New York, February 02, 2011 -- Moody's Investors Service announced that it has assigned the following
ratings to the notes issued by CLO Pass-Through Repackaging 2011-1
Ltd. (the "Issuer"):
U.S. $75,000,000 Class A Notes due 2019
(the "Class A Notes"), Assigned Aaa (sf);
U.S. $13,250,000 Class B Notes due 2019
(the "Class B Notes," and together with the Class A Notes,
collectively the "Notes"), Assigned A1 (sf).
RATINGS RATIONALE
CLO Pass-Through Repackaging 2011-1 Ltd. is a repackaging
of U.S. $88,250,000 of U.S.
$450,000,000 Class A-1 Floating Rate Notes due
2019 (the "Underlying Securities") issued by LightPoint CLO V, Ltd.
The Underlying Securities are currently rated Aa2(sf).
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 Securities' portfolio of
leveraged loans, the transaction's legal structure and the characteristics
of the Underlying Securities.
LightPoint CLO V, Ltd. is a CLO transaction that closed on
August 3, 2006. It is collateralized primarily by senior
secured bank loans and senior secured notes. The collateral manager
is LightPoint Capital Management LLC. LightPoint CLO V, Ltd.
is still in its reinvestment period, which will end in August 2013.
The Underlying Securities are the most senior class of notes in the capital
structure of LightPoint CLO V, Ltd.
The Issuer issued two classes of notes, the Class A Notes and the
Class B Notes. 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 Securities 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 Securities, which is 3 month LIBOR plus 25 basis
points paid quarterly.
Since the ratings of the Notes are linked to the rating of the Underlying
Securities, any rating action on the Underlying Securities 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 LightPoint CLO V, Ltd.'s
covenants and Moody's stressed parameters:
• Diversity 70
• Stressed WARF 3514 (30% default probability stress based
on the actual WARF of 2767)
• Weighted Average Spread 2.68%
• Weighted Average Recovery Rate 44.03%
• Weighted Average Life 5.10 years.
Together with the refined set of modeling assumptions above, Moody's
conducted additional sensitivity analysis which included various default
probability assumptions to capture potential defaults in the underlying
portfolio as well as a range of asset recovery rate assumptions.
Below is a summary of the impact of different default probabilities (expressed
in terms of WARF levels) on all rated notes (shown in terms of the number
of notches' difference versus the current model output, whereby
a positive difference corresponds to lower expected losses), assuming
that all other factors are held equal:
Moody's Adjusted WARF - 20% (2811)
Class A Notes 0
Class B Notes +3
Moody's Adjusted WARF + 20% (4217)
Class A Notes -1
Class B Notes -1.
Below is a summary of the impact of different recovery rate levels on
all rated notes (shown in terms of the number of notches' difference versus
the current model output, whereby a positive difference corresponds
to lower expected losses), assuming that all other factors are held
equal:
Moody's Adjusted WARR + 2% (46.03%)
Class A Notes 0
Class B Notes +1
Moody's Adjusted WARR - 2% (42.03%)
Class A Notes 0
Class B Notes 0.
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 methodologies used in this rating were "Moody's
Approach to Rating Collateralized Loan Obligations," published
in August 2009 and "Moody's Approach to Rating Repackaged
Securities," published in April 2010.
The Special Report "V Scores and Parameter Sensitivities in the Global
Cash Flow CLO Sector" is also 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 in this transaction.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
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
Oksana Yerynovska
Vice President - Senior Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Danielle Nazarian
Senior Vice President
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.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's assigns ratings to two classes of notes issued by CLO Pass-Through Repackaging 2011-1 Ltd., a repackaging transaction
