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05 Jan 2016
Moody's also affirms the rating of $179.5 million of notes
NOTE: On March 04 2016, the press release was corrected as follows: In the Ratings Rationale section, under Loss and Cash Flow Analysis, changed the WARF for “assuming a two-notch upgrade to assets with below-investment grade ratings or rating estimates” to “550” and changed the WARF for “assuming a two-notch downgrade to assets with below-investment grade ratings or rating estimates” to “1269.” Revised release follows.
New York, January 05, 2016 -- Moody's Investors Service has upgraded the rating on the following notes
issued by U.S. Capital Funding VI, Ltd.:
U.S. $60,000,000 Class A-2 Floating
Rate Senior Notes Due 2043, Upgraded to B1 (sf); previously
on November 25, 2014 Upgraded to B3 (sf)
Moody's also affirmed the rating on the following notes:
U.S. $375,000,000 Class A-1 Floating
Rate Senior Notes Due 2043 (current balance of $ 179,520,080),
Affirmed Baa3 (sf); previously on November 25, 2014 Upgraded
to Baa3 (sf)
U.S. Capital Funding VI, Ltd., issued
in June 2007, is a collateralized debt obligation backed by a portfolio
of bank trust preferred securities (TruPS).
The rating actions are primarily a result of the deleveraging of the Class
A-1 notes, an increase in the transaction's over-collateralization
ratios and a decrease in the total amount of defaulted assets since January
2015. The Class A-1 notes have paid down by approximately
5% or $9.3 million January 2015, using principal
proceeds from the redemption of the underlying assets, the diversion
of excess interest proceeds and recovery from defaulted assets.
Based on Moody's calculation, the par coverage for Class A-1
notes and Class A-2 notes have improved to 141.3%
and 105.9%, respectively. In addition,
the total par amount of assets that Moody's treated as having defaulted
or deferring declined to $165.4 million. The Class
A-1 notes will continue to benefit from the diversion of excess
interest and the use of proceeds from redemptions of any assets in the
Nevertheless, the credit quality of the underlying portfolio has
deteriorated. Based on Moody's calculations, the weighted
average rating factor (WARF) increased to 842, from 667 in May 2015.
The key model inputs Moody's used in its analysis, such as
par, weighted average rating factor, and weighted average
recovery rate, are based on its methodology and could differ from
the trustee's reported numbers. In its base case, Moody's
analyzed the underlying collateral pool has having a performing par of
$253.7 million, defaulted/deferring par of $165.4
million, a weighted average default probability of 9.5%
(implying a WARF of 842), and a weighted average recovery rate upon
default of 10%\. In addition to the quantitative factors
Moody's explicitly models, qualitative factors are part of
rating committee considerations. Moody's considers the structural
protections in the transaction, the risk of an event of default,
recent deal performance under current market conditions, the legal
environment and specific documentation features. All information
available to rating committees, including macroeconomic forecasts,
inputs from other Moody's analytical groups, market factors,
and judgments regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Approach
to Rating TruPS CDOs," published in June 2014. Please see
the Credit Policy page on www.moodys.com for a copy of this
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
1) Macroeconomic uncertainty: TruPS CDOs performance could be negatively
affected by uncertainty about credit conditions in the general economy.
Moody's has a stable outlook on the US banking sector.
2) Portfolio credit risk: Credit performance of the assets collateralizing
the transaction that is better than Moody's current expectations
could have a positive impact on the transaction's performance.
Conversely, asset credit performance weaker than Moody's current
expectations could have adverse consequences on the transaction's
3) Deleveraging: One source of uncertainty in this transaction is
whether deleveraging from unscheduled principal proceeds and excess interest
proceeds will continue and at what pace. Note repayments that are
faster than Moody's current expectations could have a positive impact
on the notes' ratings, beginning with the notes with the highest
4) Resumption of interest payments by deferring assets: The timing
and amount of deferral cures could have significant positive impact on
the transaction's over-collateralization ratios and the ratings
on the notes.
5) Exposure to non-publicly rated assets: The deal contains
a large number of securities whose default probability Moody's assesses
through credit scores derived using RiskCalc™ or credit estimates.
Because these are not public ratings, they are subject to additional
Loss and Cash Flow Analysis:
Moody's applied a Monte Carlo simulation framework in Moody's
CDOROM™ to model the loss distribution for TruPS CDOs. The
simulated defaults and recoveries for each of the Monte Carlo scenarios
defined the reference pool's loss distribution. Moody's
then used the loss distribution as an input in its CDOEdge™ cash
flow model. CDOROM™ is available on www.moodys.com
under Products and Solutions -- Analytical models,
upon receipt of a signed free license agreement.
The portfolio of this CDO contains TruPS issued by small to medium sized
U.S. community banks that Moody's does not rate publicly.
To evaluate the credit quality of bank TruPS that do not have public ratings,
Moody's uses RiskCalc™, an econometric model developed by
Moody's Analytics, to derive credit scores. Moody's evaluation
of the credit risk of most of the bank obligors in the pool relies on
the latest FDIC financial data.
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 relative to the base case modeling results, which may
be different from the current public ratings of the 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):
Assuming a two-notch upgrade to assets with below-investment
grade ratings or rating estimates (WARF of 550)
Class A-1: +2
Class A-2: +2
Class B-1: 0
Class B-2: 0
Assuming a two-notch downgrade to assets with below-investment
grade ratings or rating estimates (WARF of 1269)
Class A-1: -1
Class A-2: -2
Class B-1: 0
Class B-2: 0
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
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
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Structured Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
Senior Vice President/Manager
Structured Finance Group
Moody's upgrades the rating on $60 million of TruPS CDO notes issued by U.S. Capital Funding VI, Ltd.
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
No Related Data.
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