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I AGREE
07 Jun 2012
Approximately $96.1 Million of Structured Securities Affected
New York, June 07, 2012 -- Moody's has affirmed the ratings of all classes of Notes issued by Saturn
Ventures I, Ltd. 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 and
Re-Remic) transactions.
Moody's rating action is as follows:
Class A-1 Floating Rate Senior Notes, Affirmed at Aaa (sf);
previously on Oct 27, 2010 Upgraded to Aaa (sf)
Class A-2 Floating Rate Senior Notes, Affirmed at Baa3 (sf);
previously on Aug 31, 2011 Upgraded to Baa3 (sf)
Class A-3 Floating Rate Senior Notes, Affirmed at Ca (sf);
previously on Aug 6, 2009 Downgraded to Ca (sf)
Class B Floating Rate Subordinate Notes, Affirmed at C (sf);
previously on Mar 6, 2009 Downgraded to C (sf)
RATINGS RATIONALE
Saturn Ventures I, Ltd. is a static cash CRE CDO transaction
backed by a portfolio of commercial mortgage backed securities (CMBS)
(67.9% of the pool balance), residential mortgage
backed securities primarily in the form of "subprime",
"alt-A", and "prime" (RMBS) (12.6%),
collateralized debt obligations (CDO) (8.6%), real
estate investment trust (REIT) debt (6.8%) and asset backed
securities (ABS) credit cards (4.1%). As of the April
27, 2012 Trustee report, the aggregate Note balance of the
transaction, including preferred shares, has decreased to
$117.1 million from $400.0 million at issuance.
The majority of the paydown has been directed to the Class A-1
Notes, as a result of full and partial amortization of the underlying
collateral and the redirection of interest proceeds as principal proceeds
due to the failure of certain principal coverage tests. The transaction
was structured at issuance such that 5% of the principal proceeds
were used to paydown pro-rata Classes A-2, A-3,
and B, provided each of the coverage tests was satisfied.
As of November 2007 certain coverage tests started failing, resulting
in all principal proceeds being directed to the Class A-1 Notes.
The transaction is currently under-collateralized by $43.9
million due to losses on the underlying collateral.
There are eleven assets with a par balance of $10.5 million
(14.3% of the current pool balance) that are considered
defaulted securities as of the April 27, 2012 Trustee report.
Nine of these assets (54.2% of the defaulted balance) are
RMBS, one is a CDO (22.0%) and one is a CMBS (23.8%).
Moody's expects 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 credit estimates 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 2,134 compared to 2,206
at last review. The distribution of current ratings and credit
estimates is as follows: Aaa-Aa3 (25.4% compared
to 28.4% at last review), A1-A3 (8.6%
compared to 7.4% at last review), Baa1-Baa3
(10.9% compared to 25.2% at last review),
Ba1-Ba3 (14.8% compared to 7.7% at
last review), B1-B3 (19.7% compared to 12.4%
at last review), and Caa1-C (20.7% compared
to 18.9% 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 2.0 years compared
to 1.5 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 24.3% compared to 24.8% 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 10.0% compared to 1.7% 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 cash flow model, CDOEdge® v3.2.1.1,
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 24.3%
to 14.3% or up to 34.3% would result in average
modeled rating movement on the rated tranches of 0 to 1 notch downward
and 0 to 1 notch 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.
Jocelyn Delifer
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 Saturn Ventures I, Ltd.
No Related Data.
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