Approximately $4.62 Billion of Structured Securities Affected
New York, March 16, 2011 -- Moody's Investors Service (Moody's) affirmed the ratings of eleven credit
tenant lease (CTL) transactions supported by CVS/Caremark Corporation
(CVS) lease obligations as follows:
Issuer: CVS Lease-Backed Pass-Through Certificates,
Series 2001
Certificates, Affirmed at Baa2; previously on Mar 6,
2007 Confirmed at Baa2
Issuer: CVS Lease-Backed Pass-Through Certificates,
Series 2002-1
Certificates, Affirmed at Baa2; previously on Mar 6,
2007 Confirmed at Baa2
Issuer: CVS Lease-Backed Pass-Through Certificates,
Series 2003-1
Certificates, Affirmed at Baa2; previously on Mar 6,
2007 Confirmed at Baa2
Issuer: CVS Lease-Backed Pass-Through Certificates,
Series 2003-2
Certificates, Affirmed at Baa2; previously on Mar 6,
2007 Confirmed at Baa2
Issuer: CVS Lease-Backed Pass-Through Certificates,
Series 2004-1
Certificates, Affirmed at Baa2; previously on Mar 6,
2007 Confirmed at Baa2
Issuer: CVS Lease-Backed Pass-Through Certificates,
Series 2005-1
Certificates, Affirmed at Baa2; previously on Mar 6,
2007 Confirmed at Baa2
Issuer: CVS Lease-Backed Pass-Through Certificates
Series 2006
Certificates, Affirmed at Baa2; previously on Mar 23,
2007 Confirmed at Baa2
Issuer: CVS Caremark Lease-Backed Pass-Through Certificates,
Series 2007
Certificates, Affirmed at Baa2; previously on Dec 24,
2007 Definitive Rating Assigned Baa2
Issuer: CVS/Caremark Lease-Backed Pass-Through Certificates,
Series 2009A
Certificates, Affirmed at Baa2; previously on Jun 30,
2009 Definitive Rating Assigned Baa2
Issuer: CVS/Caremark Lease-Backed Pass-Through Certificates,
Series 2009-B
Certificates, Affirmed at Baa2; previously on Dec 27,
2009 Definitive Rating Assigned Baa2
Issuer: CVS Lease-Backed Pass-Through Certificates
Series 2010-B
Certificates, Affirmed at Baa2; previously on Dec 20,
2010 Definitive Rating Assigned Baa2
RATINGS RATIONALE
The ratings of the Certificates are affirmed at Baa2 based on the current
rating of CVS (senior unsecured debt rating Baa2, stable outlook).
This action is the result of Moody's on-going surveillance of commercial
mortgage backed (CMBS) securities.
In rating this transaction, Moody's used its credit-tenant
lease (CTL) financing rating methodology (CTL approach). Under
Moody's CTL approach, the rating of a transaction's certificates
is primarily based on the senior unsecured debt rating (or the corporate
family rating) of the tenant, usually an investment grade rated
company, leasing the real estate collateral supporting the bonds.
This tenant's credit rating is the key factor in determining the probability
of default on the underlying lease. The lease generally is "bondable",
which means it is an absolute net lease, yielding fixed rent paid
to the trust through a lock-box, sufficient under all circumstances
to pay in full all interest and principal of the loan. The leased
property should be owned by a bankruptcy-remote, special
purpose borrower, which grants a first lien mortgage and assignment
of rents to the securitization trust. The dark value of the collateral,
which assumes the property is vacant or "dark", is then examined;
the dark value must be sufficient, assuming a bankruptcy of the
tenant and rejection of the lease, to support the expected loss
consistent with the certificates' rating. Moody's may make adjustments
reflecting the possibility of lease affirmations by the tenant and for
the landlord's claim for lease rejection damages in bankruptcy.
Moody's also may give credit for some amortization of the debt,
depending upon the rating of the credit tenant. In addition,
Moody's considers the overall structure and legal integrity of the transaction.
The certificates' rating may change as the senior unsecured debt rating
(or the corporate family rating) of the tenant changes.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found in the Credit Policy & Methodologies
directory.
There were no models used in the review of this transaction.
Moody's ratings are determined by a committee process that considers both
quantitative and qualitative factors.
The rating action is a result of Moody's on-going surveillance
of commercial mortgage backed securities (CMBS) transactions. Moody's
prior full review is summarized in a press release dated May 12,
2010. Please see the ratings tab on the issuer / entity page on
moodys.com for the last rating action and the ratings history.
DEAL PERFORMANCE
The 11 transactions are supported by portfolios of single-tenant,
stand-alone retail buildings leased to CVS. Each property
is subject to a fully bondable, triple net lease guaranteed by CVS.
For each transaction, the lease payments are sufficient to pay all
interest and principal of the Certificates. However, the
Certificates are not obligations of, nor guaranteed by CVS.
CVS, headquartered in Woonsocket, Rhode Island, is the
largest provider of prescriptions in the United States. The company
fills or manages more than 1 billion prescriptions annually through about
7,000 CVS pharmacy stores, its pharmacy benefits management
operation, its mail order and specialty pharmacy division,
Caremark Pharmacy Services, and its on-line pharmacy.
New York
Amit Rustgi
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Sandra Ruffin
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Affirms the CTL Ratings of 11 CVS Lease Backed Certificates