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06 May 2010
EUR 80 million and USD 75 million of debt securities affected
London, 06 May 2010 -- Moody's Investors Service announced today the following rating actions
on notes issued by Cloverie Plc under Series 2004-72, 2004-77
& 2005-04 (relating to the US Onyx AAA portfolio) and Series
2005-07 (relating to the US Onyx VIII portfolio).
Issuer: Cloverie plc - Series 2004-72 and 2004-77
EUR 30,000,000 Class C Secured Floating Rate Portfolio Linked
Notes due 2024, Downgraded to Caa3; previously on Feb 23,
2010 Downgraded to Ba1
EUR 50,000,000 Class C Secured Floating Rate Series 77,
Downgraded to Caa3; previously on Feb 23, 2010 Downgraded to
USD 50,000,000 Class C Secured Floating Rate Series 2005-04,
Downgraded to Caa3; previously on Feb 23, 2010 Downgraded to
Issuer: Cloverie Plc - Series 2005-07 (US Onyx)
USD 25,000,000 Class C Secured Floating Rate Series 2005-07,
Downgraded to Caa3; previously on Mar 11, 2009 Downgraded to
The transactions are synthetic collateralised debt obligations backed
by static portfolios of US RMBS securities all originated in 2004 and
2005. Upon a credit event, losses on the defaulted securities
are fixed at 20%. These synthetic transactions are structured
in such a way so as to replicate certain features of cashflow transactions
through the use of excess spread and a payment waterfall.
Moody's notes that the rating actions taken today are a result of a deterioration
of the credit quality of the reference portfolios. This can be
observed through a decline in the average credit rating (as measured by
an increase in the Weighted Average Rating Factor or "WARF").
The current portfolio WARF is 453 versus a WARF of 262 at the time of
the previous rating action in Feb 2010 for US Onyx AAA. For the
US Onyx VIII portfolio, the current WARF is 786 compared to 363
in Jan 2009.
In particular, Moody's notes a significant risk of credit
event on two US Onyx AAA portfolio securities, namely RASC Series
2004-KS7 Trust Class A-II-B3, currently rated
Caa2, and RASC Series 2004-KS9 Trust Class A-II-3,
rated B3. There are also two securities with a high risk of credit
event in the US Onyx VIII portfolio, RASC Series 2004-KS9
Trust Class A-II-3 and CWALT, Inc. Mortgage
Pass-Through Certificates, Series 2005-14 Cl.
2-A-3 currently rated Caa2. These securities remain
on watch for downgrade. The default of these two securities could
lead to losses on the rated notes as the credit enhancement is thin and
the benefit provided by the excess spread mechanism, which offsets
losses by residual interest, is uncertain and highly dependent on
the timing of default and amortisation of the portfolio securities.
Moody's also explained that in arriving at the rating action noted above,
the ratings of subprime, Alt-A and Option-ARM RMBS
which are currently on review for possible downgrade were stressed.
For purposes of monitoring its ratings of SF CDOs with exposure to 2005-2007
vintage RMBS, Moody's used certain projections of the lifetime
average cumulative losses as set forth in Moody's press releases dated
January 13th for subprime, January 14th for Alt-A,
and January 27th for Option-ARM. Based on the anticipated
ratings impact of the updated cumulative loss numbers, the stress
varied based on vintage, current rating, and RMBS asset type.
For purposes of monitoring its ratings of SF CDOs with exposure to pre-2005
vintage RMBS, Moody's considered the various factors indicating
continued negative performance that were described in Moody's press
releases dated April 8th for subprime, April 12th for Option-ARM
and April 13th for Alt-A. Such seasoned deals will have
varying stress based on RMBS asset type.
For 2005 Alt-A and Option-ARM securities, securities
that are currently rated Aaa or Aa were stressed by eleven notches,
and securities currently rated A or Baa were stressed by eight notches.
Those securities currently rated in the Ba or B range were stressed to
Caa3, while current Caa securities were treated as Ca.
For 2005 subprime RMBS, those currently rated Aa, A or Baa
were stressed by five notches, Ba rated securities were stressed
to Caa3, and B or Caa securities were treated as Ca.
Moody's noted that the stresses applicable to categories of 2005-2007
subprime RMBS that are not listed above will be two notches if the RMBS
ratings are on review for possible downgrade.
For pre-2005 Alt-A, Aaa rated securities were stressed
by four notches, Aa rated securities by six notches, and A
or Baa rated securities by nine notches. Pre-2005 Option-ARM
securities currently rated Aaa were stressed by two notches, Aa
and A by six notches, and Baa by nine notches.
For pre-2005 subprime, Aaa and Aa rated securities were stressed
by two notches, A rated securities were stressed by six notches,
and Baa rated securities were stressed by nine notches.
All subprime, Alt-A and Option-ARM RMBS securities
which originated prior to 2005, are currently rated Ba or below,
and are also currently on review for possible downgrade have been stressed
Moody's further explained that these stresses are based on a preliminary
sample analysis of deals from a given vintage and asset type, and
that they will be utilized in its SF CDO rating analysis while subprime,
Alt-A and Option-ARM securities remain on review for downgrade.
Current public ratings will be used for securities that have undergone
an in depth review by our RMBS team, and that are no longer on review
Moody's also performed a number of sensitivity analyses with various
assumptions of weighted average life for each portfolio security and for
the rated liabilities.
Moody's continues to monitor this transaction using primarily the methodology
and its supplements for SF CDOs as described in Moody's Special Report
- Moody's Approach to Rating SF CDOs (August 2009)
In deriving its ratings, Moody's uses the collateral instrument's
current rating-based expected loss, Moody's recovery rate
table, and the original rating of the instrument along with its
average life to infer an unadjusted default probability. In addition
to the quantitative factors that are explicitly modelled, qualitative
factors are part of 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, and specific documentation features. 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.
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found in the Rating Methodologies sub-directory
under the Research & Ratings tab. In addition, Moody's
publishes a weekly summary of structured finance credit, ratings
and methodologies, available to all registered users of our website,
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's downgrades SF CDO notes of Cloverie Plc (US Onyx)
VP - Senior Credit Officer
Structured Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
No Related Data.
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