USD 34 million of debt securities affected
New York, January 25, 2012 -- Moody's Investors Service announced today that it has upgraded the ratings
of the following notes issued by Olympic CLO I Ltd.:
U.S. S19,000,000 Class A-3L Floating
Rate Notes Due May 2016, Upgraded to Aa2 (sf); previously on
August 4, 2011 Upgraded to A1 (sf);
U.S. $ 15,000,000 Class B-1L Floating
Rate Notes Due May 2016, Upgraded to Ba2 (sf); previously on
August 4, 2011 Upgraded to Ba3 (sf).
RATINGS RATIONALE
According to Moody's, the rating action taken on the notes is primarily
a result of amortization of the senior notes and an increase in the transaction's
overcollateralization ratios since the last rating action. Moody's
notes that the Class A-1LA Notes have been paid down fully and
the Class A-1L Notes and Class A-1B Notes have been paid
down approximately 49.7% or $12.9 million
and 35.6% or $8.8 million respectively,
since the rating action in August 2011. As a result of the pay
down, the overcollateralization ratios have increased since the
last rating action. Based on the latest trustee report dated January
5, 2012, the Senior Class A, the Class A, the
Class B-1L and the Class B-2L overcollateralization ratios
are reported at 197.32%, 138.94%,
112.63% and 105.23%, respectively,
versus July 2011 levels of 161.23%, 128.33%,
110.53% and 104.89%, respectively.
Notwithstanding the amortization of the transaction, Moody's notes
that the credit quality of the underlying portfolio has deteriorated since
the rating action in August 2011. In particular, the weighted
average rating factor is currently 2892 compared to 2789 in July 2011.
Additionally, Moody's notes that the underlying portfolio includes
a number of investments in securities that mature after the maturity date
of the notes. Based on the January 2012 trustee report, reference
securities that mature after the maturity date of the notes currently
make up approximately 6.68% of the underlying reference
portfolio. These investments potentially expose the notes to market
risk in the event of liquidation at the time of the notes' maturity.
Due to the impact of revised and updated key assumptions referenced in
"Moody's Approach to Rating Collateralized Loan Obligations" published
in June 2011, key model inputs used by Moody's in its analysis,
such as par, weighted average rating factor, diversity score,
and weighted average recovery rate, may be different from the trustee's
reported numbers. In its base case, Moody's analyzed
the underlying collateral pool to have a performing par and principal
proceeds balance of $89.4 million, defaulted par of
$3.1 million, a weighted average default probability
of 18.26% (implying a WARF of 3194), a weighted average
recovery rate upon default of 44.84%, and a diversity
score of 28. The default and recovery properties of the collateral
pool are incorporated in cash flow model analysis where they are subject
to stresses as a function of the target rating of each CLO liability being
reviewed. The default probability is derived from the credit quality
of the collateral pool and Moody's expectation of the remaining
life of the collateral pool. The average recovery rate to be realized
on future defaults is based primarily on the seniority of the assets in
the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the collateral
are also factors.
Olympic CLO I Ltd. issued in March 2004, is a collateral
loan obligation backed primarily by a portfolio of senior secured loans.
The principal methodology used in this rating was "Moody's Approach to
Rating Collateralized Loan Obligations" published in June 2011.
Please see the Credit Policy page on www.moodys.com for
a copy of this methodology.
Moody's modeled the transaction using the Binomial Expansion Technique,
as described in Section 2.3.2.1 of the "Moody's Approach
to Rating Collateralized Loan Obligations" rating methodology published
in June 2011.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of credit
conditions in the general economy and 2) the large concentration of speculative-grade
debt maturing between 2013 and 2015 which may create challenges for issuers
to refinance. CLO notes' performance may also be impacted
by 1) the manager's investment strategy and behavior and 2) divergence
in legal interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Below is a summary of the impact of different default probabilities (expressed
in terms of WARF levels) on all rated notes (shown in terms of the number
of notches' difference versus the current model output, where
a positive difference corresponds to lower expected loss), assuming
that all other factors are held equal:
Moody's Adjusted WARF -- 20% (2555)
Class A-1L: 0
Class A-1LB: 0
Class A-2L: 0
Class A-3L: +1
Class B-1L: +1
Class B-2L: +2
Moody's Adjusted WARF + 20% (3833)
Class A-1L: 0
Class A-1LB: 0
Class A-2L: 0
Class A-3L: -2
Class B-1L: -1
Class B-2L: -2
Sources of additional performance uncertainties are described below:
1) De-leveraging: The main source of uncertainty in this
transaction is whether de-leveraging from unscheduled principal
proceeds will continue and at what pace. De-leveraging may
accelerate due to high prepayment levels in the loan market and/or collateral
sales by the manager, which may have significant impact on the notes'
ratings.
2) Recovery of defaulted assets: Market value fluctuations in defaulted
assets reported by the trustee and those assumed to be defaulted by Moody's
may create volatility in the deal's overcollateralization levels.
Further, the timing of recoveries and the manager's decision
to work out versus sell defaulted assets create additional uncertainties.
Moody's analyzed defaulted recoveries assuming the lower of the
market price and the recovery rate in order to account for potential volatility
in market prices.
3) Long-dated assets: The presence of assets that mature
beyond the CLO's legal maturity date exposes the deal to liquidation
risk on those assets. Moody's assumes an asset's terminal
value upon liquidation at maturity to be equal to the lower of an assumed
liquidation value (depending on the extent to which the asset's
maturity lags that of the liabilities) and the asset's current market
value.
Further information on Moody's analysis of this transaction is available
on www.moodys.com. In addition, Moody's publishes
a weekly summary of structured finance credit, ratings and methodologies,
available to all registered users of our web site, at www.moodys.com/SFQuickCheck.
REGULATORY DISCLOSURES
Although this credit rating has been issued in a non-EU country
which has not been recognized as endorsable at this date, this credit
rating is deemed "EU qualified by extension" and may still
be used by financial institutions for regulatory purposes until 31 January
2012. ESMA may extend the use of credit ratings for regulatory
purposes in the European Community for three additional months,
until 30 April 2012, if ESMA decides that exceptional circumstances
arise that may imply potential market disruption or financial instability.
Further information on the EU endorsement status and on the Moody's
office that has issued a particular Credit Rating is available on www.moodys.com.
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant 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 relevant 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 relevant 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.
Information sources used to prepare the rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
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 considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
entities that hold ratings from MIS that have also publicly reported to
the SEC an ownership interest in MCO of more than 5%. A
member of the board of directors of this rated entity may also be a member
of the board of directors of a shareholder of Moody's Corporation;
however, Moody's has not independently verified this matter.
Please see Moody's Rating Symbols and Definitions on the Rating Process
page on www.moodys.com for further information on the meaning
of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time
before Moody's ratings were fully digitized and accurate data may not
be available. Consequently, Moody's provides a date that
it believes is the most reliable and accurate based on the information
that is available to it. Please see the ratings disclosure page
on our website www.moodys.com for further information.
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.
Suzanna Sava
Asst Vice President - 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
Ramon O. Torres
Senior Vice President
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 the ratings of CLO notes issued by Olympic CLO I Ltd.
