Approximately $361.4 Million of Structured Securities Affected
New York, December 14, 2012 -- Moody's has affirmed the ratings of all classes of Notes issued by N-Star
Real Estate CDO VI, Ltd. 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 CLO) transactions.
Moody's rating action is as follows:
Cl. A-1, Affirmed at A1 (sf); previously on Dec
15, 2010 Downgraded to A1 (sf)
Cl. A-2, Affirmed at Ba2 (sf); previously on
Dec 15, 2011 Downgraded to Ba2 (sf)
Cl. A-R, Affirmed at A1 (sf); previously on Dec
15, 2010 Downgraded to A1 (sf)
Cl. B, Affirmed at B1 (sf); previously on Dec 15,
2011 Downgraded to B1 (sf)
Cl. C, Affirmed at B2 (sf); previously on Dec 15,
2011 Downgraded to B2 (sf)
Cl. D, Affirmed at Caa1 (sf); previously on Dec 15,
2011 Downgraded to Caa1 (sf)
Cl. E, Affirmed at Caa1 (sf); previously on Dec 15,
2010 Downgraded to Caa1 (sf)
Cl. F, Affirmed at Caa2 (sf); previously on Dec 15,
2010 Downgraded to Caa2 (sf)
Cl. G, Affirmed at Caa3 (sf); previously on Dec 15,
2010 Downgraded to Caa3 (sf)
Cl. H, Affirmed at Caa3 (sf); previously on Dec 15,
2010 Downgraded to Caa3 (sf)
Cl. J, Affirmed at Caa3 (sf); previously on Dec 15,
2010 Downgraded to Caa3 (sf)
Cl. K, Affirmed at Caa3 (sf); previously on Dec 15,
2010 Downgraded to Caa3 (sf)
RATINGS RATIONALE
N-Star Real Estate CDO VI, Ltd. is a currently static
(the reinvestment period ended in June 2011) cash transaction backed by
a portfolio of whole loans (40.9% of the current pool balance),
mezzanine loans (25.5%), CRE CDO (18.6%),
b-notes (13.6%) and commercial mortgage backed securities
(CMBS) (1.4%). As of the November 7, 2012 Trustee
report, the aggregate Note balance of the transaction, including
preferred shares, has decreased to $425.0 million
from $450.0 million at issuance, with the paydown
directed to the Class A-1 and A-R Notes, as a result
of amortization and pay-off to the underlying collateral.
The decrease in the balance is also due to partial cancellations of the
Class C, D and G Notes totaling $8.0 million.
In general, holding all key parameters static, the junior
note cancellations results in slightly higher expected losses and longer
weighted average lives on the senior Notes, while producing slightly
lower expected losses on the mezzanine and junior Notes. However,
this does not cause, in and of itself, a downgrade or upgrade
of any outstanding classes of Notes.
There are three assets with a par balance of $21.2 million
(4.6% of the current pool balance) that are considered defaulted
securities as of the November 7, 2012 Trustee report. While
there have been limited realized losses on the underlying collateralto
date, Moody's does expect significant 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
7,889 compared to 7,243 at last review. The current
distribution of Moody's rated collateral and assessments for non-Moody's
rated collateral is as follows: Aaa-Aa3 (1.0%,
the same as that as last review), A1-A3 (6.0%,
the same as that as last review), B1-B3 (8.0%
compared to 12.3% at last review), and Caa1-C
(85.1% compared to 80.7% at last review).
Moody's modeled a WAL of 4.0 years, the same as that at last
review. The current modeled WAL incorporates updated assumptions
about extensions on the loan collateral.
Moody's modeled a fixed WARR of 27.0% compared to
28.2% at last review.
Moody's modeled a MAC of 99.9%, the same as
that at last review.
Moody's review incorporated CDOROM® v2.8, one of Moody's
CDO rating models, which was released on March 22, 2012.
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 27.0%
to 17.0% or up to 37.0% would result in a
modeled rating movement on the rated tranches of 0 to 5 notches downward
and 0 to 8 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 is for continued below-trend
growth in US GDP over the near term, with consumer spending remaining
soft in the US. Hurricane Sandy may skew near-term economic
data but is unlikely to have any long-term macroeconomic effects.
Primary downside risks include: a deeper than expected recession
in the euro area accompanied by deeper credit contraction; the potential
for a hard landing in major emerging markets, including China,
India and Brazil; an oil supply shock; albeit abated in recent
months; and given recent political gridlock, excessive fiscal
tightening in the US in 2013 leading the US into recession. However,
the Federal Reserve has shown signs of support for activity by continuing
with quantitative easing.
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.
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
Deryk Meherik
VP - Senior Credit Officer
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 N-Star Real Estate CDO VI Ltd.
