Approximately $224.0 Million of Structured Securities Rated
New York, January 05, 2011 -- Moody's Investors Service has assigned definitive rating of Aaa (sf) to
Class A4A, A3 (sf) to Class A4B, A1 (sf) to Class A4B-1,
and A3 (sf) to Class A4B-2, issued by Morgan Stanley Re-REMIC
Trust 2010-GG10. The pass-through certificates are
collateralized by Class A-4 ("Underlying Certificate") issued by
GS Mortgage Securities Trust 2007-GG10. This transaction
represents the first upsizing of amounts issued pursuant to the original
trust agreement dated as of June 29, 2010. Please see Moody's
announcement dated July 1, 2010.
US$160.0M Cl. A4A Certificate, Assigned Aaa
(sf)
US$64.0M Cl. A4B Certificate, Assigned A3 (sf)
US$32.0M Cl. A4B-1 Certificate*,
Assigned A1 (sf)
US$32.0M Cl. A4B-2 Certificate*,
Assigned A3 (sf)
*exchangeable certificates
RATINGS RATIONALE
The Certificates are backed by Class A-4 ("Underlying Certificate")
issued by GS Mortgage Securities Trust 2007-GG10. The Underlying
Certificate is backed by fixed rate mortgage loans secured by first liens
on commercial and multifamily properties. The Class A4A is senior
to Class A4B and Class A4B absorbs realized losses prior to A4A.
Class A4B is exchangeable for Class A4B-1 and Class A4B-2,
and vice versa. Class A4B-1 is senior to Class A4B-2
and Class A4B-2 absorbs realized losses prior to Class A4B-1.
Class A4A and Class A4B are exchangeable for Class A4 (not rated by Moody's),
and vice versa.
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-4 Certificates
of GS Mortgage Securities Trust 2007-GG10 is 6.3 years assuming
a 0%/0% CDR/CPR. Expected recovery rates at the mortgage
loan level ranged from 40% to 60% with a WARR of 54.2%.
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 October 5, 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 certificates are particularly sensitive to
changes in recovery rate assumptions. Holding all other key parameters
static, changing the recovery rate assumption from 50% to
27% would result in average rating movement on the junior most
Aaa (sf) rated tranche of 1 notch 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 current stressed macroeconomic environment
and continuing weakness in the commercial real estate and lending markets.
Moody's currently views the commercial real estate market as stressed
with further performance declines expected in a majority of property sectors.
The availability of debt capital is improving with terms returning towards
market norms. Job growth and housing price stability will be necessary
precursors to commercial real estate recovery. Overall, Moody's
central global scenario remains "hook-shaped" for 2010 and 2011;
we expect overall a sluggish recovery in most of the world's largest economies,
returning to trend growth rate with elevated fiscal deficits and persistent
unemployment levels.
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
investors.
The principal methodologies used in this rating was "U.S.
CMBS: Moody's Approach to Rating Static CDOs Backed by Commercial
Real Estate Securities" published in June 2004.
In addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck.
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.
REGULATORY DISCLOSURES
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, confidential and proprietary Moody's Analytics'
information.
Moody's considers the quality of information available on the issuer satisfactory
for the purposes 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.
New York
Gordon Sinclair
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Nick Levidy
MD - Structured Finance
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 Assigns Ratings to first additional certificates of MSRR Series 2010-GG10
