(The following statement was released by the rating agency)
Dec 20 -
-- We have reviewed the ratings on all European transactions in the
monthly Global SROC Report.
-- We have taken various rating actions on 33 of these European synthetic
After running its month-end SROC (synthetic rated overcollateralization) figures, Standard &
Poor's Ratings Services today took various rating actions on 33 European synthetic
collateralized debt obligation (CDO) tranches.
-- Placed on CreditWatch negative our ratings on three tranches;
-- Placed on CreditWatch positive our ratings on two tranches;
-- Removed from CreditWatch negative our rating on one tranche;
-- Raised and removed from CreditWatch positive our ratings on 11
-- Lowered to 'CC (sf)' our ratings on 11 tranches; and
-- Affirmed our ratings on five tranches.
For the full list of rating actions see "European Synthetic CDO Rating Actions
At December 2012."
Today's rating actions are part of our regular monthly review of European
synthetic CDOs. The actions incorporate, among other things, the effect of
recent rating migration within reference portfolios and recent credit events
on corporate entities.
WHERE WE HAVE PLACED OUR RATINGS ON CREDITWATCH NEGATIVE
The SROC (synthetic rated overcollateralization; see "What Is SROC?" below)
has fallen below 100% during the November 2012 month-end run. This indicates
to us that the current credit enhancement may not be sufficient to maintain
the current tranche rating.
WHERE WE HAVE REMOVED OUR RATINGS FROM CREDITWATCH NEGATIVE
The SROC has risen above 100% during the November 2012 month-end run. This
indicates to us that the current credit enhancement is sufficient to maintain
the current tranche rating.
WHERE WE HAVE PLACED OUR RATINGS ON CREDITWATCH POSITIVE
The tranche's current SROC exceeds 100%, which indicates to us that the
tranche's credit enhancement is greater than that required to maintain the
current rating. Additionally, our analysis indicates that the current SROC
would be greater than 100% at a higher rating level than currently assigned.
WHERE WE HAVE LOWERED OUR RATINGS
We have run SROC for the current portfolio and have projected SROC 90 days
into the future, while assuming no asset rating migration.
We have lowered our ratings to the level at which SROC is above or equal to
100%. However, if the SROC is below 100% at a certain rating level but greater
than 100% in the projected 90-day run, we may leave the rating on CreditWatch
negative at the revised rating level.
WHERE WE HAVE RAISED OUR RATINGS
We have raised our ratings to the level at which SROC exceeds 100% and meets
our minimum cushion requirement. For further details of our upgrade
guidelines, see "Revised Methodologies And Assumptions For Global Synthetic
CDO Surveillance," published on Sept. 30, 2010.
WHERE WE HAVE AFFIRMED OUR RATINGS
We have affirmed our ratings on those tranches for which credit enhancement
is, in our opinion, still at a level commensurate with their current ratings.
WHERE WE HAVE LOWERED OUR RATINGS TO 'CC'
Where losses in a portfolio have already exceeded the available credit
enhancement or where, in our opinion, it is highly likely that this will occur
once final valuations are known, we have lowered our ratings to 'CC'. We have
done so as we consider the likelihood that the noteholders will not receive
their full principal to be high.
For those transactions where our September 2009 CDO criteria are not
applicable, we have run our analysis on CDO Evaluator models 2.7 and 4.1 (see
"Update To Global Methodologies And Assumptions For Corporate Cash Flow And
Synthetic CDOs," published on Sept. 17, 2009). For the transactions where our
September 2009 criteria are applicable, we have run our analysis on CDO
Evaluator model 6.0.1, which includes the top obligor and industry test SROCs.
In addition to the obligor and industry tests, and the Monte Carlo default
simulation results, we may consider certain factors such as credit stability
and rating sensitivity to modeling parameters when assigning ratings to CDO
tranches. We assess these factors case-by-case and may adjust the ratings to a
rating level that is different to that indicated by the quantitative results
WHAT IS SROC?
One of the main steps in our rating analysis is the review of the credit
quality of the portfolio referenced assets. SROC is one of the tools we use
when surveilling our ratings on synthetic CDO tranches with reference
SROC is a measure of the degree by which the credit enhancement (or attachment
point) of a tranche exceeds the stressed loss rate assumed for a given rating
scenario. SROC helps capture what we consider to be the major influences on
portfolio performance: Credit events, asset rating migration, asset
amortization, and time to maturity. It is a comparable measure across
different tranches of the same rating.
RELATED CRITERIA AND RESEARCH
-- Counterparty Risk Framework Methodology And Assumptions, Nov. 29, 2012
-- Criteria For Assigning 'CCC+', 'CCC', 'CCC-', And 'CC' Ratings, Oct.
-- Credit Rating Model: CDO Evaluator 6.0, March 19, 2012
-- Global CDOs Of Pooled Structured Finance Assets: Methodology And
Assumptions, Feb. 21, 2012
-- Revised Methodologies And Assumptions For Global Synthetic CDO
Surveillance, Sept. 30, 2010
-- Update To Global Methodologies And Assumptions For Corporate Cash Flow
And Synthetic CDOs, Sept. 17, 2009
-- CDO Spotlight: Counterparty Risk In Structured Finance Transactions,
March 7, 2005
-- European Synthetic CDO Rating Actions At December 2012, Dec. 20, 2012
-- S&P Announcement: CDO Evaluator Version 6.0.1 Released, Aug. 7, 2012
-- European Structured Finance Scenario And Sensitivity Analysis: The
Effects Of The Top Five Macroeconomic Factors, March 14, 2012
-- Global Structured Finance Scenario And Sensitivity Analysis: The
Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011
-- CDO Spotlight: What Is A Synthetic CDO?, April 30, 2010