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I AGREE
27 Oct 2010
Approximately $141.8 Million of Structured Securities Affected
New York, October 27, 2010 -- Moody's has upgraded two and affirmed two classes of Notes issued by Saturn
Venture I, Ltd. due to the rapid pace of amortization of
the senior class of Notes. The rating action is the result of Moody's
on-going surveillance of commercial real estate collateralized
debt obligation (CRE CDO) transactions.
Class A-1 Floating Rate Senior Notes Notes, Upgraded to Aaa
(sf); previously on Aug 6, 2009 Downgraded to A1 (sf)
Class A-2 Floating Rate Senior Notes Notes, Upgraded to Ba3
(sf); previously on Aug 6, 2009 Downgraded to B2 (sf)
Class A-3 Floating Rate Senior Notes Notes, Affirmed at Ca
(sf); previously on Aug 6, 2009 Downgraded to Ca (sf)
Class B Floating Rate Subordinate Notes Notes, Affirmed at C (sf);
previously on Mar 6, 2009 Downgraded to C (sf)
RATINGS RATIONALE
Saturn Ventures I, Ltd. is a CRE CDO transaction backed by
a portfolio of commercial mortgage backed securities (CMBS) (61.2%),
residential mortgage backed securities (RMBS) [(16.6%);
subprime (10.7%), jumbo (4.8%),
and second lien (1.1%)], CDO (10.3%),
REIT debt (9.5%), and ABS credit cards (2.4%).
As of the September 30, 2010 Trustee report, the aggregate
Note balance of the transaction has decreased to $162.9
million from $400.0 million at issuance, with the
majority of the paydown (96.3% of the total paydowns) directed
to the Class A Notes. Saturn Venture I, Ltd. has a
turbo feature that allows for partial paydown of all subordinate classes
(95% of principle to paydown Class A-1, and the remaining
5% to pay down Classes A-2, A-3, and
B on a pro-rata basis). As of the September 30, 2010
Trustee report, the deal is undercollateralized by approximately
$36.5 million due to losses on underlying securities.
As a result, the transaction, if failing its Coverage Tests,
will cause the turbo feature to shut off, and all principle will
then be directed to paydown the Class A-1 Notes.
There are fourteen assets with a par balance of $17.8 million
(14.1% of the current pool balance) that are considered
Defaulted Securities as of the September 30, 2010 Trustee report.
Twelve of these assets (66.2% of the defaulted balance)
are RMBS, and two are CDO (33.8%). Of the defaulted
RMBS securities, ten are subprime (41.4% of the defaulted
balance) and two are jumbo (24.8%). Moody's
does expect significant losses on the defaulted securities 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), 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
rated reference obligations. The bottom-dollar WARF is a
measure of the default probability within a collateral pool. Moody's
modeled a bottom-dollar WARF of 1,499 compared to 988 at
last review. The distribution of current ratings and credit estimates
is as follows: Aaa-Aa3 (28.3% compared to 26.5%
at last review), A1-A3 (14.0% compared to 23.8%
at last review), Baa1-Baa3 (29.4% compared
to 28.4% at last review), Ba1-Ba3 (5.8%
compared to 7.4% at last review), B1-B3 (7.8%
compared to 4.3% at last review), and Caa1-C
(14.7% compared to 9.6% 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 2.0 years
compared to 2.8 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 with a mean of 28.2% compared to a mean of 30.7%
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 11.7% compared to 1.3% at
last review. The greater MAC is due to the shift in the ratings
distribution towards higher risk collateral within a small number of collateral
names.
Moody's review incorporated CDOROM® v2.6, one of Moody's
CDO rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge® v3.2, 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 28%
to 18% or up to 38% would result in average rating movement
on the rated tranches of 0 to 1 notches downward and 0 to 1 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 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 methodologies used in rating Saturn Ventures I, Ltd.
were "CMBS: Moody's Approach to Rating Static CDOs Backed by Commercial
Real Estate Securities published on June 2004, and "Moody's
Approach to Rating SF CDOs" published in August 2009. Other
methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
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 6 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
Scott Epperson
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.
Moody's Upgrades Two and Affirms Two CRE CDO Classes of Saturn Ventures I, Ltd.
No Related Data.
© 2019 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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