Class A1 through Class D2 and Class X Notes affected
Tokyo, February 10, 2011 -- Moody's Japan K.K has today changed ratings on the Class A1 through
D2 and Class X Notes issued by JLOC37.
Details follow:
Class A1/A2, downgraded to Aa3 (sf) from Aa2 (sf); previously,
on January 13, 2011, Aa2 (sf) placed under review for possible
downgrade
Class B1/B2, downgraded to Ba1 (sf) from A3 (sf); previously,
on January 13, 2011, A3 (sf) placed under review for possible
downgrade
Class C1/C2, downgraded to Caa2 (sf) from B3 (sf); previously,
on January 13, 2011, B3 (sf) placed under review for possible
downgrade
Class D1/D2, confirmed at Caa3 (sf); previously, on January
13, 2011, Caa3 (sf) placed under review for possible downgrade
Class X, downgraded to Aa3 (sf) from Aa2 (sf); previously,
on January 13, 2011, Aa2 (sf) placed under review for possible
downgrade
Deal Name: JLOC37
Class: Class A1 through D2 and Class X notes
Issue Amount (initial): JPY 81.22 billion
Dividend: Floating
Issue Date (initial): July 11, 2007
Final Maturity Date: January, 2015
Underlying Asset (initial): 10 non-recourse loans backed
by real estate
Originator: Morgan Stanley Japan Securities Co., Ltd.
and Morgan Stanley Japan Limited (as of the issue date)
Arranger: Morgan Stanley Japan Securities Co., Ltd.
(as of the issue date)
JLOC37, effected in July 2007, represents the securitization
of ten loans backed by real estate. The originator transferred
the ten loans to the issuer SPE, which issued the Class A1 through
D2 and X notes and then sold them to investors. The notes are rated
by Moody's.
The underlying loans are classified as either component loans or pooled
loans. Component loans are further divided into senior and junior
components. The senior component and pooled loans will secure the
Class A1 through D2 and X notes.
Interest and principal collections from the pooled loans will be used
to make payments on the senior notes. Interest payments on the
notes will be made sequentially, while principal payments will be
made pro-rata. Principal collections from the underlying
loans (other than defaulted loans) will be used to pay down the Class
A1 through D2 notes pro-rata.
Interest and principal collections from the component loans will be used
to pay down the senior and junior notes. Interest payments on the
senior and junior components will be made sequentially, while principal
payments will be made pro-rata. Principal collections from
the underlying loans (other than defaulted loans) will be paid pro-rata,
according to the outstanding amount of the senior and junior components.
Interest and principal payments made on the senior component loans will
be used to pay the interest on and principal of the senior notes in the
same manner as the pooled loans: interest payments on the notes
will be made sequentially, while principal payments will be made
pro-rata. Principal collections from the senior component
(other than defaulted loans) will used to pay down the Class A1 through
D2 notes pro-rata.
Five of the ten loans have been paid down in full thus far, so the
transaction is now backed by the remaining five loans. Four of
these are backed by office, residential, or hotel properties
located throughout Japan and are under special servicing. The fifth
is backed by an office building in central Tokyo and will mature in November
2011.
RATING RATIONALE
The recovery of the loan backed by hotels outside of a major city and
under special servicing may well be lower than Moody's assumptions
in June 2009 (the last rating action on these notes), in light of
the type of property, location, and the special servicer's
actions. Moody's has thus re-assessed and lowered
by 67% (from its initial estimates) its recovery assumptions.
Moody's has re-assessed and lowered by 37% its recovery
assumptions for the loan backed by office buildings in Tokyo and Saitama
and under special servicing, and by 38% for the loan backed
by office, residential, and hotel properties and under special
servicing.
One loan under special servicing is likely to be recovered in full as
a result of special servicing.
In this transaction, the principal collections from the underlying
loans on the maturity or prepayment date will be used to pay down the
notes pro-rata. Thus, in this rating action,
Moody's is incorporating the impact stemming from the pro-rata
payments on the loan backed by an office building in central Tokyo and
maturing in December 2011.
The principal methodology used in this rating was "Updated: Moody's
Approach to Rating CMBS Transactions in Japan" (June 2010) published on
September 30, 2010, and available on www.moodys.co.jp.
In addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all egistered
users of our website, at www.moodys.com/SFQuickCheck.
Moody's did not receive or take into account any third party due diligence
reports on the underlying assets or financial instruments related to the
monitoring of this transaction in the past six months.
REGULATORY DISCLOSURES
For an explanation of the (sf) indicator, please see "Moody's Structured
Finance Rating Scale" on www.moodys.com.
The principal information used to prepare the credit rating included the
asset disposition report, and special servicer and trustee reports.
Information used to prepare the credit rating came the following:
parties involved in the ratings (such as the arranger), parties
not involved in the ratings (such as the servicer), public information,
confidential and proprietary Moody's information.
Measures taken to ensure the quality of this information include preparation
or reviews by a third party.
Moody's considers the quality of information available on the issuer or
obligation satisfactory for the purposes of maintaining 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.
Credit ratings are Moody's current opinions of the relative future credit
risk of entities, credit commitments, or debt or debt-like
securities. 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. Credit
ratings do not address any other risk, including but not limited
to: liquidity risk, market value risk, or price volatility.
Credit ratings do not constitute investment or financial advice,
and credit ratings are not recommendations to purchase, sell,
or hold particular securities. No warranty, express or implied,
as to the accuracy, timeliness, completeness, merchantability
or fitness for any particular purpose of any such rating or other opinion
or information is given or made by Moody's in any form or manner whatsoever.
The credit risk of an issuer or its obligations is assessed based on information
received from the issuer or from public sources. Moody's may change
the rating when it deems necessary. Moody's may also withdraw the
rating due to insufficient information, or for other reasons.
Moody's Japan K.K. is a credit rating agency registered
with the Japan Financial Services Agency and its registration number is
FSA Commissioner (Ratings) No. 2. The Financial Services
Agency has not imposed any supervisory measures on Moody's Japan K.K.
in the past year.
Please see ratings tab on the issuer/entity page on the Moody's website
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 Credit Ratings were fully digitized and accurate
data may not be available. Consequently, Moody's 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 the Moody's website for further information.
Please see the Credit Policy page on the Moody's website for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Tokyo
Kiyosei Sugioka
Analyst
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Tokyo
Koji Kumamaru
MD - Structured Finance
Structured Finance Group
Moody's Japan K.K.
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100
Moody's Japan K.K.
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Tokyo 105-6220
Japan
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Moody's confirms/downgrades JLOC37 Notes (CMBS)