Approximately $105.6 Million of Structured Securities Affected
New York, July 20, 2011 -- Moody's has downgraded the ratings of three classes and affirmed the ratings
of one class of Notes issued by Crest G-Star 2001-1,
LP due to the deterioration in the credit quality of the underlying portfolio
as evidenced by an increase in the weighted average rating factor (WARF),
a decrease in weighted average recovery rate (WARR) and an increase in
Defaulted Securities. The rating action is the result of Moody's
on-going surveillance of commercial real estate collateralized
debt obligation (CRE CDO) transactions.
Class B-1 Second Priority Fixed Rate Term Notes, Downgraded
to Ba1 (sf); previously on Oct 26, 2009 Downgraded to Baa3
(sf)
Class B-2 Second Priority Floating Rate Term Notes, Downgraded
to Ba1 (sf); previously on Oct 26, 2009 Downgraded to Baa3
(sf)
Class C Third Priority Fixed Rate Term Notes, Downgraded to Caa3
(sf); previously on Sep 30, 2010 Downgraded to Caa1 (sf)
Class D Fourth Priority Fixed Rate Term Notes, 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 commercial mortgage backed securities (CMBS) (99.6%
of the pool balance) and one whole loan (0.4%). As
of the June 30, 2011 Trustee report, the aggregate Note balance
of the transaction, including preferred shares, has decreased
to $135.9 million from $500.4 million at issuance,
with the paydown directed to the Class A, Class B-1 and B-2
Notes. This is a result of amortization of the underlying collateral
and the failure of the Class B and Class C over-collateralization
tests. The Class A Note has completely paid down as of the June
30, 2011 Trustee Report.
There are twenty assets with a par balance of $86.9 million
(65.1% of the current pool balance) that are considered
Defaulted Securities as of the June 30, 2011 Trustee report.
While there have been limited realized losses to the underlying collateral
to date, Moody's does expect significant losses to occur once
they are realized.
Moody's has identified the following parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted
average life (WAL), (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 5,212 compared to 2,392
at last review. The distribution of current ratings and credit
estimates is as follows: Aaa-Aa3 (16.6% compared
to 8.2% at last review), A1-A3 (0.0%
compared to 11.2% at last review), Baa1-Baa3
(1.8% compared to 36.8% at last review),
Ba1-Ba3 (14.9% compared to 16.1% at
last review), B1-B3 (16.1% compared to 9.8%
at last review), and Caa1-C (50.6% compared
to 17.9% 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 2.0 years compared
to 1.3 years at last review.
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 13.4% compared to a mean of 32.2%
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 13.6% compared to 3.1% 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® v3.2.1.0,
was used to analyze the cash flow waterfall and its effect on the capital
structure of the deal.
Changes in any one or combination of the key parameters may have rating
implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the other
key parameters. Rated notes are particularly sensitive to changes
in recovery rate assumptions. Holding all other key parameters
static, a one notch downgrade or a one notch upgrade to the underlying
collateral would result in average rating movement on the rated tranches
of 0 to 3 notches downward and 0 to 2 notches upward, respectively.
The performance expectations for a given variable indicate Moody's forward-looking
view of the likely range of performance over the medium term. From
time to time, Moody's may, if warranted, change these
expectations. Performance that falls outside the given range may
indicate that the collateral's credit quality is stronger or weaker than
Moody's had anticipated when the related securities ratings were issued.
Even so, a deviation from the expected range will not necessarily
result in a rating action nor does performance within expectations preclude
such actions. The decision to take (or not take) a rating action
is dependent on an assessment of a range of factors including, but
not exclusively, the performance metrics. Primary sources
of assumption uncertainty are the current sluggish macroeconomic environment
and varying performance in the commercial real estate property markets.
However, Moody's expects to see increasing or stabilizing property
values, higher transaction volumes, a slowing in the pace
of loan delinquencies and greater liquidity for commercial real estate
in 2011 The hotel and multifamily sectors are continuing to show signs
of recovery, while recovery in the office and retail sectors will
be tied to recovery of the broader economy. The availability of
debt capital continues to improve with terms returning toward market norms.
Moody's central global macroeconomic scenario reflects an overall sluggish
recovery through 2012, amidst ongoing individual, corporate
and governmental deleveraging, persistent unemployment, and
government budget considerations.
The principal methodology used in these ratings is "Moody's Approach
to Rating SF CDOs" published in November 2010.
Other methodologies used in these ratings are "CMBS: Moody's Approach
to Rating Static CDOs Backed by Commercial Real Estate Securities" published
in June 2004. Please see the Credit Policy page on www.moodys.com
for a copy of these methodologies.
REGULATORY DISCLOSURES
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.
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
Moody's did not receive or take into account a third party assessment
on the due diligence performed regarding the underlying assets or financial
instruments related to the monitoring of this transaction in the past
six months.
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.
New York
Romina Padhi
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Deryk Meherik
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
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 One and Downgrades Three CRE CDO Classes of Crest G-Star 2001-1, LP
