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Rating Action:

Moody's upgrades and places on review for upgrade the ratings of 36 tranches in 16 TruPS CDOs due to significant deleveraging

05 Aug 2013

Moody's also places on review for upgrade the ratings on another 31 tranches in 15 TruPS CDOs

New York, August 05, 2013 -- Moody's Investors Service announced today that it has upgraded the ratings on 36 tranches in 16 collateralized debt obligation backed by Trust Preferred Securities (TruPS CDOs), totaling approximately $3.89 billion of outstanding rated balance. The magnitude of the upgrades ranged between one to three notches. Moody's simultaneously placed on review for upgrade the ratings on all of the upgraded tranches. In addition, Moody's placed on review for upgrade the ratings on another 31 tranches in 15 TruPS CDOs, totaling approximately $2.95 billion of outstanding rated balance. A list of securities affected by today's actions is included below:

Excel File: http://www.moodys.com/viewresearchdoc.aspx?docid=PBS_SF338453

RATINGS RATIONALE

Moody's explained that today's rating actions on the affected TruPS CDOs are primarily a result of the recent substantial deleveraging of senior notes, increases in the overcollateralization (OC) ratios, and improvements in the credit quality of the underlying portfolios. Both the unscheduled redemptions of underlying bank assets and diversions of excess interest to cure OC test failures have contributed to the deleveraging of senior notes and OC improvements in these transactions. Further, many underlying TruPS issuers that had previously been deferring assets have recently cured their deferrals and resumed paying interest, which also improved the OC ratios. Lastly, the portfolio weighted average rating factors (WARFs) in the affected TruPS CDOs have declined substantially, reflecting improvements in the credit quality of the underlying banks.

Moody's notes that the senior notes in the affected CDOs have been paid down significantly during the last 12 months, due to faster than expected redemptions of underlying assets and the continued diversion of excess interest proceeds to pay down the notes . Some of the deferring banks that were previously treated as defaulted in our analysis have resumed interest payments and repaid all accrued deferred interest on their TruPS, while a few others have redeemed their TruPS at par. As a result of both redemptions and the curing of interest deferrals on the underlying TruPS, the par coverage for the senior notes in the affected transactions has improved significantly .

Moody's also notes that the affected deals benefited from an improvement in the credit quality of the underlying portfolios. Based on Moody's calculations, the average WARF in the affected transactions has improved by about 350 points since the last reviews.

To identify and analyze the affected transactions, Moody's examined primarily the extent of OC increases for each tranche and WARF improvements in a total of 88 outstanding bank TruPS CDOs since the last reviews. In addition, Moody's considered the following key portfolio- and tranche-level parameters:

- Amount of cash in the principal collections account;

- Amount of cash in the interest collections account;

- Notional and maturity of outstanding interest rate swaps;

- Absolute OC level for each tranche in relation to its current rating;

- Portfolio WARF level;

- Exposure to assets that are defaulted or deferring interest;

- Other idiosyncratic deal features if applicable

All of the tranches upgraded remain on review for upgrade, pending comprehensive analysis of each affected TruPS CDO. Moody's endeavors to complete its analyses of all affected deals within 90 days. While in some cases Moody's did not place the ratings on all tranches from the same deal on review for upgrade, the rating agency will review the entire capital structure when it conducts a full analysis of each deal and take rating actions when warranted.

All deals affected today are TruPS CDOs that are mainly backed by bank TruPS. 15 of 26 deals are backed solely by bank TruPS and the remaining deals contain over 65% of bank TruPS collateral.

The principal methodology used in these ratings was "Moody's Approach to Rating TRUP CDOs" published in May 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Moody's did not rely on explicit cash modeling or perform any sensitivity analyses, because today's actions result primarily from consideration of rapid deleveraging in the transactions, and the ratings of affected transactions remain under review for possible upgrades.

Moody's notes that the affected transactions are still subject to a high level of macroeconomic uncertainty although our Moody's outlook on the banking sector has changed to stable from negative. The pace of FDIC bank failures continues to decline in 2013 compared to the last four years, and some of the previously deferring banks have resumed interest payment on their TruPS.

Further information on Moody's analysis of these transactions are available on www.moodys.com.

REGULATORY DISCLOSURES

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

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

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this rating action, and whose ratings may change as a result of this rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Rachid Ouzidane
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Jian Hu
MD - Structured Finance
Structured Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's upgrades and places on review for upgrade the ratings of 36 tranches in 16 TruPS CDOs due to significant deleveraging
No Related Data.
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