Moody’s af­firms all classes of Gramercy Real Es­tate

The Pak Banker - - Front Page -


Global rat­ing agency Moody’s has af­firmed the rat­ings of all classes of Notes is­sued by Gramercy Real Es­tate CDO 2005-1, Ltd.

The af­fir­ma­tions are due to key trans­ac­tion pa­ram­e­ters per­form­ing within lev­els com­men­su­rate with the ex­ist­ing rat­ings lev­els. The rat­ing ac­tion is the re­sult of Moody’s on­go­ing sur­veil­lance of com­mer­cial real es­tate col­lat­er­al­ized debt obli­ga­tion and col­lat­er­al­ized loan obli­ga­tion (CRE CDO CLO) transactions.

Gramercy Real Es­tate CDO 20051, Ltd. is a static (the rein­vest­ment pe­riod ended in July 2010) cash trans­ac­tion backed by a port­fo­lio of whole loans (53.1% of the pool bal­ance), com­mer­cial mort­gage backed se­curi- ties (CMBS) in­clud­ing rake bonds (29.8%), mez­za­nine loans (9.7%), and B-Notes (7.4%). As of the Septem­ber 28, 2012 trustee re­port, the ag­gre­gate Note bal­ance of the trans­ac­tion, in­clud­ing Pref­er­ence Shares, has de­creased to $760.7 mil­lion from $1.0 bil­lion at is­suance, as a re­sult of the com­bi­na­tion of the ju­nior notes can­cel­la­tion to Class E, Class F, Class G, and Class H Notes and of the pay­down di­rected to the Class A-1 Notes from reg­u­lar amor­ti­za­tion of col­lat­eral, res­o­lu­tion and sales of de­faulted col­lat­eral, and in­ter­est pro­ceeds paid as prin­ci­pal pro­ceeds as a re­sult of fail­ing the par value tests. In gen­eral, hold­ing all key pa­ram­e­ters static, the ju­nior note can­cel­la­tions re­sults in slightly higher expected losses and longer weighted av­er­age lives on the se­nior Notes, while pro­duc­ing slightly lower expected losses on the mez­za­nine and ju­nior Notes. How­ever, this does not cause, in and of it­self, a down­grade or up­grade of any out­stand­ing classes of Notes. The trans­ac­tion is fail­ing its two par value tests while pass­ing all of its in­ter­est cov­er­age tests. Cur­rently, the trans­ac­tion is over-col­lat­er­al­ized by $39.2 mil­lion (in­clud­ing cash prin­ci­pal avail­able for reg­u­lar dis­tri­bu­tion).

There are nine as­sets with par bal­ance of $243.1 mil­lion (30.9% of the cur­rent pool bal­ance) that are con­sid­ered de­faulted se­cu­ri­ties as of the Septem­ber 28, 2012 trustee re­port, com­pared to three de­faulted se­cu­ri­ties to­tal­ing $151.9 mil­lion par amount (16.8%) at last re­view. Moody’s does ex­pect mod­er­ate to sig­nif­i­cant losses to oc­cur from these de­faulted se­cu­ri­ties once they are re­al­ized.

Moody’s has iden­ti­fied the fol­low­ing pa­ram­e­ters as key in­di­ca­tors of the expected loss within CRE CDO transactions: weighted av­er­age rat­ing fac­tor (WARF), weighted av­er­age life (WAL), weighted av­er­age re­cov­ery rate (WARR), and Moody’s as­set cor­re­la­tion (MAC). These pa­ram­e­ters are typ­i­cally mod­eled as ac­tual pa­ram­e­ters for static deals and as covenants for man­aged deals.

WARF is a pri­mary mea­sure of the credit qual­ity of a CRE CDO pool. We have com­pleted updated as­sess­ments for the non-Moody’s rated col­lat­eral. The bot­tom-dol­lar WARF is a mea­sure of the de­fault prob­a­bil­ity within a col­lat­eral pool. Moody’s mod­eled a bot­tom-dol­lar WARF of 5,572 com­pared to 5,007 at last re­view. The cur­rent dis­tri­bu­tion of Moody’s rated col­lat­eral and as­sess­ments for non-Moody’s rated col­lat­eral is as fol­lows: Aaa-Aa3 (10.4% com­pared to 11.2%), A1-A3 (4.0% com­pared to 6.7%),Baa1-Baa3 (5.4% com­pared to 2.1% at last re­view), Ba1-Ba3 (9.6% com­pared to 14.3% at last re­view), B1-B3 (6.6% com­pared to 10.1% at last re­view), and Caa1Ca/C (64.0% com­pared to 55.6% at last re­view).

Moody’s mod­eled to a WAL of 3.0 years, the same as that at last re­view. The cur­rent WAL is based on the as­sump­tion about ex­ten­sions.

Changes in any one or com­bi­na­tion of the key pa­ram­e­ters may have rat­ing im­pli­ca­tions on cer­tain classes of rated notes.

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