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Rating Action:

Moody's upgrades ratings of three classes of notes issued by ARCap 2003-1

11 Feb 2015

Moody's also affirms the ratings of two classes of notes

New York, February 11, 2015 -- Moody's Investors Service has upgraded the ratings on the following notes issued by ARCap 2003-1 Resecuritization Trust Collateralized Debt Obligation Certificates, Series 2003-1. ("ARCap 2003-1"):

Cl. B, Upgraded to A2 (sf); previously on Mar 5, 2014 Upgraded to Baa1 (sf)

Cl. C, Upgraded to Ba1 (sf); previously on Mar 5, 2014 Upgraded to Ba3 (sf)

Cl. D, Upgraded to Caa1 (sf); previously on Mar 5, 2014 Affirmed Caa3 (sf)

Moody's has also affirmed the ratings on the following notes:

Cl. E, Affirmed C (sf); previously on Mar 5, 2014 Affirmed C (sf)

Cl. F, Affirmed C (sf); previously on Mar 5, 2014 Affirmed C (sf)

RATINGS RATIONALE

Moody's has upgraded the ratings on three classes due to material improvement in the pool's WARF, which more than offsets the decrease in WARR and the repayment of principal on the underlying high credit risk collateral. The affirmations are a result of key transaction metrics are commensurate with existing ratings. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO and Re-REMIC) transactions.

ARCap 2003-1 is a cash transaction backed by a portfolio of commercial mortgage backed securities (CMBS) (100% of the pool balance) issued between 1999 and 2003. As of the trustee's December 31, 2014 trustee report, the aggregate note balance of the transaction, including preferred shares, is $338.3 million, as compared to $347.6 million at last review due to collateral amortization.

Moody's has identified the following as key indicators of the expected loss in CRE CDO transactions: the weighted average rating factor (WARF), the weighted average life (WAL), the weighted average recovery rate (WARR), and Moody's asset correlation (MAC). Moody's typically models these as actual parameters for static deals and as covenants for managed deals.

WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's has updated its assessments for the collateral it does not rate. The rating agency modeled a bottom-dollar WARF of 4,039, compared to 6,017 at last review. The current ratings on the Moody's-rated collateral and the assessments of the non-Moody's rated collateral follow: Aaa-Aa3 (5.4% compared to 0.3% at last review); A1-A3 (0% compared to 5.1% at last review); Baa1-Baa3 (16.4% compared to 10.8% at last review); Ba1-Ba3 (28% compared to 5.1% at last review); B1-B3 (12.9% compared to 22% at last review); and Caa1-Ca/C (37.3%, compared to 56.7% at last review).

Moody's modeled a WAL of 3.2 years, as compared to 3.6 at last review. The WAL is based on assumptions about extensions on the underlying collateral.

Moody's modeled a fixed WARR of 0%, as compared to 6% at last review.

Moody's modeled a MAC of 100%, same as last review.

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:

The performance of the notes is subject to uncertainty, because it is sensitive to the performance of the underlying portfolio, which in turn depends on economic and credit conditions that are subject to change. The servicing decisions of the master and special servicer and surveillance by the operating advisor with respect to the collateral interests and oversight of the transaction will also affect the performance of the rated notes.

Moody's Parameter Sensitivities: Changes to any one or more of the key parameters could have rating implications for some of the rated notes, although a change in one key parameter assumption could be offset by a change in one or more of the other key parameter assumptions. The rated notes are particularly sensitive to changes in the rating recovery rates of the underlying collateral and credit assessments. Increasing the recovery rate of 100% of the collateral pool by 5% would result in an average modeled rating movement on the rated notes of zero to one notch (e.g., one notch up implies a ratings movement of Baa3 to Baa2).

The primary sources of uncertainty in Moody's assumptions are the extent of growth in the current macroeconomic environment given the weak recovery and certain commercial real estate property markets. Commercial real estate property values continue to improve modestly, along with a rise in investment activity and stabilization in core property type performance. Limited new construction and moderate job growth have aided this improvement. However, sustained growth will not be possible until investment increases steadily for a significant period, non-performing properties are cleared from the pipeline and fears of a euro area recession abate.

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.

The analysis relies on a Monte Carlo simulation that generates a large number of collateral loss or cash flow scenarios, which on average meet key metrics Moody's determines based on its assessment of the collateral characteristics. Moody's then evaluates each simulated scenario using model that replicates the relevant structural features and payment allocation rules of the transaction, to derive losses or payments for each rated instrument. The average loss a rated instrument incurs in all of the simulated collateral loss or cash flow scenarios, which Moody's weights based on its assumptions about the likelihood of events in such scenarios actually occurring, results in the expected loss of the rated instrument.

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.

Scarlett Shao
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

Deryk Meherik
VP - Sr Credit Officer/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 ratings of three classes of notes issued by ARCap 2003-1
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.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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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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