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Rating Action:

Moody's upgrades EUR 34.5m CLO notes of Leopard CLO I B.V.

18 Apr 2012

London, 18 April 2012 -- Moody's Investors Service announced today that it has upgraded the rating of the following notes issued by Leopard CLO I B.V.:

Issuer: Leopard CLO I B.V.

....EUR34.5M Class B Senior Floating Rate Notes, Upgraded to Aa1 (sf); previously on Aug 17, 2011 Upgraded to Aa2 (sf)

Leopard CLO I B.V., issued in January 2003, is a single currency Collateralised Loan Obligation ("CLO") backed by a portfolio of mostly high yield European and US senior secured loans. The reinvestment period expired in February 2008 and reinvestment of proceeds is currently not permitted due to breach of certain reinvestment criteria.

RATINGS RATIONALE

According to Moody's, the rating action taken on the notes is primarily a result of an increase in the transaction's overcollateralization ratio (or "OC" ratio) due to deleveraging of the senior notes. Moody's notes that the Class A notes have been paid down by approximately 31.5% or EUR 21.6 million since the last rating action in August 2011. As a result, the OC ratio has increased since the rating action in August 2011. As of the latest trustee report dated 29 February 2012, the Class A/B OC ratio is reported at 167.1% versus August 2011 level of 145.4%.

Due to the impact of revised and updated key assumptions referenced in "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011, key model inputs used by Moody's in its analysis, such as the portfolio par amount, WARF, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. In its base case, Moody's analyzed the underlying collateral pool to have a performing par and principal proceeds balance of EUR 139.84 million, defaulted par of EUR 4.56 million, a 10-year weighted average default probability of 40.09% (consistent with a WARF of 4009), a weighted average recovery rate upon default of 45.64% for a Aaa liability target rating, a diversity score of 20 and a weighted average spread of 2.55%.

The default probability 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 of the assets in the collateral pool. For a Aaa liability target rating, Moody's assumed that 89.10% of the portfolio exposed to senior secured corporate assets would recover 50% upon default, while the remainder non first-lien loan corporate assets would recover 10%. In each case, historical and market performance trends and collateral manager latitude for trading the collateral are also relevant factors. These default and recovery properties of the collateral pool are incorporated in cash flow model analysis where they are subject to stresses as a function of the target rating of each CLO liability being reviewed.

In the process of determining the final rating, Moody's took into account the results of a number of sensitivity analyses:

(1) A model run with a deteriorated WARF of 4100 (an increase of about 100 points), the covenanted weighted average spread (2.50%) and a reduced weighted average recovery rate (42%). This case yielded model output consistent with the base case result.

(2) Additional run with a further deteriorated WARF of 4400 (an increase of about 400 points), a reduced WAS (2.3%) and a reduced weighted average recovery rate (42%). This run generated model output that was within one notch of the base case result.

Moody's notes that this transaction is subject to a high level of macroeconomic uncertainty, which could negatively impact the ratings of the notes, as evidenced by the large concentration of speculative-grade debt maturing between 2012 and 2015 which may create challenges for issuers to refinance.

Sources of additional performance uncertainties are described below:

(1) Deleveraging: The pace of amortisation of the underlying portfolio. Pace of amortisation could vary significantly subject to market conditions and this may have a significant impact on the notes' ratings. In particular, amortisation could accelerate as a consequence of high levels of prepayments in the loan market or collateral sales by the Collateral Manager or be delayed by rising loan amend-and-extent restructurings. Fast amortisation would usually benefit the ratings of the notes.

(2) Recovery of defaulted assets: Market value fluctuations in defaulted assets reported by the trustee and those assumed to be defaulted by Moody's may create volatility in the deal's overcollateralization levels. Further, the timing of recoveries and the manager's decision to work out versus sell defaulted assets create additional uncertainties. Moody's analyzed defaulted recoveries assuming the lower of the market price and the recovery rate in order to account for potential volatility in market prices. Realization of higher than expected recoveries would positively impact the ratings of the notes.

(3) Weighted average life: The notes' ratings are sensitive to the weighted average life assumption of the portfolio, which may be extended due to the manager's decision to reinvest into new issue loans or other loans with longer maturities and/or participate in amend-to-extend offerings. Extending the weighted average life of the portfolio may positively or negatively impact the ratings of the notes depending on their seniority with the transactions structure.

(4) Additionally, Moody's notes that around 64% of the collateral pool consists of debt obligations whose credit quality has been assessed through Moody's credit estimates. Large single exposures to obligors bearing a credit estimate have been subject to a stress applicable to concentrated pools as per the report titled "Updated Approach to the Usage of Credit Estimates in Rated Transactions" published in October 2009. Because of this stress, the base case WARF Moody's used in its analysis is substantially higher than the trustee reported WARF.

The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in June 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's modelled the transaction using the Binomial Expansion Technique, as described in Section 2.3.2.1 of the "Moody's Approach to Rating Collateralized Loan Obligations" rating methodology published in June 2011.

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.

This model was used to represent the cash flows and determine the loss for each tranche. The cash flow model evaluates all default scenarios that are then weighted considering the probabilities of the binomial distribution assumed for the portfolio default rate. In each default scenario, the corresponding loss for each class of notes is calculated given the incoming cash flows from the assets and the outgoing payments to third parties and note holders. Therefore, the expected loss or EL for each tranche is the sum product of (i) the probability of occurrence of each default scenario; and (ii) the loss derived from the cash flow model in each default scenario for each tranche. As such, Moody's analysis encompasses the assessment of stressed scenarios.

In addition to the quantitative factors that are explicitly modelled, qualitative factors are part of the rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

The rating has been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

Information sources used to prepare the rating are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's did not receive or take into account a third-party assessment on the due diligence performed regarding the underlying assets or financial instruments related to the monitoring of this transaction in the past six months.

Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.

Moody's adopts all necessary measures so that the information it uses in assigning a 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.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entity or its related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.

The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's 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 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.

Mizuho Tanaka
Asst Vice President - Analyst
Structured Finance Group
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

Neelam S. Desai
Senior Vice President
Structured Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
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 EUR 34.5m CLO notes of Leopard CLO I B.V.
No Related Data.
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