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14 Dec 2010
London, 14 December 2010 -- Moody's Investors Service announced today it has upgraded its rating of
Series 2006-2 notes issued by Starts (Ireland) plc.
Issuer: Starts (Ireland) plc
....US$15M STARTS (Ireland) plc Series
2006-2 USD 115,000,000 Leveraged Super Senior Credit-Linked
Notes due 2013, Upgraded to A3 (sf); previously on Mar 9,
2009 Downgraded to Baa2 (sf)
This transaction is a Leveraged Super Senior transaction with time-dependant
thresholds (the "loss triggers") which, if exceeded, could
lead to a deleveraging or early termination of the transaction at market
value. Investors would lose a substantial part of their investment
in the process. The series is exposed to a static reference portfolio
of 100 corporate reference entities until March 2013. The initial
size of the notes was USD 115 million, but this amount was partially
cancelled in May 2008 and currently USD 15 million of the notional amount
are outstanding.
Moody's explained that the action effected today is the result of several
concurrent factors. The overall credit quality of the static portfolio
which is reflected in the removal of negative outlook and review for possible
downgrade status on several reference entities since the last rating action
in March 2009. The model results also benefited from the reduced
remaining time to maturity (in July 2013) and the greater relative importance
of the highest loss triggers.
Moody's also performed sensitivity analysis consisting in modelling Moody's
market implied rating in place of the corporate fundamental rating to
derive the default probability of each corporate name in the reference
portfolio. Moody's market implied ratings are derived from observable
CDS spread on each corporate name and mapped to Moody's rating scale.
The gap between a Market implied rating and a Moody's corporate fundamental
rating is an indicator of the extent of the divergence of credit view
between Moody's and the market on each referenced name in the CSO portfolio.
This run generated a result that supports the base run result.
Moody's also looked at results of sensitivity analysis which included
removal of forward-looking measures, the notching adjustment
on each entity's rating due to watch for downgrade or negative outlook
was removed. The result of this run was consistent with the base
run result. Moody's also run a stress scenario where all
the reference entities belonging to the most represented industry sector
in the portfolio (Retail 18%) were downgraded by one notch.
In addition to the quantitative factors that are explicitly modelled,
qualitative factors are part of 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, and specific documentation features. 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.
The principal methodology used in this rating was "Moody's Approach to
Rating Corporate Synthetic Obligations" rating methodology published in
September 2009.
Moody's analysis for this transaction is based on the CDOROMTM.
This model is available on moodys.com under Products and Solutions
-- Analytical models, upon return of a signed free
license agreement.
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
6 months.
Due to the impact of revised and updated key assumptions referenced in
"Moody's Approach to Rating Corporate Synthetic Obligations", key
model inputs used by Moody's in its analysis may be different from the
manager/arranger's reported numbers. In particular, rating
assumptions for all publicly rated corporate credits in the underlying
portfolio have been adjusted for "Review for Possible Downgrade",
"Review for Possible Upgrade", or "Negative Outlook".
Moodys did not run a separate loss and cash flow analysis other than the
one already done using the CDOROM model. For a description of the
analysis, refer to the methodology and the CDOROM user guide on
Moodys website.
Moody's analysis of corporate CSOs is subject to uncertainties,
the primary sources of which includes complexity, governance and
leverage. Although the CDOROM model capture many of the dynamics
of the Corporate CSO structure, it remains a simplification of the
complex reality. Of greatest concern are (a) variations over time
in default rates for instruments with a given rating, (b) variations
in recovery rates for instruments with particular seniority/security characteristics
and (c) uncertainty about the default and recovery correlations characteristics
of the reference pool. Similarly on the legal/structural side,
the legal analysis although typically based in part on opinions (and sometimes
interpretations) of legal experts at the time of issuance, is still
subject to potential changes in law, case law and the interpretations
of courts and (in some cases) regulatory authorities. Although
the impact of these decisions is mitigated by structural constraints,
anticipating the quality of these decisions necessarily introduces some
level of uncertainty in our assumptions. Given the tranched nature
of Corporate CSO liabilities, rating transitions in the reference
pool may have leveraged rating implications for the ratings of the Corporate
CSO liabilities, thus leading to a high degree of volatility.
All else being equal, the volatility is likely to be higher for
more junior or thinner liabilities. The base case scenario modelled
fits into the central macroeconomic scenario predicted by Moody's of a
sluggish recovery scenario of the corporate universe. Should macroeconomics
conditions evolves towards a more severe scenario such as a double dip
recession, the CSO rating will likely be downgraded to an extent
depending on the expected severity of the worsening conditions.
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 and public information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
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Moody's Investors Service may have provided Ancillary or Other Permissible
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In addition, Moody's publishes a weekly summary of structured finance
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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
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Please see ratings tab on the issuer/entity page on Moodys.com
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Please see the ratings disclosure page on our website www.moodys.com
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used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
London
Luca Vit
Associate 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 USD 15m LSS Notes of Starts
No Related Data.
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