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Rating Action:

Moody's places 166 tranches in 60 TruPS CDOs on review for upgrade following an update on the TruPS CDO methodology

26 Jun 2014

Approximately $11.7 billion of securities affected

New York, June 26, 2014 -- Moody's Investors Service announced today that it has placed 166 tranches in 60 Collateralized Debt Obligations backed by trust-preferred securities (TruPS CDOs) on review for upgrade. The current outstanding balance of the affected tranches total approximately $11.7 billion.

Please click on this link: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF371881 for the list of affected credit ratings. This list is an integral part of this press release and identifies each affected issuer.

RATINGS RATIONALE

The actions are the result of updates to Moody's methodology for rating TruPS CDOs. These updates include: (1) removing the current 25% macro default probability stress for bank and insurance TruPS; (2) expanding the default timing profiles from one to six probability-weighted scenarios; (3) incorporating a redemption profile for bank and insurance TruPS; (4) using a loss distribution generated by Moody's CDOROM™ for deals that do not permit reinvestment; (5) giving full par credit to deferring bank TruPS that meet certain criteria; and (6) raising the assumed recovery rate for insurance TruPS. Moody's expects the methodology update to have a positive impact of up to four notches on the ratings of senior tranches and up to three notches on those of mezzanine and junior tranches. Please see Moody's announcement on the TruPS CDO methodology update,

https://www.moodys.com/research/PR_302828

Moody's has assessed all of its outstanding ratings on 85 bank-only and bank and insurance TruPS CDOs and 32 combination securities to determine which ratings to place on review for upgrade. The ratings of the following types of tranches are not placed under review: (1) tranches rated Aaa (sf), (2) tranches rated below Caa1 (sf) that are currently deferring interest payments and are significantly under-collateralized, (3) transactions that are backed by highly concentrated portfolios, (4) transactions that are currently in an event of default, (5) combination securities that are principal protected, and (6) combination securities rated Ca and below and their components are still deferring. In these cases, the changes in the methodology do not have a direct impact on the ratings.

Moody's will complete the review of all affected transactions within the next six months.

The principal methodology used in these ratings was "Moody's Approach to Rating TruPS CDOs," published in June 2014. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Factors That Would Lead to an Upgrade or Downgrade of the Rating:

The following factors could lead to an upgrade or downgrade of the rating:

(1) Macroeconomic uncertainty: General economic uncertainty could negatively affect TruPS CDOs performance. However, Moody's has a stable outlook on the US banking, health & life and property & casualty insurance sectors;

(2) Portfolio credit risk: Credit performance of the assets collateralizing the transaction that is better than Moody's current expectations could have a positive effect on transaction performance. Conversely, asset credit performance that is weaker than Moody's current expectations could adversely affect transaction performance;

(3) Deleveraging: Deleveraging from unscheduled principal proceeds and excess interest proceeds could positively affect a transaction's performance . Note repayments that are faster than Moody's current expectations could have a positive impact on the notes' ratings, beginning with the notes with the highest payment priority;

(4) Resumption of interest payments by deferring assets: A number of banks have resumed making interest payments on their TruPS. The timing and amount of deferral cures could positively affect a transaction's over-collateralization (OC) ratios and the ratings on the notes;

(5) Exposure to non-publicly rated assets: These transactions contain a large number of securities whose default probability are assessed through credit scores derived using RiskCalc™ or credit estimates. Because these are not public ratings, they are subject to additional uncertainties.

Moody's did not model the affected transactions and did not run any additional sensitivities or stress scenarios because the rating actions primarily reflect the preliminary assessment of the impact of the updated methodology.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

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 these transactions in the past six months.

Moody's did not use any models, or loss or cash flow analysis, in its analysis.

Moody's did not use any stress scenario simulations in its analysis.

For ratings issued on a program, series or category/class of debt, this announcement provides certain 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 certain 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 certain 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.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Rachid Ouzidane
Asst Vice President - 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

Rodrigo Araya
Senior Vice President/Manager
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 places 166 tranches in 60 TruPS CDOs on review for upgrade following an update on the TruPS CDO methodology
No Related Data.
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