of the issuer's ratings on review
primarily as a result of substantial deleveraging of the senior
notes and increases in OC ratios resulting from high rates of loan
collateral prepayments during the first half of 2013.
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 $243.9 million, no defaulted par, a weighted
average default probability of 17.73% (implying a WARF of 2422), a
weighted average recovery rate upon default of 52.47%, and a
diversity score of 45. 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.
Nantucket CLO I Ltd., issued in November 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's 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% (1938)
Class A: 0
Class B: 0
Class C: +2
Class D: +2
Class E: +1
Moody's Adjusted WARF + 20% (2906)
Class A: 0
Class B: 0
Class C: -2
Class D: -2
Class E: -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.
NEWCASTLE CDO IX: Moody's Hikes Rating on 2 Note Classes to Ca
--------------------------------------------------------------
Moody's has upgraded the ratings of two classes and affirmed the
ratings of nine classes of Notes issued by Newcastle CDO IX 1,
Limited. The upgrades are primarily due to the rapid redemption of
the senior notes. The affirmations are due to key transaction
parameters performing within levels commensurate with the existing
ratings levels. The rating action is the result of Moody's on-
going surveillance of commercial real estate collateralized debt
obligation (CRE CDO CLO) transactions.
Moody's rating action is as follows:
Cl. A-1, Upgraded to Aa3 (sf); previously on Sep 12, 2012 Upgraded
to A1 (sf)
Cl. A-2, Upgraded to Baa3 (sf); previously on Sep 12, 2012
Upgraded to Ba1 (sf)
Cl. B, Affirmed Ba3 (sf); previously on Sep 12, 2012 Upgraded to
Ba3 (sf)
Cl. E, Affirmed B2 (sf); previously on Sep 12, 2012 Upgraded to B2
(sf)
Cl. F, Affirmed B3 (sf); previously on Sep 12, 2012 Upgraded to B3
(sf)
Cl. G, Affirmed Caa1 (sf); previously on Sep 12, 2012 Upgraded to
Caa1 (sf)
Cl. H, Affirmed Caa2 (sf); previously on Sep 12, 2012 Upgraded to
Caa2 (sf)
Cl. J, Affirmed Caa3 (sf); previously on Sep 30, 2010 Downgraded
to Caa3 (sf)
Cl. K, Affirmed Caa3 (sf); previously on Sep 30, 2010 Confirmed at
Caa3 (sf)
Cl. L, Affirmed Ca (sf); previously on Sep 30, 2010 Downgraded to
Ca (sf)
Cl. M, Affirmed Ca (sf); previously on Sep 30, 2010 Confirmed at
Ca (sf)
Ratings Rationale:
Newcastle CDO IX 1, Limited is a static (the reinvestment period
ended in May, 2012) cash transaction backed by a portfolio of: i)
mezzanine loans (56.5% of the pool balance); ii) B-Notes (12.1%);
iii) CRE CDO securities (12.7%); iv) commercial mortgage backed
securities (CMBS) (7.5%); v) asset-backed securities, primarily in
the form of wireless tower backed notes, (ABS) (3.9%); vi) whole
loans (0.8%); vii) CMBS rake-bonds (0.3%); and viii) other
commercial real estate related debt, primarily in the form of term
loans (5.9%). As of the July 18, 2013 trustee report, the
aggregate note balance of the transaction, including preferred
shares, has decreased to $619.0 million (which includes previously
executed partial and full junior note cancellations). The
amortization in the current period includes sales of certain
securities and regular amortization of collateral. The paydown is
directed to the Class A-1 Note.
There are two assets with a par balance of $14.0 million (2.0% of
the current pool balance) that are considered defaulted assets as
of the July 18, 2013 trustee report, compared to two assets with a
par balance of $14.0 million (1.7% of the pool balance) at last
review. Moody's expects significant losses from those defaulted
assets to occur once they are realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
These parameters are typically modeled as actual parameters for
static deals and as covenants for managed deals.
WARF is a primary measure of the credit quality of a CRE CDO pool.
Moody's has completed updated assessments for the non-Moody's
rated collateral. Moody's modeled a bottom-dollar WARF of 5,501
(excluding defaulted assets) compared to 5,088 at last review. The
current distribution of Moody's rated collateral and assessments
for non-Moody's rated collateral is as follows: Aaa-Aa3 (0.1%
compared to 0.1% at last review), A1-A3 (2.3% compared to 2.0% at
last review), Baa1-Baa3 (3.3% compared to 2.9% at last review),
Ba1-Ba3 (12.4% compared to 10.7% at last review), B1-B3 (11.5%
compared to 15.9% at last review), and Caa1-C (70.4% compared to
68.5% at last review).
Moody's modeled a WAL of 4.2 years, compared to 3.2 years at last
review. The current WAL is based on the assumption about
extensions on the underlying collateral assets.
Moody's modeled a fixed WARR of 9.7%, compared to 8.8% at last
review.
Moody's modeled a MAC of 14.2%, compared to 16.5% at last review.
Moody's review incorporated CDOROM v2.8, one of Moody's CDO rating
models, which was released on March 25, 2013.
The cash flow model, CDOEdge v3.2.1.2, released on May 16, 2013,
was used to analyze the cash flow waterfall and its effect on the
capital structure of the deal.
Moody's analysis encompasses the assessment of stress scenarios.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However, in
many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the
other key parameters. Rated notes are particularly sensitive to
changes in recovery rate assumptions. Holding all other key
parameters static, changing the recovery rate assumption, down
from 9.7% to 4.7% or up to 14.7% would result in a rating movement
on the rated tranches of 0 to 2 notches downward and 0 to 2
notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of growth
in the current macroeconomic environment 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 hotel sector continues to exhibit growth albeit at a slightly
slower pace. The multifamily sector should remain stable with
moderate growth. Gradual recovery in the office sector continues
and will be assisted in the next quarter when absorption is likely
to outpace completions. However, since office demand is closely
tied to employment, Moody's expects regional employment growth to
provide market differentiation. CBD markets continue to outperform
secondary suburban markets. The retail sector exhibited a slight
reduction in vacancies in the first quarter; the largest drop
since 2005. However, consumers continue to be cautious as
evidenced by sales growth continuing below historical trends.
Across all property sectors, the availability of debt capital
continues to improve with robust securitization activity of
commercial real estate loans supported by a monetary policy of low
interest rates.
Moody's central global macroeconomic outlook indicates the global
economy has lost momentum over the past quarter as it tries to
recover. US GDP growth for 2013 is likely to remain close to 2%,
however US sequestration cuts that came into effect in March may
create a drag on the positive growth in the US private sector.
While the broad economic impact in unclear, the direct effect is
likely to shave 0.4% off US GDP growth in 2013. Continuing from
the previous quarter, Moody's believes that the three most
immediate risks are: i) the risk of an even deeper than currently
expected recession in the euro area, accompanied by deeper credit
contraction, potentially triggered by a further intensification of
the sovereign debt crisis; ii) slower-than-expected recovery in
major emerging markets following the recent slowdown; and iii) an
escalation of geopolitical tensions, resulting in adverse economic
developments.
The methodologies used in this rating were "Moody's Approach to
Rating SF CDOs" published in May 2012, and "Moody's Approach to
Rating Commercial Real Estate CDOs" published in July 2011.
OCEAN TRAILS IV: S&P Assigns Prelim 'BB' Rating on Class E Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to Ocean Trails CLO IV/Ocean Trails CLO IV LLC's
$366.65 million floating-rate notes.
The note issuance is a collateralized loan obligation
securitization backed by a revolving pool consisting primarily of
broadly syndicated senior secured loans.
The preliminary ratings are based on information as of Aug. 16,
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
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 0.28%-11.57%.
-- The transaction's overcollateralization and interest
coverage tests, a failure of which would lead to the
diversion of interest and principal proceeds to reduce the
balance of the rated notes outstanding.
STANDARD & POOR'S 17G-7 DISCLOSURE REPORT
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1741.pdf
PRELIMINARY RATINGS ASSIGNED
Ocean Trails CLO IV/Ocean Trails CLO IV LLC
Class Rating Amount
(mil. $)
X AAA (sf) 2.65
A AAA (sf) 242.50
B AA (sf) 51.00
C (deferrable) A (sf) 25.75
D (deferrable) BBB (sf) 20.25
E (deferrable) BB (sf) 16.50
F (deferrable) B (sf) 8.00
Subordinated notes NR 36.00
OCTAGON INVESTMENT VIII: Moody's Ups Cl. D Notes Rating From Ba2
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Octagon Investment Partners VIII, Ltd.:
$22,500,000 Class C Secured Deferrable Floating Rate Notes due
September 15, 2017, Upgraded to Aaa (sf); previously on July 15,
2013 Upgraded to Aa1 (sf) and Placed Under Review for Possible
Upgrade;
$22,400,000 Class D Secured Floating Rate Notes due September 15,
2017, Upgraded to Aa3 (sf); previously on February 19, 2013
Upgraded to Baa1 (sf);
$16,500,000 Class E Secured Floating Rate Notes due September 15,
2017 (current outstanding balance of $15,348,673), Upgraded to
Baa3 (sf); previously on February 19, 2013 Upgraded to Ba2 (sf).
Moody's also affirmed the ratings of the following notes:
$318,000,000 Class A-1 Senior Secured Floating Rate Notes due
September 15, 2017 (current outstanding balance of
$83,491,683.84), Affirmed Aaa (sf); previously on February 19,
2013 Affirmed Aaa (sf);
$25,000,000 Class A-2 Revolving Senior Secured Floating Rate due
September 15, 2017 (current outstanding balance of $6,563,811.61),
Affirmed Aaa (sf); previously on February 19, 2013 Affirmed Aaa
(sf);
$18,000,000 Class B Senior Secured Floating Rate Notes due
September 15, 2017, Affirmed Aaa (sf); previously on February 19,
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 February 2013. Moody's notes that the Class A
Notes have been paid down by approximately 54% or $106.3 million
since the last rating action. Based on the latest trustee report
dated July 31, 2013, the Class A/B, Class C, Class D and Class E
overcollateralization ratios are reported at 173.7%, 143.8%,
122.7% and 111.5%, respectively, versus December 2012 levels of
137.0%, 124.0%, 113.3% and 107.0%, respectively.
In taking the foregoing actions, Moody's also announced that it
had concluded its review of the rating on the issuer's Class C
Notes announced on July 15, 2013. At that time, Moody's said that
it had upgraded and placed certain of the issuer's ratings on
review primarily as a result of substantial deleveraging of the
senior notes and increases in OC ratios resulting from high rates
of loan collateral prepayments during the first half of 2013.
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 $187.7 million, no defaulted par, a weighted
average default probability of 14.1% (implying a WARF of 2460), a
weighted average recovery rate upon default of 47.7%, and a
diversity score of 34. 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.
Octagon Investment Partners VIII, Ltd., issued in August 2005, 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% (1968)
Class A-1: 0
Class A-2: 0
Class B: 0
Class C: 0
Class D: +2
Class E: +2
Moody's Adjusted WARF + 20% (2952)
Class A-1: 0
Class A-2: 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:
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.
PALMER SQUARE 2013-1: S&P Affirms 'BB' Rating on Class D Notes
--------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on Palmer
Square CLO 2013-1 Ltd./Palmer Square CLO 2013-1 LLC's
$330.75 million floating-rate notes following the transaction's
effective date as of July 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 (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 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
Palmer Square CLO 2013-1 Ltd./Palmer Square CLO 2013-1 LLC
Class Rating Amount
(mil. $)
A-1 AAA (sf) 212.80
A-2 AA (sf) 59.70
B (deferrable) A (sf) 19.75
C (deferrable) BBB (sf) 16.20
D (deferrable) BB (sf) 13.65
E (deferrable) B (sf) 8.65
RALI TRUST: Moody's Takes Action on $594MM RMBS Issued 2003-2007
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of three
tranches and confirmed the ratings of eight tranches from six
transactions backed by Alt-A/Option ARM loans, issued by
Residential Accredit Loans, Inc.
Complete rating actions are as follows:
Issuer: RALI Series 2003-QA1 Trust
Cl. A-I, Confirmed at Baa1 (sf); previously on May 14, 2013 Baa1
(sf) Placed Under Review Direction Uncertain
Cl. A-II, Confirmed at Baa1 (sf); previously on May 14, 2013 Baa1
(sf) Placed Under Review Direction Uncertain
Cl. M-1, Confirmed at Ba3 (sf); previously on May 14, 2013 Ba3
(sf) Placed Under Review Direction Uncertain
Cl. M-2, Upgraded to Caa1 (sf); previously on May 14, 2013 Caa3
(sf) Placed Under Review Direction Uncertain
Issuer: RALI Series 2005-QA1 Trust
Cl. A-1, Upgraded to A3 (sf); previously on May 14, 2013 Baa1 (sf)
Placed Under Review Direction Uncertain
Cl. A-2, Upgraded to Baa2 (sf); previously on May 14, 2013 Ba2
(sf) Placed Under Review Direction Uncertain
Cl. M-1, Confirmed at Caa2 (sf); previously on May 14, 2013 Caa2
(sf) Placed Under Review Direction Uncertain
Issuer: RALI Series 2007-QH3 Trust
Cl. A-1, Confirmed at Caa3 (sf); previously on May 14, 2013 Caa3
(sf) Placed Under Review Direction Uncertain
Issuer: RALI Series 2007-QH4 Trust
Cl. A-1, Confirmed at Caa3 (sf); previously on May 14, 2013 Caa3
(sf) Placed Under Review Direction Uncertain
Issuer: RALI Series 2007-QH5 Trust
Cl. A-I-1, Confirmed at Caa3 (sf); previously on May 14, 2013 Caa3
(sf) Placed Under Review Direction Uncertain
Issuer: RALI Series 2007-QH6 Trust
Cl. A-1, Confirmed at Caa3 (sf); previously on May 14, 2013 Caa3
(sf) Placed Under Review Direction Uncertain
Ratings Rationale:
The actions are primarily a result of the recent performance of
the underlying pools and reflect Moody's updated loss expectations
on the pools. The upgrades are a result of build-up in credit
enhancement on the bonds and stable performance of the underlying
pool.
The actions also reflect the correction of errors in the
Structured Finance Workstation (SFW) cash flow models used by
Moody's in rating these transactions, specifically in how the
models handle interest allocation for these transactions. The cash
flow models used in past rating actions used a separate interest
waterfall. However, the pooling and servicing agreements for these
transactions provide that all collected principal and interest is
commingled into one payment waterfall to first pay all promised
interest due on bonds , and then pay scheduled principal. Due to
the discovery of these errors, eleven tranches were placed on
watch on May 14, 2013. The errors have now been corrected, and
these rating actions reflect these changes.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in June 2013.
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
8.2% in July 2012 to 7.4% in July 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.
RESIDENTIAL FUNDING: Moody's Takes Action on $382-Mil. of RMBS
--------------------------------------------------------------
Moody's Investors Service has confirmed the ratings of 13 tranches
and upgraded the ratings of five tranches from seven transactions
issued by Residential Funding Corporation, backed by Subprime
mortgage loans.
Complete rating actions are as follows:
Issuer: RAMP Series 2003-RZ1 Trust
Cl. A-I-5, Upgraded to Ba2 (sf); previously on May 14, 2013 B2
(sf) Placed Under Review Direction Uncertain
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Cl. A-I-6, Upgraded to Ba2 (sf); previously on May 14, 2013 B3
(sf) Placed Under Review Direction Uncertain
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Cl. A-I-7, Upgraded to Ba2 (sf); previously on May 14, 2013 B2
(sf) Placed Under Review Direction Uncertain
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Cl. A-II, Upgraded to Ba2 (sf); previously on May 14, 2013 B2 (sf)
Placed Under Review Direction Uncertain
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Issuer: RAMP Series 2003-RZ4 Trust
Cl. A-6, Confirmed at Baa1 (sf); previously on May 14, 2013 Baa1
(sf) Placed Under Review Direction Uncertain
Underlying Rating: Confirmed at Baa1 (sf); previously on May 14,
2013 Baa1 (sf) Placed Under Review Direction Uncertain
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Cl. A-7, Confirmed at A3 (sf); previously on May 14, 2013 A3 (sf)
Placed Under Review Direction Uncertain
Cl. M-1, Confirmed at B2 (sf); previously on May 14, 2013 B2 (sf)
Placed Under Review Direction Uncertain
Issuer: RASC Series 2001-KS2 Home Equity Mortgage Asset-Backed
Pass-Through Certificates, Series 2001-KS2
Cl. A-I-5, Confirmed at Caa2 (sf); previously on May 14, 2013 Caa2
(sf) Placed Under Review Direction Uncertain
Cl. A-I-6, Confirmed at Caa1 (sf); previously on May 14, 2013 Caa1
(sf) Placed Under Review Direction Uncertain
Cl. A-II, Confirmed at Ba1 (sf); previously on May 14, 2013 Ba1
(sf) Placed Under Review Direction Uncertain
Cl. M-II-1, Confirmed at Caa3 (sf); previously on May 14, 2013
Caa3 (sf) Placed Under Review Direction Uncertain
Issuer: RASC Series 2002-KS8 Trust
A-5, Confirmed at Caa3 (sf); previously on May 14, 2013 Caa3 (sf)
Placed Under Review Direction Uncertain
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
A-6, Confirmed at Caa2 (sf); previously on May 14, 2013 Caa2 (sf)
Placed Under Review Direction Uncertain
Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Issuer: RASC Series 2003-KS2 Trust
Cl. A-I-5, Confirmed at B1 (sf); previously on May 14, 2013 B1
(sf) Placed Under Review Direction Uncertain
Cl. A-I-6, Confirmed at Ba3 (sf); previously on May 14, 2013 Ba3
(sf) Placed Under Review Direction Uncertain
Cl. M-I-1, Confirmed at Caa3 (sf); previously on May 14, 2013 Caa3
(sf) Placed Under Review Direction Uncertain
Issuer: RASC Series 2004-KS11 Trust
Cl. M-1, Upgraded to B3 (sf); previously on May 14, 2013 Caa3 (sf)
Placed Under Review Direction Uncertain
Issuer: RASC Series 2005-EMX5 Trust
Cl. A-2, Confirmed at Caa3 (sf); previously on May 14, 2013 Caa3
(sf) Placed Under Review Direction Uncertain
Underlying Rating: Confirmed at Caa3 (sf); previously on May 14,
2013 Caa3 (sf) Placed Under Review Direction Uncertain
Financial Guarantor: Financial Guaranty Insurance Company (Insured
Rating Withdrawn Mar 25, 2009)
Ratings Rationale:
The rating actions reflect the recent performance of the
underlying pools and Moody's updated expected losses on the pools.
The rating actions also reflect correction of errors in the
Structured Finance Workstation (SFW) cash flow models previously
used by Moody's in rating these transactions.
The cash flow models used in previous rating actions for these
transactions incorrectly applied separate interest and principal
waterfalls. In the impacted deals, all collected principal and
interest is commingled into one payment waterfall to pay all
interest due on the bonds first, and then pay principal. Due to
the discovery of these errors, these tranches were placed on
review on May 14, 2013. The errors have now been corrected, and
these rating actions reflect the changes.
The methodology used in these ratings was "US RMBS Surveillance
Methodology" published in June 2013.
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 July 2012 to 7.4% in July 2013. Moody's
forecasts an unemployment central range of 7.0% to 8.0% for 2013.
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.
ROSEDALE CLO: Moody's Lifts Ratings on 2 Note Classes From 'Ba1'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Rosedale CLO Ltd.:
$15,500,000 Class C Third Priority Senior Secured Deferrable
Floating Rate Notes Due 2021, Upgraded to Aa1 (sf); previously on
July 15, 2013 Upgraded to A2 (sf) and Placed Under Review for
Possible Upgrade;
$6,500,000 Class D-1 Fourth Priority Mezzanine Deferrable Floating
Rate Notes Due 2021, Upgraded to Baa1 (sf); previously on June 30,
2011 Upgraded to Ba1 (sf);
$10,000,000 Class D-2 Fourth Priority Mezzanine Deferrable Step-Up
Notes Due 2021, Upgraded to Baa1 (sf); previously on June 30, 2011
Upgraded to Ba1 (sf).
Moody's also affirmed the ratings of the following notes:
$8,980,000 Class X Floating Rate Installment Notes Due 2014
(current outstanding balance of $718,400), Affirmed Aaa (sf);
previously on June 30, 2006 Assigned Aaa (sf);
$25,000,000 Class A-1R First Priority Senior Secured Floating Rate
Revolving Notes Due 2021 (current outstanding balance of
$8,732,100), Affirmed Aaa (sf); previously on June 30, 2011
Upgraded to Aaa (sf);
$25,000,000 Class A-1D First Priority Senior Secured Floating Rate
Delayed Draw Notes Due 2021 (current outstanding balance of
$8,732,100), Affirmed Aaa (sf); previously on June 30, 2011
Upgraded to Aaa (sf);
$106,000,000 Class A-1A First Priority Senior Secured Floating
Rate Term Notes Due 2021 (current outstanding balance of
$37,024,105), Affirmed Aaa (sf); previously on June 30, 2011
Upgraded to Aaa (sf);
$60,000,000 Class A-1S First Priority Senior Secured Floating Rate
Term Notes Due 2021 (current outstanding balance of $15,425,954),
Affirmed Aaa (sf); previously on February 11, 2011 Upgraded to Aaa
(sf);
$8,500,000 Class A-1J First Priority Senior Secured Floating Rate
Term Notes Due 2021, Affirmed Aaa (sf); previously on July 15,
2013 Upgraded to Aaa (sf);
$22,000,000 Class B Second Priority Senior Secured Floating Rate
Notes Due 2021, Affirmed Aaa (sf); previously on July 15, 2013
Upgraded to Aaa (sf);
$9,000,000 Class E Fifth Priority Mezzanine Deferrable Floating
Rate Notes Due 2021, Affirmed B1 (sf); previously on June 30, 2011
Upgraded to B1 (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
January 2013. Moody's notes that the Class A-1R, A-1D and A-1A
Notes have been paid down by approximately 50% or $54.9 million,
and the Class A-1S Notes have been paid down by approximately 61%
or $24.1 million since January 2013. Based on the latest trustee
report dated August 2, 2013, the Class A/B, Class C, Class D and
Class E overcollateralization ratios are reported at 145.7%,
126.2%, 110.5% and 103.5%, respectively, versus January 2013
levels of 125.0%, 115.0%, 106.3% and 102.0%, respectively.
Moody's also announced that it had concluded its review of its
ratings on the issuer's Class C Notes announced on July 15, 2013.
At that time, Moody's said that it had upgraded and placed certain
of the issuer's ratings on review for upgrade primarily as a
result of substantial deleveraging of the senior notes and
increases in OC ratios resulting from high rates of loan
collateral prepayments during the first half of 2013.
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 $144.2 million, defaulted par of $7.0 million,
a weighted average default probability of 19.49% (implying a WARF
of 2932), a weighted average recovery rate upon default of 51.52%,
and a diversity score of 40. The default and recovery properties
of the collateral pool are incorporated in cash flow model
analysis where they are subject to stresses as a function of the
target rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Rosedale CLO Ltd., issued in June 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% (2345)
Class X: 0
Class A-1R: 0
Class A-1D: 0
Class A-1A: 0
Class A-1S: 0
Class A-1J: 0
Class B: 0
Class C: +1
Class D-1: +2
Class D-2: +2
Class E: +1
Moody's Adjusted WARF + 20% (3518)
Class X: 0
Class A-1R: 0
Class A-1D: 0
Class A-1A: 0
Class A-1S: 0
Class A-1J: 0
Class B: 0
Class C: -2
Class D-1: -2
Class D-2: -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.
SCHOONER TRUST 2007-7: Moody's Affirms Ratings on 12 Certificates
-----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes and
affirmed the ratings of twelve classes of Schooner Trust
Commercial Mortgage Pass-Through Certificates, Series 2007-7 as
follows:
Cl. A-1, Affirmed Aaa (sf); previously on Mar 6, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Mar 6, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. B, Upgraded to Aaa (sf); previously on Sep 20, 2012 Upgraded
to Aa1 (sf)
Cl. C, Upgraded to Aa2 (sf); previously on Sep 20, 2012 Upgraded
to A1 (sf)
Cl. D, Affirmed Baa2 (sf); previously on Mar 6, 2007 Definitive
Rating Assigned Baa2 (sf)
Cl. E, Affirmed Baa3 (sf); previously on Mar 6, 2007 Definitive
Rating Assigned Baa3 (sf)
Cl. F, Affirmed Ba1 (sf); previously on Mar 6, 2007 Definitive
Rating Assigned Ba1 (sf)
Cl. G, Affirmed Ba2 (sf); previously on Mar 6, 2007 Definitive
Rating Assigned Ba2 (sf)
Cl. H, Affirmed Ba3 (sf); previously on Mar 6, 2007 Definitive
Rating Assigned Ba3 (sf)
Cl. J, Affirmed B2 (sf); previously on Oct 22, 2009 Downgraded to
B2 (sf)
Cl. K, Affirmed Caa1 (sf); previously on Oct 22, 2009 Downgraded
to Caa1 (sf)
Cl. L, Affirmed Caa2 (sf); previously on Oct 22, 2009 Downgraded
to Caa2 (sf)
Cl. XP, Affirmed Aaa (sf); previously on Mar 6, 2007 Definitive
Rating Assigned Aaa (sf)
Cl. XC, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Ratings Rationale:
The upgrades are due to increased credit support from pay downs
and amortization. The pool has paid down by 10% since Moody's last
full review. The affirmations are due to key parameters, including
Moody's loan to value (LTV) ratio, Moody's stressed debt service
coverage ratio (DSCR) and the Herfindahl Index (Herf), remaining
within acceptable ranges. Based on Moody's current base expected
loss, the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
The rating of the IO Classes, Classes XP and XC, are consistent
with the expected credit performance of their referenced classes
and thus are affirmed.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines, the
expected level of credit enhancement and the priority in the cash
flow waterfall may be insufficient for the current ratings of
these classes.
Moody's rating action reflects a cumulative base expected loss of
2.2% of the current balance compared to 2.5% at last review. Base
expected losses and realized losses have decreased to 1.4% of the
original balance from 1.7% at last review.
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 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.
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 Canadian CMBS" published in
May 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 20 compared to 21 at last review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through 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 September 20, 2012.
Deal Performance:
As of the August 12, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 37.5% to $267.4
million from $427.6 million at securitization. The Certificates
are collateralized by 47 mortgage loans ranging in size from less
than 1% to 14% of the pool, with the top ten loans representing
54% of the pool.
Ten loans, representing 13.7% 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.
One loan has been liquidated from the pool, resulting in a
realized loss of $6,223 (1.2% loss severity). There are currently
no loans in special servicing.
Moody's has assumed a high default probability for three poorly
performing loans representing 3.3% of the pool and has estimated a
$1.3 million loss (15% expected loss based on a 50% probability
default) from these troubled loan.
Moody's was provided with full year 2012 operating results for 94%
of the pool. Moody's weighted average conduit LTV is 80% compared
to 83% 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 9.2%.
Moody's actual and stressed conduit DSCRs are 1.60X and 1.40X,
respectively, compared to 1.53X and 1.32X, respectively, at last
full review. Moody's actual DSCR is based on Moody's net cash flow
(NCF) and the loan's actual debt service. Moody's stressed DSCR is
based on Moody's NCF and a 9.25% stressed rate applied to the loan
balance.
The three largest conduit loans represent 30.6% of the pool
balance. The largest loan is the MTS Building Loan ($37.9 million
-- 14.2% of the pool), which is secured by two adjacent office
buildings located in Winnipeg, Manitoba. One of the two buildings
serves as MTS Allstream's corporate headquarters. MTS is the
largest telecommunications company in Manitoba and the 4th largest
company in Canada. MTS occupies 89% of the net rentable area (NRA)
via a lease that runs through December 2021. The property was 100%
leased as of June 2013, which is the same as last review and at
securitization. Moody's LTV and stressed DSCR are 92% and 1.03x,
respectively, compared to 96% and 0.98x at last review.
The second largest loan is the Aviva Insurance Complex Loan ($28.6
million -- 10.7%), which is secured by a 437,667 square foot
mixed-use complex located in Toronto, Ontario. The property was
100% leased as of August 2013 compared to 93% leased at last
review. Aviva Canada is the property's largest tenant, which
leases 73% of the net rentable area through September 2016.
Moody's LTV and stressed DSCR are 88% and 1.11x, respectively,
compared to 91% and 1.07x at last review.
The third largest loan is the Milner Professional Loan ($15.2
million -- 5.7%), which is secured by a 268,203 square foot office
building located in Toronto, Ontario. The property was 78% leased
as of July 2013. The property has experienced a decline in
performance since last review due to lower rental revenue. Moody's
LTV and stressed DSCR are 80% and 1.22x, respectively, compared to
72% and 1.35x at last review.
SDART 2013-A: S&P Assigns 'BB+' Rating on Class E Notes
-------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to
Santander Drive Auto Receivables Trust 2013-A's $800.00 million
asset-backed notes.
The note issuance is an asset-backed securitization backed by
subprime auto loan receivables.
The ratings reflect S&P's view of:
-- The availability of 49.72%, 43.57%, 34.86%, 30.76%, and
26.18% of credit support for the class A, B, C, D, and E
notes, respectively, based on stress cash flow scenarios
(including excess spread), which provide coverage of more
than 3.50x, 3.00x, 2.30x, 1.93x, and 1.60x its 13.50%-
14.50% expected cumulative net loss.
-- The timely interest and principal payments made under
stressed cash flow modeling scenarios appropriate to the
assigned ratings.
-- Its expectation that under a moderate ('BBB') stress
scenario, all else being equal, its ratings on the class A,
B, and C notes will remain within one rating category of
the assigned ratings during the first year, and its ratings
on the class D and E notes will remain within two rating
categories of the assigned ratings, which is within the
outer bounds of S&P's credit stability criteria.
-- The originator/servicer's history in the subprime/specialty
auto finance business.
-- S&P's analysis of eight years of static pool data on
Santander Consumer USA Inc.'s lending programs.
-- The transaction's payment/credit enhancement 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/1737.pdf
RATINGS ASSIGNED
Santander Drive Auto Receivables Trust 2013-A
Class Rating Type Interest Amount
rate (mil. $)
A-1 A-1+ (sf) Senior Fixed 114.00
A-2 AAA (sf) Senior Fixed 227.00
A-3 AAA (sf) Senior Fixed 176.26
B AA (sf) Subordinate Fixed 85.48
C A (sf) Subordinate Fixed 105.21
D BBB+ (sf) Subordinate Fixed 48.22
E BB+ (sf) Subordinate Fixed 43.83
SILVERADO CLO 2006-II: Moody's Lifts Rating on Cl. D Notes to Ba3
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Silverado CLO 2006-II Limited:
$15,000,000 Class A-1-J Senior Secured Floating Rate Notes due
2020, Upgraded to Aaa (sf); previously on September 1, 2011
Upgraded to Aa1 (sf);
$16,000,000 Class A-2 Senior Secured Floating Rate Notes due 2020,
Upgraded to Aa1 (sf); previously on September 1, 2011 Upgraded to
Aa3 (sf);
$20,750,000 Class B Senior Secured Deferrable Floating Rate Notes
due 2020, Upgraded to A1 (sf); previously on September 1, 2011
Upgraded to A3 (sf);
$17,500,000 Class C Senior Secured Deferrable Floating Rate Notes
due 2020, Upgraded to Baa3 (sf); previously on September 1, 2011
Upgraded to Ba1 (sf); and
$12,250,000 Class D Secured Deferrable Floating Rate Notes due
2020, Upgraded to Ba3 (sf); previously on September 1, 2011
Upgraded to B1 (sf).
Moody's also affirmed the ratings of the following notes:
$107,250,000 Class A-1 Senior Secured Floating Rate Notes due
2020, Affirmed Aaa (sf); previously on December 27, 2006 Assigned
Aaa (sf); and
$135,000,000 Class A-1-S Senior Secured Floating Rate Notes due
2020; Affirmed Aaa (sf); previously on December 27, 2006 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 October 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 WAS compared to
covenant levels. Moody's modeled a WARF and a WAS of 2568 and
3.16%, respectively, compared to the covenant levels of 2816 and
2.30%, respectively. Moody's also notes that the transaction's
reported overcollateralization ratios are stable.
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 $339 million, no defaulted par, a weighted
average default probability of 18.05% (implying a WARF of 2568), a
weighted average recovery rate upon default of 51.22%, and a
diversity score of 59. The default and recovery properties of the
collateral pool are incorporated in cash flow model analysis where
they are subject to stresses as a function of the target rating of
each CLO liability being reviewed. The default probability is
derived from the credit quality of the collateral pool and Moody's
expectation of the remaining life of the collateral pool. The
average recovery rate to be realized on future defaults is based
primarily on the seniority of the assets in the collateral pool.
In each case, historical and market performance trends and
collateral manager latitude for trading the collateral are also
factors.
Silverado CLO 2006-II Limited, issued in October 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% (2054)
Class A-1: 0
Class A-1-S: 0
Class A-1-J: 0
Class A-2: +1
Class B: +3
Class C: +2
Class D: +1
Moody's Adjusted WARF + 20% (3081)
Class A-1: 0
Class A-1-S: 0
Class A-1-J: 0
Class A-2: -1
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 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) 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.
SOLEDAD RDA SUCCESSOR: Moody's Cuts Rating on 1998 TABs to B1
-------------------------------------------------------------
Moody's Investors Service has downgraded to B1 from Ba1 the rating
on the Successor Agency of Soledad Redevelopment Agency's (CA)
1998 Series A Tax Allocation Bonds. The bonds are secured by a
pledge of tax increment revenues from the Agency's Soledad
Redevelopment Project Area.
Rating Rationale:
The downgrade and B1 rating primarily reflects the less than sum
sufficient coverage on an annual and semiannual basis. The weak
coverage is due to a decline in assessed value and the dissolution
of redevelopment agencies (now known as successor agencies), which
shifts cash flow to a semiannual consideration. However, this
revenue shortfall will be supplemented by additional cash reserves
from unspent bond proceeds that will pay debt service as needed.
These funds significantly reduce the risk of default in the near-
term due to revenue shortfalls. In the long-term, Moody's expects
eventual steady assessed value growth to return coverage to sum-
sufficient levels.
Strengths:
- Additional cash reserves of unspent bond proceeds can pay debt
service before reserve fund is used
- Cash funded reserve fund
Challenges:
- Very narrow annual coverage
- Less than sum sufficient coverage
- Small rural tax base with low resident wealth levels
The City of Soledad is located in Monterey County (Aa2 Issuer
Rating) located 25 miles southeast of Salinas in a primarily
agricultural region. The Soledad Redevelopment Project Area covers
approximately 520 acres, or 17.8% of the city, in a primarily
residential and commercial portion of town.
What could move the rating-UP
- Sustained coverage levels above one times
- Substantial improvement in wealth levels
What could move the rating-DOWN
- Use of reserves without significantly improved coverage levels
- Ongoing assessed value decline
The principal methodology used in this rating was Moody's Analytic
Approach To Rating California Tax Allocation Bonds published in
December 2003.
SOUTHFORK CLO: Moody's Hikes Rating on Class C Notes to 'Ba1'
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Southfork CLO Ltd.:
$39,000,000 Class B Floating Rate Senior Secured Deferrable
Interest Extendable Notes Due 2017, Upgraded to Aa1 (sf);
previously on July 15, 2013 Upgraded to Aa3 (sf) and Placed Under
Review for Possible Upgrade;
$36,300,000 Class C Floating Rate Senior Secured Deferrable
Interest Extendable Notes Due 2017, Upgraded to Ba1 (sf);
previously on February 21, 2013 Affirmed Ba2 (sf).
Moody's also affirmed the ratings of the following notes:
$52,000,000 Class A-1a Floating Rate Senior Secured Extendable
Notes Due 2017 (current outstanding balance of 8,235,833),
Affirmed Aaa (sf); previously on February 21, 2013 Affirmed Aaa
(sf);
$7,000,000 Class A-1b Fixed Rate Senior Secured Extendable Notes
Due 2017 (current outstanding balance of 1,108,672), Affirmed Aaa
(sf); previously on February 21, 2013 Affirmed Aaa (sf);
$400,000,000 Class A-1g Floating rate Senior Secured Extendable
Notes Due 2017 (current outstanding balance of 63,352,573),
Affirmed Aaa (sf); previously on February 21, 2013 Affirmed Aaa
(sf)
Financial Guarantor: Assured Guaranty Corp (Current Rating A3, Not
on Watch; January 17, 2013);
$42,500,000 Class A-2 Floating Rate Senior Secured Extendable
Notes Due 2017, Affirmed Aaa (sf); previously on February 21, 2013
Affirmed Aaa (sf);
$23,500,000 Class A-3a Floating Rate Senior Secured Extendable
Notes Due 2017, Affirmed Aaa (sf); previously on February 21, 2013
Upgraded to Aaa (sf);
$2,500,000 Class A-3b Fixed Rate Senior Secured Extendable Notes
Due 2017, Affirmed Aaa (sf); previously on February 21, 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 since the
rating action in February 2013. Moody's notes that the Class A-1a,
Class A-1b, and Class A-1g Notes have been paid down by
approximately 70% or $166.6 million since the rating action in
February 2013. Based on the latest trustee report dated July 2013,
the Class A, Class B, and Class C overcollateralization ratios are
reported at 155.77%, 130.70%, and 113.68%, respectively, versus
December 2012 levels of 129.47%, 117.94%, and 108.91%,
respectively. Moody's also announced that it had concluded its
review of its ratings on the issuer's Class B Notes announced on
July 15, 2013. At that time, Moody's said that it had upgraded and
placed certain issuer's ratings on review for upgrade primarily as
a result of substantial deleveraging of the senior notes and
increases in OC ratios resulting from high rates of loan
collateral prepayments during the first half of 2013.
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 July 2013 trustee
report, the weighted average rating factor is currently 2846
compared to 2740 in December 2012. In addition, the issuer has a
significant exposure to defaulted securities. Based on the trustee
report dated July 2013, defaulted securities total $31.4 million.
In addition, Moody's has modeled a further $7.2 million of
securities with speculative grade ratings as if they are
defaulted. A high proportion of such defaulted collateral is
believed to be illiquid.
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 calculations, securities that mature
after the maturity date of the notes currently make up
approximately 25.5% 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.
The rating on the Class A-1g Notes reflects the actual underlying
rating of the Notes. This underlying rating is based solely on the
intrinsic credit quality of the Class A-1g Notes in the absence of
the guarantee from Assured Guaranty Corp., whose insurance
financial strength rating is currently at A3.
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 $244 million, defaulted par of $38.7 million,
a weighted average default probability of 17.44% (implying a WARF
of 3175), a weighted average recovery rate upon default of 51.34%,
and a diversity score of 24. 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.
Southfork CLO Ltd., issued in March 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.
Moody's also notes that a material proportion of the collateral
pool includes debt obligations whose credit quality has been
assessed through Moody's Credit Estimates ("CEs"). Moody's
analysis reflects the application of certain adjustments with
respect to the default probabilities associated with CEs.
Specifically, Moody's assumed an equivalent of Caa3 for assets
with CEs that were not updated within the last 15 months, which
represent approximately 7.12% of the collateral pool.
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% (2540)
Class A-1a: 0
Class A-1b: 0
Class A-1g: 0
Class A-2: 0
Class A-3a: 0
Class A-3b: 0
Class B: +1
Class C: +2
Moody's Adjusted WARF + 20% (3810)
Class A-1a: 0
Class A-1b: 0
Class A-1g: 0
Class A-2: 0
Class A-3a: 0
Class A-3b: 0
Class B: -1
Class C: -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. 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.
STONE TOWER V: Moody's Hikes Rating on $24MM Cl. D Notes to Ba3
---------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Stone Tower CLO V Ltd.:
$54,500,000 Class A-2b Floating Rate Notes Due 2020, Upgraded
to Aaa (sf); previously on September 12, 2011 Upgraded to Aa1
(sf);
$43,000,000 Class A-3 Floating Rate Notes Due 2020, Upgraded to
Aa1 (sf); previously on September 12, 2011 Upgraded to Aa3
(sf);
$36,000,000 Class B Deferrable Floating Rate Notes Due 2020,
Upgraded to A2 (sf); previously on September 12, 2011 Upgraded
to A3 (sf);
$29,000,000 Class C-1 Floating Rate Notes Due 2020, Upgraded to
Baa3 (sf); previously on September 12, 2011 Upgraded to Ba1
(sf);
$2,500,000 Class C-2 Fixed Rate Notes Due 2020, Upgraded to
Baa3 (sf); previously on September 12, 2011 Upgraded to Ba1
(sf);
$24,000,000 Class D Floating Rate Notes Due 2020, Upgraded to
Ba3 (sf); previously on September 12, 2011 Upgraded to B1 (sf);
Moody's also affirmed the ratings of the following notes:
$60,000,000 Class A-1 Floating Rate Notes Due 2020, Affirmed
Aaa (sf); previously on September 12, 2011 Upgraded to Aaa
(sf);
$75,000,000 Class A-2a I Floating Rate Notes Due 2020, Affirmed
Aaa (sf); previously on August 31, 2006 Assigned Aaa (sf);
$100,000 Class A-2a V Floating Rate Notes Due 2020, Affirmed
Aaa (sf); previously on August 31, 2006 Assigned Aaa (sf);
$411,900,000 Class A-2a NV Floating Rate Notes Due 2020,
Affirmed Aaa (sf); previously on August 31, 2006 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 October 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 expected to benefit from weighted average spread (WAS) and
weighted average recovery rate (WARR) levels that are assumed to
be higher than their covenant levels. Based on its calculations,
Moody's modeled WAS and WARR of 3.25% and 49.97%, respectively,
compared to the covenant levels of 1.92% and 43.7%, respectively.
Moody's also notes that the transaction's reported
overcollateralization ratios are stable since the last rating
action.
Moody's notes that the key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor (WARF),
diversity score, and WARR, 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 $762 million,
defaulted par of $9.2 million, a weighted average default
probability of 16.83% (implying a WARF of 2485), a WARR upon
default of 49.97%, and a diversity score of 69. The default and
recovery properties of the collateral pool are incorporated in
cash flow model analysis where they are subject to stresses as a
function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit
quality of the collateral pool and Moody's expectation of the
remaining life of the collateral pool. The average recovery rate
to be realized on future defaults is based primarily on the
seniority of the assets in the collateral pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Stone Tower CLO V Ltd., issued in August 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodology used in this rating was "Moody's 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% (1988)
Class A1: 0
Class A2a: 0
Class A2b: 0
Class A3: +1
Class B: +3
Class C1: +2
Class C2: +2
Class D: +1
Moody's Adjusted WARF + 20% (2982)
Class A1: 0
Class A2a: 0
Class A2b: -1
Class A3: -2
Class B: -2
Class C1: -1
Class C2: -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 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.
STRUCTURED ASSET 2005-15: Moody's Cuts Ratings on 3 Secs. to Caa1
-----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of three
tranches from Structured Asset Securities Corp 2005-15.
Complete rating actions are as follows:
Issuer: Structured Asset Securities Corp Trust 2005-15
Cl. 6-A1, Downgraded to Caa1 (sf); previously on Mar 13, 2011
Downgraded to B2 (sf)
Cl. 6-A2, Downgraded to Caa1 (sf); previously on Mar 13, 2011
Downgraded to B2 (sf)
Cl. 6-A3, Downgraded to Caa1 (sf); previously on Mar 13, 2011
Downgraded to B2 (sf)
Ratings Rationale:
The rating action reflects the recent performance of the pool of
mortgages backing the underlying bond and the rating of the
underlying bond. The resecuritization bonds are backed by Class 5-
A-1 issued by Structured Asset Securities Corporation 2005-10
transaction. The Class 5-A-1 bond is currently rated Caa1.
The principal methodology used in this rating was "Moody's
Approach to Rating US Resecuritized Residential Mortgage-Backed
Securities" published in February 2011.
The methodology used in determining the ratings of the underlying
bonds was "US RMBS Surveillance Methodology" published in June
2013.
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
8.2% in July 2012 to 7.4% in July 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.
UBS-BARCLAYS 2012-C3: DBRS Confirms 'BB' Rating on Cl. E Certs
--------------------------------------------------------------
DBRS Inc. has confirmed the ratings on the following classes of
Commercial Mortgage Pass-Through Certificates, Series 2012-C3,
issued by UBS-Barclays Commercial Mortgage Trust, 2012-C3:
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-S at AAA (sf)
-- Class B at AA (low) (sf)
-- Class C at A (low) (sf)
-- Class D at BBB (low) (sf)
-- Class E at BB (sf)
-- Class F at B (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
All trends are Stable. DBRS does not rate the first lost piece,
Class G.
The collateral consists of 76 fixed-rate loans secured by 113
commercial properties. As of the August 2013 remittance report,
the pool has a balance of approximately $1.61 billion,
representing a collateral reduction of approximately 1.16% since
issuance in September 2012. Overall, the loans in the pool have
reported stable performance since issuance. The transaction also
benefits from loans structured with significant amortization, as
20.9% of the pool amortizes down by maturity.
As of the August 2013 remittance report, there are no delinquent
or specially serviced loans, and there are no loans on the
servicer's watchlist.
The DBRS analysis included an in-depth review of the top 15 loans
and loans on the servicer's watchlist, which represents
approximately 55.3% of the current pool balance. According to the
most recent reporting, these loans had a weighted-average debt
service coverage ratio (DSCR) of 1.75x and a weighted-average debt
yield of 11.0%. While these figures represent overall stable
performance, it is of note that only approximately 85.1% of the
pool is reporting YE2012 financials. The remainder of the pool is
reporting partial-year figures, which are being annualized by the
servicer for the purposes of calculating the updated DSCR. As
such, the figures are less reliable indicators of property
performance than the true full-year figures, which should be
available in the coming year.
UBS-BACRLAYS 2012-C3: Moody's Keeps Ba3 Rating on X-B Securities
----------------------------------------------------------------
Moody's Investors Service affirmed the ratings of twelve classes
of UBS-Barclays Commercial Mortgage Trust 2012-C3 as follows:
Cl. A-1, Affirmed Aaa (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. A-2, Affirmed Aaa (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. A-3, Affirmed Aaa (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. A-S, Affirmed Aaa (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Aa3 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Aa3 (sf)
Cl. C, Affirmed A3 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned A3 (sf)
Cl. D, Affirmed Baa3 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Baa3 (sf)
Cl. E, Affirmed Ba2 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Ba2 (sf)
Cl. F, Affirmed B2 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned B2 (sf)
Cl. X-A, Affirmed Aaa (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Aaa (sf)
Cl. X-B, Affirmed Ba3 (sf); previously on Oct 1, 2012 Definitive
Rating Assigned Ba3 (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. The rating of the IO
Classes, Class X-A and X-B, are consistent with the expected
credit performance of their referenced classes and thus is
affirmed.
Moody's rating action reflects a cumulative base expected loss of
1.9% of the current balance. No realized losses have been
incurred. 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 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 29.
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 definitive ratings
were assigned and summarized in a press release dated October 1,
2012.
Deal Performance:
As of the August 12, 2013 distribution date, the transaction's
aggregate certificate balance has decreased by 1.2% to $1.07
billion from $1.08 billion at securitization. The Certificates are
collateralized by 85 mortgage loans ranging in size from less than
1% to 11% of the pool, with the top ten loans representing 46% of
the pool.
Moody's was provided with full year 2012 operating results for 83%
of the pool balance. Moody's weighted average conduit LTV is
97.4%. Moody's net cash flow reflects a weighted average haircut
of 12.4% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.9%.
Moody's actual and stressed conduit DSCRs are 1.62X and 1.10X,
respectively. 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 24.1% of the pool balance.
The largest loan is the 1000 Harbor Boulevard Loan ($120 million -
- 10.6% of the pool), which is secured by a ten story suburban
office building located in Weehawken, New Jersey. The loan
represents a 94% pari-passu interest in a $120 million loan. The
property was 100% occupied as of June 2012 with 95% of the NRA
(net rentable area) leased to UBS Financial Services, Inc. through
2028. The property is part of Lincoln Harbor, a master planned
community set on 60 acres along the Hudson River, directly across
from Midtown Manhattan. Moody's LTV and stressed DSCR are 104% and
0.97x, respectively, the same as last review.
The second largest loan is the Apache Mall Loan ($98.4 million --
9.2%), which is secured by an enclosed single level regional mall
located in Rochester, Minnesota. The collateral consists of
591,423 square foot (SF) of the total property which is 754,213
SF. Major anchor tenants include JC Penny, Sears, Herberger's, and
Macy's. An updated rent roll was not received. At securitization,
the collateral was 96% occupied as of June 2012. Moody's LTV and
stressed DSCR are 96% and 1.02x, respectively, similar to last
review.
The third largest loan is the Reisterstown Loan ($46.3 million --
4.3%), which is secured by a 660,408 SF mixed use and anchored
retail center located in Baltimore. Maryland. The anchor tenants
include Giant Foods, Burlington Coat Factory, Shoppers World, Big
Lot's and Marshalls. The main office tenant is the Department of
Public Safety which leases 16.4% of the NRA through December 2021.
The property was 94% leased as of December 2012. Moody's LTV and
stressed DSCR are 99% and 1.06x, respectively, the same as last
review.
US CAPITAL I: Moody's Affirms Caa1 Ratings on 2 TruPS CDO Notes
---------------------------------------------------------------
Moody's Investors Service has affirmed the ratings of the
following notes issued by U.S. Capital Funding I, Ltd.:
$100,000,000 Class A-1 Floating Rate Senior Notes Due 2034
(current balance of $42,261,060.61), Affirmed A2 (sf); previously
on August 31, 2009 Downgraded to A2 (sf)
$24,000,000 Class A-2 Floating Rate Senior Notes Due 2034,
Affirmed Baa2 (sf); previously on March 27, 2009 Downgraded to
Baa2 (sf)
$45,000,000 Class B-1 Floating Rate Senior Subordinate Notes Due
2034, Affirmed Caa1 (sf); previously on November 12, 2008
Downgraded to Caa1 (sf)
$24,000,000 Class B-2 Fixed/Floating Rate Senior Subordinate Notes
Due 2034, Affirmed Caa1 (sf); previously on November 12, 2008
Downgraded to Caa1 (sf)
Ratings Rationale:
According to Moody's, the affirmation is primarily a result of a
reduced likelihood for the deal to trigger an event of default and
accelerate the notes, which offsets the credit performance
improvement of the transaction.
Moody's notes that the Class B notes in this deal are not allowed
to defer interest. In the absence of an acceleration of the notes,
the payment of both current and deferred interest on the Class B
notes is senior in the waterfall before payment of principal to
the Class A notes. The deal will trigger an Event of Default (EoD)
if there is a default on the payment of interest on either the
Class A or B notes. After an EOD occurs, the deal may accelerate
the notes or liquidate the collateral, both of which require the
vote from two thirds (66 2/3%) of each class of notes, voting
separately. Acceleration of the notes would be beneficial to the
Class A notes as payment to the Class B notes will be
subordinated. In light of the possibility of acceleration, Moody's
performed an analysis assuming that the deal triggers an EOD and
accelerates the notes, in addition to an analysis assuming that no
acceleration occurs. In Moody's opinion, the probability of EoD in
this deal has declined substantially because of the improvement in
credit quality, resulting in a lower likelihood that an
acceleration of the notes, which benefits the Class A notes, will
occur. The modeled output in an EoD and acceleration scenario can
be multiple notches higher for the Class A notes than in a non-EoD
scenario.
Moody's also notes that given the 1) low collateral spreads (2.90%
on average for the floating rate collateral), 2) high CDO
liability spreads and 3) under-collateralization of the B notes
(around 96%), the deal will have insufficient interest proceeds to
pay current and deferred interest on the Class B notes in the
future, and will thus need to rely on principal proceeds. Such
diversion of principal proceeds may be substantial and will erode
the cushion for the collateral that support the Class A notes.
Moody's notes that the Class A-1 Notes have been paid down by
approximately 42.1% or $30.7 million since August 2012, 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 308.09% from 191.42%, as calculated by Moody's. Based
on the latest trustee report dated July 24, 2013, the Class A
Overcollateralization Test is 179.5% (limit 125.0%), versus the
July 2012 level of 154.0%. In the near term, 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
871 compared to 1058 as of the last rating action date. The total
par amount that Moody's treated as defaulted or deferring declined
to $22.0 million compared to $32.0 million as of August 2012. The
decline is due to improvement in the credit quality and the
financial ratios of the banks that issued the two assets that were
assumed to be defaulted in the last review.
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 of $130.2
million, defaulted/deferring par of $22.0 million, a weighted
average default probability of 19.05% (implying a WARF of 871),
Moody's Asset Correlation of 20.09%, and a weighted average
recovery rate upon default of 10%. In addition to the quantitative
factors that are explicitly modeled, qualitative factors are part
of rating committee considerations. Moody's considers the
structural protections in the transaction, the risk of triggering
an Event of Default, recent deal performance under current market
conditions, the legal environment, and specific documentation
features. All information available to rating committees,
including macroeconomic forecasts, inputs from other Moody's
analytical groups, market factors, and judgments regarding the
nature and severity of credit stress on the transactions, may
influence the final rating decision.
U.S. Capital Funding I, Ltd., issued on February 2004, is a
collateralized debt obligation backed by a portfolio of bank 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 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 Q1-2013.
The methodologies used in this rating were "Moody's Approach to
Rating TRUP CDOs" published in May 2011 and "Updated Approach to
the Usage of Credit Estimates in Rated Transactions" published in
October 2009.
Moody's also evaluates the sensitivity of the rated transaction to
the volatility of the credit estimates, as described in Moody's
Cross Sector Rating Methodology "Updated Approach to the Usage of
Credit Estimates in Rated Transactions" published in October 2009.
The transaction's portfolio was modeled using CDOROM v.2.8 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 150 points from the
base case of 871, 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 340 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, it
gave par credit to $3 million of bank TruPS. In the second
sensitivity analysis, it 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: +1
Class B-2: +1
Sensitivity Analysis 2:
Class A-1: 0
Class A-2: 0
Class B-1: +1
Class B-2: +1
Moody's notes that this transaction is still subject to a high
level of macroeconomic uncertainty although Moody's outlook on the
banking sector has changed to stable from negative. The pace of
FDIC bank failures continues to decline in 2013 compared to the
last four years, and some of the previously deferring banks have
resumed interest payment on their trust preferred securities.
US CAPITAL II: S&P Raises Rating on Class A-2 Notes to BB+
----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A-1 and A-2 notes from U.S. Capital Funding II Ltd., a
collateralized debt obligation (CDO) transaction backed by trust
preferred securities (TruPs) and issued by financial institutions.
At the same time, S&P removed its rating on the class A-1 notes
from CreditWatch with positive implications, where it placed it on
May 17, 2013.
The upgrades reflect paydowns to the class A-1 notes and the
improved credit support available to the notes since S&P last
upgraded the class A-1 notes in May 2012, following an update to
S&P's criteria for rating CDOs backed by bank TruPs. Since then,
and after considering the August 2013 distribution, the
transaction has paid down the class A-1 notes by approximately
$60.05 million, leaving the notes at 37.10% of their original
balance.
The upgrades also reflect the improved overcollateralization (O/C)
available to the notes, mainly because of the aforementioned
paydowns, since our May 2012 rating action. The trustee reported
the following O/C ratios in the August 2013 note valuation report:
-- The class A O/C ratio was 202.58%, compared with a reported
ratio of 153.23% in May 2012.
-- The class B O/C ratio was 94.90%, compared with a reported
ratio of 90.10% in May 2012.
Standard & Poor's will continue to review whether, in its view,
the ratings assigned to the notes remain consistent with the
credit enhancement available to support them and take rating
actions as it 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 AND CREDITWATCH ACTIONS
U.S. Capital Funding II Ltd.
Rating
Class To From
A-1 BBB+ (sf) B+ (sf)/Watch Pos
A-2 BB+ (sf) CCC- (sf)
US EDUCATION III: Moody's Ups Rating on Cl. 2004B Notes from Ba1
----------------------------------------------------------------
Moody's Investors Service has upgraded the rating of the
subordinated class of notes issued by U.S. Education Loan Trust
III, LLC. The underlying collateral consists of loans originated
under the Federal Family Education Loan Program (FFELP), which are
guaranteed by the U.S. government for a minimum of 98% of
defaulted principal and accrued interest.
Ratings Rationale:
The primary rationale for the upgrade is the continued build-up in
credit enhancement supporting the notes. The total parity (the
ratio of total assets to total liabilities) has increased from
102.4% as of March 2012 to 103.7% as of the latest reporting date
of March 2013. The increase in the total parity resulted primarily
from the continued purchases of outstanding auction rate
securities at a discount as well as from the pay-down of the notes
with excess spread generated in the transaction.
The principal methodology used in this rating was "Moody's
Approach to Rating Securities Backed by FFELP Student Loans"
published in April 2012.
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.
The ratings on the bonds would not be upgraded or downgraded
should the current three-month commercial paper rate increase to
5%.
To assess rating implications of the higher expected losses, each
individual transaction was run through a variety of stress
scenarios using the Structured Finance Workstation(R) (SFW), a
cash flow model developed by Moody's Wall Street Analytics.
Ratings:
Issuer: U.S. Education Loan Trust III, LLC (2004 Indenture)
2004A-1, Affirmed Aaa (sf); previously on Aug 2, 2011 Confirmed at
Aaa (sf)
2004A-2, Affirmed Aaa (sf); previously on Aug 2, 2011 Confirmed at
Aaa (sf)
2004A-3, Affirmed Aaa (sf); previously on Aug 2, 2011 Confirmed at
Aaa (sf)
2004B, Upgraded to A2 (sf); previously on Jul 16, 2013 Upgraded to
Ba1 (sf) and Remained On Review for Possible Upgrade
WACHOVIA BANK 2004-C10: Moody's Keeps Rating on 13 Cert. Classes
----------------------------------------------------------------
Moody's Investors Service upgraded the CMBS ratings of four
classes and affirmed 13 classes of Wachovia Bank Commercial
Mortgage Securities Trust Commercial Mortgage Pass-Through
Certificates, Series 2004-C10 as follows:
Cl. A-1A, Affirmed Aaa (sf); previously on Sep 28, 2004 Definitive
Rating Assigned Aaa (sf)
Cl. A-4, Affirmed Aaa (sf); previously on Sep 28, 2004 Definitive
Rating Assigned Aaa (sf)
Cl. B, Affirmed Aaa (sf); previously on Nov 21, 2006 Upgraded to
Aaa (sf)
Cl. C, Affirmed Aaa (sf); previously on Jan 10, 2008 Upgraded to
Aaa (sf)
Cl. D, Upgraded to Aaa (sf); previously on Oct 27, 2011 Upgraded
to Aa1 (sf)
Cl. E, Upgraded to Aaa (sf); previously on Oct 27, 2011 Upgraded
to Aa3 (sf)
Cl. F, Upgraded to Aa3 (sf); previously on Jan 10, 2008 Upgraded
to A3 (sf)
Cl. G, Upgraded to A3 (sf); previously on Sep 28, 2004 Definitive
Rating Assigned Baa2 (sf)
Cl. H, Affirmed Baa3 (sf); previously on Sep 28, 2004 Definitive
Rating Assigned Baa3 (sf)
Cl. J, Affirmed Ba2 (sf); previously on Dec 2, 2010 Downgraded to
Ba2 (sf)
Cl. K, Affirmed B2 (sf); previously on Dec 2, 2010 Downgraded to
B2 (sf)
Cl. L, Affirmed Caa1 (sf); previously on Dec 2, 2010 Downgraded to
Caa1 (sf)
Cl. M, Affirmed Caa3 (sf); previously on Dec 2, 2010 Downgraded to
Caa3 (sf)
Cl. N, Affirmed Ca (sf); previously on Dec 2, 2010 Downgraded to
Ca (sf)
Cl. O, Affirmed C (sf); previously on Dec 2, 2010 Downgraded to C
(sf)
Cl. SL, Affirmed Aaa (sf); previously on Oct 27, 2011 Upgraded to
Aaa (sf)
Cl. X-C, Affirmed Ba3 (sf); previously on Feb 22, 2012 Downgraded
to Ba3 (sf)
Ratings Rationale:
The upgrades are due to defeasance and an increase in credit
support from loan amortization and loan payoffs. Fifteen loans,
representing 57% of the pooled balance, are currently defeased
compared to 51% at last review. Forty-eight loans, representing
99% of the pooled balance, have maturity or anticipated repayment
dates (ARD) in the next six months. Moody's expects further
improvement in credit support as a majority of those loans are
expected to repay by loan maturity or ARD date.
The affirmations of Cl. A-1A through Cl. C and Cl. H through Cl. K
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 Class H is
sufficient to maintain its current rating.
The affirmations of Cl. L through Cl. O are because the current
ratings reflect Moody's expected loss for these classes.
The affirmation of Cl. SL, a non-pooled or rake bond, is due to
defeasance. The rake bond is secured by a junior portion of the
Starrett-Lehigh Loan, which is fully defeased.
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.
The ratings of the interest-only (IO) classes, Class X-C, is
consistent with the expected credit performance of its referenced
classes and thus is affirmed.
Moody's rating action reflects a cumulative base expected loss of
2.3% of the current pooled balance, which is the same as at last
review. Moody's base expected loss plus realized losses is now
3.0% of the original pooled balance compared to 3.1% 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 U.S. CMBS Conduit Transactions" published on 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 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 11, compared to 14 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 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.
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 September 6, 2012.
Deal Performance:
As of the July 17, 2013 distribution date, the transaction's
aggregate pooled certificate balance has decreased by 40% to $770
million from $1.29 billion at securitization. The deal also
contains a $20 million non-pooled rake bond, which brings the
deal's current balance to $790 million. The Certificates are
collateralized by 53 mortgage loans ranging in size from less than
1% to 10% of the pool, with the top ten loans representing 31% of
the pool. Fifteen pooled loans, representing 57% of the pool, have
been defeased and are collateralized with U.S. Government
Securities.
Eight loans, representing 5% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package. As part of its
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 at loss from the pool, resulting
in an aggregate realized loss of $20 million (43% average loss
severity). Two loans, representing less than 1% of the pool, are
currently in special servicing. The largest specially serviced
loan is the Indian Trail Center Loan ($2 million -- 0.3% of the
pool), which is secured by a 46,000 square foot (SF) office
property located in Norcross, Georgia. The property recently
became real estate owned (REO). The servicer intends to stabilize
the asset before marketing it for sale. The property was 44%
leased as of June 2013.
The servicer has recognized an aggregate $1 million appraisal
reduction for one of the two specially serviced loan. Moody's has
estimated a $2 million loss (48% average loss severity) for both
specially serviced loans.
Moody's has assumed a high default probability for two poorly
performing loans representing 1% of the pool and has estimated a
$1 million aggregate loss (17% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2011 and partial or full year
2012 operating results for 94% and 92% of the pool's non-defeased
loans, respectively. Moody's weighted average conduit LTV is 91%
compared to 90% at Moody's prior review. The conduit portion of
the pool excludes specially serviced, troubled and defeased loans.
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 9.0%.
Moody's actual and stressed conduit DSCRs are 1.36X and 1.13X,
respectively, compared to 1.37X and 1.14X 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 19% of the pool. The largest
conduit loan is the North Riverside Park Mall Loan ($80 million --
10.4% of the pool), which is secured by the borrower's interest in
a 1.1 million square foot (SF) regional mall located 11 miles west
of Chicago's CBD in North Riverside, Illinois. The mall is
anchored by a J.C. Penney, Carson Pirie Scott & Co and Sears. The
440,000 SF collateral portion was 93% leased as of May 2013
compared to 95% as of July 2012. The loan's ARD date is in
February 2014. Moody's LTV and stressed DSCR are 119% and 0.82X,
respectively, compared to 122% and 0.80X at last review.
The second largest loan is the Villa del Sol Apartments Loan ($40
million -- 5.2% of the pool), which is secured by a 562-unit
apartment complex located in Santa Ana, California. The property
has maintained a 95%+ occupancy since securitization. It was 96%
leased as of August 2013. The property's average rent is $1,352
per unit, which is approximately 10% higher than at Moody's last
review. The loans' ARD date is in December 2013. Moody's LTV and
stressed DSCR are 81% and 1.13X, respectively, compared to 88% and
1.04X at last review.
The third largest loan is the Pine Trail Square Loan ($26 million
-- 3.4% of the pool), which is secured by a 270,000 SF retail
center located in West Palm Beach, Florida. Former anchor tenant
Albertson's, which occupied 54,000 SF, vacated the property. The
sponsor has re-leased 32,000 SF of the former's Albertson's space
to HH Gregg, but the rest remains vacant. The property was 86%
leased as of August 2013 compared to 87% as of April 2012. The
loan's ARD date is in February 2014. Moody's LTV and stressed DSCR
are 73% and 1.34X, respectively, compared to 80% and 1.21X at last
review.
WFRBS COMMERCIAL 2013-C15: Fitch Assigns 'B' Rating to Cl. F Certs
------------------------------------------------------------------
Fitch Ratings has assigned the following ratings and Rating
Outlooks to WFRBS Commercial Mortgage Trust 2013-C15 Commercial
Mortgage Pass-Through Certificates:
-- $60,151,000 Class A-1 'AAAsf'; Outlook Stable;
-- $48,146,000 Class A-2 'AAAsf'; Outlook Stable;
-- $260,000,000 Class A-3 'AAAsf'; Outlook Stable;
-- $301,785,000 Class A-4 'AAAsf'; Outlook Stable;
-- $104,819,000 Class A-SB 'AAAsf'; Outlook Stable;
-- $80,257,000 Class A-S 'AAAsf'; Outlook Stable;
-- $855,158,000* Class X-A 'AAAsf'; Outlook Stable;
-- $74,723,000 Class B 'AA-sf'; Outlook Stable;
-- $42,896,000 Class C 'A-sf'; Outlook Stable;
-- $197,876,000b Class PEX 'A-sf'; Outlook Stable;
-- $62,269,000a Class D 'BBB-sf'; Outlook Stable;
-- $22,140,000a Class E 'BBsf'; Outlook Stable;
-- $11,070,000a Class F 'Bsf'; Outlook Stable.
* 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 PEX certificates; and class PEX certificates may be
exchanged for class A-S, class B and class C certificates.
Fitch does not rate the $38,745,430 Class G.
The classes above reflect the final ratings and deal structure.
The certificates represent the beneficial ownership in the trust,
primary assets of which are 86 loans secured by 136 commercial
properties having an aggregate principal balance of approximately
$1.107 billion as of the cutoff date. The loans were contributed
to the trust by The Royal Bank of Scotland; Wells Fargo Bank,
National Association; NCB, FSB; Liberty Island Group I LLC; C-III
Commercial Mortgage LLC; and Basis Real Estate Capital II, LLC.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 78.7% of the properties
by balance, cash flow analysis of 87.1%, and asset summary reviews
on 87.1% of the pool.
Key Rating Drivers
Fitch Leverage: The Fitch debt service coverage ratio (DSCR) and
loan-to-value (LTV) of 1.74x and 96.6%, respectively, are better
than the average DSCR and LTV of 1.36x and 99.8% of Fitch-rated
conduit transactions for the first half of 2013. Excluding the
loans collateralized by cooperative housing (co-op) properties,
which make up 9.4% of the pool, the Fitch DSCR and LTV are 1.25x
and 103.1%.
Loan Concentration: The 10 largest loans account for 56.2% of the
pool balance, which is higher than the respective average 2012 and
first half 2013 top 10 loan concentrations of 54.2% and 54.3%. In
addition, no loan accounts for more than 10% of the pool's
aggregate cut-off principal balance. The loan concentration index
(LCI) of 441 represents one of the more concentrated conduit pools
by loan size.
Property Type Diversity: The pool has a higher concentration of
retail (38.8%) than the average conduit transactions through the
first-half 2013, with three malls in the top-six loans.
Additionally, three of the top-10 loans are secured by self-
storage properties, a property type not common in the top-10, but
which has historically exhibited a delinquency rate of less than
half the overall CMBS delinquency rate. Further, there is a higher
exposure to hotels, at 18.0% of the pool, which is somewhat
mitigated by the high concentration of multifamily/manufactured
housing of 17.5%. The average first-half 2013 property type
concentrations for retail, hotel and multifamily/manufactured
housing are, respectively, 31.6%, 13.8%, and 15.0%.
Rating Sensitivities
For this transaction, Fitch's net cash flow (NCF) was 16.5% below
the full-year 2012 net operating income (NOI) (for properties for
which 2012 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 WFRBS 2013-C15 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
'AAsf' 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 'A-sf' could result. The presale report
includes a detailed explanation of additional stresses and
sensitivities in the Rating Sensitivity Section.
The Master Servicers will be Wells Fargo Bank, N.A. and NCB, FSB,
rated 'CMS1-' and 'CMS2-', respectively, by Fitch. The special
servicers will be CWCapital Asset Management LLC and NCB, FSB
rated 'CSS1-' and 'CSS3+', respectively, by Fitch.
WHITTIER PUBLIC: Moody's Confirms Ba1 Rating on Series A Bonds
--------------------------------------------------------------
Moody's Investors Service has confirmed the Ba1 rating on the
Whittier Public Financing Authority's (CA) 2002 Series A Revenue
Bonds.
The bonds are secured by a loan agreement between the Authority
and the Whittier Redevelopment Agency (now the City of Whittier as
Successor Agency). The Agency's loan payments are secured by its
pledge of tax increment revenues of the Greenleaf Avenue/Uptown
Whittier project area.
Rating Rationale
The rating reflects the current and projected total project area
debt service coverage amounts that are lean on a semi-annual
basis. Coverage is somewhat narrower alone for the Greenleaf
Avenue/Uptown Whittier project area alone on an annual basis. The
rating also incorporates the low incremental to total AV ratio
that accentuates revenue volatility the average wealth levels. The
Greenleaf Avenue/Uptown Whittier project area is small however the
combined project areas of the Successor Agency are sizeable.
Strengths
- Assessed valuation grew in 2013 with prospects for additional
growth in 2014
- Sizeable total project area
Challenges
- Low debt service coverage on all debt of the Successor Agency
at below 2x annually
- Small size of the rated Greenleaf Avenue/Uptown Whittier
project area.
- Low increment to total AV for combined project area
What Could Change The Rating Up
- Sizable increase in incremental AV of the project area and
combined project area resulting in higher debt service
coverage ratios
What Could Change The Rating Down
- Decline in assessed valuation and coverage levels
The principal methodology used in this rating was Moody's Analytic
Approach To Rating California Tax Allocation Bonds published in
December 2003.
* Fitch: RMBS, Regional Lending at Risk in Eminent Domain Plans
---------------------------------------------------------------
The potential use of eminent domain by communities in California
would negatively affect private label U.S. RMBS and future lending
in those regions. If those communities are successful, similar
plans might be replicated in other communities, broadening the
impacts, Fitch Ratings says. "We also believe these programs could
further weigh on private investor confidence and appetite for
private-label mortgage-backed securities going forward," Fitch
says.
Last year, San Bernardino County voted to form a joint powers
authority with area cities to explore using eminent domain to
seize mortgages. Fontana, CA and Ontario, CA joined the joint
powers authority. The group decided not to pursue eminent domain
over concerns it would restrict future lending in the area. Last
month, Richmond, CA announced plans to seize mortgages from
investors and write down the loan balances on underwater
properties.
"We expect action on these plans to be slow and legally
challenged. This week, mortgage bond investors Pacific Investment
Management Co., BlackRock Inc. and DoubleLine Capital sued the
city of Richmond and Mortgage Resolution Partners, seeking an
injunction," Fitch says.
In addition to pushing losses forward on performing loans, the use
of eminent domain could also have other unintended consequences,
including increasing mortgage interest rates and decreasing credit
availability in affected areas. On Aug. 8, Fannie Mae's and
Freddie Mac's regulator, the Federal Housing Finance Agency
(FHFA), said it may direct the GSEs to stop their activities in
towns that use eminent domain to seize mortgages.
Eminent domain provides a mechanism for local, county or state
governments to seize mortgages at discounted values, potentially
resulting in losses for the holders of those seized. Several of
these plans focus on borrowers who are current on their existing
mortgage obligations.
* Fitch Says US CREL CDO Delinquency Rate Remains Stable
--------------------------------------------------------
The overall delinquency rate for CREL CDOs fell marginally to
11.7% from 11.8% last month as only three new delinquent assets
were reported and six assets were removed from the Index,
according to the latest results from Fitch Ratings.
New delinquencies included two recently matured balloon loans and
one security with a new interest shortfall. The removed assets
included five assets disposed of at losses and one security that
is no longer suffering from interest shortfalls.
CDO managers reported approximately $66 million in realized
principal losses in July from asset disposals. The average loss on
these assets, which include both loans and securities, was
approximately 34%.
* Fitch: TruPS CDOs Defaults/Deferrals Dip to 27.6% in July
-----------------------------------------------------------
Combined defaults and deferrals for U.S. bank TruPS CDOs have
further decreased to 27.6% at the end of the July from 27.8% at
the end of June, according to Fitch Ratings.
In July, seven banks representing approximately $62 million of
collateral cured and resumed their interest payments on their
TruPS. There were no new defaults or deferrals.
Year-to-date, there have been nine new deferrals and defaults
compared to 34 over a comparable period last year. Cures continue
to trend higher, with 44 cures year to date compared to 28 last
year.
The total number of bank issuers outstanding across Fitch rated
U.S. TruPS CDOs stood at 1,434 at the end of July. Of this total,
220 bank issuers are in default and 293 in deferral.
* Moody's Takes Action on $342MM of RMBS Issued 2002 to 2004
------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 70
tranches and confirmed the rating of one tranche backed by Prime
Jumbo RMBS loans, issued by CSFB.
Complete rating actions are as follows:
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2002-26
Cl. III-X, Downgraded to B2 (sf); previously on May 24, 2012
Confirmed at Ba3 (sf)
Cl. III-M-2, Downgraded to A3 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2003-19
Cl. I-A-1, Downgraded to A3 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. I-A-2, Downgraded to A3 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. I-A-4, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. I-A-14, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. I-A-19, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. I-A-23, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Cl. I-P, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. II-A-1, Downgraded to A3 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. II-P, Downgraded to A3 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. C-B-2, Downgraded to Ca (sf); previously on May 24, 2012
Downgraded to Caa2 (sf)
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2003-25
Cl. I-A-4, Downgraded to Baa3 (sf); previously on Apr 25, 2013
Downgraded to Baa1 (sf)
Cl. I-A-7, Downgraded to Ba3 (sf); previously on Apr 25, 2013
Downgraded to Baa3 (sf)
Cl. I-A-8, Downgraded to Ba1 (sf); previously on Apr 25, 2013
Downgraded to Baa2 (sf)
Cl. I-A-9, Downgraded to Ba1 (sf); previously on Apr 25, 2013
Downgraded to Baa2 (sf)
Cl. I-A-11, Downgraded to Baa3 (sf); previously on Apr 25, 2013
Downgraded to Baa1 (sf)
Cl. I-P, Downgraded to Ba1 (sf); previously on Apr 25, 2013
Downgraded to Baa2 (sf)
Cl. II-P, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2003-27
Cl. 1-A-3, Downgraded to Baa3 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. 1-A-4, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. II-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Cl. II-P, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Cl. III-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013
A1 (sf) Placed Under Review for Possible Downgrade
Cl. III-A-2, Downgraded to Baa3 (sf); previously on Jun 19, 2013
A3 (sf) Placed Under Review for Possible Downgrade
Cl. IV-A-4, Downgraded to Baa2 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. IV-A-6, Downgraded to A3 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. IV-A-7, Downgraded to Ba1 (sf); previously on Apr 10, 2012
Downgraded to Baa1 (sf)
Cl. IV-A-8, Downgraded to Ba1 (sf); previously on Apr 10, 2012
Downgraded to Baa1 (sf)
Cl. IV-A-16, Downgraded to Ba1 (sf); previously on Apr 10, 2012
Downgraded to Baa1 (sf)
Cl. IV-A-17, Downgraded to Baa3 (sf); previously on Jun 19, 2013
A3 (sf) Placed Under Review for Possible Downgrade
Cl. IV-P, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. IV-X, Downgraded to B1 (sf); previously on Apr 10, 2012
Confirmed at Ba3 (sf)
Cl. V-A-3, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. V-A-4, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. VI-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Cl. VI-P, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. VII-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013
A3 (sf) Placed Under Review for Possible Downgrade
Cl. VIII-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013
A3 (sf) Placed Under Review for Possible Downgrade
Cl. IX-A-1, Downgraded to Baa2 (sf); previously on Apr 10, 2012
Downgraded to Baa1 (sf)
Cl. A-P, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. D-P, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2003-29
Cl. I-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Cl. II-A-2, Downgraded to A3 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Cl. II-A-3, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. II-A-4, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Cl. III-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013
A2 (sf) Placed Under Review for Possible Downgrade
Cl. IV-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Cl. V-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Cl. VI-A-1, Downgraded to A3 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. VII-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013
A3 (sf) Placed Under Review for Possible Downgrade
Cl. VIII-A-1, Downgraded to A3 (sf); previously on Jun 19, 2013 A1
(sf) Placed Under Review for Possible Downgrade
Cl. D-P-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. D-P-2, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. D-P-3, Downgraded to A3 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2003-AR15
Cl. II-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. II-X, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2003-AR24
Cl. IV-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. C-B-2, Downgraded to C (sf); previously on May 6, 2011
Downgraded to Ca (sf)
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2003-AR28
Cl. I-A-1, Downgraded to Ba1 (sf); previously on Jan 25, 2013
Downgraded to Baa3 (sf)
Cl. II-A-1, Downgraded to Ba1 (sf); previously on Jan 25, 2013
Downgraded to Baa3 (sf)
Cl. IV-A-1, Downgraded to Ba1 (sf); previously on Jan 25, 2013
Downgraded to Baa3 (sf)
Cl. V-A-1, Downgraded to Ba1 (sf); previously on Jan 25, 2013
Downgraded to Baa3 (sf)
Cl. VI-M-1, Confirmed at A3 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2003-AR30
Cl. I-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. II-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. III-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013
A3 (sf) Placed Under Review for Possible Downgrade
Cl. IV-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Cl. V-A-1, Downgraded to Baa1 (sf); previously on Jun 19, 2013 A3
(sf) Placed Under Review for Possible Downgrade
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2004-1
Cl. I-A-1, Downgraded to A3 (sf); previously on Jun 19, 2013 A2
(sf) Placed Under Review for Possible Downgrade
Cl. I-X, Downgraded to B1 (sf); previously on Feb 22, 2012
Downgraded to Ba3 (sf)
Ratings Rationale:
The actions are a result of the recent performance of the
underlying pools and reflect Moody's updated loss expectations on
the pools. In addition, the downgrades reflect the exposure of the
affected bonds to tail risk due to the pro-rata pay nature of the
transactions.
In addition, Class Cl. VI-M-1 from CSFB Mortgage-Backed Pass-
Through Certificates, Series 2003-AR28 is backed by an
overcollateralized pool and was incorrectly placed on review in
the June 19, 2013 rating action addressing tail risk in RMBS
Shifting Interest/Pro-rata deals. The rating on this tranche
should not have been placed on review and it is being confirmed in
this rating action.
The principal methodology used in these ratings was "US RMBS
Surveillance Methodology" published in June 2013.
As detailed in the methodology, subject to the results of a stress
scenario analysis, Moody's caps the ratings of bonds exposed to
tail-end risk to A3 (sf) or below, unless the bonds are expected
to pay off within a year or are expected to pay off well before
the underlying pool is expected to be small pool (100 loans).
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
8.2% in July 2012 to 7.4% in July 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 Ratings on 31 Classes Ratings From 19 RMBS Deals
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 31
classes from 19 U.S. residential mortgage-backed securities (RMBS)
transactions and removed 26 of them from CreditWatch with negative
implications. At the same time, S&P affirmed its ratings on 319
classes from 66 transactions and removed 99 of them from
CreditWatch negative.
The complete list of rating actions is available in "U.S. RMBS
Classes Affected By The Aug. 20, 2013 Rating Actions," published
on RatingsDirect.
The rating actions resolve a portion of the transactions that S&P
placed on CreditWatch last month as a result of an announcement
by Ocwen Loan Servicing (Ocwen) that $1.4 billion of previously
undisclosed losses on certain loans were to be realized in the May
2013 remittance period. The loans involved had received a
forbearance modification from Homeward Residential Inc. (Homeward)
before having their servicing transferred to Ocwen. These
modifications were intended to be reported as principal losses to
the loans, which would have then been passed through to the
related RMBS at that time.
All of the transactions in this review were issued between 2001-
2007, and are backed by a mix of adjustable- and fixed-rate prime
jumbo, subprime, Alternative-A, document-deficient, reperforming,
and Neg-Am loans secured primarily by first-liens on one- to four-
family residential properties.
Among the 67 transactions reviewed, the amount of losses tied to
forbearance modifications as a proportion of the original
collateral balance varied from as low as 0.08% (MESA Trust 2001-5)
to 3.71% (Soundview Home Loan Trust 2007-OPT1). In those cases
where the number of loans placed in forbearance was low, S&P's
lifetime projected losses stayed virtually unchanged despite loss
reclassifications. In other cases where the number of loans
placed in forbearance resulted in an upward adjustment to S&P's
lifetime projected losses, its downgrades stemmed primarily from
deteriorating credit support caused by increased delinquencies.
In general, transactions reporting the highest amounts of
forbearance losses already had speculative-grade ratings.
S&P lowered its ratings on 31 classes from 19 transactions
(removing 26 of them from CreditWatch with negative implications)
due to increased losses resulting from a changing delinquency
pipeline.
S&P lowered its ratings on two classes out of the investment-grade
range (i.e., 'BBB-' or higher), to 'BB+ (sf'' from 'BBB- (sf)'.
Out of the remaining classes with lowered ratings, four continue
to be in the investment-grade category, while the remaining were
already in the speculative-grade category before the rating
actions.
For certain transactions, S&P considered specific performance
characteristics that, in its view, may add a layer of volatility
to its loss assumptions when they are stressed at the rating, as
suggested by S&P's cash flow models. In these circumstances, S&P
affirmed its ratings on those classes to promote ratings
stability. In general, the bonds that were affected reflect the
following:
-- Historical interest shortfalls;
-- Low priority in principal payments;
-- Significant growth in the delinquency pipeline;
-- A high proportion of reperforming loans in the pool;
-- Significant growth in observed loss severities; and
-- Weak hard-dollar credit support.
The 17 affirmed 'AAA (sf)' ratings from nine transactions affect
bonds that have one or both of these characteristics:
-- More than sufficient credit support to absorb the projected
remaining losses associated with this rating stress; and
-- Benefit from permanently failing cumulative loss triggers.
The 48 affirmations from 24 transactions in the 'AA (sf)' and 'A
(sf)' categories affect classes that are currently in first,
second, or third payment priority. In addition, S&P affirmed its
ratings on 37 classes from 25 transactions in the 'BBB (sf)'
through 'B (sf)' rating categories. The projected credit support
on these classes remained relatively consistent with prior
projections.
S&P affirmed its ratings on 217 additional classes in the
'CCC (sf)' or 'CC (sf)' rating categories. S&P believes that the
projected credit support for these classes will remain
insufficient to cover the revised projected losses to these
classes.
Standard & Poor's will review all reported forbearance loss
amounts associated with the Homeward serviced loans and, in turn,
resolve each of the ratings currently on CreditWatch.
According to 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 generally provide credit support for the reviewed
transactions.
ECONOMIC OUTLOOK
When analyzing U.S. RMBS collateral pools to determine 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:
-- Its unemployment rate forecast is 7.5% for 2013 and 6.9% for
2014, compared with the actual 8.1% rate in 2012.
-- Home prices will increase 11% in 2013, using the 20-city
Standard & Poor's/Case-Shiller Home Price Index.
-- Real GDP growth will be 2.0% in 2013 and 3.1% in 2014.
-- The 30-year mortgage rate will average 3.9% for 2013 and
reach slightly higher levels in 2014; and
-- Inflation will be 1.3% in 2013 and 1.6% in 2014.
Overall, S&P's outlook for RMBS is stable. Although S&P views
overall housing fundamentals positively, it believes RMBS
fundamentals still hinge on additional factors, such as the
ultimate fate of modified loans, the servicers' propensity 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, and job growth would slow to almost
zero in 2013 and 2014.
-- Downward pressure causes less than 1% GDP growth 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
* S&P Lowers 27 Ratings From 9 U.S. RMBS Transactions
-----------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 27
classes from nine U.S. residential mortgage-backed securities
(RMBS) transactions and removed 24 of them from CreditWatch with
negative implications. At the same time, S&P affirmed its ratings
on 192 classes from 30 transactions and removed 131 of them from
CreditWatch negative. Furthermore, S&P withdrew the rating on
class A3 from Structured Adjustable Rate Mortgage Loan Trust 2005-
6XS and removed it from CreditWatch negative because the balance
was paid in full.
The rating actions resolve a portion of the transactions that S&P
placed on CreditWatch in July as a result of Nationstar Mortgage
LLC's (Nationstar's) announcement that $1 billion of previously
undisclosed losses on certain loans were to be realized in the
July 2013 remittance period. The loans involved had received a
forbearance modification from Aurora Loan Services LLC (Aurora)
before having their servicing transferred to Nationstar. These
modifications were intended to be reported as principal losses to
the loans, which would have then been passed through to the
related RMBS at that time.
All of the transactions in this review were issued between 2003-
2006, and are backed by a mix of adjustable- and fixed-rate prime
jumbo, subprime, Alternative-A, outside-the-guidelines, and
reperforming loans secured primarily by first-liens on one- to
four-family residential properties.
The amount of losses tied to forbearance modifications as a
proportion of the original collateral balance varied from deal to
deal. In those cases where the number of loans placed in
forbearance was low, S&P's lifetime projected losses stayed
virtually unchanged despite loss reclassifications. In other
cases where the number of loans placed in forbearance resulted in
an upward adjustment to S&P's lifetime projected losses, its
downgrades stemmed primarily from deteriorating credit support
caused by increased delinquencies. In general, transactions
reporting the highest amounts of forbearance losses already had
speculative-grade ratings.
S&P lowered its ratings on 27 classes from nine transactions
(removing 24 of them from CreditWatch with negative implications)
because of increased losses resulting from a changing delinquency
pipeline. Out of those, S&P lowered its ratings on six classes
out of the investment-grade range (i.e., 'BBB-' or higher). The
remaining downgraded classes were already in the speculative-grade
category before the rating actions.
For certain transactions, S&P considered specific performance
characteristics that, in its view, may add a layer of volatility
to its loss assumptions when they are stressed at the rating, as
S&P's cash flow models suggested. In these circumstances, S&P
affirmed its ratings on those classes to promote ratings
stability. In general, the bonds that were affected reflect the
following:
-- Historical interest shortfalls;
-- Low priority in principal payments;
-- Significant growth in the delinquency pipeline;
-- A high proportion of reperforming loans in the pool;
-- Significant growth in observed loss severities; and
-- Weak hard-dollar credit support.
The 12 affirmed 'AAA (sf)' ratings from six transactions affect
bonds that have one or both of these characteristics:
-- More than sufficient credit support to absorb the projected
remaining losses associated with this rating stress; and
-- Benefit from permanently failing cumulative loss triggers.
The 77 affirmations from 19 transactions in the 'AA (sf)' and
'A (sf)' categories affect classes that are currently in first,
second, or third payment priority. In addition, S&P affirmed its
ratings on 42 classes from 19 transactions in the 'BBB (sf)'
through 'B (sf)' rating categories. The projected credit support
on these classes remained relatively consistent with prior
projections.
S&P affirmed its ratings on 61 additional classes in the
'CCC (sf)' or 'CC (sf)' rating categories. S&P believes that the
projected credit support for these classes will remain
insufficient to cover the revised projected losses to these
classes.
Standard & Poor's will review all reported forbearance loss
amounts associated with the Aurora serviced loans and, in turn,
resolve each of the ratings currently on CreditWatch.
According to 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 generally provide credit support for the reviewed
transactions.
ECONOMIC OUTLOOK
When analyzing U.S. RMBS collateral pools to determine 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:
-- Its unemployment rate forecast is 7.5% for 2013 and 6.9% for
2014, compared with the actual 8.1% rate in 2012.
-- Home prices will increase 11% in 2013, using the 20-city
Standard & Poor's/Case-Shiller Home Price Index.
-- Real GDP growth will be 2.0% in 2013 and 3.1% in 2014.
-- The 30-year mortgage rate will average 3.9% for 2013 and
reach slightly higher levels in 2014.
-- Inflation will be 1.3% in 2013 and 1.6% in 2014.
Overall, S&P's outlook for RMBS is stable. Although S&P views
overall housing fundamentals positively, it believes RMBS
fundamentals still hinges on additional factors, such as the
ultimate fate of modified loans, the servicers' propensity 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 U.S. RMBS credit quality 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, and job growth would slow to almost
zero in 2013 and 2014.
-- Downward pressure causes less than 1% GDP growth 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
*********
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, Valerie Udtuhan, 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
e-mail. Additional e-mail subscriptions for members of the same
firm for the term of the initial subscription or balance thereof
are $25 each. For subscription information, contact Peter A.
Chapman at 215-945-7000 or Nina Novak at 202-241-8200.
*** End of Transmission ***