Approximately $50.61 Million of Structured Securities Rated
New York, March 31, 2011 -- Moody's Investors Service has assigned definitive rating of Aaa (sf) to
the Class 1-A Certificates, a definitive rating of Baa1 (sf)
to the Class 1-B Certificates, and a definitive rating of
Baa1 (sf) to the Class 1-X issued by Morgan Stanley Re-REMIC
Trust 2011-KEY (collectively the "Certificates").
The pass-through certificates are collateralized by Class A-2
("Underlying Certificate") issued by Key Commercial Mortgage
Securities Trust 2007-SL1, Commercial Mortgage Pass-Through
Certificates, Series 2007-SL1.
Moody's rating action is as follows:
US$42.2M Cl. 1-A Certificate, Assigned
US$8.4092M Cl. 1-B Certificate, Assigned
Cl. 1-X Certificate, Assigned Baa1 (sf)*
*approximate notional amount
The Certificates are backed by Class A-2 ("Underlying Certificate")
issued by Key Commercial Mortgage Securities Trust 2007-SL1,
Commercial Mortgage Pass-Through Certificates, Series 2007-SL1.
The Underlying Certificate is backed by fixed rate mortgage loans secured
by first liens on commercial and multifamily properties. The Class
1-A is senior to Class 1-B and Class 1-B absorbs
realized losses prior to Class 1-A. The Class 1-X
Certificates are notional amount certificates referencing the 1-A
and 1-B Certificate class principal balances and are subordinate
to the class 1-B in priority of interest payments.
The methodology used in assigning the ratings is as follows: 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.
Within the resecuritization, the WAL of the Class A-2 Certificates
of Key Commercial Mortgage Securities Trust 2007-SL1is 5.07
years assuming a 0%/0% CDR/CPR. Expected recovery
rates at the mortgage loan level ranged from 40% to 60%
with a WARR of 55.5%.
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. The last monitoring action placed on the Underlying
Certificate was on September 16, 2010.
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% or up to 60% would result in average rating movement
on the rated tranches of 1 to 2 notches downward and 0 to 2 notches upward,
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 current sluggish macroeconomic environment
and varying performance in the commercial real estate property markets.
However, Moody's expects to see increasing or stabilizing property
values, higher transaction volumes, a slowing in the pace
of loan delinquencies and greater liquidity for commercial real estate
in 2011 The hotel and multifamily sectors are continuing to show signs
of recovery, while recovery in the office and retail sectors will
be tied to recovery of the broader economy. The availability of
debt capital continues to improve with terms returning toward market norms.
Moody's central global macroeconomic scenario reflects an overall sluggish
recovery through 2012, amidst ongoing individual, corporate
and governmental deleveraging, persistent unemployment, and
government budget considerations.
These ratings are based upon the quality of the underlying collateral
and the legal structure. Moody's ratings address only the credit
risks associated with the transaction. Other non-credit
risks, such as those associated with the timing of principal prepayments
have not been addressed and may have a significant effect on yield to
The principal methodology used in these ratings was "Moody's
Approach to Rating Repackaged Securities" published in April 2010.
Further information on Moody's analysis of this transaction is available
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
in this transaction.
Information sources used to prepare the credit 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
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purpose of assigning
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
MD - Structured Finance
Structured Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's Assigns Ratings to Morgan Stanley Re-REMIC Trust 2011-KEY
250 Greenwich Street
New York, NY 10007