London, 21 September 2011 -- Moody's Investors Service announced today that it has downgraded the ratings
of the following notes issued by Corsair Finance (Ireland) No.
2 Limited - Series 13:
Issuer: Corsair Finance (Ireland) No. 2 Limited
....EUR200M Series 13 Floating Rate Secured
Portfolio Credit -Linked Notes, Downgraded to B3 (sf);
previously on Mar 1, 2011 Downgraded to Ba2 (sf)
RATINGS RATIONALE
This transaction is a collateralized debt obligation (the "Collateralized
Synthetic Obligation" or "CSO") referencing a static portfolio of 50 synthetic
credit corporate exposures.
Moody's explained that the rating action taken today is the result of
the overall credit deterioration of the reference portfolio. The
transaction is exposed to Bank of Ireland and Allied Irish Banks,
p.l.c. which have suffered credit events since the
last rating action in March 2011. The 10 year weighted average
rating factor of the portfolio, adjusted with forward looking measures
and based on senior unsecured debt ratings, has deteriorated from
234 to 445, equivalent to an average rating of the current portfolio
of Baa3. In downgrading the rating of the tranche, Moody's
has taken into account that the reference portfolio is 100% exposed
to the Banking and Finance industry sectors. Furthermore 95%
of the reference portfolio is exposed to subordinated debt. Approximately
28% of the reference portfolio is exposed to entities in Greece,
Ireland, Portugal and Spain, countries of which some have
experienced multi notch downgrades since the last rating action.
The notes have a remaining life of 4.26 years and credit enhancement
of approximately 7.78%.
Because of the high concentration of subordinated debt in the reference
portfolio, in its base case run Moody's used subordinated
debt ratings as inputs in the CDOROM.
In the process of determining the final rating, Moody's took into
account the results of the sensitivity analysis where two exposures amounting
to 4% of the pool were ran as defaulted in order to test the deal
sensitivity to the lowest rated entities of the portfolio. This
run generated a result that was consistent with the rating assigned today.
Moody's analysis of corporate CSOs is subject to uncertainties,
the primary sources of which includes complexity, governance and
leverage. Although the CDOROM model capture many of the dynamics
of the Corporate CSO structure, it remains a simplification of the
complex reality. Of greatest concern are (a) variations over time
in default rates for instruments with a given rating, (b) variations
in recovery rates for instruments with particular seniority/security characteristics
and (c) uncertainty about the default and recovery correlations characteristics
of the reference pool. Similarly on the legal/structural side,
the legal analysis although typically based in part on opinions (and sometimes
interpretations) of legal experts at the time of issuance, is still
subject to potential changes in law, case law and the interpretations
of courts and (in some cases) regulatory authorities. Although
the impact of these decisions is mitigated by structural constraints,
anticipating the quality of these decisions necessarily introduces some
level of uncertainty in our assumptions. Given the tranched nature
of Corporate CSO liabilities, rating transitions in the reference
pool may have leveraged rating implications for the ratings of the Corporate
CSO liabilities, thus leading to a high degree of volatility.
All else being equal, the volatility is likely to be higher for
more junior or thinner liabilities.
The base case scenario modeled fits into the central macroeconomic scenario
predicted by Moody's of a sluggish recovery scenario of the corporate
universe. Should macroeconomics conditions evolves towards a more
severe scenario such as a double dip recession, the CSO rating will
likely be downgraded to an extent depending on the expected severity of
the worsening conditions.
The principal methodology used in this rating was "Moody's Approach to
Rating Corporate Collateralized Synthetic Obligations" published
in September 2009. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Moody's analysis for this transaction is based on the CDOROM. This
model is available on moodys.com under Products and Solutions --Analytical
models, upon return of a signed free license agreement.
Due to the impact of revised and updated key assumptions referenced in
"Moody's Approach to Rating Corporate Synthetic Obligations", key
model inputs used by Moody's in its analysis may be different from the
manager/arranger's reported numbers. In particular, rating
assumptions for all publicly rated corporate credits in the underlying
portfolio have been adjusted for "Review for Possible Downgrade",
"Review for Possible Upgrade", or "Negative Outlook".
Moodys did not run a separate loss and cash flow analysis other than the
one already done using the CDOROM model. For a description of the
analysis, refer to the methodology and the CDOROM user guide on
Moodys website.
In addition to the quantitative factors that are explicitly modeled,
qualitative factors are part of the rating committee considerations.
These qualitative factors include the structural protections in each transaction,
the recent deal performance in the current market environment, the
legal environment, specific documentation features, the collateral
manager's track record, and the potential for selection bias in
the portfolio. All information available to rating committees,
including macroeconomic forecasts, input from other Moody's analytical
groups, market factors, and judgments regarding the nature
and severity of credit stress on the transactions, may influence
the final rating decision.
REGULATORY DISCLOSURES
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following:
parties involved in the ratings and public information.
Moody's did not receive or take into account a third party assessment
on the due diligence performed regarding the underlying assets or financial
instruments related to the monitoring of this transaction in the past
six months.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
Moody's adopts all necessary measures so that the information it uses
in assigning a 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.
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
special report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure page
on our website www.moodys.com for further information.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's 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 our website www.moodys.com for further information.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Branimir Jovanovic
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Neelam S. Desai
Senior Vice President
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades EUR 200m CSO notes of Corsair Finance (Ireland) No. 2 Limited
