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PLEASE READ AND SCROLL DOWN!

 

By clicking “I AGREE” [at the end of this document], you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s inform​ation that becomes accessible to you [after clicking “I AGREE”] (the “Information”).   References herein to “Moody’s” include Moody’s Corporation, Inc. and each of its subsidiaries and affiliates.

 

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2.            You acknowledge and agree that Moody’s credit ratings: (i) are current opinions of the future relative creditworthiness of securities and address no other risk; and (ii) are not statements of current or historical fact or recommendations to purchase, hold or sell particular securities.  Moody’s credit ratings and publications are not intended for retail investors, and it would be reckless and inappropriate for retail investors to use Moody’s credit ratings and publications when making an investment decision.  No warranty, express or implied, as the accuracy, timeliness, completeness, merchantability or fitness for any particular purpose of any Moody’s credit rating is given or made by Moody’s in any form whatsoever.          

 

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Related Issuers
Rating Action:

Moody's downgrades the ratings of six classes of notes issued by Palisades CDO Ltd., a SF CDO.

22 Mar 2012

USD 250 million of debt securities affected.

New York, March 22, 2012 -- Moody's Investors Service announced today that it has downgraded the ratings of the following notes issued by Palisades CDO Ltd.:

U.S. $366,000,000 Class A-1A Floating Rate Notes Due July 2039 (current outstanding balance of $147,264,967.40), Downgraded to Caa3 (sf); previously on October 29, 2009 Downgraded to Caa1 (sf);

U.S. $6,000,000 Class A-1B 4.69% Notes Due July 2039 (current outstanding balance of $2,414,179.79), Downgraded to Caa3 (sf); previously on October 29, 2009 Downgraded to Caa1 (sf);

U.S. $78,000,000 Class B-1 Floating Rate Notes Due July 2039, Downgraded to C (sf); previously on March 20, 2009 Downgraded to Ca (sf);

U.S. $6,000,000 Class B-2 Floating Rate Notes Due July 2039, Downgraded to C (sf); previously on March 20, 2009 Downgraded to Ca (sf);

U.S. $15,000,000 Type III Composite Notes Due July 2039 (current rated balance of $13,126,203.41), Downgraded to C (sf); previously on March 20, 2009 Downgraded to Ca (sf);

U.S. $4,800,000 Type IV Composite Notes Due July 2039 (current rated balance of $2,982,437.53), Downgraded to C (sf); previously on March 20, 2009 Downgraded to Ca (sf).

RATINGS RATIONALE

According to Moody's, the rating downgrades today are the result of deterioration in the credit quality of the underlying portfolio. Such credit deterioration is observed through numerous factors, including an increase in the WARF, an increase in the dollar amount of defaulted securities and a decrease in the transaction's overcollateralization ratios. Based on the latest trustee report dated February 1, 2012, the WARF of the portfolio has increased to 2476 from 1285 since the last rating action in October 2009. Additionally, the Class A/B and Class C overcollateralization ratios are reported at 52.4% and 47.5% respectively versus August 2009 levels of 70.9% and 66.7%, respectively.

Palisades CDO Ltd., issued in July 2004, is a collateralized debt obligation backed primarily by a portfolio of RMBS, CMBS and SF CDOs originated from 2001 to 2006.

The principal methodology used in this rating was "Moody's Approach to Rating SF CDOs" published in November 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's applied the Monte Carlo simulation framework within CDOROMv2.8 to model the loss distribution for SF CDOs. Within this framework, defaults are generated so that they occur with the frequency indicated by the adjusted default probability pool (the default probability associated with the current rating multiplied by the Resecuritization Stress) for each credit in the reference. Specifically, correlated defaults are simulated using a normal (or "Gaussian") copula model that applies the asset correlation framework. Recovery rates for defaulted credits are generated by applying within the simulation the distributional assumptions, including correlation between recovery values.

Together, the simulated defaults and recoveries across each of the Monte Carlo scenarios define the loss distribution for the reference pool.

Once the loss distribution for the collateral has been calculated, each collateral loss scenario derived through the CDOROM loss distribution is associated with the interest and principal received by the rated liability classes via the CDOEdge cash-flow model . The cash flow model takes into account the following: collateral cash flows, the transaction covenants, the priority of payments (waterfall) for interest and principal proceeds received from portfolio assets, reinvestment assumptions, the timing of defaults, interest-rate scenarios and foreign exchange risk (if present). The Expected Loss (EL) for each tranche is the weighted average of losses to each tranche across all the scenarios, where the weight is the likelihood of the scenario occurring. Moody's defines the loss as the shortfall in the present value of cash flows to the tranche relative to the present value of the promised cash flows. The present values are calculated using the promised tranche coupon rate as the discount rate. For floating rate tranches, the discount rate is based on the promised spread over Libor and the assumed Libor scenario.

Moody's notes that in arriving at its ratings of SF CDOs, there exist a number of sources of uncertainty, operating both on a macro level and on a transaction-specific level. Primary sources of assumption uncertainty are the extent of the slowdown in growth in the current macroeconomic environment and the commercial and residential real estate property markets. While commercial real estate property markets are gaining momentum, a consistent upward trend will not be evident until the volume of transactions increases, distressed properties are cleared from the pipeline and job creation rebounds. Among the uncertainties in the residential real estate property market are those surrounding future housing prices, pace of residential mortgage foreclosures, loan modification and refinancing, unemployment rate and interest rates.

Moody's rating action today factors in a number of sensitivity analyses and stress scenarios, discussed below. Results are shown in terms of the number of notches' difference versus the current model output, where a positive difference corresponds to lower expected loss, assuming that all other factors are held equal:

Moody's Caa rated assets notched up by 2 rating notches:

Class A-1: 0

Class B: 0

Moody's Caa rated assets notched down by 2 rating notches:

Class A-1: -1

Class B: 0

Further information on Moody's analysis of this transaction is available on www.moodys.com

REGULATORY DISCLOSURES

Although this credit rating has been issued in a non-EU country which has not been recognized as endorsable at this date, this credit rating is deemed "EU qualified by extension" and may still be used by financial institutions for regulatory purposes until 30 April 2012. Further information on the EU endorsement status and on the Moody's office that has issued a particular Credit Rating is available on www.moodys.com.

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.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service 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.

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.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

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.

Aniket Deshpande
Associate Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Ramon O. Torres
Senior Vice President
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades the ratings of six classes of notes issued by Palisades CDO Ltd., a SF CDO.
No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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