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14 Nov 2014
New York, November 14, 2014 -- Moody's Investors Service has upgraded the ratings on notes issued by
C-BASS CBO IX Limited:
U.S.$10,000,000 Class B Third Priority
Senior Secured Floating Rate Notes, Due 2039 (current outstanding
balance of $9,388,820), Upgraded to B2 (sf);
previously on March 20, 2014 Upgraded to Caa2 (sf)
U.S.$12,000,000 Class C Fourth Priority
Secured Floating Rate Deferrable Interest Notes Due April 2039,
Upgraded to Caa3 (sf); previously on September 24, 2013 Upgraded
to Ca (sf)
RATINGS RATIONALE
These rating actions are due primarily to the deleveraging of the senior
notes and an increase in the transaction's over-collateralization
ratios since March 2014. The Class A-2 Notes have been paid
down in full and Class B notes have been paid down by approximately $0.6
million or 7% since that time. Based on Moody's calculation,
the OC ratios for the Class B and Class C notes are currently at 222.2%
and 97.5%, respectively, versus 151.7%
and 81.4% in March 2014.
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.
4) Lack of portfolio granularity: The performance of the portfolio
depends to a large extent on the credit conditions of a few large obligors
Moody's rates Caa1 or lower, especially if they jump to default.
Because of the deal's lack of granularity, Moody's supplemented
its analysis with a individual scenario analysis.
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):
Ba1 and below ratings notched up by two rating notches:
Class B: +3
Class C: +1
Class D: 0
Ba1 and below ratings notched down by two notches:
Class B: -3
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
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rating practices. For ratings issued on a support provider,
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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
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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.
Simran Sangari
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 $21.4 million of SF CDO notes issued by C-BASS CBO IX Limited
No Related Data.
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