Moody's also confirms the ratings of $129MM notes
New York, September 18, 2009 -- Moody's Investors Service announced today that it has downgraded the ratings
of the following notes issued by Centurion CDO VII Limited:
U.S. $22,000,000 Class A-1b Floating
Rate Notes due 2016, Downgraded to Aa3, previously on March
4, 2009 Aaa Placed Under Review for Possible Downgrade;
U.S. $632,500,000 Class A-2 Floating
Rate Notes due 2016 (current balance of $630,774,485),
Downgraded to Aa2, previously on May 18, 2004 Assigned Aaa;
U.S. $5,000,000 Class D-1 Deferrable
Fixed Rate Notes due 2016, Downgraded to Caa3, previously
on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible
Downgrade;
U.S. $25,300,000 Class D-2 Deferrable
Floating Rate Notes due 2016, Downgraded to Caa3, previously
on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible
Downgrade;
U.S. $6,000,000 Class H Combination Securities
due 2016 (current rated balance of $1,893,328),
Downgraded to B2, previously on May 18, 2004 assigned Ba2;
U.S. $10,000,000 Class J Combination
Securities due 2016 (current rated balance of $7,169,370),
Downgraded to Baa2, previously on March 4, 2009 A3 Placed
Under Review for Possible Downgrade;
U.S. $8,500,000 Class K Combination Securities
due 2016 (current rated balance of $4,566,086),
Downgraded to Ba1, previously on March 4, 2009 Baa2 Placed
Under Review for Possible Downgrade.
In addition, Moody's has confirmed the ratings of the following
notes:
U.S. $22,500,000 Class B-1 Deferrable
Fixed Rate Notes due 2016, Confirmed at Baa3, previously on
March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible
Downgrade;
U.S. $76,500,000 Class B-2 Deferrable
Floating Rate Notes due 2016, Confirmed at Baa3, previously
on March 18, 2009 Downgraded to Baa3 and Placed Under Review for
Possible Downgrade;
U.S. $3,000,000 Class C-1 Deferrable
Fixed Rate Notes due 2016, Confirmed at Ba3, previously on
March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible
Downgrade;
U.S. $27,205,000 Class C-2 Deferrable
Floating Rate Notes due 2016, Confirmed at Ba3, previously
on March 18, 2009 Downgraded to Ba3 and Placed Under Review for
Possible Downgrade.
According to Moody's, the rating actions taken on the notes are
a result of credit deterioration of the underlying portfolio. Such
credit deterioration is observed through a decline in the average credit
rating (as measured by the weighted average rating factor), an increase
in the dollar amount of defaulted securities, and an increase in
the proportion of securities from issuers rated Caa1 and below.
In particular, the weighted average rating factor has increased
over the last year and is currently 2629 versus a test level of 2590 as
of the last trustee report, dated August 24, 2009.
Based on the same report, defaulted securities currently held in
the portfolio total about $76 million, accounting for roughly
7% of the collateral balance, and securities rated Caa1 or
lower make up approximately 8% of the underlying portfolio.
Today's rating actions also reflect Moody's revised assumptions
with respect to default probability and the calculation of the Diversity
Score. These revised assumptions are described in the publication
"Moody's Approach to Rating Collateralized Loan Obligations,"
dated August 12, 2009. Moody's analysis also reflects the
expectation that recoveries for high-yield corporate bonds and
second lien loans will be below their historical averages, consistent
with Moody's research (see Moody's Special Comment titled "Strong Loan
Issuance in Recent Years Signals Low Recovery Prospects for Loans and
Bonds of Defaulted U.S. Corporate Issuers," dated
June 2008). Other assumptions used in Moody's CLO monitoring
are described in the publication "CLO Ratings Surveillance Brief
- Second Quarter 2009," dated July 17, 2009.
Due to the impact of all aforementioned stresses, 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.
Centurion CDO VII Limited, issued on May 18, 2004, is
a collateralized loan obligation, backed primarily by a portfolio
of senior secured loans.
The principal methodologies used in rating and monitoring the transaction
are described in the following publications, which can be found
at www.moodys.com in the Research & Ratings directory,
in the Rating Methodologies subdirectory:
Moody's Approach to Rating Collateralized Loan Obligations (August 12,
2009);
Using the Structured Note Methodology to Rate CDO Combo-Notes (February
26, 2004).
Other methodologies and factors that may have been considered in the process
of rating this issue can also be found in the Research & Ratings directory.
Further information on Moody's analysis of this transaction is available
on www.moodys.com. Moody's also publishes a weekly
summary of structured finance credit, ratings and methodologies,
available to all registered users of our website, at www.moodys.com/SFQuickCheck.
In addition to the quantitative factors that are explicitly modeled,
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, 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.
New York
Maria E. Leibholz
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Alena Chen
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's downgrades the ratings of $697MM CLO notes issued by Centurion CDO VII Limited