USD 84 million of debt securities affected
New York, December 14, 2012 -- Moody's Investors Service announced today the following rating action
on REVE SPC Dryden XVII, a collateralized debt obligation transaction
(the "Collateralized Synthetic Obligation" or "CSO"). The CSO references
a portfolio of synthetic corporate senior unsecured and subordinated bonds.
USD 80,000,000 (Current Balance 54,000,000) Dryden
XVII Notes of Series 2007-1, Class JSS due September 20,
2014 Notes, Upgraded to Ba3 (sf); previously on March 11,
2011 Upgraded to B2 (sf);
USD 15,000,000 (Current Balance 30,000,000) UBS
AG, London Branch CDS Reference Number 37613929 (DRYDEN XVII) Notes,
Upgraded to Ba2 (sf); previously on March 11, 2011 Upgraded
to B1 (sf).
RATINGS RATIONALE
Moody's rating action today is the result of the shortened time to maturity
of the CSO, the level of credit enhancement remaining in the transaction,
and the improving credit quality of the reference portfolio.
Since the last rating review in March 2011, the ten year weighted
average rating factor (WARF) of the portfolio dropped from 953 to 788
excluding settled credit events. The credit quality of the portfolio
continues to improve with 10.38% of the portfolio rated
B1 or below, compared to 11.56% from the last review.
There are 23 reference entities with a negative outlook compared to 7
that are positive, and 2 entities on watch for downgrade compared
to none on watch for upgrade.
There has been one additional credit event on Residential Capital LLC
since the last rating action. The portfolio has experienced seven
credit events, equivalent to 8.50% of the portfolio
based on the portfolio notional value at closing. Since inception,
the subordination of the rated tranches have been reduced by 4.039%
due to credit events on Federal Home Loan Mortgage Corporation,
Federal National Mortgage Association, Lehman Brothers Holding Inc.,
Syncora Guarantee Inc., CIT Group Inc., Ambac
Assurance Corporation and Residential Capital LLC.
The CSO tranches maturing on September 20, 2014 have a remaining
life of 1.8 years.
The principal methodology used in these ratings was "Moody's Approach
to Rating Corporate Collateralized Synthetic Obligations" published in
September 2009. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Moody's analysis for this transaction is based on CDOROM v2.8.
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 six months, keeping all other things equal.
The result of this run is zero to one notch higher than in the base case.
• 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 zero to one notch lower than the base case.
• Moody's performs a stress analysis consisting of defaulting
all entities rated Caa3 and below. The result of this run is comparable
to the base case.
• Moody's conducts a sensitivity analysis consisting of notching
down by one the ratings of reference entities in the Banking, Finance,
and Real Estate sectors. The result from this run is zero to two
notches below the one modeled under the base case.
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, the CSO
ratings will change to reflect the new economic developments.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
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.
Information sources used to prepare each of the ratings 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 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.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
Moody's adopts all necessary measures so that the information it
uses in assigning the ratings 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 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.
Sarah Christine Dolan
Associate 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
Ramon O. Torres
Senior Vice President
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 its ratings of REVE SPC Dryden XVII, a CSO
