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By clicking “I AGREE”, you indicate that you understand and intend these terms and conditions to be the legal equivalent of a signed, written contract and equally binding, and that you accept such terms and conditions as a condition of viewing any and all Moody’s information that becomes accessible to you (the “Information”). References herein to “Moody’s” include Moody’s Corporation. and each of its subsidiaries and affiliates..

 

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Related Issuers
Rating Action:

Moody's upgrades rating on $39.6 million of SF CDO notes issued by Lakeside CDO II, Ltd

02 Nov 2016

New York, November 02, 2016 -- Moody's Investors Service has upgraded the rating on notes issued by Lakeside CDO II, Ltd:

U.S. $1,170,000,000 Class A-1 First Priority Senior Secured Floating Rate Delayed Draw Notes Due 2040 (current outstanding balance of $ 39,626,424.11), Upgraded to Baa2 (sf); previously on July 16, 2015 Upgraded to Baa3 (sf);

Lakeside CDO II, Ltd, issued in March 2004, is a collateralized debt obligation backed primarily by a portfolio of RMBS, TruPS and SF CDOs, originated in 2002 -- 2004.

RATINGS RATIONALE

This rating action is due primarily to the deleveraging of the senior notes and an increase in the transaction's Class A-1 overcollateralization (OC) ratio since November 2015. The Class A-1 notes have been paid down by approximately 41.0%, or $27.5 million since that time. Based on Moody's calculation, the Class A-1 OC ratio is currently 488%, versus 316% in November 2015. Interest payments on the Class A-1 and Class A-2 notes and principal paydown of the Class A-1 notes is partially the result of interest and principal proceeds from certain assets treated as defaulted by the trustee in amounts materially exceeding expectation.

The deal has also benefited from an improvement in the credit quality of the underlying portfolio since November 2015. Based on Moody's calculation, the weighted average rating factor is currently 1724, compared to 1942 in November 2015.

Notwithstanding the benefits of deleveraging and improvement in credit quality of the portfolio, there is interest shortfall. Interest payments on the Class A-1 and Class A-2 notes are partially supplemented with principal proceeds in the waterfall. A total of $2.8 million of principal proceeds have been diverted to pay the Class A-1 and Class A-2 interest since November 2015.

Methodology Underlying the Rating Action

The methodology used in this rating was "Moody's Approach to Rating SF CDOs," published in October 2016. Please see the Rating Methodology page on www.moodys.com for a copy of these methodologies.

Factors That Would Lead To an Upgrade or Downgrade of the Rating:

This transaction is subject to a number of factors and circumstances that could lead to either an upgrade or downgrade of the ratings, as described below:

1) Macroeconomic uncertainty: Primary causes of uncertainty about assumptions are the extent of any deterioration in either consumer or commercial credit conditions and in the residential real estate property markets. The residential real estate property market's uncertainties include housing prices; the pace of residential mortgage foreclosures, loan modifications and refinancing; the unemployment rate; and interest rates.

2) Deleveraging: One source of uncertainty in this transaction is whether deleveraging from principal proceeds, recoveries from defaulted assets, and excess interest proceeds will continue and at what pace. Faster than expected deleveraging could have a significantly positive impact on the notes' ratings.

3) Recovery of defaulted assets: The amount of recoveries received from defaulted assets reported by the trustee and those that Moody's assumes as having defaulted as well as the timing of these recoveries create additional uncertainty. Moody's analyzed defaulted assets assuming limited recoveries, and therefore, realization of any recoveries exceeding Moody's expectation in the future would positively impact the notes' ratings.

Loss and Cash Flow Analysis

Moody's applies a Monte Carlo simulation framework in Moody's CDOROM™ to model the loss distribution for SF CDOs. The simulated defaults and recoveries for each of the Monte Carlo scenarios define the reference pool's loss distribution. Moody's then uses the loss distribution as an input in the CDOEdge™ cash flow model.

In addition to the base case analysis, Moody's also conducted sensitivity analyses to test the impact of a number of default probabilities on the rated notes. Below is a summary of the impact of different default probabilities (expressed in terms of WARF) on all of the rated notes (by the difference in the number of notches versus the current model output, for which a positive difference corresponds to lower expected loss):

Ba1 and below ratings notched up by two rating notches (976):

Class A-1: 0

Class A-2: 0

Class B: 0

Class C: 0

Ba1 and below ratings notched down by two notches (Insert WARF level):

Class A-1: -2

Class A-2: 0

Class B: 0

Class C: 0

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions of the disclosure form.

Moody's describes its loss and cash flow analysis in the section "Ratings Rationale" of this press release.

Moody's quantitative analysis entails an evaluation of scenarios that stress factors contributing to sensitivity of ratings and take into account the likelihood of severe collateral losses or impaired cash flows. Moody's weights the impact on the rated instruments based on its assumptions of the likelihood of the events in such scenarios occurring.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

Svetlana Zaitseva
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

David Ham
VP - Senior Credit Officer
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

No Related Data.
© 2022 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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Additional terms for Australia only: Any publication into Australia of this document is pursuant to the Australian Financial Services License of MOODY’S affiliate, Moody’s Investors Service Pty Limited ABN 61 003 399 657AFSL 336969 and/or Moody’s Analytics Australia Pty Ltd ABN 94 105 136 972 AFSL 383569 (as applicable). This document is intended to be provided only to “wholesale clients” within the meaning of section 761G of the Corporations Act 2001. By continuing to access this document from within Australia, you represent to MOODY’S that you are, or are accessing the document as a representative of, a “wholesale client” and that neither you nor the entity you represent will directly or indirectly disseminate this document or its contents to “retail clients” within the meaning of section 761G of the Corporations Act 2001. MOODY’S credit rating is an opinion as to the creditworthiness of a debt obligation of the issuer, not on the equity securities of the issuer or any form of security that is available to retail investors.

Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY100,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​
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