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15 Oct 2010
EUR 18 million of debt securities affected
London, 15 October 2010 -- Moody's Investors Service announced today that it has downgraded the rating
of the Class C note issued by Euroloan CLO I B.V:
EUR 18,000,000 Class C Notes Due January 2029 (current balance
of EUR18,990,881 including deferred interest), Downgraded
to Caa2 (sf); previously on Nov 4, 2009 Downgraded to B3 (sf)
Euroloan CLO I B.V. is a static collateralised loan obligation
backed by a portfolio of senior secured loans (78%), and
other non-secured loans. A significant proportion of the
portfolio (14%) additionally consists of CLO mezzanine securities
rated between B1 and Caa3.
According to Moody's, the downgrade rating action taken on the Class
C note is the result of continued credit deterioration of the portfolio.
Whilst the average credit quality of the portfolio has remained stable
since the last rating action in November 2009, Moody's has
observed a significant increase in the proportion of securities rated
Caa1 and below (7.57% in October 2009, compared to
20.74% in June 2010). This deterioration of the portfolio
predominantly affects the junior classes of notes.
Although the increase in the Caa bucket has resulted in larger haircuts
being applied to overcollateralisation calculations, its effect
has been largely compensated by amortisation of the portfolio.
Consequently, overcollateralisation ratios have been relatively
steady with Class A/B and Class C overcollateralisation ratios currently
observing 103.37% and 95.82% respectively
(June 2010 Trustee Report), versus previous levels of 103.85%
and 96.79% respectively (October 2009 Trustee Report).
As a base case, Moody's analyzed the underlying collateral pool
with an adjusted weighted average rating factor of 4894 and a weighted-average
recovery rate of 45.44%. In addition, specific
asset correlations were applied to CLO mezzanine securities (20%
asset correlation between CLO securities and loans and 80% correlation
between two CLO securities) as per the methodology used at the inception
of the transaction.
Moody's additionally ran sensitivity analyses on key parameters for the
rated notes. Among these, Moody's considered the impact
of CLO assets observing recovery rates between 15% and 25%
in the event of a default versus the base case assumption of 0%.
Moody's found that applying such recovery rates would not significantly
impact the results modelled for the senior Class A1 note but could impact
Classes A2, B and C by 3, 4 and 2 notches respectively.
Moody's also considered the impact of further stresses to large
single exposures assessed through credit estimates. A two notch
downgrade applied to the rating of credit estimates equal or greater than
3% of the portfolio had no significant effect on model results
for the Class A1 note and would likely impact model results of Class A2
and B by not more than two notches. Moody's current ratings
do not deviate by more than one notch from the model results of these
The principal methodology used in rating Euroloan CLO I B.V.
was "Moody's Approach to Rating Collateralized Loan Obligations" rating
methodology published in August 2009. Other methodologies and factors
that may have been considered in the process of rating this issuer can
also be found on Moody's website.
Under this methodology, due to the lack of granularity of the portfolio
and the correlation framework required to model the large proportion of
structured finance assets, Moody's relies on a simulation based
framework. Moody's therefore used CDOROM, to generate
default and recovery scenarios for each asset in the portfolio and then
a cash-flow model in order to compute the associated loss to each
tranche in the structure.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's EMEA Cash-Flow
Due to the impact of revised and updated key assumptions referenced in
"Moody's Approach to Rating Collateralized Loan Obligations" and "Annual
Sector Review (2009): Global CLOs", 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.
Moody's also notes that a material proportion of the collateral pool consists
of debt obligations whose credit quality has been assessed through Moody's
credit estimates. As credit estimates do not carry credit indicators
such as ratings reviews and outlooks, a stress of a quarter notch-equivalent
assumed downgrade was applied to each of these estimates. In addition,
large single exposure to obligors bearing a Credit Estimates have been
considered for the analysis and applied a stress applicable to concentrated
pools with non publicly rated issuers as per the report titled "Updated
Approach to the Usage of Credit Estimates in Rated Transactions" published
in October 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or financial
instruments related to the monitoring of this transaction in the past
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information and confidential and proprietary Moody's Investors
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
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 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.
VP - Senior Credit Officer
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
Moody's downgrades CLO Note of Euroloan CLO I B.V.
One Canada Square
London E14 5FA
No Related Data.
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