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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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Rating Action:

Moody's Downgrades Two CRE CDO Classes of Sonoma Valley 2007-4

23 Feb 2011

Approximately $33.7 Million of Structured Securities Affected

New York, February 23, 2011 -- Moody's has downgraded two classes of Notes issued by Sonoma Valley 2007-4 Synthetic CDO of CMBS Variable Rate Notes Due 2051 due to the deterioration in the credit quality of the underlying portfolio of 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.

Moody's rating action is as follows:

Series 114/2007, Downgraded to B3 (sf); previously on Jul 16, 2010 Downgraded to B1 (sf)

Series 115/2007, Downgraded to B2 (sf); previously on Jul 16, 2010 Downgraded to Ba3 (sf)

RATINGS RATIONALE

Sonoma Valley 2007-4 Synthetic CDO of CMBS Variable Rate Notes Due 2051 is a static synthetic CRE CDO transaction backed by a portfolio of credit linked notes referencing $2.3 billion notional amount of commercial mortgage backed securities (CMBS). All of the CMBS reference obligations were securitized in 2006 (45%) and 2007 (55%). And all reference obligations are currently rated by Moody's.

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. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 81 compared to 32 at last review. The distribution of current ratings is as follows: Aaa (38.3% compared to 65.2% at last review), Aa1-Aa3 (33.9% compared to 20.0% at last review), A1-A3 (7.8% compared to 13.1% at last review), and Baa1-Baa3 (20.0% compared to 1.7% 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 5.7 years compared to 6.3 years at last review.

WARR is the par-weighted average of the mean recovery values for the reference obligations in the pool. Moody's modeled a variable WARR with a mean of 63.9%, compared to 69.1% at last review.

MAC is a single factor that describes the pair-wise asset correlation to the default distribution among the instruments within the reference obligations pool (i.e. the measure of diversity). Moody's modeled a MAC of 50.0%, compared to 53.3% at last review.

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. In general, the rated Notes are particularly sensitive to rating changes within the collateral pool. Holding all other key parameters static; stressing all underlying CMBS assets currently under review for possible downgrade: three Aaa rated assets were downgraded by two notches and one Aa1-rated assets was downgraded by three notches; the model results did not change.

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 "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.

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's information, confidential and proprietary Moody's Analytics' information.

Moody's 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
Biao He
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 Two CRE CDO Classes of Sonoma Valley 2007-4
No Related Data.
© 2021 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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​
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