Approximately $192.4 Million of Structured Securities Affected
New York, March 16, 2011 -- Moody's has affirmed all classes of Notes issued by Abacus 2006-NS1,
Ltd. The key indicators of the expected loss within CRE CDO transactions:
WARF, weighted average life (WAL), weighted average recovery
rate (WARR), and Moody's asset correlation (MAC) are all 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) transactions.
Moody's prior full review is summarized in a press release dated March
26, 2010. Please see the ratings tab on the issuer / entity
page on moodys.com for the last rating action and the ratings history.
Moody's rating action is as follows:
Cl. A, Affirmed at Ca (sf); previously on Mar 26,
2010 Downgraded to Ca (sf)
Cl. B, Affirmed at C (sf); previously on Mar 26,
2010 Downgraded to C (sf)
Cl. C, Affirmed at C (sf); previously on Mar 26,
2010 Downgraded to C (sf)
Cl. D, Affirmed at C (sf); previously on Mar 26,
2010 Downgraded to C (sf)
Cl. E, Affirmed at C (sf); previously on Mar 26,
2010 Downgraded to C (sf)
Cl. G, Affirmed at C (sf); previously on Mar 26,
2010 Downgraded to C (sf)
Cl. H, Affirmed at C (sf); previously on Mar 26,
2010 Downgraded to C (sf)
Cl. J, Affirmed at C (sf); previously on Mar 26,
2010 Downgraded to C (sf)
Cl. K, Affirmed at C (sf); previously on Mar 26,
2010 Downgraded to C (sf)
RATINGS RATIONALE
Abacus 2006-NS1, Ltd. is a static synthetic CRE CDO
transaction backed by a reference portfolio of commercial mortgage backed
securities (CMBS) collateral (84.8 % of the pool) and CRE
CDO collateral (15.2% of the pool). As of February
18, 2011, the aggregate Notes balance of the transaction has
decreased to $192.4 million from $225.8 million
at issuance, due to Optional Redemption in the amount of approximately
$33.4 million to the Class A, F, J and K Notes.
Moody's has identified the following parameters as key indicators of the
expected loss within CRE CDO transactions: 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 reference obligations. The bottom-dollar WARF is a
measure of the default probability within a collateral pool. Moody's
modeled a bottom-dollar WARF of 7,996 compared to 3,923
at last review. The distribution of current ratings and credit
estimates is as follows: Baa1-Baa3 (0.0% compared
to 13.1% at last review), Ba1-Ba3 (7.4%
compared to 18.9% at last review), B1-B3 (13.4%
compared to 36.4% at last review), and Caa1-C
(79.2% compared to 31.6% at last review).
WAL acts to adjust the probability of default of the reference obligations
in the pool for time. Moody's modeled to a WAL of 5.4 years
compared to 6.5 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 fixed
WARR of 1.4% compared to 6.7% 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 99.9% compared to 23.7% 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 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 methodologies used in these ratings were "Moody's
Approach to Rating SF CDOs" published in November 2010 and "U.S.
CMBS: Moody's Approach to Rating Synthetic CMBS Resecuritizations"
published in December 2005. 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.
Further information on Moody's analysis of this transaction is available
on www.moodys.com.
New York
Zhonghui (Grace) Wu
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Deryk Meherik
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Affirms All CRE CDO Classes of Abacus 2006-NS1, Ltd.