Moody’s affirms Aphex Capital NSCR 2007

Global rating agency Moody’s has downgraded the ratings of two classes and affirmed the ratings of seven classes of notes issued by Aphex Capital NSCR 2007-7SR, Ltd. The downgrades are due to deterioration in underlying reference obligation performance as evidenced by negative transition in Moody’s weighted average rating factor (WARF) and weighted average recovery rate (WARR). 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 on-going surveillance of commercial real estate collateralized debt obligation (CRE CDO Synthetic) transactions.

Aphex Capital NSCR 2007-7SR, Ltd. is a static synthetic transaction backed by a portfolio of credit default swaps referencing 100% commercial mortgage backed securities (CMBS). All of the CMBS reference obligations were securitized in 2006 (80.0%) and 2007 (20.0%). Currently, 73.3% of the reference obligations are rated by Moody’s.

Moody’s has identified the following parameters as key indicators of the expected loss within CRE CDO transactions: WARF, weighted average life (WAL), 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 reference obligations. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody’s modeled a bottom-dollar WARF of 8,207 compared to 6,529 at last review. The current distribution is as follows: Ba1Ba3 (3.3% compared to 6.7% at last review), B1-B3 (6.7% compared to 13.3% at last review), and Caa1-Ca/C (90.0% compared to 80.0% at last review).

Changes in any one or combination of the key parameters may have rating implications on certain classes of rated notes. However, in many instances, a change in key parameter assumptions in certain stress scenarios may be offset by a change in one or more of the other key parameters. In general, the rated notes are particularly sensitive to credit changes within the reference obligations. However, in light of the performance indicators noted above, Moody’s believes that it is unlikely that the ratings announced today are sensitive to further change.

The performance expectations for a given variable indicate Moody’s for- ward-looking view of the likely range of performance over the medium term. From time to time, Moody’s may, if warranted, change these expectations. Performance that falls outside the given range may indicate that the collateral’s credit quality is stronger or weaker than Moody’s had anticipated when the related securities ratings were issued. Even so, a deviation from the expected range will not necessarily result in a rating action nor does performance within expectations preclude such actions. The decision to take (or not take) a rating action is dependent on an assessment of a range of factors including, but not exclusively, the performance metrics.