Moody's publishes additional information on TRUP CDOs
New York, December 10, 2008 -- Moody's is providing additional information from the November 12,
2008 press release on TRUP CDOs (Rating Action). The additional
information, shown in the table below, includes the modeled
weighted average rating factor (WARF) (including the 1.25 stress)
and the assumed defaulted par for each of the 44 TRUP CDOs using the approach
described in the Rating Action.
Moody's methodology for bank TRUP CDOs is summarized below.
This methodology is the same approach used in the Rating Action.
Moody's approach to calculating the default probability used two financial
ratios for every bank in the collateral portfolio. The first ratio
is calculated as follows: (non-current loans plus other real
estate owned) divided by (tangible common equity plus allowance for loan
losses) ("First Ratio"). The second ratio is calculated as follows:
(non-current loans plus other real estate owned plus 20%
of current construction and development loans) divided by (tangible common
equity plus allowance for loan losses) ("Second Ratio"). If the
First Ratio is above 150% or the Second Ratio is above 175%,
for purposes of these rating actions, Moody's assumed these banks
to be defaulted with a zero recovery. If the First Ratio is above
100% or the Second Ratio is above 130%, Moody's assumed
these banks had an implied default probability Rating Factor of 6500 (implied
default probability rating of Caa2). Moody's used the second quarter
2008 financials when calculating the First Ratio and Second Ratio.
Generally, the First Ratio and Second Ratio were used to identify
banks more likely to defer payments on their trust preferred securities
or default.
For all other banks in TRUP CDOs without a public rating from Moody's,
when calculating the default probability, Moody's used the quantitative
V3.1 Risk Calc Model for private banks with the credit cycle adjustment
(the "Model"). To account for potential model error and adverse
selection, the most favorable implied default probability Rating
Factor assumed from the Model was 360, which translates into an
implied default probability rating of Baa2. Finally, to account
for the increased likelihood of deferral on the bank TRUPs in the current
environment, the pool-wide default probability was multiplied
by 1.25. Moody's used the second quarter 2008 financials
in the Model.
For correlation purposes, Moody's continued to assume five regions
for U.S. banks, but no longer making a distinction
between banks and thrifts. Also, Moody's increased the assumed
inter-asset correlation, which is correlation between bank
regions, to 10%. The assumed intra-asset correlation,
which is correlation within bank regions, remained at 45%.
The update to the default probability assumptions was a much larger driver
to these rating actions than the correlation update.
Moody's continued to assume a 10% recovery for bank trust preferred
securities in its cash flow analysis which represents the likelihood that
some banks that defer interest payments may ultimately pay cumulative
interest without defaulting. For any bank TRUP issuer currently
deferring interest, Moody's assumed that issuer was defaulted
with a zero recovery. Moody's also continued to use the correlated
binomial to analyze TRUP CDOs. Other than the assumptions noted
above, these actions used the approach outlined in Moody's Approach
to Rating U.S. Bank Trust Preferred Security CDOs,
April 14, 2004.
TRUP CDO: ALESCO Preferred Funding I, Ltd.
WARF*: 1194
Assumed Defaulted Par Amount: $37,500,000
TRUP CDO: ALESCO Preferred Funding II, Ltd.
WARF*: 889
Assumed Defaulted Par Amount: $40,000,000
TRUP CDO: ALESCO Preferred Funding III, LTD.
WARF*: 1333
Assumed Defaulted Par Amount: $25,000,000
TRUP CDO: ALESCO Preferred Funding IV, Ltd.
WARF*: 1740
Assumed Defaulted Par Amount: $28,000,000
TRUP CDO: MM Community Funding Ltd.
WARF*: 1520
Assumed Defaulted Par Amount: $21,000,000
TRUP CDO: MM Community Funding II, Ltd.
WARF*: 392
Assumed Defaulted Par Amount: $28,000,000
TRUP CDO: MM COMMUNITY FUNDING III, LTD.
WARF*: 711
Assumed Defaulted Par Amount: $10,000,000
TRUP CDO: MM Community Funding IX, Ltd.
WARF*: 1608
Assumed Defaulted Par Amount: $9,250,000
TRUP CDO: MMCAPS Funding I, Ltd.
WARF*: 761
Assumed Defaulted Par Amount: $25,000,000
TRUP CDO: MMCAPS Funding XIX, Ltd.
WARF*: 1549
Assumed Defaulted Par Amount: $13,500,000
TRUP CDO: MMCAPS Funding XVIII, Ltd.
WARF*: 1590
Assumed Defaulted Par Amount: $17,500,000
TRUP CDO: Preferred Term Securities I, Ltd.
WARF*: 1070
Assumed Defaulted Par Amount: $36,000,000
TRUP CDO: Preferred Term Securities II, Ltd
WARF*: 1141
Assumed Defaulted Par Amount: $41,000,000
TRUP CDO: Preferred Term Securities IV, Ltd.
WARF*: 1969
Assumed Defaulted Par Amount: $12,000,000
TRUP CDO: Preferred Term Securities V, Ltd.
WARF*: 999
Assumed Defaulted Par Amount: $0
TRUP CDO: Preferred Term Securities VI, Ltd.
WARF*: 3002
Assumed Defaulted Par Amount: $0
TRUP CDO: Preferred Term Securities VII
WARF*: 2373
Assumed Defaulted Par Amount: $49,000,000
TRUP CDO: Preferred Term Securites VIII, Ltd
WARF*: 1967
Assumed Defaulted Par Amount: $30,000,000
TRUP CDO: Preferred Term Securities IX, Ltd.
WARF*: 1428
Assumed Defaulted Par Amount: $10,000,000
TRUP CDO: Preferred Term Securities X, Ltd.
WARF*: 1696
Assumed Defaulted Par Amount: $24,500,000
TRUP CDO: Preferred Term Securities XI, Ltd.
WARF*: 1615
Assumed Defaulted Par Amount: $8,000,000
TRUP CDO: Preferred Term Securities XII, Ltd.
WARF*: 1632
Assumed Defaulted Par Amount: $16,000,000
TRUP CDO: Preferred Term Securities XIII, LTD.
WARF*: 1483
Assumed Defaulted Par Amount: $14,000,000
TRUP CDO: Preferred Term Securities XIV, Ltd.
WARF*: 974
Assumed Defaulted Par Amount: $5,000,000
TRUP CDO: Regional Diversified Funding 2004-1LTD.
WARF*: 1761
Assumed Defaulted Par Amount: $35,000,000
TRUP CDO: Regional Diversified Funding Ltd.
WARF*: 1373
Assumed Defaulted Par Amount: $10,000,000
TRUP CDO: Soloso CDO 2005-1 Ltd.
WARF*: 1732
Assumed Defaulted Par Amount: $39,000,000
TRUP CDO: TPREF FUNDING I LTD.
WARF*: 1429
Assumed Defaulted Par Amount: $30,000,000
TRUP CDO: TPREF FUNDING II Ltd.
WARF*: 1624
Assumed Defaulted Par Amount: $19,000,000
TRUP CDO: TPREF Funding III, Ltd.
WARF*: 1245
Assumed Defaulted Par Amount: $26,000,000
TRUP CDO: Trapeza CDO I, LLC
WARF*: 1668
Assumed Defaulted Par Amount: $26,000,000
TRUP CDO: Trapeza CDO II, LLC
WARF*: 1591
Assumed Defaulted Par Amount: $22,330,000
TRUP CDO: Trapeza CDO III, LLC
WARF*: 1814
Assumed Defaulted Par Amount: $30,670,000
TRUP CDO: Trapeza CDO IV, LLC
WARF*: 1667
Assumed Defaulted Par Amount: $36,000,000
TRUP CDO: Trapeza CDO V, Ltd.
WARF*: 1345
Assumed Defaulted Par Amount: $36,000,000
TRUP CDO: Trapeza CDO VI, Ltd.
WARF*: 1113
Assumed Defaulted Par Amount: $33,000,000
TRUP CDO: Trapeza CDO VII, Ltd.
WARF*: 1730
Assumed Defaulted Par Amount: $0
TRUP CDO: Tropic CDO II, LTD
WARF*: 1742
Assumed Defaulted Par Amount: $36,000,000
TRUP CDO: Tropic CDO III LTD
WARF*: 1908
Assumed Defaulted Par Amount: $20,500,000
TRUP CDO: Tropic CDO IV LTD.
WARF*: 1635
Assumed Defaulted Par Amount: $16,500,000
TRUP CDO: US Capital Funding I LTD
WARF*: 1014
Assumed Defaulted Par Amount: $9,000,000
TRUP CDO: US Capital Funding II LTD
WARF*: 1083
Assumed Defaulted Par Amount: $9,500,000
TRUP CDO: US Capital Funding III, Ltd.
WARF*: 833
Assumed Defaulted Par Amount: $22,000,000
TRUP CDO: US CAPITAL FUNDING IV, LTD.
WARF*: 1294
Assumed Defaulted Par Amount: $57,400,991
* (Including the 1.25 Stress)
For more information please see www.moodys.com.
New York
Jian Hu
Managing Director
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
James Brennan
VP - Senior Credit Officer
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653