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Rating Action:

Moody's downgrades the ratings of Notes issued by Trainer Wortham First Republic CBO V Limited, an ABS CDO

05 Aug 2010

New York, August 05, 2010 -- Moody's Investors Service announced today that it has downgraded the ratings of three classes of notes issued by Trainer Wortham First Republic CBO V Limited. The notes affected by today's rating action are as follows:

U.S.$255,000,000 Class A-1 First Priority Senior Secured Floating Rate Notes Due 2040 (current balance of $149,389,276), Downgraded to Caa3 (sf); previously on October 29, 2009 Downgraded to Caa2 (sf);

U.S.$34,000,000 Class A-2 Second Priority Senior Secured Floating Rate Notes Due 2040, Downgraded to C (sf); previously on October 29, 2009 Downgraded to Ca (sf);

U.S.$28,000,000 Class B Third Priority Senior Secured Floating Rate Notes Due 2040, Downgraded to C (sf); previously on October 29, 2009 Downgraded to Ca (sf).

Trainer Wortham First Republic CBO V Limited is a collateralized debt obligation issuance backed by a portfolio of primarily Residential Mortgage-Backed Securities (RMBS) originated between 2004 and 2007.

According to Moody's, the rating downgrade actions today are the result of deterioration in the credit quality of the underlying portfolio. Such credit deterioration is observed through numerous factors, including a decline in the average credit rating of the portfolio (as measured by an increase in the weighted average rating factor), an increase in the dollar amount of defaulted securities, and failure of the coverage tests. Defaulted securities, as reported by the trustee, have increased from $83 million in October 2009 to $87 million in July 2010. The Class A/B Overcollateralization Ratio, as reported by the trustee, has decreased from 76.48 to 69.50 in that period. Moody's noted that the transaction is negatively impacted by a large pay-fixed, receive-floating interest rate swap where payments to the hedge counterparty absorb a large portion of the excess spread in the deal. Additionally, approximately $49 million of RMBS within the underlying portfolio are currently on review for possible downgrade as a result of Moody's updated loss projections.

Moody's 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 such 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 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 2006 and 2007 Alt-A and Option-ARM securities, currently Aaa or Aa rated securities were stressed by eight notches, and securities currently rated A, Baa or Ba were stressed by five notches. Those securities currently rated in the 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. For subprime RMBS originated in the first half of 2006, those currently rated Aaa were stressed by four notches, while Aa, A and Baa rated securities were stressed by eight notches. Those securities currently rated in the Ba range were stressed to Caa3, while current B and Caa securities were treated as Ca. For subprime RMBS originated in the second half of 2006, those currently rated Aa, A, Baa or Ba were stressed by four notches, currently B rated securities were treated as Caa3, and currently Caa rated securities were treated as Ca. For 2007 subprime RMBS, currently Ba rated securities were stressed by four notches, currently B rated securities were treated as Caa3, and currently Caa rated 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 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 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 to Ca.

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 for downgrade.

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.

Moody's continues to monitor this transaction using primarily the methodology and its supplements for ABS CDOs as described in Moody's Special Report below:

- 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 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, 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 on Moody's website. 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.

New York
Rodrigo Araya
Senior Vice President
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 Investors Service
250 Greenwich Street
New York, NY 10007
USA

Moody's downgrades the ratings of Notes issued by Trainer Wortham First Republic CBO V Limited, an ABS CDO
No Related Data.
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