EUR 77.5 million of debt securities affected
London, 15 April 2011 -- Moody's Investors Service announced today it has upgraded its ratings
of four classes of notes issued by Static Loan Funding 2007-1 Ltd.
Issuer: Static Loan Funding 2007-1 Limited
....EUR20M Class B Senior Secured Floating
Rate Notes due 2017, Upgraded to A1 (sf); previously on Jun
17, 2009 Downgraded to A2 (sf)
....EUR25M Class C Deferrable Senior Secured
Floating Rate Notes due 2017, Upgraded to Baa2 (sf); previously
on Jun 17, 2009 Downgraded to Baa3 (sf)
....EUR17.5M Class D Deferrable Senior
Secured Floating Rate Notes due 2017, Upgraded to Ba3 (sf);
previously on Jun 17, 2009 Downgraded to B1 (sf)
....EUR15M Class E Deferrable Senior Secured
Floating Rate Notes due 2017-1, Upgraded to B3 (sf);
previously on Jun 17, 2009 Downgraded to Caa2 (sf)
RATINGS RATIONALE
Static Loan Funding 2007-1 is a static cash CLO with exposure to
93% senior secured loans, 4% mezzanine loans and 3%
second lien loans.
According to Moody's, the rating actions are the result of continued
amortisation and improvement in credit quality of the underlying portfolio.
The class A notional size decreased from 291.75m to 242.90m
and the weighted average rating factor (or 'WARF') decreased from 2805
down to 2613 between May 2010 and February 2011. This improvement
accounts for the technical transition related to rating factors of european
corporate credit estimates, as announced in the press release published
by Moody's on 1 September 2010. Primarily as a consequence of amortisation,
OC levels have improved from 128.01% to 132.43%
for Class A/B, 118.51% to 120.93% for
class C and 112.65% to 114.00% for class D
over the same period.
In its base case, Moody's analyzed the underlying collateral pool
with an adjusted WARF of 3775, a diversity score of 32, a
weighted average recovery rate of 62% and a weighted average spread
of 2.55%.
In order to assess the sensitivity of model outputs of the notes to changes
in key parameters, Moody's ran various sensitivity analyses.
For example, Moody's ran cases with a +/- 10%
WARF change in the base case and observed that the impact was less than
1 notch from the base case model outputs across the capital structure
with the most senior tranche affected by less than half a notch.
Moody's notes that this transaction is subject to a high level of macroeconomic
uncertainty, as evidenced by 1) uncertainties of credit conditions
in the general economy and 2) the large concentration of speculative-grade
debt maturing between 2012 and 2014 which may create challenges for issuers
to refinance.
The main source of uncertainty in this transaction is whether deleveraging
from unscheduled principal proceeds will continue and at what pace.
Deleveraging may accelerate due to high prepayment levels in the loan
market and/or credit impaired collateral sales by the liquidation agent,
which may have significant impact on the notes' ratings.
The principal methodology used in this rating was "Moody's Approach to
Rating Collateralized Loan Obligations" published in August 2009.
Under this principal methodology, Moody's used its Binomial Expansion
Technique, whereby the pool is represented by independent identical
assets, the number of which being determined by the diversity score
of the portfolio. The default and recovery properties of the collateral
pool are incorporated in a cash flow model where the default probabilities
are subject to stresses as a function of the target rating of each CLO
liability being reviewed. The default probability range is derived
from the credit quality of the collateral pool, and Moody's expectation
of the remaining life of the collateral pool. The average recovery
rate to be realized on future defaults is based primarily on the seniority
and jurisdiction of the assets in the collateral pool.
The cash flow model used for this transaction, whose description
can be found in the methodology listed above, is Moody's EMEA Cash-Flow
model.
Due to the impact of revised and updated key assumptions referenced in
"Moody's Approach to Rating Collateralized Loan Obligations" and "Annual
Sector Review (2009): Global CLOs", key model inputs used
by Moody's in its analysis, such as par, weighted average
rating factor, diversity score, and weighted average recovery
rate, may be different from the trustee's reported numbers.
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 six months.
REGULATORY DISCLOSURES
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, parties not involved in the ratings,
public information, and confidential and proprietary Moody's Investors
Service 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.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
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.
London
Son Nguyen
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Paris
Guillaume Jolivet
Vice President - Senior Analyst
Structured Finance Group
Moody's France SAS
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's upgrades CLO notes issued by Static Loan Funding 2007-1