USD 42.6 million of debt securities affected.
New York, December 21, 2012 -- Moody's Investors Service announced today that it has upgraded the ratings
of the following notes issued by MWAM CBO 2001-1, LTD.:
U.S.$197,500,000 Class A Floating Rate
Notes Due January 30, 2031 (current balance of $20,716,306.57),
Upgraded to Aaa (sf); previously on December 20, 2010 Upgraded
to Aa2 (sf)
U.S.$21,875,000 Class B Floating Rate
Notes Due January 30, 2031, Upgraded to Baa1 (sf); previously
on December 20, 2010 Upgraded to Ba3 (sf)
RATINGS RATIONALE
According to Moody's, the rating upgrades today are primarily a
result of deleveraging of the Class A Notes and an increase in the transaction's
overcollateralization ratios since the last rating action in December
2010. Moody's notes that the Class A Notes have been paid down
by approximately 52.6% or $22.96 million since
the last rating action. Based on the latest trustee report dated
November 30, 2012, the Class A and Class B overcollateralization
ratios are reported at 275.53% and 134.02%,
respectively, versus November 2010 levels of 162.77%
and 108.45% respectively. The increase in overcollateralization
is also partly due to the receipt of unexpected recoveries and principal
paydowns on securities assumed to be defaulted in our analysis during
the last rating action.
MWAM CBO 2001-1, LTD., issued in January 2001,
is a collateralized debt obligation backed primarily by a portfolio of
corporate securities, RMBS, and other types of ABS securities
originated from 1998 to 2003. Corporate securities currently comprise
65% or $37.8 million of the performing collateral.
The principal methodology used in this rating was "Moody's Approach to
Rating SF CDOs" published in May 2012. Please see the Credit Policy
page on www.moodys.com for a copy of this methodology.
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 notes that in arriving at its ratings of SF CDOs, there
exist a number of sources of uncertainty, operating both on a macro
level and on a transaction-specific level. Primary sources
of assumption uncertainty are the extent of the slowdown in growth in
the current macroeconomic environment and the residential real estate
property markets. Among the uncertainties in the residential real
estate property market are those surrounding future housing prices,
pace of residential mortgage foreclosures, loan modification and
refinancing, unemployment rate and interest rates.
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 non-investment grade rated assets notched up by 2 rating
notches:
Class A: 0
Class B: +1
Class C-1: 0
Class C-2: 0
Moody's non-investment grade rated assets notched down by 2 rating
notches:
Class A: 0
Class B: -1
Class C-1: 0
Class C-2: 0
Sources of additional performance uncertainties are described below:
1) Amortizations: The main source of uncertainty in this transaction
is whether amortizations will continue and at what pace. The rate
of prepayments in the underlying portfolio 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.
3) Lack of portfolio granularity: The performance of the portfolio
depends to a large extent on the credit conditions of a few large obligors,
especially when they experience jump to default.
REGULATORY DISCLOSURES
The Global Scale Credit Ratings on this press release that are issued
by one of Moody's affiliates outside the EU are endorsed by Moody's
Investors Service Ltd., One Canada Square, Canary Wharf,
London E 14 5FA, UK, in accordance with Art.4 paragraph
3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies.
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.
Sange Lama
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 two classes of notes issued by MWAM CBO 2001-1, LTD., a multi-sector SF CDO.
