Approximately $69.1 Million of Structured Securities Affected
New York, May 08, 2013 -- Moody's has upgraded the ratings of two and affirmed the ratings of two
classes of Notes issued by Crest G-Star 2001-1, LP.
The upgrades are due to greater than expected recoveries on defaulted
assets and a lower average credit risk of the remaining asset pool.
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.
Moody's rating action is as follows:
US $60,000,000 Class B-1 Second Priority Fixed
Rate Term Notes, Due 2035, Upgraded to Baa3 (sf); previously
on Jul 20, 2011 Downgraded to Ba1 (sf)
US $15,000,000 Class B-2 Second Priority Floating
Rate Term Notes, Due 2035, Upgraded to Baa3 (sf); previously
on Jul 20, 2011 Downgraded to Ba1 (sf)
US $20,000,000 Class C Third Priority Fixed Rate Term
Notes, Due 2034, Affirmed Caa3 (sf); previously on Jul
20, 2011 Downgraded to Caa3 (sf)
US $15,000,000 Class D FOurth Priority Fixed Rate Term
Notes, Due 2035, Affirmed Ca (sf); previously on Sep
30, 2010 Downgraded to Ca (sf)
RATINGS RATIONALE
Crest G-Star 2001-1, LP is a static cash 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 February 28, 2013 Note Valuation report, the aggregate
Note balance of the transaction, including preferred shares,
has decreased to $99.46 million from $500.4
million at issuance, with the paydown currently directed to the
Class B-1 and Class B-2 Notes, as a result of amortization
of the underlying collateral and failure of certain par value tests.
There are 13 assets with a par balance of $65.9 million
(87.8% of the current pool balance) that are considered
defaulted securities as of the March 28, 2013 Trustee report.
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 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 assessments for the non-Moody's rated
collateral. Moody's modeled a bottom-dollar WARF of
4,230 compared to 5,034 at last review. The current
distribution of Moody's rated collateral and assessments for non-Moody's
rated collateral is as follows: Aaa-Aa3 (11.7%
compared to 17.5% at last review), Baa1-Baa3
(10.7% compared to 7.7% at last review),
Ba1-Ba3 (16.9% compared to 7.1% at
last review), B1-B3 (14.1% compared to 11.3%
at last review), and Caa1-C (46.6% compared
to 56.3% at last review).
Moody's modeled a WAL of 2.5 years compared to 2.2 years
at last review. The greater WAL incorporates Moody's view on the
current pool composition and extension risk.
Moody's modeled a variable WARR with a mean of 13.1%
compared to 13.8% at last review.
Moody's modeled a MAC of 17.3% compared to 16.0%
at last review.
Moody's review incorporated CDOROM® v2.8, one of Moody's
CDO rating models, which was released on March 25, 2013.
The cash flow model, CDOEdge® v3.2.1.2,
was used to analyze the cash flow waterfall and its effect on the capital
structure of the deal.
Moody's analysis encompasses the assessment of stress scenarios.
Changes in any one or combination of the key parameters may have rating
implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in certain
stress scenarios may be offset by a change in one or more of the other
key parameters. 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 assessments 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 1 notch 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 given the weak pace of recovery
and commercial real estate property markets. Commercial real estate
property values are continuing to move in a modestly positive direction
along with a rise in investment activity and stabilization in core property
type performance. Limited new construction and moderate job growth
have aided this improvement. However, a consistent upward
trend will not be evident until the volume of investment activity steadily
increases for a significant period, non-performing properties
are cleared from the pipeline, and fears of a Euro area recession
are abated.
The hotel sector is performing strongly with nine straight quarters of
growth and the multifamily sector continues to show increases in demand
with a growing renter base and declining home ownership. Recovery
in the office sector continues at a measured pace with minimal additions
to supply. However, office demand is closely tied to employment,
where growth remains slow and employers are considering decreases in the
leased space per employee. Also, primary urban markets are
outperforming secondary suburban markets. Performance in the retail
sector continues to be mixed with retail rents declining for the past
four years, weak demand for new space and lackluster sales driven
by internet sales growth. Across all property sectors, the
availability of debt capital continues to improve with robust securitization
activity of commercial real estate loans supported by a monetary policy
of low interest rates.
Moody's central global macroeconomic scenario calls for US GDP growth
for 2013 that is likely to remain close to 2% as the greater impetus
from the US private sector is likely to broadly offset the drag on activity
from more restrictive fiscal policy. Thereafter, we expect
the US economy to expand at a somewhat faster pace than is likely this
year, closer to its long-run average pace of growth.
Risks to our forecasts remain skewed to the downside despite recent positive
developments. Moody's believes that the three most immediate
risks are: i) the risk of a deeper than currently expected recession
in the euro area accompanied by deeper credit contraction, potentially
triggered by a further intensification of the sovereign debt crisis;
ii) slower-than-expected recovery in major emerging markets
following the recent slowdown; and iii) an escalation of geopolitical
tensions, resulting in adverse economic developments.
The methodologies used in this rating were "Moody's Approach to Rating
SF CDOs" published in May 2012, and "Moody's Approach to Rating
Commercial Real Estate CDOs" published in July 2011. Please see
the Credit Policy page on www.moodys.com for a copy of these
methodologies.
REGULATORY DISCLOSURES
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.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit 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
Michael Gerdes
MD - Structured Finance
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 Upgrades Two and Affirms Two Classes of Crest G-Star 2001-1, LP
