New York, October 28, 2010 -- Moody's Investors Service announced today that it has downgraded its ratings
of 95 Notes issued by 56 collateralized debt obligation transactions which
consist of significant exposure to one or more of Alt-A,
Option-ARM and subprime RMBS securities, CLOs, or CMBS.
Today's rating actions are as follows:
888 Tactical Fund, Ltd.
U.S. $39,200,000 Class S Floating Rate
Notes due 2015, Downgraded to C (sf); previously on September
23, 2008 Downgraded to Ca (sf).
AArdvark ABS CDO 2007-1
U.S. $1,305,140,296 Class A1 Extended
Notes due 2047, Downgraded to C (sf); previously on August
26, 2008 Downgraded to Ca (sf).
ACA ABS 2006-1 Ltd.
Class A-1LA Notes, Downgraded to C (sf); previously
on August 26, 2008 Downgraded to Ca (sf).
ACA ABS 2007-1, Ltd.
U.S. $930,000,000 Class A1S Variable
Funding Senior Secured Floating Rate Notes Due 2047, Downgraded
to C (sf); previously on June 2, 2008 Downgraded to Ca (sf).
ACA ABS 2007-3, Limited
U.S. $7,000,000 Class X Floating Rate
Notes Due August 2013, Downgraded to C (sf); previously on
August 26, 2008 Downgraded to Ca (sf).
Acacia Option ARM 1 CDO, Ltd.
U.S.$380,000,000 Class A1S First Priority
Senior Secured Floating Rate Notes Due 2052, Downgraded to C (sf);
previously on September 23, 2008 Downgraded to Ca (sf).
Adrastea SHG 2007-1, Ltd.
U.S. $1,600,000,000 Class A-1M
Variable Funding Floating Rate Notes Due 2052, Downgraded to C (sf);
previously on April 22, 2009 Downgraded to Ca (sf).
Broderick CDO III Ltd.
U.S. $750,000,000 Class A-1 First
Priority Senior Secured Floating Rate Notes due 2050, Downgraded
to C (sf); previously on September 23, 2008 Downgraded to Ca
(sf).
Brookville CDO I, Ltd.
U.S. $200,000,000 Class A-1 First
Priority Senior Secured Floating Rate Delayed Draw Notes Due 2050,
Downgraded to C (sf); previously on August 26, 2008 Downgraded
to Ca (sf).
CETUS ABS CDO 2006-1, LTD.
U.S.$100,000,000 Class A-1 Floating
Rate Senior Secured Notes Due 2046, Downgraded to C (sf); previously
on August 26, 2008 Downgraded to Ca (sf).
Cairn Mezz ABS CDO II Limited
U.S.$450,000,000 Class A1-VF Senior
Secured Floating Rate Notes Due 2047, Downgraded to C (sf);
previously on September 23, 2008 Downgraded to Ca (sf).
Camber 7 plc
U.S.$485,000,000 Class A-1 Floating
Rate Secured Notes Due 2042, Downgraded to C (sf); previously
on September 23, 2008 Downgraded to Ca (sf).
Cetus ABS CDO 2006-2, Ltd.
U.S.$100,000,000 Class A-1 Floating
Rate Senior Secured Notes Due 2046, Downgraded to C (sf); previously
on August 26, 2008 Downgraded to Ca (sf).
Cetus ABS CDO 2006-4, Ltd.
U.S.$75,000,000 Class A-2 Floating
Rate Senior Secured Notes Due 2047, Downgraded to C (sf); previously
on May 23, 2008 Downgraded to Ca (sf).
U.S.$82,500,000 Class B Floating Rate
Deferrable Subordinate Secured Notes Due 2047, Downgraded to C (sf);
previously on November 12, 2007 Downgraded to Ca (sf).
Class V Funding III, Ltd.
U.S.$39,200,000 Class S Notes due 2015,
Downgraded to C (sf); previously on May 29, 2008 Downgraded
to Ca (sf).
Up to U.S.$500,000,000 Class A1 Floating
Rate Notes due 2052, Downgraded to C (sf); previously on May
29, 2008 Downgraded to Ca (sf).
Diogenes CDO I
Class A-1, Downgraded to C (sf); previously on April
22, 2009 Downgraded to Ca (sf).
Duke Funding High Grade V, Ltd.
Class A-1 Senior Secured Floating Rate Notes Due 2050, Downgraded
to C (sf); previously on September 23, 2008 Downgraded to Ca
(sf).
Duke Funding XI, Ltd.
€33,000,000 Class X Floating Rate Notes Due 2013,
Downgraded to C (sf); previously on April 24, 2009 Downgraded
to Ca (sf).
€704,000,000 Senior Swap, Downgraded to C (sf);
previously on April 24, 2009 Downgraded to Ca (sf).
Duke IX
Senior Swap, Downgraded to C (sf); previously on April 22,
2009 Downgraded to Ca (sf).
Combo Notes, Downgraded to C (sf); previously on April 22,
2009 Downgraded to Ca (sf).
Fourth Street Funding, Ltd.
U.S. $200,000,000 Class A-1 First
Priority Senior Secured Floating Rate Delayed Draw Notes Due 2050,
Downgraded to C (sf); previously on August 26, 2008 Downgraded
to Ca (sf).
GSC ABS CDO 2006-1c, Ltd.
Class A-1, Downgraded to C (sf); previously on October
17, 2008 Downgraded to Ca (sf).
Class A-2, Downgraded to C (sf); previously on October
17, 2008 Downgraded to Ca (sf).
GSC ABS CDO 2006-4u, Ltd.
Up to U.S.$502,000,000 Class A-S1VF
Senior Secured Floating Rate Notes due 2046, Downgraded to C (sf);
previously on August 26, 2008 Downgraded to Ca (sf).
GSC CDO 2007-1r, Ltd.
U.S. $375,000,000 Class A-1LA
VFN Senior Secured Floating Rate Notes due 2039, Downgraded to C
(sf); previously on September 23, 2008 Downgraded to Ca (sf).
Glacier Funding CDO IV Ltd.
U.S.$296,000,000 Class A-1 First
Priority Senior Secured Floating Rate Notes Due 2045, Downgraded
to C (sf); previously on September 23, 2008 Downgraded to Ca
(sf).
Highridge ABS CDO I, Ltd.
U.S.$321,500,000 Class A-1AD First
Priority Senior Secured Floating Rate Delayed Draw Notes due 2048,
Downgraded to C (sf); previously on August 26, 2008 Downgraded
to Ca (sf).
U.S.$976,000,000 Class A-1AT First
Priority Senior Secured Floating Rate Notes due 2048, Downgraded
to C (sf); previously on August 26, 2008 Downgraded to Ca (sf).
Independence VII CDO, Ltd.
U.S.$360,000,000 Class A-1A First
Priority Senior Secured Floating Rate Delayed Draw Notes due 2045,
Downgraded to C (sf); previously on September 23, 2008 Downgraded
to Ca (sf).
U.S.$60,000,000 Class A-1B First
Priority Senior Secured Floating Rate Notes due 2045-2, Downgraded
to C (sf); previously on September 23, 2008 Downgraded to Ca
(sf).
Ischus Mezzanine CDO III, Ltd.
U.S. $396,000,000 Class A-1 First
Priority Senior Secured Floating Rate Notes Due 2046, Downgraded
to C (sf); previously on September 23, 2008 Downgraded to Ca
(sf).
Ivy Lane CDO Ltd.
U.S.$350,000,000 Class A-1 Floating
Rate Senior Secured Notes Due 2046-1, Downgraded to C (sf);
previously on September 23, 2008 Downgraded to Ca (sf).
Jupiter High-Grade CDO V, Ltd.
U.S.$1,290,000,000 Class A-1
Senior Secured Floating Rate Notes Due March 2052, Downgraded to
C (sf); previously on August 26, 2008 Downgraded to Ca (sf).
Knollwood CDO II Ltd.
Class A-1VF First Priority Senior Secured Floating Rate Notes Due
2046, Downgraded to C (sf); previously on April 22, 2009
Downgraded to Ca (sf).
Laguna Seca Funding I, Ltd.
U.S. $250,000,000 Class A-1 VFN
Senior Secured Floating Rate Notes due 2047, Downgraded to C (sf);
previously on September 23, 2008 Downgraded to Ca (sf).
Libertas Preferred Funding II, Ltd.
U.S.$6,000,000 Class X Senior Secured
Floating Rate Notes Due 2012, Downgraded to C (sf); previously
on August 26, 2008 Downgraded to Ca (sf).
U.S.$325,000,000 Class A-1 Senior
Secured Floating Rate Notes Due 2047, Downgraded to C (sf);
previously on August 26, 2008 Downgraded to Ca (sf).
Longstreet CDO I, Ltd.
U.S.$350,000,000 Class A-1 First
Priority Senior Secured Delayed Draw Floating Rate Notes due November
2046, Downgraded to C (sf); previously on August 26,
2008 Downgraded to Ca (sf).
MKP CBO VI, Ltd.
Class A-1 First Priority Senior Secured Floating Rate Notes due
2051, Downgraded to C (sf); previously on August 26,
2008 Downgraded to Ca (sf).
Maxim High Grade CDO I, Ltd.
U.S.$1,200,000,000 Class A-1
First Priority Senior Secured Delayed Draw Floating Rate Notes Due 2048,
Downgraded to C (sf); previously on September 23, 2008 Downgraded
to Ca (sf).
Maxim High Grade CDO II, Ltd.
U.S. $1,200,000,000 Class A-1
First Priority Senior Secured Delayed Draw Floating Rate Notes Due 2053,
Downgraded to C (sf); previously on September 23, 2008 Downgraded
to Ca (sf).
McKinley Funding III, Ltd.
U.S.$1,230,000,000 Class A-1
Senior Secured Floating Rate Notes Due 2046, Downgraded to C (sf);
previously on September 23, 2008 Downgraded to Ca (sf).
Neptune CDO V, Ltd.
U.S. $10,000,000 Class X Floating Rate
Notes Due July 2014, Downgraded to C (sf); previously on May
16, 2008 Downgraded to Ca (sf).
U.S. $190,000,000 Class A-1LA-1
Floating Rate Notes Due January 2045, Downgraded to C (sf);
previously on May 16, 2008 Downgraded to Ca (sf).
U.S. $35,000,000 Class A-1LA-2
Floating Rate Notes Due January 2045, Downgraded to C (sf);
previously on May 16, 2008 Downgraded to Ca (sf).
U.S. $25,000,000 Class A-1LB Floating
Rate Notes Due January 2045, Downgraded to C (sf); previously
on May 16, 2008 Downgraded to Ca (sf).
U.S. $41,000,000 Class A-2L Floating
Rate Notes Due January 2045, Downgraded to C (sf); previously
on May 16, 2008 Downgraded to Ca (sf).
U.S. $9,000,000 Class A-3L Floating
Rate Notes Due January 2045, Downgraded to C (sf); previously
on November 13, 2007 Downgraded to Ca (sf).
Orion 2006-1 Ltd.
Class A, Downgraded to C (sf); previously on May 9, 2008
Downgraded to Ca (sf).
Class B, Downgraded to C (sf); previously on May 9, 2008
Downgraded to Ca (sf).
Class C, Downgraded to C (sf); previously on March 26,
2008 Downgraded to Ca (sf).
Class D, Downgraded to C (sf); previously on March 26,
2008 Downgraded to Ca (sf).
Senior Swap, Downgraded to C (sf); previously on December 16,
2008 Downgraded to Ca (sf).
Palmer ABS CDO 2007-1, Ltd.
U.S. $100,000,000 Class A-1 Floating
Rate Senior Secured Notes Due 2047, Downgraded to C (sf); previously
on March 26, 2008 Downgraded to Ca (sf).
U.S. $50,000,000 Class A-2 Floating
Rate Senior Secured Notes Due 2047, Downgraded to C (sf); previously
on March 26, 2008 Downgraded to Ca (sf).
U.S. $55,000,000 Class B Floating Rate
Deferrable Subordinate Secured Notes Due 2047, Downgraded to C (sf);
previously on March 26, 2008 Downgraded to Ca (sf).
U.S. $40,000,000 Class C Floating Rate
Deferrable Junior Subordinate Secured Notes Due 2047, Downgraded
to C (sf); previously on March 26, 2008 Downgraded to Ca (sf).
U.S. $22,500,000 Class D Floating Rate
Deferrable Junior Subordinate Secured Notes Due 2047, Downgraded
to C (sf); previously on November 5, 2007 Downgraded to Ca
(sf).
Pine Mountain CDO II Ltd.
$392,750,000 Class A Floating Rate Notes Due November
30, 2046, Downgraded to C (sf); previously on December
16, 2008 Downgraded to Ca (sf).
$37,500,000 Class B Floating Rate Notes Due November
30, 2046, Downgraded to C (sf); previously on May 18,
2008 Downgraded to Ca (sf).
Pine Mountain CDO III Ltd.
Up to $230,000,000 Class A-1 Floating Rate Notes
Due July 7, 2047, Downgraded to C (sf); previously on
April 22, 2009 Downgraded to Ca (sf).
Port Jackson CDO 2007-1, Ltd.
U.S.$112,500,000 Class A-2 Second
Priority Senior Secured Floating Rate Notes due 2052, Downgraded
to C (sf); previously on May 30, 2008 Downgraded to Ca (sf).
U.S.$17,500,000 Class A-3 Third
Priority Senior Secured Floating Rate Notes due 2052, Downgraded
to C (sf); previously on May 30, 2008 Downgraded to Ca (sf).
U.S.$60,000,000 Class B Fourth Priority
Senior Secured Floating Rate Notes due 2052, Downgraded to C (sf);
previously on May 30, 2008 Downgraded to Ca (sf).
Pyxis ABS CDO 2006-1 Ltd.
Class A-1 Senior Secured Floating Rate Variable Funding Notes Due
2046-1, Downgraded to C (sf); previously on May 18,
2008 Downgraded to Ca (sf).
Class A-2 Senior Secured Floating Rate Notes Due 2046, Downgraded
to C (sf); previously on May 18, 2008 Downgraded to Ca (sf).
Class B Secured Floating Rate Notes Due 2046, Downgraded to C (sf);
previously on May 18, 2008 Downgraded to Ca (sf).
Class C Secured Deferrable Floating Rate Notes Due 2046, Downgraded
to C (sf); previously on March 26, 2008 Downgraded to Ca (sf).
Class D Mezzanine Secured Deferrable Floating Rate Notes Due 2046,
Downgraded to C (sf); previously on March 26, 2008 Downgraded
to Ca (sf).
Class X Subordinated Notes Due 2046, Downgraded to C (sf);
previously on March 26, 2008 Downgraded to Ca (sf).
Senior Swap, Downgraded to C (sf); previously on December 16,
2008 Downgraded to Ca (sf).
RFC CDO IV Ltd.
Super Senior Facility, Downgraded to C (sf); previously on
April 22, 2009 Downgraded to Ca (sf).
Ridgeway Court Funding II, Ltd.
Up to U.S. $840,000,000 Class A1A Floating
Rate Notes Due June 2047, Downgraded to C (sf); previously
on September 23, 2008 Downgraded to Ca (sf).
U.S. $660,000,000 Class A1B Floating
Rate Notes Due June 2047, Downgraded to C (sf); previously
on September 23, 2008 Downgraded to Ca (sf).
U.S. $450,000,000 Class A1C Floating
Rate Notes Due June 2047, Downgraded to C (sf); previously
on September 23, 2008 Downgraded to Ca (sf).
STAtic ResidenTial CDO 2005-C
Class A-1, Downgraded to C (sf); previously on April
22, 2009 Downgraded to Ca (sf).
Class B, Downgraded to C (sf); previously on December 16,
2008 Downgraded to Ca (sf).
Class C, Downgraded to C (sf); previously on December 16,
2008 Downgraded to Ca (sf).
Class D, Downgraded to C (sf); previously on December 16,
2008 Downgraded to Ca (sf).
Class E, Downgraded to C (sf); previously on December 16,
2008 Downgraded to Ca (sf).
Sorin VI CDO Ltd.
Class A-1LA Floating Rate Notes Due 2052, Downgraded to C
(sf); previously on September 23, 2008 Downgraded to Ca (sf).
Soter 2007-CRN3, Ltd.
U.S. $100,000,000 A1 Variable Notes Due
2047, Downgraded to C (sf); previously on December 11,
2008 Downgraded to Ca (sf).
Stockton CDO Ltd.
U.S. $495,000,000 Class A-1 Variable
Funding Senior Secured Floating Rate Notes Due 2052, Downgraded
to C (sf); previously on September 23, 2008 Downgraded to Ca
(sf).
Tahoma CDO II, Ltd.
Class A-1 Senior Secured Floating Rate Notes due 2047-1,
Downgraded to C (sf); previously on May 29, 2008 Downgraded
to Ca (sf).
Class A-2 Senior Secured Floating Rate Notes due 2047, Downgraded
to C (sf); previously on May 29, 2008 Downgraded to Ca (sf).
Class B Senior Secured Floating Rate Notes due 2047, Downgraded
to C (sf); previously on May 29, 2008 Downgraded to Ca (sf).
Tahoma CDO III, Ltd.
U.S. $192,500,000 Class A-1 Senior
Secured Floating Rate Notes due 2047, Downgraded to C (sf);
previously on May 29, 2008 Downgraded to Ca (sf).
U.S. $97,000,000 Class A-2 Senior
Secured Floating Rate Notes due 2047, Downgraded to C (sf);
previously on May 29, 2008 Downgraded to Ca (sf).
VOLANS FUNDING 2007-1, LTD.
U.S. $770,000,000 Class A-1 Senior
Secured Floating Rate Variable Funding Notes Due 2052, Downgraded
to C (sf); previously on August 26, 2008 Downgraded to Ca (sf).
Vertical ABS CDO 2005-1
Class A-1 SENIOR SECURED FLOATING RATE TERM NOTES-1,
Downgraded to C (sf); previously on February4, 2009 Downgraded
to Ca (sf).
Vertical ABS CDO 2006-1
A-S1VF, Downgraded to C (sf); previously on April 22,
2009 Downgraded to Ca (sf).
Vertical CDO 2004-1 Ltd.
Class A Floating Rate Notes, Downgraded to C (sf); previously
on April 2, 2009 Downgraded to Ca (sf).
RATINGS RATIONALE
According to Moody's, the rating downgrade actions today are the
result of deterioration in the credit quality of the underlying portfolios.
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, or failure
of the coverage tests and further significant loss of overcollateralization.
Based on trustee reports, the transactions affected today either
have all of their underlying assets defaulted or have extremely low coverage
on the particular tranches.
Moody's notes that in arriving at its ratings of Structured Finance CDOs,
there exist a number of sources of uncertainty, operating both on
a macro level and on a transaction-specific level. Among
the general macro uncertainties are those surrounding future housing prices,
pace of residential mortgage foreclosures, loan modification and
refinancing, unemployment rate and interest rates. However,
in light of the performance indicators noted above, Moody's believes
that it is unlikely that the ratings announced today are sensitive to
further change.
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.
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.
The approach Moody's takes to defining the default distribution for the
SF CDO collateral depends on the structure of the CDO itself.
Moody's applied the Monte Carlo simulation framework within CDOROMv2.6
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 the 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 of: 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.
The principal methodology used in rating these transactions was "Moody's
Approach to Rating SF CDOs" rating methodology published in August 2009.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found on Moody's website.
Moody's Investors Service did not receive or take into account a third
party due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past 6 months.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
Public information, Confidential and proprietary Moody's Investors
Service's information, Confidential and proprietary Moody's Analytics'
information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Further information on Moody's analysis of this transaction is available
on www.moodys.com. 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.
MOODY'S adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Gong Cai
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Rodrigo Araya
Senior Vice President
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
U.S.A.
Moody's lowers ratings of 95 Notes issued by 56 structured finance CDO transactions
