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Rating Action:

Moody's Downgrades the ratings of one TRUP CDO note issued by Preferred Term Securities VI, Ltd.

22 Oct 2010

USD 26.27 million of debt securities affected

New York, October 22, 2010 -- Moody's Investors Service announced today that it has upgraded notes issued by Preferred Term Securities VI, Ltd.

U.S.$199,950,000 Floating Rate Mezzanine Notes Due July 3, 2032 (current balance of $26,266,827.28), Downgraded to Ca (sf); previously on March 27, 2009 Downgraded to Caa1 (sf).

RATINGS RATIONALE

Preferred Term Securities VI, Ltd., issued in June 26, 2002, is a collateral debt obligation backed by a managed portfolio of bank trust preferred securities (the 'TRUP CDO'). On March 27, 2009, Moody's downgraded one class of notes as a result of the application of revised and updated key modeling assumptions, as well as the deterioration in the credit quality of the transaction's underlying portfolio.

Moody's indicated that the rating actions on the notes are primarily the result of increase in the assumed defaulted amount and a decrease in the Weighted Average Rating Factor (WARF) of the pool. The defaults increased by $33 million since March 27, 2009. Cumulative assumed defaulted amounts now total $33 million (81% of the portfolio). All the assumed defaulted assets are carried at zero recovery in our analysis. The remaining assets in the portfolio have experienced a credit improvement overall, as indicated by the WARF which decreased to 601 from 5374, in March 27, 2009.

The par loss due to the increase in the assumed defaulted amount has resulted in loss of overcollateralization for the tranches affected and an increase of their expected losses since the last rating action. In addition, the overcollateralization tests continue to breach their triggers which has resulted in a diversion of excess spreads to pay down senior notes. As of the latest trustee report dated September 29, 2010, the Class B Mezzanine Principal Coverage Ratio is reported at 50.49% versus trustee reported levels from the report dated January 5, 2009 of 176.92%, which was used during the last rating action on March 27, 2009.

The credit deterioration exhibited by these portfolios is a reflection of the continued pressure in the banking sector as the number of bank failures and interest deferrals of trust preferred securities issued by banks has continued to increase. According to FDIC data, a total of 300 banks have failed, to date, since the onset of the current economic crisis in 2007, of which 251 have defaulted since the last rating action. In Moody's opinion, the banking sector outlook continues to remain negative.

In our analysis we assume no prepayments. The WAL of the portfolio is approximately 27 years.

Moody's evaluation of this transaction relies on financial data received for a majority of obligors in the pool as of Q1-2010. This financial data is used by Moody's to assess the credit quality of obligors in the pool, relying on RiskCalc, an econometric model developed by Moody's KMV. The results obtained from the RiskCalc model have been translated to Moody's rating scale and adjusted by one notch where necessary in order to compensate for the absence of credit indicators such as rating reviews, outlooks and adjustments factoring in cyclical developments in the economy.

Additional sources of uncertainty to the evaluation assumptions result from continued negative outlook of the underlying collateral portfolio sectors, especially in the banking industry where we anticipate more bank closures by the FDIC in 2010 as compared to previous years.

In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. Moody's considers as well the structural protections in each transaction, current Event of Default (EoD), the recent deal performance in the current market environment, the legal environment, and specific documentation features. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision.

The principal methodology used in rating Preferred Term Securities VI, Ltd. was "Moody's Approach to Rating U.S. Bank Trust Preferred Security CDOs" rating methodology published in June 2010. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found on Moody's website.

Due to the impact of revised and updated key assumptions referenced in these rating methodologies, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, Moody's Asset Correlation, and weighted average recovery rate, may be different from the trustee's reported numbers. In particular, rating assumptions for all publicly rated corporate credits in the underlying portfolio have been adjusted for "Review for Possible Downgrade", "Review for Possible Upgrade", or "Negative Outlook".

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 6 months.

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.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service information, and 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.

Further information on Moody's analysis of this transaction is available on www.moodys.com.

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
Caroline Chan
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Rodrigo Araya
Senior Vice President
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.

Moody's Downgrades the ratings of one TRUP CDO note issued by Preferred Term Securities VI, Ltd.
No Related Data.
© 2018 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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