Moody's Assigns Provisional Ratings to $1.279 Billion of CVS Lease-Backed Notes

Moody's Investors Service - November 17, 2006

Based on information received through November 15, Moody's Investors Service assigns a provisional (P) Baa2 rating to approximately $1.279 billion of CVS Lease-Backed Pass-Through Certificates, Series 2006, to be issued by a trust that will acquire 340 first-priority lien commercial mortgage, credit-tenant lease loans. The loans will be secured by newly constructed and existing drug stores and related realty that will be triple-net leased to subsidiaries of CVS Corporation. Each of the leases will be bondable and guaranteed by CVS Corporation, and bankruptcy-remote, special purpose borrowers will own each of the fee or ground-leased properties. The loans mature in December 2028. Fixed net rent under the leases, plus a pre-funded interest reserve, will be sufficient to pay in full all interest and principal of the loans. The 340 drugstores are located in 28 states and the District of Columbia.

Moody's determined that, among other factors, the dark value of the collateral is sufficient, assuming a bankruptcy of CVS and rejection of the leases, to support the expected loss consistent with the Certificates' rating. The rating of the Certificates is primarily based on the senior unsecured debt rating of CVS Corporation, which is currently Baa2, on review for possible upgrade; therefore, the Certificates' rating will change as the senior unsecured debt rating of CVS Corporation may change. The rating of the Certificates was also based on the overall structure and legal integrity of the transaction. Sphere: Related Content