New York, August 04, 2015 -- Moody's Investors Service has upgraded the ratings on the following notes
issued by Trapeza CDO XIII, Ltd.:
U.S. $375,000,000 Class A-1 Senior
Secured Floating Rate Notes Due 2042 (current balance of $289,031,456),
Upgraded to A1 (sf); previously on December 22, 2014 Affirmed
A2 (sf)
U.S. $97,000,000 Class A-2a Senior
Secured Floating Rate Notes Due 2042, Upgraded to A3 (sf);
previously on December 22, 2014 Affirmed Baa1 (sf)
U.S. $5,000,000 Class A-2b Senior
Secured Fixed/Floating Rate Notes Due 2042, Upgraded to A3 (sf);
previously on December 22, 2014 Affirmed Baa1 (sf)
U.S. $21,000,000 Class A-3 Senior
Secured Floating Rate Notes Due 2042, Upgraded to Baa1 (sf);
previously on December 22, 2014 Upgraded to Baa3 (sf)
U.S. $65,000,000 Class B Secured Deferrable
Floating Rate Notes Due 2042, Upgraded to Ba2 (sf); previously
on December 22, 2014 Upgraded to B2 (sf)
U.S. $58,000,000 Class C-1 Secured
Deferrable Floating Rate Notes Due 2042 (current balance of $62,925,703
including cumulative deferred interest balance), Upgraded to Caa1
(sf); previously on December 22, 2014 Upgraded to Caa3 (sf)
U.S. $5,000,000 Class C-2 Secured
Deferrable Fixed/Floating Rate Notes Due 2042 (current balance of $7,313,883
including cumulative deferred interest balance), Upgraded to Caa1
(sf); previously on December 22, 2014 Upgraded to Caa3 (sf)
Trapeza CDO XIII, Ltd., issued in August 2007,
is a collateralized debt obligation backed by a portfolio of bank and
insurance trust preferred securities (TruPS).
RATINGS RATIONALE
These rating actions are due primarily to the deleveraging of the senior
notes and an increase in the transaction's over-collateralization
(OC) ratios. the Class A-1 notes have paid down by approximately
4% or $11.6 million since December 2014, from
the redemption of a performing asset and recoveries from defaulted assets,
as well as the diversion of excess interest proceeds. As a result,
the Class A-1 notes' par coverage has improved to 201.4%
from 195.1% since December 2014, by Moody's
calculations. Based on the trustee's June 2015 report,
the over-collateralization ratio of the Class A notes was 141.9%
(limit 129.5%), versus 138.1% in November
2014, that of the Class B notes, 122.6% (limit
119.0%), versus 119.0%, and that
of the Class C notes, 106.9% (limit 113.5%),
versus 104.2%. The Class A-1 notes will continue
to benefit from the diversion of excess interest and the use of proceeds
from redemptions of any assets in the collateral pool. Since December
2014, the $2.5 million cumulative deferred interest
balance on the Class B notes has been repaid in full. The Class
C-1 and C-2 notes are also receiving current interest payments,
but continue to carry a deferred interest balance, because of the
ongoing failure of the Class C OC test.
The deal has also benefited from improvement in the credit quality of
the underlying portfolio. According to Moody's calculations,
the weighted average rating factor (WARF) improved to 771 from 872 in
December 2014.
The key model inputs Moody's used in its analysis, such as
par, weighted average rating factor, and weighted average
recovery rate, are based on its methodology and could differ from
the trustee's reported numbers. In its base case, Moody's
analyzed the underlying collateral pool has having a performing par (after
treating deferring securities as performing if they meet certain criteria)
of $582 million, defaulted/deferring par of $90.5
million, a weighted average default probability of 8.6%
(implying a WARF of 771), and a weighted average recovery rate upon
default of 10%. In addition to the quantitative factors
Moody's explicitly models, qualitative factors are part of
rating committee considerations. Moody's considers the structural
protections in the transaction, the risk of an event of default,
recent deal performance under current market conditions, the legal
environment and specific documentation features. All information
available to rating committees, including macroeconomic forecasts,
inputs from other Moody's analytical groups, market factors,
and judgments regarding the nature and severity of credit stress on the
transactions, can influence the final rating decision.
Methodology Underlying the Rating Action
The principal methodology used in these ratings was "Moody's Approach
to Rating TruPS CDOs," published in June 2014. Please see
the Credit Policy page on www.moodys.com for a copy of this
methodology.
Factors that Would Lead to an Upgrade or Downgrade of the Rating:
This transaction is subject to a number of factors and circumstances that
could lead to either an upgrade or downgrade of the ratings, as
described below:
1) Macroeconomic uncertainty: TruPS CDOs' performance could
be negatively affected by uncertainty about credit conditions in the general
economy. Moody's has a stable outlook on the US banking and
insurance sectors.
2) Portfolio credit risk: Credit performance of the assets collateralizing
the transaction that is better than Moody's current expectations
could have a positive impact on the transaction's performance.
Conversely, asset credit performance weaker than Moody's current
expectations could have adverse consequences on the transaction's
performance.
3) Deleveraging: One source of uncertainty in this transaction is
whether deleveraging from unscheduled principal proceeds and excess interest
proceeds will continue and at what pace. Note repayments that are
faster than Moody's current expectations could have a positive impact
on the notes' ratings, beginning with the notes with the highest
payment priority.
4) Resumption of interest payments by deferring assets: A number
of banks have resumed making interest payments on their TruPS.
The timing and amount of deferral cures could have significant positive
impact on the transaction's over-collateralization ratios and the
ratings on the notes.
5) Exposure to non-publicly rated assets: The deal contains
a large number of securities whose default probability Moody's assesses
through credit scores derived using RiskCalc™ or credit estimates.
Because these are not public ratings, they are subject to additional
uncertainties.
Loss and Cash Flow Analysis:
Moody's applied a Monte Carlo simulation framework in Moody's
CDOROM™ to model the loss distribution for TruPS CDOs. The
simulated defaults and recoveries for each of the Monte Carlo scenarios
defined the reference pool's loss distribution. Moody's
then used the loss distribution as an input in its CDOEdge™ cash
flow model. CDOROM™ is available on www.moodys.com
under Products and Solutions -- Analytical models,
upon receipt of a signed free license agreement.
The portfolio of this CDO contains mainly TruPS issued by small to medium
sized U.S. community banks and insurance companies that
Moody's does not rate publicly. To evaluate the credit quality
of bank TruPS that do not have public ratings, Moody's uses RiskCalc™,
an econometric model developed by Moody's Analytics, to derive credit
scores. Moody's evaluation of the credit risk of most of the bank
obligors in the pool relies on FDIC Q1-2015 financial data.
For insurance TruPS that do not have public ratings, Moody's relies
on the assessment of its Insurance team, based on the credit analysis
of the underlying insurance firms' annual statutory financial reports.
In addition to the base case analysis, Moody's also conducted sensitivity
analyses to test the impact of a number of default probabilities on the
rated notes relative to the base case modeling results, which may
be different from the current public ratings of the notes. Below
is a summary of the impact of different default probabilities (expressed
in terms of WARF) on all of the rated notes (by the difference in the
number of notches versus the current model output, for which a positive
difference corresponds to lower expected loss):
Assuming a two-notch upgrade to assets with below-investment
grade ratings or rating estimates (WARF of 494)
Class A-1: +1
Class A-2a: +2
Class A-2b: +2
Class A-3: +1
Class B: +2
Class C-1: +2
Class C-2: +2
Assuming a two-notch downgrade to assets with below-investment
grade ratings or rating estimates (WARF of 1221)
Class A-1: -1
Class A-2a: -2
Class A-2b: -1
Class A-3: -2
Class B: -2
Class C-1: -2
Class C-2: -2
REGULATORY DISCLOSURES
For further specification of Moody's key rating assumptions and sensitivity
analysis, see the sections Methodology Assumptions and Sensitivity
to Assumptions of the disclosure form.
Moody's describes its loss and cash flow analysis in the section
"Ratings Rationale" of this press release.
Moody's quantitative analysis entails an evaluation of scenarios
that stress factors contributing to sensitivity of ratings and take into
account the likelihood of severe collateral losses or impaired cash flows.
Moody's weights the impact on the rated instruments based on its
assumptions of the likelihood of the events in such scenarios occurring.
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Simran Sangari
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
Min Xu
Senior Vice President/Manager
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 on $547.3 million of TruPS CDO notes issued by Trapeza CDO XIII, Ltd.
