USD 215 million and EUR 15 million of debt securities affected
New York, March 11, 2011 -- Moody's Investors Service announced today the following rating actions
on REVE SPC Dryden XVII, a collateralized debt obligation transaction
(the " Collateralized Synthetic Obligation" or "CSO"). The CSO,
issued in 2007, references a portfolio of corporate synthetic senior
unsecured bonds.
Issuer: REVE SPC Dryden XVII Notes Series 2007-11 (Segregated
Portfolio Series 10)
....US$25M USD 25,000,000
Dryden XVII Notes of Series 2007-1, Class B-2 due
September 20, 2014 Notes, Upgraded to Caa2; previously
on Oct 16, 2009 Downgraded to Ca
Issuer: REVE SPC Dryden XVII Notes Series 2007-1 (Segregated
Portfolio Series 11)
....EUR10M EUR 10,000,000 Dryden
XVII Notes, Series 2007-1 Class B-2 due September
20, 2014 Notes, Upgraded to Caa2; previously on Oct 16,
2009 Downgraded to Ca
Issuer: REVE SPC Dryden XVII Notes Series 2007-2 (Segregated
Portfolio Series 12)
....EUR5M EUR 5,000,000 Dryden
XVII Notes, Series 2007-2 Class C-2 due September
20, 2014 Notes, Upgraded to Caa3; previously on Mar 13,
2009 Downgraded to Ca
Issuer: REVE SPC Dryden XVII Notes Series 2007-1 (Segregated
Portfolio Series 23)
....US$80M USD 80,000,000
Dryden XVII Notes of Series 2007-1, Class JSS due September
20, 2014 Notes, Upgraded to B2; previously on Oct 16,
2009 Downgraded to Caa2
Issuer: REVE SPC Dryden XVII Synthetic CDO Variable Spread Notes
of Series 2008-3 (Segregated Portfolio Series 35(b))
....US$10M U.S. $10,000,000
Dryden XVII Synthetic CDO Variable Spread Notes of Series 2008-3,
Class C-2 due March 20, 2017 Notes, Upgraded to Caa3;
previously on Mar 13, 2009 Downgraded to Ca
Issuer: UBS AG, London Branch CDS Ref. #37585711
(DRYDEN XVII)
....US$25M USD 25,000,000
UBS AG, London Branch CDS Reference Number 37585711 (DRYDEN XVII)
Notes, Upgraded to B1; previously on Oct 16, 2009 Downgraded
to Caa1
Issuer: UBS AG, London Branch CDS Ref. #37613894
(DRYDEN XVII)
....US$60M USD 60,000,000
UBS AG, London Branch CDS Reference Number 37613894 (DRYDEN XVII)
Notes, Upgraded to B1; previously on Oct 16, 2009 Downgraded
to Caa1
Issuer: UBS AG, London Branch CDS Ref. #37613929
(Dryden XVII)
....US$15M USD 15,000,000
UBS AG, London Branch CDS Reference Number 37613929 (DRYDEN XVII)
Notes, Upgraded to B1; previously on Oct 16, 2009 Downgraded
to Caa1
RATINGS RATIONALE
Moody's rating action today is the result of the improving credit profile
of the underlying portfolio, the level of credit enhancements remaining
in the transaction and the shortened time to maturity of the CSO tranches.
Since the last rating review in October 2009, the 10-year
weighted average rating factor (WARF) of the portfolio improved from 1235,
equivalent to B1, to 953, equivalent to Ba2. There
are 22 reference entities with a negative outlook compared to eight that
are positive, and two entities on watch for downgrade compared to
two on watch for upgrade. At the time of the last rating action
there were 34 entities on negative outlook compared to two on positive
outlook and two entities on watch for downgrade as opposed to two for
upgrade. The portfolio has experienced six credit events,
equivalent to approximately 2.8 percent of the portfolio.
Since the last rating action in October 2009, the portfolio has
experienced three additional credit events from Ambac Assurance Corporation,
Syncora Guarantee Inc, and CIT Group. In addition,
the portfolio is exposed to Residential Capital, LLC, which
has not been subject to a credit event, but nonetheless is modeled
as defaulted based on its rating. The tranches with an original
WAL of seven years have a remaining life of 3.5 years, the
tranches with an original WAL of 10 years have a remaining life of 6.0
years.
Moody's rating actions today factor 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 things equal. The
result of this run is comparable to the base case for all rated tranches.
• 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 all
tranches.
• Moody's performs a stress analysis consisting of defaulting
all entities rated Caa1 and below. The result of this run varies
from comparable to the base case to two notches below the base case.
• Moody's conducts a sensitivity analysis consisting of notching
down by one the ratings of reference entities in the Banking, Finance,
Insurance and Real Estate sectors. The result from this run varies
from 1.5 notches below to comparable to the base case scenario.
• Removing the notch-down adjustment on ratings of all reference
entities on negative outlook and/or on watch for downgrade generates a
result ranges from comparable to the base case to one notch above.
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 ratings.
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 REVE SPC Dryden XVII, a CSO
