DBRS Publishes Updated Methodology and Models for Rating CLOs and CDOs of Large Corporate Credit

DBRS Ratings Limited, DBRS, Inc. and DBRS Limited have today released an updated global methodology to rate and monitor collateralized loan obligations (“CLOs”) and collateralized debt obligations (“CDOs”) backed by non-granular portfolios of large corporate credit. DBRS will apply this methodology to provide ratings on large corporate CLOs and CDOs issued in the U.S, Europe and Asia.

The updated 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, effective as of the date of this press release, supersedes the following methodologies:
• Rating Global High-Yield Loan Securitizations, Structured Loans and Tranched Credit Derivatives, published March 2009
• The CDO Toolbox, published April 2007
• Rating Canadian Structured Credit Transactions, published April 2011
• Canadian Structured Credit Surveillance, published April 2011

The updated methodology is supported by three new public models:
• DBRS Diversity Model v.1.1
• DBRS Large Pool Model v.1.1
• DBRS CDO Toolbox v.3.1

These three publicly available models, effective as of the date of this press release, supersede the DBRS CDO Toolbox v.1.1.

The new public models are available on the DBRS website at www.dbrs.com under Methodologies, and are also available on the Structured Credit homepage.

The updated methodology does not have any substantive changes from the proposed methodologies published on January 9, 2012, with a request for comments.

Compared with the superseded methodologies, the updated methodology incorporates a new diversity measure (the “DBRS Correlation Metric”), which is calculated using the new “DBRS Diversity Model”. The revised methodology also incorporates the “DBRS Idealized Default Probability Table,” and includes updated recovery rates, and tiered recovery rate and timing categories by asset domicile. For revolving portfolios, the revised methodology replaces use of the “DBRS CDO Toolbox” with a new closed-form statistical model (the “DBRS Large Pool Model”) for analyzing pool-wide default and loss characteristics,. The revised methodology generally utilizes a proprietary model based on Monte Carlo simulation for analyzing pool-wide default and loss characteristics for static portfolios.

The updated methodology is expected to impact ratings which were rated or monitored under the superseded methodologies listed above. In general, DBRS expects the ratings impact of the updated methodology to be positive for existing ratings. DBRS will publish separate press releases with the results of the applicable rating actions.

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.