/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/140907.mbx T R O U B L E D C O M P A N Y R E P O R T E R Sunday, September 7, 2014, Vol. 18, No. 249 Headlines AMERICREDIT AUTOMOBILE 2014-3: S&P Gives BB Rating on Cl. E Notes ANTHRACITE 2004-HY1: S&P Lowers Rating on 3 Note Classes to 'D' ANTHRACITE CDO I: S&P Affirms 'CCC+' Rating on Class F Notes ARBOR REALTY 2006-1: Moody's Hikes Cl. B Notes Rating to 'Ba3' ARES XXI CLO: Moody's Affirms Ba2 Rating on $15MM Class D Notes ARROWPOINT CLO 2014-2: S&P Affirms 'BB-' Rating on Class E Notes ASHFORD CDO II: S&P Raises Rating on Class B-1L Notes to 'BB+' ATLAS SENIOR: S&P Assigns Prelim. BB- Rating on Class E Notes ATRIUM V: Moody's Hikes Rating on Class D Notes to 'Ba1' BBCMS TRUST 2014-BXO: S&P Assigns 'BB-' Rating on Class E Notes BEAR STEARNS 2004-1: S&P Lowers Rating on 3 Note Classes to 'D' BEAR STEARNS 2007-BBA8: S&P Raises Rating on Class H Notes to B+ BLADE ENGINE 2006-1: S&P Lowers Rating on Class B Notes to 'BB-' BLUEMOUNTAIN 2014-3: S&P Assigns Prelim. BB Rating on Cl. D Notes CAPTEC FRANCHISE 1998-1: Fitch Affirms 'Dsf' Rating on C Notes CARLYLE GLOBAL 2014-3: Moody's Rates $6.7MM Class E Notes 'B3' CITIGROUP COMMERCIAL 2012-GC8: Fitch Affirms BB Rating on E Notes CLOVERIE PLC 43: S&P Raises Rating on Series 43 Notes to 'BB+' COAST INVESTMENT 2002-1: Moody's Cuts Cl. B Notes Rating to 'Ca' COMM 2007-FL14: S&P Lowers & Withdraws 'D' Ratings on 2 Notes CONNECTICUT VALLEY II: Moody's Hikes Rating on 2 Notes to Ba2 CONNECTICUT VALLEY II: S&P Raises Rating on 2 Notes to 'B-' CPS AUTO 2014-C: S&P Assigns Prelim. B+ Rating on Class E Notes CSMC TRUST 2014-WIN1: S&P Assigns 'BB+' Rating on Class B-3 Notes CWCAPITAL COBALT: S&P Lowers Rating on Class A-1 Notes to 'CCC-' DBALT 2007-RAMP1: Moody's Ups Interest Rate Swap Rating to Ba3 DEL MAR CLO I: Moody's Hikes Rating on Class E Notes to 'Ba1' DIAMOND LAKE: S&P Affirms 'BB-' Rating on Class B-2L Notes EATON VANCE VIII: S&P Raises Rating on Cl. D Notes From 'BB+' FLATIRON CLO 2007-1: Moody's Affirms Ba1 Rating on Class D Notes FREMF 2013-KF02: Moody's Affirms 'Ba3' Rating on Cl. X Securities FOUR CORNERS II: Moody's Lowers Rating on Cl. E Notes to 'B1' GALE FORCE 3: Moody's Affirms 'Ba1' Rating on Class E Notes GALLATIN CLO III 2007-1: S&P Raises Rating on B-2L Notes to BB+ GANNETT PEAK I: S&P Raises Rating on 2 Notes From 'B+' GMAC COMMERCIAL 2006-C1: Fitch Cuts Rating on Cl. A-M Certs to BB GREENBRIAR CLO: Moody's Affirms 'B1' Rating on Class E Notes GREENWICH CAPITAL 2007-GG9: Fitch Cuts Cl. A-M Certs Rating to BB GS MORTGAGE 2012-GCJ9: Moody's Affirms B2 Rating on Cl. F Secs. GSC GROUP VIII: S&P Affirms 'B+' Rating on Class D Notes HEWETT'S ISLAND VI: S&P Raises Rating on Class E Notes to 'B+' HEWETT'S ISLAND CLO I-R: S&P Affirms 'B+' Rating on Class E Notes HIGHBRIDGE LOAN 4-2014: S&P Assigns B Rating on Class E Notes ICG US CLO 2014-1: S&P Affirms 'B' Rating on Class E Notes IXION PLC 2007: Moody's Reinstates Rating on $70MM Notes to C JPMBB COMMERCIAL 2014-C22: Moody's Rates Cl. UHP Certs 'Ba3' KINGSLAND III: S&P Raises Rating on 2 Note Classes to 'BB+' LIBERTY CLO: Moody's Affirms 'B2' Rating on $52MM Class C Notes LIGHTPOINT CLO V: S&P Affirms 'BB-' Rating on Class D Notes MADISON PARK III: S&P Raises Rating on Class D Notes to 'BB+' MM COMMUNITY III: Moody's Confirms 'Ba1' Rating on Class B Notes MOUNTAIN VIEW 2014-1: S&P Assigns Prelim. BB- Rating on E Notes N-STAR REL IV: Moody's Affirms 'Caa2' Rating on Class E Notes NEWCASTLE CDO IX: Moody's Hikes Rating on Class K Notes to Caa1 NORTHSTAR MORTGAGE 2012-1: Moody's Affirms B2 Cl. F Certs Rating OCP CLO 2014-5: S&P Affirms 'BB' Rating on Class D Notes PUTNAM STRUCTURED 2002-1: S&P Affirms 'BB-' Rating on 9 Notes RACE POINT VI: S&P Affirms 'BB' Rating on Class E Notes SARATOGA CLO I: S&P Raises Rating on Class D Notes to BB+ SDART 2014-4: S&P Assigns Prelim. BB+ Rating on Class E Notes SORIN REAL ESTATE IV: Moody's Hikes Class B Notes Rating to Caa1 SOUND POINT VI: Moody's Assigns B2 Rating on $15.75MM Cl. F Notes SOUTH COAST V: Moody's Hikes Rating on 2 Note Classes to 'B1' SPRINGLEAF MORTGAGE 2011-1: S&P Affirms B Rating on Class B-2 Note STEELE CREEK 2014-1: Moody's Assigns Ba3 Rating on 2 Note Classes THL CREDIT 2014-2: Moody's Assigns 'B3' Rating on Class F Notes TRAPEZA CDO XII: Moody's Ups Rating on $49MM Cl. B Notes to Caa2 WASATCH CLO: S&P Raises Rating on Type IV Notes to 'CC' WELLS FARGO 2011-C5: Fitch Affirms 'Bsf' Rating on Class G Notes WELLS FARGO 2014-C22: Fitch to Rate Class E Notes 'BBsf' * Moody's Takes Action on $142MM RMBS Issued 2003-2004 * Moody's Takes Action on $458MM of RMBS Issued 2003-2004 * Moody's Hikes Rating on $65MM of Subprime RMBS Deals * S&P Lowers Rating on 93 Classes From 68 RMBS Deals to 'D(sf)' * S&P Lowers 49 Ratings on 3 Classes From 22 Transactions * S&P Lowers 26 Ratings on 70 Classes From 19 US RMBS Transactions * S&P Takes Various Rating Actions on 18 U.S. RMBS Transactions * S&P Puts Ratings on 202 Tranches From 57 CLO Deals on Watch Pos. * S&P Lowers 15 Ratings From 15 RMBS Transactions ********* AMERICREDIT AUTOMOBILE 2014-3: S&P Gives BB Rating on Cl. E Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to AmeriCredit Automobile Receivables Trust 2014-3's $1 billion automobile receivables-backed notes series 2014-3. The note issuance is an asset-backed securities transaction backed by subprime auto loan receivables. The ratings reflect S&P's view of: -- The availability of approximately 41.3%, 35.8%, 28.7%, 21.8%, and 18.1% credit support for the class A-1, A-2-A, A- 2-B, and A-3 (collectively, the class A notes), B, C, D, and E notes, respectively (based on stressed cash flow scenarios, including excess spread), which provide coverage of more than 3.50x, 3.00x, 2.55x, 1.75x, and 1.50x S&P's 10.50%-11.00% expected cumulative net loss range for the class A, B, C, D, and E notes, respectively. These credit support levels are commensurate with the assigned 'A-1+ (sf)' rating for the class A-1 notes and the 'AAA (sf)', 'AA (sf)', 'A+ (sf)', 'BBB (sf)', and 'BB (sf)' ratings on the class A, B, C, D, and E notes, respectively. -- S&P's expectation that under a moderate, or 'BBB', stress scenario, its ratings on the notes would not decline by more than one rating category from its ratings (all else being equal) over a 12-month period. S&P's ratings stability criteria describe the outer bound of credit deterioration within one year as one rating category in the case of 'AAA' and 'AA' rated securities and two rating categories in the case of 'A', 'BBB', and 'BB' rated securities. -- The credit enhancement in the form of subordination, overcollateralization, a reserve account, and excess spread. -- The timely interest and ultimate principal payments made under the stressed cash flow modeling scenarios, which are consistent with the assigned ratings. -- The collateral characteristics of the securitized pool of subprime auto loans. -- General Motors Financial Co. Inc.'s (GM Financial, formerly known as AmeriCredit Corp.; BB/Positive/--) extensive securitization performance history since 1994. On Sept. 6, 2013, Standard & Poor's affirmed its long-term counterparty credit rating on GM Financial at 'BB' and revised the outlook to positive from stable. -- The transaction's payment and legal structures. RATINGS ASSIGNED AmeriCredit Automobile Receivables Trust 2014-3 Class Rating Type Interest Amount rate(%) (mil. $) A-1 A-1+ (sf) Senior 0.23 141.00 A-2-A AAA (sf) Senior 0.64 120.00 A-2-B AAA (sf) Senior 1-month LIBOR + 0.32 250.87 A-3 AAA (sf) Senior 1.15 198.42 B AA (sf) Subordinate 1.92 76.51 C A+ (sf) Subordinate 2.58 94.99 D BBB (sf) Subordinate 3.13 93.40 E(i) BB (sf) Subordinate 3.72 24.81 (i) Class E will be retained and is not included in the public offering amount. ANTHRACITE 2004-HY1: S&P Lowers Rating on 3 Note Classes to 'D' --------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on the class A, B, and C notes from Anthracite 2004-HY1 Ltd., a U.S. commercial real estate collateralized debt obligation (CRE CDO) transaction. S&P also lowered its ratings on the class D, E, and F notes to 'D (sf)' from 'CCC- (sf)' and removed them from CreditWatch, where S&P had placed them with negative implications on July 2, 2014. The affirmations reflect the sufficient credit support available at the current rating level. Since S&P's last rating actions, the class A notes have paid down by $13.69 million, to 58.49% of their original balance. But during the August 2014 payment period, inadequate interest proceeds prevented payments to the class E and F noteholders. The class D notes received a partial interest payment. S&P lowered its ratings on the class D, E, and F notes because it do not expect their deferred interest and principal to be paid back in full given the low ratings on the portfolio and the low coverage levels. All of these tranches have an outstanding deferred interest amount. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and will take rating actions as it deems necessary. RATINGS LOWERED AND REMOVED FROM CREDITWATCH Anthracite 2004-HY1 Ltd. Rating Class To From D D (sf) CCC- (sf)/Watch Neg E D (sf) CCC- (sf)/Watch Neg F D (sf) CCC- (sf)/Watch Neg RATINGS AFFIRMED Anthracite 2004-HY1 Ltd. Class Rating A CCC+ (sf) B CCC- (sf) C CCC- (sf) ANTHRACITE CDO I: S&P Affirms 'CCC+' Rating on Class F Notes ------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its 'CCC+(sf)' rating on the class F notes from Anthracite CDO I Ltd., a U.S. collateralized debt obligation of commercial mortgage-backed securities transactions managed by Blackrock Financial Management Inc. The affirmation reflects the sufficient credit support available at the current rating level. Since S&P's last rating actions in Dec. 2013, the class D, D-FL, E, and E-FL notes were all paid in full. Class F is now the only rated tranche in the deal and has an outstanding balance of $43.85 million. According to the July 2014 trustee report, the deal currently is exposed to concentration risk, as it has only 12 assets in the underlying asset pool. Also, 21.52% of the deal's securities are considered defaulted and 12.71% are in the 'CCC' rating range. Standard & Poor's will continue to review whether, in its view, the rating assigned to the notes remains consistent with the credit enhancement available to support it and take rating actions as it deems necessary. ARBOR REALTY 2006-1: Moody's Hikes Cl. B Notes Rating to 'Ba3' -------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Arbor Realty Mortgage Securities Series 2006-1 ("Arbor Realty 2006-1"): Cl. A-1A, Upgraded to Aaa (sf); previously on Oct 9, 2013 Affirmed Aa3 (sf) Cl. A-1AR, Upgraded to Aaa (sf); previously on Oct 9, 2013 Affirmed Aa3 (sf) Cl. A-2, Upgraded to A2 (sf); previously on Oct 9, 2013 Affirmed Ba2 (sf) Cl. B, Upgraded to Ba3 (sf); previously on Oct 9, 2013 Affirmed B2 (sf) Moody's has also affirmed the ratings on the following notes: Cl. C, Affirmed Caa2 (sf); previously on Oct 9, 2013 Affirmed Caa2 (sf) Cl. D, Affirmed Caa3 (sf); previously on Oct 9, 2013 Affirmed Caa3 (sf) Cl. E, Affirmed Caa3 (sf); previously on Oct 9, 2013 Affirmed Caa3 (sf) Cl. F, Affirmed Caa3 (sf); previously on Oct 9, 2013 Affirmed Caa3 (sf) Cl. G, Affirmed Caa3 (sf); previously on Oct 9, 2013 Affirmed Caa3 (sf) Cl. H, Affirmed Caa3 (sf); previously on Oct 9, 2013 Affirmed Caa3 (sf) Ratings Rationale Moody's has upgraded the ratings on four classes of notes due to material unexpected pre-payments since last review while credit metrics remain stable. Moody's has affirmed the ratings on six classes of notes because the key transaction metrics are commensurate with existing ratings. The action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CLO) transactions. Arbor Realty 2006-1 is a cash transaction whose reinvestment period ended in January 2012. The transaction is backed by a portfolio of i) whole loans/a-notes (80.3% of the current pool balance), ii) mezzanine interests (10.7%) and iii) b-notes (9.0%). As of the July 28, 2014 note valuation report, the aggregate note balance of the transaction, including preferred shares, has decreased to $290.3 million, from $600.0 million at issuance with the pay-down currently directed to the senior most outstanding class of notes. The pool contains two assets totaling $40.0 million (13.5% of the collateral pool balance) that are listed as defaulted securities as of the July 31, 2014 trustee report. While there have been limited realized losses on the underlying collateral to date, Moody's does expect low/moderate losses to occur on the defaulted securities. Moody's has identified the following as key indicators of the expected loss in CRE CLO transactions: the weighted average rating factor (WARF), the weighted average life (WAL), the weighted average recovery rate (WARR), and Moody's asset correlation (MAC). Moody's typically models these as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CLO pool. Moody's has updated its assessments for the collateral it does not rate. The rating agency modeled a bottom-dollar WARF of 7,450 compared to 7,590 at last review. The current ratings on the Moody's-rated collateral and the assessments of the non-Moody's rated collateral follow: Aaa-Aa3 (1.0% compared to 2.5% at last review), A1-A3 (0.0% compared to 2.1% at last review), Baa1-Baa3 (1.7% compared to 1.1% at last review), Ba1-Ba3 (0.3% compared to 0.2% at last review), B1-B3 (22.1% compared to 15.1% at last review), and Caa1-C (74.9% compared to 79.0% at last review). Moody's modeled a WAL of 5.5 years, the same as that at last review. The WAL is based on assumptions about extensions on the underlying loan collateral. Moody's modeled a fixed WARR of 40.8%, compared to 44.5% at last review. Moody's modeled a MAC of 100.0%, the same as that at last review. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes. Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for some of the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the recovery rates of the underlying collateral and credit assessments. Holding all other parameters constant, reducing the recovery rates of 100% of the collateral pool by 10% would result in an average modeled rating movement on the rated notes of 0 to 6 notches downward (e.g., one notch down implies a ratings movement of Baa3 to Ba1). Increasing the recovery rate of 100% of the collateral pool by 10% would result in an average modeled rating movement on the rated notes of 0 to 6 notches upward (e.g., one notch upward implies a ratings movement of Baa3 to Baa2). The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and commercial real estate property markets. Commercial real estate property values continue to improve modestly, along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate. ARES XXI CLO: Moody's Affirms Ba2 Rating on $15MM Class D Notes --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Ares XXI CLO Ltd.: $25,000,000 Class A-2 Floating Rate Notes Due 2018, Upgraded to Aaa (sf); previously on January 7, 2014 Upgraded to Aa1 (sf) $25,000,000 Class B Deferrable Floating Rate Notes Due 2018, Upgraded to Aa3 (sf); previously on January 7, 2014 Affirmed A3 (sf) Moody's also affirmed the ratings on the following notes: $333,000,000 Class A-1 Floating Rate Notes Due 2018 (current outstanding balance of $210,253,500), Affirmed Aaa (sf); previously on January 7, 2014 Affirmed Aaa (sf) $18,000,000 Class C Floating Rate Notes Due 2018, Affirmed Baa3 (sf); previously on January 7, 2014 Affirmed Baa3 (sf) $15,000,000 Class D Floating Rate Notes Due 2018, Affirmed Ba2 (sf); previously on January 7, 2014 Affirmed Ba2 (sf) Ares XXI CLO Ltd., issued in December 2006, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ended in February 2014. Ratings Rationale These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over- collateralization (OC) ratios since February 2014. The Class A-1 notes have been paid down by approximately 19.7% or $51.6 million since February 2014. Based on the trustee's August 2014 report, the OC ratios for the Class A, Class B, Class C and Class D notes are reported at 124.5%, 114.5%, 108.3% and 103.6%, respectively, versus December 2013 levels of 119.5%, 111.7%, 106.7% and 102.8%, respectively. Additionally, Moody's notes that the trustee reported OC ratios do not reflect the August 15, 2014 payment distribution when $51.6 million of principal proceeds were used to pay down the Class A-1 Notes. The deal has also benefited from an improvement in the credit quality of the portfolio since February 2014. Based on Moody's calculation, the weighted average rating factor (WARF) is currently 2376 compared to 2474 in January 2014. The portfolio includes a number of investments in securities that mature after the notes do. Based on the trustee's August 2014 report, securities that mature after the notes do currently make up approximately 5.4% of the portfolio. These investments could expose the notes to market risk in the event of liquidation when the notes mature. Despite the increase in the OC ratios of the Class C and D notes, Moody's affirmed the ratings on the Class C and D notes owing to market risk stemming from the exposure to these long-dated assets. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. Realization of higher than assumed recoveries would positively impact the CLO. 6) Long-dated assets: The presence of assets that mature after the CLO's legal maturity date exposes the deal to liquidation risk on those assets. This risk is borne first by investors with the lowest priority in the capital structure. Moody's assumes that the terminal value of an asset upon liquidation at maturity will be equal to the lower of an assumed liquidation value (depending on the extent to which the asset's maturity lags that of the liabilities) or the asset's current market value. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (1901) Class A-1: 0 Class A-2: 0 Class B: +2 Class C: +2 Class D: +3 Moody's Adjusted WARF + 20% (2851) Class A-1: 0 Class A-2: -1 Class B: -2 Class C: -1 Class D: -1 Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $305.6 million, defaulted par of $0.75 million, a weighted average default probability of 13.30% (implying a WARF of 2376), a weighted average recovery rate upon default of 50.1%, a diversity score of 46 and a weighted average spread of 3.0%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. ARROWPOINT CLO 2014-2: S&P Affirms 'BB-' Rating on Class E Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on Arrowpoint CLO 2014-2 Ltd./Arrowpoint CLO 2014-2 Corp.'s $414.50 million fixed- and floating-rate notes following the transaction's effective date as of July 29, 2014. Most U.S. cash flow collateralized loan obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The "effective date" for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral, or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request the rating agencies that have issued ratings upon closing to affirm the ratings issued on the closing date after reviewing the effective date portfolio (typically referred to as an "effective date rating affirmation"). An effective date rating affirmation reflects S&P's opinion that the portfolio collateral purchased by the issuer, as reported to S&P by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that S&P assigned on the transaction's closing date. The effective date reports provide a summary of certain information that S&P used in its analysis and the results of its review based on the information presented to S&P. S&P believes the transaction may see some benefit from allowing a window of time after the closing date for the collateral manager to acquire the remaining assets for a CLO transaction. This window of time is typically referred to as a "ramp-up period." Because some CLO transactions may acquire most of their assets from the new issue leveraged loan market, the ramp-up period may give collateral managers the flexibility to acquire a more diverse portfolio of assets. For a CLO that has not purchased its full target level of portfolio collateral by the closing date, S&P's ratings on the closing date and prior to its effective date review are generally based on the application of S&P's criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to S&P by the collateral manager, and may also reflect its assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased. "When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee," S&P said. "In our published effective date report, we discuss our analysis of the information provided by the transaction's trustee and collateral manager in support of their request for effective date rating affirmation. In most instances, we intend to publish an effective date report each time we issue an effective date rating affirmation on a publicly rated U.S. cash flow CLO," S&P added. On an ongoing basis after S&P issues an effective date rating affirmation, it will periodically review whether, in its view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as S&P deems necessary. RATINGS LIST Arrowpoint CLO 2014-2 Ltd. Rating Class Identifier To From A-1L 04280PAA5 AAA (sf) AAA (sf) A-1F 04280PAC1 AAA (sf) AAA (sf) B 04280PAE7 AA (sf) AA (sf) C 04280PAG2 A (sf) A (sf) D 04280PAJ6 BBB (sf) BBB (sf) E 04280QAA3 BB- (sf) BB- (sf) F 04280QAC9 B (sf) B (sf) ASHFORD CDO II: S&P Raises Rating on Class B-1L Notes to 'BB+' -------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1LA, A-1LB, A-2L, A-3L, and B-1L notes from Ashford CDO II Ltd., a U.S. collateralized debt obligation (CDO) transaction predominantly backed by tranches from other CDOs of corporate securities. The transaction is managed by Babson Capital Management LLC. S&P removed its ratings on the class A-1LA, A- 1LB, and A-2L notes from CreditWatch, where it placed them with positive implications on July 2, 2014. At the same time, S&P affirmed its 'CC (sf)' rating on the class B-2L notes from the same transaction. Ashford CDO II Ltd. ended its reinvestment period in August 2009. Since the November 2013 rating actions, the class A-1LA notes have been paid down by $66.15 million, bringing them to about 13.99% of their original notional balance and increasing the overcollateralization (O/C) ratios available to support all the rated notes. The trustee reported the following O/C ratios in the July 25, 2014, monthly report: -- The A-3L O/C ratio was 123.95%, up from the 115.08% reported in Oct. 2013; -- The B-1L O/C ratio was 107.21%, up from the 98.79% reported in Oct. 2013; and -- The B-2L O/C ratio was 96.03%, up from the 90.59% reported in Oct. 2013. The transaction has had no additional defaults since S&P's Nov. 2013 rating actions. The total defaulted amount was $17.99 million in both the July 25, 2014, trustee report and the Oct. 25, 2013, trustee report, which S&P referenced for its Nov. 2013 rating actions. The affirmation reflects that the credit support available to the class B-2L notes is sufficient for the current rating level. S&P will continue to review its ratings on the notes and assess whether, in its view, they remain consistent with the credit enhancement available to support them, and S&P will take further rating actions as it deems necessary. RATINGS LIST Ashford CDO II Ltd. Rating Rating Class Identifier To From A-1LA 89609AAA3 AA (sf) A- (sf)/Watch Pos A-1LB 89609AAC9 A+ (sf) BBB+ (sf)/Watch Pos A-2L 89609AAD7 A- (sf) BBB- (sf)/Watch Pos A-3L 89609AAE5 BBB (sf) BB+ (sf) B-1L 89609AAF2 BB+ (sf) B+ (sf) B-2L 89608YAA2 CC (sf) CC (sf) ATLAS SENIOR: S&P Assigns Prelim. BB- Rating on Class E Notes ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Atlas Senior Loan Fund VI Ltd./Atlas Senior Loan Fund VI LLC's $460.00 million floating-rate notes. The note issuance is a collateralized loan obligation transaction backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The preliminary ratings are based on information as of Aug. 26, 2014. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect S&P's assessment 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 including excess spread) and the 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. -- The transaction's ability to make timely interest and ultimate principal payments on the preliminary rated notes, which S&P assessed using its cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.2381%-13.8385%. -- The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. -- The transaction's interest diversion test, a failure of which during the reinvestment period will lead to the reclassification of up to 50% of excess interest proceeds that are available before curing an effective date rating agency confirmation failure or paying subordinated, deferred, and incentive management fees; uncapped administrative expenses; hedge payments; and subordinated note payments as principal proceeds to purchase additional collateral assets or to pay down the notes according to the note payment sequence, at the collateral manager's option. PRELIMINARY RATINGS ASSIGNED Atlas Senior Loan Fund VI Ltd./Atlas Senior Loan Fund VI LLC Class Rating Amount (mil. $) A AAA (sf) 309.50 B AA (sf) 56.00 C A (sf) 43.50 D BBB (sf) 26.00 E BB- (sf) 25.00 Subordinated notes NR 52.96 NR--Not rated. ATRIUM V: Moody's Hikes Rating on Class D Notes to 'Ba1' -------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Atrium V: $41,000,000 Class A-4 Notes, Upgraded to Aaa (sf); previously on June 27, 2013 Upgraded to Aa1 (sf) $51,500,000 Class B Notes, Upgraded to A1 (sf); previously on June 27, 2013 Upgraded to A3 (sf) $32,500,000 Class C Notes, Upgraded to Baa1 (sf); previously on June 27, 2013 Upgraded to Baa3 (sf) $19,330,000 Class D Notes, Upgraded to Ba1 (sf); previously on June 27, 2013 Upgraded to Ba2 (sf) Moody's also affirmed the ratings on the following notes: $110,000,000 Class A-1 Notes (current outstanding balance $69,830,965), Affirmed Aaa (sf); previously on June 27, 2013 Upgraded to Aaa (sf) $333,000,000 Class A-2a Notes (current outstanding balance $181,088,014), Affirmed Aaa (sf); previously on June 27, 2013 Affirmed Aaa (sf) $83,000,000 Class A-2b Notes, Affirmed Aaa (sf); previously on June 27, 2013 Upgraded to Aaa (sf) $142,000,000 Class A-3a Notes (current outstanding balance $84,302,659), Affirmed Aaa (sf); previously on June 27, 2013 Affirmed Aaa (sf) $16,000,000 Class A-3b Notes, Affirmed Aaa (sf); previously on June 27, 2013 Upgraded to Aaa (sf) Atrium V, issued in July 2006, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ended in August 2013. Ratings Rationale These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over- collateralization ratios since October 2013. The Class A notes have been paid down by approximately 34.3% or 247.7 million since then. Based on the trustee's July 2014 report, the over- collateralization (OC) ratios for the Class A, Class B, Class C, and Class D notes are reported at 134.7%, 123.3%, 117.0% and 113.5%, respectively, versus October 2013 levels of 126.5%, 118.2%, 113.4% and 110.8%, respectively. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. Realization of higher than assumed recoveries would positively impact the CLO. 6) Long-dated assets: The presence of assets that mature after the CLO's legal maturity date exposes the deal to liquidation risk on those assets. This risk is borne first by investors with the lowest priority in the capital structure. Moody's assumes that the terminal value of an asset upon liquidation at maturity will be equal to the lower of an assumed liquidation value (depending on the extent to which the asset's maturity lags that of the liabilities) or the asset's current market value. The deal's increased exposure owing to amendments to loan agreements extending maturities continues. In light of the deal's sizable exposure to long-dated assets, which increases its sensitivity to the liquidation assumptions in the rating analysis, Moody's ran scenarios using a range of liquidation value assumptions. However, actual long-dated asset exposures and prevailing market prices and conditions at the CLO's maturity will drive the deal's actual losses, if any, from long-dated assets. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2193) Class A-1: 0 Class A-2a: 0 Class A-2b: 0 Class A-3a: 0 Class A-3b: 0 Class A-4: 0 Class B: +2 Class C: +3 Class D: +2 Moody's Adjusted WARF + 20% (3290) Class A-1: 0 Class A-2a: 0 Class A-2b: 0 Class A-3a: 0 Class A-3b: 0 Class A-4: -1 Class B: -2 Class C: -2 Class D: -1 Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $665.3 million (reflecting principal payments of $77.97 million to the Class A notes on 8/20/2014) , defaulted par of $14.4 million, a weighted average default probability of 19.2% (implying a WARF of 2742), a weighted average recovery rate upon default of 49.7%, a diversity score of 66 and a weighted average spread of 3.42%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. BBCMS TRUST 2014-BXO: S&P Assigns 'BB-' Rating on Class E Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to BBCMS Trust 2014-BXO's $355 million commercial mortgage pass-through certificates. The certificate issuance is a commercial mortgage-backed securities transaction backed by one two-year, floating-rate commercial mortgage loan totaling $355 million, with three one- year extension options, secured by a cross-collateralized and cross-defaulted first-priority lien mortgage on the borrowers' fee simple interests in nine office properties. Since S&P assigned its preliminary ratings to classes A through F on Aug. 12, 2014, the issuer confirmed the class X certificates' notional amount. The ratings reflect S&P's view of the collateral's historical and projected performance, the sponsors' and managers' experience, the trustee-provided liquidity, the loan's terms, and the transaction's structure. RATINGS ASSIGNED BBCMS Trust 2014-BXO Class Rating(i) Amount ($) A AAA (sf) 146,400,000 X AAA (sf) 83,084,519(ii) B AA- (sf) 55,700,000 C A- (sf) 28,870,000 D BBB- (sf) 35,420,000 E BB- (sf) 48,120,000 F B- (sf) 40,490,000 (i) The certificates will be issued to qualified institutional buyers according to Rule 144A of the Securities Act of 1933. (ii) Notional balance. BEAR STEARNS 2004-1: S&P Lowers Rating on 3 Note Classes to 'D' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the class A-1, A-2, and A-7 pass-through certificates from Bear Stearns Structured Products Inc.'s series prime R1 2004-1 to 'D (sf)' from 'AA+ (sf)', and removed them from CreditWatch where they were placed with negative implications on May 22, 2014. The transaction in this review is a U.S. residential mortgage- backed securities (RMBS) resecuritized real estate mortgage investment conduit (re-REMIC) transaction issued in 2004. The re- REMIC certificates represent an interest in a trust fund consisting primarily of a 100% interest in both Credit Suisse First Boston Mortgage Securities Corp.'s class I-A-28 certificates series 2003-17; and Credit Suisse First Boston Mortgage Securities Corp.'s class I-A-1 certificates series 2003-19. The underlying certificates are backed by prime jumbo residential mortgage loans issued in 2003. The re-REMIC transaction's underlying securities receive credit support from subordination. Bear Stearns Structured Products Inc.'s series prime R1 2004-1 does not benefit from subordination within its own structure. The downgrades reflect S&P's view of the principal write-downs allocated to the classes during the May 2014 remittance period due to trustee expenses. The rating actions do not reflect the underlying deals' performance. On May 22, 2014, S&P placed the three ratings on CreditWatch with negative implications due to $13,220 in interest shortfalls and $97,808 in principal write-downs allocated to these classes during the April 2014 distribution period. According to the trustee, these write-downs and shortfalls were caused by funds that were incorrectly overpaid to certificate holders of one or more underlying classes and that had not yet been paid back. The trustee anticipated that the overpaid certificate holders would reimburse the principal and missed interest to these classes. The April 2014 remittance report was subsequently updated, and the previously allocated principal write-downs and interest shortfalls mentioned above were removed. However, the May 2014 remittance reports reported principal write-down amounts of $162, $175, and $946 to the A-1, A-2, and A-7 classes, respectively. The trustee attributed these losses to trustee expenses to cover legal fees allowed under the pooling agreement; the trustee does not expect these losses to be paid back. Because S&P's ratings on the re- REMIC classes consider timely interest and ultimate principal payments, S&P lowered these ratings to 'D (sf)'. ECONOMIC OUTLOOK When determining a U.S. RMBS collateral pool's relative credit quality, S&P's loss expectations stem, to a certain extent, from its view of how the loans will behave under various economic conditions. Standard & Poor's baseline macroeconomic outlook assumptions for variables that we believe could affect residential mortgage performance are as follows: -- A 6.3% unemployment rate for 2014, decreasing to 5.8% for 2015; -- Home prices will increase 6% in 2014, using the 20-city Standard & Poor's/Case-Shiller Home Price Index; -- Real GDP growth will be 2.1% in 2014 and 3.0% in 2015; -- The 30-year mortgage rate will average 4.3% for 2014 and increase to 5.0% in 2015; and -- The inflation rate will be 1.9% in both 2014 and 2015. 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 propensity of servicers to advance on delinquent loans, and liquidation timelines. Under S&P's baseline economic assumptions, it expects RMBS collateral quality to improve. However, if the U.S. economy were to become stressed in line with Standard & Poor's downside forecast, it believes that U.S. RMBS credit quality would weaken. S&P's downside scenario reflects these key assumptions: -- Total unemployment rises to 7.0% in 2014 and then 7.2% in 2015; -- Downward pressure causes a 1.1% GDP growth in 2014, rising slightly to 1.2% in 2015; -- Home price momentum slows as potential buyers are not able to purchase property; and -- The 30-year fixed mortgage rate falls slightly to 4.3% in 2014, but limited access to credit and pressure on home prices largely prevents consumers from capitalizing on such lower rates. RATINGS LOWERED AND REMOVED FROM CREDITWATCH Bear Stearns Structured Products Inc. Series prime R1 2004-1 Rating Rating Class CUSIP To From A-1 07383UHH1 D (sf) AA+ (sf)/Watch Neg A-2 07383UHJ7 D (sf) AA+ (sf)/Watch Neg A-7 07383UHP3 D (sf) AA+ (sf)/Watch Neg BEAR STEARNS 2007-BBA8: S&P Raises Rating on Class H Notes to B+ ---------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class H and J commercial mortgage pass-through certificates from Bear Stearns Commercial Mortgage Securities Trust 2007-BBA8, a U.S. commercial mortgage-backed securities (CMBS) transaction. In addition, S&P affirmed its 'CCC- (sf)' rating on class K from the same transaction. The rating actions follow S&P's analysis of the transaction primarily using its criteria for rating U.S. and Canadian CMBS transactions and its review of the collateral securing the transaction, the deal structure, and liquidity available to the trust. The raised ratings on classes H and J reflect the significantly reduced pool trust balance, S&P's expectation for the credit enhancement available to these classes, which it believes is greater than its current necessary credit enhancement estimate for the most recent rating levels, and its view of the current and future performance of the transaction's remaining collateral. The affirmed rating on class K reflects subordination and liquidity that are consistent with the outstanding rating. While available credit enhancement levels could suggest further positive movements on classes H and J and an upgrade on class K, S&P's analysis also considered the transaction's susceptibility to reduced liquidity support if the borrower is not able to pay off the loan by the March 2015 maturity date. S&P's property-level analysis included reevaluating the office/industrial properties that secure the remaining loan in the trust. S&P considered the servicer-reported net operating income (NOI) and occupancy for the past four years, as well as third- party market data. S&P then derived our sustainable in-place net cash flow, which it divided by a 7.92% weighted average capitalization rate to determine our expected-case value, yielding an in-trust 87.9% loan-to-value ratio. As of the Aug. 15, 2014, trustee remittance report, the trust comprised one floating-rate loan indexed to one-month LIBOR (0.152%) totaling $72.3 million, down from $1.5 billion at issuance. The Westcore Colorado Portfolio loan, with a $72.3 million trust balance and a $137.9 million whole loan balance, is currently secured by 12 office properties and one industrial property totaling 1.12 million sq. ft. in the Denver metropolitan statistical area. The loan was transferred to the special servicer for imminent monetary default on July 15, 2011, modified on Nov. 9, 2011, and returned to the master servicer on May 2, 2012. The modification terms extended the loan maturity date to March 10, 2015, from Nov. 11, 2011, and required the borrower to pay all associated costs (including the 0.25% special servicing fee) and list one of the properties for sale, among other items. "We based our analysis partly on a review of the property's historical NOI for the years ended Dec. 31, 2013, 2012, 2011, and 2010, and the June 30, 2014, rent rolls the master servicer provided to determine our opinion of a sustainable cash flow for the combined properties. The master servicer, KeyBank Real Estate Capital, reported a debt service coverage of 9.09x on the trust balance for the six months ended June 30, 2014. According to the June 30, 2014, rent rolls, occupancy on the portfolio was 84.6%, the five largest tenants make up 28.4% of the collateral net rentable area (NRA), and 12.6% of the NRA have leases expiring in 2014 and 30.1% expire in 2015," S&P said. RATINGS LIST Bear Stearns Commercial Mortgage Securities Trust 2007-BBA8 Commercial mortgage pass-through certificates series 2007-BBA8 Rating Class Identifier To From H 07388TAQ6 B+ (sf) B- (sf) J 07388TAR4 B- (sf) CCC (sf) K 07388TAS2 CCC- (sf) CCC- (sf) BLADE ENGINE 2006-1: S&P Lowers Rating on Class B Notes to 'BB-' ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the class A-1 and A-2 notes from Blade Engine Securitization Ltd.'s series 2006-1 to 'BBB- (sf)' from 'A- (sf)', and its rating on the class B notes from the same series to 'BB- (sf)' from 'BB+ (sf)'. At the same time, S&P removed these ratings from CreditWatch, where they were placed with negative implications on June 13, 2014. Blade Engine Securitization Ltd.'s series 2006-1 is an asset-backed securities transaction backed by the lease revenue and sales proceeds from a commercial aircraft engine portfolio. The downgrades reflect the engine portfolio's deteriorating quality and unfavorable rent and residual cash flow generating capability, a significant number of engines off-lease for more than six months, class E certificate minimum distributions paid prior to the rated notes' scheduled principal payment (though after the rated notes' minimum principal payment), hedge payments, and future interest rate risk. The aircraft engine portfolio consisted of 46 engines as of June 15, 2014. The majority of the engines are powered on end-of- production aircraft, which leads to the engines' diminishing re- leasing and sale prospects. There are 10 engines off-lease for more than six months, and three of the 10 engines are not in serviceable condition. There are also many leases that mature in the remainder of 2014 and in 2015, which adds uncertainty regarding rent cash flow stability. S&P is aware that Blade has instructed GE Capital Aviation Services (the servicer) to actively remarket, sell, or seek lease extensions on the engines. Blade's priority of payments allows for the class E certificate minimum distributions to be paid prior to the rated notes' scheduled principal payment (though after the rated notes' minimum principal payment). In situations such as when there is a large end-of-lease maintenance adjustment amount paid into the transaction, this lump-sum amount is allocated according to the regular priority of payments; therefore, a significant amount can be paid toward the class E certificate minimum distributions. The class A-1 and B notes are floating rate. The transaction currently has an interest rate hedge, which causes a cash flow drag to the deal ($623,541 on the July 15, 2014 payment date). In S&P's analysis, it considered both rising and falling interest rate scenarios. S&P will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them, and will take further rating actions as S&P deems necessary. RATINGS LOWERED Blade Engine Securitization Ltd. Series 2006-1 Rating Rating Class To From A-1 BBB- (sf) A- (sf)/Watch Neg A-2 BBB- (sf) A- (sf)/Watch Neg B BB- (sf) BB+ (sf)/Watch Neg BLUEMOUNTAIN 2014-3: S&P Assigns Prelim. BB Rating on Cl. D Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to BlueMountain CLO 2014-3 Ltd./ BlueMountain CLO 2014-3 LLC's $560.85 million floating-rate notes. The note issuance is a collateralized loan obligation transaction backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The preliminary ratings are based on information as of Aug. 27, 2014. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect S&P's assessment 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 to 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. -- The transaction's ability to make timely interest and ultimate principal payments on the preliminary rated notes, which S&P assessed using its cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.2381%-13.8385%. -- The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. -- The transaction's reinvestment overcollateralization test, a failure of which during the reinvestment period will lead to the reclassification of up to 50% of the excess interest proceeds that are available (before paying uncapped administrative expenses and fees, hedge payments, incentive management fees, and subordinate note payments) as principal proceeds. PRELIMINARY RATINGS ASSIGNED BlueMountain CLO 2014-3 Ltd./BlueMountain CLO 2014-3 LLC Class Rating Amount (mil. $) A-1 AAA (sf) 372.00 A-2 AA (sf) 76.00 B (deferrable) A (sf) 41.75 C (deferrable) BBB (sf) 31.70 D (deferrable) BB (sf) 25.70 E (deferrable) B (sf) 13.70 Subordinated notes NR 51.65 NR--Not rated. CAPTEC FRANCHISE 1998-1: Fitch Affirms 'Dsf' Rating on C Notes -------------------------------------------------------------- Fitch Ratings has taken the following rating actions on the outstanding Captec Franchise Receivables Trusts as detailed below: Series 1998-1 -- Class B affirmed at 'CCCsf'/RE 100%; -- Class C affirmed at 'Dsf'/RE 0%. Series 2000-1 -- Class C withdrawn; -- Class D withdrawn; -- Class E withdrawn; -- Class F withdrawn. KEY RATING DRIVERS The affirmation of the class B notes in 1998-1 reflects the likelihood of the notes paying in full and also the reliance on the four remaining obligors. The large interest shortfall to the class C notes eliminates the possibility of the notes ever receiving principal. Fitch will continue to monitor this transaction and may take additional rating action in the event of changes in performance and credit enhancement measures. The remaining notes in 2000-1 have been withdrawn as the notes have all defaulted. RATING SENSITIVITIES Unanticipated increases in the frequency of defaults could produce loss levels higher than the current expectations and impact available loss coverage. Lower loss coverage could impact ratings and Rating Outlooks, depending on the extent of the decline in coverage. The performance of the transactions will be affected by the performance of the largest obligors. Any prepayments will have a positive impact on the performance and future net loss coverage. Conversely, delinquencies and defaults from the loans to the largest obligor will have a negative impact on the remaining life of the transaction. CARLYLE GLOBAL 2014-3: Moody's Rates $6.7MM Class E Notes 'B3' -------------------------------------------------------------- Moody's Investors Service has assigned ratings to nine classes of notes issued by Carlyle Global Market Strategies CLO 2014-3, Ltd. Moody's rating action is as follows: $359,400,000 Class A-1A Senior Secured Floating Rate Notes due 2026 (the "Class A-1A Notes"), Definitive Rating Assigned Aaa (sf) $155,000,000 Class A-1B Senior Secured Floating Rate Notes due 2026 (the "Class A-1B Notes"), Definitive Rating Assigned Aaa (sf) $90,000,000 Class A-2 Senior Secured Floating Rate Notes due 2026 (the "Class A-2 Notes"), Definitive Rating Assigned Aa2 (sf) $38,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class B Notes"), Definitive Rating Assigned A2 (sf) $34,000,000 Class C-1 Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class C-1 Notes"), Definitive Rating Assigned Baa3 (sf) $10,000,000 Class C-2 Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class C-2 Notes"), Definitive Rating Assigned Baa3 (sf) $42,300,000 Class D-1 Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class D-1 Notes"), Definitive Rating Assigned Ba3 (sf) $6,000,000 Class D-2 Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class D-2 Notes"), Definitive Rating Assigned Ba3 (sf) $6,700,000 Class E Senior Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Definitive Rating Assigned B3 (sf) The Class A-1A Notes, Class A-1B Notes, Class A-2 Notes, Class B Notes, Class C-1 Notes, Class C-2 Notes, Class D-1 Notes, Class D- 2 Notes and Class E Notes are referred to herein, collectively, as the "Rated Notes." Ratings Rationale Moody's ratings of the Rated Notes address the expected losses posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Carlyle 2014-3 is a managed cash flow CLO. The issued notes are collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90% of the portfolio must consist of senior secured loans, cash, and eligible investments, and up to 10% of the portfolio may consist of second lien loans and unsecured loans. The is approximately 90% ramped as of the closing date. Carlyle Investment Management L.L.C. (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer issued subordinated notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $800,000,000 Diversity Score: 65 Weighted Average Rating Factor (WARF): 2825 Weighted Average Spread (WAS): 3.55% Weighted Average Coupon (WAC): 7.50% Weighted Average Recovery Rate (WARR): 46.5% Weighted Average Life (WAL): 8 years. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated Notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on the Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2825 to 3249) Rating Impact in Rating Notches Class A-1A Notes: -1 Class A-1B Notes: -1 Class A-2 Notes: -2 Class B Notes: -2 Class C-1 Notes: -1 Class C-2 Notes: -1 Class D-1 Notes: -1 Class D-2 Notes: -1 Class E Notes: -1 Percentage Change in WARF -- increase of 30% (from 2825 to 3373) Rating Impact in Rating Notches Class A-1A Notes: -1 Class A-1B Notes: -1 Class A-2 Notes: -4 Class B Notes: -4 Class C-1 Notes: -2 Class C-2 Notes: -2 Class D-1 Notes: -1 Class D-2 Notes: -1 Class E Notes: -3 The V Score for this transaction is Medium/High. This V Score has been assigned in a manner similar to the Medium/High V Score assigned for the global cash flow CLO sector, as described in the special report titled "V Scores and Parameter Sensitivities in the Global Cash Flow CLO Sector," dated July 6, 2009 and available on www.moodys.com. Moody's V Score provides a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. V Scores apply to the entire transaction, rather than individual tranches. CITIGROUP COMMERCIAL 2012-GC8: Fitch Affirms BB Rating on E Notes ----------------------------------------------------------------- Fitch Ratings has affirmed 12 classes of Citigroup Commercial Mortgage Trust 2012 - GC8 commercial mortgage pass-through certificates. KEY RATING DRIVERS The affirmations are based on the stable performance of the underlying collateral pool. As of the August 2014 distribution date, the pool's aggregate principal balance has been reduced by 2% to $1.02 billion from $1.04 billion at issuance. The pool has experienced no realized losses to date. Fitch has not designated any loans as Fitch Loan of Concern; no loans are delinquent or in special servicing. There is $10,580 of interest shortfalls currently affecting class G. The largest loan of the pool (11%) is the Miami Center, which is secured by a 786,836 square foot (sf), class A office tower located on Biscayne Bay in downtown Miami. The property, which is 35-stories and includes an attached nine-story parking garage with 918 spaces, is the second largest office building in the state of Florida. Approximately 45% of the property's net rentable area (NRA) is leased to investment-grade tenants or major law firms. The servicer-reported occupancy as of first-quarter 2014 was 80.8% and the year-end 2013 DSCR was 1.44x. The second largest loan, 222 Broadway (9.8%), is secured by a 786,552 sf office tower located in Manhattan's Financial District. Approximately 42.6% of the property's base rent comes from two investment grade tenants, JP Morgan Chase and Bank of America Merrill Lynch. Currently there are four tenants (16.3% of the NRA) that are either in a free rent or build-out period at the property; all are expected to begin paying full rent by July 2015. As per the property's rent roll, the May 2014 occupancy increased to 94.4% from 79.1% at issuance. The third largest loan, 17 Battery Place South (8.9%), is secured by a 428,450 sf office tower located in Manhattan's Financial District, adjacent to Battery Park and overlooking New York Harbor. The 13-story office tower is part of a 31-story building, which also contains luxury rental apartments. The property's performance declined slightly for FYE 2013 due to Hurricane Sandy. The renovations caused by the storm took longer than expected at the property, especially to the underground parking garage and electrical equipment. The servicer-reported DSCR declined to 1.63x at year-end 2013 from 1.84x at year-end 2012. Additionally, as per the property's rent roll, occupancy was 86.8% as of Aug. 31, 2014. RATING SENSITIVITIES The Rating Outlooks on all classes remain Stable. Due to the recent issuance of the transaction and stable performance, Fitch does not foresee positive or negative ratings migration until a material economic or asset level event changes the transaction's overall portfolio-level metrics. Additional information on rating sensitivity is available in the report 'CGCMT Commercial Mortgage Trust 2012-GC8' (Sept. 6, 2012). Fitch affirms these classes as indicated: -- $38.3 million class A-1 at 'AAAsf'; Outlook Stable; -- $181.6 million class A-2 at 'AAAsf'; Outlook Stable; -- $27.7 million class A-3 at 'AAAsf'; Outlook Stable; -- $379.6 million class A-4 at 'AAAsf'; Outlook Stable; -- $80.3 million class A-AB at 'AAAsf'; Outlook Stable; -- $93.6 million class A-S at 'AAAsf'; Outlook Stable; -- $61.1 million class B at 'AA-sf'; Outlook Stable; -- $39 million class C at 'A-sf'; Outlook Stable; -- $45.5 million class D at 'BBB-sf'; Outlook Stable; -- $19.5 million class E at 'BBsf'; Outlook Stable; -- $19.5 million class F at 'Bsf'; Outlook Stable; -- $801.2 million8 class X-A at 'AAAsf'; Outlook Stable. Fitch does not rate the class G and X-B certificates. * Notional and interest-only. CLOVERIE PLC 43: S&P Raises Rating on Series 43 Notes to 'BB+' -------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on 11 tranches from 10 investment-grade corporate backed U.S. synthetic collateralized debt obligation (CDO) transactions, and removed them from CreditWatch, where they were placed with positive implications. At the same time, S&P placed its ratings on 19 tranches from 16 synthetic CDO transactions on CreditWatch with positive implications. The rating and CreditWatch actions followed S&P's monthly review of synthetic CDOs and reflect the transactions' seasoning, the rating stability of the obligors in the underlying reference portfolios over the past few months, and the synthetic rated overcollateralization ratios that have risen above 100% at the next highest rating level. RATINGS RAISED AND REMOVED FROM CREDITWATCH POSITIVE Cloverie PLC Series 43 Rating Class To From Notes BB+ (sf) BB (sf)/Watch Pos Cloverie PLC Series 44 Rating Class To From Notes BB+ (sf) BB (sf)/Watch Pos Credit Default Swap US$1.4 billion Citibank N.A.--CDO no. 795246 Rating Class To From Tranche B+srb (sf)(i) Bsrb (sf)(i)/Watch Pos Credit Default Swap US$10 million swap risk rating--protection buyer CDS reference no. Torino II Rating Class To From Tranche Bsrb (sf)(i) CCC-srb (sf)(i)/Watch Pos Infiniti SPC Ltd. Series 10A-2 Rating Class To From 10A-2 A- (sf) BBB+ (sf)/Watch Pos Marvel Finance 2007-1 LLC Series 2007-1 Rating Class To From IA BBB- (sf) BB+ (sf)/Watch Pos Marvel Finance 2007-4 LLC Series 2007-4 Rating Class To From IA BBB+ (sf) BBB (sf)/Watch Pos Morgan Stanley ACES SPC Series 2006-27 Rating Class To From Class A BBB- (sf) BB+ (sf)/Watch Pos PARCS-R Master Trust Series 2007-12 Rating Class To From Trust unit A (sf) A- (sf)/Watch Pos REVE SPC EUR15 million, JPY3 billion, US$81 million REVE SPC segregated portfolio of Dryden XVII notes Rating Class To From Series 36 BB- (sf) B+ (sf)/Watch Pos Series 37 B+ (sf) B- (sf)/Watch Pos (i) S&P's single counterparty--protection buyer ('srb') ratings consider the creditworthiness of the reference portfolio and the protection buyer under the swap transaction. It does not address the specific amount of termination payments that would be payable under the credit default swap. RATINGS PLACED ON CREDITWATCH POSITIVE Capstan Master Trust Series 1 Rating Class To From Tranche B (sf)/Watch Pos B (sf) Capstan Master Trust Series 2 Rating Class To From Tranche B (sf)/Watch Pos B (sf) Capstan Master Trust Series 3 Rating Class To From Tranche B (sf)/Watch Pos B (sf) Capstan Master Trust Series 4 Rating Class To From Tranche B (sf)/Watch Pos B (sf) Camber Master Trust Series 9 Series 9 Rating Class To From Series 9 B (sf)/Watch Pos B (sf) Camber Master Trust Series 10 Series 10 Rating Class To From Series 10 B (sf)/Watch Pos B (sf) Greylock Synthetic CDO 2006 Series 2 Rating Class To From A3-$FMS BBB- (sf)/Watch Pos BBB- (sf) A3-$LMS BBB- (sf)/Watch Pos BBB- (sf) A3A-$FMS BBB- (sf)/Watch Pos BBB- (sf) A3B-$LMS BBB- (sf)/Watch Pos BBB- (sf) Infinity SPC Ltd. Series 2007-1 Rating Class To From B BB (sf)/Watch Pos BB (sf) Newport Waves CDO Series 2 Rating Class To From A1-$FMS BBB+ (sf)/Watch Pos BBB+ (sf) NOAJ CDO Ltd. Series 1 Rating Class To From BBB- (sf)/Watch Pos BBB- (sf) Pivot Master Trust Series 1 Rating Class To From Series 1 CCC- (sf)/Watch Pos CCC- (sf) Pivot Master Trust Series 2 Rating Class To From Series 2 CCC- (sf)/Watch Pos CCC- (sf) REVE SPC Series 2007-1 Rating Class To From A Series18 BB (sf)/Watch Pos BB (sf) REVE SPC EUR15 million, JPY3 billion, US$81 million REVE SPC segregated portfolio of Dryden XVII notes Rating Class To From Series 40 B+ (sf)/Watch Pos B+ (sf) Rutland Rated Investments Series DRYDEN06-3 Rating Class To From A6-$LS B+ (sf)/Watch Pos B+ (sf) STARTS (Cayman) Ltd. Series 2007-5 Rating Class To From Notes BB+ (sf)/Watch Pos BB+ (sf) COAST INVESTMENT 2002-1: Moody's Cuts Cl. B Notes Rating to 'Ca' ---------------------------------------------------------------- Moody's Investors Service has downgraded the rating on notes issued by Coast Investment Grade 2002-1, Limited: $24,000,000 Class B Floating Rate Senior Secured Notes Due 2017 (current outstanding balance of $2,424,828), Downgraded to Ca (sf); previously on February 5, 2013 Upgraded to B3 (sf) Coast Investment Grade 2002-1, Limited, issued in May 2002, is a collateralized debt obligation backed primarily by a portfolio of CLO, CFO and CBO tranches originated between 2002 and 2007. Ratings Rationale The rating action is primarily a result of diminishing excess interest proceeds and an expectation the Class B deferred interest balance will not be paid in full. As of the July 2014 payment date, the balance of the Class B deferred interest is $1.3 million. The Class B deferred interest is paid with excess interest proceeds only, and given that there are only five assets remaining in the portfolio, Moody's expects that interest proceeds generated from those assets will not be enough to pay the Class B deferred interest balance in full. It benefits from principal proceeds only when balances on the Class C-1 and C-2 notes are reduced to zero. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs," published in March 2014. Factors That Would Lead To an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: The performance of SF CDOs backed by CLOs, CFO and CBO could be negatively affected by 1) uncertainty about credit conditions in the general economy (macroeconomic uncertainty), and 2) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. Additionally, the performance of the underlying assets can also be affected positively or negatively by 1) the manager's investment strategy and behavior and 2) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 2) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds, recoveries from defaulted assets, and excess interest proceeds will continue and at what pace. Faster deleveraging than Moody's expects could have a significant impact on the notes' ratings. 3) Lack of portfolio granularity: The performance of the portfolio depends to a large extent on the credit conditions of a few large obligors, especially if they jump to default. Because of the deal's lack of granularity, Moody's supplemented its analysis with a individual scenario analysis. Loss and Cash Flow Analysis: Moody's applies a Monte Carlo simulation framework in Moody's CDOROM(TM) to model the loss distribution for SF CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios define the reference pool's loss distribution. Moody's then uses the loss distribution as an input in the CDOEdge(TM) cash flow model. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes. Below is a summary of the impact of different default probabilities on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Ba1 and below ratings notched up by two rating notches : Class B 0 Class C-1: 1 Class C-2: 1 Class D: 0 Ba1 and below ratings notched down by two notches : Class B: 0 Class C-1: 0 Class C-2: 0 Class D: 0 COMM 2007-FL14: S&P Lowers & Withdraws 'D' Ratings on 2 Notes ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the class GLB1 and GLB2 commercial mortgage pass-through certificates from COMM 2007-FL14, a U.S. commercial mortgage-backed securities (CMBS) transaction, to 'D (sf)', and then subsequently withdrew them. In addition, S&P withdrew its 'D (sf)' ratings on classes GLB3 and GLB4 from the same transaction. The downgrades on the non-pooled class GLB1 and GLB2 certificates reflect principal losses incurred by the classes due to the payoff of the MSREF/Glenborough Portfolio loan, which had a beginning trust balance of $73.6 million, according to the Aug. 15, 2014 trustee remittance report. The 'GLB' classes derive 100% of their cash flow from the MSREF/Glenborough Portfolio loan, which was previously with the special servicer. According to the trustee, US Bank National Association, after paying the interest and prior interest shortfalls on the 'GLB' classes, the remaining proceeds were not sufficient to pay the full principal on these classes. The trustee allocated $20,765 of principal losses to each of the 'GLB' classes on a pro rata basis. The principal losses represent 0.028% of each class' original certificate balance, which exceeds our de minimis threshold (one basis point of the original certificate balance on a cumulative basis). S&P subsequently withdrew its ratings on the 'GLB' classes because the principal balances were reduced to zero. RATINGS LOWERED, THEN WITHDRAWN COMM 2007-FL14 Commercial mortgage pass-through certificates Rating Rating Rating Class To Interim From GLB1 NR D (sf) BB (sf) GLB2 NR D (sf) BB- (sf) RATINGS WITHDRAWN COMM 2007-FL14 Commercial mortgage pass-through certificates Rating Rating Rating Class To From GLB3 NR D (sf) GLB4 NR D (sf) NR--Not rated. CONNECTICUT VALLEY II: Moody's Hikes Rating on 2 Notes to Ba2 ------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on notes issued by Connecticut Valley Structured Credit CDO II, Ltd.: $6,000,000 Class B-1 Deferrable Floating Rate Notes Due 2018 (current outstanding balance of $5,945,037.28), Upgraded to A1 (sf); previously on February 7, 2014 Upgraded to Ba1 (sf) $15,000,000 Class B-2 Deferrable Fixed Rate Notes Due 2018 (current outstanding balance $18,003,063.52), Upgraded to A1 (sf); previously on February 7, 2014 Upgraded to Ba1 (sf) $18,250,000 Class C-1 Deferrable Floating Rate Notes Due 2018 (current outstanding balance of $21,641,665.29), Upgraded to Ba2 (sf); previously on February 7, 2014 Upgraded to B1 (sf) $13,250,000 Class C-2 Deferrable Fixed Rate Notes Due 2018 (current outstanding balance of $19,211,380.99), Upgraded to Ba2 (sf); previously on February 7, 2014 Upgraded to B1 (sf) Connecticut Valley Structured Credit CDO II, Ltd., issued in May 2003, is a collateralized debt obligation backed primarily by a portfolio of CLOs originated between 2004 to 2007. Ratings Rationale These rating actions are due primarily to the deleveraging of the senior notes and an increase in the transaction's over- collateralization ratios since January 2014. The Class A notes have paid down completely and the Class B-1 and B-2 notes have paid down approximately 7.6% or $1.96 million in total since then. Based on Moody's calculations, the current Class A/B and Class C overcollateralization ratios are 360.25% and 133.14% respectively versus 264.51% and 128.49% respectively in January 2014. As reported by the trustee, on August 13, 2009, the transaction experienced an "Event of Default" caused by a failure of the Class A Par Value Ratio being at least equal to 102%, as required under Section 5.1(vi) of the indenture. The Controlling Party subsequently directed the Trustee to declare the principal and accrued and unpaid interest on the notes to be immediately due and payable. As a result of the acceleration of the notes, all proceeds from the underlying assets are being used to pay interest and principal on the Class B-1 and B-2 notes. Despite the significant increases in the OC ratios across the capital structure, the Class C notes have not been paid interest payments since the acceleration of the notes, and will be deferring interest payments until each of the outstanding senior notes are paid in full. Moody's notes that the rating of the B-1 and B-2 Notes reflect the low risk of liquidation of the collateral under the Event of Default due to the separate voting requirements needed by each class of notes. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs," published in March 2014. Factors That Would Lead To an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: The performance of SF CDOs backed by CLOs (CLO Squareds) could be negatively affected by 1) uncertainty about credit conditions in the general economy (macroeconomic uncertainty), and 2) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. Additionally, the performance of the CLO assets can also be affected positively or negatively by 1) the manager's investment strategy and behavior and 2) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 2) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds, recoveries from defaulted assets, and excess interest proceeds will continue and at what pace. Faster deleveraging than Moody's expects could have a significant impact on the notes' ratings. 3) Recovery of defaulted assets: The amount of recoveries received from defaulted assets reported by the trustee and those that Moody's assumes as having defaulted as well as the timing of these recoveries create additional uncertainty. Moody's analyzed defaulted assets assuming no recoveries, and therefore, realization of any recoveries in the future would positively impact the notes' ratings. Loss and Cash Flow Analysis: Moody's applies a Monte Carlo simulation framework in Moody's CDOROM to model the loss distribution for SF CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios define the reference pool's loss distribution. Moody's then uses the loss distribution as an input in the CDOEdge cash flow model. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes. Below is a summary of the impact of different default probabilities on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Ba1 and below ratings notched up by two notches: Class B-1: 0 Class B-2: 0 Class C-1: +2 Class C-2: +2 Ba1 and below ratings notched down by two rating notches: Class B-1: 0 Class B-2: 0 Class C-1: -2 Class C-2: -2 CONNECTICUT VALLEY II: S&P Raises Rating on 2 Notes to 'B-' ----------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class B-1, B-2, C-1, and C-2 notes from Connecticut Valley Structured Credit CDO II Ltd. (CVSC II), a U.S. corporate collateralized debt obligation (CDO) of CDOs transaction managed by Babson Capital Management LLC. At the same time, S&P removed the ratings on the class B-1 and B-2 notes from CreditWatch, where it placed them with positive implications on July 2, 2014. CVSC II triggered an event of default (EOD) in August 2009, and the controlling class voted to accelerate payments in Sept. 2009. Following the EOD and subsequent acceleration, the payment waterfall changed where class A interest and principal were paid before any of the subordinate classes' interest or principal. As a result, as of the last payment date in May 2014, the class A-1 and A-2 notes were paid down completely, and now all available proceeds are being used to pay down the class B-1 and B-2 pari passu notes. Since S&P's July 2013 rating actions, the class A-2 and B notes were paid $58.19million and $1.36 million total, respectively. The current underlying collateral consists mostly of tranches from various collateralized loan obligations (CLOs). The underlying CLO tranches have had significant delevering and collateral quality improvements, leading to increased credit support available across their capital structures. As a result, S&P upgraded about $50.95 million in par, or about 70.02% of the current pool, in CVSC II since our last rating actions. The class B-1 and B-2 notes have a portion of their deferred interest still unpaid and the class C-1 and C-2 notes will not receive any payments until the class B-1 and B-2 notes, along with their deferred component, are paid down in full. The class C-1 and C-2 notes will continue to capitalize the interest due on them, increasing the total note balance outstanding. The transaction currently holds $14.17 million in principal cash, and, given the class B notes' overcollateralization levels, they could potentially be paid off in a short amount of time and the class C notes would start receiving payments. Although the cash flow results pointed to higher ratings, S&P raised its ratings on the class B and C notes to 'A+ (sf)' and 'B- (sf)', respectively, in order to provide for additional cushions at the higher ratings. S&P will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them and take further rating actions as S&P deems necessary. RATINGS LIST Connecticut Valley Structured Credit CDO II Ltd. Rating Rating Class Identifier To From B-1 20779PAC5 A+ (sf) B (sf)/Watch Pos B-2 20779PAD3 A+ (sf) B (sf)/Watch Pos C-1 20779PAE1 B- (sf) CCC+ (sf) C-2 20779PAF8 B- (sf) CCC+ (sf) CPS AUTO 2014-C: S&P Assigns Prelim. B+ Rating on Class E Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to CPS Auto Receivables Trust 2014-C's $273.0 million asset-backed notes. The note issuance is an asset-backed securities transaction backed by subprime auto loan receivables. The preliminary ratings are based on information as of Sept. 4, 2014. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The availability of approximately 45.1%, 36.7%, 29.5%, 26.0%, and 24.3% of credit support for the class A, B, C, D, and E notes, respectively, based on stressed cash flow scenarios (including excess spread). These credit support levels provide coverage of 2.80x, 2.30x, 1.75x, 1.50x, and 1.17x S&P's 14.8%-15.2% expected cumulative net loss range for the class A, B, C, D, and E notes, respectively. -- S&P's expectation that, under a moderate stress scenario of 1.75x its expected net loss level, the preliminary rating on the class A notes will not decline by more than one rating category during the first year, and the preliminary ratings on the class B through E notes will not decline by more than two rating categories during the first year, all else being equal, which is consistent with S&P's credit stability criteria. -- The preliminary rated notes' underlying credit enhancement in the form of subordination, overcollateralization, a reserve account, and excess spread for the class A, B, C, D, and E notes. -- The timely interest and principal payments made to the preliminary rated notes under S&P's stressed cash flow modeling scenarios, which S&P believes is appropriate for the assigned preliminary ratings. -- The transaction's payment and credit enhancement structure, which includes a noncurable performance trigger. PRELIMINARY RATINGS ASSIGNED CPS Auto Receivables Trust 2014-C Class Rating Type Interest Amount rate(i) (mil. $) A AA- (sf) Senior Fixed 187.00 B A (sf) Subordinate Fixed 36.17 C BBB (sf) Subordinate Fixed 28.67 D BB (sf) Subordinate Fixed 13.65 E B+ (sf) Subordinate Fixed 7.51 (i) The actual coupons of these tranches will be determined on the pricing date. CSMC TRUST 2014-WIN1: S&P Assigns 'BB+' Rating on Class B-3 Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to CSMC Trust 2014-WIN1's $398.754 million mortgage pass-through certificates series 2014-WIN1. The certificate issuance is a residential mortgage-backed securities transaction backed by residential mortgage loans. The ratings reflect S&P's view of the pool's high-quality collateral, the transaction's credit enhancement, and the associated structural deal mechanics. RATINGS ASSIGNED CSMC Trust 2014-WIN1 Class Ratings Amount (mil. $)(i) 1-A-1 AAA (sf) 71.762 1-A-2 AAA (sf) 71.762 1-A-3 AAA (sf) 71.762 1-A-4 AAA (sf) 71.762 1-A-5 AAA (sf) 68.770 1-A-6 AAA (sf) 2.992 1-X-1 AAA (sf) Notional(ii) 1-X-2 AAA (sf) Notional(ii) 1-X-3 AAA (sf) Notional(ii) 1-X-4 AAA (sf) Notional(ii) 1-X-5 AAA (sf) Notional(ii) 1-X-6 AAA (sf) Notional(ii) 1-X-7 AAA (sf) Notional(ii) 1-X-8 AAA (sf) Notional(ix) 1-X-9 AAA (sf) Notional(ii) 1-X-10 AAA (sf) Notional(ii) 1-X-11 AAA (sf) Notional(ii) 2-A-1 AAA (sf) 301.905 2-A-2 AAA (sf) 301.905 2-A-3 AAA (sf) 301.905 2-A-4 AAA (sf) 301.905 2-A-5 AAA (sf) 241.524 2-A-6 AAA (sf) 60.381 2-A-7 AAA (sf) 60.381 2-A-8 AAA (sf) 60.381 2-A-9 AAA (sf) 60.381 2-A-10 AAA (sf) 60.381 2-A-11 AAA (sf) 241.524 2-A-12 AAA (sf) 241.524 2-A-13 AAA (sf) 241.524 2-A-14 AAA (sf) 241.524 2-A-15 AAA (sf) 301.905 2-A-16 AAA (sf) 289.319 2-A-17 AAA (sf) 12.586 2-A-18 AAA (sf) 289.319 2-A-19 AAA (sf) 12.586 2-X-1 AAA (sf) Notional(iii) 2-X-2 AAA (sf) Notional(iii) 2-X-3 AAA (sf) Notional(iii) 2-X-4 AAA (sf) Notional(iii) 2-X-5 AAA (sf) Notional(iv) 2-X-6 AAA (sf) Notional(iv) 2-X-7 AAA (sf) Notional(iv) 2-X-8 AAA (sf) Notional(iv) 2-X-9 AAA (sf) Notional(iii) 2-X-10 AAA (sf) Notional(iii) 2-X-11 AAA (sf) Notional(iii) 2-X-12 AAA (sf) Notional(iv) 2-X-13 AAA (sf) Notional(iv) 2-X-14 AAA (sf) Notional(iv) 2-X-15 AAA (sf) Notional(v) 2-X-16 AAA (sf) Notional(vi) 2-X-17 AAA (sf) Notional(vii) 2-X-18 AAA (sf) Notional(v) 2-X-19 AAA (sf) Notional(v) 2-X-21 AAA (sf) Notional(iii) 2-X-22 AAA (sf) Notional(iii) 2-X-23 AAA (sf) Notional(iii) 2-X-24 AAA (sf) Notional(v) 2-X-25 AAA (sf) Notional(v) 2-X-26 AAA (sf) Notional(v) 2-X-27 AAA (sf) Notional(v) 2-X-28 AAA (sf) Notional(v) 2-X-29 AAA (sf) Notional(v) 2-X-30 AAA (sf) Notional(iii) 2-X-31 AAA (sf) Notional(v) 2-X-32 AAA (sf) Notional(v) 2-X-33 AAA (sf) Notional(v) 2-X-34 AAA (sf) Notional(vii) 2-X-35 AAA (sf) Notional(v) 2-X-36 AAA (sf) Notional(v) 2-X-37 AAA (sf) Notional(iv) 2-X-38 AAA (sf) Notional(iv) 2-X-39 AAA (sf) Notional(iv) 2-X-40 AAA (sf) Notional(iv) 2-X-41 AAA (sf) Notional(v) B-1 AA (sf) 6.069 B-2 A (sf) 6.677 B-3 BB+ (sf) 7.687 B-4 B+ (sf) 4.654 B-5 NR 5.867 (i) All certificates are subject to a net WAC cap. The class 1-X-1, 1-X-2, 1-X-3, 1-X-4, 1-X-5, 1-X-6, 1-X-7, 1-X-8, 1-X-9, 1-X-10, 1-X-11, 2-X-1, 2-X-2, 2-X-3, 2-X-4, 2-X-9, 2-X-10, 2-X-11, 2-X-21, 2-X-22, 2-X-23, 2-X-30, 2-X-5, 2-X-6, 2-X-7, 2-X-8, 2-X-12, 2-X-13, 2-X-14, 2-X-37, 2-X-38, 2-X-39, 2-X-40, 2-X-15, 2-X-19, 2-X-35, 2-X-18, 2-X-24, 2-X-25, 2-X-26, 2-X-27, 2-X-28, 2-X-29, 2-X-31, 2-X-32, 2-X-33, 2-X-34, 2-X-41, 2-X-16, 2-X-17, and 2-X-36 certificates are interest-only certificates; they will not be entitled to principal distributions. (ii) Notional amount equal to class 1-A-4 balance. (iii)Notional amount equal to class 2-A-5 balance. (iv)Notional amount equal to class 2-A-8 balance. (v)Notional amount equal to sum of the balances of the class 2-A-5 and 2-A-8 certificates. (vi)Notional amount equal to class 2-A-16 balance. (vii)Notional amount equal to class 2-A-17 balance. (viii) Notional amount equal to sum of the class 2-A-16 and 2-A-17 certificate balances. (ix)Notional amount equal to sum of the class 1-A-5 and 1-A-6 certificate balances. NR--Not rated. WAC--Weighted average coupon. SPS--Select Portfolio Servicing Inc. CWCAPITAL COBALT: S&P Lowers Rating on Class A-1 Notes to 'CCC-' ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the class A-1 notes from CWCapital COBALT Vr Ltd., a U.S. commercial real estate collateralized debt obligation (CRE-CDO) transaction, to 'CCC- (sf)' from 'B+ (sf)' and removed it from CreditWatch, where it was placed with negative implications on July 2, 2014. The downgrade primarily reflects the insufficient interest coverage for this class and is driven by S&P's applied largest obligor default test, which addresses the potential concentration of exposure to certain obligors in the transaction's portfolio. The outstanding classes A-2, B, C, D, E, F, G, H, J, and K in this transaction are all rated 'D (sf)'. According to the Aug. 26, 2014, note valuation report, there was insufficient interest proceeds to cover accrued interest on the class A-1 and A1J notes. A majority of the interest proceeds were deposited to the expense reserve account after paying administrative expenses and a portion of the class A-1 and A1J accrued interest was paid using principal proceeds. Since S&P's previous rating actions, the transaction has allocated $40.92 million principal proceeds to cover the accrued fees, swap issuer payments, and note interest payments for the class A-1 and A1J notes. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and will take rating actions as it deems necessary. DBALT 2007-RAMP1: Moody's Ups Interest Rate Swap Rating to Ba3 -------------------------------------------------------------- Moody's Investors Service has upgraded the rating of the interest rate swap from DBALT 2007-RAMP1 transaction, backed by Alt-A RMBS loans. Complete rating actions are as follows: Issuer: DBALT 2007-RAMP1 Interest Rate Swap, Upgraded to Ba3 (sf); previously on Dec 16, 2011 Assigned B3 (sf) Ratings Rationale The rating on the swap addresses the credit exposure of the swap counterparty to the respective RMBS trust's ability to honor its obligations under the swaps. The primary risks driving the rating on the swap are the risk that the collateral pool amortizes at a rate that exceeds the scheduled amortization rate of the swap notional and the risk of a termination event triggered by a default of the swap counterparty.The rating takes into account the rating of the swap counterparty, the transaction's legal structure, the rating of the underlying note and the available cash-flow to make the swap payments. The principal methodology used in this rating was "US RMBS Surveillance Methodology" published in November 2013. Moody's rating approach for counterparty instrument ratings (CIR) rests on an analysis of (i) the quality of the collateral underlying the structured finance transaction and the transaction structure; and (ii) the ranking of the SPV's payment obligations under the relevant financial instrument. In this case, the swap counterparty, Deutsche Bank AG, New York Branch (A3 long term rating, P-2 short term rating) receives a fixed rate from, and pays LIBOR to, the trust on a notional amount that is balance guaranteed, i.e. the notional amount is the lesser of either the deal's outstanding bond balance or a monthly amount set forth in the schedule to the swap agreement. Per the terms of the deal documents, the swap counterparty receives payments prior to bondholders, and is thus in a senior position to all bonds issued by the trust. The termination date for the Swap is 25th January, 2020. To pay the swap counterparty, the trust also has access to principal payments, liquidation proceeds and interest collections. This provision strengthens the nature of senior payment right of the swap counterparty. Factors that would lead to an upgrade or downgrade of the rating: The primary risks driving the rating on the swap are the risk that the collateral pool amortizes at a rate that exceeds the scheduled amortization rate of the swap notional and the risk of a termination event triggered by a default of the swap counterparty. Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.2% in July 2014 from 7.3% in July 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. DEL MAR CLO I: Moody's Hikes Rating on Class E Notes to 'Ba1' ------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Del Mar CLO I, Ltd.: $15,050,000 Class D Deferrable Floating Rate Notes Due 2018, Upgraded to Aa1 (sf); previously on February 21, 2014 Upgraded to A2 (sf) $13,125,000 Class E Deferrable Floating Rate Notes Due 2018 (current outstanding balance of $12,020,463.20), Upgraded to Ba1 (sf); previously on February 21, 2014 Upgraded to Ba2 (sf) Moody's also affirmed the ratings on the following notes: $75,000,000 Class A-1 Floating Rate Notes Due 2018 (current outstanding balance of $257,128.86), Affirmed Aaa (sf); previously on February 21, 2014 Affirmed Aaa (sf) $250,000 Class A-2 Floating Rate Notes Due 2018 (current outstanding balance of $857.10), Affirmed Aaa (sf); previously on February 21, 2014 Affirmed Aaa (sf) $180,250,000 Class A-3 Floating Rate Notes Due 2018 (current outstanding balance of $617,966.31), Affirmed Aaa (sf); previously on February 21, 2014 Affirmed Aaa (sf) $23,625,000 Class B Floating Rate Notes Due 2018, Affirmed Aaa (sf); previously on February 21, 2014 Affirmed Aaa (sf) $15,575,000 Class C Deferrable Floating Rate Notes Due 2018, Affirmed Aaa (sf); previously on February 21, 2014 Upgraded to Aaa (sf) Del Mar CLO I Ltd., issued in July 2006, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ended in August 2011. Ratings Rationale These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over- collateralization ratios since March 2014. The Class A notes have been paid down by approximately 97% or $27.5 million since March 2014. Based on the trustee's July 2014 report, the over- collateralization (OC) ratios for the Class A/B, Class C, Class D and Class E notes are reported at 243.8%, 170.1%, 131.7% and 111.5%, respectively, versus March 2014 levels of 196.8%, 151.4%, 123.8% and 108.1%, respectively. Moody's notes the reported July 2014 over-collateralization ratios do not reflect the August 1, 2014 payment of $11.4 million to the Class A notes. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. Realization of higher than assumed recoveries would positively impact the CLO. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2064) Class A-1: 0 Class A-2: 0 Class A-3: 0 Class B: 0 Class C: 0 Class D: +1 Class E: +2 Moody's Adjusted WARF + 20% (3096) Class A-1: 0 Class A-2: 0 Class A-3: 0 Class B: 0 Class C: 0 Class D: -2 Class E: -1 Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $73 million, defaulted par of $5.9 million, a weighted average default probability of 14.65% (implying a WARF of 2580), a weighted average recovery rate upon default of 50.85%, a diversity score of 22 and a weighted average spread of 3.17%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. DIAMOND LAKE: S&P Affirms 'BB-' Rating on Class B-2L Notes ---------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-2L, A-3L, and B-1L notes from Diamond Lake CLO Ltd., a U.S. collateralized loan obligation (CLO) managed by Babson Capital Management LLC. At the same time, S&P removed them from CreditWatch, where it had placed them with positive implications on June 18, 2014. S&P also affirmed its ratings on the class A- 1L, A-1LR, and B-2L notes. The transaction's reinvestment period ended on Dec. 1, 2012, and the principal proceeds are being used to amortize the notes. The class A-1L and A-1LR notes are pari passu and paid pro rata. Since S&P's Dec. 2013 rating actions, for which it referenced the Oct. 2013 trustee report, the class A-1 notes have paid down a total of $55.46 million and are at about 36% of their original balance. The paydowns to the senior notes have increased the credit support available for all of the rated notes. This improvement is reflected in the overcollateralization (O/C) ratios reported by the trustee in its monthly performance reports. The trustee reported the following O/C ratios in the July 2014 monthly report: -- The class A-2L O/C ratio was 153.81%, up from 134.09% in Oct. 2013; -- The class A-3L O/C ratio was 133.50%, up from 121.95% in Oct. 2013; -- The class B-1L O/C ratio was 119.68%, up from 113.00% in Oct. 2013; and -- The class B-2L O/C ratio was 107.91%, up from 104.88% in Oct. 2013. According to the July 15, 2014 trustee report, the defaulted obligations held in the transaction have decreased to $5.15 million from the $5.83 million noted in the Oct. 15, 2013 report. The CLO currently has no assets in the 'CCC' rating category. The affirmation of the class A-1L and A-1LR notes reflects the availability of credit support at the current 'AAA' rating level. S&P affirmed its rating on the class B-2L notes at 'BB- (sf)' although the largest obligor test indicated a 'B+ (sf)' rating. The affirmation reflects improvements in the transaction's credit, including lower levels of defaulted assets, no assets in the collateral pool rated in the 'CCC' category, as well as sufficient credit support for the class B-2L notes at the current rating level based on the results of our cash flow analysis. Standard & Poor's will continue to review whether, in its view, the ratings onthe notes remain consistent with the credit enhancement available to support them and take rating actions as it deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS Diamond Lake CLO Ltd. Cash flow Cash flow Previous implied cushion Final Class rating rating i) rating A-1L AAA (sf) AAA (sf) 27.91% AAA (sf) A-1LR AAA (sf) AAA (sf) 27.91% AAA (sf) A-2L AA+ (sf)/Watch Pos AAA (sf) 13.55% AAA (sf) A-3L AA- (sf)/Watch Pos AA+ (sf) 10.47% AA+ (sf) B-1L BBB+ (sf)/Watch Pos A+ (sf) 2.39% A+ (sf) B-2L BB- (sf) BB- (sf) 0.38% BB- (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation Scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Corr. Corr. Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1L AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-1LR AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2L AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-3L AA+ (sf) AA+ (sf) AA+ (sf) AA+ (sf) AA+ (sf) B-1L A+ (sf) A- (sf) A (sf) A+ (sf) A+ (sf) B-2L BB- (sf) B+ (sf) B+ (sf) BB- (sf) BB- (sf) Corr.--Correlation. DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-1L AAA (sf) AAA (sf) AA+ (sf) AAA (sf) A-1LR AAA (sf) AAA (sf) AA+ (sf) AAA (sf) A-2L AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-3L AA+ (sf) AA+ (sf) AA (sf) AA+ (sf) B-1L A+ (sf) A+ (sf) BBB (sf) A+ (sf) B-2L BB- (sf) BB- (sf) CCC+ (sf) BB- (sf) RATINGS LIST Diamond Lake CLO Ltd. Rating Rating Class Identifier To From A-1L 252690AB8 AAA (sf) AAA (sf) A-1LR 252690AC6 AAA (sf) AAA (sf) A-2L 252690AD4 AAA (sf) AA+ (sf)/Watch Pos A-3L 252690AE2 AA+ (sf) AA- (sf)/Watch Pos B-1L 252690AF9 A+ (sf) BBB+ (sf)/Watch Pos B-2L 252689AA2 BB- (sf) BB- (sf) EATON VANCE VIII: S&P Raises Rating on Cl. D Notes From 'BB+' ------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A, B, C, and D notes from Eaton Vance CDO VIII Ltd., a collateralized debt obligation (CDO) transaction that closed in July 2006 and comprises predominantly broadly syndicated loans. At the same time, S&P removed the ratings from CreditWatch, where it had placed them with positive implications on June 18, 2014. The transaction's reinvestment period ended in August 2013 and has since paid over $204 million to the class A notes, resulting in increased overcollateralization (O/C) for each of the rated notes. The Aug. 5, 2014, trustee report, which we referenced for the rating actions, indicated these O/C increases since the May 3, 2013, trustee report used in S&P's June 19, 2013, rating actions: -- The class A O/C ratio increased to 135.3% from 127.9%. -- The class B O/C ratio increased to 121.7% from 117.7%. -- The class C O/C ratio increased to 116.0% from 113.3%. -- The class D O/C ratio increased to 108.7% from 107.5%. In addition, the transaction has experienced consistently low defaults, currently holding only one defaulted obligor with a $1.00 million par balance. S&P will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and will take further rating actions as S&P deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS Eaton Vance CDO VIII Ltd. Cash flow Previous implied Cash flow Final Class rating rating cushion(i) rating A AA+ (sf)/Watch Pos AAA (sf) 8.69% AAA (sf) B A+ (sf)/Watch Pos AA+ (sf) 4.68% AA+ (sf) C BBB+ (sf)/Watch Pos A+ (sf) 3.25% A+ (sf) D BB+ (sf)/Watch Pos BBB- (sf) 0.69% BBB- (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation Scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AA+ (sf) AA (sf) AA+ (sf) AA+ (sf) AA+ (sf) C A+ (sf) A- (sf) A+ (sf) AA- (sf) A+ (sf) D BBB- (sf) BB+ (sf) BB+ (sf) BBB (sf) BBB- (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A AAA (sf) AAA (sf) AA+ (sf) AAA (sf) B AA+ (sf) AA+ (sf) A+ (sf) AA+ (sf) C A+ (sf) A+ (sf) BBB+ (sf) A+ (sf) D BBB- (sf) BB+ (sf) BB- (sf) BBB- (sf) RATINGS RAISED AND REMOVED FROM CREDITWATCH Eaton Vance CDO VIII Ltd. Rating Class To From A AAA (sf) AA+ (sf)/Watch Pos B AA+ (sf) A+ (sf)/Watch Pos C A+ (sf) BBB+ (sf)/Watch Pos D BBB- (sf) BB+ (sf)/Watch Pos FLATIRON CLO 2007-1: Moody's Affirms Ba1 Rating on Class D Notes ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Flatiron CLO 2007-1 Ltd.: $25,400,000 Class A-1b Senior Term Notes Due 2021, Upgraded to Aaa (sf); previously on September 8, 2011 Upgraded to Aa1 (sf) $29,000,000 Class B Senior Term Notes Due 2021, Upgraded to Aa2 (sf); previously on September 8, 2011 Confirmed A2 (sf) $14,000,000 Class C Deferrable Mezzanine Term Notes Due 2021, Upgraded to A3 (sf); previously on September 8, 2011 Upgraded to Baa2 (sf) Moody's also affirmed the ratings on the following notes: $228,600,000 Class A-1a Senior Term Notes Due 2021, Affirmed Aaa (sf); previously on August 30, 2007 Assigned Aaa (sf) $15,000,000 Class D Deferrable Mezzanine Term Notes Due 2021, Affirmed Ba1 (sf); previously on September 8, 2011 Upgraded to Ba1 (sf) $11,500,000 Class E Deferrable Junior Term Notes Due 2021, Affirmed Ba3 (sf); previously on September 8, 2011 Upgraded to Ba3 (sf) Flatiron CLO 2007-1 Ltd., issued in August 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period will end in October 2014. Ratings Rationale These rating actions reflect the benefit of the short period of time remaining before the end of the deal's reinvestment period in October 2014. In light of the reinvestment restrictions during the amortization period, and therefore the limited ability of the manager to effect significant changes to the current collateral pool, Moody's analyzed the deal assuming a higher likelihood that the collateral pool characteristics will maintain a positive buffer relative to certain covenant requirements. In particular, Moody's assumed that the deal will benefit from a higher weighted average spread (WAS) and weighted average rating factor (WARF) compared to the previously assumed levels. The deal has also benefited from an increase in weighted average recovery rate of the portfolio. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will commence and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (1981) Class A-1a: 0 Class A-1b: 0 Class B: +2 Class C: +2 Class D: +2 Class E: +1 Moody's Adjusted WARF + 20% (2972) Class A-1a: 0 Class A-1b: -1 Class B: -2 Class C: -3 Class D: -1 Class E: -1 Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $339.57 million, a weighted average default probability of 18.09% (implying a WARF of 2477), a weighted average recovery rate upon default of 51.2%, a diversity score of 64 and a weighted average spread of 3.04%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. FREMF 2013-KF02: Moody's Affirms 'Ba3' Rating on Cl. X Securities ----------------------------------------------------------------- Moody's Investors Service has affirmed the ratings on five classes of securities issued by FREMF 2013-KF02 Mortgage Trust as follows: Cl. A-1, Affirmed Aaa (sf); previously on Nov 18, 2013 Definitive Rating Assigned Aaa (sf) Cl. A-2, Affirmed Aa2 (sf); previously on Nov 18, 2013 Definitive Rating Assigned Aa2 (sf) Cl. A-3, Affirmed A2 (sf); previously on Nov 18, 2013 Definitive Rating Assigned A2 (sf) Cl. B, Affirmed Baa3 (sf); previously on Nov 18, 2013 Definitive Rating Assigned Baa3 (sf) Cl. X, Affirmed Ba3 (sf); previously on Nov 18, 2013 Definitive Rating Assigned Ba3 (sf) Ratings Rationale The ratings on the P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The rating on the IO class was affirmed based on the credit performance (or the weighted average rating factor or WARF) of the referenced classes. Moody's rating action reflects a base expected loss of 3.6% of the current balance. Moody's base expected loss plus realized losses is 3.2% of the original pooled balance. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 53 compared to 61 at securitization. Deal Performance As of the July 25, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 11% to $1.37 billion from $1.54 billion at securitization. The certificates are collateralized by 74 mortgage loans ranging in size from less than 1% to 5% of the pool, with the top ten loans constituting 28% of the pool. One loan, constituting 1% of the pool, is on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. Moody's received full or partial year 2013 operating results for 95% of the pool. Moody's weighted average conduit LTV is 113% compared to 114% at securitization. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's net cash flow (NCF) reflects a weighted average haircut of 3% to the most recently available net operating income (NOI). Moody's value reflects a weighted average capitalization rate of 8%. Moody's actual and stressed conduit DSCRs are 1.59X and 0.84X, respectively, compared to 1.57X and 0.83X at securitization. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 12% of the pool balance. The largest loan is the 597 Westport Loan ($68 million -- 5% of the pool), which is secured by a 235-unit Class-A multifamily complex located in Norwalk, CT. The property was 92% leased as of December 2013 compared to 97% at securitization. Moody's LTV and stressed DSCR are 110% and 0.81X, respectively, compared to 112% and 0.80X at securitization. The second largest loan is the Northcreek Apartments Loan ($53 million -- 4% of the pool), which is secured by a 524-unit apartment complex located in Bothell, WA approximately 22 miles north of the Seattle CBD. The property includes Section 8 voucher units as well as a 5-10% student tenant concentration. The property was 97% leased as of July 2013. Moody's LTV and stressed DSCR are 102% and 0.88X, respectively, compared to 102% and 0.87X at securitization. The third largest loan is the Key Isle at Windermere Loan ($44 million -- 3% of the pool), which is secured by a 447-unit multifamily property located in Ocoee, FL, approximately 12 miles west of the Orlando CBD. The property consists of 64 two- and three-story apartment buildings as well as common area amenities. Moody's LTV and stressed DSCR are 111% and 0.83X, respectively, compared to 112% and 0.82X at securitization. FOUR CORNERS II: Moody's Lowers Rating on Cl. E Notes to 'B1' ------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Four Corners CLO II, Ltd.: $21,500,000 Class C Deferrable Floating Rate Notes Due 2020, Upgraded to Aa1 (sf); previously on May 20, 2014 Affirmed Aa3 (sf) $9,500,000 Class D Deferrable Floating Rate Notes Due 2020, Upgraded to Baa1 (sf); previously on May 20, 2014 Affirmed Baa2 (sf) Moody's also downgraded the ratings on the following notes issued by Four Corners CLO II, Ltd.: $11,000,000 Class E Deferrable Floating Rate Notes Due 2020, Downgraded to B1 (sf); previously on May 20, 2014 Ba3 (sf) Placed Under Review for Possible Downgrade Moody's also affirmed the ratings on the following notes: $232,000,000 Class A Floating Rate Notes Due 2020 (current outstanding balance of $82,825,050.40), Affirmed Aaa (sf); previously on May 20, 2014 Affirmed Aaa (sf) $10,500,000 Class B Floating Rate Notes Due 2020, Affirmed Aaa (sf); previously on May 20, 2014 Affirmed Aaa (sf) Four Corners CLO II, Ltd., issued in January 2006, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ended January 2012. Ratings Rationale The rating actions on senior notes are primarily a result of deleveraging and an increase in the transaction's over- collateralization ratios since the last rating action in May 2014. Moody's notes that the transaction retains the ability, and has continued, to reinvest certain proceeds after the end of the reinvestment period in January 2012. The Class A notes have been paid down by 5.8% or $13.5 million since the last rating action. Based on the Moody's calculation, the over-collateralization (OC) ratios for the Class A/B, Class C, Class D and Class E notes are 150.19%, 122.06%, 112.74% and 103.57%, respectively, versus May 2014 levels of 145.09%, 120.77%, 112.44% and 104.13%, respectively. Moody's also notes that the credit quality of the portfolio has improved since the last rating action date. Based on the Moody's calculation, the weighted average rating factor is currently 2223 compared to 2533 on May 2014. Moody's also downgraded the ratings on Class E notes as a result of concerns over the transaction's continued exposure to securities maturing after the stated maturity. Based on the trustee's July 2014 report, these securities make up 8.04% of the portfolio. According to Moody's, such investments could expose the Class E notes to market risk in the event of market dislocation at the time of liquidation when the deal matures. Amongst the rated notes, this risk is borne first by the Class E notes that have the lowest priority in the capital structure. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. Realization of higher than assumed recoveries would positively impact the CLO. 6) Long-dated assets: The presence of assets that mature after the CLO's legal maturity date exposes the deal to liquidation risk on those assets. This risk is borne first by investors with the lowest priority in the capital structure. Moody's assumes that the terminal value of an asset upon liquidation at maturity will be equal to the lower of an assumed liquidation value (depending on the extent to which the asset's maturity lags that of the liabilities) or the asset's current market value. In light of the deal's sizable and continued exposure to long-dated assets, which increases its sensitivity to the liquidation assumptions in the rating analysis, Moody's ran scenarios using a range of liquidation value assumptions. However, actual long-dated asset exposures and prevailing market prices and conditions at the CLO's maturity will drive the deal's actual losses, if any, from long- dated assets. 7) Post-Reinvestment Period Trading: Subject to certain requirements, the deal can reinvest certain proceeds after the end of the reinvestment period. Such reinvestment could affect the transaction either positively or negatively. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (1778) Class A: 0 Class B: 0 Class C: +1 Class D: +2 Class E: +1 Moody's Adjusted WARF + 20% (2668) Class A: 0 Class B: 0 Class C: -2 Class D: -1 Class E: -1 Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $139.3 million, defaulted par of $1.8 million, a weighted average default probability of 13.32% (implying a WARF of 2223), a weighted average recovery rate upon default of 51.43%, a diversity score of 35 and a weighted average spread of 2.77%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. GALE FORCE 3: Moody's Affirms 'Ba1' Rating on Class E Notes ----------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Gale Force 3 CLO, Ltd.: $32,400,000 Class B-1 Second Priority Senior Secured Floating Rate Notes Due 2021, Upgraded to Aaa (sf); previously on February 15, 2013 Upgraded to Aa1 (sf) $12,000,000 Class B-2 Second Priority Senior Secured Fixed Rate Notes Due 2021, Upgraded to Aaa (sf); previously on February 15, 2013 Upgraded to Aa1 (sf) $26,100,000 Class C Third Priority Senior Secured Deferrable Floating Rate Notes Due 2021, Upgraded to Aa2 (sf); previously on February 15, 2013 Upgraded to A2 (sf) $27,600,000 Class D Fourth Priority Mezzanine Deferrable Floating Rate Notes Due 2021, Upgraded to Baa1 (sf); previously on February 15, 2013 Upgraded to Baa3 (sf) Moody's also affirmed the ratings on the following notes: $300,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes Due 2021 (current outstanding balance of $196,328,104), Affirmed Aaa (sf); previously on February 15, 2013 Affirmed Aaa (sf) $143,300,000 Class A-2 First Priority Senior Secured Floating Rate Term Notes Due 2021 (current outstanding balance of $93,779,391), Affirmed Aaa (sf); previously on February 15, 2013 Affirmed Aaa (sf) $21,600,000 Class E Fifth Priority Mezzanine Deferrable Floating Rate Notes Due 2021, Affirmed Ba1 (sf); previously on February 15, 2013 Upgraded to Ba1 (sf) Gale Force 3 CLO, Ltd., issued in March 2007, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period ended in April 2013. Ratings Rationale These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over- collateralization (OC) ratios since October 2013. The Class A notes have been paid down by approximately 28.3% or $85.0 million since October 2013. Based on the trustee's August 2014 report, the OC ratios for the Class A/B, Class C, Class D and Class E notes are reported at 129.2%, 119.8%, 111.3% and 105.4%, respectively, versus October 2013 levels of 123.6%, 116.3%, 109.5% and 104.8%, respectively. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. Realization of higher than assumed recoveries would positively impact the CLO. 6) Long-dated assets: The presence of assets that mature after the CLO's legal maturity date exposes the deal to liquidation risk on those assets. This risk is borne first by investors with the lowest priority in the capital structure. Moody's assumes that the terminal value of an asset upon liquidation at maturity will be equal to the lower of an assumed liquidation value (depending on the extent to which the asset's maturity lags that of the liabilities) or the asset's current market value. 7) Post-Reinvestment Period Trading: Subject to certain requirements, the deal can reinvest certain proceeds after the end of the reinvestment period, and as such the manager has the ability to erode some of the collateral quality metrics to the covenant levels. Such reinvestment could affect the transaction either positively or negatively. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2094) Class A-1: 0 Class A-2: 0 Class B-1: 0 Class B-2: 0 Class C: +1 Class D: +2 Class E: +1 Moody's Adjusted WARF + 20% (3140) Class A-1: 0 Class A-2: 0 Class B-1: 0 Class B-2: 0 Class C: -2 Class D: -2 Class E: -1 Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $429.5 million, defaulted par of $2.8 million, a weighted average default probability of 18.1% (implying a WARF of 2617), a weighted average recovery rate upon default of 50.9%, a diversity score of 64 and a weighted average spread of 3.0%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. GALLATIN CLO III 2007-1: S&P Raises Rating on B-2L Notes to BB+ --------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on four classes of notes from Gallatin CLO III 2007-1 Ltd., a collateralized loan obligation (CLO) transaction, and removed them from CreditWatch with positive implications, where S&P had placed them on June 18, 2014. At the same time, S&P affirmed its ratings on the other two classes of notes. The transaction is currently in the amortization period after its reinvestmentperiod ended in May 2013. The upgrades reflect the class A-1L and A-1LR note paydowns of $79.95 million and $18.96 million, respectively. These paydowns led to increased overcollateralization (O/C) ratios for each outstanding class. The rating actions on class B-2L were driven by the application of the largest obligor test, which is intended to address potential exposure concentration to obligors in the transaction's portfolio. S&P will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and S&P will take rating actions as it deems necessary. CAPITAL STRUCTURE AND KEY MODEL ASSUMPTIONS COMPARISON Gallatin CLO III 2007-1 Ltd. Cash flow Previous implied Cash flow Final Class rating rating cushion (i) rating A-1L AAA (sf) AAA (sf) 28.01% AAA (sf) A-1LR AAA (sf) AAA (sf) 28.01% AAA (sf) A-2L AA+ (sf)/Watch Pos AAA (sf) 16.40% AAA (sf) A-3L A+ (sf)/Watch Pos AA+ (sf) 14.33% AA+ (sf) B-1L BBB+ (sf)/Watch Pos A+ (sf) 6.44% A+ (sf) B-2L B+ (sf)/Watch Pos BBB- (sf) 2.36% BB+ (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. Class December 2013 August 2014 Notional balance (mil.$) A-1L 158.00 78.01 A-1LR 37.47 18.51 A-2L 33.00 33.00 A-3L 24.50 24.50 B-1L 15.50 15.50 B-2L 15.50 15.50 Coverage test (%) Senior class A 132.50 150.23 A O/C 119.67 129.38 B-1L O/C 112.76 118.94 B-2L O/C 106.61 110.05 WAS (%) 3.27 3.11 WAS--Weighted average spread. O/C--Overcollateralization. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Corr. Corr. Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1L AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-1LR AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2L AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-3L AA+ (sf) AA+ (sf) AA+ (sf) AAA (sf) AA+ (sf) B-1L A+ (sf) A (sf) A+ (sf) AA- (sf) A+ (sf) B-2L BBB- (sf) BB+ (sf) BBB- (sf) BBB+ (sf) BB+ (sf) Corr.--Correlation. DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-1L AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-1LR AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2L AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-3L AA+ (sf) AA+ (sf) AA+ (sf) AA+ (sf) B-1L A+ (sf) A+ (sf) BBB+ (sf) A+ (sf) B-2L BBB- (sf) BBB- (sf) B (sf) BB+ (sf) RATINGS LIST Gallatin CLO III 2007-1 Ltd. Rating Rating Class Identifier To From A-1L 363620AA3 AAA (sf) AAA (sf) A-1LR 363620AB1 AAA (sf) AAA (sf) A-2L 363620AC9 AAA (sf) AA+ (sf)/Watch Pos A-3L 363620AD7 AA+ (sf) A+ (sf)/Watch Pos B-1L 363620AE5 A+ (sf) BBB+ (sf)/Watch Pos B-2L 363619AA5 BB+ (sf) B+ (sf)/Watch Pos GANNETT PEAK I: S&P Raises Rating on 2 Notes From 'B+' ------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the five classes of notes from Gannett Peak CLO I Ltd., a collateralized loan obligation (CLO) transaction, and removed all of them from CreditWatch, where S&P had placed them with positive implications on June 18, 2014. The transaction is currently amortizing since the transaction's reinvestment period ended in Oct. 2012. The upgrades reflect the class A-1, A-1b, and A-2 notes full $3.54 million paydowns as well as the partial $1.22 million paydowns to class B-1 and B-2. These paydowns led to increased overcollateralization (O/C) ratios for each outstanding class. The rating actions on the class D-1 and D-2 notes were driven by the application of the largest obligor test, which is intended to address potential exposure concentration to obligors in the transaction's portfolio. S&P will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and S&P will take rating actions as it deems necessary. CAPITAL STRUCTURE AND KEY MODEL ASSUMPTIONS COMPARISON Gannett Peak CLO I Ltd. Cash flow Previous implied Cash flow Final Class rating rating cushion (i) rating B-1 AA (sf)/Watch Pos AAA (sf) 38.71% AAA (sf) B-2 AA (sf)/Watch Pos AAA (sf) 38.71% AAA (sf) C BBB+ (sf)/Watch Pos AAA (sf) 27.84% AAA (sf) D-1 B+ (sf)/Watch Pos AA- (sf) 3.00% BBB+ (sf) D-2 B+ (sf)/Watch Pos AA- (sf) 3.00% BBB+ (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. Class July 2013 July 2014 Notional balance (mil. $) A-1 148.69 0.00 A-1b 24.17 0.00 A-2 41.00 0.00 B-1 26.00 22.46 B-2 9.00 7.78 C 33.50 33.50 D-1 19.00 19.00 D-2 5.00 5.00 Coverage tests (%) B O/C 123.28 357.93 C O/C 112.48 169.81 D O/C 105.84 123.36 WAS (%) 3.38 3.21 O/C--Overcollateralization test. WAS--Weighted average spread. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined below. Correlation Scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating B-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) B-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) C AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) D-1 AA- (sf) AA- (sf) AA- (sf) AA- (sf) BBB+ (sf) D-2 AA- (sf) AA- (sf) AA- (sf) AA- (sf) BBB+ (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating B-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) B-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) C AAA (sf) AAA (sf) AAA (sf) AAA (sf) D-1 AA- (sf) A+ (sf) BB (sf) BBB+ (sf) D-2 AA- (sf) A+ (sf) BB (sf) BBB+ (sf) RATINGS LIST Gannett Peak CLO ILtd. Rating Rating Class Identifier To From B-1 364731AD1 AAA (sf) AA (sf)/Watch Pos B-2 364731AE9 AAA (sf) AA (sf)/Watch Pos C 364731AF6 AAA (sf) BBB+ (sf)/Watch Pos D-1 364731AG4 BBB+ (sf) B+ (sf)/Watch Pos D-2 364731AH2 BBB+ (sf) B+ (sf)/Watch Pos GMAC COMMERCIAL 2006-C1: Fitch Cuts Rating on Cl. A-M Certs to BB ----------------------------------------------------------------- Fitch Ratings has downgraded one and affirmed 23 classes of GMAC Commercial Mortgage Securities, Inc. commercial mortgage pass- through certificates series 2006-C1. Key Rating Drivers The downgrades are due to a greater certainty of loss expectations on several of the already specially serviced assets, in addition to the transfer of the largest loan in the pool to special servicing. Fitch modeled losses of 16.8% of the remaining pool; expected losses on the original pool balance total 17.6%, including $120.1 million (6.9% of the original pool balance) in realized losses to date. Fitch has designated 21 loans (39.5%) as Fitch Loans of Concern, which includes eight specially serviced assets (18.3%). As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 34.7% to $1.13 billion from $1.73 billion at issuance. Per the servicer reporting, six loans (6.1% of the pool) are defeased. Interest shortfalls are currently affecting classes H through Q. The largest contributor to expected losses is the Design Center of the Americas loan (8% of the pool), which is secured by a 769,268 square foot (sf) showroom property located in Dania Beach, FL. The loan was previously modified in September 2012. The initial decline in performance was mainly due to several tenants (totaling 423,466 sf) vacating the property in the third quarter of 2012. Per the sub-servicer, the borrower continues with the process of converting a portion of the property to general office use and repositioning the asset to enhance its value. As of the July 2014 rent roll, the property is 53% occupied with average rent at $32 per sf. The next largest contributor to expected losses is the specially- serviced DDR Macquarie Mervyn's Portfolio loan (4.3%), which was originally secured by 35 single-tenanted retail properties located in California, Nevada, Arizona, and Texas, of which seven currently remain. The collateral was originally 100% leased by Mervyn's under 20-year leases; however, the tenant subsequently filed for Chapter 11 bankruptcy relief, and rejected and vacated each of the stores. To date, 28 properties have been released and seven are real estate owned (REO). The remaining seven properties, which in some cases have been repositioned for multi- tenant use, are collectively 50.4% leased. All reserves have been previously depleted and proceeds from the sale of properties and previous funds held in reserve have been used to reduce the outstanding principal. The loan is split into three pari passu notes, including the fixed-rate A-2 note in this transaction, the fixed-rate A-1 note ($47.2 million) securitized in the GE 2005-C4 transaction (not rated by Fitch) and the floating-rate A-3 note ($7.6 million) securitized in the COMM 2005-FL11 transaction. The third largest contributor to expected losses is the specially- serviced Newburgh Mall loan (2.7%), which is secured by a 386,075 sf regional mall located in Newburgh, NY. The loan remains specially serviced since Nov. 2011 when it transferred as a result of the borrower's request for a loan modification. Per the special servicer, lease renewal discussions are on-going with Sears, and Office Depot will remain at the property. Per the July 2014 rent roll, the mall is 90% occupied. The special servicer anticipates the foreclosure sale will occur in Sept. 2014. Rating Sensitivity Rating Outlooks on classes A-4 through A-1A remain Stable due to increasing credit enhancement and continued paydown. Ratings on the distressed classes may be subject to further downgrades should workout strategies on the existing specially serviced assets fail to stabilize performance. Fitch downgrades the following classes and assigns or revises Rating Outlooks as indicated: -- $169.7 million class A-M to 'BBsf' from 'BBBsf', Outlook to Stable from Negative. Fitch affirms the following classes but assigns or revises REs as indicated: -- $114.6 million class A-J at 'CCsf', RE 35%. Fitch affirms the following classes as indicated: -- $525.7 million class A-4 at 'AAAsf', Outlook Stable; -- $181.9 million class A-1A at 'AAAsf', Outlook Stable; -- $36.1 million class B at 'CCsf', RE 35%; -- $19.1 million class C at 'Csf', RE 0%; -- $12.7 million class D at 'Csf', RE 0%; -- $21.2 million class E at 'Csf', RE 0%; -- $15.6 million class F at 'Csf', 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%; -- $0 class O at 'Dsf', RE 0%; -- $0 class P at 'Dsf', RE 0%; -- $5.1 million class FNB-1 at 'Bsf', Outlook Negative; -- $5.6 million class FNB-2 at 'Bsf', Outlook Negative; -- $2.1 million class FNB-3 at 'CCCsf', RE 100%; -- $4.5 million class FNB-4 at 'CCCsf', RE 100%; -- $2.4 million class FNB-5 at 'CCCsf', RE 100%; -- $13.3 million class FNB-6 at 'CCCsf', RE 95%. The class A-1, A-1D, A-2 and A-3 certificates have paid in full. Fitch does not rate the class Q certificates. Fitch previously withdrew the ratings on the interest-only class XP and XC certificates. GREENBRIAR CLO: Moody's Affirms 'B1' Rating on Class E Notes ------------------------------------------------------------ Moody's Investors Service has upgraded the ratings on the following notes issued by Greenbriar CLO, Ltd.: $730,000,000 Class A Floating Rate Senior Secured Extendable Notes Due 2021 (current outstanding balance of $689,972,563.54), Upgraded to Aaa (sf); previously on July 22, 2011 Upgraded to Aa2 (sf); $60,000,000 Class B Floating Rate Senior Secured Extendable Notes Due 2021, Upgraded to Aa3 (sf); previously on July 22, 2011 Upgraded to A3 (sf); $50,000,000 Class C Floating Rate Senior Secured Deferrable Interest Extendable Notes Due 2021, Upgraded to Baa1 (sf); previously on July 22, 2011 Upgraded to Baa3 (sf). Moody's also affirmed the ratings on the following notes: $40,000,000 Class D Floating Rate Senior Secured Deferrable Interest Extendable Notes Due 2021, Affirmed Ba2 (sf); previously on July 22, 2011 Upgraded to Ba2 (sf); $40,000,000 Class E Floating Rate Senior Secured Deferrable Interest Extendable Notes Due 2021 (current outstanding balance of $22,955,095), Affirmed B1 (sf); previously on July 22, 2011 Upgraded to B1 (sf). Greenbriar CLO, Ltd., issued in December 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. The transaction's reinvestment period will end November 2014. Ratings Rationale These rating actions are primarily a result of an improvement in the credit quality of the portfolio since September 2013. Based on the trustee's July 2014 report, the weighted average rating factor is currently 2505 compared to 2616 in September 2013 The deal also benefits from the short period of time remaining before the end of the deal's reinvestment period in November 2014. In light of the reinvestment restrictions during the amortization period, and therefore the limited ability of the manager to effect significant changes to the current collateral pool, Moody's analyzed the deal assuming a higher likelihood that the collateral pool characteristics will maintain a positive buffer relative to certain covenant requirements. In particular, Moody's modeled a WAS of 3.20% compared to the covenant level of 2.95%. The deal has also benefited from a shortening of the portfolio's weighted average life since September 2013. Furthermore, the transaction's reported overcollateralization ratios have been stable since September 2013. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will commence] and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. Realization of higher than assumed recoveries would positively impact the CLO. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2099) Class A: 0 Class B: +2 Class C: +3 Class D: +2 Class E: +1 Moody's Adjusted WARF + 20% (3149) Class A: -1 Class B: -2 Class C: -2 Class D: 0 Class E: -1 Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $901 million, defaulted par of $38 million, a weighted average default probability of 17.86% (implying a WARF of 2624), a weighted average recovery rate upon default of 49.19%, a diversity score of 49 and a weighted average spread of 3.20%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDO's." In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. GREENWICH CAPITAL 2007-GG9: Fitch Cuts Cl. A-M Certs Rating to BB ----------------------------------------------------------------- Fitch Ratings has downgraded two classes of Greenwich Capital Commercial Funding Corp. (GCCFC) commercial mortgage pass-through certificates series 2007-GG9. KEY RATING DRIVERS The downgrades and Negative Rating Outlooks are due to an increase in expected losses and lack of progress disposing of assets in special servicing. Many of the specially serviced assets are REO and have been in special servicing for a number of years. Fitch modeled losses of 19.2% of the remaining pool; expected losses on the original pool balance total 17.9%, including $141.4 million (2.2% of the original pool balance) in realized losses to date. Fitch has designated 93 loans (67.1%) as Fitch Loans of Concern, which includes 31 specially serviced assets (18.9%). As of the July 2014 distribution date, the pool's aggregate principal balance has been reduced by 18% to $5.39 billion from $6.58 billion at issuance. Per the servicer reporting, six loans (0.8% of the pool) are defeased. Interest shortfalls are currently affecting classes D through S. The largest contributor to expected losses is the specially- serviced Hyatt Regency- Bethesda (2.5%), which is secured by a 390 room full-service hotel. The loan transferred to special servicing in December 2009 due to imminent default. The trust took title to the property in February 2013. The special servicer is addressing significant deferred maintenance issues at the property prior to marketing it for sale. The next largest contributor to expected losses is the specially- serviced Schron Industrial Portfolio (5.4%). The loan is secured by a portfolio of 36 industrial properties located in Nassau and Suffolk Counties on Long Island, NY. The loan transferred to the special servicer in December 2010 for imminent default. The loan was modified in 2012 and remains specially serviced. The loan was split into an A/B structure, with an A-note balance of $220 million and a subordinate B-note balance of $85 million with a scheduled maturity date of December 2016. The third largest contributor to loss is the John Hancock Tower loan (11.9%). The two largest tenants at the property will be vacating at lease expiration in Dec. 2014. The space currently leased to the second largest tenant is currently occupied by sub- tenants which will become direct tenants. The borrower is actively marketing the space to be vacated by the largest tenant. The decrease in revenue will be largely offset by the expiration of several free rent periods from other tenants in early 2014. RATING SENSITIVITY Rating Outlooks on classes A-2 through A-AB remain Stable due to increasing credit enhancement, defeasance and continued paydown. Rating Outlooks on classes A-4, A-1A and A-M and A-MFX are Negative as further collateral underperformance may lead to a downgrade. The assets in special servicing have been there for an average of 32 months and the final disposition dates remain uncertain. If realized losses exceed current expectations, downgrades to the distressed classes and the classes with negative outlooks are possible. Several of the top 15 loans have significant tenant rollover in the coming years. If these tenants don't renew leases or can't be replaced at similar rental rates then downgrades to classes with negative outlooks are likely. Fitch downgrades these classes: -- $557.6 million class A-M to 'BBsf' from 'BBBsf', Outlook Negative; -- $100 million class A-MFX to 'BBsf' from 'BBBsf', Outlook Negative. Fitch affirms these classes and revises Rating Outlooks as follows: -- $2.7 billion class A-4 at 'AAAsf', Outlook to Negative from Stable; -- $216.3 million class A-1A at 'AAAsf', Outlook to Negative from Stable. Fitch affirms these classes: -- $539.7 million class A-2 at 'AAAsf', Outlook Stable; -- $86 million class A-3 at 'AAAsf', Outlook Stable; -- $48.4 million class A-AB at 'AAAsf', Outlook Stable; -- $575.4 million class A-J at 'CCCsf', RE 30%; -- $32.9 million class B at 'CCsf', RE 0%; -- $98.6 million class C at 'CCsf', RE 0%; -- $41.1 million class D at 'CCsf', RE 0%; -- $41.1 million class E at 'CCsf', RE 0%; -- $57.5 million class F at 'Csf', RE 0%; -- $57.5 million class G at 'Csf', RE 0%; -- $82.2 million class H at 'Csf', RE 0%; -- $65.8 million class J at 'Csf', RE 0%; -- $65.8 million class K at 'Csf', RE 0%; -- $32.9 million class L at 'Csf', RE 0%; -- $16.4 million class M at 'Csf', RE 0%; -- $6.3 million class N at 'Dsf', RE 0%; -- $0 class O at 'Dsf', RE 0%; -- $0 class P at 'Dsf', RE 0%; -- $0 class Q at 'Dsf', RE 0%. Fitch previously withdrew the rating on the interest-only class X and A-MFL certificates. Fitch does not rate class S. GS MORTGAGE 2012-GCJ9: Moody's Affirms B2 Rating on Cl. F Secs. --------------------------------------------------------------- Moody's Investors Service has affirmed the ratings on 12 classes in GS Mortgage Securities Trust 2012-GCJ9 as follows: Cl. A-1, Affirmed Aaa (sf); previously on Oct 3, 2013 Affirmed Aaa (sf) Cl. A-2, Affirmed Aaa (sf); previously on Oct 3, 2013 Affirmed Aaa (sf) Cl. A-3, Affirmed Aaa (sf); previously on Oct 3, 2013 Affirmed Aaa (sf) Cl. A-AB, Affirmed Aaa (sf); previously on Oct 3, 2013 Affirmed Aaa (sf) Cl. A-S, Affirmed Aaa (sf); previously on Oct 3, 2013 Affirmed Aaa (sf) Cl. B, Affirmed Aa3 (sf); previously on Oct 3, 2013 Affirmed Aa3 (sf) Cl. C, Affirmed A3 (sf); previously on Oct 3, 2013 Affirmed A3 (sf) Cl. D, Affirmed Baa3 (sf); previously on Oct 3, 2013 Affirmed Baa3 (sf) Cl. E, Affirmed Ba2 (sf); previously on Oct 3, 2013 Affirmed Ba2 (sf) Cl. F, Affirmed B2 (sf); previously on Oct 3, 2013 Affirmed B2 (sf) Cl. X-A, Affirmed Aaa (sf); previously on Oct 3, 2013 Affirmed Aaa (sf) Cl. X-B, Affirmed Ba3 (sf); previously on Oct 3, 2013 Affirmed Ba3 (sf) Ratings Rationale The ratings on the P&I classes were affirmed because the transaction's key metrics, including Moody's loan-to-value (LTV) ratio, Moody's stressed debt service coverage ratio (DSCR) and the transaction's Herfindahl Index (Herf), are within acceptable ranges. The ratings on the IO classes were affirmed based on the credit performance (or the weighted average rating factor or WARF) of their referenced classes. Moody's rating action reflects a base expected loss of 2.6% of the current balance compared to 2.3% at Moody's last review. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan paydowns or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000. Description of Models Used Moody's review used the excel-based CMBS Conduit Model v 2.64, which it uses for both conduit and fusion transactions. Conduit model results at the Aa2 (sf) level are driven by property type, Moody's actual and stressed DSCR, and Moody's property quality grade (which reflects the capitalization rate Moody's uses to estimate Moody's value). Conduit model results at the B2 (sf) level are based on a paydown analysis using the individual loan- level Moody's LTV ratio. Moody's may consider other concentrations and correlations in its analysis. Based on the model pooled credit enhancement levels of Aa2 (sf) and B2 (sf), the required credit enhancement on the remaining conduit classes are either interpolated between these two data points or determined based on a multiple or ratio of either of these two data points. For fusion deals, Moody's merges the credit enhancement for loans with investment-grade structured credit assessments with the conduit model credit enhancement for an overall model result. Moody's incorporates negative pooling (adding credit enhancement at the structured credit assessment level) for loans with similar structured credit assessments in the same transaction. Moody's uses a variation of Herf to measure the diversity of loan sizes, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool has a Herf of 24, the same as at Moody's last review. Deal Performance As of the August 12, 2014 distribution date, the transaction's aggregate certificate balance has decreased by 2% to $1.36 billion from $1.39 billion at securitization. The certificates are collateralized by 74 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans constituting 56% of the pool. Six loans, constituting 7% of the pool, are on the master servicer's watchlist. The watchlist includes loans that meet certain portfolio review guidelines established as part of the CRE Finance Council (CREFC) monthly reporting package. As part of Moody's ongoing monitoring of a transaction, the agency reviews the watchlist to assess which loans have material issues that could affect performance. No loans have liquidated from the pool. Additionally, no loans are in special servicing and Moody's did not identify any troubled loans. Moody's received full year 2013 operating results for 100% of the pool. Moody's weighted average conduit LTV is 99% compared to 101% at Moody's last review. Moody's conduit component excludes loans with structured credit assessments, defeased and CTL loans, and specially serviced and troubled loans. Moody's value reflects a weighted average capitalization rate of 9.6%. Moody's actual and stressed conduit DSCRs are 1.61X and 1.08X, respectively, compared to 1.57X and 1.04X at the last review. Moody's actual DSCR is based on Moody's NCF and the loan's actual debt service. Moody's stressed DSCR is based on Moody's NCF and a 9.25% stress rate the agency applied to the loan balance. The top three conduit loans represent 26.5% of the pool balance. The largest loan is the Bristol Portfolio Loan ($140 million -- 10.3% of the pool). The loan is secured by two multifamily properties located at 200 East 65th Street and 336 East 71st Street in New York City. The property on 200 East 65th Street, also known as Bristol Plaza, contains 297 residential condominiums and a commercial space, of which 173 condominium units and the commercial space serve as collateral for the loan. The property at 336 East 71st Street is a 30-unit apartment building built in 1910. As of March 2014, Bristol Plaza was 98% leased and 336 East 71st Street was 87% leased, for an overall portfolio occupancy of 97%. Moody's current LTV and stressed DSCR are 91% and 0.93X, respectively, the same as the last review. The second largest loan is the Pinnacle I Loan ($129 million -- 9.4% of the pool). The loan is secured by a Class A, six-story, 393,433 square foot (SF) office building that includes a four- level sub-grade parking garage located in Burbank, California. The largest tenants include Warner Music Group, Clear Channel Communications, and NBC. As of March 30, 2014, the property was approximately 92% leased. Moody's current LTV and stressed DSCR are 112% and 0.92X, respectively, compared to 110% and 0.94X at the last review. The third largest loan is the Cooper Hotel Portfolio Loan ($92 million -- 6.8% of the pool). The loan is secured by nine full- service and two limited-service hotels containing a total of 2,128 rooms, located in Florida, Michigan, and Tennessee. Ten of the hotels operate under the Hilton Worldwide brand and one operates under the InterContinental Crowne Plaza flag. Moody's current LTV and stressed DSCR are 105% and 1.13X respectively, compared to 107% and 1.11X at the last review. GSC GROUP VIII: S&P Affirms 'B+' Rating on Class D Notes -------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2, and B notes and affirmed its ratings on the class C and D notes from GSC Group CDO Fund VIII Ltd., a collateralized loan obligation (CLO) transaction managed by GSC Acquisition Holdings LLC. At the same time, S&P removed all the above ratings from CreditWatch, where it had placed them with positive implications on June 18, 2014. The upgrades mainly reflect increased credit support to all of the tranches following the $51.6 million paydowns to the class A-1 notes on the July 17, 2014, payment date, which reduced the class A-1 balance to about 27% of the original balance and improved the overcollateralization (O/C) ratios since S&P's April 2012 rating actions. According to the July 2014 monthly report, the trustee reported the following O/C ratios: -- The class A O/C ratio was 142.00%, up from 121.70% in Feb. 2012. -- The class B O/C ratio was 124.58%, up from 113.49% in Feb. 2012. -- The class C O/C ratio was 112.49%, up from 107.12% in Feb. 2012. -- The class D O/C ratio was 106.91%, up from 103.99% in Feb. 2012. The affirmed ratings on the class C and D notes reflect the availability of adequate credit support at the current rating levels and are driven by S&P's largest obligor default test, a supplemental stress test to address the potential concentration of exposure to obligors in the transaction's portfolio, by assessing the effect of several of the largest obligors defaulting simultaneously. Although S&P's cash flow analysis indicated a higher rating, the class C and D notes can only pass the largest obligor default test at the 'BB' and 'B' rating categories respectively. S&P will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and S&P will take further rating actions as it deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS GSC Group CDO Fund VIII Ltd. Cash flow Previous implied Cash flow Final Class rating rating cushion (i) rating A-1 AA+ (sf)/Watch Pos AAA (sf) 17.42% AAA (sf) A-2 AA- (sf)/Watch Pos AAA (sf) 16.98% AAA (sf) B A- (sf)/Watch Pos AA+ (sf) 4.21% AA+ (sf) C BB+ (sf)/Watch Pos BBB+ (sf) 4.04% BB+ (sf) D B+ (sf)/Watch Pos BB- (sf) 2.44% B+ (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation Scenario Within industry (%) Between industries Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Corr. Corr. Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AA+ (sf) AA (sf) AA+ (sf) AA+ (sf) AA+ (sf) C BBB+ (sf) BBB- (sf) BBB+ (sf) BBB+ (sf) BB+ (sf) D BB- (sf) B (sf) BB- (sf) BB (sf) B+ (sf) Corr.--Correlation DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression Class implied rating implied rating rating Final rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AA+ (sf) AA+ (sf) AA (sf) AA+ (sf) C BBB+ (sf) BBB+ (sf) BB+ (sf) BB+ (sf) D BB- (sf) BB- (sf) CCC (sf) B+ (sf) RATINGS LIST GSC Group CDO Fund VIII Ltd. Rating Rating Class Identifier To From A-1 3622MQAA4 AAA (sf) AA+ (sf)/Watch Pos A-2 3622MQAC0 AAA (sf) AA- (sf)/Watch Pos B 3622MQAE6 AA+ (sf) A- (sf)/Watch Pos C 3622MQAG1 BB+ (sf) BB+ (sf)/Watch Pos D 3622MRAA2 B+ (sf) B+ (sf)/Watch Pos HEWETT'S ISLAND VI: S&P Raises Rating on Class E Notes to 'B+' -------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class C, D, and E notes from Hewett's Island CLO VI Ltd., a U.S. collateralized loan obligation (CLO) transaction that closed in 2007. In addition, S&P removed the ratings on classes C and D from CreditWatch, where they were placed with positive implications on June 18, 2014. At the same time, S&P affirmed its ratings on the class A-R, A-T, and B notes. The transaction ended its reinvestment period in June 2013 and all six tranches were upgraded in Jan. 2014 because of paydowns to the class A-R and A-T notes. Since S&P's Jan. 2014 rating actions, the class A-R and A-T notes have received an additional $60.0 million in paydowns. The upgrades reflect the increased credit support for the subordinate notes following these paydowns. The improvements are also evident in the increased class A/B, C, D, and E principal coverage ratios since S&P's Jan. 2014 rating actions. The amount of 'CCC' rated collateral held in the transaction's asset portfolio dropped since S&P's last rating actions to $1.96 million according to the Aug. 2014 trustee report, down from the $12.20 million noted in the Dec. 2013 trustee report. S&P's rating on the class E notes was constrained by the application of our largest-obligor default test, a supplemental test that addresses event and model risks that might be present in rated transactions. The affirmations reflect the sufficient credit support available to the classes at their current rating levels. S&P will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and S&P will take further rating actions as it deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS Hewett's Island CLO VI Ltd. Cash flow Cash flow Previous implied cushion Final Class rating rating (i) rating A-R AAA (sf) AAA (sf) 40.11% AAA (sf) A-T AAA (sf) AAA (sf) 40.11% AAA (sf) B AAA (sf) AAA (sf) 39.71% AAA (sf) C AA (sf)/Watch Pos AAA (sf) 10.16% AAA (sf) D BBB+ (sf)/Watch Pos AA+ (sf) 3.12% AA+ (sf) E CCC (sf) BB+ (sf) 7.24% B+ (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation Scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Corr. Corr. Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-R AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-T AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) C AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) D AA+ (sf) AA- (sf) AA (sf) AA+ (sf) AA+ (sf) E BB+ (sf) BB (sf) BB+ (sf) BBB- (sf) B+ (sf) Corr.--Correlation. DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-R AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-T AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AAA (sf) AAA (sf) AAA (sf) AAA (sf) C AAA (sf) AAA (sf) AAA (sf) AAA (sf) D AA+ (sf) AA+ (sf) A- (sf) AA+ (sf) E BB+ (sf) BB+ (sf) CCC- (sf) B+ (sf) RATINGS LIST Hewett's Island CLO VI Ltd. Rating Rating Class Identifier To From A-R 42823CAA8 AAA (sf) AAA (sf) A-T 42823CAB6 AAA (sf) AAA (sf) B 42823CAC4 AAA (sf) AAA (sf) C 42823CAD2 AAA (sf) AA (sf)/Watch Pos D 42823CAE0 AA+ (sf) BBB+ (sf)/Watch Pos E 42823CAF7 B+ (sf) CCC (sf) HEWETT'S ISLAND CLO I-R: S&P Affirms 'B+' Rating on Class E Notes ----------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A, B, and C notes from Hewett's Island CLO I-R Ltd., a U.S. collateralized loan obligation (CLO) transaction that closed in Nov. 2007, and removed them from CreditWatch, where they were placed with positive implications on June 18, 2014. At the same time, S&P affirmed its ratings on the class D and E notes. The transaction ended its reinvestment period in Nov. 2013. Since S&P's Dec. 2012 rating actions, the class A notes have received $61.3 million in paydowns. The upgrades reflect the increased credit support to the class A, B, and C notes following these paydowns. The improvements are also evident in the increased class A/B, C, and D principal coverage ratios since S&P's Dec. 2012 rating actions. S&P's rating on the class C notes was affected by the application of its largest-obligor default test, a supplemental test that addresses event and model risks that might be present in rated transactions. Despite the class D and E notes failing the largest-obligor default test at the 'BBB' and 'B' rating levels, respectively, S&P affirmed the ratings on these tranches, taking into account that the cash flow results suggested higher ratings, the transaction's improved credit support since S&P's last rating actions, and its belief that the credit support available is commensurate with the current rating levels. S&P will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and S&P will take further rating actions as it deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS Hewett's Island CLO I-R Ltd. Cash flow Cash flow Previous implied cushion Final Class rating rating (i) rating A AA+ (sf)/Watch Pos AAA (sf) 13.25% AAA (sf) B AA- (sf)/Watch Pos AA+ (sf) 12.47% AA+ (sf) C A- (sf)/Watch Pos AA- (sf) 2.37% A+ (sf) D BBB- (sf) BBB+ (sf) 1.56% BBB- (sf) E B+ (sf) BB (sf) 0.63% B+ (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation Scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Corr. Corr. Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AA+ (sf) AA+ (sf) AA+ (sf) AAA (sf) AA+ (sf) C AA- (sf) A+ (sf) A+ (sf) AA+ (sf) A+ (sf) D BBB+ (sf) BB+ (sf) BBB (sf) BBB+ (sf) BBB- (sf) E BB (sf) B+ (sf) BB- (sf) BB+ (sf) B+ (sf) Corr.--Correlation. DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AA+ (sf) AA+ (sf) AA+ (sf) AA+ (sf) C AA- (sf) AA- (sf) A- (sf A+ (sf) D BBB+ (sf) BBB+ (sf) BB+ (sf) BBB- (sf) E BB (sf) BB- (sf) CCC+ (sf) B+ (sf) RATINGS LIST Hewett's Island CLO I-R Ltd. Rating Rating Class Identifier To From A 42822XAA3 AAA (sf) AA+ (sf)/Watch Pos B 42822XAB1 AA+ (sf) AA- (sf)/Watch Pos C 42822XAC9 A+ (sf) A- (sf)/Watch Pos D 42822XAD7 BBB- (sf) BBB- (sf) E 42822XAE5 B+ (sf) B+ (sf) HIGHBRIDGE LOAN 4-2014: S&P Assigns B Rating on Class E Notes ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to Highbridge Loan Management 4-2014 Ltd./Highbridge Loan Management 4-2014 LLC's $469.00 million fixed- and floating-rate notes. The note issuance is a collateralized loan obligation transaction backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The ratings assigned to Highbridge Loan Management 4-2014 Ltd./Highbridge Loan Management 4-2014 LLC's notes reflect S&P's assessment of: -- The credit enhancement provided to the rated notes through the subordination of cash flows that are payable to the subordinated notes; -- The transaction's credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (not counting excess spread), and cash flow structure, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model, as assessed by Standard & Poor's using the assumptions and methods outlined in its corporate collateralized debt obligation (CDO) criteria -- The transaction's legal structure, which is expected to be bankruptcy remote; -- The diversified collateral portfolio, which primarily comprises broadly syndicated speculative-grade senior secured term loans; -- The asset manager's experienced management team; -- The transaction's ability to make timely interest and ultimate principal payments on the rated notes, which S&P assessed using its cash flow analysis and assumptions commensurate with the assigned ratings under various interest-rate scenarios, including LIBOR ranging from 0.2272%-12.7531%; -- The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding; and -- The transaction's interest diversion test, a failure of which will lead to the reclassification of excess interest proceeds that are available before paying subordinated management fees, uncapped administrative expenses, deferred base management fees, and subordinated note payments as principal proceeds to purchase additional collateral assets during the reinvestment period. RATINGS LIST Highbridge Loan Management 4-2014 Ltd./ Highbridge Loan Management 4-2014 LLC Class Rating Amount (mil. $) A-1 AAA (sf) 310.0 A-2a AA (sf) 32.0 A-2b AA (sf) 30.0 B A (sf) 38.0 C BBB (sf) 27.5 D BB (sf) 22.0 E B (sf) 9.5 Subordinated notes NR 44.5 NR--Not rated. ICG US CLO 2014-1: S&P Affirms 'B' Rating on Class E Notes ---------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on ICG US CLO 2014-1 Ltd./ICG US CLO 2014-1 LLC's $330.25 million fixed- and floating-rate notes following the transaction's effective date as of June 3, 2014. Most U.S. cash flow collateralized loan obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The "effective date" for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral, or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request the rating agencies that have issued ratings upon closing to affirm the ratings issued on the closing date after reviewing the effective date portfolio (typically referred to as an "effective date rating affirmation"). An effective date rating affirmation reflects S&P's opinion that the portfolio collateral purchased by the issuer, as reported to S&P by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that S&P assigned on the transaction's closing date. The effective date reports provide a summary of certain information that S&P used in its analysis and the results of its review based on the information presented to S&P. S&P believes the transaction may see some benefit from allowing a window of time after the closing date for the collateral manager to acquire the remaining assets for a CLO transaction. This window of time is typically referred to as a "ramp-up period." Because some CLO transactions may acquire most of their assets from the new issue leveraged loan market, the ramp-up period may give collateral managers the flexibility to acquire a more diverse portfolio of assets. For a CLO that has not purchased its full target level of portfolio collateral by the closing date, S&P's ratings on the closing date and prior to its effective date review are generally based on the application of S&P's criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to S&P by the collateral manager, and may also reflect its assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased. "When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee," S&P said. "In our published effective date report, we discuss our analysis of the information provided by the transaction's trustee and collateral manager in support of their request for effective date rating affirmation. In most instances, we intend to publish an effective date report each time we issue an effective date rating affirmation on a publicly rated U.S. cash flow CLO," S&P added. On an ongoing basis after S&P issues an effective date rating affirmation, it will periodically review whether, in its view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as S&P deems necessary. RATINGS AFFIRMED ICG US CLO 2014-1 Ltd./ICG US CLO 2014-1 LLC Class Rating Amount (mil. $) A-1 AAA (sf) 212.25 A-2 AA (sf) 55.75 B (deferrable) A (sf) 20.50 C (deferrable) BBB (sf) 19.00 D (deferrable) BB (sf) 15.25 E (deferrable) B (sf) 7.50 Combination notes AA (sf) 268.00 IXION PLC 2007: Moody's Reinstates Rating on $70MM Notes to C ------------------------------------------------------------- Moody's Investors Service has reinstated the rating on the following notes issued by Ixion plc 2007 Series 26: $70,000,000 Floating Rate Portfolio Credit Linked Secured Notes due 2045 (current outstanding balance of $2,294,271), Reinstated to C (sf); previously on August 7, 2012 Withdrawn Ixion plc 2007 Series 26, issued in April 2007, is a collateralized debt obligation backed primarily by a portfolio of RMBS originated in 2006. Ratings Rationale Moody's is reinstating the rating of Ixion plc 2007 Series 26 following information provided by the Swap Counterparty and Credit Support Provider, Deutsche Bank ("Deutsche"), that indicates a positive principal balance remains for these notes. The rating on these notes was withdrawn in error on August 7, 2012 due to an incorrect understanding that there was no remaining balance. The current rating takes into account the recent performance of the pool, the credit quality of which has continued to deteriorate since the last review. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs," published in March 2014. Factors That Would Lead To an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: Primary causes of uncertainty about assumptions are the extent of any slowdown in growth in the current macroeconomic environment and in the residential real estate property markets. The residential real estate property market is subject to uncertainty about housing prices; the pace of residential mortgage foreclosures, loan modifications and refinancing; the unemployment rate; and interest rates. JPMBB COMMERCIAL 2014-C22: Moody's Rates Cl. UHP Certs 'Ba3' ------------------------------------------------------------ Moody's Investors Service has assigned definitive ratings to seven classes of CMBS securities, issued by JPMBB Commercial Mortgage Securities Trust, Commercial Mortgage Pass-Through Certificates, Series 2014-C22. Cl. A-1, Definitive Rating Assigned Aaa (sf) Cl. A-2, Definitive Rating Assigned Aaa (sf) Cl. A-3A1, Definitive Rating Assigned Aaa (sf) Cl. A-3A2, Definitive Rating Assigned Aaa (sf) Cl. A-4, Definitive Rating Assigned Aaa (sf) Cl. A-SB, Definitive Rating Assigned Aaa (sf) Cl. UHP, Definitive Rating Assigned Ba3 (sf) Ratings Rationale The Certificates are collateralized by 76 fixed rate loans secured by 120 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 1.44X is higher than the 2007 conduit/fusion transaction average of 1.31X, but is lower than other conduit/fusion transactions rated by Moody's during 2014. The Moody's Stressed DSCR is .94X and is in-line with CMBS 2.0 transactions. Moody's Trust LTV ratio of 114.8% is above the 2007 conduit/fusion transaction average of 110.6%, and higher than pools securitized during 2014. There are two loans in the pool with subordinate debt, including two with mezzanine debt. With the subordinate debt the Moody's total debt LTV ratio rises to 115.5%. Additionally, there is one loan (U-Haul Self Storage Portfolio) structured as a non-pooled single-class rake existing inside of the trust. However, this non-pooled rake represents pari passu interest. A second pari passu interest which is pooled, is also contributed to the trust. Moody's LTV ratio only includes the pooled debt in the transaction. The pari passu non-pooled rake is in the amount of $15.099 million. Moody's rating (Ba3) considers the thickness of the rake in its expected loss analysis. Moody's also considers both loan level diversity and property level diversity when selecting a ratings approach. With respect to loan level diversity, the pool's loan level Herfindahl score is 31. The transaction loan level diversity profile is favorable compared to most conduit and fusion transactions. With respect to property level diversity, the pool's property level Herfindahl score is similarly positive at 35. 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 2.42, which is higher than the 2.3 average quality grade for pools. The principal methodology used in this rating was "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000. Moody's analysis employs the excel-based CMBS Conduit Model v2.64 which derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level DSCR and LTV ratios. Major adjustments to determining proceeds include loan structure, property type, sponsorship and diversity. Moody's analysis also uses the CMBS IO calculator 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. 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 classes would be Aaa, Aa1, and 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. These ratings: (a) are based solely on information in the public domain and/or information communicated to Moody's by the issuer at the date it was prepared and such information has not been independently verified by Moody's; (b) must be construed solely as a statement of opinion and not a statement of fact or an offer, invitation, inducement or recommendation to purchase, sell or hold any securities or otherwise act in relation to the issuer or any other entity or in connection with any other matter. Moody's does not guarantee or make any representation or warranty as to the correctness of any information, rating or communication relating to the issuer. Moody's shall not be liable in contract, tort, statutory duty or otherwise to the issuer or any other third party for any loss, injury or cost caused to the issuer or any other third party, in whole or in part, including by any negligence (but excluding fraud, dishonesty and/or willful misconduct or any other type of liability that by law cannot be excluded) on the part of, or any contingency beyond the control of Moody's, or any of its employees or agents, including any losses arising from or in connection with the procurement, compilation, analysis, interpretation, communication, dissemination, or delivery of any information or rating relating to the issuer. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had previously anticipated. Factors that may cause an upgrade of the ratings include significant loan paydowns or amortization, an increase in the pool's share of defeasance or overall improved pool performance. Factors that may cause a downgrade of the ratings include a decline in the overall performance of the pool, loan concentration, increased expected losses from specially serviced and troubled loans or interest shortfalls. KINGSLAND III: S&P Raises Rating on 2 Note Classes to 'BB+' ----------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on seven classes of notes from Kingsland III Ltd., a collateralized loan obligation (CLO) transaction, and removed three of them from CreditWatch where S&P had placed them with positive implications on June 18, 2014. At the same time S&P affirmed its rating on the class A-1 notes. The transaction is currently amortizing since the transaction's reinvestment period ended in Aug. 2013. The upgrades reflect the $68.62 million paydown of the class A-1 notes since S&P's Feb. 2013 rating actions, which increased each class' overcollateralization ratio. The class A-1 notes are now at 71.41% of their original balance. The affirmation reflects sufficient credit support available to the notes at its current rating level. S&P will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and S&P will take rating actions as it deems necessary. CAPITAL STRUCTURE AND KEY MODEL ASSUMPTIONS COMPARISON Kingsland III Ltd. Cash flow Previous implied Cash flow Final cushion Class rating rating (%)(i) rating A-1 AAA (sf) AAA (sf) 29.21 AAA (sf) A-2 AA+ (sf)/Watch Pos AAA (sf) 12.83 AAA (sf) A-3 AA (sf)/Watch Pos AAA (sf) 6.67 AAA (sf) B A (sf)/Watch Pos AA (sf) 1.58 AA (sf) C-1 BB+ (sf) BBB+ (sf) 2.21 BBB+ (sf) C-2 BB+ (sf) BBB+ (sf) 2.21 BBB+ (sf) D-1 B+ (sf) BB+ (sf) 5.84 BB+ (sf) D-2 B+ (sf) BB+ (sf) 5.84 BB+ (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. Class Jan. 2013 July 2014 Notional balance (mil. $) A-1 240.00 171.38 A-2 75.58 75.58 A-3 12.75 12.75 B 29.75 29.75 C-1 11.55 11.55 C-2 11.80 11.80 D-1 5.45 5.45 D-2 2.00 2.00 Coverage test (%) A O/C 128.52 136.37 B O/C 117.85 122.335 C O/C 110.63 113.22 D O/C 108.51 110.59 WAS (%) 3.74 3.17 O/C--Overcollateralization test. WAS--Weighted average spread. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined below. Correlation Scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-3 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AA (sf) A+ (sf) AA- (sf) AA+ (sf) AA (sf) C-1 BBB+ (sf) BBB- (sf) BBB+ (sf) BBB+ (sf) BBB+ (sf) C-2 BBB+ (sf) BBB- (sf) BBB+ (sf) BBB+ (sf) BBB+ (sf) D-1 BB+ (sf) BB (sf) BB+ (sf) BBB- (sf) BB+ (sf) D-2 BB+ (sf) BB (sf) BB+ (sf) BBB- (sf) BB+ (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-3 AAA (sf) AAA (sf) AA+ (sf) AAA (sf) B AA (sf) AA- (sf) A (sf) AA (sf) C-1 BBB+ (sf) BBB+ (sf) B+ (sf) BBB+ (sf) C-2 BBB+ (sf) BBB+ (sf) B+ (sf) BBB+ (sf) D-1 BB+_ (sf) BB+ (sf) CCC+ (sf) BB+ (sf) D-2 BB+ (sf) BB+ (sf) CCC+ (sf) BB+ (sf) RATINGS LIST Kingsland III Ltd. Rating Rating Class Identifier To From A-1 49638TAC7 AAA (sf) AAA (sf) A-2 49638TAE3 AAA (sf) AA+ (sf)/Watch Pos A-3 49638TAL7 AAA (sf) AA (sf)/Watch Pos B 49638TAG8 AA (sf) A (sf)/Watch Pos C-1 49638TAJ2 BBB+ (sf) BB+ (sf) C-2 49638TAN3 BBB+ (sf) BB+ (sf) D-1 49638VAA6 BB+ (sf) BB (sf) D-2 49638VAG3 BB+ (sf) BB (sf) LIBERTY CLO: Moody's Affirms 'B2' Rating on $52MM Class C Notes --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Liberty CLO, Ltd.: $43,000,000 Class A-4 Floating Rate Senior Secured Extendable Notes Due November 1, 2017, Upgraded to Aaa (sf); previously on May 2, 2014 Upgraded to Aa1 (sf) $49,000,000 Class B Floating Rate Deferrable Senior Secured Extendable Notes Due November 1, 2017, Upgraded to Baa3 (sf); previously on May 2, 2014 Upgraded to Ba1 (sf) Moody's also affirmed the ratings on the following notes: $50,000,000 Class A-1A Revolving Floating Rate Senior Secured Extendable Notes Due November 1, 2017 (current outstanding balance of $1,807,954), Affirmed Aaa (sf); previously on May 2, 2014 Affirmed Aaa (sf) $50,000,000 Class A-1B Delayed Drawdown Floating Rate Senior Secured Extendable Notes Due November 1, 2017 (current outstanding balance of $1,807,954), Affirmed Aaa (sf); previously on May 2, 2014 Affirmed Aaa (sf) $446,000,000 Class A-1C Floating Rate Senior Secured Extendable Notes Due November 1, 2017 (current outstanding balance of $16,126,953), Affirmed Aaa (sf); previously on May 2, 2014 Affirmed Aaa (sf) $68,500,000 Class A-2 Floating Rate Senior Secured Extendable Notes Due November 1, 2017, Affirmed Aaa (sf); previously on May 2, 2014 Affirmed Aaa (sf) $68,500,000 Class A-3 Floating Rate Senior Secured Extendable Notes Due November 1, 2017, Affirmed Aaa (sf); previously on May 2, 2014 Affirmed Aaa (sf) $52,000,000 Class C Floating Rate Deferrable Senior Secured Extendable Notes Due November 1, 2017 (current outstanding balance of $30,378,081), Affirmed B2 (sf); previously on May 2, 2014 Affirmed B2 (sf) Liberty CLO, Ltd., issued in December 2005, is a collateralized loan obligation (CLO) backed primarily by a portfolio of senior secured loans and CLO tranches. The transaction's reinvestment period ended in November 2012. Ratings Rationale These rating actions are primarily a result of deleveraging of the senior notes and an increase in the transaction's over- collateralization ratios since April 2014. The Class A-1A, A-1B, and A-1C notes in aggregate have been paid down by approximately 85% or $116 million since April 2014. Based on the trustee's July 2014 report, the over-collateralization (OC) ratios for the Class A, Class B, and Class C notes are reported at 139.35%, 116.29%, and 105.47%, respectively, versus April 2014 levels of 130.69%, 113.13%, and 104.43%, respectively. The July 2014 trustee-reported OC ratios do not reflect the recent payment of $47.4 million to the Class A-1A, A-1B and A-1C notes on August 1, 2014. The portfolio includes a number of investments in securities that mature after the notes do (long-dated assets), which make up approximately13.95% of the portfolio based on the trustee's July 2014 report. These investments could expose the notes to market risk in the event of liquidation when the notes mature. Despite the increase in the OC ratio of the Class C notes, Moody's affirmed the rating on the Class C notes owing to market risk stemming from the exposure to these long-dated assets. The rating action on the Class C notes also reflects a correction to Moody's modeling of recovery rate assumptions for the underlying CLO tranches, many of which mature after the CLO notes' legal maturity and are modeled as liquidated on the legal maturity date. Moody's overstated the recovery rate assumptions in its May 2014 rating action. This error has now been corrected, and the rating action reflects this change. Methodology Used for the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings: 1) Macroeconomic uncertainty: CLO performance is subject to a) uncertainty about credit conditions in the general economy and b) the large concentration of upcoming speculative-grade debt maturities, which could make refinancing difficult for issuers. 2) Collateral Manager: Performance can also be affected positively or negatively by a) the manager's investment strategy and behavior and b) differences in the legal interpretation of CLO documentation by different transactional parties owing to embedded ambiguities. 3) Collateral credit risk: A shift towards collateral of better credit quality, or better credit performance of assets collateralizing the transaction than Moody's current expectations, can lead to positive CLO performance. Conversely, a negative shift in credit quality or performance of the collateral can have adverse consequences for CLO performance. 4) Deleveraging: An important source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds will continue and at what pace. Deleveraging of the CLO could accelerate owing to high prepayment levels in the loan market and/or collateral sales by the manager, which could have a significant impact on the notes' ratings. Note repayments that are faster than Moody's current expectations will usually have a positive impact on CLO notes, beginning with those with the highest payment priority. 5) Recovery of defaulted assets: Fluctuations in the market value of defaulted assets reported by the trustee and those that Moody's assumes as having defaulted could result in volatility in the deal's OC levels. Further, the timing of recoveries and whether a manager decides to work out or sell defaulted assets create additional uncertainty. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. Because some of the defaulted assets are illiquid loans that defaulted over three years ago, Moody's also ran sensitivity scenarios assuming zero recovery value for these assets. 6) Long-dated assets: The presence of assets that mature after the CLO's legal maturity date exposes the deal to liquidation risk on those assets. This risk is borne first by investors with the lowest priority in the capital structure. Moody's assumes that the terminal value of an asset upon liquidation at maturity will be equal to the lower of an assumed liquidation value (depending on the extent to which the asset's maturity lags that of the liabilities) or the asset's current market value. In light of the deal's sizable exposure to long-dated assets, which increases its sensitivity to the liquidation assumptions in the rating analysis, Moody's ran scenarios using a range of liquidation value assumptions. However, actual long-dated asset exposures and prevailing market prices and conditions at the CLO's maturity will drive the deal's actual losses, if any, from long-dated assets. 7) Exposure to credit estimates: The deal contains a number of securities whose default probabilities Moody's has assessed through credit estimates. If Moody's does not receive the necessary information to update its credit estimates in a timely fashion, the transaction could be negatively affected by any default probability adjustments Moody's assumes in lieu of updated credit estimates. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Moody's Adjusted WARF -- 20% (2102) Class A-1A: 0 Class A-1B: 0 Class A-1C: 0 Class A-2: 0 Class A-3: 0 Class A-4: 0 Class B: +2 Class C: +1 Moody's Adjusted WARF + 20% (3154) Class A-1A: 0 Class A-1B: 0 Class A-1C: 0 Class A-2: 0 Class A-3: 0 Class A-4: 0 Class B: -1 Class C: -1 Loss and Cash Flow Analysis: Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3 of the "Moody's Global Approach to Rating Collateralized Loan Obligations," published in February 2014. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, diversity score and the weighted average recovery rate, are based on its published methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the collateral pool as having a performing par and principal proceeds balance of $288.5 million, defaulted par of $54.7 million, a weighted average default probability of 13.61% (implying a WARF of 2720), a weighted average recovery rate upon default of 50.01%, a diversity score of 23 and a weighted average spread of 3.42%. Moody's incorporates the default and recovery properties of the collateral pool in cash flow model analysis where they are subject to stresses as a function of the target rating on each CLO liability reviewed. Moody's derives the default probability from the credit quality of the collateral pool and Moody's expectation of the remaining life of the collateral pool. The average recovery rate for future defaults is based primarily on the seniority of the assets in the collateral pool. Moody's generally applies recovery rates for CLO securities as published in "Moody's Approach to Rating SF CDOs". In some cases, alternative recovery assumptions may be considered based on the specifics of the analysis of the CLO transaction. In each case, historical and market performance and the collateral manager's latitude for trading the collateral are also factors. A proportion of the collateral pool includes debt obligations whose credit quality Moody's assesses through credit estimates. Moody's analysis reflects adjustments with respect to the default probabilities associated with credit estimates. Specifically, Moody's assumed an equivalent of Caa3 for assets with credit estimates that have not been updated within the last 15 months, which represent approximately 1.23% of the collateral pool. Additionally, for each credit estimates whose related exposure constitutes more than 3% of the collateral pool, Moody's applied a two-notch equivalent assumed downgrade to approximately 4.16% of the pool. LIGHTPOINT CLO V: S&P Affirms 'BB-' Rating on Class D Notes ----------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-2 and B notes and affirmed its ratings on the class A-1, C, and D notes from LightPoint CLO V Ltd. At the same time, S&P removed the ratings on the class A-2 and B notes from CreditWatch, where S&P had placed them with positive implications on June 18, 2014. LightPoint CLO V Ltd. is a collateralized loan obligation (CLO) transaction that closed in August 2006. The transaction's reinvestment period ended in July 2013 and has since paid over $330 million to the class A-1 notes, resulting in increased overcollateralization (O/C) for each of the rated notes. The trustee report dated July 31, 2014, which S&P referenced in its rating actions, indicates the O/C increases since the Dec. 11, 2013, trustee report used in S&P's previous rating actions: -- The class A O/C increased to 143.69% from 125.29% in Dec. 2013. -- The class B O/C increased to 123.17% from 114.28% in Dec. 2013. -- The class C O/C increased to 113.53% from 108.60% in Dec. 2013. -- The class D O/C increased to 105.86% from 103.83% in Dec. 2013. In addition, the transaction currently holds no defaulted collateral, and 'CCC' rated assets total only 0.78% of the aggregate principal balance. The ratings on the class B and C notes are constrained by the application of the top obligor test, a supplemental test designed to capture concentration risk within a portfolio. Although the top obligor test indicated a one-notch downgrade on the class D notes, we affirmed the rating to reflect the strength of the cash flow analysis and quality of the collateral pool. S&P will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and S&P will take further rating actions as it deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS LightPoint CLO V Ltd. Cash flow Previous implied Cash flow Final Class rating rating cushion(i) rating A-1 AAA (sf) AAA (sf) 33.67% AAA (sf) A-2 AA+ (sf)/Watch Pos AAA (sf) 33.19% AAA (sf) B A+ (sf)/Watch Pos AAA (sf) 1.27% AA+ (sf) C BBB+ (sf) A+ (sf) 7.29% BBB+ (sf) D BB- (sf) BB+ (sf) 4.08% BB- (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation Scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AAA (sf) AA+ (sf) AA+ (sf) AAA (sf) AA+ (sf) C A+ (sf) A+ (sf) A+ (sf) AA (sf) BBB+ (sf) D BB+ (sf) BB- (sf) BB+ (sf) BB+ (sf) BB- (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AAA (sf) AAA (sf) AA+ (sf) AA+ (sf) C A+ (sf) A+ (sf) BBB (sf) BBB+ (sf) D BB+ (sf) BB+ (sf) CC (sf) BB- (sf) RATINGS RAISED AND REMOVED FROM CREDITWATCH LightPoint CLO V Ltd. Rating Class To From A-2 AAA (sf) AA+ (sf)/Watch Pos B AA+ (sf) A+ (sf)/Watch Pos RATINGS AFFIRMED LightPoint CLO V Ltd. Class Rating A-1 AAA (sf) C BBB+ (sf) D BB- (sf) MADISON PARK III: S&P Raises Rating on Class D Notes to 'BB+' ------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2b, A-3, B, C, D, and Q notes from Madison Park Funding III Ltd., a U.S. collateralized loan obligation (CLO) transaction managed by CSFB Alternative Capital Inc. At the same time, S&P removed these ratings from CreditWatch, where it placed them with positive implications on June 18, 2014. In addition, S&P affirmed its 'AAA (sf)' rating on the class A-2a notes from the same transaction. The transaction's reinvestment period ended in Oct. 2013, and the transaction continues to pay down the notes according to the transaction documents. The class A-1 and A-2 (i.e., classes A-2a and A-2b) notes are pari passu. Within the class A-2 notes, class A-2a receives principal payments before class A-2b and, as a result, can be paid down earlier and support a higher rating. The lower balances improved the overcollateralization (O/C) in the transaction. The trustee reported the following O/C ratios in the July 15, 2014, monthly trustee report: -- The class A O/C ratio was 133.00%, up from 129.22% in the Dec. 2011 trustee report, which S&P used for its Jan. 2012 rating actions when S&P last raised the ratings on all of the classes; -- The class B O/C ratio was 122.48%, up from 120.08% in Dec. 2011; -- The class C O/C ratio was 116.83%, up from 115.10% in Dec. 2011; and -- The class D O/C ratio was 112.18%, up from 110.96% in Dec. 2011. Following the July 25, 2014, payment date, the class A-2a and A-1 note balances are 76.89% and 71.18%, respectively, of their original issuance amounts, down from 100% in January 2012. S&P expects the ratios to further increase once the July 25, 2014, paydowns are factored in. S&P's analysis included a sensitivity test that evaluated the impact of market value risk on the long-dated securities (those scheduled to mature after the transaction's maturity date) in the portfolio. According to the July 2014 trustee report, long-dated assets were about 6.0% of the total assets (including principal cash), or 6.6% of the performing loans (excluding principal cash and defaults). The results of this sensitivity analysis affected the ratings on the class A-3, B, C, and D notes. Defaults increased to $13.90 million in the July 2014 monthly trustee report from $7.15 million in the Dec. 2011 monthly trustee report. However, the paydowns to the senior notes and the underlying assets' improved credit quality offset the impact of the increase in defaults. Class Q is a combination of a portion of the class C notes and a portion of the equity; its rated balance is reduced during each payment period by the proportionate distributions it receives from the class C notes and equity. The upgrades are due to the increase in the credit support. The affirmation reflects the availability of adequate credit support at the current rating level. S&P's review of this transaction included a cash-flow analysis to estimate future performance based on the portfolio and transaction as reflected in the trustee report. In line with S&P's criteria, its cash flow scenarios applied forward-looking assumptions on the expected default timing, pattern, and recoveries under various interest rate and macroeconomic scenarios. In addition, S&P's analysis considered the transaction's ability to pay timely interest, ultimate principal, or both to each of the rated tranches. In S&P's view, the results of the cash flow analysis demonstrated that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with these rating actions. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS Madison Park Funding III Ltd. Cash flow Previous implied Cash flow Final Class rating rating cushion(i) rating A-1 AA+ (sf)/Watch Pos AAA (sf) 10.11% AAA (sf) A-2a AAA (sf) AAA (sf) 23.40% AAA (sf) A-2b AA+ (sf)/Watch Pos AAA (sf) 10.11% AAA (sf) A-3 AA (sf)/Watch Pos AAA (sf) 0.86% AA+ (sf) B A (sf)/Watch Pos AA (sf) 1.19% AA- (sf) C BBB (sf)/Watch Pos A- (sf) 0.78% BBB+ (sf) D BB (sf)/Watch Pos BBB- (sf) 1.42% BB+ (sf) Q BBB- (sf)/Watch Pos A+ (sf) 5.55% A+ (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation Scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2a AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2b AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-3 AAA (sf) AA+ (sf) AA+ (sf) AAA (sf) AA+ (sf) B AA (sf) A+ (sf) AA- (sf) AA+ (sf) AA- (sf) C A- (sf) BBB+ (sf) BBB+ (sf) A+ (sf) BBB+ (sf) D BBB- (sf) BB+ (sf) BB+ (sf) BBB+ (sf) BB+ (sf) Q A+ (sf) A+ (sf) A+ (sf) AA (sf) A+ (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2a AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2b AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-3 AAA (sf) AA+ (sf) AA+ (sf) AA+ (sf) B AA (sf) AA- (sf) A (sf) AA- (sf) C A- (sf) A- (sf) BBB- (sf) BBB+ (sf) D BBB- (sf) BBB- (sf) B+ (sf) BB+ (sf) Q A+ (sf) A+ (sf) BBB+ (sf) A+ (sf) RATINGS RAISED AND REMOVED FROM CREDITWATCH POSITIVE Madison Park Funding III Ltd. Rating Rating Class To From A-1 AAA (sf) AA+ (sf)/Watch Pos A-2b AAA (sf) AA+ (sf)/Watch Pos A-3 AA+ (sf) AA (sf)/Watch Pos B AA- (sf) A (sf)/Watch Pos C BBB+ (sf) BBB (sf)/Watch Pos D BB+ (sf) BB (sf)/Watch Pos Q A+ (sf) BBB- (sf)/Watch Pos RATING AFFIRMED Madison Park Funding III Ltd. Class Rating A-2a AAA (sf) MM COMMUNITY III: Moody's Confirms 'Ba1' Rating on Class B Notes ---------------------------------------------------------------- Moody's Investors Service has confirmed the rating on the following notes issued by MM Community Funding III, Ltd.: $177,000,000 Class B Floating Rate Senior Subordinate Notes Due 2032 (current balance of $39,048,840), Confirmed at Ba1 (sf); previously on June 26, 2014 Ba1 (sf) Placed Under Review for Possible Upgrade MM Community Funding III, Ltd., issued in April 2002, is a collateralized debt obligation backed by a portfolio of bank trust preferred securities (TruPS). Ratings Rationale The rating confirmation on the Class B notes is primarily a result of the transaction's stable performances. As such, the expected loss on the Class B notes is still commensurate with its current rating level. The transaction was analyzed using the updates to Moody's TruPS CDO methodology, as described in "Moody's Approach to Rating TruPS CDOs" published in June 2014. These updates include (1) removing the current 25% macro default probability stress for bank and insurance TruPS; (2) expanding the default timing profiles from one to six probability-weighted scenarios; (3) incorporating a redemption profile for bank and insurance TruPS; (4) using a loss distribution generated by Moody's CDOROM(TM) for deals that do not permit reinvestment; (5) giving full par credit to deferring bank TruPS that meet certain criteria; and (6) raising the assumed recovery rate for insurance TruPS. In taking the foregoing actions, Moody's also announced that it had concluded its review of its rating on the issuer's Class B notes announced on June 26, 2014. At that time, Moody's had placed the rating on review for possible upgrade as a result of the aforementioned methodology updates. The Class B notes have paid down by approximately 0.8% or $0.3 million since January 2014, using the diversion of excess interest proceeds. Due to the methodology update mentioned above, Moody's gave full par credit in its analysis to one deferring asset that meets certain criteria, totaling $3.0 million in par. As a result, the Class B notes' par coverage has improved to 143.4%, by Moody's calculations. The Class B notes will continue to benefit from the diversion of excess interest and the use of proceeds from redemptions of any assets in the collateral pool. However, Moody's notes the current portfolio is highly concentrated. The portfolio consists of six performing securities, two of which constitute approximately 75% of the portfolio. The performance of the portfolio will depend largely on the credit condition of underlying banks of these two securities. Furthermore, as the two underlying banks are not publicly rated, the analysis relies on credit estimates derived through RiskCalc. Additional stress tests were performed to analyze the sensitivity of the notes to these large positions where each of the banks are assumed to "jump to default" (modeled as a downgrade to a Caa2 equivalent) independently. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, are based on its methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool has having a performing par (after treating deferring securities as performing if they meet certain criteria) of $56.0 million, defaulted/deferring par of $24 million, a weighted average default probability of 4.14% (implying a WARF of 598), and a weighted average recovery rate upon default of 10%. In addition to the quantitative factors Moody's explicitly models, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of an event of default, recent deal performance under current market conditions, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. 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. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating TruPS CDOs," published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector. 2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc(TM) or credit estimates. Because these are not public ratings, they are subject to additional uncertainties. Loss and Cash Flow Analysis: Moody's applied a Monte Carlo simulation framework in Moody's CDOROM(TM) v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. The portfolio of this CDO contains mainly TruPS issued by small to medium sized U.S. community banks that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc(TM), an econometric model developed by Moody's Analytics, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 360) Class B: +1 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 937) Class B: 0 MOUNTAIN VIEW 2014-1: S&P Assigns Prelim. BB- Rating on E Notes --------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Mountain View CLO 2014-1 Ltd./ Mountain View CLO 2014-1 Corp.'s $471.00 million floating-rate notes. The note issuance is a collateralized loan obligation transaction backed by a revolving pool consisting primarily of broadly syndicated senior secured loans. The preliminary ratings are based on information as of Aug. 26, 2014. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect S&P's assessment of: -- The credit enhancement provided to the preliminary rated notes through the subordination of cash flows that are payable to the subordinated notes. -- The transaction's credit enhancement, which is sufficient to withstand the defaults applicable for the supplemental tests (excluding excess spread). -- The 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. -- The transaction's ability to make timely interest and ultimate principal payments on the preliminary rated notes, which S&P assessed using its cash flow analysis and assumptions commensurate with the assigned preliminary ratings under various interest-rate scenarios, including LIBOR ranging from 0.2600% to 13.8391%. -- The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the balance of the rated notes outstanding. -- The transaction's interest diversion test, a failure of which during the reinvestment period will lead to the reclassification of up to 50% of available excess interest proceeds (before paying uncapped administrative expenses, subordinate and incentive management fees, expenses for refinancing and additional securities that were issued, expense reserve account top-up, hedge amounts, and subordinated note payments) as principal proceeds to purchase additional collateral assets or to pay principal on the notes sequentially, at the option of the collateral manager. PRELIMINARY RATINGS ASSIGNED Mountain View CLO 2014-1 Ltd./Mountain View CLO 2014-1 Corp. Class Rating Amount (mil. $) X AAA (sf) 3.00 A AAA (sf) 316.75 B AA (sf) 47.25 C (deferrable) A (sf) 48.00 D (deferrable) BBB (sf) 25.50 E (deferrable) BB- (sf) 22.50 F (deferrable) B- (sf) 8.00 Subordinated notes NR 47.50 NR--Not rated. N-STAR REL IV: Moody's Affirms 'Caa2' Rating on Class E Notes ------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by N-Star REL CDO IV, Ltd. ("N-Star REL CDO IV"): Cl. A, Upgraded to Aaa (sf); previously on Oct 9, 2013 Affirmed A1 (sf) Cl. B, Upgraded to A2 (sf); previously on Oct 9, 2013 Affirmed Baa3 (sf) Cl. C, Upgraded to Ba1 (sf); previously on Oct 9, 2013 Affirmed Ba3 (sf) Cl. D, Upgraded to B1 (sf); previously on Oct 9, 2013 Affirmed B3 (sf) Moody's has also affirmed the ratings on the following notes: Cl. E, Affirmed Caa2 (sf); previously on Oct 9, 2013 Affirmed Caa2 (sf) Cl. F, Affirmed Caa3 (sf); previously on Oct 9, 2013 Affirmed Caa3 (sf) Cl. G, Affirmed Caa3 (sf); previously on Oct 9, 2013 Affirmed Caa3 (sf) Ratings Rationale Moody's has upgraded the ratings on the transaction due to the rapid amortization of the underlying collateral while credit metrics have remained stable. Moody's has affirmed the ratings on the transaction because its key transaction metrics are commensurate with existing ratings. The affirmation is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO CLO) transactions. N-Star REL CDO IV is a static cash transaction whose reinvestment period ended in July 2010. The transaction is backed by a portfolio of: i) whole loans (48.7% of the collateral pool); ii) b-notes (6.1%); iii) mezzanine debt (28.8%); iv) REIT debt (2.6%); v) CRE CDOs (9.9%); and vi) commercial mortgage backed securities (CMBS) (3.9%). As of the trustee's July 13, 2014 report, the aggregate note balance of the transaction, including preferred shares, is $232.4 million, compared to $284.2 million at last review with the paydown directed to the senior most outstanding class of notes. Additionally, the classes C and class D notes have experienced partial cancellations totaling approximately $17.5 million. Typically, junior note cancellations result in slightly higher expected losses and longer weighted average lives on the senior notes, while producing slightly lower expected losses on the mezzanine and junior notes. However, in this transaction it does not cause, in and of itself, a downgrade or upgrade of any outstanding classes of notes. The pool contains seven assets totaling $46.8 million (16.4% of the collateral pool balance) that are listed as defaulted securities as of the trustee's July 13, 2014 report. Four of these assets (56.2% of the defaulted balance) are CMBS, two assets are CRE CDO (28.4%), and one assets is a commercial real estate mezzanine loan collateralized by a portfolio of office properties (15.4%). While there have been limited realized losses on the underlying collateral to date, Moody's does expect moderate losses to occur on the defaulted securities. Moody's has identified the following as key indicators of the expected loss in CRE CDO CLO transactions: the weighted average rating factor (WARF), the weighted average life (WAL), the weighted average recovery rate (WARR), and Moody's asset correlation (MAC). Moody's typically models these as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO CLO pool. Moody's has updated its assessments for the collateral it does not rate. The rating agency modeled a bottom-dollar WARF of 6957, compared to 7260 at last review. The current ratings on the Moody's-rated collateral and the assessments of the non-Moody's rated collateral follow: Aaa-Aa3 (0.0%, compared to 0.9% at last review); A1-A3 (5.2%, compared to 4.3% at last review); Baa1-Baa3 (0.0%, the same as at last review); Ba1-Ba3 (2.0%, compared to 1.7% at last review); B1-B3 (0.0%, the same as at last review); Caa1-C (92.8%, compared to 93.1% at last review). Moody's modeled a WAL of 4.2 years, compared to 4.0 at last review. The WAL is based on assumptions about extensions on the underlying collateral. Moody's modeled a fixed WARR of 30.7%, compared to 26.4% at last review. Moody's modeled a MAC of 100.0%, the same as at last review. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes. Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for some of the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the recovery rates of the underlying collateral and credit assessments. Reducing the recovery rates of 100% of the collateral pool by 10.0% would result in an average modeled rating movement on the rated notes of zero to six notches downward (e.g., one notch down implies a ratings movement of Baa3 to Ba1). Increasing the recovery rate of 100% of the collateral pool by 10.0% would result in an average modeled rating movement on the rated notes of zero to eleven notches upward (e.g., one notches upward implies a ratings movement of Baa3 to Baa2). The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and commercial real estate property markets. Commercial real estate property values continue to improve modestly, along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate. NEWCASTLE CDO IX: Moody's Hikes Rating on Class K Notes to Caa1 --------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Newcastle CDO IX 1, Limited: Cl. A-2, Upgraded to Aa2 (sf); previously on Aug 21, 2013 Upgraded to Baa3 (sf) Cl. B, Upgraded to A3 (sf); previously on Aug 21, 2013 Affirmed Ba3 (sf) Cl. E, Upgraded to Baa3 (sf); previously on Aug 21, 2013 Affirmed B2 (sf) Cl. F, Upgraded to Ba1 (sf); previously on Aug 21, 2013 Affirmed B3 (sf) Cl. G, Upgraded to Ba2 (sf); previously on Aug 21, 2013 Affirmed Caa1 (sf) Cl. H, Upgraded to Ba3 (sf); previously on Aug 21, 2013 Affirmed Caa2 (sf) Cl. J, Upgraded to B2 (sf); previously on Aug 21, 2013 Affirmed Caa3 (sf) Cl. K, Upgraded to Caa1 (sf); previously on Aug 21, 2013 Affirmed Caa3 (sf) Cl. L, Upgraded to Caa2 (sf); previously on Aug 21, 2013 Affirmed Ca (sf) Moody's has also affirmed the rating on the following notes: Cl. M, Affirmed Ca (sf); previously on Aug 21, 2013 Affirmed Ca (sf) Ratings Rationale Moody's has upgraded the ratings of nine classes of notes due to the combination of material rapid pre-payments of high credit risk assets since last review while credit metrics have remained stable to improving. Moody's has affirmed the rating of one class of notes because the key transaction metrics are commensurate with the existing rating. The rating actions are the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO CLO) transactions. Newcastle CDO IX 1, Limited is a static cash transaction backed by a portfolio of: i) mezzanine loans (59.8% of the pool balance); ii) CRE CDO securities (14.4%); iii) commercial mortgage backed securities (CMBS) (11.5%); iv) B-Notes (4.8%); v) asset-backed securities, primarily in the form of wireless tower backed notes, (ABS) (5.5%); vi) other commercial real estate related debt, primarily in the form of term loans (2.2%); vii) whole loans (1.3%); and viii) CMBS rake-bonds (0.4%); As of the July 18, 2014 trustee report, the aggregate note balance of the transaction, including preferred shares, has decreased to $377.9 million (which includes previously executed partial and full junior note cancellations) from $825.0 million at issuance. Paydowns are directed to the senior most outstanding class of notes. There are two assets with a par balance of $14.0 million (3.0% of the collateral pool balance) that are considered defaulted securities as of the July 18, 2014 trustee report. These assets are one mezzanine loan and one rake bond, both collateralized by the same asset. Moody's does expect significant losses to occur once they are realized. Moody's has identified the following as key indicators of the expected loss in CRE CDO transactions: the weighted average rating factor (WARF), the weighted average life (WAL), the weighted average recovery rate (WARR), and Moody's asset correlation (MAC). Moody's typically models these as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has updated its assessments for the collateral it does not rate. The rating agency modeled a bottom-dollar WARF (excluding defaulted securities) of 4615, compared to 5501 at last review. The current ratings on the Moody's-rated collateral and the assessments of the non-Moody's rated collateral follow: Aaa-Aa3 and 0.1% compared to 0.1% at last review, A1-A3 and 3.1% compared to 2.3% at last review, Baa1-Baa3 and 11.6% compared to 3.3% at last review, Ba1-Ba3 and 26.1% compared to 12.4% at last review, B1-B3 and 14.2% compared to 11.5% at last review, Caa1-Ca/C and 45.1% compared to 70.4% at last review. Moody's modeled a WAL of 3.0 years, compared to 4.2 years at last review. The WAL is based on assumptions about extensions on the underlying loans within the CMBS collateral and extensions on direct loan interests. Moody's modeled a fixed WARR of 11.7%, compared to 9.7% at last review. Moody's modeled a MAC of 9.9%, compared to 14.2% at last review. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes. Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for some of the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the recovery rates of the underlying collateral and credit assessments. Increasing the recovery rates by 5% would result in an average modeled rating movement on the rated notes of one to three notches (e.g., one notch up implies a ratings movement of Ba1 to Baa3). Decreasing the recovery rates by 5% would result in an average modeled rating movement on the rated notes of zero to two notches (e.g., one notch down implies a ratings movement of Baa3 to Ba1). The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and commercial real estate property markets. Commercial real estate property values continue to improve modestly, along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate. NORTHSTAR MORTGAGE 2012-1: Moody's Affirms B2 Cl. F Certs Rating ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of seven classes of NorthStar 2012-1 Mortgage Trust Commercial Pass-Through Certificates Series 2012-1 as follows: Cl. A, Affirmed Aaa (sf); previously on Oct 18, 2013 Affirmed Aaa (sf) Cl. B, Affirmed Aa2 (sf); previously on Oct 18, 2013 Affirmed Aa2 (sf) Cl. C, Affirmed A2 (sf); previously on Oct 18, 2013 Affirmed A2 (sf) Cl. D, Affirmed Baa3 (sf); previously on Oct 18, 2013 Affirmed Baa3 (sf) Cl. E, Affirmed Ba2 (sf); previously on Oct 18, 2013 Affirmed Ba2 (sf) Cl. F, Affirmed B2 (sf); previously on Oct 18, 2013 Affirmed B2 (sf) Cl. X-WAC, Affirmed A2 (sf); previously on Oct 18, 2013 Affirmed A2 (sf) Ratings Rationale The affirmations of the pooled certificate classes are due to the key parameters, including Moody's loan to value (LTV) ratio and Moody's stressed debt service coverage (DSCR) remaining within acceptable ranges. The rating of IO Class X-WAC is affirmed based on the credit quality of its referenced classes. Factors that would lead to an upgrade or downgrade of the rating: The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. Performance that falls outside the given range can indicate that the collateral's credit quality is stronger or weaker than Moody's had previously expected. Factors that could lead to an upgrade of the ratings include a significant amount of loan pay downs or amortization, an increase in the pool's share of defeasance or an improvement in pool performance. Factors that could lead to a downgrade of the ratings include a decline in the performance of the pool, loan concentration, an increase in realized and expected losses from specially serviced and troubled loans or interest shortfalls. Methodology Underlying The Rating Action The principal methodology used in this rating was "Moody's Approach to Rating CMBS Large Loan/Single Borrower Transactions" published in July 2000. Description of Models Used Moody's review incorporated the use of the excel-based Large Loan Model v 8.7. 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. Deal Performance As of the July 25, 2014 Payment Date the transaction's certificate balance has decreased by 13% to $306.2 million from $351.4 million at securitization due to the pay off of four loans and the partial pay down of one loan. The trust is collateralized by ten floating- rate loans ranging in size from 2% to 24% of the pooled balance. The largest three loans account for 58% of the total pooled balance. Most of the properties in the transaction are in a transitional phase, operating below market occupancy due to either being new construction or having suffered due to financial weakness of previous ownership. Moody's subordination levels account for this additional risk. The largest loan is the Buena Park loan ($73.0 million -- 24% of the pooled balance) secured by a 736,946 square foot retail property located in Buena Park, California, consisting of a 529,414 square foot enclosed mall and a 207,732 square foot power center located across the street. The mall is anchored by Bed Bath & Beyond, Ross Dress for Less, DSW Shoe Warehouse, Johns Incredible Pizza, 24-Hour Fitness and an 18-screen Metroplex Theater. The mall is shadow-anchored by Wal-Mart and Sears. The power center is anchored by Kohl's, Petsmart, Michaels and Toys r' Us. Occupancy for the loan collateral was 89% as April 2014 compared to 92% at securitization. Moody's loan to value (LTV) ratio is over 100%, the same as at securitization. The Cherry Hill loan ($60.4 million -- 20%) is secured by a mixed- use property located in Cherry Hill, New Jersey consisting of a 214,512 square foot retail component and a 121,232 square foot office component. The property was 77% leased as of March 2014 compared to 69% at securitization. The retail component is 100% leased with the vacancy limited to the office component. The $87.4 million whole loan includes $26.9 million of non-trust subordinate mortgage debt. Moody's LTV ratio is 98% compared to over 100% at securitization. The SunTrust loan ($43.3 million -- 14%) is secured by the SunTrust Center consisting of one 486,340 square foot office property and an adjacent parking garage located in the central business district of Richmond, Virginia. SunTrust Bank is the largest tenant occupying 315,517 square feet with a lease expiration in December 2017. Occupancy was 85% as of March 2014. The Mutual Building, with a net rentable area of 132,434 square feet, was released from the loan collateral in May 2014. Proceeds were deposited into a loan reserve fund. At securitization the Mutual Building had negative cash flow due to its low occupancy rate of 32%. Moody's LTV is over 100%, the same as at securitization. OCP CLO 2014-5: S&P Affirms 'BB' Rating on Class D Notes -------------------------------------------------------- Standard & Poor's Ratings Services affirmed its rating on OCP CLO 2014-5 Ltd./OCP CLO 2014-5 Corp.'s $679.25 million class A-1, A-2, B, C, D, E, and combination floating-rate notes following the transaction's effective date, as of June 16, 2014. Most U.S. cash flow collateralized loan obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The "effective date" for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request that the rating agencies that had issued ratings upon closing affirm those ratings after reviewing the effective date portfolio (typically referred to as an "effective date rating affirmation"). "An effective date rating affirmation reflects our opinion that the portfolio collateral purchased by the issuer, as reported to us by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that we assigned on the transaction's closing date. The effective date reports provide a summary of certain information that we used in our analysis and the results of our review based on the information presented to us," S&P said. "We believe 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," S&P added. 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. They may also reflect S&P's assumptions about the transaction's investment guidelines. "When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee," S&P said. "In our published effective date report, we discuss our analysis of the information provided by the transaction's trustee and collateral manager in support of their request for the effective date rating affirmation. In most instances, we intend to publish an effective date report each time we issue an effective date rating affirmation on a publicly rated U.S. cash flow CLO," S&P added. After S&P issues an effective date rating affirmation, it will periodically review whether, in its view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as S&P deems necessary. RATINGS AFFIRMED OCP CLO 2014-5 Ltd./OCP CLO 2014-5 Corp. Class Rating Amount (mil. $) A-1 AAA (sf) 242.00 A-2 AA (sf) 60.50 B A (sf) 25.25 C BBB (sf) 21.75 D BB (sf) 18.75 E B (sf) 8.50 Combination notes AA (sf) 302.50 PUTNAM STRUCTURED 2002-1: S&P Affirms 'BB-' Rating on 9 Notes ------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on all rated notes from Putnam Structured Product CDO 2002-1 Ltd., a collateralized debt obligation (CDO) transaction backed by residential mortgage-backed securities (RMBS) and other asset- backed securities. S&P also removed its ratings from CreditWatch where it had placed them with negative implications on July 2, 2014. The affirmations reflect the sufficient credit support available at their current rating levels. Since S&P's last rating actions, the class A-1LT notes have paid down by $572.42 million and the class A-2 notes have paid down by $14.93 million. These improvements, however, were offset by an increase in defaulted assets to $63.26 million based on the July 10, 2014, trustee report, up from $43.56 million in the Aug. 2012 trustee report, which S&P used in its Aug. 30, 2012, rating actions. 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. RATING ACTIONS Class Rating To From A-1LT-a BB-(sf) BB-(sf)/Watch Neg A-1LT-b BB-(sf) BB-(sf)/Watch Neg A-1LT-c BB-(sf) BB-(sf)/Watch Neg A-1LT-d BB-(sf) BB-(sf)/Watch Neg A-1LT-f BB-(sf) BB-(sf)/Watch Neg A-1LT-g BB-(sf) BB-(sf)/Watch Neg A-1LT-h BB-(sf) BB-(sf)/Watch Neg A-1LT-i BB-(sf) BB-(sf)/Watch Neg A-1LT-j BB-(sf) BB-(sf)/Watch Neg A2 CCC+(sf) CCC+(sf) RACE POINT VI: S&P Affirms 'BB' Rating on Class E Notes ------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings on the class A, B, C, and D notes from Race Point VI CLO Ltd., a collateralized loan obligation (CLO) transaction managed by Sankaty Advisors LLC, after the notes were redeemed in full. At the same time, S&P assigned its ratings to the replacement class A-R, B-R, C-R, and D-R notes. S&P also affirmed its 'BB (sf)' rating on the class E notes, following an amendment to the spread on the notes. The redemption of the class A, B, C, and D notes, the issuance of the replacement notes, and the amendment to the class E spread were done via a supplemental indenture. The supplemental indenture also included provisions that limit investment in non- loan collateral, subject to certain conditions outlined in the transaction documents. The issuer used all of the proceeds from the replacement classes of notes to redeem the original classes of notes, as outlined by provisions in the transaction documents. The replacement notes were all floating rate with a notional balance equal to the originally floating-rate note balance. The replacement notes were issued at a lower spread over LIBOR than the original floating- rate notes. The spread on the class E notes was amended to 5.75% over LIBOR from the original 5.50% over LIBOR. The transaction is still in its reinvestment period, and none of the notes have delevered. S&P's full cash flow analysis resulted in higher cushions for all the notes after the refinancing and amendment than before such actions. CASH FLOW ANALYSIS RESULTS Current date before refinancing and amendment Class Amount Interest BDR SDR Cushion (mil. $) rate(%) (%) (%) (%) A 243.00 LIBOR + 1.30 70.98 61.77 9.21 B 60.00 LIBOR + 2.50 64.30 53.98 10.32 C 28.50 LIBOR + 3.60 54.33 47.95 6.38 D 19.25 LIBOR + 4.50 48.02 42.18 5.84 E 17.25 LIBOR + 5.50 39.81 35.48 4.33 Current date after refinancing and amendment A-R 243.00 LIBOR + 1.14 71.85 61.77 10.08 B-R 60.00 LIBOR + 2.15 65.33 53.98 11.35 C-R 28.50 LIBOR + 3.11 55.78 47.95 7.83 D-R 19.25 LIBOR + 4.11 49.92 42.18 7.74 E 17.25 LIBOR + 5.75 42.36 35.48 6.88 Effective date A 243.00 LIBOR + 1.30 67.48 60.98 6.50 B 60.00 LIBOR + 2.50 62.55 52.76 9.79 C 28.50 LIBOR + 3.60 52.84 46.60 6.24 D 19.25 LIBOR + 4.50 47.03 40.59 6.44 E 17.25 LIBOR + 5.50 40.34 33.76 6.58 BDR--Break-even scenario. SDR--Scenario default rate. RATINGS WITHDRAWN Race Point VI CLO Ltd. Original notes Rating Rating Class To From A NR AAA (sf) B NR AA (sf) C NR A (sf) D NR BBB (sf) RATINGS ASSIGNED Race Point VI CLO Ltd. Replacement notes Class Rating A-R AAA (sf) B-R AA (sf) C-R A (sf) D-R BBB (sf) RATING AFFIRMED Race Point VI CLO Ltd. Original notes Class Rating E BB (sf) TRANSACTION INFORMATION Issuer: Race Point VI CLO Ltd. Co-issuer: Race Point VI CLO Corp. Collateral manager: Sankaty Advisors LLC Refinancing arranger: Citigroup Global Markets Inc. Trustee: The Bank Of New York Mellon Trust Co. N.A. Transaction type: Cash flow CLO SARATOGA CLO I: S&P Raises Rating on Class D Notes to BB+ --------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-2, C, and D notes from Saratoga CLO I Ltd., a cash flow collateralized loan obligation (CLO) transaction managed by INVESCO Senior Secured Management Inc. S&P also affirmed its ratings on the class A-1 and B notes. S&P removed four classes of notes from CreditWatch, where they were placed with positive implications on June 18, 2014. The upgrades on the class A-2, C, and D notes and the affirmation on the class A-1 notes reflect the increase in credit support available to these notes. Since S&P's April 2013 rating actions, the class A-1 note has paid down by $60 million to 43% of its initial issuance amount. The class A overcollateralization ratio increased to 142% as of the July 2014 trustee report, from 128% as of the March 2013 trustee report, which S&P referenced in its last rating action. The balance of 'CCC' rated collateral has also decreased notably during the same time. Although the class B notes now pass S&P's cash flow stresses at a higher rating category, it affirmed its rating because it is constrained by largest obligor test. S&P will continue to review whether, in its view, the ratings currently assigned to the notes remain consistent with the credit enhancement available to support them, and S&P will take further rating actions as it deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS Saratoga CLO I Ltd. Cash flow Previous implied Cash flow Final Class rating rating cushion(i) rating A-1 AAA (sf) AAA (sf) 22.85% AAA (sf) A-2 AA+ (sf)/Watch Pos AAA (sf) 9.60% AAA (sf) B A+ (sf)/Watch Pos AA (sf) 1.27% A+ (sf) C BB+ (sf)/Watch Pos BBB+ (sf) 1.04% BBB+ (sf) D BB (sf)/Watch Pos BB+ (sf) 3.30% BB+ (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated additional scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate S&P also generated other scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation Scenario Within industry (%) Between industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AA (sf) A+ (sf) AA- (sf) AA+ (sf) A+ (sf) C BBB+ (sf) BB+ (sf) BBB (sf) BBB+ (sf) BBB+ (sf) D BB+ (sf) B+ (sf) BB+ (sf) BB+ (sf) BB+ (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-1 AAA (sf) AAA (sf) AAA (sf) AAA (sf) A-2 AAA (sf) AAA (sf) AAA (sf) AAA (sf) B AA (sf) AA+ (sf) A+ (sf) A+ (sf) C BBB+ (sf) BBB+ (sf) BB (sf) A+ (sf) D BB+ (sf) BB+ (sf) B+ (sf) BBB+ (sf) RATINGS RAISED AND REMOVED FROM CREDITWATCH POSITIVE Saratoga CLO I Ltd. Rating Class To From A-2 AAA (sf) AA+ (sf)/Watch Pos C BBB+ (sf) BB+ (sf)/Watch Pos D BB+ (sf) BB (sf)/Watch Pos RATING AFFIRMED AND REMOVED FROM CREDITWATCH POSITIVE Saratoga CLO I Ltd. Rating Class To From B A+ (sf) A+ (sf)/Watch Pos RATING AFFIRMED Saratoga CLO I Ltd. Class Rating A-1 AAA (sf) SDART 2014-4: S&P Assigns Prelim. BB+ Rating on Class E Notes ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Santander Drive Auto Receivables Trust 2014-4's (SDART 2014-4) $1,058.80 million automobile receivables-backed notes series 2014-4. The note issuance is an asset-backed securities transaction backed by subprime auto loan receivables. The preliminary ratings are based on information as of Sept. 4, 2014. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect: -- The availability of 52.17%, 45.70%, 36.68%, 31.14%, and 27.36% of credit support for the class A-1, A-2-A, A-2-B, A- 3 (collectively, 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 3.30x, 2.85x, 2.25x, 1.90x, and 1.50x S&P's 15.00%-16.00% expected cumulative net loss (CNL). -- The timely interest and principal payments made under stressed cash flow modeling scenarios appropriate to the assigned preliminary ratings. -- The expectation that under a moderate ('BBB') stress scenario, all else being equal, S&P's ratings on the class A, B, and C notes will remain within one rating category of the assigned preliminary ratings during the first year, and S&P's ratings on the class D and E notes will remain within two rating categories of the assigned preliminary 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 (SCUSA's) lending programs. -- The transaction's payment/credit enhancement and legal structures. PRELIMINARY RATINGS ASSIGNED Santander Drive Auto Receivables Trust 2014-4 Class Rating Type Interest Amount rate(i) (mil. $)(i) A-1 A-1+ (sf) Senior Fixed 176.500 A-2-A AAA (sf) Senior Fixed 84.000 A-2-B AAA (sf) Senior Floating 251.900 A-3 AAA (sf) Senior Fixed 120.000 B AA (sf) Subordinate Fixed 123.500 C A (sf) Subordinate Fixed 152.900 D BBB+ (sf) Subordinate Fixed 91.200 E BB+ (sf) Subordinate Fixed 58.800 (i) The interest rates and actual sizes of these tranches will be determined on the pricing date. SORIN REAL ESTATE IV: Moody's Hikes Class B Notes Rating to Caa1 ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Sorin Real Estate CDO IV Ltd.: Cl. A-1, Upgraded to A2 (sf); previously on Sep 18, 2013 Affirmed Baa1 (sf) Cl. A-2, Upgraded to Ba2 (sf); previously on Sep 18, 2013 Affirmed B1 (sf) Cl. A-3, Upgraded to B1 (sf); previously on Sep 18, 2013 Affirmed B3 (sf) Cl. B, Upgraded to Caa1 (sf); previously on Sep 18, 2013 Affirmed Caa3 (sf) Moody's Investors Service has also affirmed the ratings on the following notes issued by Sorin Real Estate CDO IV Ltd.: Cl. C, Affirmed Ca (sf); previously on Sep 18, 2013 Affirmed Ca (sf) Cl. D, Affirmed C (sf); previously on Sep 18, 2013 Affirmed C (sf) Cl. E, Affirmed C (sf); previously on Sep 18, 2013 Affirmed C (sf) Cl. F, Affirmed C (sf); previously on Sep 18, 2013 Affirmed C (sf) Cl. G, Affirmed C (sf); previously on Sep 18, 2013 Affirmed C (sf) Ratings Rationale Moody's has upgraded the ratings on the transaction due to rapid redemption of the underlying collateral due to full principal repayment of high credit risk assets combined with the failure of certain par value triggers resulting in material amortization of senior-most outstanding class of notes. Additionally, the transaction is exhibiting stable forward credit metrics. Moody's has also affirmed the ratings of on the transaction because key transaction metrics are commensurate with the existing ratings. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation and collateralized loan obligation (CRE CDO CLO) transactions. Sorin Real Estate CDO IV is a cash CRE CDO transaction, whose reinvestment period ended in October 2011. The transaction is backed by a portfolio of: i) commercial mortgage backed securities (CMBS) (37.2% of the pool balance); ii) B-notes and rake bonds (29.0%); iii) whole loans and senior participations (18.8%); iv) bank loans (11.9%); and v) CRE CDO securities (3.1%). As of the July 28, 2014 note valuation report, the aggregate note balance of the transaction, including preferred shares, has decreased to $211.4 million from $400.0 million at issuance, with the principal paydown directed to the senior most outstanding class of notes. The paydown was the result of the combination of regular amortization, resolution and sales of defaulted collateral, and the failing of certain par value tests. Moody's has identified the following as key indicators of the expected loss in CRE CDO transactions: the weighted average rating factor (WARF), the weighted average life (WAL), the weighted average recovery rate (WARR), and Moody's asset correlation (MAC). Moody's typically models these as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has updated its assessments for the collateral it does not rate. The rating agency modeled a bottom-dollar WARF of 3596, compared to 3646 at last review. The current ratings on the Moody's-rated collateral and the assessments of the non-Moody's rated collateral follow: Aaa-Aa3 and 5.6% compared to 4.5% at last review; A1-A3 and 18.2% compare to 7.2% at last review; Baa1-Baa3 and 0.0% compared to 12.6% at last review; Ba1-Ba3 and 6.7% compared to 19.0% at last review; B1-B3 and 35.4% compared to 7.8% at last review; and Caa1-Ca/C and 34.1% compared to 48.9% at last review. Moody's modeled a WAL of 1.9 years, compared to 2.4 years at last review. The WAL is based on assumptions about extensions on the underlying collateral. Moody's modeled a fixed WARR of 13.9%, compared to 21.9% at last review. Moody's modeled a MAC of 16.6%, compared to 19.9% at last review. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Factors that would lead to an upgrade or downgrade of the rating: The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes. Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the recovery rate of the underlying collateral and credit assessments. Holding all other key parameters static, reducing the recovery rate by 10% would result in modeled rating movement on the rated notes of zero to two notches downward (e.g. one notch down implies a rating movement from Baa3 to Ba1). Increasing the recovery rate by 10% would result in modeled rating movement on the rated notes of zero to two notches upward (e.g. one notch up implies a rating movement from Ba1 to Baa3). The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and commercial real estate property markets. Commercial real estate property values continue to improve modestly, along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate. SOUND POINT VI: Moody's Assigns B2 Rating on $15.75MM Cl. F Notes ----------------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to nine classes of notes issued by Sound Point CLO VI, Ltd.: $4,000,000 Class X Senior Secured Floating Rate Notes due 2026 (the "Class X Notes"), Definitive Rating Assigned Aaa (sf) $360,000,000 Class A-1 Senior Secured Floating Rate Notes due 2026 (the "Class A-1 Notes"), Definitive Rating Assigned Aaa (sf) $30,000,000 Class A-2 Senior Secured Fixed Rate Notes due 2026 (the "Class A-2 Notes"), Definitive Rating Assigned Aaa (sf) $69,000,000 Class B Senior Secured Floating Rate Notes due 2026 (the "Class B Notes"), Definitive Rating Assigned Aa2 (sf) $33,000,000 Class C Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Definitive Rating Assigned A2 (sf) $33,000,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Definitive Rating Assigned Baa3 (sf) $27,000,000 Class E Junior Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Definitive Rating Assigned Ba3 (sf) $15,750,000 Class F Junior Secured Deferrable Floating Rate Notes due 2026 (the "Class F Notes"), Definitive Rating Assigned B2 (sf) Up to U.S.$423,692,307 Combination Notes due 2026, which will be composed of "Components" representing up to U.S.$360,000,000 Class A-1 Notes and up to U.S $63,692,307 Class B Notes (the "Combination Notes"), Definitive Rating Assigned Aa1 (sf). On the closing date, the initial aggregate principal amount of the Combination Notes will be $322,800,000, which will be composed of components representing $274,274,510 of Class A-1 Notes and $48,525,490 of Class B Notes. The Class X Notes, the Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes and the Combination Notes are referred to herein, collectively, as the "Rated Notes." Ratings Rationale Moody's ratings of the Rated Notes address the expected losses posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Sound Point VI is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 92.5% of the portfolio must consist of senior secured loans, cash, and eligible investments and up to 7.5% of the portfolio may consist of second lien loans, senior unsecured loans and first-lien last-out loans. The portfolio is approximately 90% ramped as of the closing date. Sound Point Capital Management, LP (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may not reinvest any principal proceeds. In addition to the Rated Notes, the Issuer issued subordinated notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $600,000,000 Diversity Score: 50 Weighted Average Rating Factor (WARF): 2615 Weighted Average Spread (WAS): 3.70% Weighted Average Coupon (WAC): 7.00% Weighted Average Recovery Rate (WARR): 46.5% Weighted Average Life (WAL): 9 years. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated Notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on the Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2615 to 3007) Rating Impact in Rating Notches Class X Notes: 0 Class A-1 Notes: -1 Class A-2 Notes: -1 Class B Notes: -2 Class C Notes: -2 Class D Notes: -1 Class E Notes: 0 Class F Notes: 0 Combination Notes: -2 Percentage Change in WARF -- increase of 30% (from 2615 to 3400) Rating Impact in Rating Notches Class X Notes: 0 Class A-1 Notes: -1 Class A-2 Notes: -1 Class B Notes: -3 Class C Notes: -4 Class D Notes: -2 Class E Notes: -1 Class F Notes: -2 Combination Notes: -3 The V Score for this transaction is Medium/High. This V Score has been assigned in a manner similar to the Medium/High V Score assigned for the global cash flow CLO sector, as described in the special report titled "V Scores and Parameter Sensitivities in the Global Cash Flow CLO Sector," dated July 6, 2009 and available on www.moodys.com. SOUTH COAST V: Moody's Hikes Rating on 2 Note Classes to 'B1' ------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by South Coast Funding V, Ltd.: $92,750,000 Class A-2 Second Priority Senior Secured Floating Rate Notes Due 2039 (current outstanding balance of $36,947,437), Upgraded to B1 (sf); previously on May 7, 2010 Downgraded to Caa3 (sf) $53,000,000 Class A-3 Second Priority Senior Secured Floating Rate Notes Due 2039 (current outstanding balance of $21,112,821), Upgraded to B1 (sf); previously on May 7, 2010 Downgraded to Caa3 (sf) South Coast Funding V Ltd. is a collateralized debt obligation backed primarily by a portfolio of RMBS, CMBS and Consumer ABS loans originated between 2003 and 2004. Ratings Rationale These rating actions are due primarily to the deleveraging of the senior notes and an increase in their over-collateralization ratios since January 2014. Since then, the combined balances of the Class A-2 and Class A-3 notes have been paid down by approximately 58%, or $80 million. Based on Moody's calculation, the over-collateralization (OC) ratio of the Class A-3 notes is currently 136.98%, versus 97.01% in January 2014. The trustee reported that, on December 5, 2012, the transaction experienced an "Event of Default" due to a failure to maintain an aggregate principal amount of Collateral Debt Securities and Eligible Investments at least equal to 100% of the aggregate principal amount of the Outstanding Class A and Class B notes, as required under Section 5.1(d)of the July 4, 2004 indenture. Holders of the majority of the controlling class have directed the trustee to declare the notes immediately due and payable. The Event of Default continues. The rating actions also reflect the diversion of excess interest proceeds to pay down the Class A-2 and Class A-3 notes as a result of the acceleration in waterfall payments. On the August 2014 payment date, $0.5 million of interest proceeds were diverted to pay down the principal balances of the Class A-2 and Class A-3 notes. Under Section 5.4(b) of the indenture, the Holders of at least 66.66%, in principal amount, of each Class of the Notes, voting as a separate Class, shall have the right to direct the Trustee in writing in the conduct of any proceedings or in the sale or liquidation of any or all of the Collateral. In that event, the severity of losses will depend on the timing and choice of remedy pursued. Although Moody's believes the likelihood of liquidation is low because of the unanimous voting requirement to liquidate, the rating actions result in part from growing concerns about potential losses arising from liquidation. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs," published in March 2014. Factors That Would Lead To an Upgrade or Downgrade of the Rating: This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: Primary causes of uncertainty about assumptions are the extent of any slowdown in growth in the current macroeconomic environment and in the commercial and residential real estate property markets. Although the commercial real estate property markets are gaining momentum, consistent growth will be unlikely until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The residential real estate property market is subject to uncertainty about housing prices; the pace of residential mortgage foreclosures, loan modifications and refinancing; the unemployment rate; and interest rates. 2) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds, recoveries from defaulted assets, and excess interest proceeds will continue and at what pace. Faster deleveraging than Moody's expects could have a significant impact on the notes' ratings. 3) Recovery of defaulted assets: The amount of recoveries received from defaulted assets reported by the trustee and those that Moody's assumes as having defaulted as well as the timing of these recoveries create additional uncertainty. Moody's analyzed defaulted assets assuming no recoveries, and therefore, realization of any recoveries in the future would positively impact the notes' ratings. Loss and Cash Flow Analysis: Moody's applies a Monte Carlo simulation framework in Moody's CDOROM(TM) to model the loss distribution for SF CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios define the reference pool's loss distribution. Moody's then uses the loss distribution as an input in the CDOEdge(TM) cash flow model. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes. Below is a summary of the impact of different default probabilities on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Caa ratings notched up by two rating notches: Class A-2: +2 Class A-3: +2 Class B: 0 Class C-1: 0 Class C-2: 0 Preference shares: 0 Caa ratings notched down by two rating notches: Class A-2: -2 Class A-3: -2 Class B: 0 Class C-1: 0 Class C-2: 0 Preference shares: 0 SPRINGLEAF MORTGAGE 2011-1: S&P Affirms B Rating on Class B-2 Note ------------------------------------------------------------------ Standard & Poor's Ratings Services affirmed its ratings on 27 classes from four Springleaf Mortgage Loan Trust U.S. residential mortgage-backed securities (RMBS) transactions. The rating actions follow S&P's review of the four transactions that were issued in 2011 and 2012 and are backed by a mix of seasoned adjustable- and fixed-rate subprime mortgage loans, which are secured primarily by first liens on single- and multifamily properties, manufactured housing, and parcels of land. For these transactions, S&P considered specific performance characteristics that, in its view, could add a layer of volatility to S&P's loss assumptions when they are stressed at the rating suggested by our cash flow models. When S&P's model recommended an upgrade, it affirmed its ratings on those classes instead to account for this uncertainty and promote ratings stability. In the Springleaf Mortgage Loan Trust 2011-1 transaction, excess interest only covers basis risk shortfalls and is not used as credit enhancement. In addition, the transaction has experienced increasing delinquencies. As a result of the increasing delinquencies and a static credit enhancement, S&P did not raise any of its ratings and instead affirmed all of the ratings from this transaction. S&P is also limiting any potential upgrade on the 2012 Springleaf Mortgage Loan Trust transactions due to the short deal seasoning of approximately two years. However, S&P believes the projected credit support on each of the classes in these deals remained relatively consistent with prior projections. Each transaction receives credit support from excess interest, overcollateralization, and subordination, except for Springleaf Mortgage Loan Trust 2011-1, which has only subordination as credit support. Classes receive principal and interest payments sequentially in all of the transactions. Each transaction has an interest reserve fund that can be used to cover any interest shortfalls. To date, no interest reserve fund has been drawn upon. According to S&P's counterparty criteria, it considered any applicable hedges related to these securities when performing these rating actions. ECONOMIC OUTLOOK When determining a U.S. RMBS collateral pool's relative credit quality, S&P's loss expectations stem, to a certain extent, from its view of how the loans will behave under various economic conditions. Standard & Poor's baseline macroeconomic outlook assumptions for variables that it believes could affect residential mortgage performance are as follows: -- A 6.3% unemployment rate for 2014, decreasing to 5.8% for 2015; -- Home prices will increase 6% in 2014, using the 20-city Standard & Poor's/Case-Shiller Home Price Index; -- Real GDP growth will be 2.1% in 2014 and 3.0% in 2015; -- The 30-year mortgage rate will average 4.3% for 2014 and increase to 5.0% in 2015; and -- The inflation rate will be 1.9% in both 2014 and 2015. 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 propensity of servicers to advance on delinquent loans, and liquidation timelines. Under S&P's baseline economic assumptions, it expects RMBS collateral quality to improve. However, if the U.S. economy were to become stressed in line with Standard & Poor's downside forecast, it believes that U.S. RMBS credit quality would weaken. S&P's downside scenario reflects the following key assumptions: -- Total unemployment rises to 7.0% in 2014 and then 7.2% in 2015; -- Downward pressure causes a 1.1% GDP growth in 2014, rising slightly to 1.2% in 2015; -- Home price momentum slows as potential buyers are not able to purchase property; and -- The 30-year fixed mortgage rate falls slightly to 4.3% in 2014, but limited access to credit and pressure on home prices largely prevents consumers from capitalizing on such lower rates. RATINGS AFFIRMED Springleaf Mortgage Loan Trust 2011-1 Mortgage-backed notes series 2011-1 Class CUSIP Rating A-1 85171UAA5 AAA (sf) M-1 85171UAB3 AA (sf) M-2 85171UAC1 A (sf) M-3 85171UAD9 BBB (sf) B-1 85171UAE7 BB (sf) B-2 85171UAF4 B (sf) A-2 85171UAJ6 AAA (sf) Springleaf Mortgage Loan Trust 2012-1 Mortgage-backed notes series 2012-1 Class CUSIP Rating A 85171VAA3 AAA (sf) M-1 85171VAB1 AA (sf) M-2 85171VAC9 A+ (sf) M-3 85171VAD7 A- (sf) B-1 85171VAE5 BBB (sf) B-2 85171VAF2 BB (sf) Springleaf Mortgage Loan Trust 2012-2 Mortgage-backed notes series 2012-2 Class CUSIP Rating A 85171WAA1 AAA (sf) M-1 85171WAB9 AA (sf) M-2 85171WAC7 A+ (sf) M-3 85171WAD5 A- (sf) B-1 85171WAE3 BB (sf) B-2 85171WAF0 B (sf) M-4 85171WAJ2 BBB (sf) Springleaf Mortgage Loan Trust 2012-3 Mortgage-backed notes series 2012-3 Class CUSIP Rating A 85171YAA7 AAA (sf) M1 85171YAB5 AA (sf) M2 85171YAC3 A+ (sf) M3 85171YAD1 A- (sf) M4 85171YAE9 BBB (sf) B1 85171YAF6 BB (sf) B2 85171YAG4 B (sf) STEELE CREEK 2014-1: Moody's Assigns Ba3 Rating on 2 Note Classes ----------------------------------------------------------------- Moody's Investors Service has assigned ratings to seven classes of notes issued by Steele Creek CLO 2014-1, Ltd. $213,800,000 Class A-1 Senior Secured Floating Rate Notes due 2026 (the "Class A-1 Notes"), Definitive Rating Assigned Aaa (sf) $40,000,000 Class A-2 Senior Secured Floating Rate Notes due 2026 (the "Class A-2 Notes"), Definitive Rating Assigned Aaa (sf) $46,200,000 Class B Senior Secured Floating Rate Notes due 2026 (the "Class B Notes"), Definitive Rating Assigned Aa2 (sf) $24,000,000 Class C Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class C Notes"), Definitive Rating Assigned A2 (sf) $25,000,000 Class D Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Definitive Rating Assigned Baa3 (sf) $7,000,000 Class E-1 Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class E-1 Notes"), Definitive Rating Assigned Ba3 (sf) $12,500,000 Class E-2 Mezzanine Secured Deferrable Floating Rate Notes due 2026 (the "Class E-2 Notes"), Definitive Rating Assigned Ba3 (sf) The Class A-1 Notes, the Class A-2 Notes, the Class B Notes, the Class C Notes, the Class D Notes, the Class E-1 Notes and the Class E-2 Notes are referred to herein, collectively, as the "Rated Notes." Ratings Rationale Moody's ratings of the Rated Notes address the expected losses posed to noteholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. Steele Creek CLO is a managed cash flow CLO. The issued notes will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 95.0% of the portfolio must consist of senior secured loans, cash, and eligible investments, and up to 5.0% of the portfolio may consist of second lien loans and unsecured loans. The portfolio is 75% ramped as of the closing date. Steele Creek Investment Management LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk assets, subject to certain restrictions. In addition to the Rated Notes, the Issuer will issue subordinated notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes in order of seniority. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $400,000,000 Diversity Score: 60 Weighted Average Rating Factor (WARF): 2750 Weighted Average Spread (WAS): 3.80% Weighted Average Coupon (WAC): 7.50% Weighted Average Recovery Rate (WARR): 47.0% Weighted Average Life (WAL): 8 years Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Notes is subject to uncertainty. The performance of the Rated Notes is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Notes. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated Notes. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on the Rated Notes (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2750 to 3163) Rating Impact in Rating Notches Class A-1 Notes: 0 Class A-2 Notes: 0 Class B Notes: -1 Class C Notes: -2 Class D Notes: -1 Class E-1 Notes: 0 Class E-2 Notes: 0 Percentage Change in WARF -- increase of 30% (from 2750 to 3575) Rating Impact in Rating Notches Class A-1 Notes: -1 Class A-2 Notes: -1 Class B Notes: -3 Class C Notes: -3 Class D Notes: -2 Class E-1 Notes: -1 Class E-2 Notes: -1 The V Score for this transaction is Medium/High. This V Score has been assigned in a manner similar to the Medium/High V Score assigned for the global cash flow CLO sector, as described in the special report titled "V Scores and Parameter Sensitivities in the Global Cash Flow CLO Sector," dated July 6, 2009 and available on www.moodys.com. The score for the "Experience of, Arrangements Among and Oversight of the Transaction Parties," a sub-category of the V Score, is one notch higher than that of the benchmark CLO, which is Low/Medium. The score of Medium reflects the fact that this transaction will be the Manager's first CLO. This higher score for "Experience of, Arrangements Among and Oversight of the Transaction Parties" does not, however, cause this transaction's overall composite V Score of Medium/High to differ from that of the CLO sector benchmark. Moody's V Score provides a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. The V Score applies to the entire transaction, rather than individual tranches. THL CREDIT 2014-2: Moody's Assigns 'B3' Rating on Class F Notes --------------------------------------------------------------- Moody's Investors Service has assigned ratings to ten classes of debt issued by THL Credit Wind River 2014-2 CLO Ltd. Moody's rating action is as follows: Up to $340,000,000 Class A-1 Senior Secured Floating Rate Notes due 2026, with an initial principal amount of $140,000,000 (the "Class A-1 Notes"), Assigned Aaa (sf) $200,000,000 Class A Loans due 2026 (the "Class A Loans"), Assigned Aaa (sf) $50,000,000 Class A-2 Senior Secured Floating Rate Notes due 2026 (the "Class A-2 Notes"), Assigned Aaa (sf) $62,000,000 Class B-1 Senior Secured Floating Rate Notes due 2026 (the "Class B-1 Notes"), Assigned Aa2 (sf) $10,000,000 Class B-2 Senior Secured Floating Rate Notes due 2026 (the "Class B-2 Notes"), Assigned Aa2 (sf) $28,500,000 Class C-1 Secured Deferrable Floating Rate Notes due 2026 (the "Class C-1 Notes"), Assigned A3 (sf) $20,000,000 Class C-2 Secured Deferrable Floating Rate Notes due 2026 (the "Class C-2 Notes"), Assigned A3 (sf) $30,500,000 Class D Secured Deferrable Floating Rate Notes due 2026 (the "Class D Notes"), Assigned Baa3 (sf) $31,000,000 Class E Secured Deferrable Floating Rate Notes due 2026 (the "Class E Notes"), Assigned Ba3 (sf) $10,700,000 Class F Secured Deferrable Floating Rate Notes due 2026 (the "Class F Notes"), Assigned B3 (sf) The Class A-1 Notes, the Class A Loans, the Class A-2 Notes, the Class B-1 Notes, the Class B-2 Notes, the Class C-1 Notes, the Class C-2 Notes, the Class D Notes, the Class E Notes and the Class F Notes are referred to herein, collectively, as the "Rated Debt." At closing, the Class A-1 Notes will have a principal balance of U.S.$140,000,000 and the Class A Loans will have a principal balance of U.S.$200,000,000. At any time, the Class A Loans may be converted in whole or in part to Class A-1 Notes. However, the aggregate balance of the Class A-1 Notes and the Class A Loans may never exceed $340,000,000. Ratings Rationale Moody's ratings of the Rated Debt address the expected losses posed to debtholders. The ratings reflect the risks due to defaults on the underlying portfolio of assets, the transaction's legal structure, and the characteristics of the underlying assets. THL Credit Wind River 2014-2 is a managed cash flow CLO. The issued debt will be collateralized primarily by broadly syndicated first lien senior secured corporate loans. At least 90% of the portfolio must consist of senior secured loans and eligible investments, and up to 10% of the portfolio may consist of second lien loans and senior unsecured loans. The Issuer's documents require the underlying portfolio to be 47% ramped as of the closing date. THL Credit Advisors LLC (the "Manager") will direct the selection, acquisition and disposition of the assets on behalf of the Issuer and may engage in trading activity, including discretionary trading, during the transaction's four year reinvestment period. Thereafter, the Manager may reinvest unscheduled principal payments and proceeds from sales of credit risk assets, subject to certain restrictions. In addition to the Rated Debt, the Issuer will issue subordinated notes. The transaction incorporates interest and par coverage tests which, if triggered, divert interest and principal proceeds to pay down the notes and loans in order of seniority. Moody's modeled the transaction using a cash flow model based on the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Global Approach to Rating Collateralized Loan Obligations" rating methodology published in February 2014. For modeling purposes, Moody's used the following base-case assumptions: Par amount: $620,000,000 Diversity Score: 60 Weighted Average Rating Factor (WARF): 2790 Weighted Average Spread (WAS): 3.85% Weighted Average Coupon (WAC): 7.0% Weighted Average Recovery Rate (WARR): 48.5% Weighted Average Life (WAL): 8.0 years. Methodology Underlying the Rating Action: The principal methodology used in this rating was "Moody's Global Approach to Rating Collateralized Loan Obligations" published in February 2014. Factors That Would Lead to an Upgrade or Downgrade of the Rating: The performance of the Rated Debt is subject to uncertainty. The performance of the Rated Debt is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that may change. The Manager's investment decisions and management of the transaction will also affect the performance of the Rated Debt. Together with the set of modeling assumptions above, Moody's conducted an additional sensitivity analysis, which was an important component in determining the ratings assigned to the Rated Debt. This sensitivity analysis includes increased default probability relative to the base case. Below is a summary of the impact of an increase in default probability (expressed in terms of WARF level) on the Rated Debt (shown in terms of the number of notch difference versus the current model output, whereby a negative difference corresponds to higher expected losses), assuming that all other factors are held equal: Percentage Change in WARF -- increase of 15% (from 2790 to 3209) Rating Impact in Rating Notches Class A-1 Notes: 0 Class A Loans: 0 Class A-2 Notes: 0 Class B-1 Notes: -1 Class B-2 Notes: -1 Class C-1 Notes: -1 Class C-2 Notes: -1 Class D Notes: -1 Class E Notes: 0 Class F Notes: 0 Percentage Change in WARF -- increase of 30% (from 2790 to 3627) Rating Impact in Rating Notches Class A-1 Notes: -1 Class A Loans: -1 Class A-2 Notes: -1 Class B-1 Notes: -2 Class B-2 Notes: -2 Class C-1 Notes: -3 Class C-2 Notes: -3 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 and available on www.moodys.com. Moody's V Score provides a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling and the transaction governance that underlie the ratings. The V Score applies to the entire transaction, rather than individual tranches. TRAPEZA CDO XII: Moody's Ups Rating on $49MM Cl. B Notes to Caa2 ---------------------------------------------------------------- Moody's Investors Service has upgraded the ratings on the following notes issued by Trapeza CDO XII, Ltd.: $68,000,000 Class A-2 Second Priority Senior Secured Floating Rate Notes due 2042, Upgraded to Ba1 (sf); previously on June 26, 2014 B3 (sf) Placed Under Review for Possible Upgrade; $19,000,000 Class A-3 Third Priority Senior Secured Floating Rate Notes due 2042, Upgraded to Ba2 (sf); previously on June 26, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade; $49,000,000 Class B Fourth Priority Secured Deferrable Floating Rate Notes due 2042 (current balance of $51,095,150.80, including deferred interest), Upgraded to Caa2 (sf); previously on June 26, 2014 Ca (sf) Placed Under Review for Possible Upgrade. Moody's also confirmed the rating on the following notes: $250,000,000 Class A-1 First Priority Senior Secured Floating Rate Notes due 2042 (current outstanding balance $193,618,551.53), Confirmed at Baa1 (sf); previously on June 26, 2014 Baa1 (sf) Placed Under Review for Possible Upgrade. Trapeza CDO XII, Ltd., issued in March 2007, is a collateralized debt obligation backed by a portfolio of bank and insurance trust preferred securities (TruPS). Ratings Rationale The rating actions are primarily a result of updates to Moody's TruPS CDO methodology, as described in "Moody's Approach to Rating TruPS CDOs" published in June 2014, an increase in the transaction's overcollateralization ratios, the deleveraging of the Class A-1 notes, the resumption of interest payments of previously deferring assets, and the improvement in the credit quality of the underlying portfolio since January 1, 2014. The transaction has benefited from the updates to Moody's TruPS CDO methodology. These updates include: (1) removing the 25% macro default probability stress for bank and insurance TruPS; (2) expanding the default timing profiles from one to six probability- weighted scenarios; (3) incorporating a redemption profile for bank and insurance TruPS; (4) using a loss distribution generated by Moody's CDOROM(TM) for deals that do not permit reinvestment; (5) giving full par credit to deferring bank TruPS that meet certain criteria; and (6) raising the assumed recovery rate for insurance TruPS. In addition, the Class A-1 notes have paid down by approximately 3.6% or $7.2 million since January 2014, using the diversion of excess interest proceeds. The Class A-1 notes' par coverage has improved to 187.6%, by Moody's calculations. Based on the trustee's July 2014 report, the Class A, Class B, and Class C overcollateralization (OC) ratios were 128.52% (limit 127.5%), 108.72% (limit 117.0%), and 93.53% (limit 109.0%), versus 115.90%, 98.46%, and 85.18% in January 2014. Due to the Class B OC test failure, the Class A-1 notes will continue to benefit from the diversion of excess interest and the use of proceeds from redemptions of any assets in the collateral pool. Additionally, since April 2014, the deal has started paying current interest on the Class B notes after curing the breach of the Class A OC test, although deferred interest on the Class B notes will remain outstanding as long as the Class B OC test continues to fail. The deal has also benefited from improvement in the credit quality of the underlying portfolio. According to Moody's calculations, the weighted average rating factor (WARF) improved to 892 since January 2014. The total par amount that Moody's treated as having defaulted or deferring declined to $113.4 million from $173.9 million as of January 1, 2014. Three previously deferring banks with a total par of $45.0 million have resumed making interest payments on their TruPS since that time, and Moody's gave full par credit to another two deferring assets with a total par of $15.5 million because they met certain criteria in the updated methodology. In taking the foregoing actions, Moody's also announced that it had concluded its review of its ratings on the issuer's Class A-1, A-2, A-3 and B notes announced on June 26, 2014. At that time, Moody's had placed the ratings on review for upgrade as a result of the aforementioned methodology updates. The key model inputs Moody's used in its analysis, such as par, weighted average rating factor, and weighted average recovery rate, are based on its methodology and could differ from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool as having a principal proceeds balance and performing par (after treating deferring securities as performing if they meet certain criteria) of $363.3 million, defaulted par of $113.4 million, a weighted average default probability of 8.75% (implying a WARF of 892), and a weighted average recovery rate upon default of 10.0%. In addition to the quantitative factors Moody's explicitly models, qualitative factors are part of rating committee considerations. Moody's considers the structural protections in the transaction, the risk of an event of default, recent deal performance under current market conditions, the legal environment and specific documentation features. All information available to rating committees, including macroeconomic forecasts, inputs from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, can influence the final rating decision. Methodology Underlying the Rating Action The principal methodology used in this rating was "Moody's Approach to Rating TruPS CDOs," published in June 2014. Factors that Would Lead to an Upgrade or Downgrade of the Rating This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below: 1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively affected by uncertainty about credit conditions in the general economy. Moody's has a stable outlook on the US banking sector. Moody's maintains its stable outlook on the US insurance sector. 2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive impact on the transaction's performance. Conversely, asset credit performance weaker than Moody's current expectations could have adverse consequences on the transaction's performance. 3) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from unscheduled principal proceeds and excess interest proceeds will continue and at what pace. Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority. 4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could have significant positive impact on the transaction's over-collateralization ratios and the ratings on the notes. 5) Exposure to non-publicly rated assets: The deal contains a large number of securities whose default probability Moody's assesses through credit scores derived using RiskCalc(TM) or credit estimates. Because these are not public ratings, they are subject to additional estimation uncertainty. Loss and Cash Flow Analysis Moody's applied a Monte Carlo simulation framework in Moody's CDOROM(TM) v.2.13.1 to model the loss distribution for TruPS CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios defined the reference pool's loss distribution. Moody's then used the loss distribution as an input in its CDOEdge(TM) cash flow model. CDOROM(TM) v. 2.13.1 is available on www.moodys.com under Products and Solutions -- Analytical models, upon receipt of a signed free license agreement. The portfolio of this CDO contains mainly TruPS issued by small to medium sized U.S. community banks and insurance companies that Moody's does not rate publicly. To evaluate the credit quality of bank TruPS that do not have public ratings, Moody's uses RiskCalc(TM), an econometric model developed by Moody's Analytics, to derive credit scores. Moody's evaluation of the credit risk of most of the bank obligors in the pool relies on FDIC Q1-2014 financial data. For insurance TruPS that do not have public ratings, Moody's relies on the assessment of its Insurance team, based on the credit analysis of the underlying insurance firms' annual statutory financial reports. In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes relative to the base case modeling results, which may be different from the current public ratings of the notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss): Assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates (WARF of 554) Class A-1: +2 Class A-2: +2 Class A-3: +2 Class B: +3 Class C-1: 0 Class C-2: 0 Assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates (WARF of 1420) Class A-1: -1 Class A-2: -2 Class A-3: -2 Class B: -2 Class C-1: 0 Class C-2: 0 WASATCH CLO: S&P Raises Rating on Type IV Notes to 'CC' ------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on the class D notes from Wasatch CLO Ltd., a collateralized loan obligation CLO) transaction managed by Invesco Senior Secured Management Inc. At the same time, Standard & Poor's removed this rating from CreditWatch, where it was placed with positive implications on June 18, 2014. In addition, S&P lowered its rating on the class Type IV notes from the same transaction. S&P also affirmed its ratings on the transaction's class A-1a, A-1b, A-2, B, and C notes. The transaction's documents permit the class D note to get paid down after the end of the reinvestment period but restrict such paydowns to 50% of the interest proceeds available after payment of the subordinated management fees to the portfolio manager. (The subordinate management fee to the manager is, in turn, paid only after the transaction is tested for the class D coverage ratios and after payments, if any, to cure any class D coverage test failure.) Following the end of the reinvestment period in Nov. 2013, the transaction commenced paying down the class A-1a and A-1b notes, which are pari passu. The class D notes also received paydowns due to the previously mentioned structural feature. After the most recent paydowns on Aug. 14, the class D balance is $1.8 million, which is 13.8% of its original issuance. The lower balance improved its credit support, which drove the upgrade. However, the rating on the class D note is affected by S&P's largest obligor default test, a supplemental stress test to address the potential concentration of exposure to obligors in the transaction's portfolio by assessing the effect of several of the largest obligors defaulting simultaneously. The class D notes can only pass the largest obligor default test at the 'A (sf)' rating category, though S&P's cash flow analysis indicated a higher rating. The affirmations of class A-1a, A-1b, A-2, B, and C notes reflect the adequate credit support available at the current ratings. The cash flow analysis indicated that the class A-2 and B note ratings could be raised by a notch. However, the cushion at the higher ratings and the results of S&P's various sensitivity analysis played a role in our decision to affirm those ratings rather than raise them. The class Type IV notes are backed by a synthetic CLO (Fermat Ltd.) note component and a subordinate note component of Wasatch CLO Ltd. Although the Type IV notes continue to receive payments that reduced the outstanding balance to $7.06 million (as per the Aug. 16, 2014, note payment report), S&P lowered the rating on Fermat Ltd. to 'D (sf)' in March 2013--and subsequently withdrew it--due to a reduction in its notional balance following principal losses in the underlying reference portfolio. Given the reliance on some portion of Fermat Ltd. notes' principal and interest distributions, S&P lowered its rating on the class Type IV notes to 'CC (sf)'. The downgrade of the composite notes reflects S&P's view of the likelihood that proceeds from the underlying collateral components will be insufficient to pay the full principal balance at maturity. S&P's review of this transaction included a cash flow analysis to estimate future performance based on the portfolio and transaction reflected in the trustee report. In line with S&P's criteria, its cash flow scenarios applied forward-looking assumptions on the expected default timing, pattern, and recoveries under various interest rate and macroeconomic scenarios. In addition, S&P's analysis considered the transaction's ability to pay timely interest, ultimate principal, or both to each of the rated tranches. In S&P's view, the cash flow analysis demonstrated that all of the rated outstanding classes have adequate credit enhancement available at the rating levels associated with these rating actions. S&P will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them, and S&P will take further rating actions as it deems necessary. CASH FLOW RESULTS AND SENSITIVITY ANALYSIS Wasatch CLO Ltd. Cash flow Previous implied Cash flow Final Class rating rating cushion (i) rating A-1a AA+ (sf) AA+ (sf) 7.13% AA+ (sf) A-1b AA+ (sf) AA+ (sf) 7.13% AA+ (sf) A-2 AA (sf) AA+ (sf) 1.29% AA (sf) B A- (sf) A (sf) 1.08% A- (sf) C BBB- (sf) BBB- (sf) 2.62% BBB- (sf) D BB (sf)/Watch Pos AAA (sf) 30.13% A+ (sf) (i) The cash flow cushion is the excess of the tranche break-even default rate above the scenario default rate at the cash flow implied rating for a given class of rated notes. RECOVERY RATE AND CORRELATION SENSITIVITY In addition to S&P's base-case analysis, it generated scenarios in which it made negative adjustments of 10% to the current collateral pool's recovery rates relative to each tranche's weighted average recovery rate. S&P also generated scenarios by adjusting the intra- and inter-industry correlations to assess the current portfolio's sensitivity to different correlation assumptions assuming the correlation scenarios outlined. Correlation Within Between Scenario industry (%) industries (%) Below base case 15.0 5.0 Base case 20.0 7.5 Above base case 25.0 10.0 Recovery Correlation Correlation Cash flow decrease increase decrease implied implied implied implied Final Class rating rating rating rating rating A-1a AA+ (sf) AA+ (sf) AA+ (sf) AA+ (sf) AA+ (sf) A-1b AA+ (sf) AA+ (sf) AA+ (sf) AA+ (sf) AA+ (sf) A-2 AA+ (sf) AA- (sf) AA- (sf) AA+ (sf) AA (sf) B A (sf) BBB+ (sf) A- (sf) A+ (sf) A- (sf) C BBB- (sf) BB+ (sf) BBB- (sf) BBB+ (sf) BBB- (sf) D AAA (sf) AAA (sf) AAA (sf) AAA (sf) A+ (sf) DEFAULT BIASING SENSITIVITY To assess whether the current portfolio has sufficient diversity, S&P biased defaults on the assets in the current collateral pool with the highest spread and lowest base-case recoveries. Spread Recovery Cash flow compression compression implied implied implied Final Class rating rating rating rating A-1a AA+ (sf) AA+ (sf) A+ (sf) AA+ (sf) A-1b AA+ (sf) AA+ (sf) A+ (sf) AA+ (sf) A-2 AA+ (sf) AA (sf) A+ (sf) AA (sf) B A (sf) A- (sf) BB+ (sf) A- (sf) C BBB- (sf) BB+ (sf) B+ (sf) BBB- (sf) D AAA (sf) AAA (sf) AAA (sf) A+ (sf) RATING AND CREDITWATCH ACTIONS Wasatch CLO Ltd. Rating Class To From D A+ (sf) BB (sf)/Watch Pos Type IV CC (sf) CCC- (sf) RATINGS AFFIRMED Wasatch CLO Ltd. Class Rating A-1a AA+ (sf) A-1b AA+ (sf) A-2 AA (sf) B A- (sf) C BBB- (sf) WELLS FARGO 2011-C5: Fitch Affirms 'Bsf' Rating on Class G Notes ---------------------------------------------------------------- Fitch Ratings has affirmed 12 classes of Wells Fargo Bank, N.A. Commercial Mortgage Trust 2011-C5 certificates. Key Rating Drivers The affirmations are based on the stable performance of the underlying collateral. As of the August 2014 distribution date, the pool's aggregate principal balance has been reduced by 3.6% to $1.05 billion from $1.09 billion at issuance. The pool has experienced no realized losses to date. Fitch has not designated any loans as Fitch Loans of Concern, and no loans are currently in special servicing. Since issuance only one loan (0.61% of the pool) has been in special servicing due to a borrower bankruptcy, which was resolved by a change in ownership the property's performance remains stable. There is $11,861 of interest shortfalls currently affecting the non-rated class H. The largest loan of the pool (19%) is secured by The Domain, an 878,974-square foot (sf) lifestyle center comprised of retail and office space located in Austin, TX. The mall features four anchors, Dillard's and Macy's, which are non-collateral, and Dick's Sporting Goods, and Neiman Marcus. The property's year-end 2013 DSCR increased to 1.82x from 1.56x as of year-end 2012. The servicer reported occupancy also increased slightly to 95% as Dec. 2013 from 92% as of year-end 2012. The second largest loan (8.1%) is secured by The Puck Building, a 206,693-sf mixed use retail and office property located in the SoHo neighborhood of Manhattan in New York City. The building was recently renovated and repositioned as a residential and commercial development. The collateral for the loan is 162,298-sf of office space along with 44,395-sf of retail. The property's performance has improved significantly over the last two years due to tenant rent abatements that ended in 2012. DSCR for 2013 increased to 1.40x from 0.43x as of year-end 2011. Fitch is closely monitoring the tenth largest loan (2.2%), the Ascent Hotel Portfolio. The loan is comprised of four cross- collateralized limited-service hotels, located in secondary markets throughout Alabama and Mississippi, totaling 325 rooms. The properties were redeveloped and rebranded under the Hampton Inn and Holiday Inn flags within the last 6 years. As noted in Fitch's presale report at issuance, limited operating history was available due to the recent construction of the properties. As per the servicer-reported financials, the portfolio's revenue has been declining since 2011. As of year-end 2013, net operating income is performing 28% below that of underwritten at issuance. However, as per the third-quarter 2013 Smith Travel Research Report, the portfolio as a whole remains competitive in their respective market sets. RATING SENSITIVITIES The Rating Outlooks on all classes remain Stable. Due to the recent issuance of the transaction and stable performance, Fitch does not foresee positive or negative ratings migration until a material economic or asset level event changes the transaction's overall portfolio-level metrics. Fitch affirms these classes as indicated: -- $27.8 million class A-1 at 'AAAsf'; Outlook Stable -- $118.4 million class A-2 at 'AAAsf'; Outlook Stable -- $107.9 million class A-3 at 'AAAsf'; Outlook Stable -- $471 million class A-4 at 'AAAsf'; Outlook Stable -- $85.9 million class A-S at 'AAAsf'; Outlook Stable -- $810.9 million* class X-A at 'AAA' Outlook Stable -- $54.6 million class B at 'AAsf'; Outlook Stable -- $40.9 million class C at 'Asf'; Outlook Stable -- $25.9 million class D at 'BBB+sf'; Outlook Stable -- $49.1 million class E at 'BBB-sf'; Outlook Stable -- $17.7 million class F at 'BBsf'; Outlook Stable -- $16.4 million class G at 'Bsf'; Outlook Stable. * Notional amount and interest-only. Fitch does not rate the class H and X-B certificates. WELLS FARGO 2014-C22: Fitch to Rate Class E Notes 'BBsf' -------------------------------------------------------- Fitch Ratings has issued a presale report on Wells Fargo Bank, N.A.'s WFRBS Commercial Mortgage Trust 2014-C22 Pass-Through Certificates. Fitch expects to rate the transaction and assign Rating Outlooks on: -- $57,333,000 Class A-1 'AAAsf'; Outlook Stable; -- $75,863,000 Class A-2 'AAAsf'; Outlook Stable; -- $59,936,000 Class A-3 'AAAsf'; Outlook Stable; -- $360,000,000 Class A-4 'AAAsf'; Outlook Stable; -- $386,043,000 Class A-5 'AAAsf'; Outlook Stable; -- $102,144,000 Class A-SB 'AAAsf'; Outlook Stable; -- $104,132,000b Class A-S 'AAAsf'; Outlook Stable; -- $1,145,451,000* Class X-A 'AAAsf'; Outlook Stable; -- $68,802,000b Class B 'AA-sf'; Outlook Stable; -- $52,066,000b Class C 'A-sf'; Outlook Stable; -- $225,000,000b Class PEX 'A-sf'; Outlook Stable; -- $31,611,000*a Class X-C 'BBsf'; Outlook Stable; -- $14,876,000*a Class X-D 'Bsf'; Outlook Stable; -- $111,570,000a Class D 'BBB-sf'; Outlook Stable; -- $31,611,000a Class E 'BBsf'; Outlook Stable; -- $14,876,000a Class F 'Bsf'; Outlook Stable. * Notional amount and interest-only. a Privately placed pursuant to Rule 144A. b Class A-S, B and C certificates may be exchanged for class PEX certificates; and class PEX certificates may be exchanged for class A-S, B and C certificates. The expected ratings are based on information provided by the issuer as of Aug. 28, 2014. Fitch does not expect to rate the $232,438,000 interest-only class X-B, $63,223,793 interest-only class X-E, $29,558,534 interest-only class X-Y, or the $63,223,793 class G. The certificates represent beneficial ownership in the trust, primary assets of which are 129 loans secured by 172 commercial properties having an aggregate principal balance of approximately $1.487 billion as of the cutoff date. The loans were contributed to the trust by Wells Fargo Bank, National Association, The Royal Bank of Scotland, Rialto Mortgage Finance, LLC, Liberty Island Group I LLC, NCB, FSB, C-III Commercial Mortgage LLC, Basis Real Estate Capital II, LLC, and Walker & Dunlop Commercial Property Funding I WF, LLC. Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 62.2% of the properties by balance, cash flow analysis of 70.7%, and asset summary reviews on 68.8% of the pool. KEY RATING DRIVERS Fitch Leverage: The pool's Fitch DSCR and LTV are 1.47x and 106.2%, respectively, compared with the first-half 2014 averages of 1.19x and 105.6%, respectively. However, excluding the co-op properties, the pool's Fitch DSCR and LTV are 1.16x and 110.1%, respectively. This represents higher leverage than recent Fitch- rated fixed-rate deals, excluding the 19 loans collateralized by cooperative housing (co-op) properties. Diverse Pool: The pool is diverse by loan size and sponsor as compared to recent transactions, as evidenced by a loan concentration index (LCI) of 317 and sponsor concentration index (SCI) of 330. Also, the 10 largest loans represent 43.6% of the total pool balance, which is lower than the average 2013 top 10 concentration of 54.5% and the first-half of 2014 average of 52.5%. Single-Tenant Assets: Of the Top 20 loans, there are five loans (9.3% of the pool) that are secured by properties leased to a single tenant. This includes both CSM Bakery Portfolios (4.6%), Preferred Freezer Houston (1.7%), 400 Atlantic (1.7%), and Lincoln Plaza (1.2%). Limited Amortization: Approximately 17% of the pool is full-term interest-only, and 41.8% of the pool is partial-term interest- only. Four loans within the pool (8.7%) are structured as ARD loans. The remainder of the pool (77 loans, 32.5%) consists of amortizing balloon loans with loan terms of five to 10 years. Based on the scheduled balance at maturity, the pool will have paid down 11.2%. RATING SENSITIVITIES For this transaction, Fitch's net cash flow (NCF) was 7.31% below the most recent NOI (for properties for which a recent NOI was provided, excluding properties that were stabilizing during this period). Unanticipated further declines in property-level NCF could result in higher defaults and loss severities on defaulted loans, and could result in potential rating actions on the certificates. Fitch evaluated the sensitivity of the ratings assigned to WFRBS 2014-C22 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 'A- sf' could result. In a more severe scenario, in which NCF declined a further 30% from Fitch's NCF, a downgrade of the junior 'AAAsf' certificates to 'BBB-sf' could result. The presale report includes a detailed explanation of additional stresses and sensitivities on pages 80 - 81. The master servicers will be Wells Fargo Bank, National Association 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. * Moody's Takes Action on $142MM RMBS Issued 2003-2004 ------------------------------------------------------ Moody's Investors Service, on Aug. 21, 2014, upgraded the ratings of six tranches and downgraded the ratings of 26 tranches from nine transactions issued by Banc of America and Bear Stearns. The tranches are backed by Alt-A RMBS loans issued from 2003 to 2004. Complete rating actions are as follows: Issuer: Banc of America Alternative Loan Trust 2003-6 Cl. 1-NC-3, Upgraded to Ba1 (sf); previously on Apr 13, 2012 Downgraded to Ba3 (sf) Cl. 1-NC-4, Upgraded to B1 (sf); previously on Apr 13, 2012 Downgraded to B2 (sf) Cl. 2-A-1, Downgraded to B1 (sf); previously on Apr 13, 2012 Downgraded to Ba2 (sf) Cl. 2-A-WIO, Downgraded to B1 (sf); previously on Apr 13, 2012 Confirmed at Ba3 (sf) Cl. PO, Downgraded to Ba3 (sf); previously on Apr 13, 2012 Downgraded to Ba2 (sf) Issuer: Banc of America Alternative Loan Trust 2004-1 Cl. 4-A-1, Downgraded to B2 (sf); previously on Oct 18, 2013 Downgraded to Ba3 (sf) Cl. 5-A-1, Downgraded to Ba3 (sf); previously on Apr 13, 2012 Downgraded to Ba1 (sf) Cl. 5-A-2, Downgraded to Ba3 (sf); previously on Oct 18, 2013 Downgraded to Ba1 (sf) Cl. 5-A-3, Downgraded to Caa1 (sf); previously on Oct 18, 2013 Downgraded to B3 (sf) Cl. PO, Downgraded to B3 (sf); previously on Feb 27, 2013 Affirmed B1 (sf) Issuer: Banc of America Alternative Loan Trust 2004-11 Cl. 1-CB-1, Downgraded to Caa1 (sf); previously on Mar 15, 2011 Downgraded to B3 (sf) Cl. 3-A-1, Downgraded to Ba3 (sf); previously on Jun 21, 2012 Upgraded to Ba1 (sf) Cl. 4-A-1, Downgraded to Ba3 (sf); previously on Jun 21, 2012 Downgraded to Ba1 (sf) Cl. 2-CB-1, Downgraded to Caa1 (sf); previously on Mar 15, 2011 Downgraded to B3 (sf) Cl. 2-CB-2, Downgraded to C (sf); previously on Jun 21, 2012 Downgraded to Ca (sf) Cl. 15-PO, Downgraded to B1 (sf); previously on Jun 21, 2012 Upgraded to Ba2 (sf) Cl. CB-IO, Downgraded to Caa1 (sf); previously on Jun 21, 2012 Confirmed at B3 (sf) Cl. X-PO, Downgraded to Caa1 (sf); previously on Mar 15, 2011 Downgraded to B3 (sf) Issuer: Banc of America Alternative Loan Trust 2004-4 Cl. 4-A-5, Downgraded to Caa2 (sf); previously on Jun 21, 2012 Downgraded to Caa1 (sf) Cl. 4-IO, Downgraded to Caa2 (sf); previously on Jun 21, 2012 Downgraded to B3 (sf) Cl. 5-A-1, Downgraded to Caa1 (sf); previously on Jun 21, 2012 Upgraded to B2 (sf) Cl. 6-A-1, Downgraded to Caa1 (sf); previously on Mar 15, 2011 Downgraded to B2 (sf) Cl. 15-IO, Downgraded to Caa1 (sf); previously on Jun 21, 2012 Confirmed at B2 (sf) Cl. PO, Downgraded to Caa1 (sf); previously on Jun 21, 2012 Downgraded to B2 (sf) Issuer: Banc of America Alternative Loan Trust 2004-5 Cl. 3-IO, Downgraded to B3 (sf); previously on Jun 21, 2012 Downgraded to B1 (sf) Cl. 4-IO, Downgraded to B1 (sf); previously on Jun 21, 2012 Confirmed at Ba3 (sf) Issuer: Banc of America Alternative Loan Trust 2004-6 Cl. 3-A-1, Downgraded to B1 (sf); previously on Apr 13, 2012 Downgraded to Ba3 (sf) Cl. 3-IO, Downgraded to B1 (sf); previously on Apr 13, 2012 Confirmed at Ba3 (sf) Issuer: Bear Stearns ALT-A Trust 2004-3 Cl. M-2, Upgraded to B3 (sf); previously on Oct 22, 2013 Upgraded to Caa2 (sf) Issuer: Bear Stearns ALT-A Trust 2004-6 Cl. M-2, Upgraded to Caa3 (sf); previously on Mar 14, 2011 Downgraded to C (sf) Issuer: Bear Stearns ALT-A Trust 2004-8 Cl. II-A, Upgraded to Baa2 (sf); previously on Mar 14, 2011 Downgraded to Ba1 (sf) Cl. M-1, Upgraded to Caa1 (sf); previously on Mar 14, 2011 Downgraded to Caa3 (sf) Ratings Rationale The rating actions are a result of performance on the underlying pools and reflect Moody's updated loss expectations on the pools. The rating upgrades are due to stable pool performance and build up of credit enhancement from excess spread. The rating downgrades are due to the weak performance of the underlying collateral. The rating actions on Banc of America Alternative Loan Trust 2003- 6, 2004-1 and 2004-6 also reflect updates and corrections to the cash-flow models used by Moody's in rating these transactions. For all three transactions the modeling changes pertain to the calculation of the senior percentage post subordination depletion. For Series 2003-6 and 2004-6, the changes also pertain to the loss allocation to the bonds. For Series 2004-1, the changes also pertain to the interest payments to the bonds. The principal methodology used in these ratings was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.2% in July 2014 from 7.3% in July 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. Finally, performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. * Moody's Takes Action on $458MM of RMBS Issued 2003-2004 --------------------------------------------------------- Moody's Investors Service, on Aug. 25, 2014, upgraded the ratings of 11 tranches and downgraded the ratings of seven tranches from six transactions backed by Alt-A and Option ARM RMBS loans, issued by multiple issuers. Complete rating actions are as follows: Issuer: Impac CMB Trust Series 2004-4 Collateralized Asset-Backed Bonds, Series 2004-4 Cl. 1-A-3, Upgraded to B1 (sf); previously on Jul 12, 2012 Downgraded to B3 (sf) Cl. 1-M-1, Upgraded to B3 (sf); previously on Jul 12, 2012 Downgraded to Caa2 (sf) Cl. 1-M-2, Upgraded to Caa1 (sf); previously on Jul 12, 2012 Downgraded to Caa3 (sf) Cl. 1-M-3, Upgraded to Caa2 (sf); previously on Jul 12, 2012 Downgraded to Caa3 (sf) Cl. 2-A-1, Downgraded to B1 (sf); previously on Jul 12, 2012 Downgraded to Ba2 (sf) Cl. 2-A-2, Downgraded to B1 (sf); previously on Jul 12, 2012 Downgraded to Ba2 (sf) Issuer: Impac Secured Assets Corp. Mortgage Pass-Through Certificates, Series 2003-1 Cl. A-1, Downgraded to A3 (sf); previously on Jul 12, 2012 Downgraded to A2 (sf) Cl. M-1, Downgraded to Ba2 (sf); previously on Jul 12, 2012 Downgraded to Baa3 (sf) Issuer: Impac Secured Assets Corp. Mortgage Pass-Through Certificates, Series 2003-3 Cl. A-1, Downgraded to Baa2 (sf); previously on Jul 12, 2012 Downgraded to A3 (sf) Cl. M-1, Downgraded to B1 (sf); previously on Jul 12, 2012 Downgraded to Ba2 (sf) Issuer: IndyMac INDX Mortgage Loan Trust 2007-FLX3 Cl. A-1, Upgraded to B2 (sf); previously on Dec 1, 2010 Downgraded to Caa1 (sf) Issuer: Structured Asset Mortgage Investments II Trust 2007-AR3 Cl. I-A-2, Downgraded to Caa1 (sf); previously on Dec 14, 2010 Confirmed at B2 (sf) Issuer: WaMu Mortgage Pass-Through Certificates, Series 2005-AR1 Cl. A-1B, Upgraded to Caa3 (sf); previously on Dec 15, 2010 Downgraded to Ca (sf) Cl. A-2A1, Upgraded to Ba3 (sf); previously on Apr 30, 2013 Upgraded to B3 (sf) Cl. A-2A3, Upgraded to Ba3 (sf); previously on Apr 30, 2013 Upgraded to B3 (sf) Cl. A-2B, Upgraded to Caa3 (sf); previously on Dec 15, 2010 Downgraded to C (sf) Cl. A-3, Upgraded to Caa1 (sf); previously on Dec 15, 2010 Downgraded to Caa3 (sf) Cl. X, Upgraded to Caa2 (sf); previously on Apr 30, 2013 Upgraded to Caa3 (sf) Ratings Rationale The actions are a result of the recent performance of the underlying pools and reflect Moody's updated loss expectations on the pools. The ratings upgraded are due to stable pool performance and build up of credit enhancement. The ratings downgraded are due to the weaker performance of the underlying collateral and the erosion of enhancement available for those bonds. The principal methodology used in these ratings was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.2% in July 2014 from 7.3% in July 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. * Moody's Hikes Rating on $65MM of Subprime RMBS Deals ------------------------------------------------------ Moody's Investors Service, on Aug. 22, 2014, upgraded the ratings of 16 tranches from six transactions backed by Subprime mortgage loans. Complete rating actions are as follows: Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2004- HE2 Cl. M-2, Upgraded to Ba2 (sf); previously on Apr 16, 2012 Confirmed at B1 (sf) Cl. M-3, Upgraded to B2 (sf); previously on Oct 21, 2013 Upgraded to Caa1 (sf) Cl. M-4, Upgraded to Caa2 (sf); previously on Oct 21, 2013 Upgraded to Ca (sf) Cl. M-5, Upgraded to Ca (sf); previously on Mar 15, 2011 Downgraded to C (sf) Issuer: ACE Securities Corp. Home Equity Loan Trust, Series 2004- HE4 Cl. M-2, Upgraded to B2 (sf); previously on Mar 15, 2011 Downgraded to Caa1 (sf) Cl. M-3, Upgraded to Caa3 (sf); previously on Apr 16, 2012 Downgraded to C (sf) Issuer: AMRESCO Residential Mortgage Loan Trust 1998-2 A-5, Upgraded to Ba3 (sf); previously on Mar 24, 2011 Downgraded to B2 (sf) A-6, Upgraded to Ba2 (sf); previously on Mar 24, 2011 Downgraded to B1 (sf) Issuer: AMRESCO Residential Mortgage Loan Trust 1998-3 M-1A, Upgraded to B1 (sf); previously on Mar 24, 2011 Downgraded to B3 (sf) Issuer: Citigroup Mortgage Loan Trust, Series 2004-RES1 Cl. M-1, Upgraded to Baa3 (sf); previously on Apr 9, 2012 Confirmed at Ba2 (sf) Cl. M-2, Upgraded to Ba2 (sf); previously on Jan 24, 2014 Upgraded to B1 (sf) Cl. M-3, Upgraded to B3 (sf); previously on Jan 24, 2014 Upgraded to Caa2 (sf) Cl. M-4, Upgraded to Caa1 (sf); previously on Jan 24, 2014 Upgraded to Caa3 (sf) Cl. M-5, Upgraded to Caa3 (sf); previously on Mar 7, 2011 Downgraded to C (sf) Issuer: Equifirst Mortgage Loan Trust 2004-3 Cl. M-4, Upgraded to Ba2 (sf); previously on Mar 5, 2013 Downgraded to B1 (sf) Cl. M-5, Upgraded to B1 (sf); previously on Mar 5, 2013 Downgraded to B2 (sf) Ratings Rationale The actions are a result of the recent performance of the underlying pools and reflect Moody's updated loss expectations on the pools. The upgrades are a result of improving performance of the related pools and/or faster pay-down of the bonds due to high prepayments/faster liquidations. The principal methodology used in these ratings was "US RMBS Surveillance Methodology" published in November 2013. Factors that would lead to an upgrade or downgrade of the rating: Ratings in the US RMBS sector remain exposed to the high level of macroeconomic uncertainty, and in particular the unemployment rate. The unemployment rate fell to 6.2% in July 2014 from 7.3% in July 2013. Moody's forecasts an unemployment central range of 6.5% to 7.5% for the 2014 year. Deviations from this central scenario could lead to rating actions in the sector. House prices are another key driver of US RMBS performance. Moody's expects house prices to continue to rise in 2014. Lower increases than Moody's expects or decreases could lead to negative rating actions. Finally, performance of RMBS continues to remain highly dependent on servicer procedures. Any change resulting from servicing transfers or other policy or regulatory change can impact the performance of these transactions. * S&P Lowers Rating on 93 Classes From 68 RMBS Deals to 'D(sf)' --------------------------------------------------------------- Standard & Poor's Ratings Services, on Aug. 28, 2014, lowered its ratings to 'D (sf)' on 93 classes of mortgage pass-through certificates from 68 U.S. residential mortgage-backed securities (RMBS) transactions issued between 2002 and 2009. At the same time, S&P placed its 'B- (sf)' rating on First Horizon Mortgage Pass-Through Trust 2006-AR2's class III-A-1 on CreditWatch with negative implications because another class from the transaction defaulted from a rating above 'CCC'. The downgrades reflect S&P's assessment of principal write-downs on the affected classes during recent remittance periods. Before the rating actions, S&P rated all of these classes either 'CCC (sf)' or 'CC (sf)', except for class II-1A-1 from Bear Stearns Asset Backed Securities I Trust 2006-HE10, rated 'B+ (sf)', and classes I-A-1 from First Horizon Mortgage Pass-Through Trust 2006- AR2 and I-A-2 from Structured Asset Mortgage Investments II Trust 2007-AR3, which S&P rated 'B- (sf)'. These three transactions are backed by RMBS subprime, prime jumbo, and negative amortization collateral, respectively. S&P is placing its rating on First Horizon Mortgage Pass-Through Trust 2006-AR2's class III-A-1 on CreditWatch with negative implications because its class I-A-1 defaulted from 'B- (sf)'; S&P expects to resolve the placement after fully reviewing this transaction. All other ratings within these transactions were already rated below 'B- (sf)'. The 93 defaulted classes consist of the following: -- 23 classes from Alternative-A transactions (24.45%); -- 22 from subprime transactions (23.65%); -- 21 from prime jumbo transactions (22.58%); -- 15 from resecuritized real estate mortgage investment conduit (re-REMIC) transactions (16.13%); -- Nine from RMBS negative amortization transactions (9.68%); -- Two from outside-the-guidelines transactions; -- One from a small balance commercial transaction. All of the transactions in this review receive credit enhancement from a combination of subordination, excess spread, and overcollateralization (where applicable). S&P will continue to monitor its ratings on securities that experience principal write-downs and adjust them as S&P considers appropriate according to its criteria. * S&P Lowers 49 Ratings on 3 Classes From 22 Transactions --------------------------------------------------------- Standard & Poor's Ratings Services lowered 49 ratings, including eight to 'D(sf)', from 20 U.S. residential mortgage-backed securities (RMBS) transactions issued from 2002-2005 and removed 31 of them from CreditWatch where they were placed with negative implications. In addition, S&P affirmed 66 ratings from 17 transactions and removed one of them from CreditWatch negative. Lastly, S&P withdrew three ratings from one transaction. The rating actions resolve a portion of the ratings that S&P placed on CreditWatch negative in May 2014 and June 2014 because the trustees reported possible interest shortfalls. All of the transactions in this review were issued between 2002 and 2005 and are supported by a mix of fixed- and adjustable-rate Alternative-A (Alt-A), prime jumbo, negative amortization (Neg- Am), reperforming, small balance commercial, and subprime mortgage loans secured primarily by first-liens on one- to four-family residential properties. S&P lowered 37 ratings from 19 transactions, including eight to 'D (sf)', and removed 30 of them from CreditWatch negative based on S&P's assessment of interest shortfalls on the affected classes during recent remittance periods. S&P derived the lowered ratings by applying its interest shortfall criteria. S&P also lowered its ratings on 12 classes from eight transactions and removed one from CreditWatch negative because projected losses increased from a changing delinquency pipeline. Of the downgrades, S&P lowered 18 ratings out of investment-grade to 'BB+ (sf)' or lower; 16 other classes remain investment-grade. The remaining 15 lowered ratings were already non-investment-grade before the rating actions. S&P considered specific performance characteristics for certain transactions that, in S&P's view, could add a layer of volatility to its loss assumptions when they are stressed at the rating suggested by S&P's cash flow models. When S&P's model recommended a higher rating, it affirmed its ratings on those classes to promote ratings stability. In general, the affected bonds 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 -- Low subordination, overcollateralization, or both. S&P affirmed its 'AAA (sf)' ratings on two classes from Equity One Mortgage Pass-Through Trust 2003-1 due to their sufficient credit support to absorb the projected remaining losses associated with this rating stress. The affirmations on 30 ratings in the 'AA' or 'A' categories from 11 transactions affect classes that are currently first, second, or third in their payment priorities. S&P removed one of these ratings from CreditWatch negative. In addition, S&P affirmed nine ratings in the 'BBB' through 'B' rating categories from seven transactions. The projected credit support on these classes remained relatively consistent with prior projections. S&P affirmed 25 additional ratings in the 'CCC ' or 'CC' rating categories. S&P believes that the projected credit support for these classes will remain insufficient to cover the revised base- case projected losses to these classes. The 'CCC (sf)' affirmations reflect our belief that these classes are still vulnerable to defaulting. The 'CC (sf)' affirmations reflect S&P's belief that these classes remain virtually certain to default. Lastly, S&P withdrew its ratings on classes I-X-A-1, I-X-A-2, and I-X-A-3 from Bear Stearns ALT-A Trust 2003-5 after applying its interest-only (IO) criteria. According to S&P's counterparty criteria, it considered any applicable hedges related to these securities when performing these rating actions. The reviewed transactions generally receive credit support from subordination, overcollateralization (when available), and excess interest. Some classes may also benefit from bond insurance. In these cases, the long-term rating on the class reflects the higher of the rating on the bond insurer and the underlying credit rating on the security without the bond insurance benefit. ECONOMIC OUTLOOK When determining a U.S. RMBS collateral pool's relative credit quality, S&P's loss expectations stem, to a certain extent, from its view of how the loans will behave under various economic conditions. Standard & Poor's baseline macroeconomic outlook assumptions for variables that we believe could affect residential mortgage performance are as follows: -- A 6.3% unemployment rate for 2014, decreasing to 5.8% for 2015; -- Home prices will increase 6% in 2014, using the 20-city Standard & Poor's/Case-Shiller Home Price Index; -- Real GDP growth will be 2.1% in 2014 and 3.0% in 2015; -- The 30-year mortgage rate will average 4.3% for 2014 and increase to 5.0% in 2015; and -- The inflation rate will be 1.9% in both 2014 and 2015. 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 propensity of servicers to advance on delinquent loans, and liquidation timelines. Under S&P's baseline economic assumptions, it expects RMBS collateral quality to improve. However, if the U.S. economy were to become stressed in line with Standard & Poor's downside forecast, it believes that U.S. RMBS credit quality would weaken. S&P's downside scenario reflects the following key assumptions: -- Total unemployment rises to 7.0% in 2014 and then 7.2% in 2015; -- Downward pressure causes a 1.1% GDP growth in 2014, rising slightly to 1.2% in 2015; -- Home price momentum slows as potential buyers are not able to purchase property; and -- The 30-year fixed mortgage rate falls slightly to 4.3% in 2014, but limited access to credit and pressure on home prices largely prevents consumers from capitalizing on such lower rates. * S&P Lowers 26 Ratings on 70 Classes From 19 US RMBS Transactions ------------------------------------------------------------------ Standard & Poor's Ratings Services, on Aug 28, 2014, took various rating actions on 19 U.S. residential mortgage-backed securities (RMBS) Alternative-A (Alt-A) and negative amortization (Neg-Am) transactions. S&P lowered its ratings on 26 classes, raised its ratings on 24, and affirmed its ratings on 70. Additionally, S&P placed two of the lowered ratings on CreditWatch with negative implications based on S&P's interest shortfall criteria. The complete list of rating actions is available in "U.S. RMBS Classes Affected By The Aug. 28, 2014, Rating Actions," published on RatingsDirect. The list is also available on the Standard & Poor's public Web site. The transactions in this review were issued between 1999 and 2007 and are backed primarily by adjustable- and fixed-rate Alt-A and Neg-Am mortgage loans secured primarily by first-liens on one- to four-family residential properties. S&P considered specific performance characteristics for certain transactions that, in its view, could add a layer of volatility to its loss assumptions when they are stressed at the rating suggested by S&P's cash flow models. When S&P's model recommended a higher rating, it affirmed its ratings on those classes instead to account for this uncertainty and to promote ratings stability. In general, these affirmed classes have one or more of the following characteristics that limit any potential upgrade: -- Insufficient subordination; -- Increased delinquency trends; -- Historical interest shortfalls; -- Low priority in principal payments; or -- Significant growth in observed loss severities. In addition, some of the classes have failed their current delinquency triggers, limiting the amount of unscheduled principal payments to subordinate classes. However, these transactions allow an increased percentage of unscheduled principal to resume being paid to the subordinate classes if those failed classes begin passing the delinquency triggers again. Therefore, S&P affirmed these ratings even though some of these classes passed a higher stress scenario. The lowered ratings reflect S&P's belief that projected credit enhancement for the affected classes will be insufficient to cover the projected losses S&P applied at the previous rating levels. S&P projected increased losses for these transactions primarily because of: -- Increased delinquencies; -- Decreased credit enhancement provided to the classes; -- A noticeable increase or decrease in constant prepayment rates; or -- Large loan delinquency shifts (a high-balance loan within a transaction moving into the 90-plus-days delinquent bucket from 30-days delinquent since S&P's previous review). S&P lowered seven ratings by at least four notches after conducting its cash flow analysis to these transactions: -- GSAA Home Equity Trust 2004-5 -- Residential Asset Securitization Trust 1999-A3 -- Residential Asset Securitization Trust 2002-A14J -- Structured Asset Mortgage Investments II Trust 2006-AR3 -- WaMu Mortgage-Backed Pass-Through Certificates Series 2001- AR5 S&P lowered its ratings on classes AF-4 and AF-5 from GSAA Home Equity Trust 2004-5 to 'BB+ (sf)' from 'AA+ (sf)' and placed them on CreditWatch negative. Both of these classes have interest shortfalls that have been outstanding for several months and it is unclear whether a repayment will be made. There are several other factors, such as tail risk and S&P's principal-only methodology, as noted in the ratings list that contributed to the downgrades. Of the 26 downgrades, S&P lowered its ratings on seven classes to speculative-grade from investment- grade, ranging from 'BB+ (sf)' to 'B- (sf)' on each. Six of the lowered ratings remain investment-grade. The remaining 13 downgraded classes already had speculative-grade ratings before the downgrades. S&P raised its ratings on 24 classes from five transactions with improved delinquency levels and performance trends. The upgrades reflect S&P's opinion that the projected credit support for the classes will be more than sufficient to cover the revised projected losses at the higher ratings. Some of the upgraded classes benefit particularly from principal payment priorities in their respective waterfalls, which decrease their exposure to expected losses versus the timing of when S&P projects these classes to be paid in full. Of the 70 affirmations, 33 were investment-grade, and 37 were speculative-grade ranging from 'BB+ (sf)' to 'CC (sf)'. S&P believes that the projected credit support for the 'CCC (sf)' and 'CC (sf)' rated classes will remain insufficient to cover the revised base-case projected losses to these classes. The 'CCC (sf)' affirmations indicate that S&P believes these classes are still vulnerable to defaulting, and the 'CC (sf)' affirmations reflect its belief that these classes remain virtually certain to default. According to S&P's counterparty criteria, it considered any applicable hedges related to these securities when taking these rating actions. These transactions generally receive credit support from subordination, overcollateralization (when available), and excess interest, as applicable. Some classes may also benefit from bond insurance. In these cases, the long-term rating on the class reflects the higher of the rating on the bond insurer and the underlying credit rating on the security without the bond insurance benefit. ECONOMIC OUTLOOK When determining a U.S. RMBS collateral pool's relative credit quality, S&P's loss expectations stem, to a certain extent, from its view of how the loans will behave under various economic conditions. Standard & Poor's baseline macroeconomic outlook assumptions for variables that it believes could affect residential mortgage performance are as follows: -- A 6.3% unemployment rate for 2014, decreasing to 5.8% for 2015; -- Home prices will increase 6% in 2014, using the 20-city Standard & Poor's/Case-Shiller Home Price Index; -- Real GDP growth will be 2.1% in 2014 and 3.0% in 2015; -- The 30-year mortgage rate will average 4.3% for 2014 and increase to 5.0% in 2015; and -- The inflation rate will be 1.9% in both 2014 and 2015. 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 propensity of servicers to advance on delinquent loans, and liquidation timelines. Under S&P's baseline economic assumptions, it expects RMBS collateral quality to improve. However, if the U.S. economy were to become stressed in line with Standard & Poor's downside forecast, S&P believes that U.S. RMBS credit quality would weaken. S&P's downside scenario reflects these key assumptions: -- Total unemployment rises to 7.0% in 2014 and then 7.2% in 2015; -- Downward pressure causes a 1.1% GDP growth in 2014, rising slightly to 1.2% in 2015; -- Home price momentum slows as potential buyers are not able to purchase property; and -- The 30-year fixed mortgage rate falls slightly to 4.3% in 2014, but limited access to credit and pressure on home prices largely prevents consumers from capitalizing on such lower rates. * S&P Takes Various Rating Actions on 18 U.S. RMBS Transactions --------------------------------------------------------------- Standard & Poor's Ratings Services took various rating actions on 199 transactions from 18 U.S. residential mortgage-backed securities (RMBS). S&P lowered its ratings on 42 classes, raised its ratings on 13, affirmed its ratings on 143, and withdrew one rating. The reviewed transactions were issued between 2002 and 2005 and are backed by adjustable- and fixed-rate prime jumbo mortgage loans, which are secured primarily by first liens on one- to four- family residential properties. Subordination provides credit enhancement for all of the reviewed deals. S&P considered specific performance characteristics for certain transactions that, in its view, could add a layer of volatility to our loss assumptions when they are stressed at the rating suggested by our cash flow models. When S&P's model recommended a higher rating, it affirmed its ratings on those classes instead to account for this uncertainty and to promote ratings stability. In general, these affirmed classes have one or more of the following characteristics that limit any potential upgrade: -- Insufficient subordination to warrant an upgrade; -- Delinquency trends; -- Historical interest shortfalls; -- Low priority in principal payments; or -- Significant growth in observed loss severities. In addition, some of the classes have failed their current delinquency triggers, which have limited the amount of unscheduled principal payments to subordinate classes. However, these transactions allow an increased percentage of unscheduled principal to resume being paid to the subordinate classes if those failed classes begin passing the delinquency triggers again. Therefore, S&P affirmed these ratings even though some of these classes passed a higher stress scenario. Seven of the transactions are backed by a small remaining pool of mortgage loans. S&P believes that transactions with a small number of remaining loans could negatively affect the credit support for the rated securities (tail risk). S&P addressed tail risk by conducting an additional loan-level analysis that stresses the loan concentration risk within the specific pool. The final rating assigned to each class is the lower of the rating derived from S&P's surveillance criteria without considering tail risk factors and the rating derived from its surveillance criteria while considering tail risk factors. Of the seven transactions, class 2-A-1 from Banc of America Mortgage Trust 2005-9 was the only class affected and thus downgraded after applying S&P's tail risk methodology. Other lowered ratings reflect S&P's belief that projected credit enhancement for the affected classes will be insufficient to cover the projected losses S&P applied at the previous rating levels. S&P projected increased losses for these transactions primarily because of: -- Increased delinquencies; -- Decreased credit enhancement provided to the classes; -- A noticeable increase or decrease in constant prepayment rates; or -- Large loan delinquency shifts (a high-balance loan within a transaction moving into the 90-plus-days delinquent bucket from 30-days delinquent since S&P's previous review). S&P lowered seven ratings from the transactions below by at least four notches after conducting its cash flow analysis: -- Banc of America Funding 2003-1 Trust, -- Banc of America Mortgage Trust 2005-9, -- CSFB Mortgage-Backed Trust Series 2004-8, -- Merrill Lynch Mortgage Investors Trust Series MLCC 2004-B, -- Structured Asset Securities Corporation Trust 2005-10, -- WaMu Mortgage Pass-Through Certificates Series 2003-AR1 Trust, and -- Wells Fargo Mortgage Backed Securities 2004-R Trust. There are several other factors, as noted in the ratings list, that contributed to the downgrades. Of the 42 downgrades, S&P lowered its ratings on four classes to speculative-grade from investment-grade. However, 20 lowered ratings remain investment- grade, and 18 were already speculative-grade before the rating actions. "We raised our ratings on 13 classes from four transactions due to improved delinquency levels and performance trends. The upgrades reflect our opinion that the projected credit support for the classes will be more than sufficient to cover the revised projected losses at the higher ratings. Some of the upgraded classes benefit particularly from principal payment priorities in their respective waterfalls, which decrease their exposure to expected losses versus timing of expected pay-down," S&P said. S&P raised its 'CCC (sf)' rating on the 4-A-2 class from Banc of America Mortgage Trust 2005-9 because it believes this class is no longer vulnerable to defaulting. Of the 143 affirmations, 80 were investment-grade and the other 63 were speculative-grade. S&P believes that the projected credit support for the 'CCC (sf)' and 'CC (sf)' rated classes will remain insufficient to cover the revised base-case projected losses to these classes. The 'CCC (sf)' affirmations indicate that S&P believes these classes are still vulnerable to defaulting, and the 'CC (sf)' affirmations reflect S&P's belief that these classes remain virtually certain to default. S&P withdrew its rating on class 5-A3 from Structured Asset Securities Corporation Trust 2005-10 after applying S&P's interest-only criteria. According to S&P's counterparty criteria, it considered any applicable hedges related to these securities when performing these rating actions. ECONOMIC OUTLOOK When determining a U.S. RMBS collateral pool's relative credit quality, S&P's loss expectations stem, to a certain extent, from its view of how the loans will behave under various economic conditions. Standard & Poor's baseline macroeconomic outlook assumptions for variables that it believes could affect residential mortgage performance are as follows: -- A 6.3% unemployment rate for 2014, decreasing to 5.8% for 2015; -- Home prices will increase 6% in 2014, using the 20-city Standard & Poor's/Case-Shiller Home Price Index; -- Real GDP growth will be 2.1% in 2014 and 3.0% in 2015; -- The 30-year mortgage rate will average 4.3% for 2014 and increase to 5.0% in 2015; and -- The inflation rate will be 1.9% in both 2014 and 2015. 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 propensity of servicers to advance on delinquent loans, and liquidation timelines. Under S&P's baseline economic assumptions, it expects RMBS collateral quality to improve. However, if the U.S. economy were to become stressed in line with Standard & Poor's downside forecast, it believes that U.S. RMBS credit quality would weaken. S&P's downside scenario reflects the following key assumptions: -- Total unemployment rises to 7.0% in 2014 and then 7.2% in 2015; -- Downward pressure causes a 1.1% GDP growth in 2014, rising slightly to 1.2% in 2015; -- Home price momentum slows as potential buyers are not able to purchase property; and -- The 30-year fixed mortgage rate falls slightly to 4.3% in 2014, but limited access to credit and pressure on home prices largely prevents consumers from capitalizing on such lower rates. * S&P Puts Ratings on 202 Tranches From 57 CLO Deals on Watch Pos. ------------------------------------------------------------------ Standard & Poor's Ratings Services, on Aug. 29, 2014, placed its ratings on 202 tranches from 57 U.S. collateralized loan obligation (CLO) transactions, which had $8.91 billion in original issuance, on CreditWatch with positive implications. The CreditWatch positive placements follow S&P's monthly review of U.S. cash flow collateralized debt obligations (CDOs) and resulted from increased overcollateralization from paydowns to the senior tranches among these CLO transactions; 35 of the 202 tranches have started paying down. Out of the 57 transactions in this review, 56 have exited their reinvestment period and the remaining transaction's reinvestment period will end in Sept. 2014. One transaction was issued in 2004, 10 were issued in 2005, 23 were issued in 2006, and 23 were issued in 2007. S&P expects to resolve the CreditWatch placements within 90 days after it completes a comprehensive cash flow analysis and committee review for each of the affected transactions. S&P will continue to monitor the CDO transactions it rates and take rating actions, including CreditWatch placements, as S&P deems appropriate. RATINGS PLACED ON CREDITWATCH POSITIVE ABCLO 2007-1 Ltd. Rating Class To From A-1b AA+ (sf)/Watch Pos AA+ (sf) A-2 AA+ (sf)/Watch Pos AA+ (sf) B A+ (sf)/Watch Pos A+ (sf) C BBB- (sf)/Watch Pos BBB- (sf) ACA CLO 2006-1 Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A- (sf)/Watch Pos A- (sf) D BB (sf)/Watch Pos BB (sf) ACAS CLO 2007-1 Ltd. Rating Class To From A-1 AA+ (sf)/Watch Pos AA+ (sf) A-1-J AA+ (sf)/Watch Pos AA+ (sf) A-2 AA+ (sf)/Watch Pos AA+ (sf) B A+ (sf)/Watch Pos A+ (sf) C BBB+ (sf)/Watch Pos BBB+ (sf) AIMCO CLO Series 2006-A Rating Class To From A-2 AA+ (sf)/Watch Pos AA+ (sf) B A+ (sf)/Watch Pos A+ (sf) Airlie CLO 2006-II Ltd. Rating Class To From A-1 AA+ (sf)/Watch Pos AA+ (sf) A-2 AA- (sf)/Watch Pos AA- (sf) B A (sf)/Watch Pos A (sf) AMMC CLO IV Ltd. Rating Class To From D BB+ (sf)/Watch Pos BB+ (sf) Ares IIIR/IVR CLO Ltd. Rating Class To From A-1 AA+ (sf)/Watch Pos AA+ (sf) A-2 AA+ (sf)/Watch Pos AA+ (sf) B AA (sf)/Watch Pos AA (sf) C A (sf)/Watch Pos A (sf) D BBB (sf)/Watch Pos BBB (sf) Avenue CLO Fund Ltd. Rating Class To From B-1F BB+ (sf)/Watch Pos BB+ (sf) B-1L BB+ (sf)/Watch Pos BB+ (sf) B-2L CCC+ (sf)/Watch Pos CCC+ (sf) Babson CLO Ltd. 2005-III Rating Class To From C A+ (sf)/Watch Pos A+ (sf) D BBB- (sf)/Watch Pos BBB- (sf) E BB+ (sf)/Watch Pos BB+ (sf) Babson CLO Ltd. 2006-I Rating Class To From C AA+ (sf)/Watch Pos AA+ (sf) D A+ (sf)/Watch Pos A+ (sf) E BB+ (sf)/Watch Pos BB+ (sf) Babson Mid-Market CLO Ltd. 2007-II Rating Class To From C AA+ (sf)/Watch Pos AA+ (sf) D A (sf)/Watch Pos A (sf) E BB+ (sf)/Watch Pos BB+ (sf) Bacchus (U.S.) 2006-1 Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A (sf)/Watch Pos A (sf) D BBB- (sf)/Watch Pos BBB- (sf) E B+ (sf)/Watch Pos B+ (sf) Belhurst CLO Ltd. Rating Class To From C(deferrable) AA- (sf)/Watch Pos AA- (sf) D(deferrable) BBB+ (sf)/Watch Pos BBB+ (sf) E(deferrable) BB+ (sf)/Watch Pos BB+ (sf) Black Diamond CLO 2005-1 Ltd. Rating Class To From C AA+ (sf)/Watch Pos AA+ (sf) D-1 BBB+ (sf)/Watch Pos BBB+ (sf) D-2 BBB+ (sf)/Watch Pos BBB+ (sf) E B+ (sf)/Watch Pos B+ (sf) BlackRock Senior Income Series V Ltd. Rating Class To From A-1 AA+ (sf)/Watch Pos AA+ (sf) A-2b AA+ (sf)/Watch Pos AA+ (sf) A-3 AA+ (sf)/Watch Pos AA+ (sf) B AA (sf)/Watch Pos AA (sf) C A (sf)/Watch Pos A (sf) D BB+ (sf)/Watch Pos BB+ (sf) Carlyle High Yield Partners VII Ltd. Rating Class To From C AA+ (sf)/Watch Pos AA+ (sf) D-1 BB+ (sf)/Watch Pos BB+ (sf) D-2 BB+ (sf)/Watch Pos BB+ (sf) Carlyle McLaren CLO Ltd. Rating Class To From A-1L AA+ (sf)/Watch Pos AA+ (sf) A-1LV AA+ (sf)/Watch Pos AA+ (sf) A-2L AA (sf)/Watch Pos AA (sf) A-3L A (sf)/Watch Pos A (sf) B-1L BBB (sf)/Watch Pos BBB (sf) B-2L CCC+ (sf)/Watch Pos CCC+ (sf) Castle Garden Funding Rating Class To From B-1 AA+ (sf)/Watch Pos AA+ (sf) B-2 AA+ (sf)/Watch Pos AA+ (sf) C-1 A- (sf)/Watch Pos A- (sf) C-2 A- (sf)/Watch Pos A- (sf) D-1 BBB+ (sf)/Watch Pos BBB+ (sf) D-2 BBB+ (sf)/Watch Pos BBB+ (sf) CIFC Funding 2006-I Ltd. Rating Class To From A--3L AA+ (sf)/Watch Pos AA+ (sf) B-1L A+ (sf)/Watch Pos A+ (sf) B-2L BB+ (sf)/Watch Pos BB+ (sf) CIFC Funding 2006-II Ltd. Rating Class To From A-2L AA+ (sf)/Watch Pos AA+ (sf) A-3L AA- (sf)/Watch Pos AA- (sf) B-1L A- (sf)/Watch Pos A- (sf) B-2L BB+ (sf)/Watch Pos BB+ (sf) CIFC Funding 2007-I Ltd. Rating Class To From A-1L AA+ (sf)/Watch Pos AA+ (sf) A-1LB AA+ (sf)/Watch Pos AA+ (sf) A-2L AA (sf)/Watch Pos AA (sf) A-3L A (sf)/Watch Pos A (sf) B-1L BBB (sf)/Watch Pos BBB (sf) Clear Lake CLO Ltd. Rating Class To From A-1 AA+ (sf)/Watch Pos AA+ (sf) A-2 AA- (sf)/Watch Pos AA- (sf) B A- (sf)/Watch Pos A- (sf) C BBB (sf)/Watch Pos BBB (sf) D B+ (sf)/Watch Pos B+ (sf) ColumbusNova CLO Ltd. 2007-I Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C AA- (sf)/Watch Pos AA- (sf) D BBB (sf)/Watch Pos BBB (sf) E BB (sf)/Watch Pos BB (sf) ColumbusNova CLO Ltd. 2006-I Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A+ (sf)/Watch Pos A+ (sf) D BBB- (sf)/Watch Pos BBB- (sf) E BB- (sf)/Watch Pos BB- (sf) Eaton Vance CDO IX Ltd. Rating Class To From C AA+ (sf)/Watch Pos AA+ (sf) D BBB+ (sf)/Watch Pos BBB+ (sf) Foothill CLO I Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A+ (sf)/Watch Pos A+ (sf) D BBB+ (sf)/Watch Pos BBB+ (sf) E BB+ (sf)/Watch Pos BB+ (sf) Type I Q BBB+p (sf)(i)/Watch Pos BBB+p (sf)(i) (i) The 'p' subscript indicates that the rating addresses only the principal portion of the obligation. Fraser Sullivan CLO II Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A+ (sf)/Watch Pos A+ (sf) D BB+ (sf)/Watch Pos BB+ (sf) E B (sf)/Watch Pos B (sf) Galaxy VIII CLO Ltd. Rating Class To From C A+ (sf)/Watch Pos A+ (sf) D BBB (sf)/Watch Pos BBB (sf) E B+ (sf)/Watch Pos B+ (sf) Golden Knight II CLO Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A (sf)/Watch Pos A (sf) D BBB (sf)/Watch Pos BBB (sf) Halcyon Loan Investors CLO II Ltd. Rating Class To From A-1-J AA+ (sf)/Watch Pos AA+ (sf) A-2 AA (sf)/Watch Pos AA (sf) B A (sf)/Watch Pos A (sf) C BBB (sf)/Watch Pos BBB (sf) Inwood Park CDO Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A+ (sf)/Watch Pos A+ (sf) D BBB (sf)/Watch Pos BBB (sf) Katonah VII CLO Ltd. Rating Class To From C A+ (sf)/Watch Pos A+ (sf) Kennecott Funding Ltd. Rating Class To From D-1 BBB+ (sf)/Watch Pos BBB+ (sf) D-2 BBB+ (sf)/Watch Pos BBB+ (sf) KKR Financial CLO 2005-2 Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A+ (sf)/Watch Pos A+ (sf) Landmark VII CDO Ltd. Rating Class To From A-3L AA+ (sf)/Watch Pos AA+ (sf) B-1L BBB+ (sf)/Watch Pos BBB+ (sf) B-2L B+ (sf)/Watch Pos B+ (sf) LCM V Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A+ (sf)/Watch Pos A+ (sf) D BBB+ (sf)/Watch Pos BBB+ (sf) E BB+ (sf)/Watch Pos BB+ (sf) LightPoint CLO IV Ltd. Rating Class To From A-2A AA+ (sf)/Watch Pos AA+ (sf) Lime Street CLO Ltd. Rating Class To From A AA+ (sf)/Watch Pos AA+ (sf) B A+ (sf)/Watch Pos A+ (sf) C BBB+ (sf)/Watch Pos BBB+ (sf) D BB+ (sf)/Watch Pos BB+ (sf) Loomis Sayles CLO I Ltd. Rating Class To From C AA+ (sf)/Watch Pos AA+ (sf) D BB+ (sf)/Watch Pos BB+ (sf) E CCC+ (sf)/Watch Pos CCC+ (sf) Madison Park Funding I Ltd. Rating Class To From D AA (sf)/Watch Pos AA (sf) E BBB+ (sf)/Watch Pos BBB+ (sf) Mountain View CLO II Ltd. Rating Class To From A-1 AA+ (sf)/Watch Pos AA+ (sf) A-2 AA+ (sf)/Watch Pos AA+ (sf) A-3 AA+ (sf)/Watch Pos AA+ (sf) B AA- (sf)/Watch Pos AA- (sf) NACM CLO I Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A+ (sf)/Watch Pos A+ (sf) D BB+ (sf)/Watch Pos BB+ (sf) Nautique Funding Ltd. Rating Class To From A-3 AA+ (sf)/Watch Pos AA+ (sf) B-1 A+ (sf)/Watch Pos A+ (sf) B-2 A+ (sf)/Watch Pos A+ (sf) C BBB- (sf)/Watch Pos BBB- (sf) D BB- (sf)/Watch Pos BB- (sf) Octagon Investment Partners X Ltd. Rating Class To From A-1 AA+ (sf)/Watch Pos AA+ (sf) A-1R AA+ (sf)/Watch Pos AA+ (sf) B AA (sf)/Watch Pos AA (sf) C A (sf)/Watch Pos A (sf) D BBB (sf)/Watch Pos BBB (sf) E BB (sf)/Watch Pos BB (sf) One Wall Street CLO II Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A+ (sf)/Watch Pos A+ (sf) D BB+ (sf)/Watch Pos BB+ (sf) E B- (sf)/Watch Pos B- (sf) PPM Grayhawk CLO Ltd. Rating Class To From A-1 AA- (sf)/Watch Pos AA- (sf) A-2b AA- (sf)/Watch Pos AA- (sf) A-3 A+ (sf)/Watch Pos A+ (sf) B BBB+ (sf)/Watch Pos BBB+ (sf) Red River CLO Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C AA- (sf)/Watch Pos AA- (sf) Sapphire Valley CDO I Ltd. Rating Class To From A AA+ (sf)/Watch Pos AA+ (sf) B A+ (sf)/Watch Pos A+ (sf) C A- (sf)/Watch Pos A- (sf) D BBB (sf)/Watch Pos BBB (sf) Shinnecock CLO 2006-1 Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C A (sf)/Watch Pos A (sf) D BBB- (sf)/Watch Pos BBB- (sf) Silverado CLO 2006-II Ltd. Rating Class To From A-1 AA+ (sf)/Watch Pos AA+ (sf) A-1J AA+ (sf)/Watch Pos AA+ (sf) A-2 AA (sf)/Watch Pos AA (sf) B A (sf)/Watch Pos A (sf) C BBB- (sf)/Watch Pos BBB- (sf) Southfork CLO Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C BB+ (sf)/Watch Pos BB+ (sf) Stone Tower CLO VI Ltd. Rating Class To From A-1 AA+ (sf)/Watch Pos AA+ (sf) A-2b AA+ (sf)/Watch Pos AA+ (sf) A-3 AA (sf)/Watch Pos AA (sf) B A (sf)/Watch Pos A (sf) Stone Tower CLO VII Ltd. Rating Class To From A-1 AA+ (sf)/Watch Pos AA+ (sf) A-2 AA+ (sf)/Watch Pos AA+ (sf) A-3 AA- (sf)/Watch Pos AA- (sf) TELOS CLO 2006-1 Ltd. Rating Class To From B AA+ (sf)/Watch Pos AA+ (sf) C AA- (sf)/Watch Pos AA- (sf) D BBB+ (sf)/Watch Pos BBB+ (sf) E BB (sf)/Watch Pos BB (sf) Trimaran CLO IV Ltd. Rating Class To From A-3L AA+ (sf)/Watch Pos AA+ (sf) B-1L BBB+ (sf)/Watch Pos BBB+ (sf) Westchester CLO Ltd. Rating Class To From A-1-B AA (sf)/Watch Pos AA (sf) B A+ (sf)/Watch Pos A+ (sf) C BBB (sf)/Watch Pos BBB (sf) D B+ (sf)/Watch Pos B+ (sf) E CCC- (sf)/Watch Pos CCC- (sf) WhiteHorse IV Ltd. Rating Class To From A-1 AA+ (sf)/Watch Pos AA+ (sf) A-2 AA (sf)/Watch Pos AA (sf) B A (sf)/Watch Pos A (sf) C BBB (sf)/Watch Pos BBB (sf) * S&P Lowers 15 Ratings From 15 RMBS Transactions ------------------------------------------------- Standard & Poor's Ratings Services lowered, on Aug. 29, 2014, its ratings on 15 classes from eight U.S. residential mortgage-backed securities (RMBS) transactions backed primarily by second-lien mortgage loans. Two of these ratings were removed from CreditWatch, where they were placed with negative implications. In addition, S&P affirmed its ratings on 13 classes from four transactions. The reviewed transactions were issued between 2001 and 2005 and are backed primarily by adjustable- and fixed-rate closed-end second-lien, home equity line of credit (HELOC), and second-lien high-combined loan-to-value (HCLTV) mortgage loans on one- to four-family residential properties. The downgrades stemmed primarily from increased loss projections because of increasing delinquency pipelines, which, based on S&P's criteria, affect the roll-rates applied to delinquent and nondelinquent loans. In addition, the lowered ratings reflect continual principal payments to support classes, which deteriorate the dollar amount of credit enhancement for some classes. Two of the lowered ratings had been placed on CreditWatch with negative implications on Aug. 19, 2014, because of interest shortfalls. In accordance with S&P's interest shortfall criteria, it lowered its rating on class A-5 from CWABS Inc.'s series 2002- S2 to 'BB+ (sf)' from 'A+ (sf)' and removed it from CreditWatch negative. This class began taking interest shortfalls in Feb. 2014 and has had an interest shortfall outstanding for seven months. S&P also lowered its rating on Irwin Whole Loan Home Equity Trust 2005-B's class 2B-1 to 'CC (sf)' from 'BBB- (sf)' and removed it from CreditWatch negative, as not only is the class experiencing interest shortfalls, but also its credit support has deteriorated to the point where S&P believes default is virtually certain. Of the 15 downgrades, S&P lowered eight ratings out of the investment-grade category ('BBB-' or higher), with four ratings remaining investment grade after being lowered. The remaining downgraded classes already had speculative-grade ratings ('BB+' or lower) before the actions. Senior tranches accounted for four of the lowered ratings. S&P affirmed its ratings on 13 classes from four transactions, including one class rated 'CC (sf)'. The affirmations on classes with ratings above 'CCC (sf)' reflect S&P's opinion that the credit support for these classes will remain sufficient to cover the projected losses at that rating level. S&P believes that the projected credit support for the 'CC (sf)' rated class will remain insufficient to cover the projected base-case loss to the respective transaction. In addition, the 'CC (sf)' affirmation reflects S&P's belief that this class remains virtually certain to default. "Based on our criteria, we use a collateral pool's total cumulative losses to determine its risk score, which in turn we use to determine the default rates we apply to the pool's nondelinquent and delinquent loans. Some transactions in this review benefit from a pool policy that covers certain losses on specific loans. In addition, some transactions benefit from seller's loss coverage, where the seller makes payments to the trust fund if the pool policy does not cover realized losses on the mortgage loans. Therefore, the reported cumulative losses may not fully indicate actual collateral performance, so we evaluate these transactions by adding the amounts drawn on each collateral pool's respective pool policy or seller's loss coverage to the reported cumulative loss amounts to determine the collateral pool's actual cumulative losses. This may result in higher risk scores and higher projected default rates," S&P said. Because pool policy agreements may also require certain conditions before coverage, transactions benefiting from pool policies still experience significant losses despite this pool policy coverage. Also, because of these conditions, some transactions have received sporadic coverage from their pool policies, while others have received none for several years while still experiencing realized losses. Therefore, when the pool policy provider has an investment-grade rating, our analysis first considers the underlying credit rating on the security determined without the pool policy's benefit. Then, if the pool policy provider has consistently covered losses over a period of time, S&P may assign a rating on the security up to two notches above the underlying credit rating. Transactions with seller's loss coverage may be rated up to the rating on the seller's loss coverage provider, if the loss coverage is sufficient to maintain the rating at that category. In line with S&P's counterparty criteria, it considered any applicable hedges related to these securities when performing these rating actions. The transactions generally receive credit support from subordination, overcollateralization (when available), and excess interest (as applicable). Bond insurance might also benefit some classes. In these cases, the long-term rating on the class reflects the higher of the rating on the bond insurer and the underlying credit rating on the security without the bond insurance's benefit. ECONOMIC OUTLOOK When determining a U.S. RMBS collateral pool's relative credit quality, S&P's loss expectations stem, to a certain extent, from its view of how the loans will behave under various economic conditions. Standard & Poor's baseline macroeconomic outlook assumptions for variables that it believes could affect residential mortgage performance are as follows: -- A 6.3% unemployment rate for 2014, decreasing to 5.8% for 2015; -- Home prices will increase 6% in 2014, using the 20-city Standard & Poor's/Case-Shiller Home Price Index; -- Real GDP growth will be 2.1% in 2014 and 3.0% in 2015; -- The 30-year mortgage rate will average 4.3% for 2014 and increase to 5.0% in 2015; and -- The inflation rate will be 1.9% in both 2014 and 2015. 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 propensity of servicers to advance on delinquent loans, and liquidation timelines. Under S&P's baseline economic assumptions, it expects RMBS collateral quality to improve. However, if the U.S. economy were to become stressed in line with Standard & Poor's downside forecast, it believes that U.S. RMBS credit quality would weaken. S&P's downside scenario reflects the following key assumptions: -- Total unemployment rises to 7.0% in 2014 and then 7.2% in 2015; -- Downward pressure causes a 1.1% GDP growth in 2014, rising slightly to 1.2% in 2015; -- Home price momentum slows as potential buyers are not able to purchase property; and -- The 30-year fixed mortgage rate falls slightly to 4.3% in 2014, but limited access to credit and pressure on home prices largely prevents consumers from capitalizing on such lower rates. RATINGS LOWERED American Home Mortgage Investment Trust 2004-4 Rating Class CUSIP To From Main rating driver VII-A 02660TCU5 B (sf) BB+ (sf) Higher of SPUR/insurer rating Credit Suisse First Boston Mortgage Securities Corp., Series 2001- S6 Rating Class CUSIP To From Main rating driver II-P 22540AH35 BBB (sf) A+ (sf) PO methodology B-1 22540AH68 BBB (sf) A+ (sf) Eroded credit support due to passing triggers CWABS Inc., Series 2003-S1 Rating Class CUSIP To From Main rating driver M-1 126671ZS8 B (sf) BBB+ (sf) Increased delinquencies CWABS Inc., Series 2003-S2 Rating Class CUSIP To From Main rating driver M-1 126671P67 BBB (sf) A+ (sf) Increased delinquencies M-2 126671P75 BB (sf) BBB- (sf) Increased delinquencies B-1 126671P83 B- (sf) BB+ (sf) Increased delinquencies Home Equity Loan Trust 2004-HS1 Rating Class CUSIP To From Main rating driver A-II 76110VQE1 BB+ (sf) BBB+ (sf) Higher of SPUR/insurer rating Home Loan Trust 2003-HI2 Rating Class CUSIP To From Main rating driver M-2 76110VNH7 BB+ (sf) BBB (sf) Increased delinquencies M-3 76110VNJ3 CCC (sf) B- (sf) Failed base-case loss stress Irwin Whole Loan Home Equity Trust 2005-B Rating Class CUSIP To From Main rating driver 2M-2 464187CW1 BBB+ (sf) A (sf) Increased delinquencies 2M-3 464187CX9 B+ (sf) BBB+ (sf) Increased delinquencies 2M-4 464187CY7 CCC (sf) BBB (sf) Increased delinquencies SPUR--Standard & Poor's underlying rating. PO--Principal only. RATINGS LOWERED AND REMOVED FROM CREDITWATCH CWABS Inc., Series 2002-S2 Rating Class CUSIP To From Main rating driver A-5 126671QN9 BB+ (sf) A+ (sf)/ Interest shortfall Watch Neg criteria Irwin Whole Loan Home Equity Trust 2005-B Rating Class CUSIP To From Main rating driver 2B-1 464187CZ4 CC (sf) BBB- (sf)/ Increased delinquencies Watch Neg RATINGS AFFIRMED CWABS Inc., Series 2003-S1 Rating Class CUSIP To From A-5 126671ZP4 A+ (sf) A+ (sf) CWABS Inc., Series 2003-S2 Rating Class CUSIP To From A-4 126671P34 A+ (sf) A+ (sf) A-5 126671P42 A+ (sf) A+ (sf) Home Loan Trust 2003-HI2 Rating Class CUSIP To From A-6 76110VNE4 A+ (sf) A+ (sf) M-1 76110VNG9 A+ (sf) A+ (sf) B 76110VNK0 CC (sf) CC (sf) Irwin Whole Loan Home Equity Trust 2005-B Rating Class CUSIP To From 1M-1 464187CR2 A+ (sf) A+ (sf) 1M-2 464187CS0 A (sf) A (sf) 1M-3 464187CT8 BBB (sf) BBB (sf) 1M-4 464187CU5 BBB- (sf) BBB- (sf) 2M-1 464187CV3 A+ (sf) A+ (sf) 1B-1 464187DB6 BB+ (sf) BB+ (sf) 1B-2 464187DC4 BB (sf) BB (sf) ********* 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 by e-mail. 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 the nation's bankruptcy courts. The list includes links to freely downloadable of these small-dollar petitions in Acrobat PDF documents. 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. ********* 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, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Psyche A. Castillon, Ivy B. Magdadaro, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2014. 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 ***