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Related Issuers
Rating Action:

Moody's upgrades ratings on $14.3 million of SF CDO notes issued by C-BASS CBO IX Limited

20 Mar 2014

New York, March 20, 2014 -- Moody's Investors Service has upgraded the ratings on notes issued by C-BASS CBO IX Limited:

U.S.$20,000,000 Class A-2 Second Priority Senior Secured Floating Rate Notes, Due 2039 (current outstanding balance of $4,294,303), Upgraded to B1 (sf); previously on March 6, 2014 Caa1 (sf) Placed Under Review for Possible Upgrade

U.S.$10,000,000 Class B Third Priority Senior Secured Floating Rate Notes, Due 2039, Upgraded to Caa2 (sf); previously on March 6, 2014 Caa3 (sf) Placed Under Review for Possible Upgrade

C-BASS CBO IX, Limited, issued in March 2004, is a collateralized debt obligation issuance backed by a portfolio of RMBS and ABS, originated in 2003 and 2004.

RATINGS RATIONALE

These rating actions are primarily a result of deleveraging of the Class A-2 notes and an increase in the transaction's over-collateralization ("OC") ratios since September 2013. The Class A-2 Notes have been paid down by approximately 57%, or $5.6 million since September 2013. Based on Moody's calculation, the OC ratios for the Class A-2 and Class B note are currently at 505.0% and 151.7%, respectively, versus 225.6% and 112.2% in September 2013.

The deal also benefits from the updates to the Moody's SF CDO methodology described in "Moody's Approach to Rating SF CDOs" published on March 6, 2014. These updates include: (i) lowering the resecuritization stress factors for RMBS (US Prime, Subprime, Manufactured Housing), CDOs exposed to investment grade corporate assets, and ABS backed by franchise loans or by mutual fund fees; (ii) using a common table of recovery rates for all structured finance assets (except for CMBS and SF CDO); and (iii) providing more guidance on the rating caps we apply to deals experiencing event of default. In taking the foregoing actions, Moody's also announced that it had concluded its review of its ratings on the issuer's Class A-2 and Class B notes announced on March 6, 2014. At that time, Moody's said that it had placed the ratings on review for upgrade as a result of the aforementioned methodology updates.

Despite the benefits of the deleveraging, the credit quality of the portfolio has deteriorated since September 2013. Based on Moody's calculation, the weighted average rating factor is currently 4334, compared to 3393 in September 2013.

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 no recoveries, and therefore, realization of any recoveries 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 notches:

Class A-2: 0

Class B: +2

Class C: 0

Class D: 0

Ba1 and below ratings notched down by two notches:

Class A-2: 0

Class B: -1

Class C: 0

Class D: 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.

Aileen Wang
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

Moody's upgrades ratings on $14.3 million of SF CDO notes issued by C-BASS CBO IX Limited
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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