CDO Analysis Sample Report

8/9/2019 CDO Analysis Sample Report

1/13

July 2008

Blue Bell Funding, Ltd. CMBS and ABS (BLUEBELL)Realpoint Analyst Class Outlook Role Company

Michael J. Magerman, CFA Class ABCP Not Rated Investment AdvisorCapmarkInvestments LP

[email protected] Classes A-1, A-2, B, C Underperform Trustee La Salle Bank267-960-6022 Preferred Shares Underperform

OpinionBased on June 2008 remittance reports, Realpoint expects continued deterioration of the subprime residentialportfolio, while the CMBS and most of the other ABS transactions in the Blue Bell Funding CDO should

perform within expectations over the next 12 months. An increasing number of downgrades among subprimeresidential and CDO holdings has prompted all three rating agencies to downgrade at least one class of BlueBell Funding since November 2007. We lowered our outlook for Class A-1 to underperform in July, as theprospect for substantially lower subordination appears increasingly likely.

In its downgrade press release in November 2007, Fitch reviewed 74 CDOs including Blue Bell Funding. Thereview focused on deteriorating credit quality of the underlying collateral, as well as adjustments toassumptions to account for higher probability of default and lower recoveries.

While only two assets in the Blue Bell Funding portfolio have defaulted as of the June remittance report, thefuture expectations of timely repayment for several subprime and other assets have seriously deteriorated inrecent months. The mortgage backed securities market and rating agencies have made negative adjustmentsto reflect larger expected losses in subprime residential pools.

Asset Type Balance ($ millions) % of PortfolioResidential B & C 400.6 32.2%CMBS 314.3 25.3%Residential A 197.3 15.9%

ABS CBOs 197.1 15.9%Home Equity 111.5 9.0%Other 21.5 1.7%

Realpoint does not have full access to residential mortgage data. As such, we have made very conservativeloss assumptions based on recent developments in the market. Based on the $400.6 million of B & Cresidential holdings, and assuming that 100% will default and incur losses, we applied three loss scenarioswith severities of 15%, 25% and 35%. The results of those assumptions are as follows:

Impact on Blue Bell Funding Stressed Scenario ResultsClass Balance Current Sub. 15% loss 25% loss 35% lossCP 1,112,500,000

A-1 55,000,000 6.6% 1.9% sub. 32% lost 100% lostA-2 20,000,000 5.0% 0.2% sub. 100% lost 100% lostB 37,500,000 2.0% 94% lost 100% lost 100% lostC 18,750,000 0.5% 100% lost 100% lost 100% lost

0 0% 100% l t 100% l t 100% l t


2/13

Rating Actions Since May Remittance

Deal Class Agency Prev. Rtg. New Rtg. Date Reason

ACABS 2003-1A AM S&P BB- CC 5/29/2008 Poor underlying performanceDUKEF 2004-6 A1J S&P BBB+ BB+ 5/29/2008 Poor underlying performanceGSTR 2003-3 A2 Moodys Aa1 Aa2 5/30/2008 Poor underlying performanceRAMC 2002-3 M1 Fitch AA AA- 6/04/2008 Losses, eroding OCCWALT 2005-56 M3 Moodys Aa3 B1 6/19/2008 Higher loss severityCWALT 2005-59 B1 Moodys A3 B3 6/19/2008 Higher loss severityCWALT 2005-76 M2 Moodys Aa2 B3 6/19/2008 Higher loss severityFFCA 1999-2 WA1C Moodys Aaa A2 6/19/2008 Downgrade of bond insurerFFCA 2000-1 A2 Moodys Aaa A2 6/19/2008 Downgrade of bond insurer

RAAC 2007-RP2 M2 Moodys A2 Caa2 6/24/2008 Higher loss severityRAAC 2007-RP4 M1 Moodys Aa2 B3 6/24/2008 Higher loss severityCWL 2007-SEA1 2M3 Moodys A1 Baa2 6/25/2008 Higher loss severityFFML 2003-FFH1 M2 S&P B CCC 6/25/2008 Losses, eroding OC

Trigger Items

Class A Class BPrincipal Coverage 100.53% fail (103.0%) 97.38% fail (101.5%)Interest Coverage 379.76% pass (103.0%) 235.34% pass (101.5%)

Key Issues None of the CMBS holdings appear to have a likelihood of principal losses, though losses appear

increasingly likely among the subprime residential holdings. There has been a notable increase indowngrades to subprime bonds since midyear 2007. Tests for bonds rated below Aaa/AAA exceeding50% and for those below Aa/AA exceeding 10% were failed in the nine most recent remittanceperiods. The weighted average Moodys rating has also moved farther out of compliance; the Junevalue was 436, which is slightly worse than Baa2. The test limit is 27, which is between Aa2 and Aa3.Through early 2007, the weighted average rating had been between 20 and 21. A 2006 home equity

holding has been reported in default since February, a first for the Blue Bell portfolio. The portfolio holds far more ABS than most other real estate CDOs covered by Realpoint, plus several

classes from ABS and real estate CDOs. CMBS (ex-RE CDOs) makes up 16.5% of the portfolio, andthere are three total holdings from large loan transactions. The ABS holdings are heavily concentratedin B/C residential, home equity and A residential, with a small number of bonds from other sectors.

Concerns There were 13 more residential and CDO class holdings downgraded in the June remittance period,

bringing the total number of downgrades to 90 since August 2007, with 47 different classes receiving

at least one downgrade. As a result of downgrades, 14% of the total portfolio had Moodys ratingsbelow investment grade at the end of June, up from 11.6% in May and 8.7% in April.

Chase 2000-2 had delinquency remain at 1.6% in June. A 186,000 sf retail property in Indianapolissecures a loan (1.34%) that went into foreclosure in August 2006. Subordination to Class A2 droppedto 26.20% from 26.32% following a July 2006 loss (27.83% in June). Losses of $4.6 million (0.6%) areforecast.

CSCMT 2006-TFL2 had delinquency inch up to 5.1% in June from 5.0% May, and from zero in


3/13

Asset Diversity

Moody's Rating Distribution(all rated holdings)

4.9%

21.7%

4.1%6.7% 2.6%1.4% 0.5%0.9%1.8%1.2%

1.1%

0.5%1.6%1.1%

1.0%1.6%

2.4% 2.9%1.7%

0.5%

41.9%

0%

20%

40%

Aa

a

Aa

1

Aa

2

Aa

3

A

1

A

2

A

3

Baa1

Baa2

Baa3

Ba1

Ba2

Ba3

B1

B2

B3

Caa1

Caa2

Caa3

Ca C

Asset Class Distribution(Moody's types)

25.1%

0.2%

32.2%15.9%

15.9%10.7%

CMBS Conduit CMBS Other RMBS B/C

RMBS A CDOs Other ABS

Forecasted Losses

Below are forecasted losses for the 13 CMBS deals in the Blue Bell portfolio.

Deal Name Total ProjectedLoss to Deal Loss as% ofDeal

ClassHeld % ofClass HeldBy CDO

Sub. ToLowestHolding

BACM 2000-2 $4.6 million 0.6% A2 1.89% 28.72%BSCMS 1999-CLF1 $0 * A3 22.5% 23.06%CCMSC 2000-2 $4.1 million 0.7% A2 2.44% 27.83%GCC 2005-GG5 $1 million


4/13

Delinquency Summary

CMBS Portion - In aggregate, the 13 remaining CMBS transactions excluding CRMA 1998-C1, and G-Star2002-2 and 2003-3 represented in the portfolio (and including recently added GCC 2005-GG5, LBUB 2006-C4,MLMT 2005-CKI1, MLMT 2005-CKP1, CSM 2006-TFL2, BACM 2002-2 and MSC 2007-XLF9) contain a totalof 1,281 loans secured by 1,920 properties, with an outstanding balance of $18.12 billion, compared to $20.79billion at issuance. As of the June remittance reports, portfolio delinquency totals 1.02% of the current balance(up from 1.01% in May) and is distributed as follows: no loans were 30 to 60 days delinquent, no loans were 60to 90 days delinquent, six loans for 0.82% were 90 or more days delinquent, and four assets for 0.20% wereREO or in process of foreclosure.

There were no realized losses or meaningful changes in delinquency in June.

There were no realized losses in May, and only a few minor changes in delinquency. In SBM 2000-C2, a loansecured by an office property in Syracuse, N.Y. advanced to over 90 days delinquent from over 60 days inApril. The loan has been at the special servicer since May 2007. Total delinquency did not change in May.

There were no realized losses in April, and few changes in delinquency. The most notable change was thedelinquent loan (4.96%) secured by the Las Vegas condominium complex in CSCMT 2006-TFL2. The loanwas reported to be over 90 days delinquent in April, after being over 30 days delinquent in March. That is thedeals only delinquent loan, and it remains with the master servicer.

There was one realized loss in March. In SBM 2000-C2, the St. Joseph Professional Office Building inHouston was resolved for a loss of $6.9 million on a loan with a remaining balance of $8 million. The losscaused subordination to Class A2 to drop to 27.78% from 28.48%. There are still four loans with forecastlosses totaling $13.2 million.

There was one realized loss in February. In BACM 2000-2, the Spokane, Wash. Home Base retail propertywas resolved with a loss of $2.5 million on a remaining balance of $5.6 million. The impact to subordination forthe Class A2 holding was negligible. The only meaningful change in delinquency was to the sixth largest loan

in CSCMT 2006-TFL2, $128 million secured by a luxury condominium complex in Las Vegas. The generalcontractor has filed a $24 million lien in a legal dispute with the developer. The loan was reported over 30days delinquent in February. The loan represents 4.8% of CSCMT 2006-TFL2. The DMA 1998-C1 holdingwas sold in February, rendering the concern in the paragraph below of no further consequence.

There were no realized losses in January. The only significant difference in delinquency was in DMA 1998-C1, where total delinquency increased to 1.35% in January from 0.43% in December 2007. Sincesubordination to Class D is now over 58%, the increase is not a cause for concern.

There were no significant changes in delinquency in October, November, or December 2007, and there wereno realized losses.

There were no significant changes in delinquency in September, and there was just one realized loss. In DMA1998-C1, a fairly small loan on a San Diego office property lost just $15,000, a loss of slightly more than 1%.The effect of the loss was dwarfed by the payoff of two of the three largest loans in the pool, totaling $100million. The payoff increased subordination to Class D to 34.6% from 28.2%.


5/13

There were two losses realized in June. In DMARC 1998-C1, there was a total loss on the disposition of theHoliday Inn in Homewood, Ala., near Birmingham. Despite the $5.4 million loss, subordination to Class Dincreased to 24.75% from 23.79%. There was also a loss of about $259,000 on the disposition of theSouthern Tier Moving & Storage property in Olean, N.Y. from BASS 2002-X1. Again, the loss did not preventsubordination to Class A3 from rising to 48.30% from 48.19%. There was a significant change in delinquencyin BACM 2000-2, as the loan secured by a St. Paul office property (1.54%) which was reported over 60 dayspast due in April and current in May, was over 90 days past due in June. The loan has been at the specialservicer since February. That change in status pushed total delinquency to 3.92% in June from 2.37% in May.Subordination to Class A2 is 28.11%.

ABS Portion - Among the ABS holdings, many appear to have delinquencies in line with expectations. Thirty-six of the 134 ABS deals represented as of the reporting date have 60+ day delinquencies that equate to 40%

or more of available subordination, two fewer than the previous month and seven more than in December2007. See Table 4 on the last three pages of this report for more information and a detailed summary.

TMTS 2006-6 2A2 was listed as defaulted for the first time on the February remittance report. The recoveryrates are widely divergent for the $13.06 million holding, with Moodys at 75% and Standard & Poors at 10%.A second defaulted holding was noted on the June report. ACABS 2003-1 AM, a $15 million holding of a CDOof residential MBS was listed as having a 65% recovery rate by Moodys.

The Blue Bell Funding portfolio contains significant exposure to the subprime problems prevalent in the 2005

and 2006 vintages. Downgrades had been limited to a few holdings through the summer of 2007, but haveaccelerated from September 2007 through June 2008. Novembers downgrades were concentrated in CDOholdings containing significant exposure to subprime bonds, while those in December and January weremainly in subprime and home equity bonds. Downgrades since February were largely in subprime and CDOs.

Transactions

Only one holding was added in April, an additional $7.95 million piece of CMBS deal LBUBS 2006-C4 AJ,

which was already in the portfolio.

No new holdings were added in March, with the exception of an additional piece of a 2007 Bayview deal.

In February, four new CMBS holdings were added. Three fusion deals from 2005, including two from MerrillLynch and one from Greenwich, and one 2006 issuance from Lehman UBS for a total face amount of $55million. All of the purchases were junior AAAs, and the average purchase price was roughly 85. Tworesidential deals with face value of $16.5 million were also purchased. Also, three CMBS holdings totaling$59.9 million were sold, including COMM 2001-J2 A2, DMA 1998-C1 D and MLMI 1998-CTL A3.

In January, two positions totaling $17.5 million were added. One was a $6.5 million holding of a Countrywidesubprime deal from 2007. The other was $11 million of a Citigroup home equity deal from 2007, which had itsAAA rating placed on CreditWatch by Standard & Poors on January 30, 2008.

In December 2007, two positions totaling $25.07 million were added. The larger purchase was a $20 millionpiece of a 2008 Bayview deal, with the rest in a 2007 Credit Suisse deal.


6/13

In September, several residential purchases were added, including deals from Bayview and Morgan Stanley.Also, another class of G-Star 2003-3 was added. Total purchases were $45.1 million. The $12.1 millionholding from GSMS 1999-C1 was sold.

In August, a $15.8 million piece of a 2007 Bayview deal was purchased.

In July, six classes from four residential deals were purchased for $42.1 million. The labels were from AssetBacked Funding, Bayview, Countrywide and RAAC. Three holdings, from Asset Backed Securities HomeEquity, Fieldstone and Structured Asset Investment Loan Trust, were sold for $26.5 million.

In June, three 2007 residential deals totaling $27 million were purchased, two from the RAAC label and onefrom Merrill Lynch. Also, a $9.7 million piece of a 2005 WAMU deal was sold.

In May, a $5.7 million piece of a Citigroup 2007 subprime deal was added.

In April, an $18 million piece of TACL synthetic CDO was added.

In March, an $8 million piece of Duke Funding 2005-9 CDO was added. Also, a $4.5 million piece of asubprime deal issued by Merrill Lynch and First Franklin was added.

In February, a $9 million holding of BACM 2000-2 was added to the CMBS portion of the portfolio. Also, a $10

million holding of Acacia CDO 11 was added.

In January 2007, a $9.3 million holding of CSM 2006-TFL2 was added, increasing exposure to large CMBSloans. Also, a $14.1 million holding of a Bayview 2006 home equity deal was added.

In December 2006, a total of $30.6 million was added with the purchase of six assorted residential holdings,including three Countrywide alt-A and other subprime issues.

In November 2006, a $13.3 million piece of DLJ 1998-CF2 Class A1B was added to the CMBS portfolio. Also,an $18.4 million piece of a Countrywide alt-A 2005 deal was added.

In October 2006, a $4.2 million piece of DMARC 1998-C1 Class D was added to the CMBS portfolio.In September 2006, two Park Place 2004 home equity issues were purchased for a total of $12 million, andtwo other issues totaling $12.6 million.

In August 2006, two Countrywide alt-A classes were purchased for $21 million, and a J.P. Morgan class waspurchased for $12 million.

July 2006 saw the purchase of three RMBS classes for $14.7 million. Both classes of Bear Stearns 2003-AC4

were sold for $7.9 million.

June 2006 was fairly active in turnover of the residential MBS portfolio. There were seven classes purchasedfrom seven different deals for a total of $46.3 million. There were also three classes sold for a total of $17.6million, and two other holdings were retired.

In May 2006, three new residential MBS positions were added for a total of $20 million. In April, one


7/13

for $5 million. Also four residential MBS positions paid off via amortization. In October five new residentialMBS positions totaling $25.4 million were added, and one other position was increased by $5 million.September saw the addition of three more residential MBS positions totaling $27 million. In August, threemore 2005 issue residential MBS positions were added, for a total of $30.7 million. Also two Newman trustcertificates backed by municipal bonds, issued in 2000 and 2001 were added, totaling $19.3 million. Threenew residential MBS positions totaling $18 million were added in July. Also purchased was a $10 millionholding of Class C of CMCMT 1998-C1, the reremic of CMBS which is also represented in other CDOsmanaged by Capmark Investments. Two classes of Home Equity Asset Trust totaling $6.1 million were sold inJuly. Also sold was $10 million of the $31 million position in Goldman 1998-GLII.

More subprime and residential exposure was purchased with three bonds totaling $15.9 million in April 2005.The bonds were issued in 2004 by Countrywide, First Franklin and Impac.

G-Force 2001-1 was paid off in February 2005, so the $9.45 million holding in Blue Bell Funding was retired.There were reinvestments in February of $2.5 million in an Ameriquest 2004 deal and $10 million in aFieldstone Mortgage issue from 2005. In March, $2.4 million was reinvested in a 2004 issue backed by allfloating rate 30-year residential loans from Impac Mortgage.

A $3.6 million piece of Renaissance Home Equity 2004-1 was purchased in early December 2004. The onepurchase in early November was a $4.85 million piece of a Countrywide subprime home equity deal from2004. There were several purchases of 2004 vintage residential ABS during August, September and October.

In August alone, three RFC deals and two classes from one Countrywide alt-A deal totaled over $37.4 million.Other purchases during the period from August to October totaled $8.3 million.

The last remaining $5 million piece of CSFB 1999-C1 was sold in August 2004. Also sold in August were the$9 million holding of Trizec 2001-TZH, the $15.25 million holding of Capital One 1998-1 and a $3.2 millionpiece of the $25 million holding of GSMS 1999-C1. A $5 million piece of CSFB 1999-C1 was sold in March2004, the second such sale since Blue Bell Funding was issued. That reduced the holding to $5 million fromthe original holding of $15 million. A $5 million piece from G-Force 2003-1 was also sold in March. A $14.3million holding of Bayview Financial 2003-F was sold in April. A $12 million piece of the Trizec 2001-TZHoffice property deal was sold in June 2004, reducing the holding to $8.9 million. A $9.1 million piece of

Renaissance Home Equity 2003-3 was also sold in June 2004.

Purchases in February 2004 included a $7.5 million piece of the Trainer Wortham CDO issued in February2003, and a $13.5 million piece of a RAMP 2004 B/C residential deal. In March 2004, a $10 million piece ofthe recently issued Duke Funding VI CDO was purchased, along with a $5 million piece of an Ameriquest 2003home equity deal. In April 2004, a $5.5 million piece of Novastar Home Equity 2003-3 was purchased.Several purchases were made in May 2004: a $10 million piece of New Century Home Equity 2003-B; an $8.3million piece of Countrywide Alternative 2003-15T2; a $3 million piece of Aames Mortgage 2003-1 (joins anexisting holding of a lower class of the same deal); a $3 million piece of Countrywide 2004-SD2. An AAA-rated

$20.6 million piece of FFCA 1999-2 was purchased in June 2004, with a wrap from MBIA. An additional $4.2million piece of Aames Mortgage 2003-1 class 1A2 was purchased in late June 2004 and settled in early July.


8/13

Rating Agency Actions

Moodys, Standard & Poors and Fitch rate Blue Bell Funding, Ltd.

Ratings at IssuanceClass S&P Moodys FitchCP notes A-1+ P-1 F1+A-1 AAA Aaa AAAA-2 AA Aa2 AAB A- A3 A-C NR Baa3 BBBPS NR NR NR

July 8, 2008 Moodys downgraded classes A-1, A-2, B and C as follows:Class A-1 to Baa1 from AaaClass A-2 to Ba1 from Aa2Class B to Caa3 from Baa2Class C to C from Caa1All classes remain on review for possible further downgrade. The credit deterioration of a portion of theresidential holdings prompted the rating actions.

May 1, 2008 Moodys downgraded class C to Caa1 from Baa3 and class B to Baa2 from A3, and left bothclasses on review for possible downgrade. The credit deterioration of a portion of the residential holdingsprompted the rating actions.

March 27, 2008 Standard & Poors downgraded class B to BBB+ from A-. The downgrade was part of apress release covering nine CDOs with subprime residential exposure. Credit deterioration of underlyingholdings was the rationale for the downgrades.

February 27, 2008 Fitch placed classes A-1, A-2, B and C on watch for possible further downgrade. The

action was the result of a large scale review of 97 CDOs containing subprime collateral.

January 30, 2008 Standard & Poors placed class B on CreditWatch negative. The CreditWatch action wasthe result of a large scale review of 572 CDOs containing subprime collateral.

January 4, 2008 Moodys placed class C on review for possible downgrade. The credit deterioration of aportion of the residential holdings prompted the rating review.

November 21, 2007 Fitch downgraded classes A-1, A-2, B and C as follows:Class A-1 to BB from AAAClass A-2 to B from AAClass B to CCC from A-Class C to CC from BBB

October 29, 2007 Fitch placed classes A-1, A-2, B and C on watch for possible downgrade. The number ofdowngrades and holdings on watch for possible downgrade among underlying subprime residential holdings,and CDO holdings containing subprime bonds prompted the action


9/13

Rating Agency Negative Watch Holdings

Deal Class Asset Type Agency Current Rtg. Date of WatchSTART 2006-A A2, B CDO Moodys Aaa, Aa1 10/26/2007AMSI 2003-AR2 M2 Res. B&C Moodys A2 1/14/2008ACABS 2003-1 AM CDO Fitch B+ 2/27/2008DUKEF 2005-9 A1 CDO Fitch A- 2/27/2008GSTR 2003-3 A1 CDO Fitch AAA 2/27/2008GSTR 2003-3 A2 CDO Fitch AAA 2/27/2008GSTR 2004-4 A2B CDO Fitch BBB 2/27/2008TRAIN 3A A2 CDO Fitch BB 2/27/2008

TACL 2007-2 Note Res. B&C Moodys Caa2 3/3/2008ABFC 2007-NC1 M2 Res. B&C Fitch AA 3/4/2008CWALT 2006-20CB A15 Res. A Fitch AAA 3/6/2008JPALT 2006-S1 3A3 Res. A Fitch AAA 3/6/2008NAA 2005-AP3 A4 Res. A Moodys Aaa 3/19/2008IXIS 2005-HE1 M3 Res. B&C Fitch A+ 4/1/2008ACABS 2003-1 AM CDO S&P BB- 4/16/2008DUKE6 2004-1 A1J CDO S&P BBB+ 4/16/2008CMLTI 2007-AHL2 M6 Res. B&C Moodys B3 4/16/2008

DUKE6 2004-1 A1J CDO Moodys Baa2 4/24/2008DUKEF 2005-9 A1 CDO Moodys Ba2 4/24/2008TRAIN 3A A2 CDO Moodys Baa2 5/08/2008HEAT 2005-9 M1 Res. B&C S&P AA+ 5/16/2008ACCDO 11A A CDO S&P CCC- 5/22/2008GSTR 2003-3 A2 CDO Moodys Aa2 5/30/2008

Copyright 2008 Realpoint LLC

The material contained herein (the Material) is being distributed in the United States by Realpoint LLC (Realpoint). Realpoint makes norepresentation as to its accuracy, timeliness or completeness and does not undertake to update any information or opinions contained in theMaterial. The Material is published solely for information purposes and is not an offer to buy or sell or a solicitation of an offer to buy or sell anysecurity or derivative The Material is not to be construed as providing investment services in any state country or jurisdiction From time to


10/13


11/13


12/13


13/13

CDO Analysis Sample Report

Documents

Transcript of CDO Analysis Sample Report