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I AGREE
02 Feb 2011
Approximately $112 Million of Structured Securities Affected
New York, February 02, 2011 -- Moody's has downgraded one class of Notes issued by Pegasus 2007-1,
Ltd. due to the deterioration in the credit quality of the underlying
reference obligations as evidenced by an increase in the weighted average
rating factor (WARF. The rating action is the result of Moody's
on-going surveillance of commercial real estate collateralized
debt obligation (CRE CDO) transactions.
US$112M Cl. A1 Notes Notes, Downgraded to Ba1 (sf);
previously on Feb 19, 2010 Downgraded to Baa1 (sf)
RATINGS RATIONALE
Pegasus 2007-1 Ltd. is a synthetic CRE CDO transaction backed
by commercial mortgage backed securities (CMBS) (100.0%)reference
obligations. As of the January 18, 2011 Trustee report,
the aggregate Note balance of the transaction has remained $112.0
million,the same as at issuance.
Moody's has identified the following parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted
average life (WAL), weighted average recovery rate (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 credit estimates for the non-Moody's
rated reference obligations. The bottom-dollar WARF is a
measure of the default probability within a collateral pool. Moody's
modeled a bottom-dollar WARF of 25 compared to 6 at last review.
The distribution of current ratings and credit estimates is as follows:
Aaa-Aa3 (89.3% compared to 96.4% at
last review) and A1-A3 (10.7% compared to 3.6%
at last review).
WAL acts to adjust the probability of default of the reference obligations
in the pool for time. Moody's modeled to a WAL of 5.1 years
compared to 6.0 years at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed
WARR of 69.6% compared to 73.8% at last review.
MAC is a single factor that describes the pair-wise asset correlation
to the default distribution among the instruments within the collateral
pool (i.e. the measure of diversity). Moody's
modeled a MAC of 63.7% compared to 69.1% at
last review.
The principal methodologies used in this rating were "U.S.
CMBS: Moody's Approach to Rating Synthetic CMBS Resecuritizations"
published in December 2005, and "Moody's Approach to Rating
SF CDOs" published in November 2010.
Further information on Moody's analysis of this transaction is available
on www.moodys.com. 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 review incorporated CDOROM® v2.8, one of Moody's
CDO rating models, which was released on January 24, 2011.
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 70%
to 60% or up to 80% would result in average rating movement
on the rated tranches of 0 to 1 notches downward and 0 to 1 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 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.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past six months.
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 Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
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
Edward Siegel
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Deryk Meherik
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 Downgrades One CRE CDO Class of Pegasus 2007-1, Ltd.
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.
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