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I AGREE
06 Apr 2011
Approximately $1.3 Billion of Structured Securities Affected
New York, April 06, 2011 -- Moody's has downgraded one and affirmed thirteen classes of Notes issued
by LNR CDO IV Ltd. The transaction declared an event of default
on 4/2/2010 in which the counterparty is owed a termination penalty.
The current balance as of the Februrary 23, 2011 Trustee Report
is $57.6 million. As a result, all of the Notes
are shorted their current interest payments.
The rating action is the result of Moody's on-going surveillance
of commercial real estate collateralized debt obligation (CRE CDO) transactions.
Moody's prior full review is summarized in a press release dated April
6, 2010. Please see the ratings tab on the issuer / entity
page on moodys.com for the last rating action and the ratings history.
Cl. A, Downgraded to C (sf); previously on Apr 6,
2010 Downgraded to Ca (sf)
Cl. B-FX, Affirmed at C (sf); previously on Apr
6, 2010 Downgraded to C (sf)
Cl. B-FL, Affirmed at C (sf); previously on Apr
6, 2010 Downgraded to C (sf)
Cl. C-FX, Affirmed at C (sf); previously on Apr
6, 2010 Downgraded to C (sf)
Cl. C-FL, Affirmed at C (sf); previously on Apr
6, 2010 Downgraded to C (sf)
Cl. D-FX, Affirmed at C (sf); previously on Apr
6, 2010 Downgraded to C (sf)
Cl. D-FL, Affirmed at C (sf); previously on Apr
6, 2010 Downgraded to C (sf)
Cl. E, Affirmed at C (sf); previously on Apr 6,
2010 Downgraded to C (sf)
Cl. F-FL, Affirmed at C (sf); previously on Apr
6, 2010 Downgraded to C (sf)
Cl. F-FX, Affirmed at C (sf); previously on Apr
6, 2010 Downgraded to C (sf)
Cl. G, Affirmed at C (sf); previously on Apr 6,
2010 Downgraded to C (sf)
Cl. H, Affirmed at C (sf); previously on Apr 6,
2010 Downgraded to C (sf)
Cl. J, Affirmed at C (sf); previously on Apr 6,
2010 Downgraded to C (sf)
Cl. K, Affirmed at C (sf); previously on Apr 6,
2010 Downgraded to C (sf)
RATINGS RATIONALE
LNR CDO IV Ltd. is a static CRE CDO transaction 100% backed
by commercial mortgage backed securities (CMBS), of which 80.3%
were issued in 2005. On April 2, 2010 the deal experienced
an Event of Default (EOD) caused by a default in the interest payment
to the Non-PIKable Class B Notes. Since then all rated classes,
including the Class A Notes have been accruing interest. As of
the March 23, 2011 Trustee Report date, the aggregate collateral
balance of the transaction is $1.2 billion compared to $1.6
billion at issuance, representing $407.6 million of
realized losses to date.
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 9,074compared to 7,681
at last review. The distribution of current ratings and credit
estimates is as follows: Baa1-Baa3 (3.7% compared
to 2.0% at last review), Ba1-Ba3 (1.6%
compared to 0.5% at last review), B1-B3 (3.9%
compared to 14.6% at last review), and Caa1-C
(90.8% compared to 82.9% 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 6.6 years
compared to 7.7 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 3.2% compared to 2.7% 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 99.9%, the same as 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.
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 methodologies used in these ratings were "Moody's
Approach to Rating SF CDOs" published in November 2010, and
"CMBS: Moody's Approach to Rating Static CDOs Backed by Commercial
Real Estate Securities published in June 2004.
Further information on Moody's analysis of this transaction is available
on www.moodys.com.
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
Zhonghui (Grace) Wu
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 and Affirms Thirteen CRE CDO Classes of LNR CDO IV Ltd.
No Related Data.
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