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Announcement:

Moody's publishes its updated methodology for rating securities backed by secured debt and equity tranches of SF CDOs

07 Oct 2016

New York, October 07, 2016 -- Moody's Investors Service has published an updated methodology for rating securities backed by both secured debt and equity tranches of collateralized debt obligations backed by structured finance securities (SF CDOs). The updated methodology, which replaces the one published on 7 July 2015, aims to account for the risks associated with a potential refinancing of the SF CDO secured debt tranches in such securities. The update follows the review of comments in response to the Requests for Comment (RFCs) "Moody's Proposes Revised Approach to Rating Instruments Backed by CLO/CDO Secured Debt Tranches and Equity," published on 29 July 2016, and " Moody's Proposes Revised Approach to the Rating of Combination Securities," published on 21 April 2016.

The updated methodology adds a SF CDO refinancing scenario to Moody's analysis of securities backed by both SF CDO secured debt and equity tranches, when the security's documentation permits refinancing. Adding the refinancing scenario analysis will capture the combined effects of loss of future coupon payments from the refinanced SF CDO secured debt tranches, as well as the impact on the instrument's weighted average life or duration. The methodology update appears in the appendix "Approach to Rating SF CDO instruments That Are Backed by SF CDO Secured Debt Tranches and Equity, and SF CDO Instruments with Non-Standard Promises" found in "Moody's Approach to Rating SF CDOs."

Impact on Moody's Ratings

The methodology update will not result in rating actions for any outstanding ratings of combination securities backed by SF CDO secured debt and equity tranches.

Moody's will no longer assign new ratings to combination securities backed by both SF CDO secured debt and equity tranches that have a rated balance promise that differs from the entire contractual promise of these securities. Moody's will however monitor all ratings currently outstanding for such securities, which ratings continue to be based upon the rated balance, and not the contractual promise. For a list of these outstanding ratings, see the SF CDO tab of the spreadsheet at

http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF440601

Results of Consultation

As noted in Moody's report "Request for Comment / Results of Consultation: Moody's Proposes Revised Approach to the Rating of Combination Securities" (ROC), Moody's received five comments in response to this RFC, of which two respondents requested confidentiality. The comments are summarized in the ROC, available at:

http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1038016

As noted in Moody's report "Request for Comment Results of Consultation: Moody's Proposes Revised Approach to Rating Instruments Backed by CLO/CDO Secured Debt Tranches and Equity" (ROC), Moody's received one comment, whose respondent requested confidentiality, in response to the RFC. The comment is summarized in the ROC, available at: http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1041724

This press release is not intended to provide a summary of the proposed methodology. For a full explanation of the updated methodology, please consult "Moody's Approach to Rating SF CDOs" which is available on www.moodys.com and accessible at:

http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBS_1038012

This publication does not announce a credit rating action. For any credit ratings referenced in this publication, please see the ratings tab on the issuer/entity page on www.moodys.com for the most updated credit rating action information and rating history.

Algis Remeza
Associate Managing Director
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

Jian Hu
MD - Structured Finance
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

No Related Data.
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