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Rating Action:

Moody's affirms six trust units issued by Calculus CMBS Resec Trust

15 Oct 2014

New York, October 15, 2014 -- Moody's Investors Service has affirmed the ratings on the following trust units issued by Calculus CMBS Resecuritization Trust:

Series 2006-1 Trust Units, Affirmed Ca (sf); previously on Nov 12, 2013 Affirmed Ca (sf)

Series 2006-2 Trust Units, Affirmed Ca (sf); previously on Nov 12, 2013 Affirmed Ca (sf)

Series 2006-3 Trust Units, Affirmed Ca (sf); previously on Nov 12, 2013 Affirmed Ca (sf)

Series 2006-4 Trust Units, Affirmed Ca (sf); previously on Nov 12, 2013 Affirmed Ca (sf)

Series 2006-6 Trust Units, Affirmed Ca (sf); previously on Nov 12, 2013 Affirmed Ca (sf)

Credit Default Swap Class A, Affirmed Caa3 (sf); previously on Nov 12, 2013 Affirmed Caa3 (sf)

RATINGS RATIONALE

Moody's has affirmed the ratings on the transaction because key transaction metrics are commensurate with the existing ratings. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO Synthetic) transactions.

Calculus CMBS Resecuritization Trust is a static synthetic credit linked notes transaction backed by a portfolio of credit default swaps referencing 100% commercial mortgage backed securities (CMBS). All of the CMBS reference obligations were securitized in 2004 (2.5%), 2005 (77.7%), and 2006 (19.8%). Currently, 77% of the reference obligations are publicly rated by Moody's.

Moody's has identified the following as key indicators of the expected loss in CRE CDO transactions: the weighted average rating factor (WARF), the weighted average life (WAL), the weighted average recovery rate (WARR), and Moody's asset correlation (MAC). Moody's typically models these 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. Moody's has updated its assessments for the reference obligations it does not rate. The rating agency modeled a bottom-dollar WARF of 968, compared to 692 at last review. The current ratings on the Moody's-rated reference obligations and the assessments of the non-Moody's rated reference obligations follow: Aaa-Aa3 and 34.3% compared to 22.0% at last review; A1-A3 and 28.0%, the same as last review; Baa1-Baa3 and 9.8% compared to 22.0% at last review; Ba1-Ba3 and 13.2% compared to 15.5% at last review; B1-B3 and 7.2% compared to 10.0% at last review; and Caa1-Ca/C and 7.5% compared to 2.5%.

Moody's modeled a WAL of 2.0 years, compared to 1.9 years at last review. The WAL is based on assumptions about extensions on the underlying reference obligations.

Moody's modeled a variable WARR with a mean of 14.1%, compared to a mean of 38.4% at last review.

Moody's modeled a MAC of 8.3%, compared to 21.5% at last review.

Methodology Underlying the Rating Action:

The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in March 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Factors that would lead to an upgrade or downgrade of the rating:

The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes.

Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for some of the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the ratings of the reference obligations and credit estimates. Notching the reference obligations down by -1 notch would result in no rating movement on the rated notes (e.g. one notch downward implies Baa3 to Ba1). Notching the reference obligations upward by +1 notch would result in an average modeled rating movement of zero to one notch upward (e.g. one notch upward implies Baa3 to Baa2).

The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and commercial real estate property markets. Commercial real estate property values continue to improve modestly, along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

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.

In rating this transaction, Moody's used Moody's CDOROM™ to model the cash flows and determine the loss for each tranche. Moody's CDOROM™ is a Monte Carlo simulation that uses Moody's default probabilities as input. Moody's models each corporate reference entity individually with a standard multi-factor model that incorporates both intra- and inter-industry correlations. The correlation structure is based on a Gaussian copula. Each Monte Carlo scenario simulates defaults to derive losses on a portfolio, which the model then allocates to the notes in reverse order of priority to derive the loss on the issuer's notes. By repeating this process and averaging the number of simulations, Moody's can derive an estimate of the expected loss on the notes.

As the section on loss and cash flow analysis describes, Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain 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 certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Biao He
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

Deryk Meherik
VP - Sr Credit Officer/Manager
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 affirms six trust units issued by Calculus CMBS Resec Trust
No Related Data.
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