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Related Issuers
Rating Action:

Moody's Upgrades Ten and Affirms Seven Classes of Wachovia CRE CDO 2006-1

23 Nov 2011

Approximately $1,263.3 Million of Structured Securities Affected

New York, November 23, 2011 -- Moody's has upgraded the ratings of ten classes and affirmed the ratings of seven classes of Notes issued by Wachovia CRE CDO 2006-1, Ltd. due to improvement in the underlying collateral as evidenced by the Moody's weighted average rating factor (WARF) and weighted average recovery rate (WARR). The manager has invested the cash balance available as of Moody's last review in higher quality loan collateral. The affirmations are due to the key transaction parameters performing within levels commensurate with the existing ratings levels. 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:

Cl. A-1A, Upgraded to Aa3 (sf); previously on Apr 7, 2009 Downgraded to A2 (sf)

Cl. A-1B, Upgraded to Ba1 (sf); previously on Apr 7, 2009 Downgraded to Ba3 (sf)

Cl. A-2A, Affirmed at Aaa (sf); previously on Apr 7, 2009 Confirmed at Aaa (sf)

Cl. A-2B, Upgraded to Baa1 (sf); previously on Apr 7, 2009 Downgraded to Baa3 (sf)

Cl. B, Upgraded to Ba3 (sf); previously on Apr 7, 2009 Downgraded to B2 (sf)

Cl. C, Upgraded to B1 (sf); previously on Apr 7, 2009 Downgraded to Caa1 (sf)

Cl. D, Upgraded to B2 (sf); previously on Apr 7, 2009 Downgraded to Caa1 (sf)

Cl. E, Upgraded to B2 (sf); previously on Apr 7, 2009 Downgraded to Caa2 (sf)

Cl. F, Upgraded to B3 (sf); previously on Apr 7, 2009 Downgraded to Caa2 (sf)

Cl. G, Upgraded to Caa1 (sf); previously on Apr 7, 2009 Downgraded to Caa2 (sf)

Cl. H, Upgraded to Caa2 (sf); previously on Apr 7, 2009 Downgraded to Caa3 (sf)

Cl. J, Affirmed at Caa3 (sf); previously on Apr 7, 2009 Downgraded to Caa3 (sf)

Cl. K, Affirmed at Caa3 (sf); previously on Apr 7, 2009 Downgraded to Caa3 (sf)

Cl. L, Affirmed at Caa3 (sf); previously on Apr 7, 2009 Downgraded to Caa3 (sf)

Cl. M, Affirmed at Caa3 (sf); previously on Apr 7, 2009 Downgraded to Caa3 (sf)

Cl. N, Affirmed at Caa3 (sf); previously on Apr 7, 2009 Downgraded to Caa3 (sf)

Cl. O, Affirmed at Caa3 (sf); previously on Apr 7, 2009 Downgraded to Caa3 (sf)

RATINGS RATIONALE

Wachovia CRE CDO 2006-1, Ltd. is a currently static cash CRE CDO CLO transaction (the reinvestment period ended on September 26, 2011) backed by a portfolio of a-notes and whole loans (92.1% of the pool balance), commercial mortgage backed securities (CMBS) (4.8%), real estate investment trust (REIT) debt (1.5%), b-notes (0.8%) and mezzanine loans (0.8%). As of the September 26, 2011 Note Valuation report, the aggregate Note balance of the transaction, including preferred shares, has declined to $1,299.1 million from $1,300.0 million at issuance, with the paydown directed to the Class A-1A and Class A-2A Notes, as a result of amortization of the underlying collateral.

There are three assets with a par balance of $32.3 million (2.4% of the current pool balance) that are considered Defaulted Securities as of the October 17, 2011 Trustee report. While there have been no losses to the trust to date, Moody's does expect low to moderate losses to occur once they are realized.

Moody's has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: WARF, weighted average life (WAL), 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 collateral. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 3,476 compared to 5,474 at last review. The distribution of current ratings and credit estimates is as follows: Aaa-Aa3 (3.3% compared to 5.8% at last review), A1-A3 (2.9% compared to 2.6% at last review), Baa1-Baa3 (3.3% compared to 2.7% at last review), Ba1-Ba3 (23.6% compared to 3.8% at last review), B1-B3 (49.7% compared to 29.2% at last review), and Caa1-C (17.2% compared to 55.9% at last review).

WAL acts to adjust the probability of default of the collateral in the pool for time. Moody's modeled to a WAL of 5.0 years compared to 8.0 years at last review. The modeled WAL includes current assumptions about extensions on the underlying loan collateral.

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 54.4% compared to 50.6% 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 18.8% compared to 14.4% 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.

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. Rated notes are particularly sensitive to changes in recovery rate assumptions. Holding all other key parameters static, changing the recovery rate assumption down from 54.4% to 44.4% or up to 64.4% would result in average modeled rating movement on the rated tranches of 0 to 4 notches downward and 0 to 7 notches upward, respectively.

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 is the extent of the slowdown in growth in the current macroeconomic environment and performance in the commercial real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. The hotel and multifamily sectors are continuing to show signs of recovery through the third quarter of 2011. Improvements in the office sector continue, with fundamentals in Gateway cities the strongest. However the sector is closely tied to employment with currently weak fundamentals. The retail sector has been at a standstill following eleven consecutive quarters of rent deflation. The availability of debt capital continues to improve with monetary policy expected to remain supportive and interest rate hikes postponed. Moody's central global macroeconomic scenario reflects an overall downward revision of forecasts since last quarter, amidst ongoing fiscal consolidation efforts, household and banking sector deleveraging, persistently high unemployment levels, and weak housing markets that will continue to constrain growth.

The methodologies used in this rating were "Moody's Approach to Rating SF CDOs" published in November 2010, and "Moody's Approach to Rating Commercial Real Estate CDOs" published in July 2011. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

REGULATORY DISCLOSURES

The Global Scale Credit Ratings on this press release that are issued by one of Moody's affiliates outside the EU are considered EU Qualified by Extension and therefore available for regulatory use in the EU. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

Information sources used to prepare the 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 did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a 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 the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Romina Padhi
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Tad Philipp
Senior Vice President
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Upgrades Ten and Affirms Seven Classes of Wachovia CRE CDO 2006-1
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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