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Related Issuers
Rating Action:

Moody's upgrades EUR 92.3m CLO Notes of RMF CDO IV PLC

19 Apr 2011

London, 19 April 2011 -- Moody's Investors Service announced today that it has upgraded the ratings of five classes of notes and withdrawn four combination notes issued by RMF Euro CDO IV PLC. The notes affected by today's rating action are as follows:

Issuer: RMF Euro CDO IV PLC

....EUR39.3M Class II Senior Secured Floating Rate Notes, due 2022, Upgraded to A2 (sf); previously on Nov 26, 2009 Downgraded to A3 (sf)

....EUR15.3M Class III Deferrable Mezzanine Floating Rate Notes, due 2022, Upgraded to Baa3 (sf); previously on Dec 23, 2010 Ba1 (sf) Placed Under Review for Possible Upgrade

....EUR21.6M Class IV-A Deferrable Mezzanine Floating Rate Notes, due 2022, Upgraded to Ba3 (sf); previously on Dec 23, 2010 B2 (sf) Placed Under Review for Possible Upgrade

....EUR3.5M Class IV-B Deferrable Mezzanine Floating Rate Notes, due 2022, Upgraded to Ba3 (sf); previously on Dec 23, 2010 B2 (sf) Placed Under Review for Possible Upgrade

....EUR12.6M Class V Deferrable Mezzanine Floating Rate Notes, due 2022, Upgraded to B3 (sf); previously on Dec 23, 2010 Caa2 (sf) Placed Under Review for Possible Upgrade

....EUR6M Class R Combination Notes, due 2022, Withdrawn (sf); previously on Dec 23, 2010 Caa3 (sf) Placed Under Review for Possible Upgrade

....EUR6M Class S Combination Notes, due 2022, Withdrawn (sf); previously on Dec 23, 2010 B3 (sf) Placed Under Review for Possible Upgrade

....EUR4M Class Q Combination Notes, due 2022, Withdrawn (sf); previously on Dec 23, 2010 Caa1 (sf) Placed Under Review for Possible Upgrade

....EUR10M Class P-a Combination Notes, due 2022, Withdrawn (sf); previously on May 24, 2006 Assigned Aaa (sf)

Moody's has today withdrawn the ratings assigned to Classes Pa, Q, R and S Combination Notes. These notes were split back into their original components and thus are no longer outstanding.

RATINGS RATIONALE

RMF Euro CDO IV PLC is a managed cash CLO with exposure to predominantly European senior secured loans that remains in its reinvestment period.

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. Since the last rating action in November 2009, the reported class I/II, class III, class IV and class V overcollateralization ('OC') ratios have increased by 7.59%, 7.12%, 6.45% and 6.16% respectively. All OC tests are in compliance. In addition, the weighted average rating factor ("WARF") has increased from 2728 in September 2009 to 2883 in March 2011. This increase incorporates 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. Hence effectively, the WARF of this portfolio has remained stable since last rating action. Further, the proportion of securities from issuers rated Caa1 and below has decreased from 14.2% (at last rating action) to approximately 11.13%. These measures were taken from the recent trustee report dated 1 March 2011.

In its base case, Moody's analyzed the underlying collateral pool with an adjusted WARF of 3740 (compared to an adjusted WARF of 4264 at last rating action), a diversity score of 41 and a weighted average recovery rate of 57.96%.

In order to assess the sensitivity of the notes to changes in credit quality of the portfolio, Moody's ran sensitivity analyses on key parameters. For example, Moody's ran cases with a plus 10% change in the base case WARF and an absolute change of minus 10% in the WARR. In all cases, the impact on the notes was less than 2 notches from the base case model outputs.

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) Other collateral quality metrics: The deal is allowed to reinvest (on a non-discretionary basis) and the manager has the ability to deteriorate the collateral quality metrics' existing cushions against the covenant levels. Moody's analyzed the impact of assuming lower of reported and covenanted values for weighted average rating factor, weighted average spread, recovery rates and diversity score, and found that the impact was within one notch of the base case model outputs.

CDO notes' performance may also be impacted by 1) the manager's investment strategy and behaviour and 2) divergence in legal interpretation of CDO documentation by different transactional parties due to embedded ambiguities.

The principal methodology used in this rating was "Moody's Approach to Rating Collateralized Loan Obligations" published in August 2009.

The cash flow model used for this transaction, whose description can be found in the methodology listed above, is Moody's CDOEdge™ software.

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.

Under the 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.

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
Greg O''Reilly
Analyst
Structured Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Neelam S. Desai
Senior Vice President
Structured Finance Group
Moody's Investors Service Ltd.
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 EUR 92.3m CLO Notes of RMF CDO IV PLC
No Related Data.
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