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Rating Action:

Moody's takes action on Ciena Capital small business loan ABS

01 Oct 2013

Approximately $67 million ABS affected

NOTE: On December 30, 2013, the press release was revised as follows: The following was added in the Ratings Rationale section after "The methodology is described as follows": “The principal methodology used in these ratings was Moody’s Approach to Rating SBA Loan-Backed Securitizations published in March 1996. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.” Revised release follows.

New York, October 01, 2013 -- Moody's Investors Service upgraded nine tranches and downgraded one tranche issued in six securitizations of small business loans sponsored by Ciena Capital, LLC, formerly known as Business Loan Express. Small balance commercial real estate primarily secures the loans.

RATINGS RATIONALE

The upgrade actions in the 2003-2, 2004-A, 2005-1, 2005-A, and 2006-A securitizations were due to increased credit enhancement or decreased delinquencies, depending on the deal. In the past year for the 2005-1, 2005-A, and 2006-A deals, the reserve accounts have increased by approximately six to ten percentage points as of the September 2013 distribution date, while delinquency levels have remained fairly steady. For the 2003-2 and 2004-A deals, loans 60 days or more past due, including foreclosure and REO, have decreased in one year to a range of 1%-13% from 9%-24% of the outstanding pool balance, while credit enhancement has remained fairly stable.

The downgrade action in the 2003-A securitization was prompted by a decrease in credit enhancement and an increasingly concentrated pool, which currently contains 12 loans. As of the September 2013 distribution date, the reserve account decreased to approximately 1% from 7% of the outstanding pool balance since the last rating action in April 2012. Additionally, the top five largest loans increased to approximately 73% from 61% of the outstanding pool balance since the last rating action, which increases potential volatility.

The methodology is described as follows:

The principal methodology used in these ratings was Moody’s Approach to Rating SBA Loan-Backed Securitizations published in March 1996. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

The methodology used in the rating actions for deals with more than 50 loans remaining included an analysis of the loan collateral to arrive at a projected remaining net loss. For the 2003-2, 2005-1, 2005-A, and 2006-A securitizations, Moody's determined the expected remaining losses using representative delinquency roll rates and an estimate of market recoveries. Because of the hard charge-off policy by which a loan must be charged off after being a certain number of days past due, we also estimated and incorporated future recoveries on charged-off loans whose collateral has not yet been sold. These future recoveries were determined by a loan level analysis using an estimate of market value. Our remaining expected net losses for the 2003-2, 2005-1, 2005-A, and 2006-A securitizations are 10%, 24%, 15%, and 18%, of the outstanding pool balances, respectively.

For deals with less than 50 loans outstanding, the methodology used in these rating actions included a loan level analysis to determine a range of expected net losses. Moody's evaluated scenarios that take into account an updated or estimated market value of each property in relation to the outstanding loan amount. To estimate the current market value of the properties, Moody's applied the change in the non-major market Moody's/RCA Commercial Property Price Index (CPPI) from the date of the most recent appraised value or broker's price opinion to today. Additionally, Moody's evaluated stress scenarios, such as the top five loans defaulting with a market recovery rate of 30%. Similar to the approach used for deals with more than 50 loans outstanding, we estimated and incorporated future recoveries on charged-off loans whose collateral has not yet been sold.

Moody's also considered the condition of the commercial property market and the potential volatility associated with the small number of loans in these securitizations (12 and 39 for 2003-A and 2004-A, respectively) to evaluate protection against future collateral losses for a given rating.

For all securitizations, the projected net losses or range of projected net losses were evaluated against the available credit enhancement provided by subordination, the reserve account, excess spread, and if available, overcollateralization. Sufficiency of coverage was considered in light of the credit quality of the collateral pools, industry, geographical and loan concentrations, historical variability of losses experienced by the issuer, and servicer quality.

Primary sources of assumption uncertainty are the general economic environment, commercial property values, and the ability of small businesses to recover from the recession. In general, if the remaining expected net losses used in determining the ratings increased by 25%, the tranches may be downgraded.

Other methodologies and factors that may have been considered in the process of rating these transactions can also be found on Moody's website. Further information on Moody's analysis of this transaction is available on www.moodys.com.

The complete rating actions are as follows:

Issuer: Business Loan Express Business Loan Trust 2003-A

Class A, Downgraded to B1 (sf); previously on Apr 19, 2012 Downgraded to Ba2 (sf)

Issuer: Business Loan Express Business Loan Trust 2004-A

Cl. B, Upgraded to B2 (sf); previously on Jan 26, 2011 Downgraded to Caa2 (sf)

Cl. C, Upgraded to B3 (sf); previously on Sep 13, 2012 Upgraded to Caa3 (sf)

Issuer: Business Loan Express Business Loan Trust 2005-A

Cl. A, Upgraded to Ba1 (sf); previously on Jan 26, 2011 Downgraded to Ba2 (sf)

Cl. B, Upgraded to Ba3 (sf); previously on Jan 26, 2011 Downgraded to B3 (sf)

Cl. C, Upgraded to Caa2 (sf); previously on Jan 26, 2011 Downgraded to C (sf)

Issuer: Business Loan Express Business Loan Trust 2006-A

Cl. B, Upgraded to Caa1 (sf); previously on Jan 26, 2011 Downgraded to Caa3 (sf)

Cl. C, Upgraded to Caa3 (sf); previously on Jan 26, 2011 Downgraded to C (sf)

Issuer: Business Loan Express SBA Loan Trust 2003-2

Cl. M, Upgraded to A2 (sf); previously on Apr 19, 2012 Upgraded to Baa1 (sf)

Issuer: Business Loan Express SBA Loan Trust 2005-1

Cl. M, Upgraded to Ba2 (sf); previously on Apr 19, 2012 Downgraded to B1 (sf)

REGULATORY DISCLOSURES

Moody's received and took into account one or more third party assessments on the due diligence performed regarding the underlying assets or financial instruments in these transactions and the assessments had a neutral impact on the rating.

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.

Katherine L Lew
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

Amelia (Amy) Tobey
VP - Sr Credit Officer/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 takes action on Ciena Capital small business loan ABS

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