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Related Issuers
Announcement:

Moody's Affirms All Classes of Crest 2003-2, Ltd.

08 Aug 2012

Approximately $205.3 Million of Structured Securities Affected

New York, August 08, 2012 -- Moody's has affirmed all classes of Notes issued by Crest 2003-2, Ltd. due to 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:

Cl. A-1, Affirmed at Aa2 (sf); previously on Oct 27, 2010 Downgraded to Aa2 (sf)

Cl. A-2, Affirmed at Aa2 (sf); previously on Oct 27, 2010 Downgraded to Aa2 (sf)

Cl. A-3, Affirmed at Aa2 (sf); previously on Oct 27, 2010 Downgraded to Aa2 (sf)

Cl. B-1, Affirmed at Baa2 (sf); previously on Oct 27, 2010 Downgraded to Baa2 (sf)

Cl. B-2, Affirmed at Baa2 (sf); previously on Oct 27, 2010 Downgraded to Baa2 (sf)

Cl. C-1, Affirmed at Ba2 (sf); previously on Oct 27, 2010 Downgraded to Ba2 (sf)

Cl. C-2, Affirmed at Ba2 (sf); previously on Oct 27, 2010 Downgraded to Ba2 (sf)

Cl. D-1, Affirmed at Caa1 (sf); previously on Aug 17, 2011 Downgraded to Caa1 (sf)

Cl. D-2, Affirmed at Caa1 (sf); previously on Aug 17, 2011 Downgraded to Caa1 (sf)

Cl. E-1, Affirmed at Caa3 (sf); previously on Oct 27, 2010 Downgraded to Caa3 (sf)

Cl. E-2, Affirmed at Caa3 (sf); previously on Oct 27, 2010 Downgraded to Caa3 (sf)

RATINGS RATIONALE

Crest 2003-2, Ltd. is a static CRE CDO transaction backed by a portfolio of commercial mortgage backed securities (CMBS) (88.6% of the pool balance), real estate investment trust (REIT) debt (5.3%), credit tenant leases (CTL) (3.6%) and one CRE CDO class (2.3%). As of the June 28, 2012 Trustee report, the aggregate Note balance of the transaction has decreased to $258.9 million from $325.0 million at issuance, with the paydown directed to the Class A-1, Class A-2 and Class A-3 Notes.

There are six assets with a par balance of $24.5 million (9.6% of the current pool balance) that are considered credit risk securities and seventeen assets with a par balance of $61.2 million (24.0% of the current pool balance) that are considered defaulted securities as of the June 28, 2012 Trustee report. While there have been minimal realized losses to date, Moody's does expect significant losses to occur to the credit risk and defaulted securities.

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. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 3,829 compared to 3,351 at last review. The current distribution of Moody's rated collateral and assessments for non-Moody's rated collateral is as follows: Aaa-Aa3 (4.2% compared to 3.6% at last review), A1-A3 (2.8% compared to 5.8% at last review), Baa1-Baa3 (16.1% compared to 18.8% at last review), Ba1-Ba3 (27.2% compared to 30.4% at last review), B1-B3 (14.5% compared to 14.8% at last review), and Caa1-C (35.2% compared to 26.7% 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 2.3 compared to 1.9 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 13.1% compared to 14.7% 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 7.7% compared to 8.9% 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® v3.2.1.2, 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, changing the recovery rate assumption down from 13.1% to 3.1% or up to 23.1% would result in average rating movement on the rated tranches of 0 to 2 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 extent of growth in the current macroeconomic environment and commercial real estate property markets. While commercial real estate property values are beginning to move in a positive direction along with a rise in investment activity and stabilization in core property type performance, a consistent upward trend will not be evident until the volume of investment activity steadily increases, distressed properties are cleared from the pipeline, and job creation rebounds. The hotel sector is performing strongly and the multifamily sector continues to show increases in demand. Moderate improvements in the office sector continue with minimal additions to supply. However, office demand is closely tied to employment, where growth remains slow. Performance in the retail sector has been mixed with lackluster sales driven by discounting and promotions. However, rising wages and reduced unemployment, along with increased consumer confidence, is helping to spur consumer spending. Across all property sectors, the availability of debt capital continues to improve with increased securitization activity of commercial real estate loans supported by a monetary policy of low interest rates. Moody's central global macroeconomic scenario reflects healthier growth in the US and US growth decoupling from the recessionary trend in the euro zone, while a mild recession is expected in 2012. Downside risks remain significant, although they have moderated compared to earlier this year. Major downside risks include an increase in the potential magnitude of the euro area recession, the risk of an oil supply shock weighing negatively on consumer purchasing power and home prices, ongoing and policy-induced banking sector deleveraging leading to a tightening of bank lending standards and credit contraction, financial market turmoil continuing to negatively impact consumer and business confidence, persistently high unemployment levels, and weak housing markets, any or all of which will continue to constrain growth.

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

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are endorsed by Moody's Investors Service Ltd., One Canada Square, Canary Wharf, London E 14 5FA, UK, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

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.

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.

Milan Parikh
Associate 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 Affirms All Classes of Crest 2003-2, Ltd.
No Related Data.
© 2022 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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