DBRS Requests Comments on its Updated Methodology for Rating CLOs and CDOs of Large Corporate Credit

DBRS is requesting comments on proposed changes to the methodology it uses to rate and monitor collateralized loan obligations (CLOs) and collateralized debt obligations (CDOs) of large corporate credit. Market participants are asked to submit comments on the proposal to DBRSSCMethodology_Comments@DBRS.com on or before January 27, 2012. Following the review and evaluation of all submissions, DBRS will publish a final version of this methodology. DBRS intends to make use of this methodology to provide ratings on CLOs issued in the U.S, Europe and Asia.

The proposed revised methodology includes three components:
• Rating Methodology for CLOs and CDOs of Large Corporate Credit
• Cash Flow Assumptions for Corporate Credit Securitizations
• Canadian Surveillance Methodology for CDOs of Large Corporate Credit

This methodology is intended to supersede the following methodologies:
• Rating Global High-Yield Loan Securitizations, Structured Loans and Tranched Credit Derivatives
• The CDO Toolbox
• Rating Canadian Structured Credit Transactions
• Canadian Structured Credit Surveillance

The updated methodology incorporates the new “DBRS Correlation Metric,” which is a measure of diversity calculated using a newly proposed model, the “DBRS Diversity Model” (available upon request during this comment period). The proposal also incorporates updates to the DBRS Idealized Default Probability Table, recovery rates, and international recovery rate and timing categories. For revolving portfolios, the proposed revised methodology also replaces the “DBRS CDO Toolbox” with a new closed-form statistical model for analyzing pool-wide default and loss characteristics. This new closed-form statistical model, the “DBRS Large Pool Model”, is also available upon request during this comment period.

In addition to this methodology, DBRS has also published the “Unified Interest Rate Model for U.S. & European Structured Credit.” This methodology provides a framework for generating interest rate stress scenarios for use in structured credit rating analysis for U.S and European transactions.

DBRS criteria and methodologies are publicly available on its website www.dbrs.com under Methodologies.

DBRS's rating definitions and the terms of use of such ratings are available at www.dbrs.com.