EUR 474.95 million of debt securities affected
London, 22 March 2011 -- Moody's Investors Service announced today that it has upgraded the ratings
of seven CLO notes issued by EUROCREDIT CDO VII PLC:
Issuer: EUROCREDIT CDO VII PLC
....EUR221.5M Class A Senior Secured
Floating Rate Notes due 2023, Upgraded to Aa1 (sf); previously
on Aug 18, 2009 Downgraded to Aa2 (sf)
....EUR38.3M Class B Senior Secured
Deferrable Floating Rate Notes due 2023-1, Upgraded to A2
(sf); previously on Aug 18, 2009 Downgraded to Baa1 (sf)
....EUR31.2M Class C Senior Secured
Deferrable Floating Rate Notes due 2023, Upgraded to Ba1 (sf);
previously on Dec 23, 2010 Ba2 (sf) Placed Under Review for Possible
Upgrade
....EUR29.1M Class D Senior Secured
Deferrable Floating Rate Notes due 2023, Upgraded to B2 (sf);
previously on Dec 23, 2010 Caa1 (sf) Placed Under Review for Possible
Upgrade
....EUR19.8M Class E Senior Secured
Deferrable Floating Rate Notes due 2023-1, Upgraded to Caa1
(sf); previously on Dec 23, 2010 Ca (sf) Placed Under Review
for Possible Upgrade
....EUR4M Class P Combination Notes due 2023,
Upgraded to Baa1 (sf); previously on Aug 18, 2009 Downgraded
to Ba2 (sf)
....EUR8M Class Q Combination Notes due 2023,
Upgraded to B3 (sf); previously on Dec 23, 2010 Caa1 (sf) Placed
Under Review for Possible Upgrade
....EUR15M Class R Combination Notes due 2023,
Upgraded to Ba2 (sf); previously on Dec 23, 2010 Ba3 (sf) Placed
Under Review for Possible Upgrade
....EUR6M Class S Combination Notes due 2023,
Upgraded to Baa1 (sf); previously on Aug 18, 2009 Downgraded
to Ba2 (sf)
....EUR125M Revolving Loan Facility Notes,
Upgraded to Aa1 (sf); previously on Aug 18, 2009 Downgraded
to Aa2 (sf)
....EUR3M Class V Combination Notes due 2023,
Withdrawn (sf); previously on Dec 23, 2010 Caa2 (sf) Placed
Under Review for Possible Upgrade
....EUR8M Class W Combination Notes due 2023,
Withdrawn (sf); previously on Aug 18, 2009 Downgraded to B3
(sf)
The ratings to the Class P Combination Notes, Class Q Combination
Notes, Class R Combination Notes and Class S Combination Notes address
the repayment of the Rated Balance on or before the legal final maturity,
where the 'Rated Balance' is equal at any time to the principal amount
of the each Combination Note on the Issue Date (and for Class R Combination
Notes increased by the Rated Coupon of 1.50% per annum accrued
on the Rated Balance on the preceding payment date minus the aggregate
of all payments made from the Issue Date to such date, either through
interest or principal payments. It is not an opinion about the
ability of the issuer to pay interest. Moody's outstanding Rated
Balance may not necessarily corresponds to the outstanding notional amount
reported by the trustee.
Class V and W combination notes were exchanged for their original components.
Consequently, the ratings on these combination notes are withdrawn.
RATINGS RATIONALE
Eurocredit CDO VII PLC, issued in April 2007, is a multicurrency
collateralised loan obligation backed by a portfolio of mostly high yield
European loans. The asset pool comprises approximately EUR 457.44
million of assets which are managed by Intermediate Capital Managers Limited.
This transaction has 2.2 years remaining until the end of the reinvestment
period. The portfolio is denominated in EUR, GBP and USD.
It is composed of 86% senior secured loans from 21 various industries.
According to Moody's, the upgrade rating actions taken on the notes
is a result primarily of the improved credit quality of the underlying
portfolio and increased overcollateralization cushions since the last
rating action. These are driven by the upgrade trend of corporate
credits and the increase in loan prices. Since the last rating
action in August 2009, class A and class E notes were partially
redeemed due to the breach of Class D and Class E OC tests during the
payment date in 2009 and 2010, currently all the OC tests are back
to compliance. As of the latest collateral administrator report
dated January 2011, the class A, class B, class C,
class D and class E overcollateralization ratios are reported at 143.19%,
127.71%, 117.68%, 109.51%
and 104.97% respectively, versus July 2009 levels
of 136.67%, 122.53%, 113.00%,
105.36% and 100.73% respectively. In
addition, the weighted average rating factor ("WARF")
has decreased from 2690 in July 2009 to 2666 in January 2011. This
reported WARF understates the actual improvement in the portfolio credit
quality because of the technical adjustment of rating factors effected
in September 2010. Hence effectively, the WARF of this portfolio
has improved by 196 points since last rating action. The deal also
experienced a decrease in defaulted assets from 10% to 2%
of the portfolio over the same period.
In the base case, Moody's analyzed the underlying collateral pool
with an adjusted weighted average rating factor of 3868, a diversity
score of 41 and a weighted-average recovery rate of 57.7%.
Moody's also ran sensitivity analyses on key parameters for the rated
notes. For instance, modelling the portfolio using the worse
of its current or covenant matrix point parameters had an impact of less
than 2 notches on the model output across the capital structure.
The principal methodology used in this rating was "Moody's Approach to
Rating Collateralized Loan Obligations" published in August 2009.
Under this methodology, Moody's used its Binomial Expansion Technique,
whereby the pool is represented by independent identical assets,
the number of which is 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 amount, weighted average
rating factor, diversity score, and weighted average recovery
rate, may be different from the trustee's reported numbers.
Moody's also notes that 68.2% of the collateral pool consists
of debt obligations whose credit quality has been assessed through Moody's
credit estimates.
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.
In addition, Moody's publishes a weekly summary of structured finance
credit, ratings and methodologies, available to all registered
users of our website, at www.moodys.com/SFQuickCheck.
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
Lydia Ho
Associate Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456.
SUBSCRIBERS: 44 20 7772 5454.
Paris
Florence Tadjeddine
VP - Senior Credit Officer
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
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United Kingdom
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Moody's upgrades CLO notes of Eurocredit CDO VII