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I AGREE
24 Apr 2013
Approximately $85.5 Million of Structured Securities Affected
New York, April 24, 2013 -- Moody's has affirmed the ratings of three classes of Notes issued by Saturn
Ventures I, Ltd. While Moody's weighted average rating
factor (WARF) and associated weighted average recovery rate (WARR) reflect
higher credit risk, rapid amortization has offset these factors
such that the transaction is performing within the current outstanding
ratings. 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-2 Floating Rate Senior Notes, Affirmed Baa3 (sf);
previously on Aug 31, 2011 Upgraded to Baa3 (sf)
Class A-3 Floating Rate Senior Notes, Affirmed Ca (sf);
previously on Aug 6, 2009 Downgraded to Ca (sf)
Class B Floating Rate Subordinate Notes, Affirmed 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)
(58.2% of the pool balance), residential mortgage
backed securities primarily in the form of "subprime", "alt-A",
and "prime" (RMBS) (16.3%), collateralized debt obligations
(CDO) (12.2%), real estate investment trust (REIT)
debt (7.6%) and credit card asset backed securities (ABS)
(5.7%). As of the March 28, 2013 trustee report,
the aggregate Note balance of the transaction, has decreased to
$106.5 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 re-direction of interest proceeds as principal
proceeds due to the failure of certain par value tests. The transaction
was structured at issuance such that 5% ongoing principal proceeds
were used to pay classes A-2, A-3, and B pro-rata
provided each of the coverage tests was satisfied. As of November
2007, certain coverage tests failed, switching the transaction
to sequential payment for all classes of notes. Approximately $43.7
million of collateral has been lost due to liquidated collateral.
There are eleven assets with a par balance of $9.9 million
(19.0% of the current pool balance) that are considered
defaulted securities as of the March 28, 2013 trustee report.
Nine of these assets (50.8% of the defaulted balance) are
RMBS, one is a CDO (24.0%) and one is a CMBS (25.2%).
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: WARF, weighted
average life (WAL), 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 3,025
compared to 2,134 at last review. The current distribution
of Moody's rated collateral and assessments for non-Moody's
rated collateral is as follows: Aaa-Aa3 (12.5%
compared to 25.4% at last review), A1-A3 (3.8%
compared to 8.6% at last review), Baa1-Baa3
(28.6% compared to 10.9% at last review),
Ba1-Ba3 (0.0% compared to 14.8% at
last review), B1-B3 (26.7% compared to 19.7%
at last review), and Caa1-C (28.4% compared
to 20.7% at last review).
Moody's modeled a WAL of 3.1 years compared to 2.0 years
at last review. The current WAL is based on the assumption about
extensions on the underlying collateral.
Moody's modeled a fixed WARR of 19.5%, compared
to 24.3% at last review.
Moody's modeled a MAC of 12.5%, compared to
10.0% at last review.
Moody's review incorporated CDOROM® v2.8, one of Moody's
CDO rating models, which was released on March 25, 2013.
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.
Moody's analysis encompasses the assessment of stress scenarios.
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, excluding defaulted
securities, down from 24.1% to 14.1%
or up to 34.1% would result in a 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 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 calls for US GDP growth
for 2013 that is likely to remain close to 2% as the greater impetus
from the US private sector is likely to broadly offset the drag on activity
from more restrictive fiscal policy. Thereafter, we expect
the US economy to expand at a somewhat faster pace than is likely this
year, closer to its long-run average pace of growth.
Risks to our forecasts remain skewed to the downside despite recent positive
developments. Moody's believes that the three most immediate risks
are: i) the risk of a deeper than currently expected recession in
the euro area accompanied by deeper credit contraction, potentially
triggered by a further intensification of the sovereign debt crisis;
ii) slower-than-expected recovery in major emerging markets
following the recent slowdown; and iii) an escalation of geopolitical
tensions, resulting in adverse economic developments.
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
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.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit 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 Three Classes of Saturn Ventures I, Ltd.
No Related Data.
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