Moody's also affirmed rating of $70.95 mm of notes.
New York, May 08, 2013 -- Moody's Investors Service announced today that it has upgraded the rating
on the following notes issued by MMCaps Funding XVII, Ltd.
U.S. $162,000,000 Class A-1 Floating
Rate Notes Due 2035 (current outstanding balance of $ 94,644,676.61),
Upgraded to Aa3 (sf); previously on March 20, 2012 Upgraded
to A3 (sf);
U.S. $19,500,000 Class A-2 Floating
Rate Notes Due 2035 (current outstanding balance of $19,500,000),
Upgraded to A2 (sf); previously on March 20, 2012 Upgraded
to Baa1 (sf);
U.S. $33,000,000 Class B Floating Rate
Notes Due 2035 (current outstanding balance of $33,000,000),
Upgraded to A3 (sf); previously on March 20, 2012 Upgraded
to Baa3 (sf);
Moody's also affirmed the ratings on the following notes:
U.S.$35,475,000 Class C-1 Floating
Rate Notes Due 2035 (current outstanding balance of $35,475,000),
Affirmed to Ca (sf); previously on March 27, 2009 Downgraded
to Ca (sf);
U.S.$35,475,000 Class C-2 Floating
Rate Notes Due 2035 (current outstanding balance of $35,475,000),
Affirmed to Ca (sf); previously on March 27, 2009 Downgraded
to Ca (sf)
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes
are primarily a result of the deleveraging of the senior notes and an
increase in the transaction's overcollateralization ratios since
the last rating action in March 2012.
Moody's notes that the Class A-1 notes have been paid down
by approximately 27.2% or $35.36 million since
the last rating action, due to diversion of excess interest proceeds
and disbursement of principal proceeds from redemptions and sales of underlying
assets. As a result of this deleveraging, the Class A-1
notes' par coverage improved to 213.43% from 174.47%
since the last rating action, as calculated by Moody's.
Based on the latest trustee note valuation report dated March 1,
2013, the Class A/B Principal Coverage Ratio and the Class C Principal
Coverage Ratio are reported at 136.62% (limit 125.0%)
and 93.61% (limit 102.10%), respectively,
versus February 24, 2012 levels of 129.81% and 93.47%,
respectively. Going forward, the senior notes will continue
to benefit from the diversion of excess interest and the proceeds from
future redemptions of any assets in the collateral pool.
Moody's also notes that the deal benefited from a slight improvement in
the credit quality of the underlying portfolio. Based on Moody's
calculation, the weighted average rating factor (WARF) improved
to 1081 compared to 1166 as of the last rating action date. The
Moody's cumulative assumed defaulted amount has declined to $42.6
million from $49.7 million as of the last rating action
date.
Due to the impact of revised and updated key assumptions referenced in
our rating methodology, key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor,
Moody's Asset Correlation, and weighted average recovery rate,
may be different from the trustee's reported numbers. In its base
case, Moody's analyzed the underlying collateral pool to have a
performing par balance of $202 million, defaulted/deferring
par of $42.6 million, a weighted average default probability
of 23.55% (implying a WARF of 1081), Moody's Asset
Correlation of 23.03%, and a weighted average recovery
rate upon default of 9.55%. In addition to the quantitative
factors that are explicitly modeled, qualitative factors are part
of rating committee considerations. Moody's considers the structural
protections in the transaction, the risk of triggering an Event
of Default, recent deal performance under current market conditions,
the legal environment, and specific documentation features.
All information available to rating committees, including macroeconomic
forecasts, inputs from other Moody's analytical groups, market
factors, and judgments regarding the nature and severity of credit
stress on the transactions, may influence the final rating decision.
MMCAPS Funding XVII, Ltd., issued in September 2005,
is a collateralized debt obligation backed by a portfolio of bank and
insurance trust preferred securities.
The portfolio of this CDO is mainly comprised of trust preferred securities
(TruPS) issued by small to medium sized U.S. community banks
and insurance companies that are generally not publicly rated by Moody's.
To evaluate the credit quality of bank TruPS without public ratings,
Moody's uses RiskCalc model, an econometric model developed by Moody's
KMV, to derive their credit scores. Moody's evaluation of
the credit risk for a majority of bank obligors in the pool relies on
FDIC financial data received as of Q4-2012. For insurance
TruPS without public ratings, Moody's relies on the insurance team
and the underlying insurance firms' annual financial reporting to assess
their credit quality. Moody's also evaluates the sensitivity of
the rated transaction to the volatility of the credit estimates,
as described in Moody's Rating Implementation Guidance "Updated Approach
to the Usage of Credit Estimates in Rated Transactions" published in October
2009.
The principal methodology used in this rating was "Moody's Approach to
Rating TRUP CDOs" published in May 2011. Please see the Credit
Policy page on www.moodys.com for a copy of this methodology.
The transaction's portfolio was modeled using CDOROM v.2.8.9
to develop the default distribution from which the Moody's Asset Correlation
parameter was obtained. This parameter was then used as an input
in a cash flow model using CDOEdge. CDOROM v.2.8.9
is available on moodys.com under Products and Solutions --
Analytical models, upon return of a signed free license agreement.
Moody's performed a number of sensitivity analyses of the results to certain
key factors driving the ratings. We analyzed the sensitivity of
the model results to changes in the portfolio WARF (representing an improvement
or a deterioration in the credit quality of the collateral pool),
assuming that all other factors are held equal. If the WARF is
increased by 200 points from the base case of 1081, the model-implied
rating of the Class A-1 notes is one notch worse than the base
case result. Similarly, if the WARF is decreased by 141 points,
the model-implied rating of the Class A-1 notes is one notch
better than the base case result.
In addition, Moody's also performed one additional sensitivity
analyses as described in the Special Comment "Sensitivity Analyses
on Deferral Cures and Default Timing for Monitoring TruPS CDOs"
published in August 2012. In the first, we gave par credit
to banks that are deferring interest on their TruPS but satisfy specific
credit criteria and thus have a strong likelihood of resuming interest
payments. Under this sensitivity analysis, we gave par credit
to $15.8 million of bank TruPS. In the second sensitivity
analysis, we ran alternative default-timing profile scenarios
to reflect the lower likelihood of a large spike in defaults. Below
is a summary of the impact on all rated notes (shown in terms of the number
of notches' difference versus the current model output, where a
positive difference corresponds to lower expected loss), assuming
that all other factors are held equal:
Sensitivity Analysis 1:
Class A-1: +1
Class A-2: +1
Class B: +1
Class C-1: 0
Class C-2: 0
Sensitivity Analysis 2:
Class A-1: 0
Class A-2: 0
Class B: 0
Class C-1: 0
Class C-2: 0
Moody's notes that this transaction is subject to a high level of macroeconomic
uncertainty, as our outlook on the banking sector remains negative,
although there have been some recent signs of stabilization. The
pace of FDIC bank failures continues to decline in 2013 compared to 2012,
2011, 2010 and 2009, and some of the previously deferring
banks have resumed interest payment on their trust preferred securities.
Our outlook on the insurance sector is stable.
Further information on Moody's analysis of this transaction is available
on www.moodys.com.
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.
Rachid Ouzidane
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
Rodrigo Araya
Senior Vice President/Manager
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 ratings of $147.14 mm of TruPS CDO notes issued by MMCaps Funding XVII, Ltd.
