Approximately $160 Million of Structured Securities Affected
New York, January 31, 2012 -- Moody's Investors Service (Moody's) affirmed one class and downgraded
two classes of certificates issued by Credit Suisse First Boston Mortgage
Securities Corp. CSMC Series 2009-RR1. The affirmation
is due to key transaction parameters performing within levels commensurate
with the existing rating level. The downgrades are due to negative
credit migration of the underlying collateral and higher expected losses
for the pool of the underlying certificate. The rating action is
the result of Moody's on-going surveillance of commercial
real estate collateralized debt obligation (CRE CDO) transactions.
Cl. A-3A, Affirmed at Aaa (sf); previously on
Jul 17, 2009 Assigned Aaa (sf)
Cl. A-3B, Downgraded to Aa2 (sf); previously
on Jun 28, 2010 Confirmed at Aaa (sf)
Cl. A-3C, Downgraded to Baa3 (sf); previously
on Jun 28, 2010 Downgraded to A3 (sf)
RATINGS RATIONALE
Credit Suisse First Boston Mortgage Securities Corp., Series
2009-RR1 is a Re-REMIC Pass Through Trust backed by $160.3
million, or 21.1% of the aggregate class principal
balance, of the super senior Class A-3 commercial mortgage
backed securities (CMBS) Certificates issued by Credit Suisse Commercial
Mortgage Trust 2007-C1.
On January 26, 2012, Moody's downgraded the Class A-3
Certificates of Credit Suisse Commercial Mortgage Trust Series 2007-1
due to negative credit migration of the underlying collateral and higher
expected losses for the pool. Moody's rating action for Credit
Suisse Commercial Mortgage Trust Series 2007-1 reflected a base
expected loss plus realized loss of 18.8% of the current
balance. Depending on the magnitude, severity, and
timing of losses from specially serviced loans and the balance of the
pool, along with any loan payoffs, sequential paydowns may
not reach this class. At the same time, losses are likely
to erode the credit enhancement cushion for the super senior classes creating
a potential differential in expected loss between those super senior classes
benefiting first from paydowns and those classes receiving paydowns last.
Although Moody's believes that it is unlikely that the Class A-3
CMBS Certificates will actually experience losses, the expected
level of credit enhancement and the class priority in the cash flow waterfall
is insufficient to maintain the ratings on Class A3-B and A3-C.
Updates to key parameters, including the constant default rate (CDR),
constant prepayment rate (CPR), weighted average life (WAL),
and weighted average recovery rate (WARR), did not materially change
the expected loss estimate of Class A3-A resulting in an affirmation.
The downgrades of Classes A3-B and A3-C were due to deterioration
in the credit quality of the underlying collateral associated with the
certificates.
Within the resecuritization, the WAL of the Class A-3 Certificates
of CSMC 2007-C1 is 4.49 years assuming a 0%/0%
CDR/CPR. For delinquent loans (30+ days, REO,
foreclosure, bankrupt), Moody's assumes a fixed WARR of 40%
while a fixed WARR of 50% for current loans. Moody's also
ran a sensitivity analysis to a fixed WARR of 40% for current loans.
Since the ratings of the CRE CDO Certificates are linked to the rating
of the underlying CMBS certificate which in turn are linked to the performance
of the underlying commercial mortgage pool's performance, any rating
action on the underlying certificate may trigger a review of the ratings
of the certificates.
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 50%
to 40% would result in average rating movement on the rated tranches
of 0 to 2 notches downward.
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 the slowdown
in growth in the current macroeconomic environment and the commercial
real estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation rebounds.
The hotel and multifamily sectors are in recovery and improvements in
the office sector continue, with fundamentals in Gateway cities
outperforming their suburban counterparts. However, office
demand is closely tied to employment, where fundamentals remain
weak, so significant improvement may be delayed. Performance
in the retail sector has been mixed with on-going rent deflation
and leasing challenges. Across all property sectors, the
availability of debt capital continues to improve with monetary policy
expected to remain supportive and interest rate hikes postponed.
Moody's central global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter, amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
When assigning and monitoring the ratings on the CRE CDO Certificates,
Moody's applied ratings-specific cash flow scenarios assuming different
loss timing, recovery and prepayment assumptions on the underlying
pool of mortgages that are the collateral for the underlying CMBS transaction
through Structured Finance Workstation® (SFW), the cash flow
model developed by Moody's Wall Street Analytics. The analysis
incorporates performance variances across the different pools and the
structural features of the transaction including priorities of payment
distribution among the different tranches, tranche average life,
current tranche balance and future cash flows under expected and stressed
scenarios. In each scenario, cash flows and losses from the
underlying collateral were analyzed applying different stresses at each
rating level. The resulting ratings specific stressed cash flows
were then input into the structure of the resecuritization to determine
expected losses for each class. The expected losses were then compared
to the idealized expected loss for each class to gauge the appropriateness
of the existing rating. The stressed assumptions considered,
among other factors, the underlying transaction's collateral attributes,
past and current performance, and Moody's current negative performance
outlook for commercial real estate.
The methodology used in these ratings were "Moody's Approach to Rating
Repackaged Securities" published in April 2010. Please see the
Credit Policy page on www.moodys.com for a copy of this
methodology.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 30 April
2012. 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.
Information sources used to prepare the rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, confidential and proprietary Moody's Investors
Service information, and confidential and proprietary Moody's
Analytics information.
Moody's did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of this transaction
in the past six months.
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 the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
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.
Edward Siegel
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
Michael M. 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 One and Downgrades Two CRE CDO Classes of CSMC Series 2009-RR1
