New York, November 09, 2012 -- Moody's Investors Service has assigned ratings to twelve classes of CMBS securities, issued by WFRBS Commercial Mortgage Trust, Commercial Mortgage Pass-Through Certificates, Series 2012-C9.
Cl. A-1, Definitive Rating Assigned Aaa (sf)
Cl. A-2, Definitive Rating Assigned Aaa (sf)
Cl. A-3, Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Definitive Rating Assigned Aaa (sf)
Cl. A-S, Definitive Rating Assigned Aaa (sf)
Cl. B, Definitive Rating Assigned Aa3 (sf)
Cl. C, Definitive Rating Assigned A3 (sf)
Cl. X-A, Definitive Rating Assigned Aaa (sf)
Cl. X-B, Definitive Rating Assigned A1 (sf)
Cl. D, Definitive Rating Assigned Baa3 (sf)
Cl. E, Definitive Rating Assigned Ba2 (sf)
Cl. F, Definitive Rating Assigned B2 (sf)
The Certificates are collateralized by 73 fixed rate loans secured by 100 properties. The ratings are based on the collateral and the structure of the transaction.
Moody's CMBS ratings methodology combines both commercial real estate and structured finance analysis. Based on commercial real estate analysis, Moody's determines the credit quality of each mortgage loan and calculates an expected loss on a loan specific basis. Under structured finance, the credit enhancement for each certificate typically depends on the expected frequency, severity, and timing of future losses. Moody's also considers a range of qualitative issues as well as the transaction's structural and legal aspects.
The credit risk of loans is determined primarily by two factors: 1) Moody's assessment of the probability of default, which is largely driven by each loan's DSCR; and 2) Moody's assessment of the severity of loss upon a default, which is largely driven by each loan's LTV ratio.
The Moody's Actual DSCR of 1.50X is greater than the 2007 conduit/fusion transaction average of 1.31X. The Moody's Stressed DSCR of 1.06X is greater than the 2007 conduit/fusion transaction average of 0.92X.
Moody's Trust LTV ratio of 103.2% is lower than the 2007 conduit/fusion transaction average of 110.6%. Moody's Total LTV ratio (inclusive of subordinated debt and debt-like preferred equity) of 104.5% is also considered when analyzing various stress scenarios for the rated debt.
Moody's also considers both loan level diversity and property level diversity when selecting a ratings approach. With respect to loan level diversity, the pool's loan level (includes cross collateralized and cross defaulted loans) Herfindahl Index is 31.5. The transaction's loan level diversity is at the higher end of the band of Herfindahl scores found in most multi-borrower transactions issued since 2009. With respect to property level diversity, the pool's property level Herfindahl Index is 33.0. The transaction's property diversity profile is higher than the indices calculated in most multi-borrower transactions issued since 2009.
This deal has a super-senior Aaa class with 30% credit enhancement. Although the additional enhancement offered to the senior most certificate holders provides additional protection against pool loss, the super-senior structure is credit negative for the certificate that supports the super-senior class. If the support certificate were to take a loss, the loss would have the potential to be quite large on a percentage basis. Thin tranches need more subordination to reduce the probability of default in recognition that their loss-given default is higher. This adjustment helps keep expected loss in balance and consistent across deals. The transaction was structured with additional subordination at class A-S to mitigate the potential increased severity to class A-S.
Moody's also grades properties on a scale of 1 to 5 (best to worst) and considers those grades when assessing the likelihood of debt payment. The factors considered include property age, quality of construction, location, market, and tenancy. The pool's weighted average property quality grade is 2.4, which is higher than the indices calculated in most multi-borrower transactions since 2009.
The methodologies used in this rating were "Moody's Approach to Rating U.S. CMBS Conduit Transactions" published in September 2000, and "Moody's Approach to Rating Structured Finance Interest-Only Securities" published in February 2012. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
Moody's analysis employs the excel-based CMBS Conduit Model v2.61 which derives credit enhancement levels based on an aggregation of adjusted loan level proceeds derived from Moody's loan level DSCR and LTV ratios. Major adjustments to determining proceeds include loan structure, property type, sponsorship, and diversity. Moody's analysis also uses the CMBS IO calculator ver_1.1, which references the following inputs to calculate the proposed IO rating based on the published methodology: original and current bond ratings and credit estimates; original and current bond balances grossed up for losses for all bonds the IO(s) reference(s) within the transaction; and IO type corresponding to an IO type as defined in the published methodology.
The V Score for this transaction is assessed as Low/Medium, the same as the V score assigned to the U.S. Conduit and CMBS sector. This reflects typical volatility with respect to the critical assumptions used in the rating process as well as an average disclosure of securitization collateral and ongoing performance.
Moody's V Scores provide a relative assessment of the quality of available credit information and the potential variability around the various inputs to a rating determination. The V Score ranks transactions by the potential for significant rating changes owing to uncertainty around the assumptions due to data quality, historical performance, the level of disclosure, transaction complexity, the modeling, and the transaction governance that underlie the ratings. V Scores apply to the entire transaction (rather than individual tranches).
Moody's Parameter Sensitivities: If Moody's value of the collateral used in determining the initial rating were decreased by 5%, 16%, and 29%, the model-indicated rating for the currently rated Aaa Super Senior class would be Aaa, Aaa, and Aa1, respectively; for the most junior Aaa rated class A-S would be Aa1, Aa1, and A2, respectively. Parameter Sensitivities are not intended to measure how the rating of the security might migrate over time; rather they are designed to provide a quantitative calculation of how the initial rating might change if key input parameters used in the initial rating process differed. The analysis assumes that the deal has not aged. Parameter Sensitivities only reflect the ratings impact of each scenario from a quantitative/model-indicated standpoint. Qualitative factors are also taken into consideration in the ratings process, so the actual ratings that would be assigned in each case could vary from the information presented in the Parameter Sensitivity analysis.
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Vaidas Nutautas Analyst Structured Finance Group Moody'sInvestors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Cedric C Philipp Senior Vice President Structured Finance Group JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653 Releasing Office: Moody's Investors Service, Inc.250 Greenwich StreetNew York, NY 10007 U.S.A. JOURNALISTS: 212-553-0376 SUBSCRIBERS: 212-553-1653(C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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