Approximately USD 51 million of debt securities affected
New York, February 24, 2012 -- Moody's Investors Service announced today that it has upgraded the ratings
on the following notes issued by I-Preferred Term Securities IV,
Ltd.
U.S. $37,000,000 Floating Rate Class
A-2 Senior Notes Due June 24, 2034 (current balance of $37,000,000),
Upgraded to A1 (sf); previously on March 27, 2009 Downgraded
to Baa1 (sf);
U.S. $13,900,000 Fixed/Floating Rate
Class A-3 Senior Notes Due June 24, 2034 (current balance
of $13,900,000), Upgraded to A1 (sf); previously
on March 27, 2009 Downgraded to Baa1 (sf).
RATINGS RATIONALE
According to Moody's, the rating actions taken on the Notes
are primarily a result of deleveraging of the Class A-1 Notes and
an increase in the transaction's overcollateralization ratios since
the last rating action in March 2009.
Moody's notes that the Class A-1 Notes have been paid down
by approximately 39.4% or $60 million since the last
rating action, as a result of diversion of excess interest proceeds
and disbursement of principal proceeds from redemptions of underlying
assets. As a result of this deleveraging, the Class A Notes'
par coverage improved since the last rating action. Based on the
latest trustee report dated 21 December 2011, after the distribution
of the principal proceeds of $9.5 million and interest proceeds,
Senior Coverage Ratio, Class B Mezzanine Coverage Ratio and Class
C Coverage Ratio are reported at 174.16% (limit 128%),
111.69% (limit 106%) and 105.79% (limit
103.5%), respectively, versus 24 December 2008
levels of 152.30%, 110.71% and 106.21%,
respectively. Going forward, the Class A Notes will continue
to benefit from the diversion of excess interest. Moody's
also notes that the deal holds only $23 million of defaulted or
deferring par, which is lower than the impairment level we had projected
during the last rating action.
Due to the impact of revised and updated key assumptions referenced in
our rating methodology, key model inputs used by Moody's in its
analysis, such as par, weighted average rating factor,
Moody's Asset Correlation, 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 $249.6
million, defaulted/deferring par of $23 million, a
weighted average default probability of 23.4% (implying
a WARF of 1242), Moody's Asset Correlation of 19.4%,
and a weighted average recovery rate upon default of 6.5%.
In addition to the quantitative factors that are explicitly modeled,
qualitative factors are part of rating committee considerations.
Moody's considers the structural protections in the transaction,
the risk of triggering 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,
may influence the final rating decision.
I-Preferred Term Securities IV, Ltd., issued
on May 12, 2004, is a collateralized debt obligation backed
by a portfolio of insurance and banks trust preferred securities.
The portfolio of this CDO is mainly comprised of trust preferred securities
(TruPS) issued by insurance companies and small to medium sized U.S.
community banks that are generally not publicly rated by Moody's.
To evaluate the credit quality of bank TruPS without public ratings,
Moody's uses RiskCalc model, an econometric model developed by Moody's
KMV, to derive their credit scores. Moody's evaluation of
the credit risk for a majority of bank obligors in the pool relies on
FDIC financial data received as of Q3-2011. For insurance
TruPS without public ratings, Moody's relies on its insurance team
and the underlying insurance firms' annual financial reporting to
assess their credit quality. Moody's also evaluates the sensitivity
of the rated transaction to the volatility of the credit estimates,
as described in Moody's Rating Implementation Guidance "Updated Approach
to the Usage of Credit Estimates in Rated Transactions" published in October
2009.
The principal methodology used in this rating was "Moody's Approach to
Rating TRUP CDOs" published in May 2011. Please see the Credit
Policy page on www.moodys.com for a copy of this methodology.
The transaction's portfolio was modeled using CDOROM v.2.8
to develop the default distribution from which the Moody's Asset Correlation
parameter was obtained. This parameter was then used as an input
in a cash flow model using CDOEdge. CDOROM v.2.8
is available on moodys.com under Products and Solutions --
Analytical models, upon return of a signed free license agreement.
Moody's performed a number of sensitivity analyses of the results to certain
key factors driving the ratings. We analyzed the sensitivity of
the model results to changes in the portfolio WARF (representing an improvement
or a deterioration in the credit quality of the collateral pool),
assuming that all other factors are held equal. If the WARF is
increased by 588 points from the base case of 1242, the model-implied
rating of the Class A-1 notes is one notch worse than the base
case result. Similarly, if the WARF is decreased by 152 points,
the model-implied rating of the Class A-1 notes is one notch
better than the base case result.
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as our outlook on the banking sector
remains negative, although there have been some recent signs of
stabilization. The pace of FDIC bank failures continues to decline
in 2012 compared to 2011, 2010 and 2009, and some of the previously
deferring banks have resumed interest payment on their trust preferred
securities. Our outlook on the insurance sector is stable.
Further information on Moody's analysis of this transaction is available
on www.moodys.com.
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 30 April 2012.
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, confidential
and proprietary Moody's Investors Service information, and confidential
and proprietary Moody's Analytics 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.
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.
Oktay Veliev
Asst Vice President - 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
Rodrigo Araya
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 on TruPS CDO Notes issued by I-Preferred Term Securities IV, Ltd.
