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I AGREE
09 Sep 2011
USD $65 million of debt securities affected
New York, September 09, 2011 -- Moody's Investors Service announced today that it has upgraded the ratings
of the following notes issued by Pacifica CDO IV, Ltd.:
U.S. $21,000,000 Class A-2L Floating
Rate Notes Due February 2017, Upgraded to Aaa (sf); previously
on June 22, 2011 Aa3 (sf) Placed Under Review for Possible Upgrade;
U.S. $20,000,000 Class A-3L Floating
Rate Notes Due February 2017, Upgraded to Aa2 (sf); previously
on June 22, 2011 Baa1 (sf) Placed Under Review for Possible Upgrade;
U.S. $14,000,000 Class B-1L Floating
Rate Notes Due February 2017, Upgraded to Baa1 (sf); previously
on June 22, 2011 Ba2 (sf) Placed Under Review for Possible Upgrade;
and
U.S. $10,000,000 Class B-2L Floating
Rate Notes Due February 2017, Upgraded to Ba2 (sf); previously
on June 22, 2011 B2 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes
are primarily a result of applying Moody's revised CLO assumptions described
in "Moody's Approach to Rating Collateralized Loan Obligations"
published in June 2011. The primary changes to the modeling assumptions
include (1) a removal of the temporary 30% default probability
macro stress implemented in February 2009 as well as (2) increased BET
liability stress factors and increased recovery rate assumptions.
The actions also reflect the consideration of credit improvement of the
underlying portfolio, an increase in the transaction's overcollateralization
ratios, and delevering of the senior notes since the rating action
in February 2011. The Class A-1L notes have been paid down
by approximately 30% or $63.9 million since the rating
action, and as a result of the delevering, the overcollateralization
ratios have increased since then. Based on the latest trustee report
dated August 4, 2011, the Senior Class A, Class A,
Class B-1L, and Class B-2L overcollateralization ratios
are reported at 129.27%, 117.46%,
110.40%, and 105.86%, respectively,
versus January 2011 levels of 124.70%, 114.57%,
108.40%, and 104.38%, respectively.
The weighted average rating factor is currently 2421 compared to 2587
in January 2011.
Additionally, Moody's notes that the underlying portfolio
includes a number of investments in securities that mature after the maturity
of the notes. Based on the August 2011 trustee report, reference
securities that mature after the maturity date of the notes currently
make up approximately 6.05% of the underlying collateral
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 $219.95 million, defaulted par
of $0.9 million, a weighted average default probability
of 15.0% (implying a WARF of 2492), a weighted average
recovery rate upon default of 50.7%, and a diversity
score of 51. These 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.
Pacifica CDO IV, Ltd., issued in December 2004,
is a collateralized 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. CDO notes' performance may also be impacted
by 1) the manager's investment strategy and behavior and 2) divergence
in legal interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are described below:
1) Delevering: A source of uncertainty in this transaction is whether
delevering from unscheduled principal proceeds will continue and at what
pace. Delevering 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) 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.
REGULATORY DISCLOSURES
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 Investors Service 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
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Please see Moody's Rating Symbols and Definitions on the Rating Process
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Please see ratings tab on the issuer/entity page on www.moodys.com
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The date on which some ratings were first released goes back to a time
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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.
New York
Cari Li
Asst Vice President - Analyst
Structured Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Rudolph Bunja
Senior Vice President
Structured Finance Group
Moody's Investors Service, Inc.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
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 four classes of CLO notes issued by Pacifica CDO IV, Ltd.
No Related Data.
© 2019 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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