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Rating Action:

Moody's Upgrades Five CRE CDO Classes of STRIPs III Ltd./STRIPs III Corp. Master Trust, Series 2003-1

15 Dec 2010

Approximately $21.6 Million of Structured Securities Affected

New York, December 15, 2010 -- Moody's has upgraded five classes of Notes issued by STRIPs III Ltd./STRIPs III Corp. Master Trust, Series 2003-1 due to the better than expected performance of the underlying collateral and faster than expected paydown of the classes of notes. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO) transactions.

Cl. J, Upgraded to Aaa (sf); previously on Oct 18, 2007 Upgraded to Aa1 (sf)

Cl. K, Upgraded to Aaa (sf); previously on Apr 3, 2006 Upgraded to A1 (sf)

Cl. L, Upgraded to Aaa (sf); previously on Apr 3, 2006 Upgraded to A3 (sf)

Cl. M, Upgraded to Aaa (sf); previously on Apr 3, 2006 Upgraded to Baa2 (sf)

Cl. N, Upgraded to Aaa (sf); previously on Apr 3, 2006 Upgraded to Baa3 (sf)

RATINGS RATIONALE

STRIPs III Ltd./STRIPs III Corp. Master Trust, Series 2003-1 is a static resecuritization transaction backed by a portfolio of nine interest only (IO) certificates from 9 CMBS transactions and twenty-one grantor trust certificates secured by a portion of the interest payments from 21 CMBS transactions issued between 1999 to 2002. As of the November 22, 2010 Trustee report, the aggregate Note balance of the transaction has decreased to $21.6 million from $465.2 million at issuance, with the paydown from excess interest directed to the rated notes in a senior-sequential manner after payments are made to the stated coupons on each outstanding rated tranche.

When assigning and monitoring the ratings on the CRE CDO Notes, Moody's applied ratings-specific cash flow scenarios assuming different loss timing, recovery and prepayment assumptions on the underlying pool of mortgages that are the collateral for the underlying CMBS transactions through Structured Finance Workstation® (SFW), the cash flow model developed by Moody's Wall Street Analytics. The analysis incorporates performance variances across the different pools and the structural features of the transaction including priorities of payment distribution among the different tranches, tranche average life, current tranche balance for principal tranches and future cash flows for both IO and principal and interest (P&I) tranches under expected and stressed scenarios. In each scenario, cash flows and losses from the underlying collateral were analyzed applying different stresses at each rating level. The resulting ratings specific stressed cash flows were then input into the structure of the resecuritization to determine expected losses for each class. The expected losses were then compared to the idealized expected loss for each class to gauge the appropriateness of the existing rating. The stressed assumptions considered, among other factors, the underlying transaction's collateral attributes, past and current performance, and Moody's current negative performance outlook for commercial real estate.

Within the resecuritization pool, the identified weighted average life is 0.7 years assuming a 0%/0% constant default and prepayment rate (CDR/CPR). Additionally, expected recovery rates at the mortgage loan level ranged between 40% to 60% and a weighted average of 40%.

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. Cash flows to the underlying IO Certificates are particularly sensitive to changes in recovery rate assumptions for the underlying CMBS transactions. 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 stressed macroeconomic environment and continuing weakness in the commercial real estate and lending markets. Moody's currently views the commercial real estate market as stressed with further performance declines expected in a majority of property sectors. The availability of debt capital is improving with terms returning towards market norms. Job growth and housing price stability will be necessary precursors to commercial real estate recovery. Overall, Moody's central global scenario remains "hook-shaped" for 2010 and 2011; we expect overall a sluggish recovery in most of the world's largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels.

The principal methodology used in these ratings was "U.S. 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. 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.

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, 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.

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 Upgrades Five CRE CDO Classes of STRIPs III Ltd./STRIPs III Corp. Master Trust, Series 2003-1
No Related Data.
© 2022 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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