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By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

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2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

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Rating Action:

Moody's Downgrades One and Affirms Five Classes of N-Star Real Estate CDO I, Ltd.

10 Aug 2011

Approximately $141 Million of Structured Securities Affected

New York, August 10, 2011 -- Moody's has downgraded one class and affirmed five of Notes issued by N-Star Real Estate CDO I, Ltd. The affirmations are a result of the key transaction parameters performing within levels commensurate with the existing ratings levels. The downgrades are due to deterioration in the credit quality of the underlying portfolio as evidenced by an increase in the weighted average rating factor (WARF) and a decrease in the weighted average recovery rate (WARR). The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO) transactions.

Moody's rating action is as follows:

Class A-1 Floating Rate Senior Notes due 2038, Affirmed at Aaa (sf); previously on Sep 22, 2010 Upgraded to Aaa (sf)

Class A-2A Floating Rate Senior Notes due 2038, Affirmed at Aa3 (sf); previously on Apr 2, 2009 Confirmed at Aa3 (sf)

Class A-2B Fixed Rate Senior Notes due 2038, Affirmed at Aa3 (sf); previously on Apr 2, 2009 Confirmed at Aa3 (sf)

Class B-2 Floating Rate Senior Notes due 2038, Downgraded to A3 (sf); previously on Apr 2, 2009 Confirmed at A2 (sf)

Class C-1A Floating Rate Subordinate Notes due 2038, Affirmed at Baa3 (sf); previously on Apr 2, 2009 Confirmed at Baa3 (sf)

Class C-1B Fixed Rate Subordinate Notes due 2038, Affirmed at Baa3 (sf); previously on Apr 2, 2009 Confirmed at Baa3 (sf)

RATINGS RATIONALE

N-Star Real Estate CDO I is a static CRE CDO transaction backed by a portfolio of commercial mortgage backed securities (CMBS) (70.7%), CRE collateralized debt obligations (CRE CDO) (8.2%) and real estate investment trust bonds (REIT) (21.0%). As of the July 29, 2011 Trustee report, the aggregate Note balance of the transaction has decreased to $231.8 million from $402.0 million at issuance, with the paydown directed to the Class A Notes, as a result of regular amortization of the underlying collateral.

There are five assets with a par balance of $25.5 million (11.3% of the current pool balance) that are considered Defaulted Securities as of the July 29, 2011 Trustee report. Three of these assets (50.4% of the defaulted balance) are CMBS and two assets are CDO (49.6%). While there have been no realized losses to date, Moody's does expect some losses to occur from the higher credit risk CMBS in the portfolio.

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 1,853 compared to 838 at last review. The distribution of current ratings and credit estimates is as follows: Aaa-Aa3 (12.7% compared to 11.9% at last review), Baa1-Baa3 (32.6% compared to 38.3% at last review), Ba1-Ba3 (14.7% compared to 16.5% at last review), B1-B3 (4.4% compared to 3.7% at last review), and Caa1-C (17.4% compared to 6.4% 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 2.3 years compared to 2.4 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 26.7% compared to 25.3% 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 6.4% compared to 13.7% at last review.

Moody's review incorporated CDOROM® v2.8, one of Moody's CDO rating models, which was released on January 24, 2011.

The cash flow model, CDOEdge® v3.2.1.0, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal.

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 26.7% to 16.7% or up to 36.7% would result in average rating movement on the rated tranches of 0 to 1 notch downward and 0 to 1 notch 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.

The principal methodology used in these ratings is "Moody's Approach to Rating SF CDOs" published in November 2010.

Other methodology used in this rating was "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

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

Information sources used to prepare the 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 Analytics information.

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.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a 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 Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 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.

New York
Lacey Morgan
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Deryk Meherik
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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 Downgrades One and Affirms Five Classes of N-Star Real Estate CDO I, 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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