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Rating Action:

Moody's Downgrades Ten CRE CDO Classes of CTX CDO I, Ltd.

13 Nov 2009

Approximately $167.5 Million of Structured Securities Affected

New York, November 13, 2009 -- Moody's Investors Service (Moody's) downgraded the rating of all classes of Notes issued by CTX CDO I, Ltd. The downgrades are due to deterioration in the credit quality of the underlying portfolio of reference obligations and directly held collateral. Moody's also placed Class A and Class B on watch for possible further downgrade due to the uncertainties surrounding both the timing of an Event of Default (EOD), which is expected to be triggered by further haircuts to Par Value, and the potential remedies the Trustee may seek upon direction by a Majority of the Controlling Class.

On August 14, 2009 Moody's placed all rated classes of Notes on review for possible downgrade due to deterioration in the credit quality of the underlying portfolio and the potential for an EOD triggered by further haircuts to Par Value resulting from additional rating downgrades of the underlying collateral. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO) transactions.

CTX CDO I, Ltd. is a hybrid collateralized debt obligation (CDO) backed by a portfolio of cash collateral (13% of the pool) and credit default swaps (87% of the pool) referencing commercial mortgage backed securities (CMBS), CRE CDOs, and real estate investment trust (REIT) debt. As of the October 26, 2009 Trustee Report, the Notes are collateralized by 45 classes of CMBS cash collateral and reference obligations (93.7% of the pool) from 28 separate transactions, two classes of CRE CDO cash collateral and reference obligations (3.3% of the pool) from two separate transactions, and one REIT debt. The collateral and reference obligations were issued between 2005 and 2007.

One reference obligation totaling $15 million of (3% of the pool) was reported as defaulted. Moody's currently estimates the rate of recovery from this defaulted asset as low.

Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor (WARF), weighted average life (WAL), weighted average recovery rate (WARR), and Moody's asset correlation (MAC). These parameters are 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 entire pool and the results will be reflected in a future Trustee Report. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 4,834, which is the WARF after factoring in potential ratings migration on over 4% of the collateral and reference obligations that are currently on review for possible downgrade by Moody's, compared to a WARF of 2,490 at last review. The distribution of current ratings and credit estimates is as follows: Baa1-Baa3 (16.6% compared to 35.5% at last review), Ba1-Ba3 (8.9% compared to 13.0% at last review), B1-B3 (33.5% compared to 36.5% at last review), Caa1-NR (41.0% compared to 15.0% at last review).

WAL acts to adjust the credit exposure of the collateral pool. Moody's modeled to the actual WAL of 6 years, compared to 10 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 6.4% compared to 10.4% at last review.

MAC is a single factor that describes the pair-wise asset correlations among the instruments within the collateral pool (i.e. the measure of diversity). Moody's modeled a MAC of 24.5% compared to 44.2% at last review.

All collateral and reference obligations are now rated at Baa3 or lower, which has resulted in over $80 million in par value haircuts, which have been factored into the calculations of both the Class A/B Overcollateralization Test and Default Par Value Coverage Ratio. As of October 26, 2009, the Trustee reports that the transaction is currently failing its Class A/B Overcollateralization Test (99.15% actual versus a trigger of 112.86%), and passing its Default Par Value Coverage Ratio (116.07% actual versus a trigger of 100.00%). Due to the failure of the transaction's Class A/B Overcollateralization Test, the interest due on the Class C, Class D, Class E, Class F, Class G, Class H, Class J and Class K Notes is being treated as deferred interest payable-in-kind (PIK).

Even though the current par value haircut amount has not trigger the EOD specified in Section 5.1(j) of the Indenture, as commercial real estate loan performance continues to deteriorate, the risk of such EOD, as triggered by additional haircuts to Par Value from further credit rating downgrades to underlying collateral and reference obligations, is increasing. As provided for in Article V of the Indenture, during the occurrence and continuance of an EOD, a Majority of the Controlling Class to the transaction may direct the Trustee to take particular actions with respect to all or a portion of the collateral or reference obligations or rights of interest therein, including liquidation (or in the case of Synthetic Assets entered into pursuant to the Synthetic Asset Agreement, designate an "Early Termination Date" under such Synthetic Asset Agreement). Moody's notes that the transaction is exposed to a significant concentration of CMBS assets, the majority of which have low investment grade and below investment grade ratings. It is also exposed to CRE CDOs with below investment grade ratings. Both types of assets have shown depressed market valuations recently and thus may result in significant losses to the transaction from any sale of cash collateral and/or any early termination of credit default swap (CDS) contracts.

Moody's will continue to closely monitor the performance of this transaction and the remedies the Trustee may exercise under the direction elected by a Majority of the Controlling Class if and when an EOD occurs.

Moody's review incorporated updated asset correlation assumptions for the commercial real estate sector consistent with one of Moody's CDO rating models, CDOROM v2.5, which was released on April 3, 2009. These correlations were updated in light of the systemic seizure of credit markets and to reflect higher inter- and intra-industry asset correlations. The updated asset correlations, depending on vintage and issuer diversity, used for CUSIP collateral (i.e. CMBS, CRE CDOs or REIT debt) within CRE CDOs range from 30% to 60%, compared to 15% to 35% previously.

The cash flow model, CDOEdge v3.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal.

Today's rating actions are as follows:

-Cl. A, Downgraded to B2 and Placed Under Review for Possible Further Downgrade; previously on Aug 14, 2009 Baa3 Placed Under Review for Possible Downgrade

-Cl. B, Downgraded to Caa3 and Placed Under Review for Possible Further Downgrade; previously on Aug 14, 2009 Ba1 Placed Under Review for Possible Downgrade

-Cl. C, Downgraded to Ca; previously on Aug 14, 2009 Ba3 Placed Under Review for Possible Downgrade

-Cl. D, Downgraded to Ca; previously on Aug 14, 2009 Ba3 Placed Under Review for Possible Downgrade

-Cl. E, Downgraded to Ca; previously on Aug 14, 2009 B1 Placed Under Review for Possible Downgrade

-Cl. F, Downgraded to Ca; previously on Aug 14, 2009 B1 Placed Under Review for Possible Downgrade

-Cl. G, Downgraded to Ca; previously on Aug 14, 2009 B1 Placed Under Review for Possible Downgrade

-Cl. H, Downgraded to Ca; previously on Aug 14, 2009 B2 Placed Under Review for Possible Downgrade

-Cl. J, Downgraded to C; previously on Aug 14, 2009 Caa2 Placed Under Review for Possible Downgrade

-Cl. K, Downgraded to C; previously on Aug 14, 2009 Caa3 Placed Under Review for Possible Downgrade

As always, Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. The rating outcome may differ from the model output.

Moody's monitors transactions both on a monthly basis through a review of the available trustee reports and a periodic basis through a full review. Moody's prior review is summarized in a press release dated March 6, 2009.

The principal methodologies used in rating and monitoring this transaction are "U.S. CMBS: Moody's Approach to Rating Synthetic CMBS Resecuritizations" published on December 19, 2005, "CMBS: Moody's Approach to Revolving Facilities in CDOs Backed by Commercial Real Estate Interests" published on July 29, 2004, and "Moody's Approach to Rating SF CDOs" published on August 21, 2009, which can be found at www.moodys.com in the Credit Policy & Methodologies directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Credit Policy & Methodologies directory. 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.

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

New York
Michael M. Gerdes
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Downgrades Ten CRE CDO Classes of CTX CDO I, Ltd.
No Related Data.
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