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05 May 2010
New York, May 05, 2010 -- Moody's Investors Service announced that it has assigned the following
ratings to the notes issued by Gale Funding Ltd. (the "Issuer"):
U.S. $68,000,000 Class A Floating Rate
Notes due 2018 (the "Class A Notes"), Assigned Aaa
U.S. $12,000,000 Class B Floating Rate
Notes due 2018 (the "Class B Notes"), Assigned Aa3
Gale Funding Ltd. is a repackaging of U.S. $80,000,000
of U.S. $366,000,000 Class A First Priority
Senior Secured Floating Rate Notes due 2018 issued by Gale Force 2 CLO,
Ltd. (the "Underlying Security"). The Underlying Security
is currently rated Aa1.
Moody's ratings of the Notes address the ultimate cash receipt of all
required interest and principal payments, as provided by the Notes'
governing documents, and are based on the expected loss posed to
noteholders, relative to the promise of receiving the present value
of such payments.
The ratings of the Notes reflect the risks due to the diminishment of
cash flow due to defaults from the Underlying Security's portfolio of
leveraged loans, the transaction's legal structure and the characteristics
of the Underlying Security.
Gale Force 2 CLO, Ltd. is a CLO transaction that closed on
June 22, 2006. It is collateralized primarily by senior secured
first lien bank loans. The collateral manager is GSO/Blackstone
Debt Funds Management LLC. Gale Force 2 CLO is still in its reinvestment
period, which will end in July 2012. The Underlying Security
is the most senior class of notes in the capital structure of Gale Force
The Issuer issued two classes of notes, Class A and Class B.
The Class A Notes are senior to the Class B Notes with regard to both
interest and principal. The transaction structure allows for a
pass-through of coupon and principal payments of the Underlying
Security to the Issuer. The Class A Notes represent approximately
85% of total issuance. The coupons payable on the Class
A Notes and the Class B Notes are the same as the coupon of the Underlying
Security, which is 3 month LIBOR plus 26 basis points annually.
Since the ratings of the Notes are linked to the rating of the Underlying
Security, any rating action on the Underlying Security may trigger
a review of the ratings of the Notes.
For modeling purposes, Moody's used, among others, the
following assumptions which are based on the worse of the Gale Force 2
CLO's covenants and Moody's stressed parameters:
Stressed WARF 3633 (30% default probability stress based
on the covenant WARF of 2800)
Weighted Average Spread 3.0%
Weighted Average Recovery Rate 41%
Weighted Average Life 7.3 years .
In analyzing this repackaging transaction, Moody's relied
on revised assumptions that are consistent with the assumptions used in
its CLO monitoring analysis. The revised assumptions are described
in the publication "Moody's Approach to Rating Collateralized Loan Obligations,"
dated August 12, 2009. Moody's analysis also reflects the
expectation that recoveries for second lien loans will be below their
historical averages, consistent with Moody's research (see Moody's
Special Comment titled "Strong Loan Issuance in Recent Years Signals Low
Recovery Prospects for Loans and Bonds of Defaulted U.S.
Corporate Issuers," dated June 2008). Due to the impact of
all aforementioned stresses, key model inputs used by Moody's in
its analysis, such as par, weighted average rating factor,
diversity score, and weighted average recovery rate, may be
different from the trustee's reported numbers.
The V Score for this transaction is Medium/High, similar to the
Medium/High V score assigned to the Global Cash Flow CLO sector (as described
in the special report titled "V Scores and Parameter Sensitivities in
the Global Cash Flow CLO Sector," dated July 17, 2009),
but with a slight deviation. Because a repackaging creates an additional
layer of securitization, Moody's assessment of disclosure of the
collateral pool's characteristics and on-going performance for
this transaction is Low/Medium compared to Low for a typical Global Cash
Flow CLO. The overall V Score indicates Medium/High uncertainty
about critical assumptions.
Moody's V Scores provide a relative assessment of the quality of available
credit information and the potential variability around the various inputs
to a rating determination. The V Score ranks transactions by the
potential for significant rating changes owing to uncertainty around the
assumptions due to data quality, historical performance, the
level of disclosure, transaction complexity, the modeling
and the transaction governance that underlie the ratings. A V Score
applies to the entire transaction (rather than individual tranches).
The methodology used to rate this transaction is consistent with the rating
approach Moody's uses to rate and monitor collateralized loan obligations.
The principal methodology used in rating and monitoring the transaction
is described in the following publication, which can be found on
www.moodys.com in the Ratings Methodologies subdirectory
under the Research & Ratings tab:
Moody's Approach to Rating Collateralized Loan Obligations (8/12/2009)
Moody's Approach to Rating Repackaged Securities (4/14/2010).
The special report "V Scores and Parameter Sensitivities in the Global
Cash Flow CLO Sector" is also available on www.moodys.com.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found in the Rating Methodologies sub-directory
on Moody's website. Moody's also publishes a weekly summary of
structured finance credit, ratings and methodologies, available
to all registered users of our website, at www.moodys.com/SFQuickCheck.
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
Moody's assigns ratings to two classes of notes issued by Gale Funding Ltd., a repackaging transaction
Structured Finance Group
Moody's Investors Service
No Related Data.
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