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Related Issuers
Announcement:

Moody's Affirms All Classes of Crest G-Star 2001-1, LP

Global Credit Research - 23 May 2012

Approximately $89.9 Million of Structured Securities Affected

NOTE: On July 23 2012, the press release was revised as follows: The maturity year of Class C Third Priority Fixed Rate Term Notes has been corrected to 2035 from 2034. Revised release follows:

New York, May 23, 2012 -- Moody's has affirmed the ratings of four classes of Notes issued by Crest G-Star 2001-1, LP. The affirmations are due to the key transaction parameters performing within levels commensurate with the existing ratings levels. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO and Re-remic) transactions.

Class B-1 Second Priority Fixed Rate Term Notes, Due 2035, Affirmed at Ba1 (sf); previously on Jul 20, 2011 Downgraded to Ba1 (sf)

Class B-2 Second Priority Floating Rate Term Notes, Due 2035, Affirmed at Ba1 (sf); previously on Jul 20, 2011 Downgraded to Ba1 (sf)

Class C Third Priority Fixed Rate Term Notes, Due 2035, Affirmed at Caa3 (sf); previously on Jul 20, 2011 Downgraded to Caa3 (sf)

Class D Fourth Priority Fixed Rate Term Notes, Due 2035, Affirmed at Ca (sf); previously on Sep 30, 2010 Downgraded to Ca (sf)

RATINGS RATIONALE

Crest G-Star 2001-1, LP is a static cash CRE CDO transaction backed by a portfolio of commercial mortgage backed securities (CMBS) (99.5% of the pool balance) and one whole loan (0.5%). As of the April 30, 2012 Trustee report, the aggregate Note balance of the transaction, including preferred shares, has decreased to $120.4 million from $500.4 million at issuance, with the paydown directed to the Class A Notes, as a result of amortization of the underlying collateral and failure of certain par value tests.

There are 15 assets with a par balance of $84.7 million (82.0% of the current pool balance) that are considered Defaulted Securities as of the April 30, 2012 Trustee report. While there have been limited realized losses on the underlying collateral to date, Moody's does expect significant losses on the Defaulted Securities to occur once they are realized.

Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor (WARF), weighted average life (WAL), weighted average recovery rate (WARR), and Moody's asset correlation (MAC). These parameters are typically modeled as actual parameters for static deals and as covenants for managed deals.

WARF is a primary measure of the credit quality of a CRE CDO pool. We have completed updated credit estimates for the non-Moody's rated collateral. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 5,034 compared to 5,212 at last review. The distribution of current ratings and credit estimates is as follows: Aaa-Aa3 (17.5% compared to 16.6% at last review), A1-A3 (0.0%, the same as that at last review), Baa1-Baa3 (7.7% compared to 1.8% at last review), Ba1-Ba3 (7.1% compared to 14.9% at last review), B1-B3 (11.3% compared to 16.1% at last review), and Caa1-C (56.3% compared to 50.7% at last review).

WAL acts to adjust the probability of default of the collateral in the pool for time. Moody's modeled to a WAL of 2.2 years compared to 2.0 years at last review. The greater WAL incorporates Moody's view on the current pool composition and extension risk.

WARR is the par-weighted average of the mean recovery values for the collateral assets in the pool. Moody's modeled a variable WARR with a mean of 13.8% compared to a mean of 13.4% at last review.

MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the collateral pool (i.e. the measure of diversity). Moody's modeled a MAC of 16.0% compared to 13.6% at last review.

Moody's review incorporated CDOROM® v2.8, one of Moody's CDO rating models, which was released on January 24, 2011.

The cash flow model, CDOEdge® v3.2.1.1, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal.

Changes in any one or combination of the key parameters may have rating implications on certain classes of rated notes. However, in many instances, a change in key parameter assumptions in certain stress scenarios may be offset by a change in one or more of the other key parameters. In general, the rated Notes are particularly sensitive to rating changes within the collateral pool. Holding all other key parameters static, changing the current ratings and credit estimates of the collateral by one notch downward or by one notch upward would result in an average modeled rating movement on the rated tranches of 0 to 2 notches downward and 1 to 2 notches upward respectively.

The performance expectations for a given variable indicate Moody's forward-looking view of the likely range of performance over the medium term. From time to time, Moody's may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral's credit quality is stronger or weaker than Moody's had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics.

Primary sources of assumption uncertainty are the extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth.

The methodologies used in this rating were "Moody's Approach to Rating SF CDOs" published in May 2012, and "Moody's Approach to Rating Commercial Real Estate CDOs" published in July 2011. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Romina Padhi
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Deryk Meherik
VP - Senior Credit Officer
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Affirms All Classes of Crest G-Star 2001-1, LP
No Related Data.

 

© 2013 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

 


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