New York, December 16, 2011 -- Moody's Investors Service announced today that it has upgraded the ratings
of five classes of notes and three composite obligations issued by ZAIS
Investment Grade Limited VI. The classes of notes affected by today's
rating actions are as follows:
U.S. $54,750,000 Class A-2a Senior
Secured Floating Rate Notes, Upgraded to Aaa (sf); previously
on August 1, 2011 Upgraded to Aa3 (sf) and Remained On Review for
Possible Upgrade
U.S. $8,250,000 Class A-2b Senior
Secured Fixed Rate Notes, Upgraded to Aaa (sf); previously
on August 1, 2011 Upgraded to Aa3 (sf) and Remained On Review for
Possible Upgrade
U.S. $21,000,000 Class A-3 Senior
Secured Floating Rate Notes, Upgraded to Aa2 (sf); previously
on August 1, 2011 Upgraded to Baa1 (sf) and Remained On Review for
Possible Upgrade
U.S. $6,400,000 Class B-1 Senior
Secured Floating Rate Notes, Upgraded to Baa1 (sf); previously
on August 1, 2011 Upgraded to Ba2 (sf) and Remained On Review for
Possible Upgrade
U.S. $36,600,000 Class B-2 Senior
Secured Fixed Rate Notes, Upgraded to Baa1 (sf); previously
on August 1, 2011 Upgraded to Ba2 (sf) and Remained On Review for
Possible Upgrade
U.S. $1,250,000 Type II Composite Obligations
(current rated balance: $636,964), Upgraded to
Aaa (sf); previously on August 1, 2011 Upgraded to Aa1 (sf)
and Remained On Review for Possible Upgrade
U.S. $10,500,000 Type IV Composite Obligations
(current rated balance: $7,383,459), Upgraded
to A3 (sf); previously on August 1, 2011 Upgraded to Ba1 (sf)
and Remained On Review for Possible Upgrade
U.S. $8,600,000 Type VI Composite Obligations
(current rated balance: $5,802,855), Upgraded
to Baa1 (sf); previously on August 1, 2011 Upgraded to Ba1
(sf) and Remained On Review for Possible Upgrade
Moody's also confirmed the rating of one composite obligation:
U.S. $15,000,000 Type V Composite Obligations
(rated balance: $6,721,192), Confirmed
at Ba1 (sf); previously on August 1, 2011 Upgraded to Ba1 (sf)
and Remained On Review for Possible Upgrade
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes result
primarily from the improvement of the credit quality of the portfolio
and the deleveraging of the Class A-1 Notes.
As of the latest trustee report dated November 16, 2011, the
Class A and Class B overcollateralization ratios are reported at 167.89%
and 132.65%, respectively, versus June 2011
levels of 136.57% and 111.97%. Also
based on this November report the WARF reported is 936 versus June 2011
reported WARF of 2136. Since the last review the Class A-1
Notes have amortized by $33.8mm. The Class B notes
have a deferred interest balance which is causing the B IC test to fail
its trigger. Therefore interest proceeds are being used to pay
down the principal balance of the Class A-1 notes. However,
the B notes are currently receiving their due interest payments.
Today's rating actions on the notes also reflect CLO tranche upgrades
that have taken place within the last six months. Since Moody's
June 22nd announcement that nearly all CLO tranches currently rated Aa1
and below were placed on review for possible upgrade, 72%
of the performing collateral has been upgraded, 43% of which
took place following the previous rating action on the Notes in August.
ZAIS Investment Grade Limited VI is a collateralized debt obligation backed
primarily by a portfolio of CLOs.
The principal methodology used in this rating was "Moody's Approach to
Rating SF CDOs" published in November 2010. Please see the Credit
Policy page on www.moodys.com for a copy of this methodology.
Other Factors used in this rating action are described in "Moody's Approach
to Rating Structured Finance Securities in Default" published in November
2009.
Moody's applied the Monte Carlo simulation framework within CDOROMv2.8
to model the loss distribution for SF CDOs. Within this framework,
defaults are generated so that they occur with the frequency indicated
by the adjusted default probability pool (the default probability associated
with the current rating multiplied by the Resecuritization Stress) for
each credit in the reference. Specifically, correlated defaults
are simulated using a normal (or "Gaussian") copula model that applies
the asset correlation framework. Recovery rates for defaulted credits
are generated by applying within the simulation the distributional assumptions,
including correlation between recovery values. Together,
the simulated defaults and recoveries across each of the Monte Carlo scenarios
define the loss distribution for the reference pool.
Once the loss distribution for the collateral has been calculated,
each collateral loss scenario derived through the CDOROM loss distribution
is associated with the interest and principal received by the rated liability
classes via the CDOEdge cash-flow model . The cash flow
model takes into account the following: collateral cash flows,
the transaction covenants, the priority of payments (waterfall)
for interest and principal proceeds received from portfolio assets,
reinvestment assumptions, the timing of defaults, interest-rate
scenarios and foreign exchange risk (if present). The Expected
Loss (EL) for each tranche is the weighted average of losses to each tranche
across all the scenarios, where the weight is the likelihood of
the scenario occurring. Moody's defines the loss as the shortfall
in the present value of cash flows to the tranche relative to the present
value of the promised cash flows. The present values are calculated
using the promised tranche coupon rate as the discount rate. For
floating rate tranches, the discount rate is based on the promised
spread over Libor and the assumed Libor scenario.
Moody's rating action today factors in a number of sensitivity analyses
and stress scenarios, discussed below. Results are 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 Performing Assets notched up by 1 rating notches:
Class A-1: 0
Class A-2a: 0
Class A-2b: 0
Class A-3: +1
Class B-1: +1
Class B-2: +1
Type II: 0
Type IV: +1
Type V: +3
Type VI: +2
Moody's Performing Assets notched down by 1 rating notches:
Class A-1: 0
Class A-2a:-1
Class A-2b: -1
Class A-3: -1
Class B-1: -4
Class B-2: -3
Type II: 0
Type IV: -3
Type V: -2
Type VI: -2
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.
Ainat Koller
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 the ratings of five classes of notes and three composite obligations issued by ZAIS Investment Grade Limited VI, Ltd., a SF CDO
