Moody's downgrades leveraged super senior Aaa notes

Moody's says it has downgraded its Aaa rating on notes issued by Starts (Cayman) Series 2006-1, a leveraged super senior CDO. The rating is now Aa1. The HSBC-arranged transaction has a trigger event basd on the total loss of the underlying corporate reference portfolio. Moody's says the rating action reflects the deterioration in credit quality of the reference portfolio.

It says that there have been no losses associated with the portfolio. But Moody's adds that the rating action addresses the expected loss to investors relative to their initial investment and is based on an analysis of the credit risks as well as the legal structure.