Approximately $132.7 Million of Structured Securities Affected
New York, March 09, 2011 -- Moody's has upgraded three, affirmed two and downgrade one class
of notes issued by Putnam Structured Product CDO 2001-1 Ltd.
The senior classes have paid down rapidly on a pro-rata basis while
the weighted average rating factor (WARF) has increased as the percentage
of B through Caa rated collateral has increased. This is resulting
in upgrades to the senior classes and downgrades to applicable junior
classes. 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. A1-SS Floating Rate Notes Due 2032, Upgraded to
Aa3 (sf); previously on Feb 24, 2009 Downgraded to A1 (sf)
Cl. A1-MM-a Floating Rate Notes Due 2032, Upgraded
to Aa3 (sf); previously on Feb 24, 2009 Downgraded to A1 (sf)
Cl. A1-MM-b Floating Rate Notes Due 2032, Upgraded
to Aa3 (sf); previously on Feb 24, 2009 Downgraded to A1 (sf)
Cl. B Floating Rate Notes Due 2037, Downgraded to Caa2 (sf);
previously on Feb 24, 2009 Downgraded to B2 (sf)
Cl. C-1 Floating Rate Notes due 2037, Affirmed at
C (sf); previously on Feb 24, 2009 Downgraded to C (sf)
Cl. C-2 Fixed Rate Notes Due 2037, Affirmed at C (sf);
previously on Feb 24, 2009 Downgraded to C (sf)
RATINGS RATIONALE
Putnam Structured Product CDO 2001-1 Ltd. is a CRE CDO transaction
backed by a portfolio of real estate investment trust bonds (REITs),
asset backed securities (ABS) that are primarily residential mortgage
backed securities (25.9%), corporate bonds (18.0%),
commercial mortgage backed securities (CMBS) (14.7% of the
pool balance), and collateralized debt obligations (7.7%).
As of the January 31, 2011 Trustee report, the aggregate Note
balance of the transaction has decreased to $178.4 million
from $300 million at issuance.
There are ten assets with par balance of $3.2 million (1.9%
of the current pool balance) that are considered Defaulted Securities
as of the January 31, 2011 Trustee report. Nine of these
assets (52.7% of the defaulted balance) are ABS and one
asset is a CDO (47.3%).
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.
We have completed updated credit estimates for the non-Moody's
ratedcollateral.. The bottom-dollar WARF is a measure
of the default probability within a collateral pool. Moody's
modeled a bottom-dollar WARF of 1,487 compared to 1,046
at last review. The distribution of current ratings and credit
estimates is as follows: Aaa-Aa3 (18.4% compared
to 24.7% at last review), A1-A3 (12.2%
compared to 11.2% at last review), Baa1-Baa3
(49.0% compared to 48.3% at last review),
Ba1-Ba3 (8.7% compared to 9.6% at last
review), B1-B3 (6.3% compared to 3.0%
at last review), and Caa1-C (5.4% compared
to 3.1% 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 4.6 years compared
to 4.9 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 36.4.% compared to 41.6% 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 1.9% compared to 5.0% 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 45%
to 25% or up to 65% would result in average rating movement
on the rated tranches of 3 to 5 notches downward or 3 to 5 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 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 "Moody's Approach
to Rating SF CDOs" published in November 2010 and "CMBS: Moody's
Approach to Rating Static CDOs Backed by Commercial Real Estate Securities"
published in June 2004.
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.
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
Edward Siegel
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 Three, Affirms Two and Downgrades One CRE CDO Classes of Putnam Structured Product CDO 2001-1 Ltd.