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Rating Action:

Moody's upgrades its ratings of Army Hawaii (Credit-Linked Trust Certificates Series 2005-I through 2005-T), a CSO

11 Mar 2011

USD 234.5 million of debt securities affected

New York, March 11, 2011 -- Moody's Investors Service announced today the following rating actions on Army Hawaii (Credit-Linked Trust Certificates Series 2005-I through 2005-T), a collateralized debt obligation transaction (the " Collateralized Synthetic Obligation" or "CSO").

The CSO tranches, issued in 2005, references a portfolio of corporate synthetic senior unsecured bonds. The Trust Certificates Series 2005-E through 2005-J ("2005-E to J") are exposed to the Dow Jones CDX.IG.4 portfolio and the Trust Certificates Series 2005-R through 2005-T ("2005-R to T") are exposed to the Dow Jones CDX.HY.4 portfolio.

Issuer: Army Hawaii (Credit-Linked Trust Certificates Series 2005-I through 2005-T)

....US$41.7M CLC Trust 2005-I-E Certificates, Upgraded to Baa3; previously on Aug 14, 2009 Downgraded to B1

....US$33.5M CLC Trust 2005-I-F Certificates, Upgraded to Baa3; previously on Aug 14, 2009 Downgraded to B1

....US$21.3M CLC Trust 2005-I-G Certificates, Upgraded to Baa3; previously on Aug 14, 2009 Downgraded to B1

....US$14.8M CLC Trust 2005-I-H Certificates, Upgraded to Baa3; previously on Aug 14, 2009 Downgraded to B1

....US$30.7M CLC Trust 2005-I-I Certificates, Upgraded to Baa3; previously on Aug 14, 2009 Downgraded to B1

....US$37.2M CLC Trust 2005-I-J Certificates, Upgraded to Baa3; previously on Aug 14, 2009 Downgraded to B1

....US$9.9M CLC Trust 2005-I-R Certificates, Upgraded to Aa1; previously on Jun 28, 2010 Upgraded to Aa2

....US$20.6M CLC Trust 2005-I-S Certificates, Upgraded to Aa1; previously on Jun 28, 2010 Upgraded to Aa2

....US$24.8M CLC Trust 2005-I-T Certificates, Upgraded to Aa1; previously on Jun 28, 2010 Upgraded to Aa2

RATINGS RATIONALE

Moody's rating actions today on Trust Certificates 2005-E to J and 2005-R to T are the result of the shortened time to maturity of the CSO tranches, the level of credit enhancements remaining in the transaction and the credit improvement of the underlying portfolio.

The remaining life of the outstanding tranches are 0.1, 0.6, 1.1, 1.6, 2.1, 2.6 year respectively for the Trust Certificates 2005-E to J. Since the last rating review in August 2010, the 10-year weighted average rating factor (WARF) of the portfolio improved from 1448 to 1419, equivalent to Ba3. There are seven reference entities with a negative outlook compared to 10 that are positive, and no entities on watch for downgrade compared to four on watch for upgrade.

The remaining life of the outstanding tranches are 1.6, 2.1, 2.6 year respectively for the Trust Certificates 2005-R to T. Since the last rating review in August 2010, the 10-year weighted average rating factor (WARF) of the portfolio improved from 3512, equivalent to Caa1 to 3441, equivalent to B3. There are 11 reference entities with a negative outlook compared to eight that are positive, and three entities on watch for downgrade compared to one on watch for upgrade. The credit risk associated with the underlying portfolio is minimal compared to the credit risk associated with the collateral securing the Certificates of these three tranches.

Moody's rating action today factors in a number of sensitivity analyses and stress scenarios, discussed below. Results are given in terms of the number of notches' difference versus the base case, where higher notches correspond to lower expected losses, and vice-versa:

• Moody's reviews a scenario consisting of reducing the maturity of the CSO by 6 months, keeping all other parameters constant. The result of this run is comparable to that of the base case for Trust Certifictaes 2005-E to J and one notch higher than in the base case for Trust Certificates 2005-R to T.

• Market Implied Ratings ("MIRS") are modeled in place of the corporate fundamental ratings to derive the default probability of the reference entities in the portfolio. The gap between an MIR and a Moody's corporate fundamental rating is an indicator of the extent of the divergence in credit view between Moody's and the market. The result of this run is comparable to that of the base case for Trust Certificates 2005-E to J and 2005-R to T.

• Moody's performs a stress analysis consisting of defaulting all entities rated Caa1 and below. The result of this run is one notch lower for Trust Certifcates 2005-E to J and comparable to the base case for Trust Certifcates 2005-R to T.

In addition to the quantitative factors that are explicitly modeled, 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 these ratings was "Moody's Approach to Corporate Collateralized Synthetic Obligations" published in September 2009.

Moody's analysis for this transaction is based on CDOROM v2.8.

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.

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".

Moody's does not run a separate loss and cash flow analysis other than the one already done by the CDOROM model. For a description of the analysis, refer to the methodology and the CDOROM user's guide on Moody's website.

Moody's analysis of CSOs is subject to uncertainties, the primary sources of which include complexity, governance and leverage. Although the CDOROM model captures 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. The performance of this CSO is also dependent on on-going decisions made by one or several parties, including the Manager and the Trustee. 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 CSO liabilities, rating transitions in the reference pool may have leveraged rating implications for the ratings of the 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 modeled fits into the central macroeconomic scenario predicted by Moody's of a sluggish recovery scenario in the corporate universe. Should macroeconomics conditions evolve towards a more severe scenario, such as a double dip recession, the CSO rating will likely be downgraded to an extent that depends on the expected severity of the worsening conditions.

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.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: public information and parties not involved in the rating.

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 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.

New York
Rodrigo Araya
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Dimitri Kaltsas
Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

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

Moody's upgrades its ratings of Army Hawaii (Credit-Linked Trust Certificates Series 2005-I through 2005-T), a CSO
No Related Data.
© 2019 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

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