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Rating Action:

Moody's affirms the ratings of three trust units issued by Calculus CMBS Resecuritization Trust

15 Jul 2016

New York, July 15, 2016 -- Moody's Investors Service has affirmed the ratings on the following trust units issued by Calculus CMBS Resecuritization Trust:

Credit Default Swap Class A, Affirmed Caa3 (sf); previously on Aug 20, 2015 Affirmed Caa3 (sf)

Series 2006-1 Trust Units, Affirmed Ca (sf); previously on Aug 20, 2015 Affirmed Ca (sf)

Series 2006-4 Trust Units, Affirmed Ca (sf); previously on Aug 20, 2015 Affirmed Ca (sf)

RATINGS RATIONALE

Moody's has affirmed the ratings on the transaction because its key transaction metrics are commensurate with the existing ratings. While the credit quality of the reference pool has migrated negatively as evidenced by WARF and WARR, there have been no protection payments made to date and our forecast of protection payment frequency and magnitude has remained within the range of the existing ratings. The rating actions are 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 on commercial mortgage backed securities (CMBS) (100% of the reference obligation pool balance) issued between 2005 and 2006.

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 4358, compared to 1628 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 13.7% compared to 51.9% at last review; A1-A3 and 0.0% compare to 11.8% at last review; Ba1-Ba3 and 17.5% compared to 9.1% at last review; B1-B3 and 34.7% compared to 11.4% at last review; and Caa1-Ca/C and 34.1% compared to 15.8%.

Moody's modeled a WAL of 1.0 years, compared to 1.6 years at last review The WAL is based on the look-through extension assumptions on the loans backing the underlying CMBS reference obligations.

Moody's modeled a variable WARR of 14.1%, compared to a mean of 24.5% at last review.

Moody's modeled a MAC of 15.7%, compared to 9.6% at last review.

Methodology Underlying the Rating Action:

The principal methodology used in these ratings was "Moody's Approach to Rating SF CDOs" published in July 2015. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

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

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 and credit assessment of the reference obligations. Notching down 100% of the reference pool by one notch would result in an average modeled rating movement on the rated notes of zero notch downward (e.g., one notch down implies a ratings movement of Baa3 to Ba1). Notching up 100% of the reference pool by one notch would result in an average modeled rating movement on the rated notes of zero to one notch upward (e.g., one notch up implies a ratings movement of 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 certain 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.

In rating this transaction, Moody's CDOROM™ is used to model the expected loss for each tranche. Moody's CDOROM™ is a Monte Carlo simulation tool which takes each underlying asset default probability as input. Each underlying asset default behavior is then modeled individually with a standard multi-factor model incorporating both intra- and inter-industry correlation. The correlation structure is based on a Gaussian copula. Each Monte Carlo scenario simulates defaults and if applicable, recovery rates, to derive losses on a portfolio. For a synthetic transaction, the model then allocates losses to the tranches in reverse order of priority to derive the loss on the tranches. By repeating this process and averaging over the number of simulations, Moody's can derive the expected loss on the tranches. For a cash transaction, the portfolio loss, or default, distribution produced by Moody's CDOROM™ may be input into a separate cash flow model in accordance with its priority of payment to determine each tranche's expected loss.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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
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

Deryk Meherik
Senior Vice President/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 the ratings of three trust units issued by Calculus CMBS Resecuritization Trust
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.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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​
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