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Rating Action:

Moody's assigns ratings to two classes of notes issued by CLO Pass-Through Repackaging 2011-1 Ltd., a repackaging transaction

02 Feb 2011

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
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.

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