Total debt affected $117.5million
New York, March 30, 2011 -- Moody's Investors Service announced today that it has upgraded the ratings
of the following notes issued by AMMC CLO V, Limited:
U.S. $ 40,000,000 Class A-1-B
Floating Rate Notes due 2017, Upgraded to Aa2(sf); previously
on July 16, 2009 Downgraded to Aa3(sf);
U.S. $ 28,750,000 Class A-2 Floating
Rate Notes due 2017, Upgraded to Aa1(sf); previously on July
16, 2009 Downgraded to Aa2(sf);
U.S. $ 9,750,000 Class B Floating Rate
Notes due 2017, Upgraded to A1(sf); previously on July 16,
2009 Downgraded to A2(sf);
U.S. $19,500,000 Class C Floating Rate
Deferrable Notes Due 2017, Upgraded to Baa2(sf); previously
on March 18, 2009 Downgraded to Ba1(sf);
U.S. $ 19,500,000 Class D Floating Rate
Deferrable Notes due 2017, Upgraded to B1(sf); previously on
July 16, 2009 Downgraded to B3(sf).
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes result
primarily from improvement in the credit quality of the underlying portfolio
and an increase in the overcollateralization ratio of the notes since
the July 2009 rating action.
Improvement in the credit quality is observed through an improvement in
the average credit rating (as measured by the weighted average rating
factor). As of the trustee report dated February 3, 2011,
the weighted average rating factor is currently 2429 compared to 3042
in the June 2009 report. Additionally, defaulted securities
total about $1.5million of the underlying portfolio compared
to $11.8million in 2009. The percentage of securities
rated Caa and below also declined to 6% from 20%.
The overcollateralization ratio of the rated notes have also improved
since the rating action. The Senior Overcollateralization Ratio
Test is reported at 118.7% versus 112.3%.
It is currently in compliance.
Due to the impact of revised and updated key assumptions referenced in
"Moody's Approach to Rating Collateralized Loan Obligations" and "Annual
Sector Review (2009): Global CLOs," 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 balance of $275million, defaulted
par of $3million, a weighted average default probability
of 24% (implying a WARF of 3460), a weighted average recovery
rate upon default of 43% and a diversity score of 67. 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.
AMMC CLO V, Limited, issued in December 2005, is a collateralized
loan obligation backed primarily by a portfolio of senior secured loans.
The principal methodology used in these ratings was "Moody's Approach
to Rating Collateralized Loan Obligations" published in August 2009.
Moody's Investors Service did not receive or take into account a third-party
due diligence report on the underlying assets or financial instruments
related to the monitoring of this transaction in the past six months.
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 August 2009.
In addition to the base case analysis described above, Moody's also
performed sensitivity analyses to test the impact on all rated notes of
various default probabilities. 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% (2768)
Class A-1-A: 0
Class A-1-B: +1
Class A-1-R: 0
Class A-2: +1
Class B: +3
Class C: +3
Class D: +2
Moody's Adjusted WARF +20% (4152)
Class A-1-A: 0
Class A-1-B: -2
Class A-1-R: 0
Class A-2: -2
Class B: -2
Class C: -3
Class D: -3
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 2012 and 2014 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) Deleveraging: The deal's reinvestment period ended in December
2010. However, the amount and pace of deleveraging from principal
proceeds is uncertain. Deleveraging 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. On the
March 2011 payment date, the Class A-1-A Notes and
Class A-1-R Notes were paid about $690,000.
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.
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
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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 ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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 the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
New York
Connie Li
Associate Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
New York
Ramon O. Torres
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's upgrades the ratings of notes issued by AMMC CLO V, Ltd.
