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TEXT-S&P puts European synthetic CDOs on watch after August run
September 17, 2012 / 4:37 PM / 5 years ago

TEXT-S&P puts European synthetic CDOs on watch after August run

OVERVIEW

     -- We have reviewed the ratings on all European transactions in the 
monthly Global SROC Report.
     -- We have taken various rating actions on 21 synthetic CDO tranches.
     -- All the transactions are European synthetic CDO transactions.
  
LONDON (Standard & Poor's) Sept. 17, 2012--After running its month-end SROC 
(synthetic rated overcollateralization) figures, Standard & Poor's Ratings 
Services today took various credit rating actions on 21 European synthetic 
collateralized debt obligation (CDO) tranches.
  
Specifically, we have: 
     -- Placed on CreditWatch negative our ratings on eight tranches; 
     -- Placed on CreditWatch positive our ratings on six tranches; and
     -- Affirmed our ratings on seven tranches.
  
For the full list of rating actions see "European Synthetic CDO CreditWatch 
Actions After Running August 2012 Month-End SROC Figures." 
 
The SROC levels for the ratings placed on CreditWatch negative fell below 100% 
during the August 2012 month-end run. We will publish these SROC figures in 
the SROC report covering August 2012, which is imminent. The Global SROC 
Report provides SROC and other performance metrics on over 823 individual CDO 
tranches. 

For those transactions where our September 2009 CDO criteria are not 
applicable, we have run our analysis on the CDO Evaluator 2.7 and CDO 
Evaluator 4.1 models (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 CDO criteria apply, we have run 
our analysis on CDO Evaluator 6.0.1. For transactions run on this model, the 
ratings list includes the top obligor and industry test SROCs at the current 
rating level. The "largest obligor default test" assesses whether a CDO 
tranche has sufficient credit enhancement to withstand specified combinations 
of underlying asset defaults based on the ratings on the assets, with a flat 
recovery of 5%. The "largest industry default test" assesses whether a CDO 
tranche rated 'AAA' to 'AA-' has sufficient credit enhancement to withstand 
the default of all obligors in the transaction's largest industry, with a flat 
recovery of 17%.

In addition, we have affirmed our ratings on the tranches for which credit 
enhancement is, in our opinion, still at a level consistent with their current 
ratings.

STANDARD & POOR'S 17G-7 DISCLOSURE REPORT

SEC Rule 17g-7 requires an NRSRO, for any report accompanying a credit rating 
relating to an asset-backed security as defined in the Rule, to include a 
description of the representations, warranties and enforcement mechanisms 
available to investors and a description of how they differ from the 
representations, warranties and enforcement mechanisms in issuances of similar 
securities. The Rule applies to in-scope securities initially rated (including 
preliminary ratings) on or after Sept. 26, 2011. 

If applicable, the Standard & Poor's 17g-7 Disclosure Reports included in this 
credit rating report are available at .

RELATED CRITERIA AND RESEARCH

     -- European Synthetic CDO CreditWatch Actions After Running August 2012 
Month-End SROC Figures, Sept. 17, 2012
     -- Counterparty Risk Framework Methodology And Assumptions, May 31, 2012
     -- European Structured Finance Scenario And Sensitivity Analysis: The 
Effects Of The Top Five Macroeconomic Factors, March 14, 2012
     -- Global CDOs Of Pooled Structured Finance Assets: Methodology And 
Assumptions, Feb. 12, 2012
     -- Global Structured Finance Scenario And Sensitivity Analysis: The 
Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011
     -- Revised Methodologies And Assumptions For Global Synthetic CDO 
Surveillance, Sept. 30, 2010
     -- CDO Spotlight: What Is A Synthetic CDO?, April 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

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