Substitute rating A1 (sf) for A1 in the heading and the second paragraph.
London, 13 January 2011 -- Revised release follows.
Moody's Investors Service has assigned the following Counterparty Instrument
Rating:
....Liquidity Facility Agreement dated 12
May 2005 relating to Opera Finance (Uni-Invest) B.V.
("Liquidity Facility"), Assigned A1 (sf)
Counterparty Instrument Ratings measure the risk posed to a counterparty
on an expected loss basis arising from the special purpose vehicle's (SPV's)
inability to honour its obligations under the referenced financial contract
by the maturity date of the contract.
For the purpose of the above rating, the SPV is Opera Finance (Uni-Invest)
B.V., the financial contract is the above mentioned
liquidity facility agreement and the maturity date of the contract is
the legal final maturity date as defined in the Terms and Conditions of
the Notes (February 2012).
Moody's rating does not address potential Liquidity Subordinated Amounts
payable (as defined in the Master Definitions Schedule) and does not address
the probability of payment of such additional amounts or any related payments
to the liquidity facility provider.
RATINGS RATIONALE
The assigned Counterparty Instrument Rating measures the risk posed to
the Liquidity Facility provider on an expected loss basis. Given
the contingent nature of the Liquidity Facility, the expected loss
in this case is calculated based (i) on the probability of a Liquidity
Facility draw and (ii) the severity posed to the Liquidity Facility provider
in scenarios in which the Liquidity Facility is not fully repaid.
For a more detailed description please see below in Rating methodology.
The probability of a draw is driven by two factors: (i) the performance
of the tenants of the property portfolio, i.e. the
ability of tenants to pay the full rental payments to be allocated to
the rent account; and (ii) the ability of the borrower to repay or
refinance the remaining loan balance prior to legal final maturity of
the Notes. At previous IPDs some partial repayments were received
as result of property disposals. Therefore, in Moody's view,
the probability of a draw is to some extent driven by the performance
of the tenants as well as the borrower's solvency and ability to sell
(part of) the portfolio and repay the loan. This means that a deterioration
of the property portfolio/ borrower performance could have a negative
impact on the Counterparty Instrument Rating assigned.
Should the underlying loan default during its remaining term (of the standstill
agreement), received rental payments or an enforcement and sale
of the underlying portfolio (at potentially distressed prices) are the
envisaged strategy to repay potential liquidity draws. The loss
severity posed to the liquidity facility provider is driven by the expected
recovery proceeds from the portfolio. The loss severity is derived
by simulating the value of the properties that secure the loan in order
to determine the recovery value, taking into account accrued interest
on the liquidity facility draws over the foreclosure time and costs related
to foreclosure. Given the nature of the simulation, the recovery
rate for each property is assumed to vary over time, reflecting
the uncertainty related to property values when a default occurs and the
location and quality of the properties. Within the portfolio,
the value of properties in the same region and/or of the same property
type is assumed to be correlated.
The interest payable on drawn amounts is based on a variable interest
rate of 12-month LIBOR and a margin. The total outstanding
Liquidity Facility amount at the legal final maturity date depends on
the interest rate over the term of the transaction, which drives
the total of accrued interest on the outstanding amounts by the Final
Maturity Date. To consider the interest rate risk, Moody's
used stressed interest rates for its accrual calculations.
UNDERLYING TRANSACTION
Opera Finance (Uni-Invest) B.V. is a true sale single
loan transaction that closed in May 2005. The securitised loan
is the senior portion of a senior/junior loan (together the "Whole Loan")
structure secured by first-ranking security over initially 321
commercial properties (the "Properties") all located in The Netherlands.
By November 2010, 103 properties had been disposed of. The
current senior loan balance is EUR661.8 million and the junior
loan balance is EUR138.9 million. The predominant property
types are office (73% by market value) and industrial (27%).
At loan maturity in February 2010, the the Whole Loan failed to
repay and parties signed a standstill agreement. In the standstill
agreement a loan event of default was waived subject to certain conditions,
including but not limited to certain senior loan targets. The legal
final maturity date of the Notes is in February 2012. Since closing,
the transaction has benefited from stable property cash flows and good
coverage ratios mainly as a result of reduced interest payments stemming
from a partial interest rate hedge (approximately 54% of senior
loan) and current low interest rates.
Moody's stated in its latest press release dated 16 March 2010 that based
on Moody's market value, the weighted-average senior loan
LTV ratio is approximately 88% compared to the reported U/W LTV
of 76% (as reported by Servicer in February 2010). Moody's
Whole Loan LTV is 106% (based on 230 properties).
Regarding the underlying transaction, the key drivers of the current
rating of the Class A Notes are (i) the execution of the borrower's disposal
plan; (ii) the refinancing of the remaining balance of the senior/junior
loan no later than three months prior to legal final maturity of the Notes;
(iii) the expected pro-rata allocation of the majority of disposal
proceeds across all classes of Notes as a result of the standstill agreement;
and (iv) the limited time remaining for execution of the disposal plan
in light of the legal final maturity of the Notes in February 2012 and
a potential event of default under the Notes.
LIQUIDITY FACILITY AGREEMENT
Lloyds TSB Bank PLC has on the closing date committed under the above
mentioned Liquidity Facility Agreement to provide a liquidity facility
of EUR63 million to the Issuer. Under this Liquidity Facility,
the Issuer is entitled to draw amounts up to the Liquidity Facility commitment
to cover an "issuer income deficiency" (on any interest payment date,
the available cash standing to the credit of the issuer general account
being insufficient to make the payments with respect to senior costs and
interest due on the Notes) and or "hedging loan" (i.e. shortfall
in the amount of any periodic amount payable under the senior hedging
arrangement).
It is a committed revolving facility for a period of 364 days and the
maturity date is the date 364 days after the date of the Liquidity Facility
agreement and if extended the earlier of (i) the date falling 364 days
after the date of such renewal and (ii) the legal final maturity date
in respect of the Notes (February 2012).
At the end of the 364-day period, the Issuer can request
the Liquidity Facility provider to enter into a new committed revolving
facility on the same terms, subject to no event of default under
the Liquidity Facility being outstanding. If the Liquidity Facility
provider declines the renewal, the Issuer may find an alternative
liquidity facility provider or request a stand-by drawing of the
undrawn liquidity facility amount which is deposited in a cash account
and can be drawn under the same conditions as the Liquidity Facility.
For undrawn amounts the Issuer has to pay a commitment fee and the interest
for drawn amounts is based on 12-month LIBOR plus a margin.
Drawn amounts under the liquidity facility have to be repaid on the next
interest payment date if sufficient funds are available, otherwise
the amounts can be re-drawn. The last repayment date of
the Liquidity Facility agreement is the legal final maturity date of the
Notes. In line with property disposals until November 2010,
the commitment reduced to EUR41.3 million representing 6.2%
of securitised balance (similar to closing).
TRANSACTION FEATURES RELEVANT FOR THE LIQUIDITY FACILITY
In the priority of payments of the Opera Finance (Uni-Invest) B.V.
transaction, amounts due to the Liquidity Facility provider rank
junior to standard senior costs via the payment waterfall in the intercreditor
agreement. The Liquidity Facility ranks senior to interest and
principal payments on the Notes, i.e. available cash
flows are first used to repay the liquidity facility before interest and
principal on the Notes are paid.
RATING METHODOLOGY
A Counterparty Instrument Rating is assigned by evaluating factors determined
to be applicable to the credit profile of the financial contract,
such as i) the nature, sufficiency, and quality of historical
performance information regarding the asset class of the underlying transaction
as well as for the transaction sponsor, ii) an analysis of the allocation
of collateral cash flows to the liquidity facility provider according
to the priority of payments, iii) an analysis of the transaction's
governance and legal structure, and iv) a comparison of these attributes
against those of other similar transactions.
The following is a description of the rating methodology applied to assign
this Counterparty Instrument Rating:
1) Type of liquidity facilities to which this methodology applies
The rating methodology used to rate this financial instrument is intended
to rate instruments designed to provide liquidity to structured finance
transactions (Liquidity Instruments, "LI"), where the probability
of draw is driven by asset performance, by opposition to liquidity
instruments in ABCP programmes, in which the probability of draw
is also driven by market conditions. Typically, such instruments
support the timely payment of interest of notes, and can also help
such notes to amortise according to a specific amortisation profile.
The actual repayment of drawn amounts also depends on how assets are performing:
this clearly makes a difference with liquidity lines used to advance payments
from a guaranteeing institution, where the rating of the liquidity
instrument would be mainly driven by the credit quality of such institution.
The repayment of drawn amounts will occupy a certain position in the transaction
priority of payments, typically senior to the specific item the
LI is protecting.
2) Expected loss calculation
Following the approach used by Moody's to rate term notes, a loss
under the LI is calculated for each asset's default scenario; by
weighting each default scenario's severity result on the LI with its probability
of occurrence, the expected loss level for the LI is determined.
Asset performance will determine when the LI needs to be drawn,
as well as the amount of such draw. The repayment of drawn amounts
will be made through the transaction's priority of payments and,
although, from a structural point of view, a senior position
to the protected item looks the most logical one, more subordinated
positions could also be used. Obviously, the rating of the
LI would be lower the more subordinated is the LI's repayment in the priority
of payments.
For each default scenario, the loss under the LI is determined by
calculating the net present value of repaid amounts (both of interest
and principal), where the discount rate used is equal to the interest
rate accrued by drawn amounts, and comparing such amount with the
amount initially available under the LI. For those payment dates
on which there is a reduction in the amount available under the LI,
such reduction would be deemed as a "repaid amount", occurring according
to the priority of payments. Finally, for those default scenarios
under which the whole amount of the LI is not used, Moody's will
assume that unused amounts are repaid as soon as the LI can no longer
be drawn, again according to the priority of payments.
The expected loss calculation includes besides amounts drawn under the
LI and accrued interest on the drawn amounts also unpaid commitment fee
but not Liquidity Subordinated Amounts.
3) Probability of default
The rating of the LI is driven not only by the expected loss, but
also by the probability of default: the size of unused amounts will
not impact the likelihood that a loss (even minimum) arises under the
LI. Such probability of default would address the ultimate payment
of drawn amounts and the associated interest accrued, but would
not take into consideration the timely payment of interest or principal.
4) Expected average life calculation
The method used to calculate the expected average life for the LI follows
the same logic as that explained above to calculate the expected loss:
an average life for the LI is calculated for each asset's default scenario,
which is weighted by the probability of occurrence of such scenario.
The principal methodologies used to rate the underlying transaction were
Update on Moody's Real Estate Analysis for CMBS Transactions in EMEA published
in June 2005 and Moody's Updates on its Surveillance Approach for EMEA
CMBS published in March 2009.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or financial
instruments related to the monitoring of this transaction in the past
six months.
REGULATORY DISCLOSURES
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
This rating is published. Any change in the rating will be publicly
disseminated by Moody's through normal print and electronic media,
and in response to requests to the Moody's rating desk, in accordance
with Moody's standard practice at the time.
Moody's will monitor this rating. All monitoring information,
details of any material changes to the information already supplied to
us and notification of any amendments to the documentation that we have
reviewed should be sent to monitor.cmbs@moodys.com.
Moody's ratings address only the credit risks associated with the transaction;
other non-credit risks have not been addressed, but may have
significant effect on yield to investors. Moody's ratings are subject
to revision, suspension or withdrawal at any time at our absolute
discretion.
The ratings are expressions of opinion and not recommendations to purchase,
sell or hold securities.
Please visit Moody's website at www.moodys.com or contact
our Client Service Desk in London (+44-20-7772 5454)
to obtain further information regarding this transaction. In addition,
Moody's publishes a weekly summary of structured finance credit,
ratings and methodologies, available to all registered users of
our website, at www.moodys.com/SFQuickCheck.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
London
Jeroen Heijdeman
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Christophe de Noaillat
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
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United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Correction to text, December 10, 2010 Release: Moody's assigns A1 (sf) Counterparty Instrument Rating to the Liquidity Facility Agreement of the CMBS transaction Opera Finance (Uni-Invest) B.V.
