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Global Credit Research - 12 Aug 2010
EUR 894.6 million of EMEA CMBS affected
London, 12 August 2010 -- Moody's Investors Service has today affirmed the rating of the Senior
CDS and Classes A+, A, B, C, D and E of CMBS
Notes issued by Stability CMBS 2007-1 GmbH (amounts reflect initial
EUR726,800,000 senior credit default swap, Affirmed
at Aaa (sf); previously on May 22, 2007 assigned Aaa (sf)
EUR500,000 Class A+ Floating Rate Credit Linked Notes due May
2022, Affirmed at Aaa (sf); previously on May 22, 2007
assigned Aaa (sf)
EUR31,800,000 Class A Floating Rate Credit Linked Notes due
May 2022, Affirmed at Aaa (sf); previously on May 22,
2007 assigned Aaa (sf)
EUR46,400,000 Class B Floating Rate Credit Linked Notes due
May 2022, Affirmed at Aa2 (sf); previously on May 22,
2007 assigned Aa2 (sf)
EUR30,500,000 Class C Floating Rate Credit Linked Notes due
May 2022, Affirmed at A2 (sf); previously on May 22,
2007 assigned A2 (sf)
EUR30,400,000 Class D Floating Rate Credit Linked Notes due
May 2022, Affirmed at Baa2 (sf); previously on May 22,
2007 assigned Baa2 (sf)
EUR28,200,000 Class E Floating Rate Credit Linked Notes due
May 2022, Affirmed at Ba3 (sf); previously on May 22,
2007 assigned Ba3 (sf)
Moody's does not rate the Class F of Notes issued by Stability CMBS 2007-1
1) Transaction Overview
Stability CMBS 2007-1 GmbH closed in 2007 and represents the synthetic
securitisation of initially 218 commercial mortgage loans granted to 91
distinct borrower groups and secured on aggregate by 119 properties located
in Europe. The loans were originated by IKB Deutsche Industriebank
Aktiengesellschaft ("IKB") in the course of its ordinary commercial mortgage
loan activity, and are serviced by IKB. At closing of the
transaction, the portfolio was replenishable up to a maximum amount
of EUR 300 million in accordance with certain criteria. However,
following a replenishment termination event in November 2009, the
protection buyer lost its right to replenish the portfolio. Since
closing of the transaction, the reference portfolio has reduced
from EUR 909 million to EUR 770 million as per April 2010, for 189
claims to 96 distinct borrower groups . The portfolio's concentration
has slightly increased as shown in a current Herfindahl Index of 25 compared
to 32 at closing. The main property type remains office building,
at 59% of the portfolio compared to 53% at closing,
followed by mixed use and retail properties. The asset location
remains predominantly Germany with 90% of the pool (the same level
as at closing) with the remaining being almost equally distributed across
Austria, the UK, Luxembourg, the Netherlands and Switzerland.
The structure is sponsored by KfW, which provides credit protection
to IKB for the reference portfolio. KfW in turn hedges its exposure
through a senior credit default swap and the issuance of certificates
of indebtedness to the issuer, Stability CMBS 2007-1 GmbH.
The issuer financed the acquisition of the certificates through the issuance
of credit-linked notes to investors. The legal final maturity
of the transaction is 2022.
No credit event nor loss claim were reported since closing, and
as per the most recent investor report, there is no current delinquency.
2) Rating Rationale
In the course of its annual review of the transaction, Moody's obtained
updated information about each of the loans and re-assessed the
performance of the securitised portfolio and its future performance expectations.
Moody's estimated the magnitude of the increase in the term and refinancing
default probability for each loan as well as the realised and further
expected value decline of the underlying property collateral. Moody's
focused its analysis more particularly on the four largest loans in the
portfolio. Furthermore, potential operational risks of the
transaction were analysed in light of the current credit situation of
the loan originator and servicer, IKB.
Today's affirmations were prompted by several counter-balancing
factors, and in particular the following negative credit aspects:
(i) The negative performance of the German, British and Dutch commercial
property markets since closing of the transaction in 2007 and Moody's
opinion about the future performance of these markets; and
(ii) The increased refinancing risk of the securitised loans, in
particular for the largest loans in the pool. More than 50%
of the portfolio in value is due for refinancing between now and end 2013,
and Moody's expects the real estate lending market to remain under
pressure for the next years.
In Moody's view, the above negative credit factors are mitigated
(i) The very low levels of arrears and delinquency historically,
and the absence of credit events to date;
(ii) The relatively moderate LTV levels of most of the borrower groups,
as currently estimated by Moody's. Moody's estimates in this
case that refinancing is more realistic than in comparably more leveraged
transactions. The current Moody's estimated weighted average
LTV of the loans is 82%, by comparison to 62% for
the underwriter's LTV. The underwriter's weighted average
LTV is based on property values at closing or replenishment. Moody's
LTV accounts for the Moody's estimated fall in commercial real estate
values in the German and other continental European markets since closing
and replenishment. Moody's also took into account the vacant
possession value of single-tenanted properties when modeling recovery
(iii) The fact that despite some replenishment, the capital structure
has deleveraged through scheduled repayment and prepayment since closing.
The purely sequential nature of the transaction has lead to increased
credit enhancement for the senior CDS and all the classes of Notes rated
3) Rating outlook
Given that replenishment is no longer possible, continuing loan
repayments and prepayments will further increase the credit enhancement
available to all rated classes of Notes. In case of a continued
solid performance of the loans, this may generate upgrade pressure
on the ratings.
4) Rating Methodology
The principal methodologies used in monitoring the transaction are "Update
on Moody's Real Estate Analysis for CMBS Transaction in EMEA" June 2005
and "Moody's Updates on its Surveillance Approach for EMEA CMBS" March
2009, which are available on www.moodys.com in the
Rating Methodologies sub-directory under the Research & Ratings
tab. Other methodologies and factors that may have been considered
in the process of rating this issuer can also be found in the Rating Methodologies
sub-directory on Moody's website. The last Performance Overview
for this transaction was published on 21 June 2010. 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.
For updated monitoring information, please contact email@example.com.
To obtain a copy of Moody's Pre-Sale Report on this transaction,
please visit Moody's website at www.moodys.com or contact
our Client Service Desk in London (+44-20-7772 5454).
Frankfurt am Main
MD - EMEA Structured Fin
Structured Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
Moody's affirms ratings of CDS and CMBS Notes issued by Stability CMBS 2007-1 GmbH
One Canada Square
London E14 5FA
No Related Data.
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