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Rating Action:

Moody's downgrades Class A of LMP Loan MT (SME loan ABS)

 The document has been translated in other languages

25 Mar 2011

JPY 18.5 billion of Trust Beneficial Interests affected

Tokyo, March 25, 2011 -- Moody's Japan K.K. has downgraded to Caa3 (sf) from B3 (sf) its rating on the Series 2007-1 Class A Senior Beneficial Interests issued by LMP Loan Master Trust.

Details follow:

Deal Name: LMP Loan Master Trust

JPY 18.5 billion Series 2007-1 Class A Senior Beneficial Interests, downgraded to Caa3 (sf); previously, on June 30, 2010, downgraded to B3 (sf) from Ba3 (sf)

Class: Series 2007-1 Class A Senior Beneficial Interests

Issue Amount: JPY 18.5 billion

Dividend: Floating

Issued Date: October 12, 2007

Final Maturity Date: (in initial agreement) March 25, 2011, (in amendment) December 26, 2011, as will hereinafter be described in detail

Underlying Asset: Real estate-backed loan receivables

Initial Servicer: SFCG Co., Ltd.

These Senior Beneficial Interests were issued in October 2007, and are backed by a pool of real estate-backed SME loans originated by SFCG Co., Ltd., and a subsidiary.

The servicing and special servicing of all the loan receivables in the transaction have been transferred to the back-up servicers.

RATING RATIONALE

The Class A Senior Beneficial Interests have been downgraded mainly because Moody's now assumes that the final loss to the Class A Senior Beneficial Interests will exceed what the current rating level indicates, given the expected collection amount from the limited number of remaining collateral properties.

On June 30, 2010, Moody's downgraded its ratings on the Class A through C Senior Beneficial Interests, mainly because of 1) the view that, given the limited amount of time before final maturity -- which may lead to an increase in the number of collateral properties to be auctioned -- the recovery rate for the collateral properties will decline further, and 2) the further substantial losses in the underlying receivables pool.

The number of collateral properties at the last rating action was approximately 150. As a result of property sales, only 40 remain (as of February 2011).

As the sale of the properties progresses, the amount of unpaid loan receivables (due to obligors' inability to make additional payments, in Moody's view) is becoming evident, resulting in substantial losses in the pool. The outstanding loan receivables currently amount to around JPY 25 billion, JPY 21 billion of which comprise losses.

Most of the remaining properties will be sold at auction, subject to legal procedures. Moody's already considered the Class A Senior Beneficial Interests may suffer losses. However, given the expected collection amount from the limited number of remaining properties, Moody's now assumes that final losses in the Class A Interests will exceed what the current rating level indicates, and has thus downgraded its rating.

The number of obligors was around 80, and the outstanding amount of the Class A Senior Beneficial Interests was about JPY 1.8 billion as of end-February 2011.

The final maturity date in the initial agreement is March 25, 2011. The amendment is to be signed on March 25, 2011, and the final maturity will be extended until September 26, 2011. In accordance with the amendment, if any loan receivables remain on September 1, 2011, the asset trustee and investors of this deal will discuss whether to postpone the final maturity again. Unless they arrive at an agreement by September 26, the final maturity will be extended automatically to December 26, 2011.

Moody's sees the amendment as a distressed exchange to avoid a payment default. (For more information on the methodology for distressed exchanges, please see "Moody's Approach to Evaluating Distressed Exchanges," published on September 30, 2010.)

However, the current ratings on the deal already reflect a certain amount of final loss. The main reason for this rating action is Moody's assumption that the final loss to Class A will exceed the current rating level, not the extension of the final maturity.

The principal methodology used in this rating was "Moody's Approach to Rating Transactions Backed by Real Estate Collateralized SME Loans in Japan," published on September 30, 2010, and available on www.moodys.co.jp.

Moody's 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 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 comprised Servicing Reports, Trustee Reports, etc.

Information sources used to prepare the credit rating are the following: parties not involved in the ratings (the trustee and the back-up servicers.); and confidential and proprietary Moody's information.

Measures taken to ensure the quality of this information include 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
Yumiko Kitaoka
Vice President - Senior 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.
Atago Green Hills Mori Tower 20fl
2-5-1 Atago, Minato-ku
Tokyo 105-6220
Japan
JOURNALISTS: (03) 5408-4110
SUBSCRIBERS: (03) 5408-4100

Moody's downgrades Class A of LMP Loan MT (SME loan ABS)
No Related Data.
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