(The following statement was released by the rating agency) OVERVIEW
-- Cedar Funding Ltd./Cedar Funding Corp.'s note issuance is backed by a revolving pool consisting primarily of broadly syndicated senior secured loans.
-- We affirmed our ratings on the class A through D notes following the transaction's effective date as of Aug. 16, 2012.
-- The "effective date" for a CLO transaction is typically the earlier of the date on which the transaction acquires the target level of portfolio collateral and the date defined in the transaction documents.
-- When requested, Standard & Poor's will analyze the information provided by the trustee and determine whether it believes a rating affirmation is appropriate. Historically, many CLOs transaction documents contain provisions that require the trustee to request the rating agencies to affirm the closing date ratings within a certain timeframe after the effective date has occurred.
-- The effective date report provides a summary of certain collateral characteristics and liability ratings at the effective and closing dates.
NEW YORK (Standard & Poor's) Oct. 2, 2012--Standard & Poor's Ratings Services today affirmed its ratings on Cedar Funding Ltd./Cedar Funding Corp.'s $320.7 million floating-rate notes following the transaction's effective date as of Aug. 16, 2012 (see list).
Most U.S. cash flow collateralized debt obligations (CLOs) close before purchasing the full amount of their targeted level of portfolio collateral. On the closing date, the collateral manager typically covenants to purchase the remaining collateral within the guidelines specified in the transaction documents to reach the target level of portfolio collateral. Typically, the CLO transaction documents specify a date by which the targeted level of portfolio collateral must be reached. The "effective date" for a CLO transaction is usually the earlier of the date on which the transaction acquires the target level of portfolio collateral, or the date defined in the transaction documents. Most transaction documents contain provisions directing the trustee to request the rating agencies that have issued ratings upon closing to affirm the ratings issued on the closing date after reviewing the effective date portfolio (typically referred to as an "effective date rating affirmation").
An effective date rating affirmation reflects our opinion that the portfolio collateral purchased by the issuer, as reported to us by the trustee and collateral manager, in combination with the transaction's structure, provides sufficient credit support to maintain the ratings that we assigned on the transaction's closing date. The effective date reports provide a summary of certain information that we used in our analysis and the results of our review based on the information presented to us.
We believe the transaction may see some benefit from allowing a window of time after the closing date for the collateral manager to acquire the remaining assets for a CLO transaction. This window of time is typically referred to as a "ramp-up period." Because some CLO transactions may acquire most of their assets from the new issue leveraged loan market, the ramp-up period may give collateral managers the flexibility to acquire a more diverse portfolio of assets.
For a CLO that has not purchased its full target level of portfolio collateral by the closing date, our ratings on the closing date and prior to our effective date review are generally based on the application of our criteria to a combination of purchased collateral, collateral committed to be purchased, and the indicative portfolio of assets provided to us by the collateral manager, and may also reflect our assumptions about the transaction's investment guidelines. This is because not all assets in the portfolio have been purchased.
When we receive a request to issue an effective date rating affirmation, we perform quantitative and qualitative analysis of the transaction in accordance with our criteria to assess whether the initial ratings remain consistent with the credit enhancement based on the effective date collateral portfolio. Our analysis relies on the use of CDO Evaluator to estimate a scenario default rate at each rating level based on the effective date portfolio, full cash flow modeling to determine the appropriate percentile break-even default rate at each rating level, the application of our supplemental tests, and the analytical judgment of a rating committee. (For more information on our criteria and our analytical tools, see "Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs," published Sept. 17, 2009.)
In our published effective date report, we discuss our analysis of the information provided by the transaction's trustee and collateral manager in support of their request for effective date rating affirmation. In most instances, we intend to publish an effective date report each time we issue an effective date rating affirmation on a publicly rated U.S. cash flow CLO.
On an ongoing basis after we issue an effective date rating affirmation, we will periodically review whether, in our view, the current ratings on the notes remain consistent with the credit quality of the assets, the credit enhancement available to support the notes, and other factors, and take rating actions as we deem necessary.
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 Report included in this credit rating report is available at "
" RELATED CRITERIA AND RESEARCH
-- Transaction Update: Cedar Funding Ltd./Cedar Funding Corp., Oct. 2, 2012
-- CDO Monitor User Guide, available at
-- Presale: Cedar Funding Ltd./Cedar Funding Corp., May 18, 2012
-- Global CDOs Of Pooled Structured Finance Assets: Methodology And Assumptions, Feb. 21, 2012
-- Global Structured Finance Scenario And Sensitivity Analysis: The Effects Of The Top Five Macroeconomic Factors, Nov. 4, 2011
-- Standard & Poor's Surveillance Process For Monitoring U.S. Cash Flow CLO Transactions, April 14, 2011
-- Standard & Poor's Provides Guidance For Collateral Managers And Trustees Regarding CDO Monitor, Nov. 11, 2009
-- Update To Global Methodologies And Assumptions For Corporate Cash Flow And Synthetic CDOs, Sept. 17, 2009
-- Revised CDO Current-Pay Criteria Assumptions For Corporate Debt When Issuers Announce A Distressed Exchange Or Buyback, May 18, 2009
-- The Use Of Rating-Based Haircuts In Event Of Default Overcollateralization Tests For CDOs, March 19, 2008
-- Qualification And Treatment Of Current-Pay Obligations In Global Cash Flow CLOs, July 11, 2007
-- Structured Finance Criteria Introduced for Cayman Islands Special-Purpose Entities, July 18, 2002
-- Global Cash Flow and Synthetic CDO Criteria: The CDO Product, March 21, 2002
RATINGS AFFIRMED Cedar Funding Ltd./Cedar Funding Corp. Class Rating Amount (mil. $) A-1 AAA (sf) 227.50 A-2 AA (sf) 39.65 B (deferrable) A (sf) 24.50 C (deferrable) BBB (sf) 15.75 D (deferrable) BB (sf) 13.30 (New York Ratings Team)