New York, November 10, 2014 -- Moody's Investors Service has upgraded the rating on the following notes
issued by Ischus CDO I Ltd.
U.S. $280,000,000 Class A-1 First
Priority Senior Secured Floating Rate Notes Due 2040 (current outstanding
balance of $16,721,287.22), Upgraded to
Caa3 (sf); previously on May 14, 2010 Downgraded to Ca (sf).
Ischus CDO I Ltd., issued in December 2004, is a collateralized
debt obligation issuance backed primarily by a portfolio of CMBS and RMBS
originated in 2004.
RATINGS RATIONALE
The rating action is due primarily to the deleveraging of the Class A-1
notes and an increase in the transaction's over-collateralization
ratios. The Class A notes have paid down by approximately 37.5%,
or $10.0 million since June 2014. Based on Moody's
calculation, the par coverage on the Class A-1 notes has
increased to approximately 117.9%. In addition to
interest and principal proceeds from performing assets, the Class
A notes have been redeemed with proceeds originating from the assets treated
as defaulted by the trustee. Accordingly, we have assumed
the deal will continue to benefit from those proceeds.
An Event of Default under Section 5.01(i) of the Indenture was
declared by the Trustee on July 31, 2009 due to the ratio of the
Net Outstanding Portfolio Collateral Balance to the Aggregate Outstanding
Amount of the Class A notes being less than 100%. As provided
in Article V of the Indenture during the occurrence and continuance of
an Event of Default, certain parties to the transaction may be entitled
to direct the Trustee to take particular actions with respect to the collateral
and the notes, including the sale and liquidation of the assets.
The severity of losses of certain tranches may be different depending
on the timing and outcome of a liquidation.
Methodology Underlying the Rating Action
The principal methodology used in this rating was "Moody's Approach to
Rating SF CDOs" published in March 2014. Please see the Credit
Policy page on www.moodys.com for a copy of this methodology.
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 slowdown in growth in the current macroeconomic
environment and in the residential real estate property markets.
The residential real estate property market is subject to uncertainty
about 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 unscheduled principal proceeds, recoveries
from defaulted assets, and excess interest proceeds will continue
and at what pace. Faster deleveraging than Moody's expects could
have a significant 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 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):
Caa ratings notched up by two rating notches:
Class A-1: 0
Class A-2: 0
Class B: 0
Class C-1: 0
Class C-2: 0
Caa ratings notched down by two notches:
Class A-1: 0
Class A-2: 0
Class B: 0
Class C-1: 0
Class C-2: 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 did not receive or take into account a third-party
assessment on the due diligence performed regarding the underlying assets
or financial instruments related to the monitoring of this transaction
in the past six months.
Moody's describes its loss and cash flow analysis in the section
"Ratings Rationale" of this press release.
As the section on loss and cash flow analysis describes, 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 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.
David Ham
VP - Senior Credit Officer
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/Manager
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 rating on USD 16.7 million of SF CDO notes issued by Ischus CDO I Ltd.
