/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/090920.mbx T R O U B L E D C O M P A N Y R E P O R T E R Sunday, September 20, 2009, Vol. 13, No. 261 Headlines 1ST FINANCIAL: S&P Assigns Ratings on $109 Mil. 2009-B Notes 1ST FINANCIAL: S&P Assigns ' Ratings on $100 Mil. 2009-C Notes ACA ABS: Fitch Downgrades Ratings on Three Classes of 2002-1 Notes ACA CDS: S&P Downgrades Ratings on Various Classes to 'CC' ACA CLO: Moody's Downgrades Ratings on Various 2005-1 Notes ACA CLO: Moody's Downgrades Ratings on Various 2006-1 Notes AIRLIE CLO: Moody's Downgrades Ratings on Various 2006-II Notes ALBANY INDUSTRIAL: S&P Corrects Rating on 2001A-D Bonds to 'CC' ALFA DIVERSIFIED: S&P Downgrades Ratings on Five Notes to 'BB+' APIDOS CDO: Moody's Downgrades Ratings on Various Classes of Notes APIDOS CINCO: Moody's Downgrades Ratings on Three Classes of Notes APIDOS QUATTRO: Moody's Downgrades Ratings on Four Classes BALLANTYNE RE: Fitch Takes Actions on Three Classes of Notes BANC OF AMERICA: S&P Downgrades Ratings on 15 2006-2 Securities BANK OF AMERICA: Fitch Downgrades Ratings on 2006-2 Certificates BANK OF AMERICA: Fitch Upgrades Ratings on Nine 2008-1 Notes BEAR STEARNS: Fitch Takes Rating Actions on 2006-PWR11 Certs. BEAR STEARNS: Moody's Downgrades Ratings on Two 2003-1 Certs. BEAR STEARNS: Moody's Reviews Ratings on 14 2005-PWR8 Certs. BEAR STEARNS: Moody's Reviews Ratings on Nine 2005-TOP20 Certs. BEAR STEARNS: Moody's Reviews Ratings on 16 2007-PWR16 Certs. BLACK DIAMOND: Moody's Downgrades Ratings on Various 2005-1 Notes BLACK DIAMOND: Moody's Downgrades Ratings on Various 2005-2 Notes CAPITALSOURCE COMMERCIAL: Moody's Confirms Ratings on 2006-2 Notes CARLYLE HIGH: Moody's Downgrades Rating on Class B 2008-1 Notes CD COMMERCIAL: Fitch Takes Rating Actions on 2007-CD5 Certificates CENTURION CDO: Moody's Downgrades Ratings on Various Classes CIFC CLO: Moody's Downgrades Ratings on Various 2007-1 Notes CIFC FUNDING: Moody's Downgrades Ratings on Four 2006-I Notes CIFC FUNDING: Moody's Downgrades Ratings on 2006-I B Notes CIFC FUNDING: Moody's Confirms Ratings on Four 2006-II Notes CIFC FUNDING: Moody's Confirms Ratings on Four 2007-II Notes CITIGROUP MORTGAGE: Moody's Cuts Ratings on 19 2005-2 Tranches CITY OF MIAMI BEACH: Fitch Affirms 'BB+' Rating on $260 Mil. Bonds COMM 2005-FL10: S&P Downgrades Ratings on 15 Classes of Certs. COMM MORTGAGE: Fitch Puts Ratings on 33 Classes on Negative Watch CREDIT DEFAULT: S&P Corrects Swap Risk Rating on Tranche CREDIT DEFAULT: S&P Withdraws 'B-' Swap Risk Rating CREDIT SUISSE: Fitch Takes Rating Actions on 2007-TFL2 Tranches CREDIT SUISSE: S&P Raises Ratings on Five 2004-C4 Securities CREDIT SUISSE: S&P Shifts Watch on 2004-C4 Certs. to Developing CSFB ADJUSTABLE: Moody's Downgrades Ratings on 16 2005-8 Tranches DAIMLERCHRYSLER AUTO: S&P Raises Ratings on Various Classes DEUTSCHEMORTGAGE SECURITIES: S&P Cuts Ratings on Two Certs. DOWLING COLLEGE: Moody's Confirms 'B1' Rating on Two Bonds DUKE FUNDING: Fitch Downgrades Ratings on Two Classes of Notes FIRST FRANKLIN: Moody's Downgrades Ratings on Seven Tranches FIRST HORIZON : Moody's Cuts Ratings on Three 2004-HE4 Tranches FIRST NATIONAL: Fitch Rates Class D 2008-2 Notes at 'BB' FORD CREDIT: S&P Assigns Ratings on $2.227 Bil. Asset-Backed Notes FOREST CREEK: Moody's Downgrades Ratings on Various Classes FOUNDERS GROVE: Moody's Downgrades Ratings on Various Classes GALLATIN CLO: Moody's Downgrades Ratings on Various 2007-1 Notes GANNETT PEAK: Moody's Downgrades Ratings on Various Classes GE CAPITAL: Fitch Puts Ratings on Four 2000-1 Certs. on Neg. Watch GRANITE VENTURES: Moody's Downgrades Ratings on Three Classes GRANITE VENTURES: Moody's Downgrades Ratings on Two Classes GRENADIER FUNDING: Fitch Downgrades Ratings on Two Classes GS MORTGAGE: Fitch Takes Rating Actions on 2006-GG6 Certificates GS MORTGAGE: S&P Downgrades Ratings on 17 2005-GG4 Securities GUGGENHEIM STRUCTURED: S&P Downgrades Ratings on Six Classes HALCYON STRUCTURED: Moody's Downgrades Ratings on 2007-3 Notes HARCH CLO: Moody's Downgrades Ratings on Various Classes HEWETT'S ISLAND: Moody's Downgrades Ratings on Various Classes HIGHLAND LOAN: Moody's Downgrades Ratings on Various Classes HUDSON STRAITS: Moody's Downgrades Ratings on Various Classes INMOBILIARIA FUMISA: Moody's Continues Rating Reviews on Bonds JPMORGAN AUTO: Fitch Affirms Ratings on 2008-A Asset-Backed Notes LB COMMERCIAL: S&P Downgrades Ratings on 23 2007-C3 Securities LB-UBS 2007-C7: Fitch Takes Various Rating Actions on Certificates LB-UBS COMMERCIAL: S&P Downgrades Ratings on 17 2005-C5 Securities LB-UBS COMMERCIAL: S&P Downgrades Ratings on 19 2007-C2 Securities LEHMAN BROTHERS: Moody's Reviews Ratings on 2004-LLF C5 Certs. LIGHTPOINT CLO: Moody's Downgrades Ratings on Various Classes LONG GROVE: Moody's Downgrades Ratings on Various Classes MARYLAND ECONOMIC: Moody's Affirms 'Ba3' Rating on 2003 Bonds MASSACHUSETTS HEALTH: S&P Gives Positive Outlook on 'BB+' Rating MASTR RESECURITIZATION: Moody's Cuts Rating on 2004-2 Notes to Ba1 MASTR RESECURITIZATION: Moody's Cuts Ratings on 2004-3 Notes to B3 MAX CMBS: S&P Downgrades Ratings on 24 Classes of Notes MBIA INC: Moody's Keeps Maryland Economic Housing Bonds Rating MERRILL LYNCH: Moody's Lifts Ratings on Three 2001-Canada 6 Certs. MORGAN STANLEY: DBRS Downgrades Class G Securities to 'BB' MORGAN STANLEY: Fitch Downgrades Ratings on 13 2007-IQ13 Certs. MORGAN STANLEY: Fitch Puts Ratings on 2006-XLF Notes on Neg. Watch MORGAN STANLEY: Fitch Takes Rating Actions on 2007-IQ16 Certs. MORGAN STANLEY: Fitch Takes Rating Actions on 23 2006-HQ10 Certs. MORGAN STANLEY: Fitch Takes Rating Actions on 2007-TOP27 Notes MORGAN STANLEY: Moody's Affirms Ratings on 13 2003-TOP11 Certs. MORGAN STANLEY: S&P Downgrades Ratings on 2006-XLF Certificates MORGAN STANLEY: S&P Downgrades Ratings on 24 2007-HQ12 Securities MORGAN STANLEY: S&P Withdraws 'CCC-' Rating on Class IIA Notes MOSELLE CLO: Moody's Downgrades Ratings on Various Classes MUIR GROVE: Moody's Downgrades Ratings on Five Classes of Notes NEWSTAR TRUST: Moody's Downgrades Ratings on Various 2005-1 Notes NORTHWOODS CAPITAL: Moody's Downgrades Ratings on Three Classes NORTHWOODS CAPITAL: Moody's Downgrades Ratings on Various Classes NYLIM FLATIRON: Moody's Downgrades Ratings on 2004-1 Notes NYLIM FLATIRON: Moody's Downgrades Ratings on Various 2005-1 Notes OCEAN TRAILS: Moody's Downgrades Ratings on Four Classes of Notes OCTAGON INVESTMENT: Moody's Downgrades Ratings on Class A-2 Notes PANIOLO CABLE: Moody's Downgrades Ratings on B Notes to 'Ba2' PYXIS ABS: Fitch Downgrades Ratings on Six Classes of 2006-1 Notes REGATTA FUNDING: Moody's Downgrades Ratings on Class A-2L Notes RFMSI SERIES: S&P Corrects Rating on Class A-15 Notes to 'B' SALOMON BROS: S&P Downgrades Ratings on Nine 2000-C3 Securities SANKATY HIGH: Moody's Confirms Ratings on Two Classes of Notes SARGAS CLO: Moody's Upgrades Ratings on Three Classes of Notes SEAWALL SPC: S&P Downgrades Ratings on Various Classes of Notes STANFIELD VANTAGE: Moody's Downgrades Ratings on Various Classes STRATA TRUST: S&P Withdraws Ratings on Various Classes of Notes SYMPHONY CLO: Moody's Downgrades Ratings on Three Classes of Notes SYMPHONY CLO: Moody's Downgrades Ratings on Various Classes TIERS CORPORATE: S&P Corrects Ratings on $100 Mil. Certs. at 'B' TRIBECA PARK: Moody's Downgrades Ratings on Class A-2 Notes TRIMARAN CLO: Moody's Downgrades Ratings on Three Classes TRIMARAN CLO: Moody's Downgrades Ratings on Various Classes VENTURE VIII: Moody's Downgrades Ratings on Various Classes WACHOVIA AUTO: Fitch Takes Rating Actions on 2006-A Notes WACHOVIA BANK: Fitch Puts Ratings on Notes on Negative Watch WACHOVIA BANK: Fitch Puts Ratings on 14 Classes Notes on WatchNeg. WACHOVIA BANK: S&P Downgrades Ratings on 18 2007-C31 Securities WACHOVIA BANK: S&P Downgrades Ratings on 18 2007-C32 Securities WASHINGTON MUTUAL: S&P Downgrades Ratings on Eight 2007-OA4 Certs. WATERFRONT CLO: Moody's Downgrades Ratings on Various 2007-1 Notes WAVE 2007-1: S&P Downgrades Ratings on Five Classes of Notes WAVE 2007-1: S&P Downgrades Ratings on Nine 2007-2 Notes WAVE 2007-1: S&P Downgrades Ratings on Five Series 2007-3 Notes JP MORGAN: S&P Downgrades Ratings on Two 2008-R4 Certificates * Fitch Puts Ratings on 28 Classes by Eight CDOs on Negative Watch * S&P Downgrades Ratings on Five Tranches From Two CDO Deals * S&P Downgrades Ratings on 10 Tranches From Seven Hybrid CDOs * S&P Downgrades Ratings on 19 Tranches From Tobacco Manufacturers * S&P Downgrades Ratings on 130 Classes From Four Prime Jumbo RMBS * S&P Downgrades Ratings on 204 Classes From 37 RMBS Transactions * S&P Puts Ratings on 3,076 CDO Deals on CreditWatch Negative ********* 1ST FINANCIAL: S&P Assigns Ratings on $109 Mil. 2009-B Notes ------------------------------------------------------------ Standard & Poor's Ratings Services assigned its ratings to 1st Financial Credit Card Master Note Trust II Series 2009-B's $109 million asset-backed notes series 2009-B. The ratings reflect: * S&P's view that the credit support for each class of notes is sufficient to withstand the simultaneous stresses S&P apply, for each rating category, to S&P's 9.5%-11.5% base case loss rate assumption, 7.0%-9.0% base case payment rate assumption, and 17.0%-19.0% base case yield assumption. In addition, S&P use stressed purchase rate, excess spread, and note interest rate assumptions to determine if sufficient credit support is available for each rating category. All of the stress assumptions outlined above are based on S&P's current criteria and assumptions; * S&P's view of the credit risk inherent in the collateral loan pool, based on its economic forecast, the trust portfolio's historical performance, the collateral characteristics, and vintage performance data; * 1st Financial Bank USA's servicing experience; and its opinion of the quality and consistency of its account origination, underwriting, account management, collections, and general operational practices; * S&P's expectation of the timely payment of interest and ultimate payment of principal by April 15, 2015, the legal final maturity date, based on stressed cash flow modeling scenarios using assumptions that are commensurate with the assigned rating categories; and * The series 2009-B notes' underlying payment structure and cash flow mechanics, and legal structure. Ratings Assigned 1st Financial Credit Card Master Note Trust II Series 2009-B Class Rating Amount (mil. $) ------ ------ --------------- A AAA 65.75 B AA 11.75 C A 8.75 D BBB- 13.75 Senior cash collateral account BBp 4.00 Intermediate cash collateral account BB-p 1.50 P - Principal-only rating; the interest is not rated. 1ST FINANCIAL: S&P Assigns ' Ratings on $100 Mil. 2009-C Notes -------------------------------------------------------------- Standard & Poor's Ratings Services assigned its ratings to 1st Financial Credit Card Master Note Trust II Series 2009-C's $100 million asset-backed notes series 2009-C. The ratings reflect: * S&P's view that the credit support for each class of notes is sufficient to withstand the simultaneous stresses S&P apply, for each rating category, to S&P's 9.5%-11.5% base case loss rate assumption, 7.0%-9.0% base case payment rate assumption, and 17.0%-19.0% base case yield assumption. In addition, S&P use stressed purchase rate, excess spread, and note interest rate assumptions to determine if sufficient credit support is available for each rating category. All of the stress assumptions outlined above are based on S&P's current criteria and assumptions; * S&P's view of the credit risk inherent in the collateral loan pool, based on its economic forecast, the trust portfolio's historical performance, the collateral characteristics, and vintage performance data; * 1st Financial Bank USA's servicing experience; and its opinion of the quality and consistency of its account origination, underwriting, account management, collections, and general operational practices; * S&P's expectation of the timely payment of interest and ultimate payment of principal by Oct. 15, 2015, the legal final maturity date, based on stressed cash flow modeling scenarios using assumptions that are commensurate with the assigned rating categories; and * The series 2009-C notes' underlying payment structure and cash flow mechanics, and legal structure. Ratings Assigned 1st Financial Credit Card Master Note Trust II Series 2009-C Class Rating Amount (mil. $) ----- ------ --------------- A-1 AAA 20.00 A-2 AAA 45.75 B AA 11.75 C A 8.75 D BBB- 13.75 Senior cash collateral account BBp 4.00 Intermediate cash collateral account BB-p 1.50 P - Principal-only rating; the interest is not rated. ACA ABS: Fitch Downgrades Ratings on Three Classes of 2002-1 Notes ------------------------------------------------------------------ Fitch Ratings has downgraded three classes of notes issued by ACA ABS 2002-1, Ltd./LLC. The downgrades are the result of continued credit deterioration experienced since Fitch's last rating action. Approximately 42.4% of the portfolio currently carries a Fitch derived rating below investment grade, with 24.9% rated in the 'CCC' category or lower. These are up from 26.8% rated below investment grade and 12.6% rated 'CCC' and lower at the last review. Since the last review, the class A/B overcollateralization test has dropped to 96.6% and is now failing the covenant of 103.4%. Consequently, all excess spread after paying interest to class B and all principal is being used to pay down the class A notes. The class A notes have paid down approximately 85.9% since closing. Fitch expects the class A notes to continue to receive interest and full principal repayment. The class B notes have been downgraded to 'CC' as they continue to receive interest payments, but Fitch does not expect any principal recovery. The class C notes are receiving interest paid in kind whereby the principal amount of the notes is written up by the amount of interest due. The class C notes have been downgraded to 'C' as Fitch does not expect this class to receive any future payments. The class A notes were assigned a Stable Rating Outlook reflecting Fitch's expectation that the rating will remain stable over the next one to two years. The class A notes were also assigned a Loss Severity rating of 'LS3'. An 'LS3' rating indicates that a tranche has a medium risk of severe loss severity given default, as evidenced by the ratio of tranche size to the base case loss expectation for the collateral in the range of 1.1 to 4. The LS rating should always be considered in conjunction with probability of default indicated by a class' long-term credit rating Fitch does not assign Rating Outlooks or LS ratings to classes rated 'CCC' and lower. ACA ABS 2002-1 is a cash flow collateralized debt obligation that closed on July 29, 2002, and was managed by ACA Management LLC until April 2008, when management duties were transferred to Solidus Capital, LLC. The reinvestment period also ended in April 2008. The reference portfolio is composed of 52.8% residential mortgage-backed securities, 15.6% asset-backed securities 13.6% commercial mortgage-backed securities, and 9.7% CDOs. Fitch has downgraded and assigned LS ratings and Rating Outlooks as indicated to these classes of notes issued by ACA ABS 2002-1, Ltd./LLC: -- $46,066,866 class A notes to 'BBB/LS3' from 'AAA'; Outlook Stable; -- $64,000,000 class B notes to 'CC' from 'B'; -- $16,932,418 class C notes to 'C' from 'CC'. ACA CDS: S&P Downgrades Ratings on Various Classes to 'CC' ---------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on ACA CDS 2006-1 Tranche F and Tribune Ltd.'s series 30 and 31 notes to 'CC' from 'CCC-' and removed them from CreditWatch with negative implications. The downgrades follow a number of credit events within the underlying corporate reference entities. S&P received final valuations on the credit events in the underlying portfolio, which indicated that losses in the portfolio had caused the notes to incur a partial principal loss. Rating And Creditwatch Actions Tribune Ltd. Series 30 Rating ------ Class To From ----- -- ---- Tranche CCsrp CCC-srp/Watch Neg Tribune Ltd. Series 31 Rating ------ Class To From ----- -- ---- Tranche CC CCC-/Watch Neg ACA CDS 2006-1 Tranche F Rating ------ Class To From ----- -- ---- F CC CCC-/Watch Neg ACA CLO: Moody's Downgrades Ratings on Various 2005-1 Notes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by ACA CLO 2005-1, Limited: -- US$216,000,000 Class A-1L Floating Rate Notes Due October 2017 (current balance of $215,427,725), Downgraded to Aa2; previously on August 16, 2005 Assigned Aaa; -- US$18,000,000 Class A-2L Floating Rate Notes Due October 2017, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$16,500,000 Class B-1L Floating Rate Notes Due October 2017, Downgraded to B1; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$8,000,000 Class B-2L Floating Rate Notes Due October 2017, Downgraded to Caa3; previously on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of this class of notes: -- US$19,000,000 Class A-3L Floating Rate Notes Due October 2017, Confirmed at Baa3; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2624 versus a test level of 2600 as of the last trustee report, dated August 5, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $12.6 million, accounting for roughly 4.25% of the collateral balance, and securities rated Caa1 or lower make up approximately 8.2% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Moody's also observes that the transaction is exposed to a number of mezzanine CLO tranches in the underlying portfolio. Some of these tranches carry depressed market valuations that may herald poor recovery prospects in the event of default. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. ACA CLO 2005-1, Limited, issued in August 16, 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. ACA CLO: Moody's Downgrades Ratings on Various 2006-1 Notes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by ACA CLO 2006-1, Limited: -- US$255,500,000 Class A-1 Senior Secured Floating Rate Notes, Due July 2018 (current balance of $245,631,309), Downgraded to Aa1; previously on July 27, 2006 Assigned Aaa; -- US$21,000,000 Class A-2 Senior Secured Floating Rate Notes, Due July 2018, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$11,375,000 Class C Deferrable Floating Rate Notes, Due July 2018, Downgraded to B1; previously on March 17, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$11,375,000 Class D Deferrable Floating Rate Notes, Due July 2018, Downgraded to Caa3; previously on March 17, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$22,750,000 Class B Deferrable Floating Rate Notes, Due July 2018, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2677 as of the last trustee report, dated August 13, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $14.4 million, accounting for roughly 4.34% of the collateral balance, and securities rated Caa1 or lower make up approximately 6.32% of the underlying portfolio. Moody's also observes that the transaction is exposed to a number of mezzanine CLO tranches in the underlying portfolio. Some of these CLO tranches carry depressed market valuations that may herald poor recovery prospects in the event of default. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. ACA CLO 2006-1, Limited, issued in July 27, 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. AIRLIE CLO: Moody's Downgrades Ratings on Various 2006-II Notes --------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Airlie CLO 2006-II Ltd.: -- US$320,500,000 Class A-1 Senior Secured Floating Rate Notes, due December 20, 2020 (current balance of $309,807,323), Downgraded to Aa2; previously on December 21, 2006 Assigned Aaa; -- US$24,750,000 Class A-2 Senior Secured Floating Rate Notes, due December 20, 2020, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$20,250,000 Class C Senior Secured Deferrable Floating Rate Notes, due December 20, 2020, Downgraded to B1; previously on March 17, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$19,000,000 Class D Secured Deferrable Floating Rate Notes, due December 20, 2020, Downgraded to Caa3; previously on March 17, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade; -- US$3,400,000 (face amount) Composite Notes, due December 20, 2020 (current rated balance of $2,825,972), Downgraded to B2; previously on March 4, 2009 Baa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$25,000,000 Class B Senior Secured Deferrable Floating Rate Notes, due December 20, 2020, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class D overcollateralization test. Based on the last trustee report, dated August 10, 2009, defaulted securities currently held in the portfolio total about $13.5 million, accounting for roughly 3.3% of the collateral balance, and securities rated Caa1 or lower make up approximately 6.3% of the underlying portfolio. The Class D overcollateralization ratio was reported at 101.17% versus a test level of 101.9%. Moody's also notes that the weighted average rating factor is currently 2726 as of the last trustee report. In addition, Moody's assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Airlie CLO 2006-II Ltd., issued in December of 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. ALBANY INDUSTRIAL: S&P Corrects Rating on 2001A-D Bonds to 'CC' --------------------------------------------------------------- Standard & Poor's Ratings Services corrected to 'CC' and withdrew its rating on Albany Industrial Development Agency, New York's civic facilities revenue bonds, (University at Albany Foundation Student Housing Corporation, Empire Commons Projects), series 2001A-D. These bonds are guaranteed by a bond insurance policy from Ambac Assurance Corp (CC/Developing). Prior to this action, the rating on these bonds was 'BBB/Watch Neg'. On July 28, 2009, S&P incorrectly did not include these bonds when S&P lowered to 'CC' and then withdrew its ratings on all bonds covered by an Ambac bond insurance policy that did not have Standard & Poor's underlying ratings. ALFA DIVERSIFIED: S&P Downgrades Ratings on Five Notes to 'BB+' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on five series of notes issued by Alfa Diversified Payment Rights Finance Co. S.A. to 'BB+' from 'BBB-' and removed the ratings from CreditWatch with negative implications, where they were placed June 18, 2009. The five series of notes are Russian financial future flow transactions backed by diversified payment rights. The ratings reflect S&P's survivability assessment of the originator, OJSC Alfa Bank (Alfa Bank), and the transaction's strong credit enhancement levels through overcollateralization and other structural features that mitigate sovereign interference and other credit risks. S&P's survivability assessment of the originator addresses the bank's ability to generate the assets necessary to service the transactions even under a state of selective default or other financial impairment over the life of the transactions. The rating actions follow the Sept. 11, 2009, lowering of S&P's counterparty rating on Alfa Bank to 'B+' from 'BB-', and the lowering of S&P's survivability assessment on the bank to 'BB+' from 'BBB-'. The downgrades reflect the continued deterioration of Alfa Bank's and the entire Russian banking industry's asset quality. S&P's ratings on Alfa Bank broadly reflect the increasing systemwide risks in Russia due to the global economic recession and deteriorating operating environment. For Alfa Bank, this has resulted in rising credit loss charges, high funding and liquidity risks, and a deposit base that is vulnerable to negative market. The performance of Alfa Bank's DPR transactions remains strong, and the transactions had a 48.5x debt service coverage ratio as of second-quarter 2009. S&P will continue to surveil the issue ratings on these future flow securitizations, and S&P will revise them as necessary to reflect any future changes in the transactions' underlying credit quality. Ratings Lowered And Removed From Creditwatch Negative Alfa Diversified Payment Rights Finance Co. S.A. Rating ------ Series To From ------ -- ---- 2006-A BB+ BBB-/Watch Neg 2006-B BB+ BBB-/Watch Neg 2006-C BB+ BBB-/Watch Neg 2007-A BB+ BBB-/Watch Neg 2007-B BB+ BBB-/Watch Neg APIDOS CDO: Moody's Downgrades Ratings on Various Classes of Notes ------------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Apidos CDO V: -- US$130,000,000 Class A-1 Senior Secured Floating Rate Notes due 2021, Downgraded to Aa2; previously on March 8, 2007 Assigned Aaa; -- US$17,000,000 Class A-1-J Senior Secured Floating Rate Notes due 2021, Downgraded to Aa3; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$19,000,000 Class A-2 Senior Secured Floating Rate Notes due 2021, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$21,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2021, Downgraded to Ba1; previously on March 13, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$18,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2021, Downgraded to B1; previously on March 13, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$12,000,000 Class D Secured Deferrable Floating Rate Notes due 2021, Downgraded to Caa3; previously on March 13, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2755 versus a test level of 2750 as of the last trustee report, dated August 5, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $10 million, accounting for roughly 2.6% of the collateral balance, and securities rated Caa1 or lower make up approximately 9.6% of the underlying portfolio. Moody's also observes that the transaction is exposed to a number of mezzanine and junior CLO tranches in the underlying portfolio. The majority of these CLO tranches are currently assigned low speculative-grade ratings and carry depressed market valuations that may herald poor recovery prospects in the event of default. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Apidos CDO V, issued in March 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. APIDOS CINCO: Moody's Downgrades Ratings on Three Classes of Notes ------------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Apidos Cinco CDO: -- US$37,500,000 Class A-1 Floating Rate Notes due 2020, Downgraded to Aa1; previously on May 30, 2007 Assigned Aaa; -- US$22,500,000 Class A-2b Floating Rate Notes due 2020, Downgraded to Aa3; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$19,000,000 Class A-3 Floating Rate Notes due 2020, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$18,000,000 Class B Deferrable Floating Rate Notes due 2020, Confirmed at Baa3; previously on March 13, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$14,000,000 Class C Floating Rate Notes due 2020, Confirmed at Ba3; previously on March 13, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$11,000,000 Class D Floating Rate Notes due 2020, Confirmed at B3; previously on March 13, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of moderate credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor) and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2751 versus a test level of 2570 as of the last trustee report, dated August 4, 2009. Based on the same report, securities rated Caa1 or lower make up approximately 13.4% of the underlying portfolio. Defaulted securities currently held in the portfolio total about $2.3 million, accounting for roughly 0.7% of the collateral balance. Moody's also observes that the transaction is exposed to a number of mezzanine and junior CLO tranches in the underlying portfolio. The majority of these CLO tranches are currently assigned low speculative-grade ratings and carry depressed market valuations that may herald poor recovery prospects in the event of default. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Apidos Cinco CDO, issued in May of 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. APIDOS QUATTRO: Moody's Downgrades Ratings on Four Classes ---------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Apidos Quattro CDO: -- US$262,000,000 Class A Senior Notes Due 2019, Downgraded to Aa1; previously on October 31, 2006 Assigned Aaa; -- US$21,000,000 Class B Senior Notes Due 2019, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$14,000,000 Class D Deferrable Mezzanine Notes Due 2019, Downgraded to B1; previously on March 17, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$12,000,000 Class E Deferrable Junior Notes Due 2019, Downgraded to Caa3; previously on March 17, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$16,000,000 Class C Deferrable Mezzanine Notes Due 2019, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2630 as of the last trustee report, dated August 12, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $10.4 million, accounting for roughly 3.1% of the collateral balance, and securities rated Caa1 or lower make up approximately 12.6%of the underlying portfolio. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Apidos Quattro CDO, issued in October 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. BALLANTYNE RE: Fitch Takes Actions on Three Classes of Notes ------------------------------------------------------------ Fitch Ratings takes these actions for the Ballantyne Re Plc tranches listed below: -- Class A-1 notes affirmed at 'CC/RR5'; -- Class B-1 notes affirmed at 'C/RR6'; -- Class B-2 notes affirmed at 'C/RR6'. Fitch's actions are based on the significant mark-to-market losses Ballantyne Re has experienced in its investment portfolio of residential-mortgage-backed and asset-backed securities. Ballantyne Re's liabilities exceed the current book value of its assets by a significant margin. Interest payments on class A-1 are current, and Fitch expects interest on class A-1 to remain current for the foreseeable future. Absent a remarkable recovery in RMBS/ABS values, however, Fitch expects Ballantyne Re will eventually be unable to pay interest or full principal on the class A-1 notes. Fitch does not expect holders of class B-1 or B-2 notes to receive any further interest or principal payments. The class A-2, series B notes are supported by a financial guarantee insurance policy provided by Assured Guaranty (UK) Ltd. Ballantyne Re is a special purpose public limited company incorporated and registered in Ireland. The company was established for the limited purpose of entering into a reinsurance agreement and conducting activities related to the notes' issuance. Ballantyne Re issued the notes to finance excess reserve requirements under Regulation XXX for the block of business ceded under the reinsurance agreement. BANC OF AMERICA: S&P Downgrades Ratings on 15 2006-2 Securities --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 15 classes of commercial mortgage-backed securities from Banc of America Commercial Mortgage Inc.'s series 2006-2 and removed them from CreditWatch with negative implications. In addition, S&P affirmed its ratings on seven other classes from the same transaction. S&P removed two of the affirmed ratings from CreditWatch with negative implications. The downgrades follow S&P's analysis of the transaction using its revised U.S. conduit and fusion CMBS criteria, which was the primary driver of the rating actions. S&P's analysis included a review of the credit characteristics of all the loans in the pool. Using servicer-provided financial information, S&P calculated an adjusted debt service coverage of 1.43x and a loan-to-value ratio of 102.4%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 0.93x and an LTV of 140.3%. The implied defaults and loss severity under the 'AAA' scenario were 82.9% and 36.9%, respectively. The DSC and LTV calculations exclude four assets with the special servicer and seven assets that did not report financial data (3.4% in the aggregate). S&P estimated losses for these 11 assets separately and included them in the 'AAA' scenario implied default and loss figures. The affirmed ratings on the principal and interest certificates reflect credit enhancement levels that, in S&P's opinion, provide adequate support through various stress scenarios. S&P has affirmed its rating on the class XW interest-only certificates based on S&P's current criteria. S&P published a request for comment proposing changes to its IO criteria on June 1, 2009. Once the criteria review is finalized, S&P may revise its current IO criteria, which may affect outstanding ratings, including the rating on the IO certificates S&P affirmed. Credit Concerns Thirteen assets ($229.1 million; 8.7%) in the pool are with the special servicer, Helios AMC LLC (Helios). The payment status of the assets is: one is real estate owned (0.1%); one is in foreclosure (0.3%); one is 90-plus-days delinquent (0.5%); one is 60-plus days delinquent (0.2%); one is 30-plus days delinquent (0.2%); seven are late but still within their grace periods (3.9%), and one is current (3.5%). Four of the specially serviced assets have appraisal reduction amounts (ARAs) in effect totaling $11.1 million. One of the top 10 loans (3.5%) is with the special servicer and is discussed below. In addition to the specially serviced loans, S&P determined one loan ($26.5 million; 1.0%) to be credit-impaired. The Nortel Networks Building loan is on the servicer's watchlist because the sole tenant, Nortel Networks Inc., is in bankruptcy; Nortel has not yet affirmed or disaffirmed its lease. The loan payment status is current. Transaction Summary As of the August 2009 remittance report, the aggregate trust balance was $2.6 billion (159 loans), compared with $2.7 billion (160 loans) at issuance. Bank of America, the master servicer, reported financial information for 97.2% of the pool; 96.4% of the financial information was full-year 2008 data. S&P calculated a weighted average DSC of 1.45x for the pool based on the master servicer's reported figures. S&P's adjusted DSC and LTV were 1.43x and 102.4%, respectively. Standard & Poor's adjusted DSC and LTV figures exclude four assets ($27.1 million, 1.0%) with the special servicer and seven assets (62.9 million; 2.4%) that did not report financial data. The transaction has not experienced any principal losses to date. Twenty-one loans are on the servicer's watchlist ($371.9 million; 14.1%). Six loans ($37.0 million, 1.4%) have reported DSCs between 1.10x and 1.0x, and 15 loans ($371.2 million, 14.1%) have reported DSCs of less than 1.0x. Summary of Top 10 Loans The top 10 exposures have an aggregate outstanding balance of $1.1 billion (43.0%). Using servicer-reported information, S&P calculated a weighted average DSC of 1.27x for the top 10 loans. One of the top 10 loans ($94.1 million, 3.5%) is with the special servicer, and another ($122.4 million, 4.6%) appears on the master servicer's watchlist. Both loans are discussed below. S&P's adjusted DSC and LTV for the top 10 loans were 1.25x and 105.7%, respectively. The Faneuil Hall loan is the seventh-largest loan in the pool and the largest loan with the special servicer. The loan is secured by a retail and office complex with three main buildings containing 371,630 sq. ft. in downtown Boston. The loan remains current, and the servicer reported an occupancy of 87% and a DSC of 1.26x for year-end 2008. The loan was transferred to the special servicer on April 17, 2009, due to General Growth Properties' bankruptcy filing. S&P will continue to monitor developments relating to this loan and will take rating actions on this transaction as necessary. The Bon-Ton Department Stores Portfolio loan ($122.4 million; 4.6%) is the fourth-largest loan in the pool and the largest loan on the servicer's watchlist. The loan was placed on the watchlist due to a low EBITDA trigger event in the loan documents. The loan is secured by 12 department stores encompassing 1.7 million sq. ft. Built between 1959 and 2004 and renovated between 1994 and 2003, the properties are located throughout Iowa (three properties), Illinois (four properties), Minnesota (three properties), and Michigan (one property). For the 12 months ended January 2009, the servicer-reported occupancy was 100% and the DSC was 1.27x. Standard & Poor's stressed the loans with the special servicer and the remaining loans in the pool according to S&P's updated conduit/fusion criteria. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative Banc of America Commercial Mortgage Inc. Commercial mortgage pass-through certificates series 2006-2 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-M A AAA/Watch Neg 20.44 A-J BBB AAA/Watch Neg 12.26 B BBB- AA/Watch Neg 10.35 C BB+ AA-/Watch Neg 9.32 D BB A/Watch Neg 7.79 E BB- A-/Watch Neg 6.77 F B+ BBB+/Watch Neg 5.62 G B+ BBB/Watch Neg 4.60 H B BBB-/Watch Neg 3.32 J B BB+/Watch Neg 2.94 K B- BB/Watch Neg 2.43 L B- B+/Watch Neg 2.04 M B- B/Watch Neg 1.92 N CCC+ B-/Watch Neg 1.66 O CCC CCC+/Watch Neg 1.40 Ratings Affirmed And Removed From Creditwatch Negative Banc of America Commercial Mortgage Inc. Commercial mortgage pass-through certificates series 2006-2 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-1A AAA AAA/Watch Neg 30.65 A-4 AAA AAA/Watch Neg 30.65 RATINGS AFFIRMED Banc of America Commercial Mortgage Inc. Commercial mortgage pass-through certificates series 2006-2 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.65 A-2 AAA 30.65 A-3 AAA 30.65 A-AB AAA 30.65 XW AAA N/A N/A - Not applicable. BANK OF AMERICA: Fitch Downgrades Ratings on 2006-2 Certificates ---------------------------------------------------------------- Fitch Ratings has downgraded and removed from Rating Watch Negative 12 classes of commercial mortgage pass-through certificates from Bank of America Commercial Mortgage Inc., 2006- 2. Fitch has also assigned Rating Outlooks, Loss Severity Ratings, and Recovery Ratings. The downgrades are the result of loss expectations and reflect Fitch's prospective views regarding commercial real estate market value and cash flow declines. Fitch foresees potential losses could reach as high as 5.7% for this transaction, should market conditions not recover. The rating actions are based on losses of 3.3%, including 100% of the term losses and 25% of the losses anticipated to occur at maturity; the 3.3% recognizes all of the losses anticipated in the next five years. Given the uncertainty surrounding macroeconomic conditions, commercial real estate fundamentals, interest rates, liquidity and property performance, Fitch's actions do not account for the full magnitude of possible maturity losses. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for 60.2% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Approximately 61.7% of the recognized losses were due to loans reviewed in detail. Approximately 3.5% of the mortgages mature within the next five years: 0.2% in 2010 and 3.3% in 2011. All losses associated with these loans are recognized in the rating actions. Fitch identified 29 Loans of Concern (12.9%) within the pool, 12 of which (5.1%) are specially serviced. Seven of the specially serviced loans are current (4.0%0. One of the Fitch Loans of Concern (3.6%) is within the transaction's top 15 loans (52.4%) by unpaid principal balance. Three of the loans within the top 15 (16.2%) are expected to default during the term, with loss severities ranging from 4% to 16%. The largest contributors to loss are: 181 West Madison Street (7.7% of the pool), Fortunoffs of Paramus (2%), and The Glen Town Center (3.3%). 181 West Madison Street is secured by a 940,639 sf office property built in 1990 and is located on the corner of Madison Street and Wells in Chicago's Central Loop. The servicer-reported YE 2008 and second quarter 2009 DSCR was 1.16x and 1.35x, respectively. Occupancy has improved to 87% as of June 2009, compared to 85% at issuance. Based on anticipated declines in performance a default is anticipated prior to the loan's maturity in May 2016. Fortunoff's of Paramus is secured by 40,000 sf single-tenant retail property built in 1988 and located in Paramus, NJ. The loan transferred to the special servicer in February 2009. The property is being marketed for sale by the servicer. Based on initial offers, losses are expected upon disposition. The Glen Town Center is a 267,890 sf retail anchored property built in 2003 located in Glenview, IL. The property's largest tenants include Dick's Sporting Goods, Von Maur and Crown Theaters. The loan transferred to the special servicer for payment default on Aug 1, 2009. The property is currently 95% occupied although a number of tenants are in default under their leases and two of the largest tenants are alleging co-tenancy violations. The servicer and borrower are negotiating a modification, however, losses are expected. Fitch has downgraded, removed from Rating Watch Negative and assigned LS and RRs to these classes: -- $215.9 million class A-J to 'AA/LS-3' from 'AAA'; Outlook Negative; -- $50.6 million class B to 'A/LS-4' from 'AA'; Outlook Negative; -- $27 million class C to 'A/LS-5' from 'AA-'; Outlook Negative; -- $40.5 million class D to 'BBB/LS-5' from 'A'; Outlook Negative; -- $27 million class E to 'BB/LS-5' from 'A-'; Outlook Negative; -- $30.4 million class F to 'BB/LS-5' from 'BBB+'; Outlook Negative; -- $27 million class G to 'B/LS-5' from 'BBB'; Outlook Negative; -- $33.7 million class H to 'B-/LS-5' from 'BBB-'; Outlook Negative; -- $10.1 million class J to 'B-/LS-5' from 'BB+'; Outlook Negative; -- $13.5 million class K to 'B-/LS-5' from 'BB'; Outlook Negative; -- $10.1 million class L to 'B-/LS-5' from 'BB-'; Outlook Negative; -- $3.4 million class M to 'B-/LS-5' from 'B+'; Outlook Negative; -- $6.7 million class N to 'B-/LS-5' from 'B'; Outlook Negative; -- $6.7 million class O to 'CCC/RR6' from 'B-'. Additionally, Fitch has affirmed these classes and assigned LS ratings: -- $52.1 million class A-1 at 'AAA/LS-1'; Outlook Stable; -- $68.6 million class A-2 at 'AAA/LS-1'; Outlook Stable; -- $145 million class A-3 at 'AAA/LS-1'; Outlook Stable; -- $118.6 million class A-AB at 'AAA/LS-1'; Outlook Stable; -- $1.27 billion class A-4 at 'AAA/LS-1'; Outlook Stable; -- $178.3 million class A-1A at 'AAA/LS-1'; Outlook Stable; -- Interest-only class XW at 'AAA'; Outlook Stable; -- $269.9 million class A-M at 'AAA/LS-3'; Outlook Stable. Fitch does not rate the $37.1 million class P. BANK OF AMERICA: Fitch Upgrades Ratings on Nine 2008-1 Notes ------------------------------------------------------------ Fitch Ratings upgrades nine classes and affirms six classes of Bank of America Auto Trust 2008-1 as part of its ongoing surveillance process. Fitch also revises the Rating Outlook to Positive from Stable. The upgrades are a result of continued available credit enhancement in excess of stressed remaining losses. The collateral continues to perform within Fitch's base case expectations. Currently, under the credit enhancement structure, the securities can withstand stress scenarios consistent with the upgraded rating categories and still make full payments of interest and principal in accordance with the terms of the documents. As before, the ratings reflect the quality of Bank of America, N.A.'s retail auto loan originations, the sound financial and legal structure of the transaction, and the servicing provided by BANA. Fitch takes these rating actions: -- Class A-2a asset-backed notes affirmed at 'AAA'; Outlook Stable; -- Class A-2b asset-backed notes affirmed at 'AAA'; Outlook Stable; -- Class A-3a asset-backed notes affirmed at 'AAA'; Outlook Stable; -- Class A-3b asset-backed notes affirmed at 'AAA'; Outlook Stable; -- Class A-4 asset-backed notes affirmed at 'AAA'; Outlook Stable; -- Class A-5 asset-backed notes affirmed at 'AAA'; Outlook Stable; -- Class B asset-backed notes upgraded to 'AA+' from 'AA'; Outlook to Positive from Stable; -- Class C asset-backed notes upgraded to 'AA' from 'AA-'; Outlook to Positive from Stable; -- Class D asset-backed notes upgraded to 'AA-' from 'A'; Outlook to Positive from Stable; -- Class E asset-backed notes upgraded to 'A+' from 'A-'; Outlook to Positive from Stable; -- Class F asset-backed notes upgraded to 'A-' from 'BBB'; Outlook to Positive from Stable; -- Class G asset-backed notes upgraded to 'A-' from 'BBB'; Outlook to Positive from Stable; -- Class H asset-backed notes upgraded to 'BBB+' from 'BBB-'; Outlook to Positive from Stable; -- Class I asset-backed notes upgraded to 'BBB' from 'BB+'; Outlook to Positive from Stable; -- Class J asset-backed notes upgraded to 'BBB-' from 'BB'; Outlook to Positive from Stable. BEAR STEARNS: Fitch Takes Rating Actions on 2006-PWR11 Certs. ------------------------------------------------------------- Fitch Ratings has downgraded, removed from Rating Watch Negative, and assigned Rating Outlooks and Loss Severity ratings to six classes of commercial mortgage pass-through certificates from Bear Stearns Commercial Mortgage Securities Trust 2006-PWR11. The downgrades are the result of loss expectations and reflect Fitch's prospective views regarding commercial real estate market value and cash flow declines. Fitch foresees potential losses could reach as high as 3.4% for this transaction should market conditions not recover. The rating actions are based on losses of 1.6%, including 100% of the term losses and 25% of the losses anticipated to occur at maturity; the 1.6% recognizes all of the losses anticipated in the next five years. Of the recognized losses, 63% were on loans reviewed in detail. Given the significant remaining term to maturity, Fitch's actions do not account for the full magnitude of possible maturity losses. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end (YE) 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for certain loans representing 62.6% of the pool and, in some cases, revised based on additional information and/or property characteristics. Approximately 11.4% of the mortgages mature or have an anticipated repayment date within the next five years: 0% in 2009, 7.3% in 2010, 0.9% in 2011, 0% in 2013, and 2.2% in 2014. All losses associated with these loans are fully recognized in the rating actions. Fitch identified 17 Loans of Concern (17.3%) within the pool, two of which (1.7%) are specially serviced. Of the specially serviced loans, none are current. None of the specially serviced loans are within the transaction's top 15 loans (45.9%) by unpaid principal balance. None of the loans within the top 15 are expected to default during the term. The largest contributors to loss are: Investcorp Retail Portfolio 1 & 2 (10.2%), Forum Center (1.1%) and Sunrise Lake Village (0.7%). Investcorp Retail Portfolio 1 & 2 are two cross-collateralized and cross-defaulted retail portfolios. The collateral consists of eight properties and approximately 1.6 million square feet with properties located Ohio and Indiana. Anchor tenants at the properties consist of Wal-Mart, Kohl's, Best Buy, Dick's Sporting Goods, Petsmart, Officemax, and Hobby Lobby. Investcorp Retail Portfolio 1 was 77.2% occupied as of a March 31, 2009 rent roll, compared to 91.7% reported for YE 2008. The YE 2008 reported debt service coverage ratio (DSCR) was 1.36 times (x). Investcorp Retail Portfolio 2 was 89.9% occupied as of March 31, 2009, compared 90.9% as of YE 2008. The YE 2008 reported DSCR was 1.41x. The sponsors are Investcorp and Cast. The loans are interest only for the loan term. Forum Center (1.1%) is a retail property located in Louisville, KY. The loan was transferred to the special servicer on April 7, 2009. It is currently due for its April 1, 2009 payment. The property occupancy is currently approximately 55% as the center has lost its biggest tenant and has another significant tenant that is behind in its lease obligations. The borrower has requested a loan modification which is subject to receipt of the updated appraisal and servicer evaluation. YE 2008 DSCR was 1.42x, however, included rent from now vacated or delinquent tenants. Sunrise Lake Village (0.7%) is a mixed use property located in Pearland, TX. This loan is pending transfer to the special servicer and is 60 days late in payments. The property sustained damage from Hurricane Ike and the insurance company has denied the borrower's insurance claim. YE 200 DSCR was 1.12x. Fitch downgrades, revises Rating Outlooks and assigns LS ratings as indicated: -- $23.2 million class H to 'BB/LS4' from 'BBB-'; Outlook Negative; -- $7.0 million class J to 'BB/LS5' from 'BB+'; Outlook Negative; -- $7.0 million class L to 'B/LS5' from 'BB-'; Outlook Negative; -- $2.3 million class M to 'B/LS5' from 'B+'; Outlook Negative; -- $4.6 million class N to 'B-/LS5' from 'B'; Outlook Negative; Additionally, Fitch has affirmed these classes, maintained Rating Outlooks and assigned LS ratings as indicated: -- $62.1 million class A-1 at 'AAA/LS1'; Outlook Stable; -- $93.7 billion class A-2 at 'AAA/LS1'; Outlook Stable; -- $44.8 million class A-3 at 'AAA/LS1'; Outlook Stable; -- $90.4 million class A-AB at 'AAA/LS1'; Outlook Stable; -- $830.7 billion class A-4 at 'AAA/LS1'; Outlook Stable; -- $127.4 million class A-1A at 'AAA/LS1'; Outlook Stable; -- $185.9 million class A-M at 'AAA/LS2'; Outlook Stable. -- $146.4 million class A-J at 'AAA/LS2' from 'AAA'; Outlook Stable; -- $37.2 million class B at 'AA/LS3'; Outlook Negative; -- $23.4 million class C at 'AA-/LS4'; Outlook Negative; -- $27.9 million class D at 'A/LS4'; Outlook Negative; -- $18.9 million class E at 'A-/LS4'; Outlook Negative; -- $20.9 million class F at 'BBB+/LS4'; Outlook Negative; -- $18.9 million class G at 'BBB/LS4'; Outlook Negative; -- $7.0 million class K at 'BB/LS5'; Outlook Negative; -- $4.6 million class O at 'B-/LS5'; Outlook Negative. Also, Fitch affirms this class: -- Class X affirmed at 'AAA', Outlook Stable. Fitch does not rate this class: -- $20.8 million class P. BEAR STEARNS: Moody's Downgrades Ratings on Two 2003-1 Certs. ------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on two certificates issued in Bear Stearns Structured Products, Inc. 2003-1. The certificates in the resecuritization are backed by one or more securities, which in turn are backed by residential mortgage loans. These rating actions have been triggered by changes in performance and/or Moody's ratings on the underlying residential mortgage-backed securities (underlying securities). The ratings on the certificates in the resecuritization are based on: (i) The updated expected loss of the pool of loans backing the underlying securities portfolio and the updated ratings on the underlying securities portfolio (ii) The available credit enhancement on the underlying securities, and (iii) The structure of the resecuritization transaction. (1) Moody's first updated its loss assumptions on the underlying pool of mortgage loans (backing the underlying securities) and then arrived at updated ratings on the underlying securities. The ratings on the underlying securities are then used to derive a weighted average portfolio rating based on a weighted average rating factor. To determine the portfolio WARF, Moody's assigns the ratings on the underlying securities a Rating Factor based on Moody's published 10-yr idealized loss expectations. Weights are assigned to each Rating Factor based on the contribution (by outstanding pledged balance) of the underlying security to the resecuritized transaction. (2) Second, Moody's determines the weighted average credit enhancement available to the portfolio security by evaluating the loss coverage level consistent with the ratings on the underlying securities and the underlying mortgage pool losses and weighting them based on the outstanding pledged balance of the underlying securities. (3) Finally, the ratings on the bonds issued in the resecuritization are determined after taking into consideration additional structural aspects of the resecuritization. For transactions where only a single tranche is issued, the weighted average portfolio rating (as determined in step 1 above) is the rating assigned to the tranche. Where multiple securities are issued, the loss allocation and cash flow priority are taken into consideration. For instance where the certificates in the resecuritization are tranched into a super senior tranche and a support tranche, the support tranche is notched down to reflect a higher severity of loss to that tranche. The rating on the super senior tranche is determined based on the total credit enhancement available i.e. the credit enhancement assessed in step (2) and the additional enhancement from the support tranche. The probability of default for the junior-most certificate in the resecuritization is the same as the probability of default for the lowest rated underlying certificate. However, Moody's anticipates a higher loss severity on the junior-most class due to its subordinate position (both in terms of principal distribution and loss allocation) and smaller size (when compared to underlying certificate). Therefore, the ratings on junior certificates in the resecuritization are lower than the portfolio rating on the combined underlying bonds. Because the ratings on the certificates in the resecuritization are linked to the ratings on the underlying certificates and their mortgage pool performance, any rating action on the underlying certificates may trigger a further review of the ratings on the certificates in the resecuritization. The ratings on the certificates in the resecuritization address the ultimate payment of promised interest and principal and do not address any other amounts that may be payable on the certificates. For securities insured by a financial guarantor, the rating on the securities is equal to the higher of (i) the guarantor's financial strength rating and (ii) the current underlying rating (i.e., absent consideration of the guaranty) on the security. The principal methodology used in determining the underlying rating is the same methodology for rating securities that do not have a financial guaranty. Complete Rating Actions are: Issuer: Bear Stearns Structured Products, Inc. 2003-1 -- Cl. B-2, Downgraded to B2; previously on Apr 29, 2003 Assigned A2 -- Cl. B-3, Downgraded to Ca; previously on Apr 29, 2003 Assigned Baa2 BEAR STEARNS: Moody's Reviews Ratings on 14 2005-PWR8 Certs. ------------------------------------------------------------ Moody's Investors Service placed 14 classes of Bear Stearns Commercial Mortgage Securities Trust Commercial Mortgage Pass- Through Certificates, Series 2005-PWR8 on review for possible downgrade due to expected losses for the pool resulting from anticipated losses from loans in special servicing, increased credit quality dispersion, and concerns about the future performance of significant loans, including the Marriott Troy, in an adverse environment. Since Moody's prior review in June 2007, the pool's exposure to specially serviced loans has increased from 0% to 4.1%. In addition, the number of loans with underlying ratings has dropped from nine (18.4% of pool) to seven (7.4% of pool). The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the September 11, 2009 distribution date, the transaction's aggregate certificate balance has decreased by 5.1% to $1.67 billion from $1.77 billion at securitization. The Certificates are collateralized by 193 mortgage loans ranging in size from less than 1% to 10.5% of the pool, with the top 10 loans representing 29.2% of the pool. Thirty-five loans, representing 12.1% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Six loans, representing 4.1% of the pool, are currently in special servicing. The largest specially serviced loan is the Kaleidoscope Center Loan ($33.9 million -- 2.0%), which is secured by a retail center located in Mission Viejo, Orange County, California. The loan was transferred to special servicing in June 2009 due to imminent payment default resulting from the departure of three major tenants. Of the remaining five specially serviced loans, one is 90+ days delinquent, two are in the process of foreclosure and two are expected to be returned to the Master Servicer as Corrected Mortgage Loans within 60 days. Moody's review will focus on the performance of the overall pool and potential losses from specially serviced loans. Moody's rating action is: -- Class A-J, $150,046,000, currently rated Aaa, on review for possible downgrade; previously affirmed at Aaa on 6/22/2007 -- Class B, $37,511,000, currently rated Aa2, on review for possible downgrade; previously affirmed at Aa2 on 6/22/2007 -- Class C, $17,653,000, currently rated Aa3, on review for possible downgrade; previously affirmed at Aa3 on 6/22/2007 -- Class D, $26,478,000, currently rated A2, on review for possible downgrade; previously affirmed at A2 on 6/22/2007 -- Class E, $17,653,000, currently rated A3, on review for possible downgrade; previously affirmed at A3 on 6/22/2007 -- Class F, $19,859,000, currently rated Baa1, on review for possible downgrade; previously affirmed at Baa1 on 6/22/2007 -- Class G, $15,446,000, currently rated Baa2, on review for possible downgrade; previously affirmed at Baa2 on 6/22/2007 -- Class H, $17,652,000, currently rated Baa3, on review for possible downgrade; previously affirmed at Baa3 on 6/22/2007 -- Class J, $8,826,000, currently rated Ba1, on review for possible downgrade; previously affirmed at Ba1 on 6/22/2007 -- Class K, $4,413,000, currently rated Ba2, on review for possible downgrade; previously affirmed at Ba2 on 6/22/2007 -- Class L, $6,620,000, currently rated Ba3, on review for possible downgrade; previously affirmed at Ba3 on 6/22/2007 -- Class M, $6,620,000, currently rated B1, on review for possible downgrade; previously affirmed at B1 on 6/22/2007 -- Class N, $2,206,000, currently rated B2, on review for possible downgrade; previously affirmed at B2 on 6/22/2007 -- Class P, $4,413,000, currently rated B3, on review for possible downgrade; previously affirmed at B3 on 6/22/2007 BEAR STEARNS: Moody's Reviews Ratings on Nine 2005-TOP20 Certs. --------------------------------------------------------------- Moody's Investors Service placed nine classes of Bear Stearns Commercial Mortgage Securities Trust 2005-TOP20, Commercial Mortgage Pass-Through Certificates, Series 2005-TOP20 on review for possible downgrade due to the deteriorating performance of the Lakeforest Mall loan and concerns about refinancing risk associated with five-year loans approaching maturity in an adverse environment. Excluding specially serviced loans, twelve loans, representing 16% of the pool, mature within the next three years and have a Moody's stressed debt service coverage ratio below 1.20X. The action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. Moody's is concerned about the weakening credit quality of the largest loan in the deal. The Lakeforest Mall Loan ($121.1 million -- 6%) is secured by the borrower's interest in a 1.1 million square foot regional mall located in Gaithersburg, Maryland. In-line occupancy for the mall has decreased drastically to 64% from 89% at last review. Expected sales for 2009 have also dropped significantly to a projected $269 per square foot in 2009 versus $373 PSF at securitization. This mall is managed by Simon Property Group. At last review, the loan had an underlying rating of Baa3. As of the September 14, 2009 distribution date, the transaction's aggregate principal balance has decreased by approximately 7% to $1.9 million from $2.1 billion at securitization. The Certificates are collateralized by 219 loans, ranging in size from less than 1% to 6% of the pool, with the top ten loans representing 42% of the pool. The pool includes eleven loans with underlying ratings, which represent 12% of the pool. Two loans, representing 0.4% of the pool, have defeased and are collateralized by U.S. Government securities. Twenty-seven loans, representing 15% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. The pool has not experienced any losses since securitization. Currently, there is one loan, representing less than 1% of the pool, in special servicing. Moody's review will focus on the performance of the overall pool. Moody's rating action is: -- Class G, $18,139,000, currently rated Baa1, on review for possible downgrade; previously affirmed Baa1 on 7/10/07 -- Class H, $23,321,000, currently rated Baa2, on review for possible downgrade; previously affirmed Baa2 on 7/10/07 -- Class J, $18,138,000, currently rated Baa3, on review for possible downgrade; previously affirmed Baa3 on 7/10/07 -- Class K, $5,183,000, currently rated Ba1, on review for possible downgrade; previously affirmed Ba1 on 7/10/07 -- Class L, $7,773,000, currently rated Ba2, on review for possible downgrade; previously affirmed Ba2 on 7/10/07 -- Class M, $7,774,000, currently rated Ba3, on review for possible downgrade; previously affirmed Ba3 on 7/10/07 -- Class N, $2,591,000, currently rated B1, on review for possible downgrade; previously affirmed B1 on 7/10/07 -- Class O, $2,591,000, currently rated B2, on review for possible downgrade; previously affirmed B2 on 7/10/07 -- Class P, $5,183,000, currently rated B3, on review for possible downgrade; previously affirmed B3 on 7/10/07 BEAR STEARNS: Moody's Reviews Ratings on 16 2007-PWR16 Certs. ------------------------------------------------------------- Moody's Investors Service placed 16 classes of Bear Stearns Commercial Mortgage Securities Trust Commercial Mortgage Pass- Through Certificates, Series 2007-PWR16 on review for possible downgrade due to expected losses for the pool resulting from anticipated losses from loans in special servicing and concerns about refinancing risk associated with five-year loans approaching maturity in an adverse environment. Since Moody's prior review in February 2009, the pool's exposure to specially serviced loans has increased from 0% to 3%. In addition, thirteen loans, representing 20% of the pool, mature within the next three years and have a Moody's stressed debt service coverage ratio below 1.00X. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the August 13, 2009 distribution date, the transaction's aggregate certificate balance has decreased by less than 1% to $3.31 billion from $3.29 billion at securitization. The Certificates are collateralized by 261 mortgage loans ranging in size from less than 1% to 15% of the pool, with the top 10 loans representing 42% of the pool. Fifty-one loans, representing 35% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Eight loans, representing 3% of the pool, are currently in special servicing. The largest specially serviced loan is the PGA Design Center ($30.0 million -- 0.9%), which is secured by an anchored retail center located in Palm Beach Gardens, Florida. The loan was transferred to special servicing in February 2009 due to payment default resulting from the departure of two major tenants. Of the remaining seven specially serviced loans, three are 30 or 60 days delinquent, two are 90+ days delinquent, and two are in the process of foreclosure. Moody's review will focus on the performance of the overall pool and potential losses from specially serviced loans. Moody's rating action is: -- Class A-J, $273,400,000, currently rated A2, on review for possible downgrade; previously downgraded to A2 from Aaa on 2/11/2009 -- Class B, $33,139,000, currently rated A3, on review for possible downgrade; previously downgraded to A3 from Aa1 on 2/11/2009 -- Class C, $33,140,000, currently rated Baa1, on review for possible downgrade; previously downgraded to Baa1 from Aa2 on 2/11/2009 -- Class D, $33,139,000, currently rated Baa2, on review for possible downgrade; previously downgraded to Baa2 from Aa3 on 2/11/2009 -- Class E, $20,712,000, currently rated Baa3, on review for possible downgrade; previously downgraded to Baa3 from A1 on 2/11/2009 -- Class F, $24,855,000, currently rated Ba1, on review for possible downgrade; previously downgraded to Ba1 from A2 on 2/11/2009 -- Class G, $28,997,000, currently rated Ba2, on review for possible downgrade; previously downgraded to Ba2 from A3 on 2/11/2009 -- Class H, $41,424,000, currently rated Ba3, on review for possible downgrade; previously downgraded to Ba3 from Baa1 on 2/11/2009 -- Class J, $33,139,000, currently rated B2, on review for possible downgrade; previously downgraded to B2 from Baa2 on 2/11/2009 -- Class K, $33,140,000, currently rated B3, on review for possible downgrade; previously downgraded to B3 from Baa3 on 2/11/2009 -- Class L, $16,569,000, currently rated Caa1, on review for possible downgrade; previously downgraded to Caa1 from Ba1 on 2/11/2009 -- Class M, $12,428,000, currently rated Caa1, on review for possible downgrade; previously downgraded to Caa1 from Ba2 on 2/11/2009 -- Class N, $12,427,000, currently rated Caa2, on review for possible downgrade; previously downgraded to Caa2 from Ba3 on 2/11/2009 -- Class O, $8,285,000, currently rated Caa2, on review for possible downgrade; previously downgraded to Caa2 from B1 on 2/11/2009 -- Class P, $8,285,000, currently rated Caa3, on review for possible downgrade; previously downgraded to Caa3 from B2 on 2/11/2009 -- Class Q, $8,285,000, currently rated Caa3, on review for possible downgrade; previously downgraded to Caa3 from B3 on 2/11/2009 BLACK DIAMOND: Moody's Downgrades Ratings on Various 2005-1 Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Black Diamond CLO 2005-1 Ltd.: -- US$431,000,000 Class A-1 Floating Rate Notes Due June 2017, Downgraded to Aa1; previously on April 7, 2005 Assigned Aaa; -- US$50,000,000 Class A-1B Floating Rate Notes Due June 2017, Downgraded to Aa2; previously on March 4, 2009 Aaa Placed Under Review for Possible Downgrade; -- US$75,000,000 Class B Floating Rate Notes Due June 2017, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$6l,000,000 Class D-l Floating Rate Notes Due June 2017, Downgraded to B3; previously on March 18, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$6,000,000 Class D-2 Fixed Rate Notes Due June 2017, Downgraded to B3; previously on March 18, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$35,000,000 Class E Floating Rate Notes Due June 2017, Downgraded to Caa3; previously on March 18, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade; -- US$12,000,000 Class I Combination Notes Due June 2017 (current rated balance of $6,974,735), Downgraded to B1; previously on March 4, 2009 Baa3 Placed Under Review for Possible Downgrade; -- US$4,000,000 Class II Combination Notes Due June 2017 (current rated balance of $2,194,689), Downgraded to Caa2; previously on March 4, 2009 Ba1 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$70,000,000 Class C Floating Rate Notes Due June 2017, Confirmed at Ba1; previously on March 18, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 3420 versus a test level of 2900 as of the last trustee report, dated August 7, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $78 million, accounting for roughly 7.5% of the collateral balance, and securities rated Caa1 or lower make up approximately 18% of the underlying portfolio. Moody's also observes that the transaction is exposed to a number of CLO tranches in the underlying portfolio. The majority of these CLO tranches are currently assigned low speculative-grade ratings and carry depressed market valuations that may herald poor recovery prospects in the event of default. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Black Diamond CLO 2005-1 Ltd., issued in April of 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. BLACK DIAMOND: Moody's Downgrades Ratings on Various 2005-2 Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Black Diamond CLO 2005-2: -- US$681,000,000 Class A Floating Rate Notes due January 2018, Downgraded to Aa1; previously on October 20, 2005 Assigned Aaa; -- US$75,000,000 Class B Floating Rate Notes due January 2018, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$67,000,000 Class D Floating Rate Notes due January 2018, Downgraded to B2; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$31,000,000 Class E-1 Floating Rate Notes due January 2018, Downgraded to Caa3; previously on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade; -- US$4,000,000 Class E-2 Fixed Rate Notes due January 2018, Downgraded to Caa3; previously on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade; -- US$45,000,000 Class I Combination Notes due January 2018 (current rated balance of $33,406,855), Downgraded to Baa2; previously on March 4, 2009 A1 Placed Under Review for Possible Downgrade; -- US$5,000,000 Class II Combination Notes due January 2018 (current rated balance of $3,825,222), Downgraded to Baa2; previously on March 4, 2009 A1 Placed Under Review for Possible Downgrade; -- US$8,000,000 Class III Combination Notes due January 2018 (current rated balance of $4,768,798), Downgraded to Caa3; previously on March 4, 2009 Ba2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$70,000,000 Class C Floating Rate Notes due January 2018, Confirmed at Baa3; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 3137 versus a test level of 2900 as of the last trustee report, dated August 25, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $94 million, accounting for roughly 11% of the collateral balance, and securities rated Caa1 or lower make up approximately 14.3% of the underlying portfolio. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Black Diamond CLO 2005-2, issued in October of 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CAPITALSOURCE COMMERCIAL: Moody's Confirms Ratings on 2006-2 Notes ------------------------------------------------------------------ Moody's Investors Service announced that it has confirmed the ratings of these notes issued by CapitalSource Commercial Loan Trust 2006-2: -- US$147,500,000 Class A-1B Floating Rate Asset Backed Notes, Confirmed at Aaa; previously on March 4, 2009 Aaa Placed Under Review for Possible Downgrade; -- US$71,250,000 Class B Floating Rate Deferrable Asset Backed Notes, Confirmed at Aa2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$157,500,000 Class C Floating Rate Deferrable Asset Backed Notes, Confirmed at Ba1; previously on March 23, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$101,250,000 Class D Floating Rate Deferrable Asset Backed Notes, Confirmed at B2; previously on March 23, 2009 Downgraded to B2 and Placed Under Review for Possible Downgrade; -- US$56,250,000 Class E Floating Rate Deferrable Asset Backed Notes, Confirmed at Caa2; previously on March 23, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. The rating actions reflect Moody's revised assumptions with respect to default probability (including certain stresses pertaining to credit estimates) and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Moody's notes that the rating confirmations on the Class A-1B, Class B, Class C, Class D, and Class E Notes have incorporated the aforementioned stresses as well as credit deterioration in the underlying portfolio. However, the actions reflect updated analysis indicating that the impact of these factors on the ratings of the Class A-1B, Class B, Class C, Class D, and Class E Notes is not as negative as previously assessed during Stage I of the deal review in March. The current conclusions stem from comprehensive deal-level analysis completed during Stage II of the ongoing CLO surveillance review, which included an in-depth assessment of results from Moody's quantitative CLO rating model along with an examination of deal-specific qualitative factors. By way of comparison, during Stage I Moody's took rating actions that were largely the result of a parameter-based approach. CapitalSource Commercial Loan Trust 2006-2, issued in 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans of middle market issuers. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CARLYLE HIGH: Moody's Downgrades Rating on Class B 2008-1 Notes --------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the rating of these notes issued by Carlyle High Yield Partners 2008- 1, Ltd.: -- US$27,500,000 Class B Senior Secured Floating Rate Notes due 2016, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$29,000,000 Class C Secured Deferrable Floating Rate Notes due 2016, Confirmed at Baa3; previously on March 20, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$16,500,000 Class D Secured Deferrable Floating Rate Notes due 2016, Confirmed at Ba3; previously on March 20, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. The rating actions reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. According to Moody's, the rating actions taken on the notes also reflect the underlying portfolio's moderate credit deterioration. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. Defaulted securities currently held in the portfolio total about $7.4 million, accounting for roughly 1.52% of the collateral balance, and securities rated Caa1 or lower make up approximately 9.6% of the underlying portfolio, based on the latest trustee report dated August 11, 2009. Moody's also notes that according to the same report, the weighted average rating factor is 2773. Carlyle High Yield Partners 2008-1, Ltd., issued in May 2008, is a collateralized loan obligation backed by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CD COMMERCIAL: Fitch Takes Rating Actions on 2007-CD5 Certificates ------------------------------------------------------------------ Fitch Ratings has downgraded, removed from Rating Watch Negative, assigned Rating Outlooks and Loss Severity ratings to certain classes of commercial mortgage pass-through certificates from CD Commercial Mortgage Trust, series 2007-CD5. A detailed list of rating actions follows at the end of this release. The downgrades are the result of loss expectations and reflect Fitch's prospective views regarding commercial real estate market value and cash flow declines. Fitch forecasts potential losses of 7.3% for this transaction, should market conditions not recover. The rating actions are based on losses of 5.8%, including 100% of the losses associated with term defaults and any losses associated with maturities within the next five years. Given the significant term to maturity, Fitch's actions only account for 25% of the losses associated with maturities beyond five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end (YE) 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for certain loans representing 57% of the pool and, in some cases, revised based on additional information and/or property characteristics. Of the recognized losses, approximately 61% are derived from loans which Fitch examined in detail. Approximately 10.5% of the mortgages mature within the next five years: 8.4% in 2012 and 2.1% in 2014. In 2017, 87.9% of the pool is scheduled to mature. Fitch identified 33 Loans of Concern (17.4%) within the pool, 20 of which (8.7%) are specially serviced. Of the specially serviced loans, 10 (2.2%) are current. Two of the specially serviced loans (3.9%) are within the transaction's top 15 loans (47.5%) by unpaid principal balance. Five of the Loans of Concern (9.9%) within the top 15 loans are expected to default during the term, with loss severities ranging from 5% to 39%. The largest contributors to loss are: Georgian Towers (2.8%), 150 18th Street NW(2.3%) and the CGM RRI Hotel Portfolio (1.6%). The Georgian Towers loan is collateralized by a 890 unit multi- family property located in Silver Spring, MD. Stellar Management (Laurence Gluck) is the sponsor. The loan was made with the expectation that unit and common area upgrades would allow for significantly increased rental rates. Currently the property renovations are approximately 50% complete. The debt service reserves have been nearly depleted and the renovation reserves have been 60% depleted. The property is not cash flowing and Fitch expects the loan to default prior to maturity. The 150 18th Street NW loan is collateralized by a 167,000 square foot (sf) office property located in Washington, DC. Lawrence Botel and Steven Klein are the sponsors. The loan transferred to special servicing in August 2009 for monetary default. Occupancy at the property declined from 97% at issuance to 80% at YE 2008. Three tenants vacated the property in 2008. The special servicer is in continuing negotiations with the sponsor. Major tenants include Reed Elsevier, Inc. (22% NRA, rated 'A-' by Fitch), Stinson Morrison Hecker LLP (10% NRA) and Miller & Chevalier (10% NRA) Additional upcoming lease rollover consists of 23% in 2010 and 40% in 2012. The CGM RRI Hotel Portfolio loan is collateralized by 52 Red Roof Inn hotels totaling 6,024 rooms, located in 22 different states. Westmont Hospitality Group is the sponsor. The loan transferred to special servicing in May 2009. The sponsorship is seeking to restructure the loan due to economic conditions. The sponsors are currently negotiating with the mezzanine lender and the special servicer. Fitch has downgraded, removed from Rating Watch Negative, assigned Rating Outlooks and LS ratings to these classes as indicated: -- $111.8 million class AJ to 'AA/LS3' from 'AAA'; Outlook Negative; -- $27 million class A-JA to 'AA/LS3' from 'AAA'; Outlook Negative; -- $20.9 million class B to 'A/LS5' from 'AA+'; Outlook Negative; -- $20.9 million class C to 'A/LS5' from 'AA'; Outlook Negative; -- $20.9 million class D to 'BBB/LS5' from 'AA-'; Outlook Negative; -- $18.3 million class E to 'BBB-/LS5' from 'A+'; Outlook Negative; -- $18.3 million class F to 'BB/LS5' from 'A'; Outlook Negative; -- $20.9 million class G to 'BB/LS5' from 'A-'; Outlook Negative; -- $23.6 million class H to 'B/LS5' from 'BBB+'; Outlook Negative; -- $23.6 million class J to 'B-/LS5' from 'BBB'; Outlook Negative; -- $20.9 million class K to 'B-/LS5' from 'BBB-'; Outlook Negative; -- $26.2 million class L to 'B-/LS5' from 'BB+'; Outlook Negative; -- $7.9 million class M to 'B-/LS5' from 'BB'; Outlook Negative; -- $5.2 million class N to 'B-/LS5' from 'BB-'; Outlook Negative; -- $5.2 million class 0 to 'CCC/RR6' from 'B+'; -- $5.2 million class P to 'CCC/RR6' from 'B'; -- $2.6 million class Q to 'CCC/RR6' from 'B-'. Fitch has affirmed these classes and assigned LS ratings: -- $33.7 million class A-1 'AAA/LS1'; Outlook Stable; -- $88.5 million class A-2 'AAA/LS1'; Outlook Stable; -- $39.4 million class A-3 'AAA/LS1'; Outlook Stable; -- $52 million class A-AB 'AAA/LS1'; Outlook Stable; -- $958.9 million class A-4 'AAA/LS1'; Outlook Stable; -- $284.6 million class A-1A 'AAA/LS1'; Outlook Stable; -- Interest-Only class XP 'AAA'; Outlook Stable; -- $168.7 million class AM 'AAA/LS3'; Outlook Stable; -- $40.7 million class A-MA 'AAA/LS3'; Outlook Stable; -- Interest-Only class XS 'AAA'; Outlook Stable; Fitch does not rate the $39.2 million class S. CENTURION CDO: Moody's Downgrades Ratings on Various Classes ------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Centurion CDO 8 Limited: -- US$465,000,000 Class A Floating Rate Notes Due 2017, Downgraded to Aa3; previously on February 2, 2005 Assigned Aaa; -- US$13,000,000 Class B-1 Deferrable Fixed Rate Notes Due 2017, Downgraded to Ba2; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$41,000,000 Class B-2 Deferrable Floating Rate Notes Due 2017, Downgraded to Ba2; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$16,500,000 Class C Deferrable Floating Rate Notes Due 2017, Downgraded to Caa2; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$16,500,000 Class D Deferrable Floating Rate Notes Due 2017 (current balance of $14,373,355), Downgraded to Caa3; previously on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2729 versus a test level of 2580 as of the last trustee report, dated July 28, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $42.0 million, accounting for roughly 7.5% of the collateral balance, and securities rated Caa1 or lower make up approximately 10.4% of the underlying portfolio. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Centurion CDO 8 Limited, issued in 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CIFC CLO: Moody's Downgrades Ratings on Various 2007-1 Notes ------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by CIFC CLO 2007-1, Ltd.: -- US$24,000,000 Class A-2L Floating Rate Notes Notes, Downgraded to Aa3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$38,200,000 Class A-1LB Floating Rate Notes Notes, Confirmed at Aa1; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$25,000,000 Class A-3L Floating Rate Notes Notes, Confirmed at Baa3; previously on March 13, 2009 Downgraded to Baa3 and Remained On Review for Possible Downgrade; -- US$17,000,000 Class B-1L Floating Rate Notes Notes, Confirmed at Ba3; previously on March 13, 2009 Downgraded to Ba3 and Remained On Review for Possible Downgrade; -- US$17,000,000 Class B-2L Floating Rate Notes Notes, Confirmed at B3; previously on March 13, 2009 Downgraded to B3 and Remained On Review for Possible Downgrade. The rating actions primarily reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. According to Moody's, the rating actions taken on the notes are also a result of moderate credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2988.as of the last trustee report, dated July 28, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $17 million, accounting for roughly 4.3% of the collateral balance, and securities rated Caa1 or lower make up approximately 9.7% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Moody's notes that the rating confirmation on the Class A-1LB, Class A-3L, Class B-1L, and Class B-2L Notes have incorporated the aforementioned stresses as well as credit deterioration in the underlying portfolio. However, the actions reflect updated analysis indicating that the impact of these factors on the ratings of the Class Class A-1LB, Class A-3L, Class B-1L, and Class B-2L Notes is not as negative as previously assessed during Stage I of the deal review in March. The current conclusions stem from comprehensive deal-level analysis completed during Stage II of the ongoing CLO surveillance review, which included an in-depth assessment of results from Moody's quantitative CLO rating model along with an examination of deal-specific qualitative factors. By way of comparison, during Stage I Moody's took rating actions that were largely the result of a parameter-based approach. CIFC CLO 2007-1, Ltd., issued in March of 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CIFC FUNDING: Moody's Downgrades Ratings on Four 2006-I Notes ------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by CIFC Funding 2006-I, Ltd.: -- US$100,000,000 Class A-1LR Variable Funding Notes Due October 2020,Downgraded to Aa2; previously on August 3, 2006 Assigned Aaa; -- US$293,000,000 Class A-1L Floating Rate Notes Due October 2020, Downgraded to Aa2; previously on August 3, 2006 Assigned Aaa; -- US$26,500,000 Class A-2L Floating Rate Notes Due October 2020, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$23,000,000 Class B-2L Floating Rate Notes Due October 2020 (current balance of $22,433,944) , Downgraded to Caa2; previously on March 23, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$30,500,000 Class A-3L Floating Rate Notes Due October 2020, Confirmed at Baa3; previously on March 23, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$20,000,000 Class B-1L Floating Rate Notes Due October 2020, Confirmed at Ba3; previously on March 23, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. The rating actions primarily reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. According to Moody's, the rating actions taken on the notes are also a result of moderate credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2899 as of the last trustee report, dated August 10, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $28.6 million, accounting for roughly 5.5% of the collateral balance, and securities rated Caa1 or lower make up approximately 10.0% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. CIFC Funding 2006-I, Ltd., issued in August of 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CIFC FUNDING: Moody's Downgrades Ratings on 2006-I B Notes ---------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by CIFC Funding 2006-I B, Ltd.: -- US$75,000,000 Class A-1LR Variable Funding Notes Due December 2020, Downgraded to Aa1; previously on October 11, 2006 Assigned Aaa; -- US$224,000,000 Class A-1L Floating Rate Notes Due December 2020, Downgraded to Aa1; previously on October 11, 2006 Assigned Aaa; -- US$22,000,000 Class A-2L Floating Rate Notes Due December 2020, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$22,500,000 Class A-3L Floating Rate Notes Due December 2020, Confirmed at Baa3; previously on March 23, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$14,500,000 Class B-1L Floating Rate Notes Due December 2020, Confirmed at Ba3; previously on March 23, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$16,000,000 Class B-2L Floating Rate Notes Due December 2020, Confirmed at B3; previously on March 23, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. The rating actions primarily reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. According to Moody's, the rating actions taken on the notes are also a result of moderate credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 3010 as of the last trustee report, dated August 10, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $18.4 million, accounting for roughly 4.7% of the collateral balance, and securities rated Caa1 or lower make up approximately 11.5% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. CIFC Funding 2006-I B, Ltd., issued in October of 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CIFC FUNDING: Moody's Confirms Ratings on Four 2006-II Notes ------------------------------------------------------------ Moody's Investors Service announced that it has confirmed the ratings of these notes issued by CIFC Funding 2006-II, Ltd.: -- US$40,000,000 Class A-1LB Floating Rate Notes Due March 2021, Confirmed at Aa1; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$36,000,000 Class A-3L Floating Rate Notes Due March 2021, Confirmed at Baa3; previously on March 23, 2009 Downgraded to Baa3 and Placed On Review for Possible Downgrade; -- US$23,000,000 Class B-1L Floating Rate Notes Due March 2021, Confirmed at Ba3; previously on March 23, 2009 Downgraded to Ba3 and Placed On Review for Possible Downgrade; -- US$25,000,000 Class B-2L Floating Rate Notes Due March 2021, Confirmed at B3; previously on March 23, 2009 Downgraded to B3 and Placed On Review for Possible Downgrade. In addition, Moody's has downgraded the ratings of these notes: -- US$35,000,000 Class A-2L Floating Rate Notes Due March 2021, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$20,000,000 Class I Combination Notes Due March 2021 (current rated balance of $15,649,291), Downgraded to Ba2; previously on March 4, 2009 Baa2 Placed Under Review for Possible Downgrade. The rating actions primarily reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. According to Moody's, the rating actions taken on the notes are also a result of moderate credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2928 as of the last trustee report, dated August 21, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $46.7 million, accounting for roughly 7.4% of the collateral balance, and securities rated Caa1 or lower make up approximately 9.7% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Moody's notes that the rating confirmations on the Class A-1LB, Class A-3L, Class B-1L, and Class B-2L Notes have incorporated the aforementioned stresses as well as credit deterioration in the underlying portfolio. However, the actions reflect updated analysis indicating that the impact of these factors on the ratings of the Class A-1LB, Class A-3L, Class B-1L, and Class B-2L Notes is not as negative as previously assessed during Stage I of the deal review in March. The current conclusions stem from comprehensive deal-level analysis completed during Stage II of the ongoing CLO surveillance review, which included an in-depth assessment of results from Moody's quantitative CLO rating model along with an examination of deal-specific qualitative factors. By way of comparison, during Stage I Moody's took rating actions that were largely the result of a parameter-based approach. CIFC Funding 2006-II, Ltd., issued in December of 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CIFC FUNDING: Moody's Confirms Ratings on Four 2007-II Notes ------------------------------------------------------------ Moody's Investors Service announced that it has confirmed the ratings of these notes issued by CIFC Funding 2007-II, Ltd.: -- US$84,000,000 Class A-1-J Senior Secured Floating Rate Notes due April 2021 Notes, Confirmed at Aaa; previously on March 4, 2009 Aaa Placed Under Review for Possible Downgrade; -- US$35,000,000 Class B Senior Secured Deferrable Floating Rate Notes due April 2021 Notes, Confirmed at Baa3; previously on March 13, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$28,000,000 Class C Senior Secured Deferrable Floating Rate Notes due April 2021 Notes, Confirmed at Ba3; previously on March 13, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$24,000,000 Class D Secured Deferrable Floating Rate Notes due April 2021 Notes, Confirmed at B3; previously on March 13, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has downgraded the ratings of these notes: -- US$56,500,000 Class A-2 Senior Secured Floating Rate Notes due April 2021 Notes, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. The rating actions primarily reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. According to Moody's, the rating actions taken on the notes are also a result of moderate credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has moderately increased and is currently 3044 as of the last trustee report, dated August 10, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $26.8 million, accounting for roughly 4.5% of the collateral balance, and securities rated Caa1 or lower make up approximately 16.9% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Moody's notes that the rating confirmations on the Class A-1-J, Class B, Class C, and Class D Notes have incorporated the aforementioned stresses as well as credit deterioration in the underlying portfolio. However, the actions reflect updated analysis indicating that the impact of these factors on the ratings of the Class A-1-J, Class B, Class C, and Class D Notes is not as negative as previously assessed during Stage I of the deal review in March. The current conclusions stem from comprehensive deal-level analysis completed during Stage II of the ongoing CLO surveillance review, which included an in-depth assessment of results from Moody's quantitative CLO rating model along with an examination of deal-specific qualitative factors. By way of comparison, during Stage I Moody's took rating actions that were largely the result of a parameter-based approach. CIFC Funding 2007-II, Ltd., issued in March of 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. CITIGROUP MORTGAGE: Moody's Cuts Ratings on 19 2005-2 Tranches -------------------------------------------------------------- Moody's Investors Service has downgraded 19 tranches from Citigroup Mortgage Loan Trust, Series 2005-2. The collateral backing the transaction consists primarily of first-lien, fixed and adjustable-rate, Alt-A mortgage loans. The actions are triggered by higher than expected increase in delinquencies and rising severities. Moody's rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool-level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, time tranching, and other structural features within the senior note waterfalls. Moody's followed a similar approach for deals from the 2005 vintage with appropriate changes to certain key input parameters such as severity and the rate of delinquency build up, which would be generally lower relative to the 2006 and 2007 vintages. These differences are aimed at better capturing the specific characteristics of loans from the 2005 vintage that were originated in an environment of relatively tighter underwriting standards and also benefited from some initial home price appreciation. Moody's has revised the lifetime expected loss on this transaction. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Complete rating actions are: Issuer: Citigroup Mortgage Loan Trust, Series 2005-2/ Group a I-1 I-3 I-4 I-5 Mortgage Loans -- Pool Current Expected Cumulative Net Losses: 2% (as a percentage of the original loan pool balance) -- Cl. I-A1, Downgraded to Baa3; previously on Feb 4, 2009 Downgraded to A1 -- Cl. I-A2A, Downgraded to A1; previously on Feb 4, 2009 Downgraded to Aa2 -- Cl. I-A2B, Downgraded to Baa3; previously on Feb 4, 2009 Downgraded to A1 -- Cl. I-A3, Downgraded to Baa3; previously on Feb 4, 2009 Downgraded to A1 -- Cl. I-A3A, Downgraded to Baa2; previously on Feb 4, 2009 Downgraded to A1 -- Cl. I-A3B, Downgraded to Ba1; previously on Feb 4, 2009 Downgraded to A1 -- Cl. I-A4, Downgraded to Baa3; previously on Feb 4, 2009 Downgraded to Aa1 -- Cl. I-A5A, Downgraded to Baa1; previously on Feb 4, 2009 Downgraded to Aa3 -- Cl. I-A5B, Downgraded to Ba1; previously on Feb 4, 2009 Downgraded to A1 Issuer: Citigroup Mortgage Loan Trust, Series 2005-2/ Group II-1 II-1-1 II-1-2 II-2 Mortgage Loans - Combined -- Pool Current Expected Cumulative Net Losses: 1% (as a percentage of the original loan pool balance) -- Cl. II-A1-1, Downgraded to Aa3; previously on June 20, 2005 Assigned Aaa -- Cl. II-A1-2, Downgraded to Aa3; previously on June 20, 2005 Assigned Aaa -- Cl. II-A2, Downgraded to Aa3; previously on June 20, 2005 Assigned Aaa -- Cl. II-XS1, Downgraded to Aa3; previously on June 20, 2005 Assigned Aaa -- Cl. II-XS2, Downgraded to Aa3; previously on June 20, 2005 Assigned Aaa -- Cl. II-PO1, Downgraded to Aa3; previously on June 20, 2005 Assigned Aaa -- Cl. II-PO2, Downgraded to Aa3; previously on June 20, 2005 Assigned Aaa -- Cl. II-B1, Downgraded to Baa2; previously on Feb. 4, 2009 Downgraded to Aa3 -- Cl. II-B2, Downgraded to Ba2; previously on Feb. 4, 2009 Downgraded to Baa2 -- Cl. II-B3, Downgraded to B3; previously on Feb. 4, 2009 Downgraded to Ba1 The ratings on the notes were assigned after evaluating factors determined applicable to the credit profile of the notes, such as: i) the nature, sufficiency, and quality of historical performance information available for the asset class as well as for the transaction sponsor, ii) collateral analysis, iii) an analysis of the policies, procedures and alignment of interests of the key parties to the transaction, most notably the originator and the servicer, iv) an analysis of the transaction's allocation of collateral cashflow and capital structure, v) an analysis of the transaction's governance and legal structure, and vi) a comparison of these attributes against those of other similar transactions. CITY OF MIAMI BEACH: Fitch Affirms 'BB+' Rating on $260 Mil. Bonds ------------------------------------------------------------------ Fitch Ratings affirmed the 'BB+' rating on approximately $260 million of the City of Miami Beach Health Facilities Authority Hospital Revenue Bonds, series 1998, 2001A and 2004 issued on behalf of Mount Sinai Medical Center of Florida. The Rating Outlook is revised to Stable from Negative. The affirmation is based on MSMC's improved operating results, relatively stable liquidity, and strong philanthropic support. Following 2008's operating loss of $15.7 million (negative 3.2% operating margin), which showed deterioration from the prior year of negative $8.9 million (negative 1.9% operating margin), management has taken several steps to improve the operating results, including adding a new chief of cardiac surgery in December 2008, a new chief of cardiology in January 2009, adding additional doctors in key service lines, and maintaining overall expense increases at only 0.3% year over year (through the six month interim). These initiatives have resulted in an increase in patient acuity, driven by strong cardiac surgical volume (up 31% year over year), thoracic surgery volume (up 15%), an increase in the case mix index, and an increase in emergency room visits, mainly from the freestanding emergency department in Aventura (up 52%). As a result, through the six month interim period ended June 30, 2009, operating income was negative $5.4 million (negative 2.1% operating margin) as compared to an $8.4 million loss (negative 3.3%) for the prior year period. These figures do not include the $5 million transfer from the foundation for the half year ($10 million will be transferred in the full fiscal year), which is recorded as net revenue. Additionally, management has hired Wellspring Partners for a six month engagement which will contribute to a total of $8.5 million in expense savings that is expected to be realized over the course of 2009, with the majority of the savings coming in the second half. Although MSMC's liquidity metrics are relatively low at 83 days cash on hand, 4.4 times (x) cushion ratio, and 39% cash to debt, they are inline with the below investment grade medians of 60 days, 4.6x, and 40%, respectively. Additionally, the liquidity position is fairly stable as the asset allocation is very conservative with 100% held in cash or short term fixed income securities. The Mount Sinai Medical Center Foundation continues to see strong community support as pledge revenues are up over 100% year over year. Through the interim period, the Foundation has raised $8.7 million and in fiscal 2008, it raised $10.5 million and made a $10 million contribution to MSMC. Primary credit concerns include the high debt burden and the disposition of Miami Heart Institute. MSMC's debt burden remains high, with MADS as a percentage of revenue of 4.7% and debt to EBITDA of 7.7x at fiscal year end. The debt is all fixed-rate and there are no swaps outstanding, which Fitch views favorably. The strong historical debt service coverage, which has averaged 1.9x over the last five fiscal years and was 1.9x in the interim, also provides some offset to the high leverage position. The disposition of the Miami Heart Institute will have a material impact on MSMC's financial standing as the facility carries $108 million in debt and sizable yearly carrying costs. Management has listed the property for sale since late 2007, and has experienced trouble moving the property given the downturn in the commercial real estate market in South Florida. The Stable Outlook is based on improvements to utilization figures, especially to the high end service lines which have improved profitability. Continued improvements to the operating margin due to expense reductions and growth in key service lines, combined with the stable liquidity position should maintain MSMC at the current rating level for the near- to medium-term. MSMC is a teaching hospital consisting of 955 licensed beds (780 staffed) and is the only health care provider in Miami Beach, FL, that offers a wide range of tertiary services. MSMC had total operating revenue of $487 million in 2008. The Foundation also has an unconditional guaranty on MSMC's outstanding debt and total assets were $82.7 million in 2008 and $86.9 million as of June 30, 2009. MSMC covenants to provide annual and quarterly disclosure to bondholders. Fitch notes that quarterly disclosure is excellent, and it includes management discussion and analysis, balance sheet, income statement, cash flow statement, and utilization statistics that can be accessed at 'www.dacbond.com'. MSMC also conducts quarterly conference calls for investors. COMM 2005-FL10: S&P Downgrades Ratings on 15 Classes of Certs. -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 15 classes of commercial mortgage pass-through certificates from COMM 2005-FL10. Concurrently, S&P affirmed its ratings on 10 other classes from this transaction. S&P removed all 25 of these ratings from CreditWatch with negative implications, where they were placed on April 7, 2009. S&P affirmed the ratings on the class X interest-only certificates based on its current criteria. S&P published a request for comment proposing changes to S&P's IO criteria on June 1, 2009. After S&P finalize its criteria review, S&P may revise its IO criteria, which may affect outstanding ratings, including the ratings on IO certificates that S&P affirmed. One pooled loan has raked certificates that S&P downgraded (a raked certificate represents a subordinate, nonpooled component of the senior participation interest in a particular loan). The affected raked certificates include the 'N-PC', 'O-PC', 'P-PC', and 'Q-PC' classes. Details are: The largest loan in the COMM 2005-FL10 pool, the Palisades Center loan, has a pooled trust balance of $512.2 million (64%) and a whole-loan balance of $550.0 million. A $37.8 million subordinate nonpooled component supports the 'PC' raked certificates. The loan is secured by the fee and leasehold interest in 2,004,571 sq. ft. of a 2,325,571-sq.-ft. super-regional mall built in 1998 in West Nyack, N.Y. The master servicer, Midland Loan Services Inc. (Midland), reported a May 2009 occupancy rate of 87.3%, down from 98% at issuance. The borrower has reported recent leasing activity that is expected to bring the occupancy rate up to approximately 89%. However, in-line sales have decreased to $382 per sq. ft., compared with $442 per sq. ft. at issuance. The loan is scheduled to mature on Feb. 9, 2010, and has no extension options remaining. S&P's adjusted valuation has fallen 27% since issuance, contributing to the downgrades of the 'PC' raked certificates. Six loans in the COMM 2005-FL10 pool totaling $769.2 million (94% of the pool's trust balance) are secured by retail properties. These properties are located predominantly in New York (86%) and Massachusetts (7%). Several of these properties have experienced declines in occupancy since issuance due to the chainwide liquidations of retailers such as Linens 'N Things and Steve & Barry's, as well as general weakness in the retail sector. The Pyramid Cos. is the sponsor for five of the six remaining retail loans (93% of the pool trust balance). According to the Aug. 15, 2009, remittance report, pool statistics for COMM 2005-FL10 are: There are seven loans in the pool, including senior participation interests in three floating-rate mortgage loans, three floating- rate whole-mortgage loans, and one floating-rate pari passu mortgage loan. There are mortgages on 19 anchored retail properties and one office property. All of the loans are indexed to one-month LIBOR. Details of the specially serviced loans in the COMM 2005-FL10 pool are: The fourth-largest loan in the pool, the Hudson Valley Plaza/West Seneca loan, has a pooled trust balance of $49.0 million (6%) and a whole-loan balance of $59.0 million. There is a $10.0 million junior participation interest held outside of the trust. The loan is secured by the fee interest in two cross-collateralized and cross-defaulted retail centers. Hudson Valley Plaza is a 689,342- sq.-ft. regional shopping center built in 1995 in Kingston, N.Y., and Shops at West Seneca is a 199,123-sq.-ft. big box retail property built in 1997 in West Seneca, N.Y. Midland reported a May 2009 occupancy rate of 89.2%, down from 93% at issuance. The loan was transferred to the special servicer, LNR Partners Inc., on July 28, 2009. The loan is scheduled to mature on Sept. 9, 2009, and has no extension options remaining. S&P's adjusted valuation has fallen 12% since issuance. The smallest loan in the pool, the Macquarie/DDR Trust Portfolio loan, has a pooled trust balance of $4.9 million (1%) and a whole- loan balance of $111.2 million. Seven retail properties have been released since issuance. The remaining collateral consists of 13 retail properties totaling 1.9 million sq. ft. in various locations throughout New York, Arkansas, North Carolina, Pennsylvania, and Tennessee. This loan has a whole-loan balance of $111.2 million that is split into four pari passu pieces. The trust's portion of the pooled balance is $4.9 million (1%). The trust balance reflects $44.8 million in paydowns since issuance due to collateral releases. The loan was transferred to the special servicer, TriMont Real Estate Advisors, on May 28, 2009, and will reach its final maturity on Oct. 1, 2009. An additional loan extension is currently being considered. TriMont reported an 83% occupancy rate as of April 2009, down from 91% at issuance. S&P's adjusted valuation has declined 27% since issuance, primarily due to lower rent income and/or lower occupancy at the remaining collateral properties. However, the loan has experienced a significant amount of deleveraging due to property releases. Excluding the two specially serviced loans, the remaining loans have final maturities between February and April 2010. LNR indicated that if there were any special servicing fees and/or workout fees on the Hudson Valley Plaza/West Seneca loan following an event of default, the nontrust junior participation interest will absorb them. In addition, the trust has incurred interest shortfalls to class M. Based on S&P's discussions with TriMont regarding the Macquarie/DDR Trust Portfolio loan, TriMont expects, as part of the negotiations with the borrower, that the borrower will assume all special servicing fees. If this does not occur and interest shortfalls continue, S&P may lower its rating on class M to 'D'. Ratings Lowered And Removed From Creditwatch Negative COMM 2005-FL10 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- B A- AA+/Watch Neg 23.41 C BBB+ AA/Watch Neg 20.45 D BBB- AA/Watch Neg 17.22 E BB+ A+/Watch Neg 13.99 F BB A/Watch Neg 10.76 G BB- A/Watch Neg 8.18 H B+ A-/Watch Neg 5.37 J B+ BBB+/Watch Neg 4.57 K B BBB/Watch Neg 2.15 L CCC BBB/Watch Neg 1.37 M CCC- BBB-/Watch Neg 0.00 N-PC B- A-/Watch Neg N/A O-PC CCC+ BBB+/Watch Neg N/A P-PC CCC BBB/Watch Neg N/A Q-PC CCC BBB-/Watch Neg N/A Ratings Affirmed And Removed From Creditwatch Negative COMM 2005-FL10 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-1 AAA AAA/Watch Neg 96.58 A-J1 AAA AAA/Watch Neg 57.04 A-J2 AAA AAA/Watch Neg 41.16 A-J3 AAA AAA/Watch Neg 35.54 X-2-DB AAA AAA/Watch Neg N/A X-2-NOM AAA AAA/Watch Neg N/A X-2-SG AAA AAA/Watch Neg N/A X-3-DB AAA AAA/Watch Neg N/A X-3-NOM AAA AAA/Watch Neg N/A X-3-SG AAA AAA/Watch Neg N/A N/A - Not applicable. COMM MORTGAGE: Fitch Puts Ratings on 33 Classes on Negative Watch ----------------------------------------------------------------- Fitch Ratings has placed 33 classes of COMM Mortgage Trust 2006- FL12 commercial mortgage pass-through certificates on Rating Watch Negative. The Negative Watch is due to Fitch's expectation that hotel performance will continue to be impacted by the economic downturn. The pool is comprised of 61% hotel loans. While year-end 2008 performance had generally declined only slightly from YE 2007, Fitch expects second quarter and YE 2009 to show significant declines. In addition, five of the eight hotel loans in the pool are collateralized by resort properties, which have been among the most severely impacted by the downturn. Fitch has placed these classes on Rating Watch Negative: -- $93.9 million class B 'AA+'; Rating Watch Negative; -- $66 million class C 'AA+; Rating Watch Negative; -- $72.8 million class D 'AA'; Rating Watch Negative; -- $54.1 million class E 'AA-'; Rating Watch Negative; -- $54.1 million class F 'A+'; Rating Watch Negative; -- $51.6 million class G 'A+'; Rating Watch Negative; -- $32.1 million class H 'A'; Rating Watch Negative; -- $36.7 million class J 'BBB'; Rating Watch Negative; -- $70.9 million class KR-1 'BBB+'; Rating Watch Negative; -- $22.1 million class KR-2 'BBB'; Rating Watch Negative; -- $62.5 million class KR-3 'BBB-'; Rating Watch Negative; -- $5 million class HDC-1 'BBB+'; Rating Watch Negative; -- $6.5 million class FSH-1 'BBB+'; Rating Watch Negative; -- $8.7 million class FSH-2 'BBB'; Rating Watch Negative; -- $9.1 million class FSH-3 'BBB-'; Rating Watch Negative; -- $3.3 million class MSH-1 'BB+'; Rating Watch Negative; -- $2.9 million class MSH-2 'BB'; Rating Watch Negative; -- $4.8 million class MSH-3 'BB-'; Rating Watch Negative; -- $4 million class MSH-4 'BB-'; Rating Watch Negative; -- $5.9 million class FG-1 'AA'; Rating Watch Negative; -- $6.1 million class FG-2 'A+'; Rating Watch Negative; -- $4.3 million class FG-3 'A-'; Rating Watch Negative; -- $5.5 million class FG-4 'BBB'; Rating Watch Negative; -- $7.2 million class FG-5 'BBB-'; Rating Watch Negative; -- $1.8 million class ES-1 'BBB-'; Rating Watch Negative; -- $1.7 million class ES-2 'BB+'; Rating Watch Negative; -- $1.5 million class ES-3 'BB'; Rating Watch Negative; -- $1.3 million class AH-1 'BBB+'; Rating Watch Negative; -- $1.3 million class AH-2 'BBB'; Rating Watch Negative; -- $1.5 million class AH-3 'BBB-'; Rating Watch Negative; -- $1.9 million class AH-4 'BB+'; Rating Watch Negative; -- $1.3 million class CM-1 'A-'; Rating Watch Negative; -- $2.5 million class CM-2 'BBB-'; Rating Watch Negative. Additionally, Fitch has affirmed these classes and revised Rating Outlooks as indicated: -- $824.8 million class A-2 at 'AAA'; Outlook Stable; -- $507 million class A-J at 'AAA'; Outlook to Negative from Stable; -- Interest only classes X-1, X-2, X-3-BC, X-3-DB, X-3-SG, X-4, X-5-BC, X-5-DB, and X-5-SG at 'AAA'; Outlook Stable; -- $11.4 million class CN-1 at 'BBB'; Outlook Negative; -- $7.8 million class CN-2 at 'BBB'; Outlook Negative; -- $7.7 million class CN-3 at 'BBB-'; Outlook Negative; -- $6.8 million class IP-1 at 'BBB+'; Outlook Stable; -- $11.2 million class IP-2 at 'BBB'; Outlook Stable; -- $11 million class IP-3 at 'BBB-'; Outlook Stable; -- $0.7 million class CA-2 at 'BBB'; Outlook Stable; -- $1.1 million class CA-3 at 'BBB-'; Outlook Stable; -- $1.4 million class CA-4 at 'BBB-'; Outlook Stable; -- $5.5 million class AN-3 at 'BBB-'; Outlook Stable; -- $4.4 million class AN-4 at 'BBB-'; Outlook Stable; -- $2.5 million class LS-1 at 'BBB+'; Outlook Stable; -- $2.7 million class LS-2 at 'BBB'; Outlook Stable; -- $2.6 million class LS-3 at 'BBB-'; Outlook Stable; -- $2.9 million class TC-1 at 'BB-'; Outlook Negative; -- $2.4 million class TC-2 at 'BB-'; Outlook Negative; -- $1.7 million class LB-1 at 'BBB+'; Outlook Stable; -- $1.2 million class LB-2 at 'BBB'; Outlook Stable; -- $1.2 million class LB-3 at 'BBB-'; Outlook Stable. CREDIT DEFAULT: S&P Corrects Swap Risk Rating on Tranche -------------------------------------------------------- Standard & Poor's Ratings Services corrected its swap risk rating on the tranche from Credit Default Swap "Paoli" Reference No. 64451, an unfunded synthetic corporate investment-grade collateralized debt obligation transaction. S&P incorrectly lowered the rating to 'BB-srp' from 'BBBsrp' on Aug. 7, 2009. On Feb. 11, 2009, this transaction was amended to provide an increase in subordination and an extension of the maturity date. Due to an administrative error, these amendments were not taken into account in S&P's analysis prior to the rating action of Aug. 7, 2009. The current rating reflects S&P's revised analysis, which takes the amendments to the transaction into account. Rating Corrected Credit Default Swap Swap Risk Rating - "Paoli" Ref No. 64451 Rating ------ Class To From ----- -- ---- Tranche BBBsrp BB-srp CREDIT DEFAULT: S&P Withdraws 'B-' Swap Risk Rating --------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'B-' swap risk rating on Credit Default Swap CDS Reference No. SDB506887699. The withdrawal follows the early termination of the swap agreement on May 5, 2009, as per section 9 of the indenture. Rating Withdrawn Credit Default Swap Swap risk rating - portfolio only, CDS reference No. SDB506887699 Rating Balance (mil. $) ------ ---------------- Class To From Current Previous ----- -- ---- ------- -------- Notes NR B-srp 0.000 40.000 NR - Not rated. CREDIT SUISSE: Fitch Takes Rating Actions on 2007-TFL2 Tranches --------------------------------------------------------------- Fitch Ratings has taken various actions on 11 classes of Credit Suisse First Boston Mortgage Securities Corp., series 2007-TFL2 including downgrades to eight tranches. A detailed list of rating actions follows at the end of this press release. The downgrades are the result of the transfer of the largest loan, Planet Hollywood Resort and Casino (30.9% of the pool) to special servicing. The loan transferred to special servicing in August 2009 due to imminent default and the borrower's request for relief. In May 2009, a modification was completed which enabled the borrower to draw down $9 million of the $11 million interest reserve, subject to replenishment at the December 2009 maturity (and possible extension). This strategy proved unsuccessful, and the borrower defaulted on its loan obligations in August 2009 after asset performance continued to be poor through the summer months. The special servicer, Archon, is discussing workout options with the borrower. Fitch analyzed the effect of a loan liquidation using three stress scenarios; a 50% value decline based on the appraisal from issuance, a 66% value decline, and a stressed value based on the trailing twelve month cash flow of $37 million and a 13% cap rate. The rating actions reflect the stressed value scenario. Fitch will continue to monitor the workout of the loan and may take additional negative rating actions once an updated appraisal has been received and more detail on the workout becomes available. Planet Hollywood Resort and Casino is a 2,519 room hotel and casino in Las Vegas, NV, previously operated as the Aladdin. The property is in the midst of a $178 million renovation and re- development project that includes substantial improvements to the facade, casino, restaurants, and guestrooms. At issuance, the property appraisal upon completion of all renovations was $1.3 billion, including land value of $397.5 million. The Resorts Atlantic City (11.7%) and Biscayne Landing (10.8%) loans are also in special servicing with Fitch expecting losses upon resolution of the workouts. Fitch downgrades and places on Rating Watch Negative these classes of CS First Boston Mortgage Securities Corp., pass-through certificates, series 2007-TFL2: -- $207 million class A-3 to 'BBB-' from 'AAA'; -- $45.7 million class B to 'BB' from 'A+'; -- $42.6 million class C to 'BB' from 'A'; -- $33.5 million class D to 'B' from 'BBB+'; -- $36.6 million class E to 'B' from 'BBB'. In addition, Fitch downgrades and assigns Recovery Ratings (RRs) to these classes: -- $36.5 million class F to 'CCC/RR6' from 'BBB-'; -- $33.5 million class G to 'CCC/RR6' from 'BB'; -- $39.6 million class H to 'CC/RR6' from 'B'. In addition, Fitch places this class on Rating Watch Negative: -- $100 million class A-2 'AAA'. In addition, the Recovery Rating on this class is revised: -- $36.6 million class J from 'CC/RR4' to 'CC/RR6'. In addition, Fitch affirms these ratings: -- $39.6 million class K at 'C/RR6'; -- $33.5 million class L at 'C/RR6'; -- $8.9 million class BSL-A at 'C/RR6'; -- $9 million class BSL-B at 'C/RR6'; -- $8.9 million class BSL-C at 'C/RR6'; -- $8.9 million class BSL-D at 'C/RR6'; -- $7.9 million class BSL-E at 'C/RR6'; -- $9.9 million class BSL-F at 'C/RR6'. In addition, these classes remain on Rating Watch Negative: -- $19.9 million class CSP-G 'BBB+'; -- $9.9 million class CSP-H 'BBB'; -- $15.9 million class CSP-J 'BBB-'; -- $18 million class CSP-K 'BB+'. In addition, Fitch affirms these classes and revises Rating Outlooks as indicated: -- $518.1 million class A-1 at 'AAA'; Outlook to Negative from Stable; -- Interest-only class A-X-1 at 'AAA'; Outlook Stable; -- Interest-only class A-X-2 at 'AAA'; Outlook Stable; -- $85.9 million class CSP-A1 at 'AAA'; Outlook Stable; -- $33.6 million class CSP-A2 at 'AAA'; Outlook Stable; -- Interest-only class CSP-AX at 'AAA'; Outlook Stable; -- $10.6 million class CSP-B at 'AA+'; Outlook Stable; -- $11.5 million class CSP-C at 'AA'; Outlook Stable; -- $9.9 million class CSP-D at 'AA-'; Outlook Stable; -- $10 million class CSP-E at 'A+': Outlook Stable; -- $9.7 million class CSP-F at 'A'; Outlook Stable. CREDIT SUISSE: S&P Raises Ratings on Five 2004-C4 Securities ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on five classes of commercial mortgage-backed securities from Credit Suisse First Boston Mortgage Securities Corp.'s series 2004-C4 and removed them from CreditWatch with developing implications. In addition, S&P affirmed its ratings on 17 classes from the same transaction and removed 14 of the affirmed ratings from CreditWatch developing. The rating actions follow S&P's analysis of the transaction using its recently released U.S. conduit and fusion CMBS criteria. S&P's analysis included a review of the credit characteristics of all of the loans in the pool. Using servicer-provided financial information, excluding loans that S&P stressed as credit concerns, S&P calculated an adjusted debt service coverage of 1.48x and a loan-to-value ratio of 90.3%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 1.12x and an LTV of 113.1%. The implied defaults and loss severity under the 'AAA' scenario were 30.1% and 29.0%, respectively. The DSC and LTV calculations excluded two specially serviced loans (0.8%), 79 cooperative apartment loans (15.8%), and nine loans that have been defeased (22.4%). S&P separately estimated losses for the two specially serviced loans, and these losses are included in the 'AAA' scenario implied default and loss figures. S&P excluded the cooperative apartment loans because they did not default under the 'AAA' scenario due to extremely low leverage. S&P affirmed the ratings on the interest-only certificates based on its current criteria. S&P published a request for comment proposing changes to the IO criteria on June 1, 2009. After S&P finalize its criteria review, S&P may revise its current IO criteria, which may affect outstanding ratings, including the ratings on the IO certificates S&P affirmed. Credit Concerns Seven assets ($79.0 million, 8.2%) in the pool, including the third- and ninth-largest exposures in the pool, are with the special servicer, J.E. Robert Cos. The payment status of the specially serviced loans is: one is a nonperforming matured balloon ($628,598, 0.1%), one is 90 days delinquent ($7.0 million, 0.7%), three are performing matured balloons ($45.4 million, 4.7%), and two are current ($26.0 million, 2.7%). An appraisal reduction amount of $1.7 million is currently in effect for the Timber Hollow Apartments loan ($7.0 million, 0.7%). Standard & Poor's expects a moderate loss upon the resolution of this asset. A discounted payoff was recently approved for the Country Haven Mobile Home Park loan ($628,598, 0.1%). Standard & Poor's anticipates a moderate loss upon the resolution of this asset. S&P expects that this loan will be removed from the trust after this transaction closes. The Bertakis MHP Portfolio loan is the third-largest loan in the pool ($36.5 million, 3.8%) and is secured by a seven-property mobile home park portfolio. The portfolio consists of 1,723 units spread over six properties in southeastern Michigan and Manvel, Texas. The loan was transferred to JER on April 13, 2009, due to an upcoming maturity. Negotiations for a loan extension are in process. The Oak Grove Apartments loan is the ninth-largest loan in the pool ($16.0 million, 1.7%) and is secured by a 369-unit multifamily building in Miami. The loan was transferred to JER on Aug. 3, 2009, due to imminent default. As of Dec. 31, 2008, the reported DSC was 0.94x. Occupancy was 92.4% as of July 23, 2009. Transaction Summary As of the August 2009 remittance report, the aggregate trust balance was $969.6 million, which represents 85.2% of the aggregate trust balance at issuance. There are 165 loans in the pool, down from 177 at issuance. The master servicer for the transaction is KeyCorp Real Estate Capital Markets Inc. Excluding $217.4 million (23.4%) in defeased collateral, the master servicer provided financial information for 99.4% of the pool, and 91.2% of the servicer-provided information was full-year 2008 data. S&P calculated a weighted average DSC of 1.86x for the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.48x and 90.3%, respectively. These calculations exclude the 79 cooperative apartment loans in the pool. To date, the transaction has experienced $539,080 losses associated with two defaulted loans. Twenty-six loans are on the master servicer's watchlist, including three of the top 10 loans. Twenty-five loans ($131.7 million, 13.6%) have a reported DSC of less than 1.10x, and 21 of these loans ($107.5 million, 11.1%) have a reported DSC of less than 1.0x. Summary Of Top 10 Loans The top 10 exposures have an aggregate outstanding balance of $309.0 million (31.9%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.40x for the top 10 loans. The third- and ninth-largest loans in the pool ($52.5 million, 5.4%) are with the special servicer and are discussed above. The second-, fourth-, and sixth-largest loans in the pool ($97.1 million, 10.0%) appear on the master servicer's watchlist. S&P's adjusted DSC and LTV for the top 10 loans were 1.40x and 97.7%, respectively. The Village on the Parkway loan ($45.8 million, 4.7%) is the second-largest loan in the pool and is secured by a 381,166-sq.- ft. anchored retail center in Addison, Texas. The master servicer placed the loan on its watchlist due to the upcoming expiration of a major tenant, which constitutes 33.4% of the center's net rentable area. The tenant has given notice that it will not renew its lease, and the space is being marketed in advance of the Jan. 31, 2010, lease expiration. The property was 77.4% occupied as of June 30, 2009, and DSC was 1.25x as of Dec. 31, 2008. The Village Square and Deerpath Court loan ($30.7 million, 3.2%) is the fourth-largest loan in the pool and is secured by two anchored retail centers in Zurich, Illinois, totaling 363,021 sq. ft. The master servicer placed this loan on its watchlist due to declines in occupancy and DSC. The property was 89.9% occupied as of July 31, 2008, and DSC was 1.32x as of Dec. 31, 2008. The Governor's Marketplace Shopping Center loan ($20.6 million, 2.1%) is the sixth-largest loan in the pool and is secured by a 244,932-sq.-ft. anchored retail center in Tallahassee, Fla. The loan is on the watchlist due to an upcoming loan maturity, for which an extension is under negotiation. The property was 92.0% occupied as of April 14, 2009, and DSC was 2.17x as of Dec. 31, 2008. Standard & Poor's stressed the loans in the pool according to its updated conduit/fusion criteria. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Raised And Removed From Creditwatch Developing Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certificates 2004-C4 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- B AA+ AA/Watch Dev 11.24 C A+ A/Watch Dev 8.60 D A A-/Watch Dev 7.57 E A- BBB+/Watch Dev 6.25 F BBB+ BBB/Watch Dev 5.37 Ratings Affirmed And Removed From Creditwatch Developing Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certificates 2004-C4 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-2 AAA AAA/Watch Dev 23.42 A-3 AAA AAA/Watch Dev 23.42 A-4 AAA AAA/Watch Dev 23.42 A-5 AAA AAA/Watch Dev 23.42 A-6 AAA AAA/Watch Dev 23.42 A-1-A AAA AAA/Watch Dev 23.42 A-J AAA AAA/Watch Dev 15.35 G BBB- BBB-/Watch Dev 3.91 H BB+ BB+/Watch Dev 3.61 J BB BB/Watch Dev 3.17 K BB- BB-/Watch Dev 2.59 L B+ B+/Watch Dev 2.15 M B B/Watch Dev 1.85 N B- B-/Watch Dev 1.41 Ratings Affirmed Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certificates 2004-C4 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-X AAA N/A A-SP AAA N/A A-Y AAA N/A CREDIT SUISSE: S&P Shifts Watch on 2004-C4 Certs. to Developing --------------------------------------------------------------- Standard & Poor's Ratings Services revised its CreditWatch status on 19 classes of certificates from Credit Suisse First Boston Mortgage Securities Corp.'s series 2004-C4 to developing from negative. The ratings were originally placed on CreditWatch negative following the release of S&P's updated criteria for U.S. conduit and fusion transactions on June 26, 2009. S&P is in the process of analyzing the transaction utilizing S&P's updated criteria. Currently, its analysis indicates that S&P will likely affirm the majority of the ratings in the transaction, and several of the investment-grade classes have the potential for upgrades. S&P expects to finalize the analysis in the near future, at which time S&P will release a full rationale. As of the August remittance report, the collateral pool consisted of 165 loans totaling $969.6 million. Of these loans, nine have been defeased ($217.4 million, 23.5%). There are seven specially serviced assets in the pool ($79.0 million, 8.2%), of which one is a nonperforming matured balloon (0.1%), one is 90 days delinquent (0.7%), three are performing matured balloons (4.7%), and two are current (2.7%). To date, the transaction has experienced $539,080 losses associated with two defaulted loans. Creditwatch Status Revised To Developing From Negative Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certificates 2004-C4 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-2 AAA/Watch Dev AAA/Watch Neg 23.42 A-3 AAA/Watch Dev AAA/Watch Neg 23.42 A-4 AAA/Watch Dev AAA/Watch Neg 23.42 A-5 AAA/Watch Dev AAA/Watch Neg 23.42 A-6 AAA/Watch Dev AAA/Watch Neg 23.42 A-1-A AAA/Watch Dev AAA/Watch Neg 23.42 A-J AAA/Watch Dev AAA/Watch Neg 15.35 B AA/Watch Dev AA/Watch Neg 11.24 C A/Watch Dev A/Watch Neg 8.60 D A-/Watch Dev A-/Watch Neg 7.57 E BBB+/Watch Dev BBB+/Watch Neg 6.25 F BBB/Watch Dev BBB/Watch Neg 5.37 G BBB-/Watch Dev BBB-/Watch Neg 3.91 H BB+/Watch Dev BB+/Watch Neg 3.61 J BB/Watch Dev BB/Watch Neg 3.17 K BB-/Watch Dev BB-/Watch Neg 2.59 L B+/Watch Dev B+/Watch Neg 2.15 M B/Watch Dev B/Watch Neg 1.85 N B-/Watch Dev B-/Watch Neg 1.41 CSFB ADJUSTABLE: Moody's Downgrades Ratings on 16 2005-8 Tranches ----------------------------------------------------------------- Moody's Investors Service has downgraded 16 tranches from CSFB Adjustable Rate Mortgage Trust 2005-8. The collateral backing the transaction consists primarily of first-lien, adjustable-rate, Alt-A mortgage loans. The actions are triggered by higher than expected increase in delinquencies and rising severities. Moody's rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool-level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, time tranching, and other structural features within the senior note waterfalls. Moody's followed a similar approach for deals from the 2005 vintage with appropriate changes to certain key input parameters such as severity and the rate of delinquency build up, which would be generally lower relative to the 2006 and 2007 vintages. These differences are aimed at better capturing the specific characteristics of loans from the 2005 vintage that were originated in an environment of relatively tighter underwriting standards and also benefited from some initial home price appreciation. Moody's has revised the lifetime expected loss on this transaction. Loss estimates are subject to variability and are sensitive to assumptions used; as a result, realized losses could ultimately turn out higher or lower than Moody's current expectations. Moody's will continue to evaluate performance data as it becomes available and will assess the pattern of potential future defaults and adjust loss expectations accordingly as necessary. Complete rating actions are: Issuer: CSFB Adjustable Rate Mortgage Trust 2005-8/ Group 1 2 3 4 5 6 -- Pool Current Expected Cumulative Net Losses: 8% (as a percentage of the original loan pool balance) -- Cl. 1-A-2, Downgraded to Ca; previously on Feb 4, 2009 Downgraded to B3 -- Cl. 2-A-1, Downgraded to Caa1; previously on Feb 4, 2009 Downgraded to B3 -- Cl. 2-A-2-1, Downgraded to B3; previously on Feb 4, 2009 Downgraded to Ba1 -- Cl. 2-A-2-2, Downgraded to Ca; previously on Feb 4, 2009 Downgraded to B3 -- Cl. 3-A-1, Downgraded to Caa1; previously on Feb 4, 2009 Downgraded to B3 -- Cl. 3-A-2-1, Downgraded to B3; previously on Feb 4, 2009 Downgraded to Ba1 -- Cl. 3-A-2-2, Downgraded to Ca; previously on Feb 4, 2009 Downgraded to B3 -- Cl. 4-A-1-1, Downgraded to Ba3; previously on Feb 4, 2009 Downgraded to Baa3 -- Cl. 4-A-1-2, Downgraded to Ca; previously on Feb 4, 2009 Downgraded to B3 -- Cl. 4-A-2-1, Downgraded to Baa2; previously on Feb 4, 2009 Downgraded to A1 -- Cl. 4-A-2-2, Downgraded to Caa3; previously on Feb 4, 2009 Downgraded to B3 -- Cl. 5-A-1, Downgraded to Caa1; previously on Feb 4, 2009 Downgraded to B3 -- Cl. 6-A-1, Downgraded to Caa1; previously on Feb 4, 2009 Downgraded to B3 Issuer: CSFB Adjustable Rate Mortgage Trust 2005-8/ Group 7A 7B -- Pool Current Expected Cumulative Net Losses: 13% (as a percentage of the original loan pool balance) -- Cl. 7-A-1-1, Downgraded to Baa3; previously on Feb 4, 2009 Downgraded to Baa1 -- Cl. 7-A-1-2, Downgraded to Ba1; previously on Feb 4, 2009 Downgraded to Baa3 -- Cl. 7-A-4, Downgraded to Ba3; previously on Feb 4, 2009 Downgraded to Ba1 The ratings on the notes were assigned after evaluating factors determined applicable to the credit profile of the notes, such as: i) the nature, sufficiency, and quality of historical performance information available for the asset class as well as for the transaction sponsor, ii) collateral analysis, iii) an analysis of the policies, procedures and alignment of interests of the key parties to the transaction, most notably the originator and the servicer, iv) an analysis of the transaction's allocation of collateral cashflow and capital structure, v) an analysis of the transaction's governance and legal structure, and vi) a comparison of these attributes against those of other similar transactions. DAIMLERCHRYSLER AUTO: S&P Raises Ratings on Various Classes ----------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class B notes issued from DaimlerChrysler Auto Trust's series 2006-A, 2006-C, and 2006-D transactions and affirmed its ratings on five classes issued from series 2005-B, 2006-A, 2006-C, and 2006-D. At the same time, Standard & Poor's affirmed its ratings on 16 classes issued from Chrysler Financial Auto Securitization Trust's series 2007-A, 2008-A, and 2008-B transactions, and removed the ratings on the class A-4, B, and C notes issued from series 2007-A and 2008-A from CreditWatch with negative implications, where they were placed May 5, 2009. The upgrades and affirmations reflect S&P's view that the total credit enhancement available is adequate for each of the raised or affirmed ratings when S&P factors in the remaining expected net losses. The collateral performance for each of the Chrysler Financial-related securitizations, beginning with series 2005-B, has been slightly worse than S&P's initial and/or revised expectations, with each subsequently issued series performing worse than its predecessor. The series 2007-A, 2008-A, and 2008-B transactions, however, have performed substantially worse than S&P's initial expectations. In May 2009, S&P revised its loss expectations for the series 2007-A and 2008-A transactions to 6.75%-7.25% when S&P placed the class A-4, B, and C notes on CreditWatch negative. This compares with 6.50%-6.70% in November 2008 and 2.25%-2.75% and 2.50%-3.00%, respectively, when S&P initially rated these transactions. Table 1 Collateral Performance As Of The September 2009 Distribution Month (%) Prior Current Cumulative Initial revised revised Pool Current recovery lifetime lifetime lifetime Series Mo. factor CNL rate CNL exp. CNL exp. CNL exp. ------ --- ------ ------- ---------- -------- -------- -------- 2005-B 52 3.92 2.02 46.87 2.10-2.30 1.80-2.00 2.05-2.15 2006-A 42 9.64 2.13 44.62 2.10-2.30 1.80-2.20 2.25-2.45 2006-C 35 18.85 2.23 43.89 1.80-2.10 1.75-2.25 2.65-2.85 2006-D 33 22.59 2.62 43.18 1.80-2.10 1.75-2.25 3.00-3.50 2007-A 22 50.42 3.96 40.34 2.25-2.75 6.75-7.25 6.75-7.25 2008-A 19 52.95 3.42 38.96 2.50-3.00 6.75-7.25 6.75-7.25 2008-B 16 59.75 2.78 40.26 2.75-3.15 7.00-7.50 6.75-7.25 CNL - Cumulative net loss. In addition S&P revised its loss expectations for the series 2008- B transaction to 6.75%-7.25%, down from 7.00%-7.50% in January 2009, when S&P lowered the ratings on the class A-4, B, and C notes, and from 2.75%-3.25% when S&P initially rated the transaction. The decrease in S&P's revised cumulative net losses for the series 2008-B transaction since January 2009 is based on S&P's view that the rate at which losses are increasing has begun to slow down to loss levels that, in S&P's view, are in line with the series 2007-A and 2008-A transactions' loss performance. All of the aforementioned transactions have a sequential principal payment structure, which pays principal to the senior-most classes of notes in full before the other senior and subordinate classes receive principal and will remain in place even if a monetary or nonmonetary event of default and/or liquidation of collateral occurs. The issuer initially structured each transaction with credit enhancement that consisted of subordination for the higher- rated tranches, a reserve account, overcollateralization, and yield supplement overcollateralization, which is used to cover interest on lower-yielding loans. The issuer also structured each transaction with a non-amortizing reserve account, which was initially funded with 0.25%-0.92% of the initial adjusted pool balance (the initial collateral balance minus the yield supplement overcollateralization amount [the percentage varies between transactions]). On Nov. 26, 2008, the transaction documents were amended for the series 2007-A and 2008- A transactions to increase the specified reserve account amount. As a result, the series 2007-A transaction's specified reserve amount is equal to the reserve account initial deposit plus $50 million and the series 2008-A transaction's specified reserve amount is equal to the reserve account initial deposit plus $30 million. S&P's analysis of these transactions incorporated cash flows, which took into account current and historical performance to estimate the future performance. S&P's various cash flow scenarios and sensitivity analyses included assumptions on recoveries, loss timing, and voluntary absolute prepayment speeds that are appropriate given each transaction's current performance, as well as S&P's view of future loss timing, recovery rates, and voluntary prepayments. The results demonstrated that the transactions had adequate remaining loss coverage at their respective rating levels for all of the classes that S&P reviewed. The results also showed that the class B notes from the series 2006-B, 2006-C, and 2006-D transactions had adequate remaining loss coverage at the revised rating levels. Despite the increase in S&P's loss expectations since deal inception, S&P have raised and affirmed its ratings on the transactions as a result of the growth in credit support as a percent of the amortizing pool balance. In S&P's view, the classes whose ratings S&P are affirming are currently able to withstand stress scenarios at their current and revised rating levels. In addition, the high seasoning and relatively low pool factors for the transactions whose ratings S&P are raising lead us to believe that they are relatively far along in their loss timing curve. This factor, coupled with the increase in credit support as a percent of the amortizing pool balance, has enabled the transactions to exceed the requisite loss coverage multiple at the previous rating levels. Table 2 Hard Credit Support As A % Of The Total Pool Balance Current Total hard total hard Pool credit support credit support Series Class factor(%) at issuance(i) (% of current)(i) ------ ----- --------- -------------- ----------------- 2005-B B 3.92 1.87 42.45 2006-A A-4 9.64 4.45 45.76 2006-A B 9.64 1.68 17.02 2006-C A-4 18.85 4.61 22.10 2006-C B 18.85 1.84 7.44 2006-D A-3 22.59 17.38 74.95 2006-D A-4 22.59 4.66 18.64 2006-D B 22.59 1.86 6.27 2007-A A-2 50.42 43.85 92.55 2007-A A-3 50.42 26.45 58.03 2007-A A-4 50.42 7.18 19.81 2007-A B 50.42 2.59 10.71 2007-A C 50.42 0.89 7.35 2008-A A-2 52.95 50.40 102.05 2008-A A-3 52.95 20.50 45.57 2008-A A-4 52.95 8.26 22.46 2008-A B 52.95 2.92 12.37 2008-A C 52.92 0.73 8.24 2008-B A-2 59.75 39.67 69.51 2008-B A-3 59.75 20.05 36.67 2008-B A-4 59.75 9.58 19.14 2008-B B 59.75 3.86 9.58 2008-B C 59.75 1.00 4.79 (i) The current total hard credit support consists of a reserve account, overcollateralization, and, for the higher-rated tranches, subordination. It excludes excess spread and yield supplement overcollateralization, which also provide additional enhancement (as of the September 2009 distribution period). Earlier this year, GMAC LLC announced that it was given a four- year agreement to provide incentivized retail financing with limited exclusivity as the preferred provider of new wholesale financing for Chrysler dealer inventory. As a result, S&P will continue to monitor new developments surrounding the future of servicing operations at Chrysler Financial and assess the effect on collateral performance. S&P will continue to monitor the performance of each transaction to assess whether the credit enhancement remains sufficient under S&P's stress scenarios for each of the rated classes. Ratings Raised DaimlerChrysler Auto Trust Rating ------ Series Class To From ------ ----- -- ---- 2006-A B AAA AA- 2006-C B AA A 2006-D B AA- A Ratings Affirmed And Removed From Creditwatch Negative Chrysler Financial Auto Securitization Trust Rating ------ Series Class To From ------ ----- -- ---- 2007-A A-4 AAA AAA/Watch Neg 2007-A B A A/Watch Neg 2007-A C BBB BBB/Watch Neg 2008-A A-4 AAA AAA/Watch Neg 2008-A B A A/Watch Neg 2008-A C BBB BBB/Watch Neg Ratings Affirmed Chrysler Financial Auto Securitization Trust Series Class Rating ------ ----- ------ 2007-A A-2a AAA 2007-A A-2b AAA 2007-A A-3a AAA 2007-A A-3b AAA 2008-A A-2a AAA 2008-A A-2b AAA 2008-A A-3a AAA 2008-A A-3b AAA 2008-B A-2a AAA 2008-B A-2b AAA 2008-B A-3a AAA 2008-B A-3b AAA 2008-B A-4a AA 2008-B A-4b AA 2008-B B BBB 2008-B C BB- DaimlerChrysler Auto Trust Series Class Rating ------ ----- ------ 2005-B B AAA 2006-A A-4 AAA 2006-C A-4 AAA 2006-D A-3 AAA 2006-D A-4 AAA DEUTSCHEMORTGAGE SECURITIES: S&P Cuts Ratings on Two Certs. ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on two classes of certificates from DeutscheMortgage Securities Inc. Mortgage Loan Resecuritization Trust Series 2009-RS2. S&P initially rated the certificates for loan groups II, III, and IV out of the four-group structure within the DMSI 2009-RS2 re-REMIC (resecuritized real estate mortgage investment conduit). S&P lowered the ratings on classes II-A-2 and III-A-2 to 'CCC' from 'B'. At the same time, S&P affirmed its 'AAA' ratings on 24 other rated classes. S&P's downgrades reflect the significant deterioration in performance of the loans backing the underlying certificates. Although this performance deterioration is severe, because classes II-A-2 and III-A-2 provide credit enhancement to other classes within group II and III, S&P affirmed the ratings on these other classes. In addition, S&P's affirmations with respect to group IV reflect the performance of the loans and available credit enhancements for the group IV underlying certificate. DMSI 2009-RS2, which closed in May 2009, is a residential mortgage-backed securities re-REMIC transaction collateralized by four underlying classes that support four independent groups within the re-REMIC. On the closing date, S&P only rated the certificates for loan groups II, III, and IV within DMSI 2009-RS2. For groups II, III, and IV, the loans securing the three underlying classes, which are from three different trusts, consist predominantly of fixed-rate prime mortgage loans and fixed-rate and adjustable-rate subprime mortgage loans. All of the group II classes from DMSI 2009-RS2 are supported by class A-1 from RFMSI Series 2006-S11 Trust (currently rated 'CCC'). The performance of the loans securing this trust has declined precipitously in recent months. This pool had experienced losses of 0.77% as of the August 2009 distribution and currently has approximately 10.74% in delinquent loans. Based on the losses to date, the current pool factor of 0.694 (69.4%), which represents the outstanding pool balance as a proportion of the original balance, and the pipeline of delinquent loans, S&P's current projected loss for this pool is 4.34%, which exceeds the level of credit enhancement available to cover losses to the II-A- 2 class of the re-REMIC. All of the group III classes from DMSI 2009-RS2 are supported by class 1-A-2 from CHL Mortgage Pass-Through Trust 2007-18 (currently rated 'CCC'). The performance of the loans securing this trust has declined precipitously in recent months. This pool had experienced losses of 0.36% as of the August 2009 distribution and currently has approximately 13.58% in delinquent loans. Based on the losses to date, the current pool factor of 0.738 (73.8%), and the pipeline of delinquent loans, S&P's current projected loss for this pool is 6.0%, which exceeds the level of credit enhancement available to cover losses to class III-A-2 of the re- REMIC. All of the group IV classes from DMSI 2009-RS2 are supported by class 2-A-1 from Newcastle Mortgage Securities Trust 2007-1 (currently rated 'AAA'). This pool had experienced losses of 7.08% as of the August 2009 distribution and currently has approximately 34.9% in delinquent loans. Based on the losses to date, the current pool factor of 0.761 (76.1%), and the pipeline of delinquent loans, S&P's current projected loss for this pool is 29.1%. The group IV affirmations are based on the available credit enhancement for class 2-A-1 from Newcastle Mortgage Securities Trust 2007-1. Over the past two years, S&P has revised its RMBS default and loss assumptions, and consequently its projected losses, to reflect the continuing decline in mortgage loan performance and the housing market. The performance deterioration of most U.S. RMBS has continued to outpace the market's expectations. Ratings Lowered Deutsche Mortgage Securities Inc. Mortgage Loan Resecuritization Trust Series 2009-RS2 Rating ------ Class CUSIP To From ----- ----- -- ---- II-A-2 25158EAE6 CCC B III-A-2 25158EAR7 CCC B Ratings Affirmed Deutsche Mortgage Securities Inc. Mortgage Loan Resecuritization Trust Series 2009-RS2 Class CUSIP Rating ----- ----- ------ II-A-1 25158EAD8 AAA II-A-3 25158EAF3 AAA II-A-4 25158EAG1 AAA II-A-5 25158EAH9 AAA II-A-6 25158EAJ5 AAA II-A-7 25158EAK2 AAA II-A-8 25158EAL0 AAA II-A-9 25158EAM8 AAA II-A-10 25158EAN6 AAA III-A-1 25158EAQ9 AAA III-A-3 25158EAS5 AAA III-A-4 25158EAT3 AAA III-A-5 25158EAU0 AAA III-A-6 25158EAV8 AAA III-A-7 25158EAW6 AAA III-A-8 25158EAX4 AAA III-A-9 25158EAY2 AAA III-A-10 25158EAZ9 AAA IV-A-1 25158EBB1 AAA IV-A-2 25158EBC9 AAA IV-A-3 25158EBD7 AAA IV-A-4 25158EBE5 AAA IV-A-5 25158EBF2 AAA IV-A-6 25158EBG0 AAA DOWLING COLLEGE: Moody's Confirms 'B1' Rating on Two Bonds ---------------------------------------------------------- Moody's has confirmed the B1 rating on Dowling College's (NY) Series 1996 and 2002 bonds and removed the rating from Watchlist for possible downgrade. The rating applies to $15.7 million of rated debt, the Series 2002 bonds which were issued through the Town of Brookhaven Industrial Development Agency and the Series 1996 bonds which were issued through the Suffolk County Industrial Development Agency. The rating outlook remains negative reflecting near-term concerns about the College's thin unrestricted liquidity, challenging student market position with multiple years of pressure on enrollment, and dependence for seasonal cash flow purposes on a $2 million operating line of credit which matures in October 2009. Legal Security: The Series 1996 and 2002 bonds are general obligations of the College and feature debt service reserve funds. The Series 2002 bonds are further secured by a first leasehold mortgage and security interest in the financed facility, a residence hall on the Shirley (Brookhaven) campus. The College's $38.5 million of Series 2006 bonds (not rated by Moody's) are a general obligation of the College and also have a debt service reserve fund. They are secured by a first mortgage lien and security interest in the College's Oakdale and Shirley campuses and property, excluding the residential facility financed with the Series 2002 bonds. The Series 2006 bonds have a subordinate mortgage lien and security interest in the Series 2002 facility. Per the Series 2006 Sublease between the College and the issuing authority, under certain circumstances (defined as Triggering Events in the Sublease), the College's Gross Revenues, excluding 2002 Facility Revenues pledged to the Series 2002 Trustee to secure the principal amount of the Series 2002 Bonds, would be directed to the Series 2006 trustee. Debt service on the Series 2006 bonds would first be paid from Gross Revenues, before other operating costs of the College. In Moody's opinion, the Series 1996 and 2002 bonds have a weaker legal security than the Series 2006 bonds. Triggering Events include breach of a financial covenant to maintain $4 million of unrestricted liquid funds (excluding debt service reserve funds) tested every 3/31 and 9/30. As of 3/31/09, Dowling's management reported that it met this financial covenant with $6.7 million of unrestricted liquidity, and management anticipates meeting the covenant when tested again as of 9/30/09. Debt-Related Rate Derivatives: None Challenges Very thin liquidity and reliance on $2 million operating line for seasonal cash flow. The College's levels of total cash and investments are modest relative to a large amount of outstanding debt ($66.7 million in FY 2008) and a large expense base ($73.5 million of expenses in FY 2008). Based on unaudited data provided by management, Moody's estimate that the College currently has approximately $16 million of cash and investments (excluding debt service reserve funds), although this is a high point for the College's liquidity levels due to the receipt of fall semester tuition revenue. During this past summer, the College fully drew on its $2 million operating line of credit (which has since been repaid) and also used approximately $5.5 million of its longer-term investment pool to cover expenses. The operating line of credit is provided by TD Bank and expires at the end of October 2009. Moody's will continue to closely monitor the College's liquidity levels and ability to either extend the line of credit or add a new operating line of credit. Challenging student market position, as evidenced by past enrollment declines and weak freshmen selectivity and matriculation levels. In fall 2008, Dowling enrolled a combined 4,376 full-time equivalent (FTE) students at its two campuses on the southern shore of Long Island, NY (compared to 4,798 FTE in fall 2005). In fall 2008, Dowling accepted 79% of freshmen applicants and 23% of those accepted chose to enroll, highlighting a significant amount of competition from both other local private and public universities. Management reports that fall 2009 total credit hours are expected to decline by approximately 2 to 3%, compared to fall 2008, a decline which was assumed in the FY 2010 operating budget. Although fall 2009 undergraduate demand appears healthy (535 entering freshmen, compared to an average of 483 during fall 2004-2008), the College is experiencing increased pressure on enrollment in graduate and continuing education programs. Pressured operating performance (5.4% operating deficit in FY 2007 and 1.7% deficit, by Moody's calculation, in FY 2008) as the College continues to work through past enrollment declines, including a notable drop off in the size of the fall 2006 entering freshmen class. Based on discussions with management, Moody's believes that the College generated another operating deficit in FY 2009, with a roughly $3 million decline in unrestricted net assets estimated for FY 2009. However, this operating deficit does include depreciation as an operating expense (approximately $3.8 million), and Moody's expect that cash flow was positive during FY 2009. The estimated FY 2009 results are worse than Moody's had anticipated in spring 2009, largely attributable to increased health insurance costs and lower summer tuition revenue during May and June 2009. The College recently hired a new chief financial officer, with a targeted focus on expense containment ($1.6 million of expense cuts made in the past month). Moody's will continue to monitor Dowling's ability to stay close to budget targets throughout FY 2010. Heavy reliance on student charges (92% of FY 2008 revenue base). Stable to growing enrollment is essential to the College's credit profile, as even a slight unexpected decline in enrollment levels, due to either deterioration of recruitment or retention, could result in significant operating pressure. Strengths Although the College's net tuition revenue declined 2.3% in FY 2007 due to overall enrollment declines in fall 2006, net tuition revenue increased 4.3% in FY 2008. Further, net tuition on a per student basis has grown in each of the past five years with $13,867 of net tuition per student in FY 2008. Based on unaudited financial data, Moody's believe that net tuition revenue (net of institutional aid) increased approximately $2.8 million in FY 2009 over FY 2008. Management reports that the current projection for FY 2010 net tuition revenue is lower than the FY 2010 budgeted amount by roughly $600,000, although the College's institutional financial aid disbursements are tracking very close to budget despite a sizeable tuition increase implemented in fall 2009 (12.5% increase in total undergraduate tuition and fees). No near-term capital or borrowing plans, except for the possible addition of a new operating line of credit when the existing line expires at the end of October 2009. The Series 1996 and 2002 bonds, which are rated by Moody's, benefit from debt service reserve funds, which are on deposit with the bond trustees and invested primarily in U.S. government securities. Outlook The negative outlook reflects Moody's longer-term concerns about the College's market position, in light of trend of declining enrollment and heavy reliance on net tuition revenue, coupled with thin liquidity. What Could Change the Rating -- UP Significant growth of financial resources coupled with strengthening of operating performance and stabilization of enrollment What Could Change the Rating -- DOWN Additional borrowing; declining liquidity; further enrollment declines and resulting pressure on operating performance; weakening of operating cash flow and inadequate annual debt service coverage Key Indicators (FY 2008 audited financial data and fall 2008 enrollment data unless otherwise noted): * Total Full-Time Equivalent (FTE) Enrollment: 4,376 FTE students * Total cash and investments (including $4.5 million of debt service reserve funds): $12.7 million * Direct Debt: $66.7 million * FY 2008 Operating Margin: -1.7% * FY 2008 Operating Cash Flow Margin: 7.6% * FY 2008 Annual Debt Service Coverage: 1.1 times * Reliance on Student Charges: 91.7% Rated Debt: * Series 1996 and 2002: B1 rating The last rating action was on June 3, 2009, when Dowling College's rating was maintained on Watchlist for possible downgrade. DUKE FUNDING: Fitch Downgrades Ratings on Two Classes of Notes -------------------------------------------------------------- Fitch Ratings downgrades two classes of notes issued by Duke Funding X CDO, Ltd./Corp. In Fitch's opinion, default of the class A1, A2, A3, B1, and B2 notes is inevitable at or prior to their maturity. The details of the rating action follow at the end of this press release. The rating actions reflect the continued deterioration in the quality of the portfolio since Duke X was last reviewed. According to the July 6, 2009 trustee report, approximately 79.8% of the portfolio is considered defaulted and all of the overcollateralization tests are failing by a significant margin. Currently, excess spread after the class A2 interest distribution and all principal proceeds are being used to redeem the outstanding swap counterparty amount due to the failing class A2 OC test. However, based on the degree of undercollateralization in the transaction and Fitch's recovery expectations on the defaulted portion of the portfolio, the class A1 notes are not expected to receive any principal repayment in the future. The class A1 and A2 notes are likely to continue receiving interest distributions, while the class A3, B1, and B2 notes are not expected to receive any interest or principal distributions going forward. Duke X is a collateralized debt obligation that closed on April 12, 2006 and is managed by Duke Funding Management, LLC. The portfolio is comprised of 58.2% subprime residential mortgage- backed securities and 41.8% prime RMBS. Duke Funding X CDO, Ltd./Corp. -- $72,000,000 class A1 notes downgraded to 'C' from 'CCC'; -- $105,000,000 class A2 notes downgraded to 'C' from 'CC'; -- $83,452,014 class A3 notes affirmed at 'C'; -- $19,884,662 class B1 notes affirmed at 'C'; -- $20,775,100 class B2 notes affirmed at 'C'. FIRST FRANKLIN: Moody's Downgrades Ratings on Seven Tranches ------------------------------------------------------------ Moody's Investors Service has downgraded the ratings of seven tranches issued in three First Franklin Mortgage Loan Trust transactions due to higher expected pool losses in relation to available credit enhancement. The collateral backing these securities consists primarily of closed-end second lien residential mortgage loans. Each of the downgraded transactions relies on support provided by pool insurance policies provided by Amerin Guaranty Corporation or Radian Insurance Inc. Moody's observed that for these transactions, losses associated with certain loans were not covered by these policies. Over the last 12 months, the proportion of pool losses not covered by the mortgage insurance policies has been as much as 50% of insured loans. As a result, Moody's substantially reduced the expected future benefit of the mortgage insurance and in turn, anticipates higher pool losses. When analyzing underlying ratings for CES and HELOC transactions, Moody's projects cumulative losses for each deal based on a collateral analysis of the deal's Constant Prepayment Rate and Constant Default Rate. CPR is based on the average of the last six months 1-month CPR. CDR -- There are two approaches for determining pool CDR. The first approach calculates CDR based on pool loan losses from the previous twelve months, i.e. recent losses. A second approach is based on pipeline losses -- losses derived from days-aged delinquencies and Moody's assumptions for default based on days delinquent, in foreclosure, or liquidation, and the severity of loss given default. Moody's assumes 100% severity for second liens, including both CES and HELOCs. After the CDR is calculated using the two methods, the effective CDR for loss projection purposes is determined by using a weighted average of the CDRs as determined by the recent loss and pipeline loss approaches -- with weightings determined on a transaction by transaction basis. For these transactions Moody's assumes that the CDR will decline by 25% for year 2, 50% for year 3, 75% for year 4, remaining constant thereafter. Based on calculated CPR and CDR, Moody's calculates projected deal-specific cumulative losses and the weighted average life of the deal. The credit enhancement calculation can also include credit for excess spread, i.e. the aggregate, positive difference in the weighted average loan coupon and the all-inclusive securities' interest and deal fees, including servicing. Excess spread benefit is calculated by multiplying the stressed annualized excess spread by the weighted average life of the deal. Aggregate credit enhancement which combines subordination benefit (including over-collateralization and/or reserve accounts) and excess spread benefit is compared with projected cumulative losses for the deal to derive coverage multiples and associated ratings by deal tranche. Moody's will analyze tranche coverage multiples after consideration of timing of tranche repayment and allocation of losses (if any). Issuer: First Franklin Mortgage Loan Trust 2003-FFA -- Expected Cumulative Losses: 0.10% (as a percentage of the original loan pool balance) -- Cl. I-B-4, Downgraded to B2; previously on Oct 10, 2006 Upgraded to Baa3 -- Cl. I-B-5, Downgraded to Caa2; previously on Apr 16, 2003 Assigned B2 Issuer: First Franklin Mortgage Loan Trust 2003-FFB -- Expected Cumulative Losses: 1.4% (as a percentage of the original loan pool balance) -- Cl. B-1, Downgraded to Caa1; previously on Apr 20, 2007 Downgraded to B3 -- Cl. B-2, Downgraded to C; previously on Apr 20, 2007 Downgraded to B3 Issuer: First Franklin Mortgage Loan Trust 2003-FFC -- Expected Cumulative Losses: 1.7% (as a percentage of the original loan pool balance) -- Cl. M-1, Downgraded to Baa2; previously on Dec 22, 2008 Downgraded to A2 -- Cl. M-2, Downgraded to Caa3; previously on Dec 22, 2008 Downgraded to Baa3 -- Cl. M-3, Downgraded to C; previously on Dec 22, 2008 Downgraded to B2 FIRST HORIZON : Moody's Cuts Ratings on Three 2004-HE4 Tranches --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of three tranches issued in First Horizon ABS Trust 2004-HE4 transaction due to higher expected pool losses in relation to available credit enhancement. The collateral backing these securities consists primarily of closed-end second lien residential mortgage loans. The primary driver of the downgrades is the increase in delinquent loans over the last 10 months and in turn, the pool expected loss. Currently 3.4% of the pool is 60 or more days past due. The current rating on the security is consistent with Moody's practice of rating insured securities at the higher of (1) the guarantor's insurance financial strength rating and (2) the underlying rating, based on Moody's modified approach to rating structured finance securities wrapped by financial guarantors. When analyzing underlying ratings for CES and HELOC transactions, Moody's projects cumulative losses for each deal based on a collateral analysis of the deal's Constant Prepayment Rate and Constant Default Rate. CPR is based on the average of the last six months 1-month CPR. CDR -- There are two approaches for determining pool CDR. The first approach calculates CDR based on pool loan losses from the previous twelve months, i.e. recent losses. A second approach is based on pipeline losses -- losses derived from days-aged delinquencies and Moody's assumptions for default based on days delinquent, in foreclosure, or liquidation, and the severity of loss given default. Moody's assumes 100% severity for second liens, including both CES and HELOCs. After the CDR is calculated using the two methods, the effective CDR for loss projection purposes is determined by using a weighted average of the CDRs as determined by the recent loss and pipeline loss approaches -- with weightings determined on a transaction by transaction basis. For this transaction Moody's assumes that the CDR will decline by 25% for year 2, 50% for year 3, remaining constant thereafter. Based on calculated CPR and CDR, Moody's calculates projected deal-specific cumulative losses and the weighted average life of the deal. The credit enhancement calculation can also include credit for excess spread, i.e. the aggregate, positive difference in the weighted average loan coupon and the all-inclusive securities' interest and deal fees, including servicing. Excess spread benefit is calculated by multiplying the stressed annualized excess spread by the weighted average life of the deal. Aggregate credit enhancement which combines subordination benefit (including over-collateralization and/or reserve accounts) and excess spread benefit is compared with projected cumulative losses for the deal to derive coverage multiples and associated ratings by deal tranche. Moody's will analyze tranche coverage multiples after consideration of timing of tranche repayment and allocation of losses (if any). Issuer: First Horizon ABS Trust 2004-HE4 -- Expected Cumulative Losses: 3.2% (as a percentage of the original loan pool balance) -- Cl. A-3, Downgraded to Ba1; previously on Dec 22, 2008 Downgraded to Aa3 -- Financial Guarantor: MBIA Insurance Corporation (Downgraded to B3, Outlook Negative on Jun 25, 2009) -- Cl. A-4, Downgraded to Ba3; previously on Dec 22, 2008 Downgraded to Aa3 -- Financial Guarantor: MBIA Insurance Corporation (Downgraded to B3, Outlook Negative on Jun 25, 2009) -- Cl. A-5, Downgraded to Ba2; previously on Dec 22, 2008 Downgraded to Aa3 -- Financial Guarantor: MBIA Insurance Corporation (Downgraded to B3, Outlook Negative on Jun 25, 2009) FIRST NATIONAL: Fitch Rates Class D 2008-2 Notes at 'BB' -------------------------------------------------------- Fitch Ratings rates First National Master Note Trust Restructured series 2008-2 variable funding notes: -- $40,584,000 LIBOR class C (2008-2) 'BBB'; Outlook Stable; -- $22,727,000 LIBOR class D (2008-2) 'BB'; Outlook Stable. The ratings are based on the quality of the underlying receivables pool, the available credit enhancement, and the legal and cash flow structure. The notes are issued by First National Master Note Trust, a Delaware statutory trust, and are secured by a beneficial interest in a pool of receivables originated under First National Bank of Omaha's VISA and MasterCard revolving credit card program. Fitch deems the underlying receivable pool to be of satisfactory quality given its favorable FICO distribution, account seasoning and overall performance to date. Credit enhancement for the class C notes includes the subordination of the class D notes and the spread account. Credit enhancement for the class D notes is the subordination of the spread account, which will be funded with a 1% initial deposit on the closing date. Fitch also considers other features embedded in the transaction for the ratings, such as 'fixed allocation of finance charge collections' and other amortization triggers. FORD CREDIT: S&P Assigns Ratings on $2.227 Bil. Asset-Backed Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its ratings to Ford Credit Auto Owner Trust 2009-D's $2.227 billion asset-backed notes. The ratings reflect S&P's opinion of: * The availability of approximately 19.2%, 16.0%, 13.9%, and 11.3% credit support to the class A, B, C, and D notes, respectively, based on stressed break-even cash flow scenarios. These credit support levels provide more than 5x, 4x, 3x, and 2x S&P's 2.95%- 3.25% expected net loss range to the class A, B, C, and D notes, respectively; * The transaction's ability to withstand more than 1.5x S&P's expected net loss level in S&P's "what-if" scenario analysis before the notes become vulnerable to a negative CreditWatch action and/or a potential downgrade; * The timely interest and principal payments made under stressed cash flow modeling scenarios appropriate to the rating categories; * The characteristics of the pool being securitized; * Ford Motor Credit Co. LLC's extensive securitization performance history, going back to 1989; and * The transaction's legal structure. Ratings Assigned Ford Credit Auto Owner Trust 2009-D Interest Amount Expected legal Class Rating Type rate (mil. $)* final maturity date ----- ------ ---- -------- --------- ------------------- A-1 A-1+ Senior Fixed 640.00 September 2010 A-2 AAA Senior Fixed 409.00 January 2012 A-3 AAA Senior Fixed 805.00 October 2013 A-4 AAA Senior Fixed 219.80 August 2014 B AA Sub Fixed 65.50 December 2014 C A Sub Fixed 43.70 May 2015 D BB+ Sub Fixed 43.70 February 2016 Sub - Subordinate. FOREST CREEK: Moody's Downgrades Ratings on Various Classes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Forest Creek CLO Ltd.: -- US$88,800,000 Class A-1L-B Floating Rate Notes Due April 2015 (current balance of $74,811,216), Downgraded to Aa1; previously on May 21, 2003 Assigned Aaa; -- US$16,200,000 Class A-2L Floating Rate Notes Due April 2015, Downgraded to Aa2; previously on March 4, 2009 Aaa Placed Under Review for Possible Downgrade; -- US$10,000,000 Class A-3L Floating Rate Notes Due April 2015, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$18,500,000 Class B-1L Floating Rate Notes Due April 2015 (current balance of $18,866,036), Downgraded to B2; previously on March 20, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$7,000,000 Class B-2L Floating Rate Notes Due April 2015 (current balance of $7,565,005), Downgraded to Ca; previously on March 20, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade; -- US$10,000,000 Class I Combination Securities Due April 2015 (rated balance of $5,294,423), Downgraded to Ba3; previously on March 4, 2009 Baa2 Placed Under Review for Possible Downgrade; -- US$5,500,000 Class II Combination Securities Due April 2015 (rated balance of $4,742,278), Downgraded to B1; previously on March 4, 2009 Baa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$20,000,000 Class A-4L Floating Rate Notes Due April 2015, Confirmed at Baa3; previously on March 20, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of certain overcollateralization tests. In particular, the weighted average rating factor has increased over the last year and is currently 2818 versus a test level of 2350 as of the last trustee report, dated July 31, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $22 million, accounting for roughly 7.7% of the collateral balance, and securities rated Caa1 or lower make up approximately 15.4% of the underlying portfolio. The Class B-1L Overcollateralization Ratio was reported at 97.59% versus a test level of 103%, and the Class B-2L Overcollateralization Ratio was reported at 94.83% versus a test level of 102.5%. Additionally, interest payments on the Class B-2L Notes are presently being deferred as a result of the failure of the Class B-1L overcollateralization test. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Forest Creek CLO Ltd., issued in May 2003, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. FOUNDERS GROVE: Moody's Downgrades Ratings on Various Classes ------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Founders Grove CLO, Ltd.: -- US$50,000,000 Class A-1 Revolving Floating Rate Notes, Due 2018, Downgraded to Aa2; previously on April 26, 2006 Assigned Aaa; -- US$170,500,000 Class A-2 Floating Rate Notes, Due 2018, Downgraded to Aa2; previously on April 26, 2006 Assigned Aaa; -- US$20,100,000 Class B Floating Rate Notes, Due 2018, Downgraded to Baa1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$27,300,000 Class D Deferrable Floating Rate Notes, Due 2018 (current balance of $26,180,721), Downgraded to B2; previously on March 17, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$6,600,000 Class C Deferrable Floating Rate Notes, Due 2018, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class D Par Value Test I. In particular, the weighted average rating factor has increased over the last year and is currently 2838 versus a test level of 2803 as of the last trustee report, dated August 20, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $7.9 million, accounting for roughly 2.8% of the collateral balance, and securities rated Caa1 or lower make up approximately 10.0% of the underlying portfolio. The Class D Par Value Test I was reported at 100.14% versus a test level of 101.60%. Moody's also assessed the collateral pool's elevated concentration risk in a small number of obligors and industries. This includes a significant concentration in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Founders Grove CLO, Ltd., issued in 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. GALLATIN CLO: Moody's Downgrades Ratings on Various 2007-1 Notes ---------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Gallatin CLO III 2007-1 Ltd.: -- US$253,000,000 Class A-1L Floating Rate Notes Due 2021, Downgraded to Aa1; previously on March 8, 2007 Assigned Aaa; -- US$60,000,000 Class A-1LR Floating Rate Revolving Notes Due 2021, Downgraded to Aa1; previously on March 8, 2007 Assigned Aaa; -- US$33,000,000 Class A-2L Floating Rate Notes Due 2021, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$24,500,000 Class A-3L Floating Rate Notes Due 2021, Downgraded to Ba1; previously on March 13, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$15,500,000 Class B-1L Floating Rate Notes Due 2021, Downgraded to B1; previously on March 13, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$15,500,000 Class B-2L Floating Rate Notes Due 2021, Downgraded to Caa3; previously on March 13, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2842 versus a test level of 2650 as of the last trustee report, dated August 13, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $28.3 million, accounting for roughly 6.9% of the collateral balance, and securities rated Caa1 or lower make up approximately 14.1% of the underlying portfolio. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Gallatin CLO III 2007-1 Ltd., issued in March 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. GANNETT PEAK: Moody's Downgrades Ratings on Various Classes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Gannett Peak CLO I, Ltd.: -- US$369,000,000 Class A-1a Senior Secured Floating Rate Notes, Due 2020, Downgraded to Aa2; previously on October 5, 2006 Assigned Aaa; -- US$60,000,000 Class A-1b Senior Secured Revolving Floating Rate Notes, Due 2020, Downgraded to Aa2; previously on October 5, 2006 Assigned Aaa; -- US$41,000,000 Class A-2 Senior Secured Floating Rate Notes, Due 2020, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$33,500,000 Class C Senior Secured Deferrable Floating Rate Notes, Due 2020, Downgraded to B1; previously on March 17, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$19,000,000 Class D-1 Senior Secured Deferrable Floating Rate Notes, Due 2020, Downgraded to Caa3; previously on March 17, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade; -- US$5,000,000 Class D-2 Senior Secured Deferrable Fixed Rate Notes, Due 2020, Downgraded to Caa3; previously on March 17, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade; -- US$14,000,000 Type I Composite Obligations, Due 2020 (current rated balance of US$11.8 mil), Downgraded to Ba1; previously on March 4, 2009 A3 Placed Under Review for Possible Downgrade; -- US$2,500,000 Type II Composite Obligations, Due 2020 (current rated balance of US$2 mil), Downgraded to B3; previously on March 4, 2009 Baa3 Placed Under review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$26,000,000 Class B-1 Senior Secured Floating Rate Notes, Due 2020, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$9,000,000 Class B-2 Senior Secured Fixed Rate Notes, Due 2020, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Reinvestment Diversion Threshold. In particular, the weighted average rating factor has increased over the last year and is currently 3034 versus a test level of 2870 as of the last trustee report, dated as of August 1, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $19.4 million, accounting for roughly 3.3% of the collateral balance, and securities rated Caa1 or lower by Moody's and CCC+ or lower by S&P make up approximately 18.2% of the underlying portfolio. The Reinvestment Diversion Threshold is reported at 102.004% versus a test level of 103.65%. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Gannett Peak CLO I, Ltd., issued in October of 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. GE CAPITAL: Fitch Puts Ratings on Four 2000-1 Certs. on Neg. Watch ------------------------------------------------------------------ Fitch Ratings has placed 4 classes of GE Capital Commercial Mortgage Corp.'s commercial mortgage pass-through certificates, series 2000-1 on Rating Watch Negative and revised the Outlook on one class as indicated below. The Rating Watch Negative placements and Negative Outlook are due to the transfer to special servicing of the second largest loan (5.3%) on Sept. 15, 2009, for imminent default. The specially serviced loan is collateralized by the Embassy Suites-New Orleans, which is secured by a 372-room hotel located in New Orleans, LA. The hotel sustained damage from Hurricane Katrina that has been repaired; however, cash flow and performance have never fully recovered. The servicer reported year-end 2008 debt service coverage ratio was 0.69x and revenue per available room dropped to $85 as of June 2009 from the pre-Katrina level of $106. The loan is scheduled to mature in May 2010. Once more information is known including valuations and workout strategies, Fitch will revisit the ratings. The Rating Watch Negative placements are based on loss estimates derived from Fitch's historical cumulative loss average for hotel loans, which is more conservative than the value derived from the most recent net operating income at an 11% capitalization rate. Downgrades are likely if losses are expected or a modification or appraisal reduction is expected to cause sustained interest shortfalls. Fitch has placed these classes on Rating Watch Negative: -- $8.8 million class D 'AAA'; -- $23 million class E 'AA-'; -- $8.8 million class F 'A-'; -- $23.9 million class G 'BB-'. In addition, Fitch revises the Rating Outlook on this class: -- $31.8 million class C 'AAA'; Outlook to Negative from Stable. GRANITE VENTURES: Moody's Downgrades Ratings on Three Classes ------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Granite Ventures II Ltd.: -- US$17,000,000 Class A-2 Floating Rate Senior Notes Due 2017, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$15,000,000 Class C Deferrable Floating Rate Subordinate Notes Due 2017, Downgraded to B1; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$6,000,000 Class D Deferrable Floating Rate Subordinate Notes Due 2017, Downgraded to Caa2; previously on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$18,000,000 Class B Deferrable Floating Rate Senior Subordinate Notes Due 2017, Confirmed at Baa3; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. The rating actions primarily reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. According to Moody's, the rating actions taken on the notes also reflect the underlying portfolio's mild amount of credit deterioration. Based on the latest trustee report dated August 5, 2009, the weighted average rating factor is 2371, defaulted securities currently held in the portfolio total about $4 million, accounting for roughly 1.2% of the collateral balance, and securities rated Caa1 or lower make up approximately 8.1% of the underlying portfolio. The Class D overcollateralization test is reported at 102.34% versus a test level of 102.40%. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Granite Ventures II Ltd., issued in December of 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. GRANITE VENTURES: Moody's Downgrades Ratings on Two Classes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Granite Ventures I Ltd.: -- US$22,000,000 Class A-2 Floating Rate Senior Notes Due 2015, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$9,500,000 Class D Deferrable Floating Rate Subordinate Notes Due 2015, Downgraded to Caa2; previously on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$15,000,000 Class B Deferrable Floating Rate Senior Notes Due 2015, Confirmed at Baa3; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$12,000,000 Class C Deferrable Floating Rate Subordinate Notes Due 2015, Confirmed at Ba3; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and the reported failure of the Class C and Class D overcollateralization tests. In particular, the weighted average rating factor has increased over the last year and is currently 2521 versus a test level of 2250 as of the last trustee report, dated August 13, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $9 million, accounting for roughly 3% of the collateral balance, and securities rated Caa1 or lower make up approximately 11% of the underlying portfolio. The Class C overcollateralization ratio was reported at 103.73% versus a test level of 104.4%, and the Class D overcollateralization ratio was reported at 100.38% versus a test level of 101.9%. Moody's notes, however, that as a result of distributions made on the August 24, 2009 payment date, the Class C overcollateralization test came into compliance and the Class D overcollateralization ratio improved. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research (see Moody's Special Comment titled "Strong Loan Issuance in Recent Years Signals Low Recovery Prospects for Loans and Bonds of Defaulted U.S. Corporate Issuers," dated June 2008). Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Granite Ventures I Ltd., issued in April of 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. GRENADIER FUNDING: Fitch Downgrades Ratings on Two Classes ---------------------------------------------------------- Fitch Ratings has downgraded two classes of notes issued by Grenadier Funding, Ltd. These rating actions are the result of continued credit deterioration experienced since Fitch's last rating action. Approximately 42.2% of the portfolio carries a Fitch-derived rating below investment grade, with 26.3% rated in the 'CCC' category or lower. This is up from 9.8% rated below investment grade and 7.3% rated 'CCC' and lower at the last review. Since the last review, the class A-1 overcollateralization test has dropped to 76.9% and is failing the covenant of 104.5%. Consequently, after paying interest to class A-2 all funds are being used to pay down the $1,077,686,108 funding notes. The commercial paper notes were paid in full through the issuance of the funding notes, which Fitch does not rate. As of the July 31, 2009 trustee report, 16.9% of the portfolio is considered defaulted. Fitch has downgraded the class A-1 and class A-2 to 'C' due to the exposure to defaulted assets. Default of these classes is inevitable. The class A-1 and A-2 notes continue to receive interest payments, but Fitch does not expect any principal recovery. The class B notes are receiving interest paid in kind whereby the principal amount of the notes is written up by the amount of interest due. The class B notes remain at 'C'. Fitch does not expect this class to receive any future payments. Grenadier is a collateralized debt obligation that closed July 21, 2003 and was managed by ACA Management LLC until May 2008, when management duties were transferred to Solidus Capital, LLC. The reinvestment period ended in August 2008. The reference portfolio is composed of 45.8% subprime residential mortgage backed securities, 22.2% prime RMBS, 14.0% CDOs, 13.2% asset backed securities, and 0.2% commercial mortgage backed securities. Fitch will continue to monitor and review this transaction for future rating adjustments. Fitch has taken these rating actions: -- $60,000,000 class A-1 notes downgraded to 'C' from 'CCC'; -- $15,000,000 class A-2 notes downgraded to 'C' from 'CC'; -- $86,142,317 class B notes affirmed at 'C'. GS MORTGAGE: Fitch Takes Rating Actions on 2006-GG6 Certificates ---------------------------------------------------------------- Fitch Ratings has downgraded, removed from Rating Watch Negative, assigned Rating Outlooks and Loss Severity ratings, as applicable, to 16 classes of commercial mortgage pass-through certificates from GS Mortgage Securities Corporation II, series 2006-GG6. The downgrades are the result of loss expectations on specially serviced loans as well as Fitch's prospective views regarding commercial real estate market value and cash flow declines. Fitch foresees potential losses could reach as high as 9.3% for this transaction should market conditions not recover. The rating actions are based on losses of 8.1%, including 100% of the term losses and 25% of the losses anticipated to occur at maturity; the 8.1% recognizes all of the losses anticipated in the next five years. Given the significant remaining term to maturity, Fitch's actions do not account for the full magnitude of possible maturity losses. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for certain loans representing 63.2% of the pool and, in some cases, revised based on additional information and/or property characteristics. Approximately 35.1% of the mortgages mature within the next five years: 13.1% in 2010, 14.9% in 2011, 4.4% in 2012, 2.3% in 2013 and 0.5% in 2014. All losses associated with these loans are fully recognized in the rating actions. Fitch identified 27 Loans of Concern (14.9%) within the pool, 11 of which (8.5%) are specially serviced. Of the specially serviced loans, two (3.1%) are current. One (2.1%) of the specially serviced loans is within the transaction's top 15 loans (46.0%) by unpaid principal balance. Two of the loans (4.0%) within the top 15 are expected to default during the term, one of which is estimated to experience a loss severity of 34.8%. The largest contributors to loss across the transaction are the Showplace Portfolio (2.1%) and the Northlake Mall loan (5.6%). The Showplace Portfolio loan is collateralized by a 699,475 square foot mixed use development comprised primarily of showroom space (73%) and exhibition space (11%) with the remainder of the space divided between office and retail. The property is located in Highpoint, N.C., within the International Home Furnishing Market. The loan is currently being specially serviced and is 60 days delinquent. Occupancy is down to approximately 70% as compared to 99.8% at issuance. The most recent debt service coverage ratio (DSCR) for the property is 1.04 times as of year-end 2008. The sponsor for the loan is an affiliate of Walton Street Capital. Based on current performance and anticipated declines, losses are expected prior to the loan's maturity in November 2010. Northlake Mall is a regional mall located in Charlotte, North Carolina. Built in 2005, the property is anchored by Dillard's, Belk, and Macy's. Other large tenants include Dick's Sporting Goods, Border's Books and Music Cafe and AMC Theaters. As of June 2009, occupancy was approximately 93% and the YE 2008 DSCR, based upon servicer reported net operating income, improved to 1.66x as compared to 1.59x at issuance. Fitch has downgraded, removed from Rating Watch Negative, assigned Rating Outlooks and LS ratings to these classes as indicated: -- $292.6 million class A-J to 'BBB-/LS-4' from 'AAA'; Outlook Negative; -- $19.5 million class B to 'BBB-/LS-5' from 'AA+'; Outlook Negative; -- $48.8 million class C to 'BB/LS-5' from 'AA'; Outlook Negative; -- $39 million class D to 'BB/LS-5' from 'AA-'; Outlook Negative; -- $29.3 million class E to 'B/LS-5' from 'A+'; Outlook Negative; -- $43.9 million class F to 'B-/LS-5' from 'A'; Outlook Negative; -- $39 million class G to 'B-/LS-5' from 'A-'; Outlook Negative; -- $39 million class H to 'B-/LS-5' from 'BBB+'; Outlook Negative; -- $43.9 million class J to 'B-/LS-5' from 'BBB'; Outlook Negative; -- $43.9 million class K to 'B-/LS-5' from 'BBB-'; Outlook Negative; -- $24.4 million class L to 'B-/LS-5' from 'BB+'; Outlook Negative; -- $14.6 million class M to 'CCC/RR6' from 'BB'; -- $19.5 million class N to 'CCC/RR6' from 'BB-'; -- $4.9 million class O to 'CCC/RR6' from 'B+'; -- $9.8 million class P to 'CCC/RR6' from 'B'; -- $14.6 million class Q to 'CCC/RR6' from 'B-'. Additionally, Fitch has affirmed, maintained the Rating Outlooks and assigned LS ratings to these classes as indicated: -- $45.0 million class A-1 at 'AAA/LS-2'; Outlook Stable; -- $1.05 billion class A-2 at 'AAA/LS-2'; Outlook Stable; -- $75.6 million class A-3 at 'AAA/LS-2'; Outlook Stable; -- $187.8 million class A-AB at 'AAA/LS-2'; Outlook Stable; -- $1 billion class A-4 at 'AAA/LS-2'; Outlook Stable; -- $309.2 million class A-1A at 'AAA/LS-2'; Outlook Stable; -- $390.1 million class A-M at 'AAA/LS-3'; Outlook Stable; -- Interest only class X-C at 'AAA'; -- Interest only class X-P at 'AAA'. The $53.6 million class S is not rated by Fitch. GS MORTGAGE: S&P Downgrades Ratings on 17 2005-GG4 Securities ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 17 classes of commercial mortgage-backed securities from GS Mortgage Securities Corp. II's series 2005-GG4 and removed them from CreditWatch with negative implications. S&P also affirmed its ratings on 10 additional classes and removed one of the affirmed ratings from CreditWatch negative. The downgrades follow S&P's analysis of the transaction using its recently released U.S. conduit and fusion CMBS criteria, which was the primary driver of the rating actions. The downgrades of the subordinate classes also reflect anticipated credit support erosion upon the eventual resolution of the specially serviced loans. S&P's analysis included a review of the credit characteristics of all of the loans in the pool. Using servicer- provided financial information, S&P calculated an adjusted debt service coverage of 1.57x and a loan-to-value ratio of 96.7%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 0.98x and an LTV of 129.4%. The implied defaults and loss severity under the 'AAA' scenario were 66.4% and 33.7%, respectively. All of the DSC and LTV calculations noted above exclude two (2.2%) of the five specially serviced assets. S&P separately estimated losses for these loans, which are included in the 'AAA' scenario implied default and loss figures. S&P affirmed the ratings on the interest-only certificates based on its current criteria. S&P published a request for comment proposing changes to the IO criteria on June 1, 2009. After S&P finalize its criteria review, S&P may revise its current IO criteria, which may affect outstanding ratings, including the ratings on the IO certificates S&P affirmed. Credit Concerns Five assets ($163.6 million, 4.3%) in the pool, including the seventh-largest exposure (discussed in more detail below), are with the special servicer, LNR Partners Inc. One ($6.0 million, 0.2%) of the five specially serviced assets was transferred to the special servicer after the August 2009 remittance report. Two ($85.9 million, 2.2%) of the specially serviced loans are more than 90 days delinquent, two ($71.7 million, 1.9%) are in their grace period, and one ($6.0 million, 0.2%) is current. There is a $1.3 million appraisal reduction amount in effect against one of the specially serviced assets. The largest specially serviced asset accounts for 2.1% of the trust balance, while the remaining specially serviced assets each account for less than 1.0% of the total trust balance. Transaction Summary As of the August 2009 remittance report, the collateral pool consisted of 187 loans with an aggregate trust balance of $3.85 billion, compared with 189 loans with an aggregate trust balance of $4.00 billion at issuance. The master servicer for the transaction is Capmark Finance Inc. The master servicer provided financial information for 94.8% of the pool, and 96.3% of the servicer-provided information was full-year 2008 or interim-2009 data. S&P calculated a weighted average DSC of 1.59x for the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.57x and 96.7%, respectively. S&P's adjusted DSC and LTV figures exclude the two specially serviced loans ($85.9 million, 2.2%) for which S&P estimated a loss. A servicer-reported DSC figure was available for one ($5.2 million, 0.1%) of these two loans. The loan's DSC was 0.84x for the nine months ended Sept. 30, 2008. To date, the transaction has experienced realized losses in the amount of $454,305 on one asset. The master servicer reported a watchlist of 29 loans ($819.2 million, 21.3%), including four of the top 10 exposures (discussed in more detail below), as well as one loan ($6.0 million, 0.2%) that was transferred to the special servicer after the August 2009 remittance report. Eight loans ($252.5 million, 6.6%) in the pool have reported DSC between 1.10x and 1.00x, and nine loans ($130.1 million, 3.4%) have reported DSC of less than 1.00x. Summary Of Top 10 Loan Exposures The top 10 loan exposures have an aggregate outstanding balance of $1.2 billion (29.9%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.61x for the top 10 assets. S&P's adjusted DSC and LTV for the top 10 loans were 1.61x and 99.4%, respectively. These calculations exclude the Astor Crowne Plaza loan, which is a top 10 asset currently with the special servicer. Four ($425.9 million, 11.1%) of the top 10 assets appear on the master servicer's watchlist. These four assets and the Astor Crowne Plaza loan are discussed below. The Astor Crowne Plaza loan, the seventh-largest loan in the pool, is with the special servicer. The asset has a balance of $80.7 million (2.1%) and is secured by a 707-room hotel in New Orleans. The asset is more than 90 days delinquent. The loan was transferred to the special servicer in May 2009. The borrower has requested debt service relief. The special servicer is in discussions with the borrower regarding possible options to resolve the default and negotiate a possible forbearance. In the event that an agreement can't be reached, LNR will pursue foreclosure. At this time, Standard & Poor's expects a significant loss upon the resolution of this asset. The third- and 10th-largest loans in the pool appear on the master servicer's watchlist due to General Growth Properties' bankruptcy filing. The Streets at Southpoint loan, the third-largest loan in the trust, has a balance of $159.0 million (4.1%) and is secured by a 583,696-sq.-ft. regional mall in Durham, N. C. The loan reported DSC of 2.04x at year-end 2008 and was reported as being in its grace period on the August 2009 remittance report. The Kings' Shops loan, the 10th-largest asset in the trust, has a trust balance of $72.0 million (1.9%) and is secured by a 73,522- sq.-ft. shopping center in Waikoloa, Hawaii. The asset reported DSC of 1.23x at year-end 2008 and was reported as being current on the August 2009 remittance report. S&P will continue to monitor the developments relating to these loans and will take rating actions on this transaction as necessary. The Lantana Campus loan, the fourth-largest loan in the pool, appears on the master servicer's watchlist due to an occupancy decrease. The asset is secured by a 331,974-sq.-ft. office complex in Santa Monica, Calif. Reported occupancy was 84.0% as of June 2009, down from 91.9% at issuance, while DSC was 1.59x at year-end 2008, down from 1.90x at issuance. The borrower has submitted revised rent rolls, which include several short-term tenants that were previously not being reported. The loan is scheduled to be removed from the master servicer's watchlist. The Century Centre Office asset, the fifth-largest asset in the pool, appears on the master servicer's watchlist due to low DSC. The asset is secured by a 447,692-sq.-ft. office complex in Irvine, Calif. Reported DSC was 0.90x for the three months ended March 31, 2009, 1.00x as of year-end 2008, and 1.15x at issuance. Reported occupancy was 87.3% as of April 2009, down from 94.5% at issuance. The decline in occupancy, with the associated decrease in revenues, is the primary reason for the downward trend in DSC. Standard & Poor's stressed the loans in the pool according to S&P's updated conduit/fusion criteria. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative GS Mortgage Securities Corp. II Commercial mortgage pass-through certificates series 2005-GG4 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-4 AA AAA/Watch Neg 20.75 A-4B AA AAA/Watch Neg 20.75 A-1A AA AAA/Watch Neg 20.75 A-J BBB+ AAA/Watch Neg 12.97 B BBB AA/Watch Neg 11.28 C BBB- AA-/Watch Neg 10.37 D BB+ A/Watch Neg 8.42 E BB A-/Watch Neg 7.39 F BB- BBB+/Watch Neg 5.96 G B+ BBB/Watch Neg 4.79 H B BBB-/Watch Neg 3.75 J B BB+/Watch Neg 3.23 K B- BB/Watch Neg 2.71 L B- BB-/Watch Neg 2.19 M CCC+ B+/Watch Neg 1.93 N CCC B/Watch Neg 1.68 O CCC B-/Watch Neg 1.42 Rating Affirmed And Removed From Creditwatch Negative GS Mortgage Securities Corp. II Commercial mortgage pass-through certificates series 2005-GG4 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-DP AAA AAA/Watch Neg 20.75 Ratings Affirmed GS Mortgage Securities Corp. II Commercial mortgage pass-through certificates series 2005-GG4 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 20.75 A-1P AAA 20.75 A-2 AAA 20.75 A-3 AAA 20.75 A-ABA AAA 30.66 A-ABB AAA 20.75 A-4A AAA 30.66 X-P AAA N/A X-C AAA N/A N/A - Not applicable. GUGGENHEIM STRUCTURED: S&P Downgrades Ratings on Six Classes ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on six classes from Guggenheim Structured Real Estate Funding 2005-2 Ltd., a commercial real estate collateralized debt obligation. The lowered ratings and one additional rating from this transaction remain on CreditWatch with negative implications. The downgrades follow S&P's analysis of the transaction due to significant credit degradation in the underlying collateral pool. As of the most recent trustee report, 31% of the assets in the pool have been classified as impaired, and an additional 16.5% ($44 million) have experienced downward rating or credit estimate migration. All of the ratings on Guggenheim 2005-2 remain on CreditWatch with negative implications due to potential downward rating or credit estimate migration within the CRE CDO's collateral pool. Numerous assets in the collateral pool are either commercial mortgage backed securities with ratings on CreditWatch negative or assets related to CMBS loans, such as subordinate and mezzanine loans ($78.7 million, 29.4%) where the senior loan is held in CMBS transactions with ratings on CreditWatch negative. According to the Aug. 18, 2009, trustee report, five assets ($81.9 million, 31%) in Guggenheim 2005-2 are impaired. The amount of impaired assets caused four overcollateralization test failures. The impaired assets include: * The class KERF from Credit Suisse First Boston Mortgage Securities Corp.'s series 2006-TFL2 ($26.2 million, 10%); * The Universal Boulevard Orlando first mortgage loan ($15.2 million, 5.7%); * The Tishman Speyer Real Estate D.C. Portfolio loan ($15 million, 5.6%); * The Steeplegate Mall B note ($14.6 million, 5.5%); and * The Resort International B note ($10.3 million, 3.9%). Excluding the impaired assets, the transaction's current asset pool includes these: * Six subordinate interest loans ($64.4 million, 24%), including one where the senior loan is held in a CMBS transaction with ratings on CreditWatch negative; * Two mezzanine loans ($39.4 million, 15%) are subordinate to senior loans that are held in CMBS transactions and have ratings on CreditWatch negative; * Three whole loans ($37.3 million, 14%); * One CMBS class ($30 million, 11%) has a rating on CreditWatch negative; and * Two term loans ($14.1 million, 5%). S&P's analysis of the transaction was based on information provided to Standard & Poor's by the collateral manager, the Aug. 18, 2009, trustee remittance report, and data on the underlying CMBS deals. S&P will update or resolve the CreditWatch negative placements on Guggenheim 2005-2 in conjunction with S&P's resolution of the CreditWatch placements on the underlying CMBS assets and/or as S&P analyze the credit characteristics of the remaining assets. Ratings Lowered And Remaining On Creditwatch Negative Guggenheim Structured Real Estate Funding 2005-2 Ltd. Rating ------ Class To From ----- -- ---- A AA+/Watch Neg AAA/Watch Neg B A-/Watch Neg AA/Watch Neg C BB+/Watch Neg A/Watch Neg D CCC+/Watch Neg BBB-/Watch Neg E CCC-/Watch Neg BB+/Watch Neg F CCC-/Watch Neg B+/Watch Neg Rating Remaining On Creditwatch Negative Guggenheim Structured Real Estate Funding 2005-2 Ltd. Class Rating ----- ------ S AAA/Watch Neg HALCYON STRUCTURED: Moody's Downgrades Ratings on 2007-3 Notes -------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Halcyon Structured Asset Management Long Secured/Short Unsecured 2007-3 Ltd.: -- US$260,000,000 Class X Senior Interest Only Secured Notes, Due 2019, Downgraded to Aa1; previously on November 29, 2007 Assigned Aaa; -- US$324,000,000 Class A-1 Senior Secured Floating Rate Notes, Due 2019 (current balance of $322,217,843), Downgraded to Aa1; previously on November 29, 2007 Assigned Aaa; -- US$31,500,000 Class A-2 Senior Secured Floating Rate Notes, Due 2019, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$21,700,000 Class D Secured Deferrable Floating Rate Notes, Due 2019 (current balance of $22,165,255), Downgraded to Caa1; previously on March 17, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$21,000,000 Class B Senior Secured Deferrable Floating Rate Notes, Due 2019, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$9,100,000 Class C Secured Deferrable Floating Rate Notes, Due 2019, Confirmed at Ba3; previously on March 17, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of certain overcollateralization tests. In particular, the weighted average rating factor has increased over the last year and is currently 2877 versus a test level of 2627 as of the last trustee report, dated August 14, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $18 million, accounting for roughly 4% of the collateral balance, and securities rated Caa1/CCC+ or lower make up approximately 17.76% of the underlying portfolio. The Class D overcollateralization test was reported at 102.907% versus a test level of 103.2%. Additionally, interest payments on the Class D Notes are presently being deferred as a result of a previous failure of the Class C overcollateralization test. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Halcyon Structured Asset Management Long Secured/Short Unsecured 2007-3 Ltd., issued in November 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. HARCH CLO: Moody's Downgrades Ratings on Various Classes -------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Harch CLO II Limited: -- US$27,600,000 Class A-1B Floating Rate Notes Due 2017, Downgraded to Aa2; previously on November 9, 2005 Assigned Aaa; -- US$8,000,000 Class A-2 Floating Rate Notes Due 2017, Downgraded to Aa3; previously on March 4, 2009 Aaa Placed Under Review for Possible Downgrade; -- US$38,000,000 Class B Floating Rate Notes Due 2017, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$26,000,000 Class D Deferrable Floating Rate Notes Due 2017, Downgraded to Caa1; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$10,000,000 Class E Deferrable Floating Rate Notes Due 2017 (current balance of $7,935,022), Downgraded to Caa3; previously on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$14,000,000 Class C Deferrable Floating Rate Notes Due 2017, Confirmed at Baa3; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2698 as of the last trustee report, dated August 10, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $15 million, accounting for roughly 3.9% of the collateral balance, and securities rated Caa1 or lower make up approximately 7.4% of the underlying portfolio. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Harch CLO II Limited, issued on November 9, 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. HEWETT'S ISLAND: Moody's Downgrades Ratings on Various Classes -------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Hewett's Island CLO I-R, Ltd.: -- US$195,850,000 Class A First Priority Senior Secured Floating Rate Notes Due 2019 (current balance of $185,648,512), Downgraded to Aa2; previously on November 20, 2007 Assigned Aaa; -- US$15,700,000 Class B Second Priority Senior Secured Floating Rate Notes Due 2019, Downgraded to Baa1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$11,250,000 Class C Third Priority Senior Secured Deferrable Floating Rate Notes Due 2019, Downgraded to Ba1; previously on March 13, 2009 Downgraded to Baa3 and Placed On Review for Possible Downgrade; -- US$9,900,000 Class D Fourth Priority Mezzanine Secured Deferrable Floating Rate Notes Due 2019 (current balance of $10,166,943), Downgraded to B2; previously on March 13, 2009 Downgraded to Ba3 and Placed On Review for Possible Downgrade; -- US$10,300,000 Class E Fifth Priority Mezzanine Secured Deferrable Floating Rate Notes Due 2019 (current balance of $9,097,805), Downgraded to Ca; previously on March 13, 2009 Downgraded to B3 and Placed On Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class C, Class D and Class E Principal Coverage Tests. In particular, defaulted securities currently held in the portfolio total about $24 million, accounting for roughly 10% of the collateral balance, and securities rated Caa1 or lower make up approximately 4.7% of the underlying portfolio. The Class C Principal Coverage Test was reported at 106.63% versus a test level of 107.60%, the Class D Principal Coverage Test was reported at 101.92% versus a test level of 104.60%, and the Class E Principal Coverage Test was reported at 98.06% versus a test level of 102.40%. Additionally, interest payments on the Class D and Class E Notes are presently being deferred as a result of the failure of the Class C and Class D Principal Coverage Test. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Hewett's Island CLO I-R, Ltd., issued in November of 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. HIGHLAND LOAN: Moody's Downgrades Ratings on Various Classes ------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Highland Loan Funding V Ltd.: -- US$352,500,000 Class A-I Floating Rate Senior Notes (current balance of $314,567,958), Downgraded to A2; previously on August 1, 2001 Assigned Aaa; -- US$33,000,000 Class A-II-A Floating Rate Senior Notes, Downgraded to Baa3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$10,000,000 Class A-II-B Fixed Rate Senior Notes, Downgraded to Baa3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$24,500,000 Class B Floating Rate Senior Subordinate Notes (current balance of $24,643,849), Downgraded to Caa1; previously on March 20, 2009 Downgraded to Ba2 and Placed Under Review for Possible Downgrade; -- US$25,000,000 Class C-1 Floating Rate Senior Subordinate Notes (current balance of 23,189,535), Downgraded to Ca; previously on March 20, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$5,000,000 Class C-2 Fixed Rate Senior Subordinate Notes (current balance of 4,696,007), Downgraded to Ca; previously on March 20, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$8,000,000 Class D Floating Rate Subordinate Notes (current balance of 8,153,895), Downgraded to Ca; previously on March 20, 2009 Downgraded to Caa1 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Principal Coverage Test with respect to the Class A, Class B, Class C, and Class D Notes. In particular, the weighted average rating factor has increased over the last year and is currently 2816 versus a test level of 2625 as of the last trustee report, dated July 23, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $64 million, accounting for roughly 13% of defaults based on total portfolio pre-defaults of the collateral balance, and securities rated Caa1 or lower make up approximately 4.14% of the underlying portfolio. The Class A Principal Coverage Test was reported at 117.137% versus a test level of 118.75%, the Class B Principal Coverage Test was reported at 109.96% versus a test level of 112.5%, the Class C Principal Coverage Test was reported at 102.87% versus a test level of 107%, and the Class D Principal Coverage Test was reported at 100.98% versus a test level of 105.8%. Additionally, interest payments on the Class B, Class C, and Class D Notes are presently being deferred as a result of the failure of the Class A Principal Coverage Test. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The rating actions also reflect Moody's revised assumptions with respect to default probability (including certain stresses pertaining to credit estimates) and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Highland Loan Funding V Ltd., issued in August of 2001, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. HUDSON STRAITS: Moody's Downgrades Ratings on Various Classes ------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Hudson Straits CLO 2004, Ltd.: -- US$33,500,000 Class B Second Priority Senior Secured Floating Rate Notes Due 2016, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$23,500,000 Class D-1 Fourth Priority Mezzanine Deferrable Floating Rate Notes Due 2016, Downgraded to B3; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$1,500,000 Class D-2 Fourth Priority Mezzanine Deferrable Fixed Rate Notes Due 2016, Downgraded to B3; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$12,100,000 Class E Fifth Priority Mezzanine Deferrable Floating Rate Notes Due 2016 (current balance of -- US$10,981,461), Downgraded to Caa3; previously on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$25,250,000 Class C Third Priority Senior Secured Deferrable Floating Rate Notes Due 2016, Confirmed at Baa3; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes reflect Moody's revised assumptions with respect to default probability (including certain stresses pertaining to credit estimates) and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. The rating actions also reflect the underlying portfolio's moderate credit deterioration. Based on the last trustee report, dated August 2, 2009, defaulted securities currently held in the portfolio total about $10 million, accounting for roughly 2.3% of the collateral balance, and securities rated Caa1 or lower make up approximately 9.7% of the underlying portfolio. In addition, Moody's notes that the weighted average rating factor has increased over the last year and is currently 2578 as of the same trustee report. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. Hudson Straits CLO 2004, Ltd., issued in July of 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. INMOBILIARIA FUMISA: Moody's Continues Rating Reviews on Bonds -------------------------------------------------------------- Moody's Investors Service continues to review the ratings on the Inmobiliaria Fumisa, S.A. DE C.V.'s Mexico City Airport Trust US$121 million and 119 million UDI lease receivable bonds. The last rating action occurred on May 12, 2009, when the rating was changed to Ba2 from Baa3 and placed on review for further downgrade. Moody's notes that in June Fumisa and bondholders successfully negotiated various changes to the passenger deficiency and debt service coverage triggers, which was one of the key factors being reviewed since the rating action. The current decision to continue the period of review is to allow for Moody's to receive additional information regarding the outcome of the sponsor's efforts to secure leases on currently vacant space in Terminal 1, an important feature given that debt service on the bonds is paid primarily from lease revenues. The lease receivable bond ratings were assigned by evaluating factors believed to be relevant to the credit profile of the Project such as i) the business risk and competitive position of the project versus others within its industry or sector, ii) the capital structure and financial risk of the project, iii) the projected performance of the project over the near to intermediate term, and iv) the project's history of achieving consistent operating performance and meeting budget or financial plan goals. These attributes were compared against other projects both within and outside of the Airport's core peer group and the lease receivable bond ratings are believed to be comparable to ratings assigned to other projects of similar credit risk. JPMORGAN AUTO: Fitch Affirms Ratings on 2008-A Asset-Backed Notes ----------------------------------------------------------------- Fitch Ratings affirms JPMorgan Auto Receivables Trust 2008-A asset-backed notes as part of its ongoing surveillance process. The collateral is performing slightly worse than Fitch's initial expectations. However, currently under the credit enhancement structure, the securities can still withstand stress scenarios consistent with the rating categories and make full payments of interest and principal in accordance with the term of the documents. As before, the ratings of the securities reflect the high quality of the underlying retail installment sales contracts, available credit enhancement, the sound legal and cash flow structure, and strength of System & Services Technologies, Inc. as the receivables servicer and JPMorgan as master servicer. The ratings are affirmed: -- Class A-2 asset-backed notes at 'AAA'; Outlook Stable; -- Class A-3 asset-backed notes at 'AAA'; Outlook Stable; -- Class A-4 asset-backed notes at 'AAA'; Outlook Stable; -- Class B asset-backed notes at 'AA'; Outlook Stable; -- Class C asset-backed notes at 'A'; Outlook Stable; -- Class D asset-backed notes at 'BBB'; Outlook Stable; -- Class E asset-backed notes at 'BB'; Outlook Stable. LB COMMERCIAL: S&P Downgrades Ratings on 23 2007-C3 Securities -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 23 classes of commercial mortgage-backed securities from LB Commercial Mortgage Trust 2007-C3 and removed them from CreditWatch with negative implications. S&P also affirmed its ratings on seven additional classes and removed one of the affirmed ratings from CreditWatch negative. The downgrades follow S&P's analysis of the transaction using its recently released U.S. conduit and fusion CMBS criteria, which was the primary driver of the rating actions. The downgrades of the subordinate and mezzanine classes also reflect anticipated credit support erosion upon the eventual resolution of the specially serviced loans, as well as concerns with loans that S&P deems to be credit impaired. S&P's analysis included a review of the credit characteristics of all of the loans in the pool. Using servicer-provided financial information, S&P calculated an adjusted debt service coverage of 1.31x and a loan-to-value ratio of 125.2%. S&P further stressed the loans' cash flows under its 'AAA' scenario to yield a weighted average DSC of 0.86x and an LTV of 156.4%. The implied defaults and loss severity under the 'AAA' scenario were 97.5% and 36.9%, respectively. All of the DSC and TV calculations noted above exclude nine of the 10 specially serviced loans (16.0%). S&P separately estimated losses for these loans, which are included in the 'AAA' scenario implied default and loss figures. S&P lowered its ratings on classes Q and S to 'D' to reflect recurring interest shortfalls S&P expects to continue for the foreseeable future. S&P affirmed the ratings on the interest-only certificates based on its current criteria. S&P published a request for comment proposing changes to the IO criteria on June 1, 2009. After S&P finalize its criteria review, S&P may revise its current IO criteria, which may affect outstanding ratings, including the ratings on the IO certificates S&P affirmed. Credit Concerns Ten loans ($564.2 million, 17.5%) in the pool are with a special servicer, Midland Loan Services Inc. Six ($115.8 million, 3.6%)of those loans are more than 90 days delinquent, two ($111.9 million, 3.6%) are more than 60 days delinquent, one ($164.5 million, 5.1%) is more than 30 days delinquent, and one ($172.0 million, 5.3%) is current. Eight of the specially serviced loans have appraisal reduction amounts (ARA) in effect totaling $71.3 million. Two specially serviced loans are top 10 loans: the Larken Portfolio loan (5.3%) and the Bethany Phoenix Portfolio loan (5.1%). These loans are discussed in further detail below. All the other specially serviced loans have balances less than or equal to 2% of the total pool balance. Transaction Summary As of the August 2009 remittance report, the aggregate trust balance was $3.23 billion, which is approximately 99.9% of the aggregate trust balance at issuance. The number of loans in the pool, at 117, is unchanged since issuance. The master servicer for the transaction is KeyBank Real Estate Capital Markets Inc. The master servicer provided financial information for 100% of the pool, and 99.7% of the servicer-provided information was full-year 2008 or interim-2009 data. S&P calculated a weighted average DSC of 1.37x for the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.31x and 125.2%, respectively. S&P's adjusted DSC and LTV figures exclude nine of the 10 specially serviced loans. S&P estimated losses separately for these nine loans ($517.3 million, 16.0%). Based on the servicer-reported DSC figures, S&P calculated a weighted average DSC of 0.99x for these nine loans, including five loans that had DSCs below 1.0x. To date, the transaction has not experienced principal losses. Fourteen loans ($587.9 million, 18.2%) are on the master servicer's watchlist. Seven loans ($407.4 million, 12.6%) have reported DSC between 1.10x and 1.0x, and 16 loans ($535.7 million, 16.6%) have reported DSC of less than 1.0x. Summary Of Top 10 Loans The top 10 exposures have an aggregate outstanding balance of $1.74 billion (53.7%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.41x for the top 10 loans. S&P's adjusted DSC and LTV for the top 10 loans were 1.33x and 115.8%, respectively. Of these loans, two are with the special servicer. The Larken Portfolio loan is the third-largest loan in the pool and the largest exposure with the special servicer. The loan is current. This asset has a balance of $172.0 million (5.3%) and is secured by a portfolio of 20 office, industrial, and retail properties in New Jersey. The loan was transferred to the special servicer on Feb. 5, 2009, due to imminent default. Reported year- end 2008 DSC was 1.16x. Despite the referenced DSC, the borrower indicated to the special servicer that it may not be able to meet debt service obligation due to deteriorating market conditions. The special server has ordered third-party reports and is considering a loan modification request that the borrower has submitted. Standard & Poor's expects a significant loss upon the resolution of the loan. The Bethany Phoenix Portfolio loan is the fourth-largest loan in the pool and the second-largest exposure with the special servicer. The loan is 30-plus-days delinquent. This asset has a balance of $164.5 million (5.1%) and is secured by a seven- property, 2,759-unit, garden-style apartment complexes in Arizona. The loan was transferred to the special servicer on Jan. 21, 2009, after the master servicer became aware of mechanics liens in the aggregate amount of $4.7 million recorded against six of the seven properties. Year-end 2008 DSC was 0.98x. Midland is currently working with a receiver to obtain interest payments as funds are available. Midland's counsel has filed a complaint against the guarantors due to waste on the properties. Standard & Poor's expects a moderate loss upon the resolution of the loan. Standard & Poor's stressed the loans in the pool according to S&P's updated conduit/fusion criteria. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative LB Commercial Mortgage Trust 2007-C3 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-4 A AAA/Watch Neg 30.02 A-4B A AAA/Watch Neg 30.02 A-4FL A AAA/Watch Neg 30.02 A-1A A AAA/Watch Neg 30.02 A-M BB+ AAA/Watch Neg 20.01 A-MB BB+ AAA/Watch Neg 20.01 A-MFL BB+ AAA/Watch Neg 20.01 A-J B AAA/Watch Neg 11.76 A-JFL B AAA/Watch Neg 11.76 B B- AA+/Watch Neg 10.76 C B- AA/Watch Neg 9.76 D B- AA-/Watch Neg 8.88 E CCC+ A+/Watch Neg 8.13 F CCC A/Watch Neg 7.25 G CCC- BBB+/Watch Neg 6.00 H CCC- BBB/Watch Neg 4.88 J CCC- BBB-/Watch Neg 4.00 K CCC- BB/Watch Neg 3.00 L CCC- B/Watch Neg 2.38 M CCC- CCC+/Watch Neg 2.00 N CCC- CCC/Watch Neg 1.88 Q D CCC-/Watch Neg 1.38 S D CCC-/Watch Neg 1.13 Rating Affirmed And Removed From Creditwatch Negative LB Commercial Mortgage Trust 2007-C3 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- P CCC- CCC-/Watch Neg 1.63 Ratings Affirmed LB Commercial Mortgage Trust 2007-C3 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.02 A-2 AAA 30.02 A-2FL AAA 30.02 A-3 AAA 30.02 A-AB AAA 30.02 X AAA N/A N/A - Not applicable. LB-UBS 2007-C7: Fitch Takes Various Rating Actions on Certificates ------------------------------------------------------------------ Fitch Ratings has taken various rating actions on LB-UBS 2007-C7, commercial mortgage pass-through certificates. In addition, Fitch has assigned Rating Outlooks, as applicable. The downgrades are the result of Fitch's loss expectations on specially serviced loans as well as prospective views regarding commercial real estate market value and cash flow declines. Fitch forecasts potential losses of 5.9% for this transaction, should market conditions not recover. The rating actions are based on losses of 4.0% including 100% of the losses associated with term defaults and any losses associated with maturities within the next five years. Given the significant term to maturity, Fitch's actions only account for 25% of the losses associated with maturities beyond five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end (YE) 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for loans representing 81.4% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Approximately 10.9% of the mortgages are scheduled to mature within the next five years, with 10.5% maturing in 2013. In 2017, 81.7% of the pool is scheduled to mature. Fitch identified 16 Loans of Concern (22.3%) within the pool, one of which (0.3%) are specially serviced. All of the top 15 loans (76.9%) are current as of the August 2009 payment date. Four of the top 15 loans (13.7% of the pool) are expected to default during the term or at maturity, with loss severities ranging from approximately 3% to 23%. Of the top 15 loans, the largest contributors (by loan balance) to term losses are: District at Tustin Legacy (6.5% of the pool balance), Nashville Multifamily Portfolio (3.7%) and Meyerland Plaza (2.9%). District at Tustin Legacy is secured by a 985,684 square foot (sf) retail center located in Tustin, CA. The property is anchored by Costco and Lowe's (not part of the collateral) as well as Target, Whole Foods, TJ Maxx, AMC Theaters, and Best Buy. As of June 30, 2009 the property was 99% occupied and near term lease expirations are limited as tenants were signed when the property was constructed in 2006. The property has been unable to achieve the rents expected at issuance, which led to a YE 2008 servicer reported debt service coverage ratio of .90 times (x). The loan is sponsored by Lee and Nancy Hanley along with Kimco Realty. The Nashville Multifamily Portfolio is collateralized by a four property, 1,593 unit, multifamily portfolio located in the Nashville, TN MSA. Property performance has declined since issuance and as of YE 2008 occupancy was 84%, down from 95% at issuance. Performance has also been hindered by increased expenses which offset a recent jump in occupancy to 91% for per the March 30, 2009 rent roll. The servicer reported YE 2008 DSCR was 0.94x, down from 1.25x at issuance. The loan is sponsored by New Dawn Companies. The Meyerland Plaza loan is collateralized by a 936,543 sf retail center in Houston, TX. The property is anchored by JC Penney and Target, which is not part of the collateral. The property is currently 91% occupied down from 99% at issuance. The property is also subject to significant near term lease expirations including 19.5% in 2010 (Old Navy, Bed, Bath & Beyond, Office Max, and Stein Mart) and 36.2% in 2012, which includes JC Penney. Servicer reported YE 2008 DSCR was 1.14x. The loan is sponsored by Ronus, Inc., an owner and developer of commercial real estate in the eastern U.S. Fitch downgrades, removes from Rating Watch Negative, and assigns Loss Severity ratings and Negative Outlooks to these classes: -- $269.5 million class A-J to 'AA/LS-3' from 'AAA'; -- $47.6 million class B to 'A/LS-5' from 'AA+'; -- $35.7 million class C to 'BBB/LS-5' from 'AA'; -- $23.8 million class D to 'BBB-/LS-5' from 'AA-'; -- $27.7 million class E to 'BB/LS-5' from 'A+'; -- $15.9 million class F to 'BB/LS-5' from 'A'; -- $31.7 million class G to 'BB/LS-5' from 'A-'; -- $27.7 million class H to 'B/LS-5' from 'BBB+'; -- $23.8 million class J to 'B/LS-5' from 'BBB'; -- $27.7 million class K to 'B-/LS-5' from 'BBB-'; -- $19.8 million class L to 'B-/LS-5' from 'BB+'; -- $11.9 million class M to 'B-/LS-5' from 'BB'; -- $11.9 million class N to 'B-/LS-5' from 'BB-'; -- $4 million class P to 'B-/LS-5' from 'B+'; -- $4 million class Q to 'B-/LS-5' from 'B'. Fitch affirms this class, removes it from Rating Watch Negative, and assigns an LS rating and Negative Outlook: -- $3.9 million class S at 'B-/LS-5'. Additionally, Fitch affirms these classes, assigns LS ratings and maintains a Stable Outlook: -- $16.1 million class A-1 at 'AAA/LS-1'; -- $194 million class A-2 at 'AAA/LS-1'; -- $74 million class A-AB at 'AAA/LS-1'; -- $1.7 billion class A-3 at 'AAA/LS-1'; -- $265.1 million class A-1A at 'AAA/LS-1'; -- $317.0 million class A-M at 'AAA/LS-3'; -- Interest-only class X-CL at 'AAA'; -- Interest-only class X-CP at 'AAA'; -- Interest-only class X-W at 'AAA'. The $47.6 million class T is not rated by Fitch. LB-UBS COMMERCIAL: S&P Downgrades Ratings on 17 2005-C5 Securities ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 17 classes of commercial mortgage-backed securities from LB-UBS Commercial Mortgage Trust 2005-C5 and removed them from CreditWatch with negative implications. In addition, S&P affirmed its ratings on eight other classes from the same transaction and removed two from CreditWatch with negative implications. At the same time, S&P affirmed its ratings on eight classes of commercial mortgage pass-through certificates from 1345 Avenue of the Americas and Park Avenue Plaza Trust's series FB 2005-1 transaction. The downgrades reflect S&P's analysis of the LB-UBS 2005-C5 transaction using S&P's recently released U.S. conduit and fusion CMBS criteria, which was the primary driver of S&P's rating actions. S&P's analysis included a review of the credit characteristics of all the loans in the pool. Using servicer- provided financial information, S&P calculated an adjusted debt service coverage of 1.51x and a loan-to-value ratio of 95.8%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 0.94x and an LTV of 128.1%. The implied defaults and loss severity under the 'AAA' scenario were 78.7% and 31.5%, respectively. The DSC and LTV calculations exclude one credit-impaired loan, five loans that haven't reported financial results, and one defeased loan (1.2% in the aggregate). S&P estimated losses for all except the defeased loan, which are included in the 'AAA' scenario implied default and loss figures. The affirmed ratings on the principal and interest certificates for LB-UBS 2005-C5 reflect credit enhancement levels that, in S&P's opinion, provide adequate support through various stress scenarios. S&P has affirmed its ratings on the interest-only certificates based on its current criteria. S&P published a request for comment proposing changes to S&P's IO criteria on June 1, 2009. Once the criteria review is finalized, S&P may revise its current IO criteria, which may affect outstanding ratings, including the ratings on the IO certificates S&P affirmed. S&P's affirmed ratings on the FB 2005-1 certificates reflect the stable operating performance of the properties and the amortization of the whole loans. The whole loans secured by 1345 Avenue of the Americas and Park Avenue Plaza are participated in both the LB-UBS 2005-C5 and FB 2005-1 trusts. The FB 2005-1 certificates derive 100% of their cash flow from the participated interests, which are discussed in further detail below. Credit Concerns Two loans ($263.7 million; 11.6%) in the pool are with the special servicer, LNR Partners Inc. (LNR). One of these loans, the second-largest loan in the pool (11.4%), is current and is described below. The other loan is less than 30 days delinquent (0.2%). No appraisal reduction amounts are in effect for these loans. In addition to the specially serviced loans, S&P deem one loan ($1.7 million; 0.1%) to be credit impaired. This loan is on the servicer's watchlist and is current but, based on low DSC, S&P considers it to have near-term default risk. Transaction Summary As of the Aug. 17, 2009, remittance report, the collateral pool consisted of 115 loans with an aggregate trust balance of $2.28 billion, compared with 115 loans and $2.34 billion at issuance. Wachovia Bank N.A., the master servicer, reported financial information for 99.1% of the pool; 95.0% of the financial information was either full-year 2008 or interim 2009 data. S&P calculated a weighted average DSC of 1.52x for the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.51x and 95.8%, respectively, excluding one credit-impaired loan, five loans not reporting financial results, and one defeased loan (1.2% in the aggregate). The transaction has not experienced any principal losses to date. Twenty-four loans are on the servicer's watchlist ($240.3 million; 10.5%). Six loans ($45.6 million, 2.0%) have reported DSC between 1.10x and 1.0x, and eight loans ($81.5 million, 3.6%) have reported DSC of less than 1.0x. Summary Of Top 10 Loans The top 10 loans secured by real estate have an aggregate outstanding balance of $1.3 billion (57.7%). Using servicer- reported information, S&P calculated a weighted average DSC of 1.55x for these loans. One of the top 10 loans (11.3%) is with the special servicer and two other top 10 loans (5.7%) are on the servicer's watchlist, all of which are described below. S&P's adjusted DSC and LTV for the top 10 loans were 1.55x and 94.1%, respectively. The Providence Place loan ($258.5 million; 11.3%) is the second- largest loan in the pool and is the largest loan with the special servicer. The loan is secured by the leasehold interest in 960,803 sq. ft. of a 1,286,803-sq.-ft. regional mall in Providence, R.I. The property was built in 1998. This loan was transferred to LNR on April 29, 2009, following the borrower's (a General Growth Properties entity) chapter 11 bankruptcy filing on April 16, 2009. he servicer reported a DSC of 1.82x and an occupancy of 98% for year-end 2008. The U-Store-It Portfolio loan ($77.8 million; 3.4%) is the fifth- largest loan in the pool and is the largest loan on the servicer's watchlist. The loan is secured by 24 self-storage properties encompassing 13,158 units and totaling 1,469,753 sq. ft. located in eight states. The properties were built between 1955 and 2003 and were renovated between 1997 and 2003. The servicer reported a DSC of 1.43x and an 76% occupancy for year-end 2008. The loan was placed on the watchlist due to deferred maintenance issues. The TAG Portfolio loan (53.4 million; 2.3%) is the ninth-largest loan in the pool and the second largest loan on the servicer's watchlist. The loan is secured by a portfolio of two properties consisting of three class A office buildings built between 1989 and 2000, with an aggregate of 404,524 sq. ft. Two of the office buildings are located on adjacent sites in Downers Grove, Ill., approximately 20 miles west of Chicago, and one building is in Dulles, Va., approximately 20 miles northwest of Washington. The servicer reported a DSC of 0.93x and a 73% occupancy for year-end 2008. 1345 Avenue of The Americas And Park Avenue Plaza Trust FB 2005-1 Stand-Alone Transaction The 1345 Avenue of the Americas property is encumbered by a $709.7 million whole loan. The loan has four senior A and B participations totaling $442.2 million and $267.5 million, respectively. The A-1 note ($36.7 million, 2%) serves as collateral in the subject (LB-UBS 2005-C5) transaction, and the A- 3, A-4, B-1, and B-2 notes serve as collateral in the FB 2005-1 stand-alone transaction ($436.4 million; 80%). Other notes serve as collateral in Hypo Real Estate Bank International AG's series Estate-US1 transaction and the Bear Stearns Commercial Mortgage Securities series 2005-T20 transaction. The loan is secured by a 1,896,140-sq.-ft. office property in midtown Manhattan. For the year ended Dec. 31, 2008, the property was 100% occupied and the weighted average in-place base rent was $66.36. S&P's adjusted valuation for this loan is up 8% since issuance. The Park Avenue Plaza property is encumbered by a $244.5 million whole loan. The loan has four senior A participations totaling $143.2 million, two B participations totaling $1.3 million, and one C participation totaling $100.0 million. In addition, there is $85.0 million of preferred equity secured by the equity interests of the borrower. The A-1 note ($16.1 million, 1%) serves as collateral in the subject (LB-UBS 2005-C5 transaction), and the A-3, A-4, B-1, and B-2 notes serve as collateral in the FB 2005-1 stand-alone transaction ($112.3 million; 20%). The C participation serves as collateral in Hypo Real Estate Bank International AG's series Estate-US1 transaction. The loan is secured by a 1,137,452-sq.-ft. office property in midtown Manhattan, N.Y. As of Dec. 31, 2008, the property was 97% occupied and the weighted average in-place base rent was $51.04. S&P's adjusted valuation for this loan is up 29% since issuance. Standard & Poor's stressed the loans with the special servicer and the remaining loans in the pool according to S&P's updated conduit/fusion criteria. The resultant credit enhancement levels support the lowered and affirmed ratings in S&P's opinion. Ratings Lowered And Removed From Creditwatch Negative LB-UBS Commercial Mortgage Trust 2005-C5 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-M A+ AAA/Watch Neg 20.57 A-J A- AAA/Watch Neg 12.34 B BBB+ AA+/Watch Neg 11.44 C BBB AA/Watch Neg 10.03 D BBB- AA-/Watch Neg 8.74 E BB+ A+/Watch Neg 7.71 F BB A/Watch Neg 6.43 G BB- A-/Watch Neg 5.27 H B+ BBB+/Watch Neg 4.24 J B+ BBB/Watch Neg 3.60 K B+ BBB-/Watch Neg 2.70 L B BB+/Watch Neg 2.31 M B BB/Watch Neg 2.06 N B- BB-/Watch Neg 1.67 P B- B+/Watch Neg 1.54 Q B- B/Watch Neg 1.29 S CCC+ B-/Watch Neg 1.03 Ratings Affirmed And Removed From Creditwatch Negative LB-UBS Commercial Mortgage Trust 2005-C5 Commercial mortgage pass-through certificates Class Rating Credit Enhancement (%) ----- ------ ---------------------- A-1A AAA 30.85 A-4 AAA 30.85 Ratings Affirmed LB-UBS Commercial Mortgage Trust 2005-C5 Commercial mortgage pass-through certificates Class Rating Credit Enhancement (%) ----- ------ ---------------------- A-1 AAA 30.85 A-2 AAA 30.85 A-3 AAA 30.85 A-AB AAA 30.85 X-CL AAA N/A X-CP AAA N/A N/A - Not Applicable 1345 Avenue of the Americas and Park Avenue Plaza Trust Commercial mortgage pass-through certificates series FB 2005-1 Class Rating ----- ------ A-2 AAA A-3 AAA B AAA C AAA D AA E A+ F A X AAA LB-UBS COMMERCIAL: S&P Downgrades Ratings on 19 2007-C2 Securities ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 19 classes of commercial mortgage-backed securities from LB-UBS Commercial Mortgage Trust 2007-C2 and removed them from CreditWatch with negative implications. S&P also affirmed the ratings on six additional classes from this transaction. The downgrades follow S&P's analysis of the transaction using its recently released U.S. conduit and fusion CMBS criteria, which was the primary driver of the rating actions. The downgrades of the subordinate and mezzanine classes also reflect anticipated credit support erosion upon the eventual resolution of the specially serviced loans, as well as concerns with loans that S&P deems to be credit impaired. S&P's analysis included a review of the credit characteristics of all of the loans in the pool. Using servicer-provided financial information, S&P calculated an adjusted debt service coverage of 1.39x and a loan-to-value ratio of 111.8%. S&P further stressed the loans' cash flows under its 'AAA' scenario to yield a weighted average DSC of 0.76x and an LTV of 146.1%. The implied defaults and loss severity under the 'AAA' scenario were 93.1% and 41.1%, respectively. All of the DSC and LTV calculations noted above exclude 13 of the 15 specially serviced loans (5.1%). S&P separately estimated losses for these loans, which are included in the 'AAA' scenario implied default and loss figures. S&P lowered the rating on class S to 'D' because of interest shortfalls to the class that S&P expects to continue for the foreseeable future. S&P affirmed the ratings on the interest-only certificates based on S&P's current criteria. S&P published a request for comment proposing changes to the IO criteria on June 1, 2009. After S&P finalizes its criteria review, S&P may revise its current IO criteria, which may affect outstanding ratings, including the ratings on the IO certificates S&P affirmed. Credit Concerns Fifteen assets ($392.3 million, 11.1%) in the pool are with the special servicer, LNR Partners Inc. One of those assets ($15.5 million, 0.4%) is real estate owned (REO); five ($63.9 million, 1.8%) are in foreclosure; five ($83.2 million, 2.4%) are more than 90 days delinquent; two ($19.7 million, 0.6%) are more than 60 days delinquent; one ($25.0 million, 0.7%) is in its grace period; and one ($185.0 million, 5.22%) is current. Ten of the specially serviced loans have appraisal reduction amounts (ARAs) in effect totaling $42.9 million. One specially serviced asset, the Bethany Maryland Portfolio II loan ($185.0 million, 5.2%), is a top 10 loan. This loan is discussed in further detail below. All the other specially serviced assets have balances below 1.2% of the total pool balance. Transaction Summary As of the August 2009 remittance report, the aggregate trust balance was $3.55 billion, which is approximately 99.8% of the issuance balance. The number of loans in the pool, at 170, is unchanged since issuance. The master servicer for the transaction is Wachovia Bank N.A. The master servicers provided financial information for 97.8% of the pool, and 84.3% of the servicer- provided information was full-year 2008 or interim-2009 data. S&P calculated a weighted average DSC of 1.40x for the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.39x and 111.8%, respectively. S&P's adjusted DSC and LTV figures exclude 13 of the 15 specially serviced loans. S&P estimated losses, which ranged from 21% to 76%, separately for these 13 loans. Based on the servicer-reported DSC figures, S&P calculated a weighted average DSC of 0.96x for these 13 loans, including four loans that had DSC of less than 1.0x. To date, the transaction has not experienced principal losses. Forty-six loans ($757.4 million, 21.4%) are on the master servicer's watchlist. Ten loans ($128.3 million, 3.6%) have reported DSC between 1.10x and 1.0x, and 17 loans ($260.6 million, 7.4%) have reported DSC of less than 1.0x. Summary of Top 10 Loans The top 10 exposures have an aggregate outstanding balance of $1.76 billion (49.7%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.49x for the top 10 loans. S&P's adjusted DSC and LTV for the top 10 loans were 1.47x and 105.8%, respectively. The Bethany Maryland Portfolio II loan is the third-largest loan in the pool and the largest exposure with the special servicer. The loan is current. This asset has a balance of $185.0 million (5.2%) and is secured by a three-property, 1,909-unit multifamily portfolio located in the Baltimore, Md., and Washington, D.C., metropolitan areas. The loan originally transferred to the special servicer due to imminent default. Year-end 2008 DSC was 1.11x. The lender has granted consent to a modification of certain payment terms of the B note and modification of reserve provisions. The loan is likely to be returned to the master servicer once an agreement has been reached. The Extendicare Portfolio loan ($125.0 million, 3.5%) is the seventh-largest loan in the pool and largest loan on the servicer's watchlist. The loan appears on the servicer's watchlist due to deferred maintenance. The loan is secured by 82 health care facilities located in 10 states, containing 8,492 licensed beds. The year-end 2008 DSC was 2.56x, down from 3.31x at issuance. The Extendicar Portfolio II loan ($89.5 million, 2.5%) is the Ninth-largest loan in the pool and the second-largest loan on the servicer's watchlist. The loan appears on the servicer's watchlist due to deferred maintenance. The year-end 2008 DSC was 2.68x, down from 2.85x at issuance. Standard & Poor's stressed the loans in the pool according to S&P's updated conduit/fusion criteria. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative LB-UBS Commercial Mortgage Trust 2007-C2 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-3 A+ AAA/Watch Neg 30.07 A-1A A+ AAA/Watch Neg 30.07 A-M BBB AAA/Watch Neg 20.05 A-J BB- AAA/Watch Neg 11.15 B B+ AA+/Watch Neg 10.40 C B+ AA/Watch Neg 8.90 D B AA-/Watch Neg 7.77 E B A+/Watch Neg 7.39 F B A/Watch Neg 6.64 G B- A-/Watch Neg 5.64 H B- BBB+/Watch Neg 4.76 J B- BBB/Watch Neg 3.76 K CCC BB+/Watch Neg 2.63 L CCC- BB/Watch Neg 2.13 M CCC- BB-/Watch Neg 1.88 N CCC- B+/Watch Neg 1.75 P CCC- B/Watch Neg 1.50 Q CCC- B-/Watch Neg 1.38 S D CCC+/Watch Neg 1.00 Ratings Affirmed Credit Suisse Commercial Mortgage Trust 2006-C4 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.07 A-2 AAA 30.07 A-AB AAA 30.07 X-CP AAA N/A X-W AAA N/A X-CL AAA N/A LEHMAN BROTHERS: Moody's Reviews Ratings on 2004-LLF C5 Certs. -------------------------------------------------------------- Moody's Investors Service placed four classes of Lehman Brothers Floating Rate Commercial Mortgage Trust Commercial Mortgage Pass- Through Certificates, Series 2004-LLF C5 on review for possible downgrade due to the significant decline in the performance of the Sheraton Chicago Hotel and Towers Loan ($141.7 million -- 59% of the pool balance) and a negative outlook for the lodging sector. This action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. The Sheraton Chicago Hotel & Towers Loan is secured by a 1,209- room convention hotel located in Chicago, Illinois. RevPAR (Revenue per available room) for the trailing twelve months ending June 2009 was down 14% from the 2008 RevPAR. RevPAR for the July 2009 year to date period was 27% lower than the same period in 2008. Similarly, the net cash flow for the trailing twelve months ending June 2009 was down 32% from the 2008 net cash flow. The loan matures in January 2010. The borrower is an affiliate of Tishman Hotel and Realty L.P. As of the September 15, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 81% to $241.7 million from $1.3 billion at securitization as a result of the pay off of 16 loans originally in the pool. Since last review, two loans have paid off decreasing the pool by 27%. There are two remaining loans in the pool, the Sheraton Chicago and the Hilton in the Walt Disney World Resort (41% of the pool balance). Moody's rating action is: -- Class G, $27,800,000, currently rated A1, on review for possible downgrade; previously downgraded to A1 from Aa1 on 3/4/2009 -- Class H, $22,800,000, currently rated A3, on review for possible downgrade; previously downgraded to A3 from Aa3 on 3/4/2009 -- Class J, $25,100,000, currently rated Baa2, on review for possible downgrade; previously downgraded to Baa2 from A3 on 3/4/2009 -- Class K, $31,531,066, currently rated Ba3, on review for possible downgrade; previously downgraded to Ba3 from Baa3 on 3/4/2009 LIGHTPOINT CLO: Moody's Downgrades Ratings on Various Classes ------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Lightpoint CLO V, Ltd.: -- US$450,000,000 Class A-1 Floating Rate Notes Due 2019, Downgraded to Aa2; previously on August 3, 2006 Assigned Aaa; -- US$30,000,000 Class A-2 Floating Rate Notes Due 2019, Downgraded to A3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$34,500,000 Class B Deferrable Floating Rate Notes Due 2019, Downgraded to Ba1; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$20,500,000 Class C Floating Rate Notes Due 2019, Downgraded to B1; previously on March 17, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$19,000,000 Class D Floating Rate Notes Due 2019, Downgraded to Caa3; previously on March 17, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade; -- US$5,000,000 Class J Blended Securities (current rated balance of 2,848,807), Downgraded to Caa3; previously on March 4, 2009 Ba3 Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2559 as of the last trustee report, dated July 30, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $26.9 million, accounting for roughly 4.6% of the collateral balance, and securities rated Caa1 or lower make up approximately 8.0% of the underlying portfolio. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Lightpoint CLO V, Ltd., issued on August 3, 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. LONG GROVE: Moody's Downgrades Ratings on Various Classes --------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Long Grove CLO Ltd.: -- US$319,400,000 Class A Senior Secured Floating Rate Notes Due 2016 (current balance of $313,080,847), Downgraded to Aa3; previously on June 14, 2004 Assigned Aaa; -- US$29,000,000 Class B Second Priority Deferrable Floating Rate Notes Due 2016, Downgraded to Ba1; previously on March 18, 2009 Downgraded to Baa2 and Placed Under Review for Possible Downgrade; -- US$17,800,000 Class C Third Priority Deferrable Floating Rate Notes Due 2016 (current balance of $17,960,620), Downgraded to B2; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$11,000,000 Class D Fourth Priority Deferrable Floating Rate Notes Due 2016 (current balance of $11,217,555), Downgraded to Ca; previously on March 18, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class B, Class C, and Class D Overcollateralization Tests. In particular, the weighted average rating factor has increased over the last year and is currently 2957 versus a test level of 2650 as of the last trustee report, dated August 17, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $22.8 million, accounting for roughly 6.0% of the collateral balance, and securities rated Caa1 or lower make up approximately 16.4% of the underlying portfolio. The Class B Overcollateralization Test was reported at 106.14% versus a test level of 109.20%, the Class C Overcollateralization Test was reported at 100.84% versus a test level of 105.60%, and the Class D Overcollateralization Test was reported at 97.80% versus a test level of 102.70%. Additionally, interest payments on the Class C and Class D notes are presently being deferred as a result of the failure of the Class B Overcollateralization Test. Moody's also assessed the collateral pool's elevated concentration risk in a small number of obligors and industries. This includes a significant concentration in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Long Grove CLO Ltd., issued in 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. MARYLAND ECONOMIC: Moody's Affirms 'Ba3' Rating on 2003 Bonds ------------------------------------------------------------- Moody's Investors Service has affirmed Ba3 rating on the Maryland Economic Development Corporation Student Housing Revenue Bonds (Bowie State University Project) Series 2003. Rating outlook remains negative. Approximately $20 million of the original $21.47 million of bonds remains outstanding. This rating affirmation is due to Moody's ongoing assessment of the project's financial position, as well as the termination of the Guaranteed Investment Contract with MBIA Inc. and MBIA Insurance Corporation (currently rated Ba3/ NEG and B3 / NEG, respectively), which held the debt service reserve fund of the Salisbury University Project. The debt service reserve fund is currently held with the Trustee in a money market fund. Recent Developments: Based on the audited financial statements ending June 30, 2008, the project's financial performance slightly improved from the prior year, yet remains weak, as demonstrated by the low debt service coverage level of 1.08x. Several expenses, such as student life and management fees are subordinated and are not included in the debt service coverage calculations. In an effort to reduce the continuing bad debt situation at the project, student residents who wish to pay rent with financial aid are able to direct the University to send a portion of their financial aid directly to the property manager to pay for their rental expenses. Additionally, rent is now payable upfront and by semester. According to management the bad debt expense was significantly reduced to approximately 3% of revenues in FY2009. However, Moody's anticipate a substantial decline in interest income, given the loss of revenues provided by the Guaranteed Investment Contract. Such loss of revenue income is likely to negatively affect the debt service coverage on the bonds. Occupancy has remained high at approximately 98% for the fall 2008 and spring 2009, and has always been near such levels since the project opened in September 2004. The average rent increase was approximately 8.5% and 8.4% for FY2008 and FY2009, respectively. Despite the rent increase, occupancy is not expected to be affected due to the lack of comparably priced off-campus housing available nearby. Credit Strengths: -- Consistently high occupancy (approximately 98% in fall 2008 and spring 2009) reflecting adequate demand for student housing, partially due to provided amenities which are superior to those at the University's own housing. -- Involvement of the University to mitigate the bad debt associated with collections by allowing students to direct the University to send their financial aid funds directly to the project to cover the rent. -- Strong oversight by MEDCO, as both issuer for the bonds and owner of the project. Credit Challenges: -- The loss of investment income derived from the Guaranteed Investment Contract is likely to negatively affect the debt service coverage on the bonds. -- Audited financial statements for fiscal year ending June 30, 2008 reflected slightly improved, albeit still low 1.08x debt service coverage. -- Absence of a long-term financial or legal commitment from the University, the University System of Maryland (rated Aa2), or the State of Maryland (rated Aaa). Outlook The negative rating outlook reflects the possibility of a further downgrade if the project's financial position does not significantly improve in the near term. What could change the rating - UP -- A substantial increase in debt service coverage. What could change the rating - DOWN -- Continued weak financial performance. The last rating action was on August 6, 2009, when Moody's downgraded to Ba3 from Ba2 the rating on the Series 2003 bonds. MASSACHUSETTS HEALTH: S&P Gives Positive Outlook on 'BB+' Rating ---------------------------------------------------------------- Standard & Poor's Ratings Services revised its outlook on the 'BB+' underlying rating on Massachusetts Health & Educational Facilities Authority's series 1998 revenue bonds, issued for Massachusetts Eye & Ear Infirmary, to positive from stable. At the same time, the rating service affirmed its 'BB+' SPUR on the debt. The positive outlook reflects the magnitude of Massachusetts Eye & Ear Infirmary's recent receipt of proceeds awarded as the outcome of its lawsuit. The funds allow the organization significantly greater financial flexibility. The 'BB+' rating reflects Massachusetts Eye & Ear Infirmary's strong balance sheet that has consistently carried solid liquidity for the rating and that has been bolstered by approximately $75 million of temporarily restricted funds derived from the favorable outcome of a recent lawsuit -- In addition, there is very little time left to maturity (2011) on the only series of debt (1998) rated by Standard & Poor's; continued operating losses that have typically been offset by nonoperating gains -- For fiscal 2009, however, the organization has realized significantly lower nonoperating revenues; and reliance on a service specialty niche - - The organization, however, has been focused on expanding its service area through various types of affiliations and outreach services, which might lessen its dependence on its Boston-based business. "Before considering an upgrade to the 'BBB' investment-grade category, S&P would like to better understand the organization's overall future financial goals and master facility plans, including plans to reduce operating losses and further debt plans," said Standard & Poor's credit analyst Jennifer Soule. "The credit, however, remains solidly 'BB+'; and it is extremely unlikely S&P would lower the rating before the bonds mature, unless it issues a substantial amount of additional debt or the losses grow significantly." A higher rating is precluded by Massachusetts Eye & Ear Infirmary's continued operating losses, even though improvement was evidenced in fiscal 2008 and despite the organization's one- time infusion of money. In January 2009, the federal appeals court ruled in favor of Massachusetts Eye & Ear Infirmary on liability and damages for the organization's claims of unjust enrichment and unfair trade practices against QLT Inc. According to management, MEEI felt it was entitled to royalties associated with a QLT drug used in patented clinical trials at the infirmary; the court agreed with these claims and awarded Massachusetts Eye & Ear Infirmary approximately $127 million in damages. The rating action affects roughly $12.8 million of debt outstanding. MASTR RESECURITIZATION: Moody's Cuts Rating on 2004-2 Notes to Ba1 ------------------------------------------------------------------ Moody's Investors Service has downgraded the rating on the notes issued by MASTR Resecuritization TRUST 2004-2 resecuritized transaction. The notes in the resecuritization are backed by a number of securities, which in turn are backed by residential mortgage loans. These rating actions have been triggered by changes in performance and/or Moody's ratings on the underlying residential mortgage-backed securities (underlying securities). The ratings on the certificates in the resecuritization are based on: (i) The updated expected loss of the pool of loans backing the underlying securities portfolio and the updated ratings on the underlying securities portfolio (ii) The available credit enhancement on the underlying securities, and (iii) The structure of the resecuritization transaction. (1) Moody's first updated its loss assumptions on the underlying pool of mortgage loans (backing the underlying securities) and then arrived at updated ratings on the underlying securities. Certain resecuritizations may contain underlying securities that were not originally rated by Moody's. In this case, lifetime roll-rates (probabilities of transition to default) were applied to the current delinquency pipeline buckets to calculate a pipeline default rate. This value was then multiplied by a replication factor to account for additional loans that are expected to default over the remaining life of the deal. The replication factor differed for each deal based on pool factor and current delinquency pipeline (higher pool factors and lower delinquency pipelines resulted in higher replication factors, for example). The final expected default number was then multiplied by an expected loss severity (based on vintage and product type - older vintages from better performing deals had lower expected severities) to arrive at an estimated expected loss. In addition, expected losses for deals with 50 or fewer loans remaining (these deals referred to as "low pool factor") were subject to additional stresses for replication factors and severities to account for increased volatility. An implicit rating was determined by comparing current available credit enhancement for the non-rated tranche to the estimated expected loss for the deal. The ratings on the underlying securities are then used to derive a weighted average portfolio rating based on a weighted average rating factor. To determine the portfolio WARF, Moody's assigns the ratings on the underlying securities a Rating Factor based on Moody's published 10-yr idealized loss expectations. Weights are assigned to each Rating Factor based on the contribution (by outstanding pledged balance) of the underlying security to the resecuritized transaction. (2) Second, Moody's determines the weighted average credit enhancement available to the portfolio security by evaluating the loss coverage level consistent with the ratings on the underlying securities and the underlying mortgage pool losses and weighting them based on the outstanding pledged balance of the underlying securities. (3) Finally, the ratings on the bonds issued in the resecuritization are determined after taking into consideration additional structural aspects of the resecuritization. For transactions where only a single tranche is issued, the weighted average portfolio rating (as determined in step 1 above) is the rating assigned to the tranche. Where multiple securities are issued, the loss allocation and cash flow priority are taken into consideration. For instance where the certificates in the resecuritization are tranched into a super senior tranche and a support tranche, the support tranche is notched down to reflect a higher severity of loss to that tranche. The rating on the super senior tranche is determined based on the total credit enhancement available i.e. the credit enhancement assessed in step (2) and the additional enhancement from the support tranche. The probability of default for the junior-most certificate in the resecuritization is the same as the probability of default for the lowest rated underlying certificate. However, Moody's anticipates a higher loss severity on the junior-most class due to its subordinate position (both in terms of principal distribution and loss allocation) and smaller size (when compared to underlying certificate). Therefore, the ratings on junior certificates in the resecuritization are lower than the portfolio rating on the combined underlying bonds. Because the ratings on the certificates in the resecuritization are linked to the ratings on the underlying certificates and their mortgage pool performance, any rating action on the underlying certificates may trigger a further review of the ratings on the certificates in the resecuritization. The ratings on the certificates in the resecuritization address the ultimate payment of promised interest and principal and do not address any other amounts that may be payable on the certificates. For securities insured by a financial guarantor, the rating on the securities is equal to the higher of (i) the guarantor's financial strength rating and (ii) the current underlying rating (i.e., absent consideration of the guaranty) on the security. The principal methodology used in determining the underlying rating is the same methodology for rating securities that do not have a financial guaranty. Complete Rating Actions are: Issuer: MASTR Resecuritization TRUST 2004-2 -- 5.25% Mortgage Resecuritization Notes, Series 2004-2, Downgraded to Ba1; previously on Nov 14, 2008 Baa3 Placed Under Review for Possible Downgrade MASTR RESECURITIZATION: Moody's Cuts Ratings on 2004-3 Notes to B3 ------------------------------------------------------------------ Moody's Investors Service has downgraded the rating on the notes issued in the MASTR Resecuritization Trust 2004-3 resecuritized transaction. The notes in the resecuritization are backed by a number of securities, which in turn are backed by residential mortgage loans. These rating actions have been triggered by changes in performance and/or Moody's ratings on the underlying residential mortgage-backed securities (underlying securities). The ratings on the certificates in the resecuritization are based on: (i) The updated expected loss of the pool of loans backing the underlying securities portfolio and the updated ratings on the underlying securities portfolio (ii) The available credit enhancement on the underlying securities, and (iii) The structure of the resecuritization transaction, as described in more detail below. (1) Moody's first updated its loss assumptions on the underlying pool of mortgage loans (backing the underlying securities) and then arrived at updated ratings on the underlying securities. Certain resecuritizations may contain underlying securities that were not originally rated by Moody's. In this case, lifetime roll-rates (probabilities of transition to default) were applied to the current delinquency pipeline buckets to calculate a pipeline default rate. This value was then multiplied by a replication factor to account for additional loans that are expected to default over the remaining life of the deal. The replication factor differed for each deal based on pool factor and current delinquency pipeline (higher pool factors and lower delinquency pipelines resulted in higher replication factors, for example). The final expected default number was then multiplied by an expected loss severity (based on vintage and product type - older vintages from better performing deals had lower expected severities) to arrive at an estimated expected loss. In addition, expected losses for deals with 50 or fewer loans remaining (these deals referred to as "low pool factor") were subject to additional stresses for replication factors and severities to account for increased volatility. An implicit rating was determined by comparing current available credit enhancement for the non-rated tranche to the estimated expected loss for the deal. The ratings on the underlying securities are then used to derive a weighted average portfolio rating based on a weighted average rating factor. To determine the portfolio WARF, Moody's assigns the ratings on the underlying securities a Rating Factor based on Moody's published 10-yr idealized loss expectations. Weights are assigned to each Rating Factor based on the contribution (by outstanding pledged balance) of the underlying security to the resecuritized transaction. (2) Second, Moody's determines the weighted average credit enhancement available to the portfolio security by evaluating the loss coverage level consistent with the ratings on the underlying securities and the underlying mortgage pool losses and weighting them based on the outstanding pledged balance of the underlying securities. (3) Finally, the ratings on the bonds issued in the resecuritization are determined after taking into consideration additional structural aspects of the resecuritization. For transactions where only a single tranche is issued, the weighted average portfolio rating (as determined in step 1 above) is the rating assigned to the tranche. Where multiple securities are issued, the loss allocation and cash flow priority are taken into consideration. For instance where the certificates in the resecuritization are tranched into a super senior tranche and a support tranche, the support tranche is notched down to reflect a higher severity of loss to that tranche. The rating on the super senior tranche is determined based on the total credit enhancement available i.e. the credit enhancement assessed in step (2) and the additional enhancement from the support tranche. The probability of default for the junior-most certificate in the resecuritization is the same as the probability of default for the lowest rated underlying certificate. However, Moody's anticipates a higher loss severity on the junior-most class due to its subordinate position (both in terms of principal distribution and loss allocation) and smaller size (when compared to underlying certificate). Therefore, the ratings on junior certificates in the resecuritization are lower than the portfolio rating on the combined underlying bonds. Because the ratings on the certificates in the resecuritization are linked to the ratings on the underlying certificates and their mortgage pool performance, any rating action on the underlying certificates may trigger a further review of the ratings on the certificates in the resecuritization. The ratings on the certificates in the resecuritization address the ultimate payment of promised interest and principal and do not address any other amounts that may be payable on the certificates. For securities insured by a financial guarantor, the rating on the securities is equal to the higher of (i) the guarantor's financial strength rating and (ii) the current underlying rating (i.e., absent consideration of the guaranty) on the security. The principal methodology used in determining the underlying rating is the same methodology for rating securities that do not have a financial guaranty. Complete Rating Actions are: Issuer: MASTR Resecuritization Trust 2004-3 -- Notes, Downgraded to B3; previously on Sep 29, 2004 Assigned Baa3 MAX CMBS: S&P Downgrades Ratings on 24 Classes of Notes ------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 24 classes from MAX CMBS I Ltd.'s series 2007-1 and 2008-1 and from COMM 2008-RS3. In addition, S&P removed its ratings on class K from MAX 2008-1 and class H from COMM 2008-RS3 from CreditWatch with negative implications. The remaining lowered ratings remain on CreditWatch with negative implications. MAX CMBS I Ltd., the issuer, has the ability to issue one or more series of notes. MAX 2008-1 is the second series of notes. The first series, MAX 2007-1, is cross-collateralized with MAX 2008-1. The issuer in the COMM 2008-RS3 transaction is a grantor trust that primarily holds certain securities from MAX 2008-1 and has a similar priority of distribution. The downgrades reflect S&P's analysis of the transactions following its downgrades of 54 commercial mortgage-backed securities certificates that serve as underlying collateral for MAX 2007-1 and MAX 2008-1. The certificates are from 25 transactions totaling $2.224 billion (28.2% of the pool balance for these transactions). S&P's ratings on MAX 2008-1, MAX 2007-1, and COMM 2008-RS3 (with the exception of class K from MAX 2008-1 and class H from COMM 2008-RS3) remain on CreditWatch negative due to each transaction's exposure to CMBS collateral that is on CreditWatch negative ($3.6 billion, 45.6%). According to the trustee report dated Aug. 17, 2009, MAX 2008-1 and MAX 2007-1 are collateralized by 156 CMBS certificates ($7.114 billion, 90% of the combined transaction balances) from 99 distinct transactions issued between 2005 and 2007. The collateral also includes 12 collateralized debt obligation securities ($776.6 million, 10%) from 12 distinct transactions. According to the trustee report, MAX 2007-1 and MAX 2008-1 have significant exposure to downgraded CMBS, including these: * CD 2007-CD4 Mortgage Trust series 2007-CD4 (classes A-4, A-MFX, and A-J; $311.3 million, 3.9%); * JPMorgan Chase Commercial Mortgage Securities Trust series 2007- CIBC19 (classes A-4, A-M, and A-J; $306.2 million, 3.9%); * GE Commercial Mortgage Corp. series 2007-C1 (classes A-M, A-MFL, A-J, and A-JFL; $263.7 million, 3.3%); * CD 2006-CD3 Mortgage Trust series 2006-CD3 (classes A-M and A-J; $162.5 million, 2.1%); and * COBALT CMBS Commercial Mortgage Trust series 2006-C1 (class A-4 and A-M; $119 million, 1.5%). The collateral for COMM 2008-RS3 consists of classes A-2A, A-2B, X-B, X-W, C, E, F, G, H, J, and K from MAX 2008-1. S&P lowered its ratings on the COMM 2008-RS3 classes concurrently with the downgrades of the respective MAX 2008-1 classes. The distribution of interest proceeds to the interest-only classes X-B and X-W from MAX 2008-1 are made pro rata to classes A-2A and A-2B, which S&P downgraded accordingly. S&P published a request for comment proposing changes to S&P's IO criteria on June 1, 2009. After S&P finalize its criteria review, S&P may revise its IO criteria, which may affect outstanding ratings, including the ratings on IO certificates being lowered. S&P expects to update or resolve the CreditWatch negative placements on MAX 2007-1, MAX 2008-1, and COMM 2008-RS3 in conjunction with S&P's CreditWatch resolutions of the underlying CMBS assets. Ratings Lowered And Remaining On Creditwatch Negative MAX CMBS I 2007-1 Ltd. Rating ------ Class To From ----- -- ---- A-1 A+/Watch Neg AAA/Watch Neg MAX CMBS I 2008-1 Ltd. Rating ------ Class To From ----- -- ---- A-1 A+/Watch Neg AAA/Watch Neg A-2A BBB-/Watch Neg AA+/Watch Neg A-2B BBB-/Watch Neg AA+/Watch Neg C BB-/Watch Neg A+/Watch Neg E BB-/Watch Neg A/Watch Neg F B/Watch Neg BBB+/Watch Neg G B/Watch Neg BBB/Watch Neg H B-/Watch Neg BB+/Watch Neg J CCC+/Watch Neg BB/Watch Neg X-B BBB-/Watch Neg AA+/Watch Neg X-W BBB-/Watch Neg AA+/Watch Neg COMM 2008-RS3 Rating ------ Class To From ----- -- ---- A-2A BBB-/Watch Neg AA+/Watch Neg A-2B BBB-/Watch Neg AA+/Watch Neg B BB-/Watch Neg A+/Watch Neg C BB-/Watch Neg A/Watch Neg D B/Watch Neg BBB+/Watch Neg E B/Watch Neg BBB/Watch Neg F B-/Watch Neg BB+/Watch Neg G CCC+/Watch Neg BB/Watch Neg X-B BBB-/Watch Neg AA+/Watch Neg X-W BBB-/Watch Neg AA+/Watch Neg Ratings Lowered And Removed From Creditwatch Negative MAX CMBS I 2008-1 Ltd. Rating ------ Class To From ----- -- ---- K CCC- B-/Watch Neg COMM 2008-RS3 Rating ------ Class To From ----- -- ---- H CCC- B-/Watch Neg MBIA INC: Moody's Keeps Maryland Economic Housing Bonds Rating -------------------------------------------------------------- Moody's Investors Service has confirmed the Baa2 rating and removed the rating from Watchlist on the Maryland Economic Development Corporation's Student Housing Revenue Bonds (University of Maryland, College Park Projects), Series 2008 and the Student Housing Refunding Revenue Bonds (University of Maryland, College Park Projects), Series 2006. This rating action affects approximately $166 million of parity debt outstanding. This rating confirmation is prompted by MBIA Inc. and MBIA Insurance Corporation (currently rated Ba1/ DEV and B3 / DEV, respectively) and the Maryland Economic Development Corporation terminating the Guaranteed Investment Contract which partially held the debt service reserve fund of the College Park Projects. According to the Trustee, the released funds are now invested in a money market fund. Moody's will continue to periodically assess the operating performance at the project and review Moody's rating on the bonds. The last rating action was on March 20, 2009, when Moody's placed the Baa2 rating on the Series 2006 and 2008 bonds on Watchlist for potential downgrade. MERRILL LYNCH: Moody's Lifts Ratings on Three 2001-Canada 6 Certs. ------------------------------------------------------------------ Moody's Investors Service upgraded the ratings of three classes of Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass- Through Certificates, Series 2001- Canada 6. The upgrades are due to increased credit support and defeasance. The action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the August 31, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 45% to $146.1 million from $265.5 million at securitization. The Certificates are collateralized by 24 mortgage loans ranging in size from less than 1% to 17% of the pool, with the top 10 loans representing 63% of the pool. Four loans, representing 11% of the pool, have defeased and are collateralized with Canadian Government securities. Three loans, representing 21% of the pool, are on the master servicer's watchlist. The largest loan on the watch list is the Westbridge Shopping Center loan ($24.9 million -- 12.1%). The loan is on the watch list due to Linen 'N Things vacating the center in early 2009. Despite the departure of a major tenant, the property continues to generate sufficient income to provide for an estimated debt service coverage ratio of 1.29X. As a result, Moody's is not concerned about this loan at this time. The watchlist includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. Not all loans on the watchlist are delinquent or have significant issues. The pool has not experienced any losses to date. There are no loans are in special servicing. Moody's was provided with full- year 2008 operating results for 95% of the pool. Moody's weighted average loan to value ratio for the total pool is 67%, basically the same since last review, compared to 81% at securitization. Moody's stressed DSCR for the pool is 1.49X compared to 1.55X at Moody's last review and 1.31X at securitization. Moody's stressed DSCR is based on Moody's net cash flow and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of the Herfindahl index to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple notch downgrades under adverse circumstance. The credit neutral Herf score is 40. The pool has a Herf of 12 compared to 16 at last review and 23 at securitization. The three largest conduit loans represent 34% of the pool. The largest loan is the Westbridge Shopping Center Loan ($24.9 million -- 12.1%), which is secured by a 211,400 square foot retail center located in Vaughan, Ontario, approximately 20 miles north of Toronto. Currently, the center's largest tenants are Toys "R" Us (14.2% of the net rentable area; lease expiration November 2014) and Mark's Work Warehouse (6.3% of the NRA; lease expiration March 2011). In 2008, Linens 'N Things (16.7% of the NRA; lease expiration January 2017) was the shopping center's anchor tenant. However, Linen 'N Things vacated its space in early 2009 after publicly announcing the closure of all its stores. Consequently, the loan was placed on the watchlist. The current occupancy is approximately 80% compared to 97% at last review and 100% at securitization. Moody's anticipates that the annualized net operating income debt service coverage ratio would decrease to 1.29X from 1.53X with the loss of Linen 'N Things. Moody's loan- to-value ratio is 80% compared to 69% at last review. The second largest loan is the Chateau Janville ($12.5 million -- 8.6%), which is secured by a 271-unit apartment complex located in Ottawa, Ontario. As of January 2009, the property was 97% occupied compared to 98% at last review and 100% at securitization. Moody's LTV ratio is 84% compared to 92% at last review. The third largest loan is the Zellers Centre Bridgeport Loan ($12.9 million - 6.3%), which is secured by a 210,800 square foot retail center located in Waterloo, Ontario. The center is anchored by Zellers (49.7% of the NRA; lease expiration October 2018) and Sobeys (22.6% of the NRA; lease expiration July 2018). As of May 2009, the property was 99% occupied, almost the same at last review, compared to 96.0% at securitization. Moody's LTV ratio is 64% compared to 71% at last review. Moody's rating action is: -- Class A-1, $5,834,787, affirmed at Aaa; previously affirmed at Aaa on 6/19/2008 -- Class A-2, $95,882,000, affirmed at Aaa; previously affirmed at Aaa on 6/19/2008 -- Class X, $145,802,414, affirmed at Aaa; previously affirmed at Aaa on 6/19/2008 -- Class B, $43,111,000, affirmed at Aaa; previously affirmed at Aaa 6/19/2008 -- Class C, $8,628,000, upgraded to Aa1; previously upgraded to Aa3 from A1 on 6/19/2008 -- Class D, $10,620,000, upgraded to Baa1; previously affirmed at Baa2 on 6/19/2008 -- Class E, $1,991,000, upgraded to Baa2; previously affirmed at Baa3 on 6/19/2008 -- Class F, $5,310,000, affirmed at Ba2; previously affirmed at Ba2 on 6/19/2008 -- Class G, $1,991,000, affirmed at Ba3; previously affirmed at Ba3 on 6/19/2008 -- Class H, $3,319,000, affirmed at B2; previously affirmed at B2 on 6/19/2008 -- Class J, $1,328,000, affirmed at B3; previously affirmed at B3 on 6/19/2008 MORGAN STANLEY: DBRS Downgrades Class G Securities to 'BB' ---------------------------------------------------------- DBRS has confirmed the ratings on Morgan Stanley Capital I Trust, Series 2007-IQ16's Classes A-1 through AM-FL, including notional classes X-1 and X-2 at AAA with Stable trends. All six shadow ratings have also been confirmed. In addition, DBRS downgraded 15 classes, Classes AJ through N, based on the following: the most recent annual net cash flows have declined for approximately 36% of the pool, based on balance from DBRS' NCFs at issuance, the high percent of loans in special servicing and the percentage of loans on the DBRS' HotList. Losses from eleven delinquent and specially serviced loans are currently projected to eliminate the unrated Class S and erode a portion of the unrated Class Q. Because DBRS expects further cash flow decline in 2009, the trend remains Negative for Classes N through K. The majority of DBRS' anticipated losses are associated with Prospectus ID#13 (Amalfi Hotel). The loan is more than 90 days delinquent and was transferred to the special servicer on April 27, 2009, as a result of the borrower's claim that cash flow from operations has declined substantially, and it will no longer be sufficient to cover debt service. As of March 31, 2009, occupancy had decreased to 45% and DSCR was projected to be 0.5x, for the full year. The property is a 215-room boutique hotel located in the River North neighborhood of Chicago, less than one mile from Michigan Ave. While the subject is a high-quality asset in a good location, the current loan per key of $172,000 is relatively high for an unflagged hotel in this challenging environment. Given the dearth of hotel transaction activity, it is difficult to determine a liquidation value at this point in time. However, a large principal loss is considered possible given the significant impairment to net cash flow and increased cap rates in the hotel sector. The DBRS liquidation scenario assumes significant losses on this loan. DBRS CMBS methodology assumes a mean reverting capitalization rate applied to all loans and therefore the current market's property value deterioration was already accounted for within the DBRS ratings at issuance. As a result, the downgrades are more related to the loan specific increased probability of default, caused by a deterioration of cash flow, for many loans within the transaction, as compared to property value declines. The pool is heavily concentrated in loans secured by retail and hotel properties, each sector showing signs of stress in the current economic environment. As such, the DBRS HotList is concentrated in these property types. There are 12 loans (10.2% of the transaction's outstanding balance) found on the DBRS HotList. As part of its review, DBRS analyzed the six shadow-rated loans, the servicer's watchlist, the delinquent loans, the specially serviced loans and the top ten loans. Combined, these loans represent 49.1% of the pool balance. The ratings actions on the Morgan Stanley Capital I Trust Commercial Mortgage Pass-Through Certificates, Series 2007-IQ16, includes: -- Class A-1, confirmed at AAA, stable trend; -- Class A-1A, confirmed at AAA, stable trend; -- Class A-2, confirmed at AAA, stable trend; -- Class A-3, confirmed at AAA, stable trend; -- Class A-4, confirmed at AAA, stable trend; -- Class A-M, confirmed at AAA, stable trend; -- Class A-MA, confirmed at AAA, stable trend; -- Class A-MFL, confirmed at AAA, stable trend; -- Class X-1, confirmed at AAA, stable trend; -- Class X-2, confirmed at AAA, stable trend; -- Class A-JA, downgraded to A (low), stable trend; -- Class A-J, , downgraded to A (low), stable trend; -- Class A-JFL, downgraded to A (low), stable trend; -- Class B, downgraded to BBB (high), stable trend; -- Class C, downgraded to BBB (high), stable trend; -- Class D, downgraded to BBB, stable trend; -- Class E, downgraded to BBB (low), stable trend; -- Class F, downgraded to BBB (low), stable trend; -- Class G, downgraded to BB (low), stable trend; -- Class H, downgraded to B (high), stable trend; -- Class J, downgraded to B, stable trend; -- Class K, downgraded to B (low), negative trend; -- Class L, downgraded to CCC, negative trend; -- Class M, downgraded to CCC, negative trend; -- Class N, downgraded to CCC, negative trend. MORGAN STANLEY: Fitch Downgrades Ratings on 13 2007-IQ13 Certs. --------------------------------------------------------------- Fitch Ratings has downgraded 13 classes of Morgan Stanley Capital I Trust Series 2007-IQ13 commercial mortgage pass-through certificates. In addition, Fitch has assigned or revised Rating Outlooks and Loss Severity ratings, as applicable. A detailed list of rating actions follows at the end of this press release. The downgrades are the result of Fitch's loss expectations on specially serviced loans as well as prospective views regarding commercial real estate market value and cash flow declines. Fitch forecasts potential losses of 9.6% for this transaction, should market conditions not recover. The rating actions are based on losses of 9.0% including 100% of the losses associated with term defaults and any losses associated with maturities within the next five years. Given the significant term to maturity, Fitch's actions only account for 25% of the losses associated with maturities beyond five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for loans representing 60.4% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Approximately 19% of the mortgages are scheduled to mature within the next five years: 9.1% in 2011, 8.2% in 2012, and 1.6% in 2014. In 2015 and 2016, 77% of the pool is scheduled to mature. Fitch identified 21 Loans of Concern (30.8%) within the pool, seven of which (4.4%) are specially serviced. None of the specially serviced loans are within the transaction's top 15 loans, which comprise 53.3% of the total pool's unpaid principal balance. (Note: Fitch considers the transaction's top 15 loan concentration to include one portfolio of four cross- collateralized and cross-defaulted loans, in addition to 14 other individual loans, as ranked by unpaid principal balance.) Three of the top 15 loans (23.7% of the pool) are expected to default during the term, with loss severities ranging from approximately 14% to 33%. Of the top 15 loans, the largest contributors (by loan balance) to maturity and term losses are: 75-101 Federal Street (13.0%), RREEF Portfolio (9.1%) and Northridge I (1.7%). The 75-101 Federal Street loan (13.0%) is secured by two inter- connected office buildings comprising a total of 811,687 square feet (sf) and 196 below-grade parking spaces, located in Boston's Financial District. The rent roll consists of over 80 tenants, none of which represent more than 7% of the space. As of Aug. 24, 2009, occupancy had declined to 79.8% (81.2% leased), from 90.7% at issuance. At issuance, the in-place underwritten debt service coverage ratio (DSCR) for 75-101 Federal Street was 1.05 times (x), while the Fitch stressed DSCR was 0.86x. The lender expected that performance would improve as space leased at below-market rents were increased to market rates upon lease rollover. However, revenues have since declined approximately 15% due to falling occupancy, and the property's reported net cash flow is insufficient to service the debt. A cash flow sweep was triggered in December 2008, and approximately $139,000 has been collected. As of Sept. 9, 2009, approximately $3.6 million of reserves were in place. The loan sponsor is Aslan Realty Partners III, LLC, an investment vehicle of Transwestern Investment Company. Upon acquisition, the borrower contributed approximately $64 million in cash equity (23%). The RREEF Portfolio loan (9.1%) is secured by a portfolio of eight class A and class B multifamily properties comprising a total of 2,580 units, which are located in five metropolitan areas throughout the Northern Virginia and Maryland suburbs. As of year-end 2008, the portfolio was approximately 94.1% occupied in the aggregate, compared to 88.3% at issuance. At issuance, the loan was underwritten by the lender to 1.00x in-place debt service coverage. Performance remains in line with Fitch's expectation at issuance, which was based on in-place tenancy and cash flow; the Fitch stressed DSCR was 0.79x and the Fitch stressed loan-to-value ratio (LTV) was 152.0% when the transaction closed. However, at year-end 2008 the property's reported net cash flow remained approximately 6% below the lender's stabilized figure (which was expected to be achieved by second-quarter 2007). The loan sponsor, RREEF/Bainbridge Companies LLC, contributed approximately $134 million in cash equity at acquisition, excluding closing costs (25%). In addition to the two notes totaling $147 million in the subject trust, the portfolio also secures pari passu notes outside of the trust totaling $263 million. The Northridge I loan (1.7%) is secured by a six-story class A office property located in the Herndon submarket of Northern Virginia. The rent roll consists of seven tenants, the largest of which is General Services Administration (42.1%, rated 'AAA' by Fitch). As of the most recent rent roll (June 30, 2009), the property had remained 99.5% occupied; however, Time Warner Cable (33.7%) vacated upon its recent expiration, indicating that the property is now 65.8% occupied. Based on the current rent roll, the Fitch-calculated DSCR is approximately 0.63x when Time Warner is excluded. According to servicer reports, the borrower has stated that there will be limited leasing prospects until the end of the year. Significant additional rollover occurs in 2011, the year prior to loan maturity, when leases representing 62.3% of the net rentable area expire. The loan sponsor, Normandy Real Estate Partners, contributed approximately $6.3 million of cash equity at acquisition, excluding closing costs (19%). Fitch downgrades, removes from Rating Watch Negative, and assigns LS ratings and Negative Outlooks to these classes: -- $149.6 million class A-J to 'BB/LS-4' from 'AAA'; -- $32.8 million class B to 'B-/LS-5' from 'AA'; -- $16.4 million class C to 'B-/LS-5' from 'AA-'; -- $16.4 million class D to 'B-/LS-5' from 'A'; -- $14.3 million class E to 'B-/LS-5' from 'A-'; -- $18.4 million class F to 'B-/LS-5' from 'BBB+'; -- $14.3 million class G to 'B-/LS-5' from 'BBB'; -- $18.4 million class H to 'B-/LS-5' from 'BBB-'; -- $8.2 million class J to 'B-/LS-5' from 'BB+'; -- $2 million class K to 'B-/LS-5' from 'BB'; -- $4.1 million class L to 'B-/LS-5' from 'BB-'; -- $6.1 million class M to 'B-/LS-5' from 'B+'; -- $2 million class N to 'B-/LS-5' from 'B'. Fitch affirms, assigns an LS rating, and revises the Rating Outlook of this class: -- $163.9 million class A-M at 'AAA/LS-3'; Outlook to Negative from Stable. Additionally, Fitch affirms these classes, assigns LS ratings and maintains a Stable Outlook: -- $29.7 million class A-1 at 'AAA/LS-2'; -- $470.6 million class A-1A at 'AAA/LS-2'; -- $114.8 million class A-2 at 'AAA/LS-2'; -- $64 million class A-3 at 'AAA/LS-2'; -- $448.8 million class A-4 at 'AAA/LS-2'; -- Interest-only class X at 'AAA'; -- Interest-only class X-Y at 'AAA'. The $6.1 million class O and the $18.4 million class P are not rated by Fitch. MORGAN STANLEY: Fitch Puts Ratings on 2006-XLF Notes on Neg. Watch ------------------------------------------------------------------ Fitch Ratings has placed five classes of Morgan Stanley Capital I Trust, Series 2006-XLF on Rating Watch Negative, and revised Outlooks as shown below. The Negative Watch and Negative Rating Outlooks are due to increased loss expectations for the specially serviced assets as well as upcoming maturities. One asset, the Laurel Mall (7.4%), incurred higher than expected losses upon disposition. The two additional loans which are in special servicing, the ResortQuest Kauai (19.8%) and the Holiday Inn - Columbus (11.2%), have both had recent appraisal reductions that indicate losses as well as future interest shortfalls. The Sheraton Delfina (13.7%) loan matures in 2010 and has no remaining extension options. Fitch also expects to see declines in performance of the Sheraton Delfina since the last reporting period. Fitch has placed these classes on Rating Watch Negative: -- $23.7 million class F 'AAA'; -- $23.7 million class G 'AAA'; -- $23.7 million class H 'AA+'; -- $6.8 million class K 'BBB'; -- $18.5 million class L 'CCC'. Fitch revises the Rating Outlooks on these classes: -- $2 million class N-SDF 'A'; Outlook to Negative from Stable; -- $10.9 million class N-LAF 'A-'; Outlook to Negative from Stable; -- $7.9 million class O-LAF 'BBB-'; Outlook to Negative from Stable. MORGAN STANLEY: Fitch Takes Rating Actions on 2007-IQ16 Certs. -------------------------------------------------------------- Fitch Ratings has taken various rating actions on 15 classes of Morgan Stanley Capital I Trust 2007-IQ16, commercial mortgage pass-through certificates. In addition, Fitch has assigned Rating Outlooks, as applicable. A detailed list of rating actions follows at the end of this press release. The downgrades are the result of Fitch's loss expectations on specially serviced loans as well as prospective views regarding commercial real estate market value and cash flow declines. Fitch forecasts potential losses of 7.1% for this transaction, should market conditions not recover. The rating actions are based on losses of 5.2% including 100% of the losses associated with term defaults and any losses associated with maturities within the next five years. Given the significant term to maturity, Fitch's actions only account for 25% of the losses associated with maturities beyond five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for loans representing 59.2% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Approximately 9.2% of the mortgages are scheduled to mature within the next five years, with 8.2% maturing in 2012. In 2017, 90% of the pool is scheduled to mature. Fitch identified 53 Loans of Concern (20.6%) within the pool, nine of which (6%) are specially serviced. Two of the specially serviced loans (4.8%) are within the transaction's top 15 loans, which comprise 43.9% of the total pool's unpaid principal balance. Nine of the top 15 loans (20.1% of the pool) are expected to default during the term or at maturity, with loss severities ranging from approximately 6% to 45%. Of the top 15 loans, the largest contributors (by loan balance) to expected term losses are: Milford Crossing (2.9% of the pool balance), Ashtabula Mall (1.6%) and the Almafi Hotel (1.4%). Milford Crossing is collateralized by a 379,685 square foot (sf) retail center located in Milford, CT. The center is anchored by Wal-Mart, on a ground lease. As of June 2009, occupancy declined to 88.7% from 97% at issuance due to the closure of Circuit City. The servicer reported debt service coverage ratio (DSCR) as of YE 2008 was 1.15 times. Ashtabula Mall is secured by 754,882 sf of retail space in an 820,368 sf mall located in Ashtabula, OH. The tenant-in-common sponsor is Cabot Investment Properties, LLC. As of YE 2008, the occupancy was 71.3% compared to 78.6% at issuance. Approximately 8.5% of the leases are scheduled to expire prior to year-end 2011. As of August 2009, $1.4 million remained in the leasing reserve. The anchor tenants are Sears, Dillard's, JCPenney and Super Kmart. The anchors, excluding Sears, operate under ground leases. The property lost Steve and Barry's (10% of the collateral space) as a tenant after the company closed all its stores. The servicer reported DSCR as of YE 2008 was 1.20x. The Almafi Hotel transferred to special servicing in March 2009 for imminent default. The reported occupancy as of June 2009 was 57%. Occupancy, average daily rate (ADR) and revenue per available room have all significantly declined since issuance. A recent appraisal value indicated a value substantially below the outstanding debt amount and the special servicer is pursuing foreclosure. The largest specially serviced asset, Wyvernwood Garden Apartments (3.3%), which is located in Los Angeles, CA, transferred to special servicing in October 2008 for imminent default. The borrower is in discussions with the special servicer for a loan modification. The borrower reported 95% occupancy as of April 2009. The loan remains current. Fitch downgrades, removes from Rating Watch Negative, and assigns Loss Severity ratings and Negative Outlooks to these classes: -- $131 million class A-J to 'A/LS-3' from 'AAA'; -- $30 million class A-JFL to 'A/LS-3' from 'AAA'; -- $33.7 million class A-JA to 'A/LS-3' from 'AAA'; -- $19.5 million class B to 'A/LS-5' from 'AA+'; -- $26 million class C to 'BBB/LS-5' from 'AA'; -- $16.2 million class D to 'BBB/LS-5' from 'AA-'; -- $38.9 million class E to 'BB/LS-5' from 'A+'; -- $13 million class F to 'BB/LS-5' from 'A'; -- $35.7 million class G to 'BB/LS-5' from 'A-'; -- $26 million class H to 'B/LS-5' from 'BBB+'; -- $26 million class J to 'B-/LS-5' from 'BBB'; -- $32.4 million class K to 'B-/LS-5' from 'BBB-'; -- $9.7 million class L to 'B-/LS-5' from 'BB'; -- $9.7 million class M to 'B-/LS-5' from 'BB-'; -- $9.7 million class N to 'B-/LS-5' from 'B+'. Additionally, Fitch affirms these classes, assigns LS ratings and maintains Stable Outlooks: -- $43.9 million class A-1 at 'AAA/LS-1'; -- $313.5 million class A-1A at 'AAA/LS-1'; -- $91.1 million class A-2 at 'AAA/LS-1'; -- $83 million class A-3 at 'AAA/LS-1'; -- $1.28 billion class A-4 at 'AAA/LS-1'; -- $194.7 billion class A-M at 'AAA/LS-3'; -- $20 million class A-MFL at 'AAA/LS-3'; -- $44.9 million class A-MA at 'AAA/LS-3'; -- Interest-only class X-1 at 'AAA'; -- Interest-only class X-2 at 'AAA'. The $16.2 million class O, $6.5 million class P, $9.7 million class Q and $29.2 million class S are not rated by Fitch. MORGAN STANLEY: Fitch Takes Rating Actions on 23 2006-HQ10 Certs. ----------------------------------------------------------------- Fitch Ratings has taken various rating actions on 23 classes of Morgan Stanley Capital I Trust 2006-HQ10, commercial mortgage pass-through certificates including downgrades to 13 tranches. In addition, Fitch has assigned Rating Outlooks and Loss Severity ratings, as applicable. A detailed list of rating actions follows at the end of this press release. The downgrades are the result of loss expectations and reflect Fitch's prospective views regarding commercial real estate market value and cash flow declines. Fitch forecasts potential losses of 6.1% for this transaction, should market conditions not recover. The rating actions are based on losses of 4.4% including 100% of the losses associated with term defaults and any losses associated with maturities within the next five years. Given the significant term to maturity, Fitch's actions only account for 25% of the losses associated with maturities beyond five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for loans representing 56.9% of the pool and, in certain cases, revised based on additional information and/or property characteristics. The loans in the reviewed sample accounted for 73% of the recognized loss in the deal. Approximately 6.2% of the mortgages are scheduled to mature within the next five years, with all occurring in 2011. In 2016, 91.4% of the pool is scheduled to mature. Fitch identified 27 Loans of Concern (18.6%) within the pool, five of which (2.4%) are specially serviced and delinquent. The transaction's top 15 loans represent 45% of the pool by unpaid principal balance. Two of the Fitch Loans of Concern (7.5%) are within the transaction's top 15 loans. Twelve of the top 15 loans (44.2%) are expected to default during the term or at maturity, with loss severities ranging from 1.8% to 32.3%. Three of the largest contributors to Fitch expected losses are: AZ Office/Retail Portfolio (4.9% of the pool), Kings Crossing Shopping Centre (2.6%) and Norris Furniture & Interiors - Naples (0.6%). The AZ Office/Retail Portfolio consists of one retail and two office properties in Scottsdale, AZ. Most recent consolidated occupancy is 73%, per the March 31, 2009 rent rolls, down from 84% at issuance. The most recent servicer reported debt service coverage ratio is 1.17 times (x) as of the first quarter of 2009 (1Q'09), a decrease from 1.58x at origination. Based on current performance and anticipated declines in performance, losses are expected prior to the loan's maturity in 2016. Kings Crossing Shopping Centre is collateralized by a 272,136 SF retail property in Shreveport, LA. As of 1Q'09, the subject was 54% occupied and had a 0.91x DSCR due to the vacancy of space by Circuit City and Linens N Things. An additional 7% of the tenants' leases expire in 2010. Based on current performance and anticipated declines in performance, along with increasing vacancies in the area retail market, losses are expected prior to the loan's maturity in 2016. The Norris Furniture & Interiors - Naples is a 45,878 SF retail property located in Naples, FL that is currently in special servicing. The property is now 100% vacant and foreclosure is being filed. Based on current performance, losses are expected prior to the loan's maturity in 2016. Fitch downgrades, removes from Rating Watch Negative, and assigns LS ratings and Outlooks to these classes: -- $119.3 million class A-J to 'AA/LS3' from 'AAA'; Outlook Negative; -- $31.7 million class B to 'A/LS5' from 'AA'; Outlook Negative; -- $16.8 million class C to 'BBB-/LS5' from 'AA-'; Outlook Negative; -- $22.4 million class D to 'BB/LS5' from 'A'; Outlook Negative; -- $16.8 million class E to 'BB/LS5' from 'A-'; Outlook Negative; -- $18.6 million class F to 'B/LS5' from 'BBB+'; Outlook Negative; -- $18.6 million class G to 'B-/LS5' from 'BBB'; Outlook Negative. -- $13 million class H to 'B-/LS5' from 'BBB-'; Outlook Negative; -- $5.6 million class J to 'B-/LS5' from 'BB+'; Outlook Negative; -- $3.7 million class K to 'B-/LS5' from 'BB'; Outlook Negative; -- $3.7 million class L to 'B-/LS5' from 'BB-'; Outlook Negative; -- $3.7 million class M to 'B-/LS5' from 'B+'; Outlook Negative; -- $1.8 million class N to 'B-/LS5' from 'B'; Outlook Negative. Fitch affirms, removes from Rating Watch Negative, and assigns a LS rating and an Outlook to this class: -- $5.6 million class O at 'B-/LS5'; Outlook Negative. Additionally, Fitch affirms and assigns LS ratings and Outlooks to these classes: -- $25.3 million class A-1 at 'AAA/LS1; Outlook Stable; -- $77.3 million class A-1A at 'AAA/LS1'; Outlook Stable; -- $88.1 million class A-2 at 'AAA/LS1'; Outlook Stable; -- $62.9 million class A-3 at 'AAA/LS1'; Outlook Stable; -- $610.2 million class A-4 at 'AAA/LS1'; Outlook Stable; -- $150 million class A-4FL at 'AAA/LS1'; Outlook Stable; -- $149.1 million class A-MFL at 'AAA/LS3'; Outlook Stable; -- Interest-only class X-1 at 'AAA'; Outlook Stable; -- Interest-only class X-2 at 'AAA'; Outlook Stable. Fitch does not rate the $16.8 million class P. MORGAN STANLEY: Fitch Takes Rating Actions on 2007-TOP27 Notes -------------------------------------------------------------- Fitch Ratings takes various actions on Morgan Stanley Capital I Trust, series 2007-TOP27. The downgrades are the result of loss expectations and reflect Fitch's prospective views regarding commercial real estate market value and cash flow declines. Fitch foresees potential losses could reach as high as 2.7% for this transaction should market conditions not recover. The rating actions are based on losses of 2.1%, including 100% of the term losses and 25% of the losses anticipated to occur at maturity; the 2.1% recognizes all of the losses anticipated in the next five years. Given the significant remaining term to maturity, Fitch's actions do not account for the full magnitude of possible maturity losses. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. Fitch analyzed the transaction and calculated expected losses by assuming cash flows on each of the properties decline 15% from year-end 2007 and property values decline 35% from issuance. These loss estimates were reviewed in more detail for certain loans representing 42.9% of the pool and, in some cases, revised based on additional information and/or property characteristics. The sampled loans represent 53.2% of the recognized losses. Approximately 20.4% of the mortgages mature within the next five years: 0.4% in 2012, 1.9% in 2013, and 5.6% in 2014. All losses associated with these loans are fully recognized in the rating actions. Fitch identified 17 Loans of Concern (6.9%) within the pool, seven of which (1.9%) are specially serviced. None of the loans within the top 15 are expected to default during the term. The largest contributors to loss are: Towne Square Mall (0.9%), Empire Towers (0.5%) and Grand Mart Chicago Portfolio (VII) (0.5%). Towne Square Mall is a 357,355 square foot anchored retail center in Owensboro, Kentucky. The servicer reported June 2009 debt service coverage ratio and occupancy were 1.06 times and 90%, respectively. Based on current performance and anticipated declines, losses are expected prior to the loan's maturity in 2017. Empire Towers is 136,112 sf office property with an adjacent 5,336 sf retail building located in Glen Burnie, MD. The loan transferred to special servicing due to monetary default. A recent appraisal indicated a value below the debt amount and losses are expected prior to the loan's maturity in 2017. Grand Mart Chicago Portfolio (VII) consists of three free-standing retail centers totaling 193,566 sf located in Illinois. The loan transferred to special servicing for payment default. The three shopping centers are vacant and all copper has been stripped. A recent appraisal indicated a value below the debt amount and losses are expected prior to the loan's maturity in 2017. Fitch has downgraded, revised the Rating Outlooks and assigned Loss Severity ratings to these classes: -- $190.6 million class A-J to 'AA/LS3' from 'AAA'; Outlook to Negative from Stable; -- $54.5 million class B to 'A/LS4' from 'AA'; Outlook to Negative from Stable; -- $30.6 million class C to 'A/LS4' from 'AA-'; Outlook to Negative from Stable; -- $30.6 million class D to 'BBB/LS4' from 'A'; Outlook to Negative from Stable; -- $23.8 million class E to 'BBB/LS5' from 'A-'; Outlook to Negative from Stable. Fitch has downgraded and assigned LS ratings to this class: -- $23.8 million class F to 'BB/LS5' from 'BBB+'; Outlook Negative. Fitch has downgraded, removed from Rating Watch Negative, and assigned Rating Outlooks and LS ratings to these classes: -- $30.6 million class G to 'BB/LS4' from 'BBB'; Outlook Negative; -- $23.8 million class H to 'B/LS5' from 'BBB-'; Outlook Negative; -- $3.4 million class J to 'B-/LS5' from 'BB+'; Outlook Negative; -- $3.4 million class K to 'B-/LS5' from 'BB'; Outlook Negative; -- $6.8 million class L to 'B-/LS5' from 'B+'; Outlook Negative; -- $6.8 million class M to 'B-/LS5' from 'B'; Outlook Negative. Fitch has affirmed, removed from Rating Watch Negative, and assigned Rating Outlooks and LS ratings to this class: -- $6.8 million class N at 'B-/LS5'; Outlook Negative. Fitch has affirmed, removed from Rating Watch Negative, and assigned a Recovery Rating (RR) to this: -- $3.4 million class O to 'CCC/RR1' from 'CCC'. Also, Fitch affirms and assigns LS ratings to these classes: -- $72.4 million class A-1 at 'AAA/LS1'; Outlook Stable; -- $287.6 million class A-1A at 'AAA/LS1'; Outlook Stable; -- $279.3 million class A-2 at 'AAA/LS1'; Outlook Stable; -- $137.4 million class A-3 at 'AAA/LS1'; Outlook Stable; -- $112.3 million class A-AB at 'AAA/LS1'; Outlook Stable; -- $1.1 billion class A-4 at 'AAA/LS1'; Outlook Stable; -- $172.3 million class A-M at 'AAA/LS2'; Outlook Stable; -- $100 million class A-MFL at 'AAA/LS2'; Outlook Stable; -- $50.2 million class AW34 at 'AAA/LS1'; Outlook Stable; -- Interest only class X at 'AAA'; Outlook Stable. The $23.8 million class P is not rated by Fitch. Class AW34 is collateralized by the 330 34th Street asset and is a non-pooled loan. MORGAN STANLEY: Moody's Affirms Ratings on 13 2003-TOP11 Certs. --------------------------------------------------------------- Moody's Investors Service affirmed the ratings of thirteen classes and downgraded three classes of Morgan Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series 2003-TOP11. The downgrades are due to realized losses, increased credit quality dispersion, anticipated losses from loans in special servicing and refinancing risk for loans approaching maturity. Two loans, representing 3% of the pool, mature within the next 12 months and have a Moody's stressed debt service coverage ratio less than 1.0X. The rating action is the result of Moody's on- going surveillance of commercial mortgage backed securities transactions. As of the September 14, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 24% to $907.39.0 million from $1.2 billion at securitization. The Certificates are collateralized by 167 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top 10 loans representing 25% of the pool. The pool includes five loans with investment-grade underlying ratings, representing 15% of the pool. Twenty loans, representing 14% of the pool, have defeased and are collateralized by U.S. Government securities. Seventeen loans, representing 8.5% of the pool, are on the master servicer's watch list. The watch list includes loans which meet certain portfolio review guidelines established as part of the Commercial Mortgage Securities Association's monthly reporting package. As part of Moody's ongoing monitoring of a transaction, Moody's reviews the watch list to assess which loans have material issues that could impact performance. Three loans have been liquidated from the pool, resulting in a $2.6 million realized loss. There are currently two loans, representing 3% of the pool, in special servicing. The largest loan is Heritage Pavilion Loan ($21.5 million -- 2.4%), which is secured by a 263,000 square feet retail property located in Smyrna, Georgia. The loan was transferred to the special servicer on May 4, 2009 for maturity default. A one-year extension of the loan was approved on June 19, 2009 and the loan is currently being monitoring for a 90-day period pursuant to its return to the Master Servicer as a Corrected Mortgage Loan. The property is anchored by TJ Maxx, Marshall's and American Signature. As of March 2009, occupancy was 97% compared to 100% at securitization. Although the property's performance has been stable, Moody's valuation reflects a stressed cash flow due to Moody's concerns about retail properties in the current environment. Moody's loan- to-value ratio and stressed DSCR are 87% and 1.18X, respectively, compared to 76% and 1.28X at last review. Moody's estimates an aggregate loss of $1.5 million for the specially serviced loans. Moody's was provided with full-year 2008 operating results for 97% of the pool, excluding the defeased loans. Moody's weighted average LTV ratio is 71%, essentially the same as at Moody's prior full review in February 2007. However, the pool has experienced increased credit quality dispersion since last review. Based on Moody's analysis, 12% of the pool has a LTV ratio greater than 100% compared to 0.3% at last review. Approximately 7% of the pool has a LTV ratio in excess of 120% compared to 0% at last review. Moody's stressed DSCR for the pool, excluding the defeased loans, is 1.69X compared to 1.52X at last review. Moody's stressed DSCR is based on Moody's net cash flow and a 9.25% stressed rate applied to the loan balance. Moody's uses a variation of the Herfindahl index to measure diversity of loan size, where a higher number represents greater diversity. Loan concentration has an important bearing on potential rating volatility, including the risk of multiple-notch downgrades under adverse circumstances. The credit neutral Herf score is 40. The pool, excluding defeased loans, has a Herf of 56, compared to 60 at last review. The largest loan with an underlying rating is the Center Tower Loan ($64.0 million - 7.1%), which is secured by a 462,000 square foot Class A office building located in Costa Mesa (Orange County), California. As of January 2009, the property was 81% leased, compared to 90% at last review. The largest tenants are Latham & Watkins (24% of the net rentable area; lease expiration July 2015), Sheppard Mullin Richter (14% of the NRA; lease expiration April 2019) and Lewis, Bisbois, Bisgaar (12% of the NRA; lease expiration July 2014). Financial performance has declined due to higher vacancy and increased expenses. Moody's current underlying rating and stressed DSCR are A3 and 1.63X, respectively, compared to A1 and 1.69X at last review. The second largest loan with an underlying rating is the 516 West 34th Street Loan ($22.9 million -- 2.5%), which is secured by a 264,000 square feet office building located in the Midtown Manhattan submarket of New York City, New York. The property is 100% occupied by two tenants: Coach Inc. (91% of the NRA; lease expiration June 2015) and Forest Electric (9% of the NRA; lease expiration June 2012). Performance has improved since last review due to higher revenues. Moody's current underlying rating and stressed DSCR are A1 and 1.88X, respectively, compared to A2 and 1.71X at last review. The third largest loan with an underlying rating is the Rexmere Village MHC Loan ($19.5 million - 2.1%), which is secured by a 774-site manufacturing housing community located in Davie, Florida. As of March 2009, occupancy was 94%. The loan is interest-only for its entire 10-year term. Performance has been stable. Moody's current underlying rating and stressed DSCR are Aa3 and 1.71X, respectively, compared to Aa3 and 1.72X at last review. The fourth largest loan with an underlying rating is the ITT Gilfillan Building Loan ($17.7 million - 2.0%), which is secured by two single-story industrial buildings totaling 278,000 square feet, located in Van Nuys, California. The buildings are 100% leased to ITT Industries Inc. through January 2013. Performance has improved due to higher rent. The loan has amortized 19% since securitization. Moody's current underlying rating and stressed DSCR are Aa3 and 2.02X, respectively, compared to A1 and 1.75X at last review. The fifth largest loan with an underlying rating is the 9401 Wilshire Boulevard Loan ($14.4 million - 1.6%), which is secured by a 130,000 square foot office building located in Beverly Hills, California. As of January 2009, occupancy was 98% compared to 95% at last review. The largest tenant is Ervin, Cohen & Jessup (29% of the NRA, lease expiration August 2017). Performance has improved since last review due to higher rent. Moody's current underlying rating and stressed DSCR are A2 and 1.77X, respectively, compared to Baa1 and 1.56X at last review. The top three performing conduit loans represent 6% of the pool. The largest conduit loan is the 1333 Broadway Loan ($23.2 million -- 2.6%), which is secured by a 239,000 square foot Class A office building located in Oakland, California. The property was 74% occupied as of March 2009 compared to 96% at last review. Occupancy dropped due to Washington Mutual vacating over 60,000 square feet in 2006. The loan is on the master servicer watch list due to low DSCR and occupancy. The near-term loan maturity date and low DSCR present considerable refinance risk. Moody's analysis incorporates a stressed case scenario. Moody's LTV and stressed DSCR are 124% and 0.90X, respectively, compared to 83% and 1.24X at last review. The second largest conduit loan is the Monterey Pines Apartments Loan ($17.2 million -- 1.9%), which is secured by a 286-unit garden style apartment complex in San Jose, California. As of March 2009, occupancy was 91% compared to 97% at last review. Despite an increase in the vacancy rate, property performance has been stable. Nevertheless, Moody's analysis incorporated a higher vacancy factor and higher capitalization rate due to concerns about the market and property age. Moody's LTV and stressed DSCR are 77% and 1.33X, respectively, compared to 71% and 1.32X at last review. The third largest conduit loan is the East Hanover Properties Loan ($15.7 million -- 1.7%), which is secured by two retail properties, totaling 168,000 square feet, located in East Hanover, New Jersey. As of December 2008, occupancy was 96% compared to 100% at last review. The major tenants are Loews East Hanover Cinema (13% of the NRA, lease expiration September 2012) and Sports Authority (25% of the NRA, lease expiration September 2012). Performance has been stable. Moody's LTV and stressed DSCR are 72% and 1.36X, respectively, essentially the same as at last review. Moody's rating action is: -- Class A-2, $40,026,135, affirmed at Aaa; previously affirmed at Aaa on 2/02/2007 -- Class A-3, $165,114,000, affirmed at Aaa; previously affirmed at Aaa on 2/02/2007 -- Class A-4, $561,379,000, affirmed at Aaa; previously affirmed at Aaa on 2/02/2007 -- Class X-1, Notional, affirmed at Aaa; previously affirmed at Aaa on 2/02/2007 -- Class X-2, Notional, affirmed at Aaa; previously affirmed at Aaa on 2/02/2007 -- Class B, $31,366,000, affirmed at Aa1; previously upgraded to Aa1 from Aa2 on 2/02/2007 -- Class C, $32,859,000, affirmed at A2; previously affirmed at A2 on 2/02/2007 -- Class D, $13,443,000, affirmed at A3; previously affirmed at A3 on 2/02/2007 -- Class E, $14,936,000, affirmed at Baa1; previously affirmed at Baa1 on 2/02/2007 -- Class F, $7,468,000, affirmed at Baa2; previously affirmed at Baa2 on 2/02/2007 -- Class G, $7,468,000, affirmed at Baa3; previously affirmed at Baa3 on 2/02/2007 -- Class H, $11,948,000, affirmed at Ba2; previously affirmed at Ba2 on 2/02/2007 -- Class J, $2,988,000, affirmed at B1; previously affirmed at B1 on 2/02/2007 -- Class K, $2,987,000, downgraded to B3 from B2; previously affirmed at B2 on 2/02/2007 -- Class L, $2,987,000, downgraded to Caa2 from B3; previously affirmed at B3 on 2/02/2009 -- Class M, $2,987,000, downgraded to Caa3 from Caa1; previously affirmed at Caa1 on 2/02/2007 MORGAN STANLEY: S&P Downgrades Ratings on 2006-XLF Certificates --------------------------------------------------------------- Standard & Poor's Ratings Services lowered and removed from CreditWatch with negative implications its ratings on nine classes of commercial mortgage pass-through certificates from Morgan Stanley Capital I Inc.'s series 2006-XLF. The downgrades reflect S&P's valuations of the three non-specially serviced loans (61% of the pooled trust balance), which have declined significantly since S&P's last review. S&P also anticipate significant losses on all three specially serviced loans (39% of the pooled trust balance). The master servicer, Midland Loan Services Inc., recently informed us that the appraisal subordinate entitlement reduction amount for the specially serviced Holiday Inn - Columbus loan will be recalculated on the $18.4 million appraisal reduction amount, which will prompt ongoing interest shortfalls in excess of $100,000. These interest shortfalls, coupled with other ASERs and trust expenses, have significantly reduced the amount of available interest. S&P will further evaluate the impact of the interest distribution on the rated classes once the interest shortfalls occur, which may be reflected as early as in the September 2009 trustee remittance report. If S&P determine that the interest shortfalls will be ongoing and not recovered for an extended period, S&P may lower the ratings to 'D'. Details of the three specially serviced loans in the transaction, with ARAs totaling $34.9 million, for which Standard & Poor's anticipates significant losses upon eventual resolutions, are: The Holiday Inn - Columbus loan, the fifth-largest loan in the pool, had a trust and whole-loan balance of $24.5 million (13% of the pooled trust balance) as of the Aug. 17, 2009, trustee remittance report. This loan, which is in foreclosure, was transferred to the special servicer, also Midland, on Jan. 25, 2008, due to the following reasons: (1) the termination of the collateral property's Holiday Inn franchise agreement; (2) a change in property management; and (3) its Feb. 9, 2008, maturity. Since the hotel lost its Holiday Inn flag, the loan did not meet its extension hurdle. To date, this loan has a total exposure of $29.1 million. In addition, the equity interests in the borrower of the whole loan secure a $10.5 million mezzanine loan. This loan is secured by a western-themed 337-room hotel resort in Columbus, Ohio, which includes a 57,700-sq.-ft. indoor water park. The property is not generating sufficient cash flow to cover operating expenses and occupancy was reported to be 27% for the six months ended June 30, 2009. The property has been marketed for sale and Midland is currently evaluating an offer. The December 2008 appraisal valued the property on an "as is" basis at a level that is significantly lower than the outstanding debt on the senior trust balance. An ARA of $18.4 million is in effect against this loan. Based on S&P's discussions with Midland, it is currently revising its ASER amount, which will likely cause additional interest shortfalls on the rated certificates. Although Midland has not declared existing or future advances to be nonrecoverable at this time, S&P has concerns that future advances could be nonrecoverable given the total exposure and revised appraisal valuation on this asset. The ResortQuest Kauai loan, the third-largest loan in the pool is 90-plus-days delinquent and was transferred to Midland on Jan. 14, 2009, due to imminent default. This loan has a whole-loan balance of $43.2 million that is split into a $34.0 million senior pooled component that makes up 18% of the pooled trust balance and a $9.2 million junior nonpooled component that is raked to the "N- RQK" certificates (not rated by Standard & Poor's). In addition, the equity interests in the borrower of the whole loan secure two mezzanine loans totaling $31.2 million, $25.2 million of which has been funded to date. This loan, which matured on July 9, 2009, is secured by a 311- room, full-service hotel in Kapa'a, Hawaii. According to Midland, the property is not generating sufficient cash flow to cover operating expenses and debt service payments. Midland recently applied settlement proceeds received from the loan's guarantors to repay outstanding advances and special servicing fees. At this time, no additional funds are expected from the guarantors. Midland reported a 46% occupancy for the 12 months ended June 30, 2009. The property, which has substantial deferred maintenance, is currently being marketed for sale. The February 2009 appraisal valued the property on an "as is" basis at a level that is lower than the outstanding debt on the senior trust balance. An ARA of $1.2 million is in effect against this loan. The Laurel Mall loan, the smallest-loan in the pool, was transferred to Midland on Nov. 10, 2008, due to imminent default after the loan became 60-plus-days delinquent. This loan has a trust and whole-loan balance of $16.0 million (8% of the pooled trust balance). In addition, the equity interests in the borrower of the whole loan secure a $9.5 million mezzanine loan. This loan, which matured on Feb. 9, 2009, is secured by 501,400 sq. ft. of a 663,400-sq.-ft. regional mall in Laurel, Md. Midland indicated that the property is not generating sufficient cash flow to cover operating expenses and the reported occupancy was 34% as of May 21, 2009. The July 2009 appraisal valued the property on an "as is" basis at a level that is significantly lower than the outstanding debt on the senior trust balance. An ARA of $15.3 million is in effect against this loan. The note was sold at a substantial loss in mid-August 2009. The proceeds from the note sale are expected to be reflected as early as in the September 2009 trustee remittance report. Details of the three non-specially serviced loans are: The Market Post Tower loan, the largest loan in the pool, has a trust balance of $50.5 million (27% of the pooled trust balance) and a whole-loan balance of $58.0 million. In addition, the equity interests in the borrower of the whole loan secure a $15.0 million mezzanine loan. This loan is secured by a 294,900-sq.-ft. class A office and telecommunications building in San Jose, Calif. The master servicer reported a debt service coverage (DSC) of 3.42x for the 12 months ended Dec. 31, 2008, and 93% occupancy as of May 31, 2009. The loan matures on Nov. 9, 2009, and has one remaining one-year extension option. Midland stated that the borrower has submitted a request to exercise its remaining extension option. S&P's adjusted valuation has declined 21% since its last review due primarily to higher operating expenses. The Lafayette Estates loan, the second-largest loan in the pool, has a whole-loan balance of $62.0 million that consists of a $37.2 million senior pooled component (19% of the pooled trust balance), a $16.8 million subordinate nonpooled component that supports the "LAF" raked certificates (not rated by Standard & Poor's), and a $8.0 million nontrust junior participation interest. The loan is secured by two multifamily apartment complexes containing eight 19-story residential apartment buildings totaling 1,872 units in Bronx, N.Y. At issuance, the borrower planned to convert the units from below-market rental housing to affordable for-sale housing cooperatives. According to Midland, the conversion project is behind schedule; one of the two complexes is currently being renovated and has received approval to convert. As of July 2009, 107 units had been sold. S&P's adjusted valuation has declined significantly since S&P's last review. The loan matures on Jan. 9, 2010, and has two six-month extension options remaining. The Sheraton Delfina loan, the fourth-largest loan in the pool, has a trust and whole-loan balance of $30.0 million that is split into a $28.0 million senior pooled component (15% of the pooled trust balance) and a $2.0 million subordinate nonpooled component that is raked to the "N-SDF" certificates. In addition, the equity interests in the borrower of the whole loan secure a $30.0 million mezzanine loan. The loan, secured by a 307-unit apartment complex that was converted to a full-service hotel in Santa Monica, Calif., matures on March 9, 2010, and has one remaining one-year extension option. S&P based its hotel analysis on a review of the borrower's operating statements for the first six months of 2009, the 12 months ended Dec. 31, 2008, and the borrower's 2009 budget. S&P's adjusted valuation declined 32% since its last review. S&P's analysis factored in its assumption that the overall average revenue per available room in 2009 in the industry would decline between 14% and 16%, as S&P noted in a recent article. S&P also considered conditions in the Southern California lodging market. According to Smith Travel, the general U.S. lodging industry posted a 18% decline in RevPAR in the first seven months of 2009 compared with 2008. Ratings Lowered And Removed From Creditwatch Negative Morgan Stanley Capital I Inc. Commercial mortgage pass-through certificates series 2006-XLF Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- E BB+ AAA/Watch Neg 77.46 F B- AAA/Watch Neg 65.01 G CCC- AA+/Watch Neg 52.56 H CCC- A+/Watch Neg 40.10 J CCC- A/Watch Neg 27.88 K CCC- BBB+/Watch Neg 24.29 L CCC- BB-/Watch Neg 14.58 N-SDF CCC- BB+/Watch Neg N/A X-1 BB+ AAA/Watch Neg N/A N/A - Not Applicable. MORGAN STANLEY: S&P Downgrades Ratings on 24 2007-HQ12 Securities ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 24 classes of commercial mortgage-backed securities from Morgan Stanley Capital I Trust 2007-HQ12 and removed them from CreditWatch with negative implications. Concurrently, S&P affirmed its ratings on three classes from the same transaction and removed one of the affirmed ratings from CreditWatch negative. The downgrades follow S&P's analysis of the transaction using its recently released U.S. conduit and fusion CMBS criteria, which was the primary driver of the rating actions. S&P's analysis included a review of the credit characteristics of all of the loans in the pool. Using servicer-provided financial information, excluding loans that S&P stressed as credit concerns, S&P calculated an adjusted debt service coverage of 1.01x and a loan-to-value ratio of 145.9%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 0.67x and an LTV of 195.3%. The implied defaults and loss severity under the 'AAA' scenario were 94.2% and 54.2%, respectively. The DSC and LTV calculations exclude one loan that S&P deemed to be credit impaired (0.2%). S&P separately estimated a loss for this loan, which is included in the 'AAA' scenario implied default and loss figures. S&P's affirmed the ratings on the interest-only certificates based on S&P's current criteria. S&P published a request for comment proposing changes to the IO criteria on June 1, 2009. After S&P finalize its criteria review, S&P may revise its current IO criteria, which may affect outstanding ratings, including the ratings on the IO certificates S&P affirmed. Credit Concerns Three assets ($99.0 million, 5.1%) in the pool are with the special servicer, LNR Partners Inc. (LNR). One of the assets ($90.0 million, 4.6%) is more than 90 days delinquent and two ($9.0 million, 0.5%) are current. The 90-day delinquent loan is the sixth-largest in the pool and is secured by the Four Seasons San Francisco asset. The loan's payment status in the August 2009 remittance report was 90-plus- days delinquent. This asset has a balance of $90.0 million (4.6%) and is secured by a mixed-use development that includes a 277- room, full-service hotel, approximately 61,000 sq. ft. of in-line retail and restaurant space, and 21,900 sq. ft. of office space in San Francisco. Year-end 2008 DSC was 1.43x, with an occupancy of 80% and an average daily rate of $600.18 at Dec. 31, 2008. The loan was transferred to the special servicer on June 4, 2009, due to payment default. The special servicer received a request for a loan modification on July 24, 2009. Transaction Summary As of the August 2009 remittance report, the total pool balance was $1.95 billion, down slightly from $1.96 billion at issuance. The number of loans in the pool, at 97, is unchanged since issuance. The master servicer for the transaction is Wells Fargo Bank N.A. The master servicer provided financial information for 99.5% of the pool, and 84.8% of the servicer-provided information was full-year 2008 data. S&P calculated a weighted average DSC of 1.19x for the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.01x and 145%, respectively. To date, the transaction has not experienced principal losses. Twenty-seven loans ($928.4 million, 47.55%) are on the master servicer's watchlist, including three of the top 10 loans. Six loans ($242.7 million, 12.4%) have reported DSC between 1.10x and 1.0x, and seven loans ($735.1 million, 37.65%) have reported DSC of less than 1.0x. A considerable percentage of the pool (46.1%) matures in less than three years. The loans have a weighted average DSC of 1.01x. Summary Of Top 10 Loans The top 10 exposures have an aggregate outstanding balance of $1.25 billion (64.3%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.12x for the top 10 loans. S&P's adjusted DSC and LTV for the top 10 loans were 0.84x and 163.1%, respectively. Standard & Poor's stressed the loans in the pool according to its updated conduit/fusion criteria. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative Morgan Stanley Capital I Trust 2007-HQ12 Commercial mortgage pass-through certificates series 2007-HQ12 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-2 BBB AAA/Watch Neg 30.09 A-2FL BBB AAA/Watch Neg 30.09 A-3 BBB AAA/Watch Neg 30.09 A-4 BBB AAA/Watch Neg 30.09 A-5 BBB AAA/Watch Neg 30.09 A-1A BBB AAA/Watch Neg 30.09 A-M BB AAA/Watch Neg 20.06 A-MFL BB AAA/Watch Neg 20.06 A-J B+ AAA/Watch Neg 12.66 A-JFL B+ AAA/Watch Neg 12.66 B B+ AA/Watch Neg 10.53 C B AA-/Watch Neg 9.40 D B A/Watch Neg 8.15 E B A-/Watch Neg 7.40 F B- BBB+/Watch Neg 6.14 G B- BBB/Watch Neg 5.02 H B- BBB-/Watch Neg 3.89 J B- BB+/Watch Neg 3.13 K CCC+ BB/Watch Neg 2.88 L CCC+ BB-/Watch Neg 2.51 M CCC+ B+/Watch Neg 2.26 N CCC B/Watch Neg 2.01 O CCC B-/Watch Neg 1.76 P CCC CCC+/Watch Neg 1.50 Rating Affirmed And Removed From Creditwatch Negative Morgan Stanley Capital I Trust 2007-HQ12 Commercial mortgage pass-through certificates series 2007-HQ12 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- Q CCC CCC/Watch Neg 1.25 Ratings Affirmed Morgan Stanley Capital I Trust 2007-HQ12 Commercial mortgage pass-through certificates series 2007-HQ12 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.09 X AAA N/A N/A - Not applicable. MORGAN STANLEY: S&P Withdraws 'CCC-' Rating on Class IIA Notes -------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'CCC-' rating on the class IIA notes issued by Morgan Stanley Managed ACES SPC's series 2007-8, a synthetic corporate investment-grade collateralized debt obligation transaction. The rating was previously on CreditWatch with negative implications. The rating withdrawal follows the redemption and cancellation of the notes pursuant to the Sept. 9, 2009, unwind notice. Rating Withdrawn Morgan Stanley Managed ACES SPC Series 2007-8 Rating Balance (mil. $) ------ ---------------- Class To From Current Previous ----- -- ---- ------- -------- IIA NR CCC-/Watch Neg 0.000 10.000 NR - Not rated. MOSELLE CLO: Moody's Downgrades Ratings on Various Classes ---------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Moselle CLO S.A.: -- EUR85,500,000 Class A-1E Floating Rate Notes due 2020 (current balance of EUR84,079,922), Downgraded to Aa3; previously on October 26, 2005 Assigned Aaa; -- US$85,500,000 Class A-1L Floating Rate Notes due 2020 (current balance of $84,079,922), Downgraded to Aa3; previously on October 26, 2005 Assigned Aaa; -- EUR35,500,000 and US$35,500,000 Class A-1LE Variable Principal Notes due 2020 (current balance of EUR34,910,377 and $34,910,377), Downgraded to Aa3; previously on October 26, 2005 Assigned Aaa; -- EUR13,750,000 Class A-2E Floating Rate Notes due 2020, Downgraded to Baa2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$13,750,000 Class A-2L Floating Rate Notes due 2020, Downgraded to Baa2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- EUR6,800,000 Class A-3E Floating Rate Notes due 2020, Downgraded to Ba2; previously on March 4, 2009 A2 Placed Under Review for Possible Downgrade; -- US$6,800,000 Class A-3L Floating Rate Notes due 2020, Downgraded to Ba2; previously on March 4, 2009 A2 Placed Under Review for Possible Downgrade; -- EUR16,000,000 Class B-1E Floating Rate Notes due 2020, Downgraded to Caa1; previously on March 4, 2009 Baa2 Placed Under Review for Possible Downgrade; -- US$16,000,000 Class B-1L Floating Rate Notes due 2020, Downgraded to Caa1; previously on March 4, 2009 Baa2 Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Senior Class A Overcollateralization Test, the Class A Overcollateralization Test and the Class B-1 Overcollateralization Test. In particular, the weighted average rating factor has increased over the last year and is currently 2586 versus a test level of 2400 as of the last trustee report, dated July 23, 2009. Based on the same report, defaulted securities held in the portfolio total about $17.7 million, accounting for roughly 6% of the collateral balance, and securities rated Caa1 or lower make up approximately 12% of the underlying portfolio. Additionally, interest payments on the Class A-3E Euro Notes, the Class A-3L US$ Notes, the Class B-1E Euro Notes and the Class B-1L US$ Notes are presently being deferred as a result of the failure of the overcollateralization tests. Moody's notes that a significant proportion of the collateral pool is concentrated in non-U.S. dollar denominated obligations from issuers in a relatively limited number of industries. The rating actions also reflect Moody's revised assumptions with respect to default probability (including certain stresses pertaining to credit estimates) and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Moselle CLO S.A., issued in October 2005, is a multicurrency collateralized loan obligation, backed primarily by a portfolio of senior secured loans denominated in U.S. dollars and euros. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. MUIR GROVE: Moody's Downgrades Ratings on Five Classes of Notes --------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Muir Grove CLO, Ltd.: -- US$372,500,000 Class A Floating Rate Notes, Due 2020, Downgraded to Aa3; previously on September 27, 2007 Assigned Aaa; -- US$31,250,000 Class B Floating Rate Notes, Due 2020, Downgraded to Baa1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$22,500,000 Class C Deferrable Floating Rate Notes, Due 2020, Downgraded to Ba1; previously on March 13, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$13,750,000 Class D Deferrable Floating Rate Notes, Due 2020, Downgraded to B1; previously on March 13, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$20,000,000 Class E Deferrable Floating Rate Notes, Due 2020 (current balance of $17,254,523), Downgraded to Caa3; previously on March 13, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class D and Class E Par Value Tests. In particular, the weighted average rating factor has increased over the last year and is currently 2876 versus a test level of 2703 as of the last trustee report, dated August 20, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $12.7 million, accounting for roughly 2.6% of the collateral balance, and securities rated Caa1 or lower make up approximately 9.2% of the underlying portfolio. The Class D Par Value Test was reported at 104.07% versus a test level of 104.80%, and the Class E Par Value Test was reported at 100.14% versus a test level of 102.20%. Moody's also assessed the collateral pool's elevated concentration risk in a small number of obligors and industries. This includes a significant concentration in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Muir Grove CLO, Ltd., issued in 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. NEWSTAR TRUST: Moody's Downgrades Ratings on Various 2005-1 Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by NewStar Trust 2005-1: -- US$156,000,000 Class A-1 Floating Rate Notes due 2018 (current balance of $146,519,247), Downgraded to Aa2; previously on August 10, 2005 Assigned Aaa; -- US$80,476,777 Class A-2 Revolving Floating Rate Notes due 2018 (current balance of $74,795,280), Downgraded to Aa2; previously on August 10, 2005 Assigned Aaa; -- US$18,750,000 Class B Floating Rate Deferrable Interest Notes due 2018 (current balance of $18,682,557), Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$39,375,000 Class C Floating Rate Deferrable Interest Notes due 2018 (current balance of $39,233,370), Confirmed at Ba1; previously on March 23, 2009 Downgraded to Ba1 and Placed Under Review for Possible Downgrade; -- US$24,375,000 Class D Floating Rate Deferrable Interest Notes due 2018 (current balance of $24,287,324), Confirmed at B1; previously on March 23, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$24,375,000 Class E Floating Rate Deferrable Interest Notes due 2018 (current balance of $24,287,325), Confirmed at Caa2; previously on March 23, 2009 Downgraded to Caa2 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor) and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 4023 versus a test level of 3300 as of the last trustee report, dated July 13, 2009. Based on the same report, securities rated Caa1 or lower by Moody's or CCC+ or lower by S&P make up approximately 24.5% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The rating actions also reflect Moody's revised assumptions with respect to default probability (including certain stresses pertaining to credit estimates) and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. NewStar Trust 2005-1, issued in August of 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans of middle market issuers. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. NORTHWOODS CAPITAL: Moody's Downgrades Ratings on Three Classes --------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Northwoods Capital VI, Limited: -- US$402,000,000 Class A-1 Senior Secured Floating Rate Notes Due 2021, Downgraded to Aa1; previously on March 16, 2006 Assigned Aaa; -- US$30,000,000 Class A-2 Senior Secured Floating Rate Notes Due 2021, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$43,250,000 Class C Senior Secured Deferrable Floating Rate Notes Due 2021, Downgraded to B3; previously on March 17, 2009 Downgraded to B1 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$49,000,000 Class B Senior Secured Deferrable Floating Rate Notes Due 2021, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 3140 versus a test level of 2993 as of the last trustee report, dated August 5, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $60.7 million, accounting for roughly 10.2% of the collateral balance, and securities rated Caa1 or lower make up approximately 21.2% of the underlying portfolio. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Northwoods Capital VI, Limited, issued in March of 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. NORTHWOODS CAPITAL: Moody's Downgrades Ratings on Various Classes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Northwoods Capital VII, Limited: -- US$162,500,000 Class A-1 Floating Rate Notes Due 2021, Downgraded to Aa2; previously on September 19, 2006 Assigned Aaa; -- US$50,000,000 Class A-2 Floating Rate Delayed Drawdown Notes Due 2021, Downgraded to Aa2; previously on September 19, 2006 Assigned Aaa; -- US$25,000,000 Class A-4 Floating Rate Notes Due 2021, Downgraded to Aa3; previously on March 4, 2009 Aaa Placed Under Review for Possible Downgrade; -- US$30,000,000 Class B Floating Rate Notes Due 2021, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$32,500,000 Class D Deferrable Floating Rate Notes Due 2021, Downgraded to B1; previously on March 17, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$10,000,000 Class E Deferrable Floating Rate Notes Due 2021 (current balance of $10,598,560), Downgraded to Ca; previously on March 17, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$37,500,000 Class C Deferrable Floating Rate Notes Due 2021, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 3098 as of the last trustee report, dated August 19, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $48 million, accounting for roughly 9.7% of the collateral balance, and securities rated Caa1 or lower make up approximately 14.9% of the underlying portfolio. Additionally, interest payments on the Class E Notes are presently being deferred due to the diversion of interest related to the loss replenishment amount. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Northwoods Capital VII, Limited, issued in September of 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. NYLIM FLATIRON: Moody's Downgrades Ratings on 2004-1 Notes ---------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by NYLIM FLATIRON CLO 2004-1 Ltd.: -- US$260,750,000 Class A Floating Rate Notes, Due 2016, Downgraded to Aa1; previously on October 27, 2004 Assigned Aaa; -- US$14,000,000 Class B Floating Rate Notes, Due 2016, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$21,000,000 Class C Deferrable Floating Rate Notes, Due 2016, Downgraded to Ba1; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$26,250,000 Class D Deferrable Floating Rate Notes, Due 2016 (current balance of $24,501,068), Downgraded to Caa2; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Maximum Rating Factor Test and Diversity Test. In particular, the weighted average rating factor has increased over the last year and is currently 2637 versus a test level of 2425 as of the last trustee report, dated July 13, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $15.9 million, accounting for roughly 4.9% of the collateral balance, and securities rated Caa1 or lower make up approximately 8.5% of the underlying portfolio. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. NYLIM FLATIRON CLO 2004-1 Ltd., issued on October 27, 2004, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. NYLIM FLATIRON: Moody's Downgrades Ratings on Various 2005-1 Notes ------------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by NYLIM Flatiron CLO 2005-1, Ltd.: -- US$40,000,000 Class A-1 Revolving Floating Rate Notes, Due 2017, Downgraded to Aa1; previously on August 10, 2005 Assigned Aaa; -- US$80,000,000 Class A-2 Delayed Drawdown Floating Rate Notes, Due 2017, Downgraded to Aa1; previously on August 10, 2005 Assigned Aaa; -- US$180,000,000 Class A-3 Floating Rate Notes, Due 2017, Downgraded to Aa1; previously on August 10, 2005 Assigned Aaa; -- US$12,000,000 Class B Floating Rate Notes, Due 2017, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$26,000,000 Class C Deferrable Floating Rate Notes, Due 2017, Downgraded to Ba1; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$28,000,000 Class D Deferrable Floating Rate Notes, Due 2017, Downgraded to B2; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Maximum Rating Factor Test and Diversity Test. In particular, the weighted average rating factor has increased over the last year and is currently 2629 versus a test level of 2478 as of the last trustee report, dated August 3, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $15.1 million, accounting for roughly 3.95% of the collateral balance, and securities rated Caa1 or lower make up approximately 5.95% of the underlying portfolio. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. NYLIM Flatiron CLO 2005-1, Ltd., issued on August 10, 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. OCEAN TRAILS: Moody's Downgrades Ratings on Four Classes of Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Ocean Trails CLO II: -- US$12.5M Class A-2 Floating Rate Notes Due 2022, Downgraded to A1; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$15M Class A-3 Floating Rate Notes Due 2022, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$15M Class D Floating Rate Notes Due 2022, Downgraded to Caa1 (current balance of $13,320,637); previously on March 17, 2009 downgraded to B3 and Placed Under Review for Possible Downgrade; -- US$4.0M Class J Blended Securities Downgraded to Ba2 (current balance of $3,404,355); previously on March 4, 2009 Baa2 Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2762, as of the last trustee report, dated August 6, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $11.2 million, accounting for roughly 2.88% of the collateral balance, and securities rated Caa1 or lower make up approximately 9.46% of the underlying portfolio. Moody's also observes that the transaction is exposed to a number of mezzanine and junior CLO tranches in the underlying portfolio. Some of these CLO tranches are currently assigned low speculative- grade ratings and carry depressed market valuations that may herald poor recovery prospects in the event of default. The downgrade action also reflects Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans and high-yield corporate bonds will be below their historical averages, consistent with Moody's research. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. In addition, Moody's has confirmed the ratings of these notes: -- US$24M Class B Deferrable Floating Rate Notes Due 2022, Confirmed at Baa3; previously on March 17, 2009 downgraded to Baa3 and Placed Under Review for Possible Downgrade. -- US$14M Class C Floating Rate Notes Due 2022, Confirmed at Ba3; previously on March 17, 2009 downgraded to Ba3 and Placed Under Review for Possible Downgrade. Moody's notes that the rating action on the Class B and C Notes have incorporated the aforementioned stresses as well as credit deterioration in the underlying portfolio. However, the actions reflect updated analysis indicating that the impact of these factors on the ratings of the Class B and C Notes is not as negative as previously assessed during Stage I of the deal review in March. The current conclusions stem from comprehensive deal- level analysis completed during Stage II of the ongoing CLO surveillance review, which included an in-depth assessment of results from Moody's quantitative CLO rating model along with an examination of deal-specific qualitative factors. By way of comparison, during Stage I Moody's took rating actions that were largely the result of a parameter-based approach. Ocean Trails CLO II issued in June 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. OCTAGON INVESTMENT: Moody's Downgrades Ratings on Class A-2 Notes ----------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the rating of these notes issued by Octagon Investment Partners IX, Ltd.: -- US$14,000,000 Class A-2 Senior Secured Floating Rate Notes due 2020, Downgraded to Aa3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$20,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2020, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$21,200,000 Class C Secured Deferrable Floating Rate Notes due 2020, Confirmed at Ba3; previously on March 17, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. The rating actions are also a result of the underlying portfolio's moderate credit deterioration. Such credit deterioration is observed through an increase in the dollar amount of defaulted securities and a decline in the average credit rating (as measured by the weighted average rating factor). According to the last trustee report, dated August 17, 2009, defaulted securities currently held in the portfolio total about $14.6 million, accounting for roughly 3.8% of the collateral balance. Moody's also notes that based on the same report, the weighted average rating factor is 2381, and securities rated Caa1 or lower make up approximately 7% of the underlying portfolio. Octagon Investment Partners IX, Ltd., issued in May of 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. PANIOLO CABLE: Moody's Downgrades Ratings on B Notes to 'Ba2' ------------------------------------------------------------- Moody's Investors Service has downgraded the A3 and Baa2 ratings of Paniolo Cable Company, LLC's Senior Secured Series A and Second Lien Series B Notes to Baa3 and Ba2 respectively and placed them under review for possible further downgrade. The downgrade follows the determination by the Federal Communications Commission's administrative agent, the National Exchange Carrier Association, to deny the request by Sandwich Isles Communications, Inc., the lessee of Paniolo's fiber optic network, for recovery of costs associated with the lease. Though NECA had already begun reimbursing SIC for its 2009 lease payments, on May 5, 2009, NECA informed SIC that it had determined that the costs related to the Paniolo lease "do not appear to meet the standards of the 'used and useful' doctrine" and it was thereby denying SIC's request for continued reimbursement of those costs. This is the first time NECA has invoked this doctrine to deny a request by a member for reimbursement of costs, which it says is necessary because the FCC no longer reviews proposed projects eligible for such reimbursement for prudency. On June 26, SIC filed a Petition for Declaratory Ruling with the FCC requesting that the FCC declare that the lease costs are indeed "used and useful" and that it direct NECA to reimburse SIC for those costs. The FCC is expected to make a ruling in the near future, but the exact timing is uncertain. The review will consider the likelihood that the FCC will comply with SIC's petition that it overturn the NECA decision and direct NECA to reimburse SIC for those costs in full, along with the potential impact on SIC's willingness and ability to make lease payments to Paniolo should the FCC reject SIC's petition in full or in part. Paniolo owns a fiber optic network connecting the Hawaiian Home Lands on six Hawaiian Islands. The Home Lands are geographically isolated, sparsely inhabited, underserved and underprivileged. Paniolo's debt is secured by lease payments from SIC, a Hawaiian based Rural Local Exchange Carrier licensed and obligated to serve the Hawaiian Home Lands. SIC in turn expected to receive cost recovery payments from NECA. NECA is a not-for-profit corporation mandated by the FCC to administer for the FCC's interstate access charge system and associated revenue pools, which support telephone companies operating in underserved areas. Subject to FCC approval, NECA sets the interstate access rate to be charged to interstate access customers, collects these charges from members, and redistributes them to those members whose costs exceed their revenues. SIC's revenues derive almost entirely from payments from NECA. Construction of the Paniolo network, which was undertaken by ClearCom, SIC's sister company and a competitive local exhange carrier, was completed about two weeks ahead of schedule. The project achieved Provisional System Acceptance on August 3. Both NECA and SIC have made arguments to the FCC supporting their respective positions and refuting the other parties' arguments. NECA has asserted that the capacity of the network far exceeds reasonably expected demand and that there were more economical alternatives available to SIC to fulfill its obligations to provide service. Finally, NECA sites concerns it has regarding the possibility that SIC might permit ClearCom to utilize the network's excess capacity to serve unregulated traffic. SIC has disputed these claims, contending that the project will only serve regulated traffic for its first five years and arguing that the incremental costs associated with the extra capacity are minimal due to the high fixed costs involved in constructing a network in such challenging terrain and that the alternatives were both inadequate and not as economic as NECA indicates. The last rating action on Paniolo was on April 15, 2008, when the Baa2 rating was assigned to the Second Lien Series B Notes. The A3 rating was previously assigned to the Senior Secured Series A Notes on February 26, 2008. Paniolo's rating was assigned by evaluating factors believed to be relevant to the credit profile of the issuer. These attributes were compared against other issuers both within and outside of Paniolo's core peer group and Paniolo's rating is believed to be comparable to ratings assigned to other issuers of similar credit risk. Paniolo Cable Company, LLC, is a limited liability company, formed under the laws of the State of Delaware, specifically to undertake the Hawaiian submarine telecommunication system project. PYXIS ABS: Fitch Downgrades Ratings on Six Classes of 2006-1 Notes ------------------------------------------------------------------ Fitch Ratings downgrades six classes of notes issued by Pyxis ABS CDO 2006-1 Ltd. In Fitch's opinion, default of the class A-1, A- 2, B, C, D and X notes is inevitable at or prior to their maturity. The details of the rating action follow at the end of this press release. Pyxis 2006-1 declared an event of default on Dec. 4, 2008 and received the required majority of votes to accelerate the transaction as of July 6, 2009. The rating actions reflect the continued deterioration in the quality of the portfolio since Pyxis 2006-1 was last reviewed. According to the Sept. 3, 2009 trustee report, approximately 94.7% of the portfolio is considered defaulted. Currently, excess spread after the class A-2 interest distribution and all principal proceeds are being used to redeem the outstanding swap counterparty amount due to the acceleration. However, based on the degree of undercollateralization in the transaction and Fitch's recovery expectations on the defaulted portion of the portfolio, the class A-1 notes are not expected to receive any principal repayment in the future. The class A-1 and A-2 notes are likely to continue receiving interest distributions, while the class B, C, D, and X notes are not expected to receive any interest or principal distributions going forward. Pyxis 2006-1 is a hybrid cash and synthetic collateralized debt obligation that closed on Oct. 3, 2006, and is managed by Putnam Advisory Company, LLC. The portfolio is comprised of approximately 93.8% residential mortgage-backed securities and 6.2% structured finance CDOs. Fitch has downgraded these: Pyxis ABS CDO 2006-1 Ltd. -- $180,000,000 class A-1 notes to 'C' from 'CC'; -- $113,500,000 class A-2 notes to 'C' from 'CC'; -- $93,500,000 class B notes d to 'C' from 'CC'; -- $89,387,063 class C notes to 'C' from 'CC'; -- $34,359,406 class D notes to 'C' from 'CC'; -- $39,806,388 class X notes to 'C' from 'CC'. REGATTA FUNDING: Moody's Downgrades Ratings on Class A-2L Notes --------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Regatta Funding Ltd.: -- US$31,000,000 Class A-2L Floating Rate Notes Due June 2020, Downgraded to Aa3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; The rating actions reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. According to Moody's, the rating actions taken on the notes also reflect the underlying portfolio's moderate credit deterioration. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, defaulted securities currently held in the portfolio total about $19.6 million, accounting for roughly 3.9% of the collateral balance, and securities rated Caa1 or lower make up approximately 9.43% of the underlying portfolio, based on the latest trustee report dated August 5, 2009. Moody's also notes that according to the same report, the weighted average rating factor is 2595. In addition, Moody's has upgraded the ratings of these notes: -- US$32,000,000 Class A-3L Floating Rate Notes Due June 2020, Upgraded to Baa2; previously on March 13, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$19,500,000 Class B-1L Floating Rate Notes Due June 2020, Upgraded to Ba2; previously on March 13, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$14,000,000 Class B-2L Floating Rate Notes Due June 2020, Upgraded to B1; previously on March 13, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade; Moody's notes that the upgrade actions on the Class A-3L, B-1L and B-2L Notes have incorporated the aforementioned stresses as well as credit deterioration in the underlying portfolio. However, the actions reflect updated analysis indicating that the impact of these factors on the ratings of the Class A-3L, B-1L, and B-2L Notes is not as negative as previously assessed during Stage I of the deal review in March. The current conclusions stem from comprehensive deal-level analysis completed during Stage II of the ongoing CLO surveillance review, which included an in-depth assessment of results from Moody's quantitative CLO rating model along with an examination of deal-specific qualitative factors. By way of comparison, during Stage I Moody's took rating actions that were largely the result of a parameter-based approach. Regatta Funding Ltd., issued in March 29, 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. RFMSI SERIES: S&P Corrects Rating on Class A-15 Notes to 'B' ------------------------------------------------------------ Standard & Poor's Ratings Services corrected its rating on class A-15 issued by RFMSI Series 2007-S4 Trust by raising it to 'B' from 'CCC'. On June 15, 2009, as a result of an administrative error, S&P lowered the rating on class A-15 to 'CCC' from 'AA' and removed the rating from CreditWatch with negative implications, as part of a larger U.S. prime jumbo residential mortgage-backed securities review that S&P conducted. However, according to S&P's criteria, the certificate has sufficient credit support to receive a 'B' rating. To maintain a 'B' rating (the base case), S&P assess whether a class can withstand losses equal to the base-case loss assumption. Rating Corrected RFMSI Series 2007-S4 Trust Rating ------ Class Current June 15 Pre-June 15 ----- ------- ------- ----------- A-15 B CCC AA/Watch Neg SALOMON BROS: S&P Downgrades Ratings on Nine 2000-C3 Securities --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on nine classes of commercial mortgage-backed securities from the Salomon Bros. Commercial Mortgage Trust 2000-C3 transaction and removed them from CreditWatch with negative implications, where they were placed June 26, 2009. In addition, S&P affirmed its ratings on five classes from the same transaction. The downgrades primarily reflect credit concerns with the specially serviced assets and two loans that S&P deemed to be credit impaired. S&P expects eventual losses on these assets to contribute to credit erosion in the future. S&P lowered its ratings on classes M and N to 'D' to reflect accumulated interest shortfalls. The shortfalls are largely due to an appraisal subordinate entitlement reduction resulting from an $11.8 million appraisal reduction amount in effect against the largest specially serviced asset in the pool. S&P expects the shortfalls to recur in the future. The affirmed ratings on the principal and interest certificates reflect credit enhancement levels that, in S&P's view, provide adequate credit support through various stress scenarios. S&P affirmed its rating on the class X interest-only certificate based on its current criteria. S&P published a request for comment proposing changes to S&P's IO criteria on June 1, 2009. After S&P finalize its criteria review, S&P may revise its IO criteria, which may affect outstanding ratings, including the rating on the IO certificate that S&P affirmed. Credit Concerns Six assets ($75.3 million, 12%) in the pool are currently with the special servicer, LNR Partners Inc. A breakdown of the special- serviced loans is: one asset is real estate owned (REO) ($20.9 million); two assets are past maturity ($24.4 million); one asset is 90-plus days delinquent ($8.3 million); one asset is 30- plus days delinquent ($.89 million); and one asset is current ($20.7 million). Two assets have ARAs in effect in the amount of $15.9 million. Five of the specially serviced assets have a balance greater than or equal to 1% of the total pool balance, while the remaining loan has a balance that is less than 0.1% of the total pool balance. Five of the top 10 nondefeased assets in the pool are with the special servicer. This includes the largest as well as the second-, fourth-, eighth-, and ninth-largest assets. The largest asset in the pool, Joirie Plaza ($20.9 million, 3.2%) was initially transferred to the special servicer in September 2008 for imminent default. The asset is secured by a 191,666-sq.-ft. office building, located in Oak Brook, Ill., built in 1961 and renovated in 1999. Title to the property was obtained via a deed- in-lieu on July 28, 2009. Based on an Aug. 31, 2008, rent roll, the property was 30.6% occupied. S&P expects a significant loss upon the eventual resolution of this asset. The second-largest loan in the pool, Westland Meadows ($20.7 million, 3.2%) was initially placed on the master servicer's watchlist due to a covenant compliance violation and was transferred to the special servicer on Aug. 17, 2009, for imminent default. The loan is secured by a 774-pad mobile home park, built in 1985 and located in Westland, Mich. Based on a Sept. 30, 2008, rent roll, the property was 83% occupied. S&P expects a significant loss upon the resolution of this loan. The fourth-, eighth-, and ninth-largest loans in the pool are with the special servicer due to various reasons and were stressed accordingly in S&P's analysis. The fourth-largest loan ($16.2 million, 2.5%) is with the special servicer due to a maturity default; it matured on Sept. 1, 2008. The loan is secured by a 256,942-sq.-ft.-anchored retail center located in Hooksett, N.H. The eighth-largest loan ($8.3 million, 1.3%) is with the special servicer due to imminent default; it is more than 90 days past due. The loan is secured by a 127-room full-service hotel located in Norwalk, Conn. The ninth-largest loan ($8.2 million, 1.3%) is with the special servicer due to a maturity default; it matured on July 9, 2009, and a large tenant recently vacated the premises. The loan is secured by a 326,014- sq.-ft. industrial building located in Catano, Puerto Rico. In addition to the specially serviced loans, S&P deemed two loans (4.4%) to be credit impaired and stressed them in S&P's analysis. The loans have issues with respect to occupancy: major tenants have recently vacated the premises in each of these properties. Transaction Summary As of the August 2009 remittance report, the collateral pool consisted of 122 assets with an aggregate trust balance of $654.4 million, compared with 180 loans and a balance of $914.7 million at issuance. Thirty-four loans (47.8% of pool) have been defeased. The master servicer, Midland Loan Services Inc., provided financial information for 97.8% of the nondefeased loans by balance, and 77.6% of the servicer-provided information was full-year 2008 or interim-2009 data. S&P calculated a weighted average debt service coverage of 1.24x for the nondefeased loans based on the reported figures. S&P's adjusted DSC and loan-to-value were 1.35x and 108.21%, respectively. The adjusted DSC excludes the defeased, specially serviced, and two aforementioned credit-impaired loans. S&P ran its 'AAA' stress scenario on the portion of the pool that was not defeased, specially serviced, or credit impaired. The implied defaults and loss severity for these loans were 26.0% and 35.9%, respectively. The transaction has experienced eight principal losses ($15.6 million, 2%) to date. Twenty-nine loans are on the master servicer's watchlist ($106.2 million, 16%). Twenty-three loans ($121.9 million, 19%) have reported DSC below 1.10x, and 21 of these loans ($111.4 million, 17%) have reported DSC of less than 1.0x. Seventy-three loans totaling $307.3 million (47%) have near-term maturity dates, maturing during the years 2009 and 2010. Summary of Top 10 Loans The top 10 nondefeased exposures have an aggregate outstanding balance of $139.9 million (21%). Using servicer-reported numbers, S&P calculated a weighted average DSC for the top 10 loans of 1.18x. S&P's adjusted DSC and LTV for the top 10 loans were 1.47x and 65.77%, respectively; these calculations exclude the aforementioned top 10 loans that are with the special servicer. Standard & Poor's stressed the loans with the special servicer and the remaining loans in the pool according to S&P's updated conduit/fusion criteria. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative Salomon Brothers Commercial Mortgage Trust 2000-C3 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- E A AA/Watch Neg 13.35 F BB+ AA-/Watch Neg 11.25 G B+ A-/Watch Neg 9.16 H CCC+ BB+/Watch Neg 4.96 J CCC BB/Watch Neg 3.91 K CCC- BB-/Watch Neg 3.04 L CCC- B-/Watch Neg 1.47 M D CCC+/Watch Neg 0.77 N D CCC/Watch Neg 0.24 Ratings Affirmed And Removed From Creditwatch Negative Salomon Brothers Commercial Mortgage Trust 2000-C3 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- D AA+ AA+/Watch Neg 15.45 Ratings Affirmed Salomon Brothers Commercial Mortgage Trust 2000-C3 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) ----- ------ ---------------------- A-2 AAA 29.77 B AAA 23.13 C AAA 17.54 X AAA N/A SANKATY HIGH: Moody's Confirms Ratings on Two Classes of Notes -------------------------------------------------------------- Moody's Investors Service announced that it has confirmed its ratings of these notes issued by Sankaty High Yield Partners II, L.P.: -- US$45,000,000 Class A-2 Second Senior Secured Fixed Rate Notes Due 2009, Confirmed at B1; previously on Oct 24, 2008 Downgraded to B1 and Remained On Review for Possible Downgrade; -- US$30,000,000 Class A-2 Second Senior Secured Floating Rate Notes Due 2009, Confirmed at B1; previously on Oct 24, 2008 Downgraded to B1 and Remained On Review for Possible Downgrade. According to Moody's, Sankaty High Yield Partners II, L.P., issued in November of 1999, is a market value collateralized loan obligation backed primarily by bank loans and high yield bonds. The rating actions taken on the notes take into account that the holders of the Class A-2 notes became the controlling class of the transaction following a redemption in full of the Class A-1 notes and the Senior Facility, which were the most senior obligations of the issuer. The Sankaty High Yield Partners II obligations were accelerated in November of 2008 following the occurrence of an event of default caused by the failure of the transaction to comply with certain over-collateralization tests in October of 2008. Since then, Sankaty Advisors LLC has been managing the collateral on behalf of the holders of the Senior Facility and the Class A-1 notes through the sale of assets in the portfolio. As a result, the Class A-1 notes and the Senior Facility were redeemed in full in April of 2009. Moody's explained that the rating actions take into consideration a significant level of market value over-collateralization in the transaction for the Class A-2 notes but also the risk of the transaction experiencing a default on its payment obligations to the outstanding Class A-2 notes on the legal final maturity date on November 30, 2009. Based on the trustee report, dated August 27, 2009, the Class A-2 Notes were over-collateralized by approximately $80 million or 417% of the Class A-2 outstanding principal amount. This calculation is based on Moody's Class A-2 advance rates specified in the transaction documents. Based on the revised assumptions described in the MV CLO rating methodology publication cited below, the Class A-2 Notes were over-collateralized by approximately $62 million or 340% of the outstanding principal amount. The level of over-collateralization in the transaction is one indicative measure of the sufficiency of the collateral should the controlling class decide to liquidate within the exposure period that was assumed in the calculation of the advance rates. The severity of loss may be different depending on the timing and outcome of a liquidation beyond the assumed exposure period. Despite the level of over-collateralization, Moody's has also considered a likelihood that the underlying collateral will not be sold in time to repay the obligations of the Class A-2 notes by the legal final maturity date. Under the transaction's governing documents, the controlling class has the right to direct the secured parties' representative to liquidate the collateral securing payment of the issuer's secured obligations in any commercially reasonable manner. As of this date, the Class A-2 noteholders have not directed the collateral to be liquidated. Sankaty Advisors LLC continues to manage the portfolio of Sankaty II on behalf of the Class A-2 noteholders. For these reasons, Moody's has taken the Class A-2 notes off of watch for possible downgrade, but otherwise left the notes at the same rating level. SARGAS CLO: Moody's Upgrades Ratings on Three Classes of Notes -------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of these notes issued by Sargas CLO I: -- US$21,000,000 Class B Notes, Upgraded to A3; previously on March 23, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$17,000,000 Class C Notes, Upgraded to Ba1; previously on March 23, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$14,000,000 Class D Notes, Upgraded to B1; previously on March 23, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$7,750,000 Class A-2A Notes, Confirmed at Aa2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$3,250,000 Class A-2B Notes, Confirmed at Aa2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$5,000,000 Type I Composite Notes (Current Balance of $3,532,769), Confirmed at Aa2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade. Finally, Moody's has downgraded the ratings of these notes: -- US$2,000,000 Type II Composite Notes (Current Balance of $1,567,620), Downgraded to Ba1; previously on March 4, 2009 Baa3 Placed Under Review for Possible Downgrade. Moody's notes that the upgrade actions on the Class B, Class C, and Class D and the rating confirmations on the Class A-2A, Class A-2B Notes and Type I Composite notes consider updated analysis incorporating certain rating stresses assumed by Moody's (discussed below) and credit deterioration, but reflect Moody's conclusion that the impact of these factors on the ratings of the notes is not as negative as previously assessed during Stage I of the deal review in March. The current conclusions stem from comprehensive deal-level analysis completed during Stage II of the ongoing CLO surveillance review, which included an in-depth assessment of results from Moody's quantitative CLO rating model along with an examination of deal-specific qualitative factors. By way of comparison, during Stage I Moody's took rating actions that were largely the result of a parameter-based approach (see press release dated March 4, 2009, titled "Moody's puts all but senior-most CLO tranches on review for downgrade"). The downgrade action on the Type II Composite Notes incorporates Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Sargas CLO I, issued in August of 2006, is a collateralized loan obligation backed primarily by a portfolio of broadly syndicated senior secured loans and senior secured loans of middle market issuers. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. SEAWALL SPC: S&P Downgrades Ratings on Various Classes of Notes --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the notes issued by Seawall SPC's series 2008 CMBS CDO-1, BSCMS 2007- PW17, MLCFC 2007-7, and 2008 CMBS CDO-9 and removed them from CreditWatch negative. All four deals are U.S. synthetic collateralized debt obligation transactions. The ratings on the tranches from series 2008 CMBS CDO-1 and BSCMS 2007-PW17 are directly linked to the rating on the class A-J certificates from Bear Stearns Commercial Mortgage Securities Trust 2007-PWR17. The ratings on the tranches from series MLCFC 2007-7 and 2008 CMBS CDO-9 are directly linked to the rating on the class AJ certificates from ML-CFC Commercial Mortgage Trust 2007-7. S&P downgraded both commercial mortgage-backed securities transactions in conjunction with S&P's rating actions on CMBS on Sept. 9, 2009. Ratings Lowered And Removed From Creditwatch Negative Seawall SPC US$62,125,964 series 2008 CMBS CDO-1 class A floating rate notes Rating ------ Class To From ----- -- ---- Notes BB AAA/Watch Neg Seawall SPC US$31,062,982 series BSCMS 2007-PW17 class AJ floating rate notes Rating ------ Class To From ----- -- ---- Notes BB AAA/Watch Neg Seawall SPC US$31,062,982 series MLCFC 2007-7 class AJ floating rate notes Rating ------ Class To From ----- -- ---- Notes B+ AAA/Watch Neg Seawall SPC US$62,125,964 series 2008 CMBS CDO-9 class A floating rate notes Rating ------ Class To From ----- -- ---- Notes B+ AAA/Watch Neg STANFIELD VANTAGE: Moody's Downgrades Ratings on Various Classes ---------------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Stanfield Vantage CLO, Ltd. -- US$327,500,000 Class A-1 Floating Rate Notes due 2017, Downgraded to Aa3; previously on March 16, 2005 Assigned Aaa; -- US$12,800,000 Class A-3 Floating Rate Notes due 2017, Downgraded to A1; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$20,000,000 Class B Floating Rate Notes due 2017, Downgraded to Baa1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$25,000,000 Class C Floating Rate Deferrable Notes due 2017, Downgraded to Ba1; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$30,000,000 Class D Floating Rate Deferrable Notes due 2017, Downgraded to B2; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2564 versus a test level of 2400 as of the last trustee report, dated August 3, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $11.3 million, accounting for roughly 2.5% of the collateral balance, and securities rated Caa1 or lower make up approximately 14.7% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Stanfield Vantage CLO, Ltd., issued on March 16, 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. STRATA TRUST: S&P Withdraws Ratings on Various Classes of Notes --------------------------------------------------------------- Standard & Poor's Ratings Services withdrew its ratings on the notes issued by STRATA Trust Ltd.'s series 2006-14, 2006-15, 2006- 16, 2006-17, and 2006-18. These transactions were synthetic corporate investment-grade collateralized debt obligations. The rating withdrawals follow the redemption of the notes in full. Ratings Withdrawn STRATA Trust Rating ------ Series Class To From ------ ----- -- ---- 2006-14 Notes NR BB+ 2006-15 Notes NR B+ 2006-16 Notes NR BB- 2006-17 Notes NR CCC+/Watch Neg 2006-18 Notes NR BB-/Watch Neg NR - Not rated. SYMPHONY CLO: Moody's Downgrades Ratings on Three Classes of Notes ------------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Symphony CLO V, Ltd.: -- US$311,300,000 Class A-1 Senior Secured Floating Rate Notes due 2024 Notes, Downgraded to A1; previously on December 13, 2007 Assigned Aaa; -- US$25,000,000 Class A-2 Senior Secured Floating Rate Notes due 2024 Notes, Downgraded to Baa1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$12,240,000 Class D Secured Deferrable Floating Rate Notes due 2024 Notes, Downgraded to Caa2; previously on March 13, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$16,000,000 Class B Senior Secured Deferrable Floating Rate Notes due 2024 Notes, Confirmed at Baa3; previously on March 13, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$14,000,000 Class C Senior Secured Deferrable Floating Rate Notes due 2024 Notes, Confirmed at Ba3; previously on March 13, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2991 versus a test level of 2581 as of the last trustee report, dated August 18, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $22.9 million, accounting for roughly 5.5% of the collateral balance, and securities rated Caa1 or lower make up approximately 11.9% of the underlying portfolio. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Symphony CLO V, Ltd., issued in December 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. SYMPHONY CLO: Moody's Downgrades Ratings on Various Classes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Symphony CLO III, Ltd.: -- US$204,300,000 Class A-1a Senior Notes Due 2019 Notes, Downgraded to Aa1; previously on March 29, 2007 Assigned Aaa; -- US$22,700,000 Class A-1b Senior Notes Due 2019 Notes, Downgraded to A1; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$75,000,000 Class A-2a Senior Revolving Notes Due 2019 Notes, Downgraded to Aa1; previously on March 29, 2007 Assigned Aaa; -- US$1,000,000 Class A-2b Senior Notes Due 2019 Notes, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$24,000,000 Class B Senior Notes Due 2019 Notes, Downgraded to Baa1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$22,500,000 Class C Deferrable Mezzanine Notes Due 2019 Notes, Downgraded to Ba1; previously on March 13, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$18,000,000 Class D Deferrable Mezzanine Notes Due 2019 Notes, Downgraded to B3; previously on March 13, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$11,500,000 Class E Deferrable Junior Notes Due 2019 Notes, Downgraded to Caa3; previously on March 13, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities and an increase in the proportion of securities from issuers rated Caa1 and below. In particular, the weighted average rating factor has increased over the last year and is currently 2870 versus a test level of 2743 as of the last trustee report, dated August 5, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $24 million, accounting for roughly 5.8% of the collateral balance, and securities rated Caa1 or lower make up approximately 10.4% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Symphony CLO III, Ltd., issued in March 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. TIERS CORPORATE: S&P Corrects Ratings on $100 Mil. Certs. at 'B' ---------------------------------------------------------------- Standard & Poor's Ratings Services corrected its rating on TIERS Corporate Bond-Backed Certificates Trust's $100 million certificates series AGC 1997-10 by affirming the 'B' rating and removing the rating from CreditWatch with negative implications, where it was placed March 4, 2009. The rating on the series AGC 1997-10 certificates is linked to the rating on American General Institutional Capital B's 8.125% capital trust preferred securities ('B'; the underlying asset). The rating action reflects the March 2, 2009, affirmation of S&P's rating on the underlying asset and S&P's removal of that rating from CreditWatch negative, where it was placed Oct. 3, 2008. S&P did not take rating action on the series AGC 1997-10 certificates contemporaneously with the action on the underlying asset due to a delay in S&P's analytical process. TRIBECA PARK: Moody's Downgrades Ratings on Class A-2 Notes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the rating of these notes issued by Tribeca Park CLO Ltd.: -- US$25M Class A-2 Senior Secured Floating Rate Notes due 2020, Downgraded to Aa3; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; In addition, Moody's has upgraded the ratings of these notes: -- US$15M Class B Senior Secured Deferrable Floating Rate Notes due 2020, Upgraded to Baa2; previously on March 20, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$12.5M Class C Senior Secured Deferrable Floating Rate Notes due 2020, Upgraded to Ba1; previously on March 20, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$10M Class D Secured Deferrable Floating Rate Notes due 2020, Upgraded to B1; previously on March 20, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. The rating actions primarily reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. According to Moody's, the rating actions taken on the notes also reflect the underlying portfolio's moderate amount of credit deterioration. Moody's notes that as of the latest trustee report dated as of August 8, 2009, the weighted average rating factor is 2747, defaulted securities total about $13.62 million, accounting for roughly 3.39% of the collateral balance, and securities rated Caa1 or lower make up approximately 8.4% of the underlying portfolio. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The upgrade actions on the Class B, C, and D Notes are also a result of the issuance of additional Subordinated Notes. On July 6, 2009, the issuer issued such notes in the aggregate principal amount of $12,470,257, which provides the positive benefit of increased collateralization. In analyzing the implications of this enhancement, Moody's concluded that the mezzanine and junior notes would be subject to a positive ratings impact. Tribeca Park CLO Ltd., issued in May of 2008, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating. TRIMARAN CLO: Moody's Downgrades Ratings on Three Classes --------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Trimaran CLO IV: -- US$258,000,000 Class A-1L Floating Rate Notes Due December 2017, Downgraded to Aa1; previously on September 29, 2005 Assigned Aaa; -- US$25,000,000 Class A-2L Floating Rate Notes Due December 2017, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$16,000,000 Class B-2L Floating Rate Notes Due December 2017, Downgraded to Caa1; previously on March 18, 2009 Downgraded to B3 and Placed Under review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$16,000,000 Class A-3L Floating Rate Notes Due December 2017, Confirmed at Baa3; previously on March 18, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$15,000,000 Class B-1L Floating Rate Notes Due December 2017, Confirmed at Ba3; previously on March 18, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; The rating actions primarily reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. According to Moody's, the rating actions taken on the notes also reflects mild credit deterioration of the underlying portfolio. Moody's notes that as of the latest trustee report dated August 20, 2009, the weighted average rating factor is 2390, defaulted securities total about $9.1 million, accounting for roughly 2.6% of the collateral balance, and securities rated Caa1 or lower make up approximately 7.12% of the underlying portfolio. Trimaran CLO IV, issued in September of 2005, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. TRIMARAN CLO: Moody's Downgrades Ratings on Various Classes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Trimaran CLO V Ltd.: -- US$33M Class B Second Priority Floating Rate Notes Due 2018, Downgraded to A1; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$11M Class E Fifth Priority Deferrable Floating Rate Notes Due 2018, Downgraded to Caa2; previously on March 17, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$21M Class A-2 Senior Secured Floating Rate Notes Due 2018, Confirmed at Aaa; previously on March 4, 2009 Aaa Placed Under Review for Possible Downgrade; -- US$17M Class C Third Priority Deferrable Floating Rate Notes Due 2018, Confirmed at Baa3; previously on March 17, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade; -- US$12M Class D Fourth Priority Deferrable Floating Rate Notes Due 2018, Confirmed at Ba3; previously on March 17, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade. The rating actions primarily reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. According to Moody's, the rating actions taken on the notes also reflect moderate credit deterioration in the underlying portfolio. Moody's notes that as of the latest trustee report dated as of August 5, 2009, the weighted average rating factor is 2276, defaulted securities total about $11.99 million, accounting for roughly 4.12% of the collateral balance, and securities rated Caa1 or lower make up approximately 5.59% of the underlying portfolio. Trimaran CLO V Ltd., issued in February of 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. VENTURE VIII: Moody's Downgrades Ratings on Various Classes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Venture VIII CDO, Limited: -- US$4,500,000 Class A-1B Senior Notes Due 2021, Downgraded to Aa2; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$47,675,000 Class A-2B Senior Notes Due 2021, Downgraded to Aa2; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$50,000,000 Class A-3 Senior Notes Due 2021, Downgraded to Aa1; previously on June 14, 2007 Assigned Aaa; -- US$46,500,000 Class B Senior Notes Due 2021, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$32,500,000 Class D Deferrable Mezzanine Notes Due 2021 , Downgraded to B1; previously on March 13, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$24,000,000 Class E Deferrable Junior Notes Due 2021, Downgraded to Caa3; previously on March 13, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the rating of these notes: -- US$50,000,000 Class C Deferrable Mezzanine Notes Due 2021, Confirmed at Baa3; previously on March 13, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Interest Reinvestment Test. In particular, the weighted average rating factor has increased over the last year and is currently 2484 as of the last trustee report, dated August 12, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $42.8 million, accounting for roughly 5.3% of the collateral balance, and securities rated Caa1 or lower make up approximately 8% of the underlying portfolio. The Interest Reinvestment Test was reported at 101.20% versus a test level of 101.80%. Moody's also assessed the collateral pool's elevated concentration risk in debt obligations of companies in the banking, finance, real estate, and insurance industries, which Moody's views to be more strongly correlated in the current market environment. The rating actions also reflect Moody's revised assumptions with respect to default probability and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for second lien loans will be below their historical averages, consistent with Moody's research. Moody's has also applied resecuritization stress factors to default probability assumptions for structured finance asset collateral as described in the press release titled "Moody's updates its key assumptions for rating structured finance CDOs," published on December 11, 2008. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Venture VIII CDO, Limited, issued in June of 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. WACHOVIA AUTO: Fitch Takes Rating Actions on 2006-A Notes --------------------------------------------------------- Fitch Ratings has upgraded one class and affirmed one class of Wachovia Auto Owner Trust 2006-A: -- Class A-4 notes upgraded to 'AAA' from 'AA'; Outlook Stable; -- Class B notes affirmed at 'BB+'; Outlook Stable. The rating action reflects the continued stabilization of cumulative net loss performance and the building credit enhancement in the transaction. Through month 38 (the July collection period), the pool factor was 21.5%, total 30+ days delinquencies stood at 6.93% and CNLs were 3.21%. Fitch's current analysis of the transaction incorporates updated stresses of the revised base case CNL assumptions, the timing of the remaining losses and various prepayment assumptions. Based on these new expectations, Fitch believes that current available credit enhancement supports multiples consistent with the upgraded rating. The transaction was initially issued in June 2006. Fitch downgraded the class A-4 notes to 'AA' from 'AAA' and the class B notes to 'BB+' from 'BBB' on Feb. 1, 2008, as delinquency and loss performance was much weaker than initial expectations. WACHOVIA BANK: Fitch Puts Ratings on Notes on Negative Watch ------------------------------------------------------------ Fitch Ratings has placed 19 classes on Rating Watch Negative and revised the Rating Outlook on one class from Wachovia Bank Commercial Mortgage Trust 2007-Whale 8. The ratings changes are due to Fitch's expectation that hotel performance will continue to be impacted by the economic downturn. The pool is comprised of 95% hotel loans. While year-end 2008 performance had generally declined only slightly from YE 2007, Fitch expects second quarter and YE 2009 to show significant declines. In addition, the loans consist of resort, luxury and extended stay hotels, which have been among the most severely impacted by the downturn. Fitch has placed these classes on Rating Watch Negative: -- $61.6 million class B 'AA-'; Rating Watch Negative; -- $47.5 million class C 'A+'; Rating Watch Negative; -- $71.2 million class D 'A'; Rating Watch Negative; -- $46.6 million class E 'A-'; Rating Watch Negative; -- $46.6 million class F 'BBB+'; Rating Watch Negative; -- $46.6 million class G 'BBB'; Rating Watch Negative; -- $30.4 million class H 'BBB-'; Rating Watch Negative; -- $10.1 million class J 'BB'; Rating Watch Negative; -- $5.2 million class K 'B+'; Rating Watch Negative; -- $12.5 million class L 'B'; Rating Watch Negative; -- $53.0 million class LXR-1 'BB-'; Rating Watch Negative; -- $70.8 million class LXR-2 'BB-'; Rating Watch Negative; -- $1.9 million class AP-1 'B-'; Rating Watch Negative; -- $5.0 million class AP-2 'B-'; Rating Watch Negative; -- $3.8 million class LP-1 'BB'; Rating Watch Negative; -- $9.1 million class LP-2 'BB-; Rating Watch Negative; -- $2.1 million class LP-3 'B+'; Rating Watch Negative; -- $3.6 million class MH-1 'BBB-'; Rating Watch Negative. In addition, Fitch revises the Outlook on this class: -- $345.4 million class A-2 at 'AA'; Outlook Negative. This class remains on Rating Watch Negative: -- $3.3 million class FSN-1 'B-'; Rating Watch Negative. Additionally, Fitch affirms these classes: -- $776.3 million class A-1 at 'AAA'; Outlook Stable; -- Interest-only class X-1B at 'AAA'; Outlook Stable. Interest-only class X-1A has been paid in full. WACHOVIA BANK: Fitch Puts Ratings on 14 Classes Notes on WatchNeg. ------------------------------------------------------------------ Fitch Ratings has placed 14 classes of Wachovia Bank Commercial Mortgage Trust series 2006-Whale 7 on Rating Watch Negative. The Negative Watch is due to Fitch's expectation that hotel performance will continue to be affected by the economic downturn. The pool is comprised of 76% hotel loans. While year-end 2008 performance had generally declined only slightly from YE 2007, Fitch expects second-quarter and YE 2009 to show significant declines. In addition, five of the six hotel loans in the pool are collateralized by either resort or limited service properties, which have been among the most severely impacted by the downturn. Fitch has placed these classes on Rating Watch Negative: -- $98.6 million class B 'AA+'; -- $95 million class C 'AA'; -- $76.8 million class D 'AA'; -- $75.2 million class E 'AA-'; -- $70.4 million class F 'A+'; -- $71.8 million class G 'A'; -- $64.9 million class H 'BBB'; -- $21.9 million class J 'BB+'; -- $68.9 million class KH-1 'BB'; -- $54.1 million class KH-2 'BB-'; -- $18 million class BH-1 'A-'; -- $28 million class BH-2 'BBB+'; -- $56 million class BH-3 'BBB-'; -- $46 million class BH-4 'BB+. These three classes remain on Rating Watch Negative: -- $25.4 million class K 'BB'; -- $28.3 million class L 'BB-'; -- $3.3 million class WA 'B'. Additionally Fitch affirms these classes and revises the Rating Outlooks as indicated: -- $1.1 billion class A-1 at 'AAA'; Outlook Stable; -- $573.5 million class A-2 at 'AAA'; Outlook to Negative from Stable; -- Interest-only class X-1B at 'AAA'; Outlook Stable; -- $2 million class BP-1 at 'BB+'; Outlook Negative; -- $2.2 million class BP-2 at 'BB'; Outlook Negative; -- $5 million class WB at 'BB'; Outlook Stable; -- $2.3 million class MB-1 at 'BBB+'; Outlook Stable; -- $2.6 million class MB-2 at 'BBB'; Outlook Stable; -- $2.6 million class MB-3 at 'BBB-'; Outlook Stable; -- $2.5 million class MB-4 at 'BBB-'; Outlook Stable; -- $1.2 million class CM at 'BB+'; Outlook Negative. Classes UV and X-1A have paid in full. WACHOVIA BANK: S&P Downgrades Ratings on 18 2007-C31 Securities --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 18 classes of commercial mortgage-backed securities from Wachovia Bank Commercial Mortgage Trust Series 2007-C31 and removed them from CreditWatch with negative implications. In addition, S&P affirmed its ratings on five classes from the same transaction. The downgrades follow S&P's analysis of the transaction using its recently released U.S. conduit and fusion CMBS criteria, which was the primary driver of the rating actions. S&P's analysis included a review of the credit characteristics of all of the loans in the pool. Using servicer-provided financial information, S&P calculated an adjusted debt service coverage of 1.24x and a loan- to-value ratio of 131.9%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 0.67x and an LTV of 190.2%. The implied defaults and loss severity under the 'AAA' scenario were 98.2% and 49.7%, respectively. All of the DSC and LTV calculations noted above exclude two (2.2%) of the seven specially serviced loans and one credit impaired loan (4.3%). S&P separately estimated losses for these loans, which are included in S&P's 'AAA' scenario implied default and loss figures. S&P affirmed the ratings on the interest-only certificates based on its current criteria. S&P published a request for comment proposing changes to S&P's IO criteria on June 1, 2009. After S&P finalize its criteria review, S&P may revise its IO criteria, which may affect outstanding ratings, including the rating on the IO certificates that S&P affirmed. Credit Concerns Seven loans ($298.9 million, 5.1%) in the pool are with the special servicer, LNR Partners Inc. The payment status of the loans are: one is in foreclosure ($122.5 million, 2.1%), three are more than 90 days delinquent ($13.3 million, 0.2%), two are 30 days delinquent ($137.6 million, 2.4%), and one is less than 30 days delinquent ($25.6 million, 0.4%). Four of the specially serviced loans have appraisal reduction amounts in effect totaling $35.3 million. Two of the specially serviced loans have balances that are greater than 2.0% of the pool, and the remaining specially serviced loans have balances that are less than 0.5% of the total pool balance. In addition to the specially serviced loans, S&P deem one loan, the Peter Cooper Village & Stuyvesant Town Pool loan ($247.7 million, 4.3%), to be credit impaired and is discussed below. Transaction Summary As of the August 2009 remittance report, the collateral pool consisted of 189 loans with an aggregate trust balance of $5.82 billion, which represents approximately 99.5% of the trust balance at issuance. No loans have paid off Or have been liquidated since issuance. The master servicer for the transaction, Wachovia Bank N.A., provided financial information for 95.3% of the pool; 92.4% of the financial information was full-year 2008 data or interim 2009 data. S&P calculated a weighted average DSC of 1.20x for the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.24x and 131.9%, respectively. S&P's adjusted DSC and LTV figures exclude two of the seven specially serviced loans and one credit impaired loan. S&P estimated losses separately for these three loans ($373.7 million, 6.4%). Based on the servicer reported DSC figures, S&P calculated a weighted average DSC of 0.76x for these three loans. Thirty-one loans (38.2%) are on the master servicer's watchlist, including six of the top 10 loans. Twenty- eight loans ($2.2 billion, 38.3%) have a reported DSC below 1.10x, and 18 of these loans ($1.5 billion, 26.5%) have a reported DSC of less than 1.0x. Summary Of Top 10 Loans The top 10 exposures have an aggregate outstanding balance of $2.60 billion (44.7%). Using servicer-reported numbers, S&P calculated a weighted average DSC for the top 10 loans of 1.02x, which excludes one loan that is not required to report financial information since it is a credit tenant loan subject to a 30-year lease. Six of the top 10 loans ($1.9 billion, 32.7%) appear on the master servicer's watchlist. S&P's adjusted DSC and LTV for the top 10 loans, excluding the one credit impaired loan and the one loan that is not required to report, are 1.10x and 153.3%, respectively. The Peter Cooper Village & Stuyvesant Town Pool loan is the fifth- largest loan in the pool and the largest credit impaired loan. The loan is current, has a trust balance of $247.7 million (4.3%), and has a whole-loan balance of $3.0 billion. In addition, the borrower's equity interest is secured by $1.4 billion of mezzanine debt. The whole loan is secured by a 110-building apartment complex consisting of 11,227 market-rent and rent-stabilized units in New York. The year-end 2008 DSC was 0.69x and the occupancy was 97%. The current balance of the debt service reserve is $49.3 million, and is likely to be depleted by the end of the year. In addition, S&P is awaiting a ruling by the New York State Court of Appeals on whether properties receiving New York City real estate tax benefits are permitted to decontrol rent stabilized apartments pursuant to New York State rent stabilization law. Currently, the master servicer is holding the rent differential from decontrolled rent stabilized units in a separate escrow account. The court is expected to issue the ruling in October 2009. S&P will evaluate any impact this ruling may have on the future performance of the property. The Five Times Square loan is the largest loan in the pool and the largest loan on the watchlist. The loan has a trust balance of $536.0 million (9.2%) and a whole-loan balance of $1.13 billion. The loan appears on the watchlist because its DSC is less than 1.10x. The loan is secured by a 1.1 million-sq.-ft. office building in New York. The year-end 2008 DSC was 0.96x and occupancy was 99%, down from 1.11x and 100% at issuance. The Beacon D.C. & Seattle Portfolio loan is the second-largest loan in the pool and the second-largest loan on the watchlist. The loan has a trust balance of $414.0 million (7.1%) and a whole- loan balance of $2.7 billion. The loan appears on the watchlist because its DSC is less than 1.10x. The loan is secured by 16 cross-collateralized and cross-defaulted office properties, the pledge of a mortgage on one office property and the related cash flows, and a covenant to deposit cash flows from three office properties that totals 9.8 million sq. ft. of space. The year-end 2008 DSC was 1.08x and occupancy was 93%, down from 1.27x and 97% at issuance. For the six months ending June 30, 2009, the reported occupancy was 90% and the DSC increased to 1.12x. The loan has been removed from the September 2009 watchlist. Standard & Poor's stressed the loans in the pool according to its updated conduit/fusion criteria. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative Wachovia Bank Commercial Mortgage Trust Series 2007-C31 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-4 BBB+ AAA/Watch Neg 30.15 A-5 BBB+ AAA/Watch Neg 30.15 A-5FL BBB+ AAA/Watch Neg 30.15 A-1A BBB+ AAA/Watch Neg 30.15 A-M BB+ AAA/Watch Neg 20.10 A-J B+ AAA/Watch Neg 12.19 B B+ AA+/Watch Neg 11.56 C B+ AA/Watch Neg 10.30 D B AA-/Watch Neg 9.05 E B A+/Watch Neg 8.54 F B A/Watch Neg 7.66 G B- A-/Watch Neg 6.66 H B- BBB+/Watch Neg 5.28 J B- BBB/Watch Neg 4.40 K CCC+ BBB-/Watch Neg 3.27 L CCC+ BB/Watch Neg 2.76 M CCC+ BB-/Watch Neg 2.51 N CCC B+/Watch Neg 2.14 Ratings Affirmed Wachovia Bank Commercial Mortgage Trust Series 2007-C31 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.15 A-2 AAA 30.15 A-3 AAA 30.15 A-PB AAA 30.15 IO AAA N/A N/A - Not applicable. WACHOVIA BANK: S&P Downgrades Ratings on 18 2007-C32 Securities --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 18 classes of commercial mortgage-backed securities from Wachovia Bank Commercial Mortgage Trust's series 2007-C32 and removed them from CreditWatch with negative implications. In addition, S&P affirmed its ratings on six classes from the same transaction and removed four of them from CreditWatch negative. The downgrades follow S&P's analysis of the transaction using its recently released U.S. conduit and fusion CMBS criteria, which was the primary driver of the rating actions. The downgrades of the subordinate classes also reflect anticipated credit support erosion upon the eventual resolution of the pooled specially serviced loans, as well as S&P's analysis of loans that S&P has determined to be credit-impaired. S&P's analysis included a review of the credit characteristics of all of the loans in the pool. Using servicer-provided financial information, S&P calculated an adjusted debt service coverage of 1.33x and a loan- to-value ratio of 126.4%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 0.70x and an LTV of 181.4%. The implied defaults and loss severity under the 'AAA' scenario were 98.7% and 49.7%, respectively. All of the DSC and LTV calculations noted above exclude five (2.2%) of the eight specially serviced loans and three credit-impaired loans (4.6%). S&P separately estimated losses for these loans, which are included in S&P's 'AAA' scenario implied default and loss figures. S&P affirmed its rating on the interest-only certificate based on its current criteria. S&P published a request for comment proposing changes to its IO criteria on June 1, 2009. After S&P finalizes its criteria review, S&P may revise its IO criteria, which may affect outstanding ratings, including the rating on the IO certificate that S&P affirmed. Credit Concerns Eight loans ($109.3 million, 2.9%) in the pool are with the special servicer, CWCapital Asset Management LLC. The payment status of the loans is: one is in foreclosure ($29.5 million, 0.8%), five are more than 90 days delinquent ($68.9 million, 1.8%), and two have bankrupt borrowers and are less than 30 days delinquent ($10.9 million, 0.3%). Five of the specially serviced loans have appraisal reduction amounts in effect totaling $41.9 million. All specially serviced loans have balances that are less than 1.0% of the total pool balance. In addition to the specially serviced loans, S&P considered three loans to be credit- impaired, including one top 10 loan, Centerside II ($89.3 million, 2.3%). This loan is discussed below. Transaction Summary As of the Aug. 17, 2009, remittance report, the collateral pool balance was $3.816 billion, down from $3.823 billion at issuance. The number of loans in the pool, at 142, is unchanged since issuance. The master servicer for the transaction, Wachovia Bank N.A., provided financial information for 99.2% of the pool; 95.2% of the financial information was full-year 2008 data or interim 2009 data. S&P calculated a weighted average DSC of 1.26x for the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.33x and 126.4%, respectively. S&P's adjusted DSC and LTV figures exclude five of the eight specially serviced loans and three credit-impaired loans. S&P estimated losses separately for these eight loans ($258.65 million, 6.8%). Based on the servicer- reported DSC figures, S&P calculated a weighted average DSC of 0.72x for these eight loans. As of the August 2009 remittance report, 41 loans (51.5%) were on the master servicer's watchlist, including five of the top 10 loans. Thirty-eight loans ($1.63 billion, 42.8%) had a reported DSC below 1.10x, and 24 of these loans ($869.9 million, 22.8%) had a reported DSC of less than 1.0x. Summary Of Top 10 Loans The top 10 exposures have an aggregate outstanding balance of $1.75 billion (45.8%). Using servicer-reported numbers from the Aug. 17, 2009, remittance report, S&P calculated a weighted average DSC for the top 10 loans of 1.27x. Five of the top 10 loans ($1.1 billion, 29.5%) appeared on the master servicer's August 2009 watchlist. S&P's adjusted DSC and LTV for the top 10 loans, excluding the one credit-impaired loan, are 1.38x and 123.6%, respectively. The Centerside II loan is the 10th-largest loan in the pool. The loan is current and has a trust balance of $89.3 million (2.3%) and a whole-loan balance of $119.3 million. The loan appears on the watchlist because its DSC is less than 1.10x. The property lost several large tenants in the beginning of this year, and leasing activity has been slow. Currently, the master servicer is monitoring this loan and communicating with the borrower about leasing strategies. For the 12 months ended June 30, 2009, DSC was 0.54x and occupancy was 63.1%, down from 1.66x and 88.7% at issuance. Given the occupancy issues, S&P considers this loan to be credit-impaired and more susceptible to default. The Beacon D.C. & Seattle Portfolio loan is the largest loan in the pool and the largest loan on the watchlist. The loan has a trust balance of $414.0 million (7.1%) and a whole-loan balance of $2.7 billion. The loan appears on the watchlist because its DSC is less than 1.10x. The loan is secured by 16 cross- collateralized and cross-defaulted office properties, the pledge of a mortgage on one office property (and the related cash flows), and a covenant to deposit cash flows from three office properties that total 9.8 million sq. ft. of space. As of year-end 2008, the DSC was 1.08x and occupancy was 93%, down from 1.27x and 97% at issuance. For the six months ended June 30, 2009, the reported occupancy was 90% and the DSC had increased to 1.12x. The master servicer has indicated that the loan will be removed from the September 2009 watchlist. The ING Hospitality Pool loan is the second-largest loan in the pool and the second-largest loan on the watchlist. The loan has a trust balance of $283.85 million (7.4%) and a whole-loan balance of $567.7 million. The loan appears on the watchlist due to the poor inspection report for the Residence Inn Chicago-Deerfield ($6.0 million allocated loan balance). The loan is secured by the fee interest in 46 cross-collateralized and cross-defaulted extended-stay hotels in 18 states. The year-end 2008 DSC for the portfolio was 1.86x. According to the borrower, the guest rooms at the Residence Inn Chicago-Deerfield are in the process of being renovated. Through discussions with the master servicer, S&P has learned that this loan will likely be removed from the October 2009 watchlist. Standard & Poor's stressed the loans in the pool according to S&P's updated conduit/fusion criteria. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2007-C32 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-3 BBB+ AAA/Watch Neg 30.06 A-1A BBB+ AAA/Watch Neg 30.06 A-4FL BBB+ AAA/Watch Neg 30.06 A-MFL BB+ AAA/Watch Neg 20.04 A-J BB- AAA/Watch Neg 13.40 B B+ AA+/Watch Neg 12.27 C B+ AA/Watch Neg 11.02 D B AA-/Watch Neg 10.27 E B A+/Watch Neg 9.52 F B A/Watch Neg 8.52 G B- BBB+/Watch Neg 7.39 H B- BBB/Watch Neg 6.14 J B- BB+/Watch Neg 4.76 K CCC+ BB-/Watch Neg 3.88 L CCC B/Watch Neg 3.38 M CCC- B-/Watch Neg 3.13 N CCC- CCC+/Watch Neg 2.76 O CCC- CCC/Watch Neg 2.50 Ratings Affirmed And Removed From Creditwatch Negative Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2007-C32 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-2 AAA AAA/Watch Neg 30.06 A-PB AAA AAA/Watch Neg 30.06 P CCC- CCC-/Watch Neg 2.25 Q CCC- CCC-/Watch Neg 2.00 Ratings Affirmed Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2007-C32 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.06 IO AAA N/A N/A - Not applicable. WASHINGTON MUTUAL: S&P Downgrades Ratings on Eight 2007-OA4 Certs. ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on eight classes of residential mortgage pass-through certificates from Washington Mutual Mortgage Pass-Through Certificates WMALT Series 2007-OA4 Trust, including the ratings on classes B-3 and B-4, which S&P lowered to 'D'. S&P removed two of the lowered ratings from CreditWatch with negative implications. The downgrades of classes B-3 and B-4 to 'D' reflect S&P's assessment of principal write-downs on these classes during recent remittance periods. The remaining downgrades reflect S&P's opinion that projected credit support for the affected classes is insufficient to maintain the previous ratings, given S&P's current projected losses. To assess the creditworthiness of each class, S&P reviewed the individual delinquency and loss trends of each transaction for changes, if any, in risk characteristics, servicing, and the ability to withstand additional credit deterioration. In order to maintain a 'B' rating on a class, S&P assessed whether, in S&P's view, a class could absorb the base-case loss assumptions S&P used in its analysis. In order to maintain a rating higher than 'B', S&P assessed whether the class could withstand losses exceeding the base-case assumption at a percentage specific to each rating category, up to 150% for a 'AAA' rating. For example, in general, S&P would assess whether one class could withstand approximately 110% of S&P's base-case loss assumptions to maintain a 'BB' rating, while S&P would assess whether a different class could withstand approximately 120% of S&P's base-case loss assumptions to maintain a 'BBB' rating. Each class with an affirmed 'AAA' rating can, in S&P's view, withstand approximately 150% of its base-case loss assumptions under S&P's analysis. S&P's also lowered S&P's ratings on certain senior classes due to principal shortfalls or write-downs in the final period of particular cash flow scenarios. These classes may not have experienced any principal shortfalls or write-downs in any of the prior periods of the particular stress scenario; however, the structural mechanics of the transaction created circumstances in which one or more classes within a transaction may have relied on principal proceeds to satisfy interest amounts due in earlier periods, thus resulting in a write-down in the final period. The use of principal to satisfy interest obligations is generally created within structures that utilize cross-collateralization and contain multiple loan groups. Based on certain stress scenarios, if a particular group is performing worse than another group, or set of groups, that group can become undercollateralized when S&P compare the group collateral balance with the related senior class balance(s). Based on the defined interest amount needed to satisfy the interest liability of the related class (or classes), interest shortfalls may occur due to a group collateral balance that is insufficient to cover the necessary interest obligations of the related liabilities. Generally, cross-collateralization is designed to allow overcollateralized groups to provide cash flow to undercollateralized groups in order to mitigate this issue. However, if the overcollateralized group has a pass-through rate that is lower than the pass-through rate of the undercollateralized group, the available interest may not be sufficient to satisfy the undercollateralized group's interest requirement. Therefore, the principal portion of available funds may be used to satisfy interest obligations based on the interest- principal payment priority within the structure. In the final payment period, a situation may occur in which available funds are not sufficient to satisfy the interest and principal requirements necessary to pay the bond in full, as principal in prior periods was used to satisfy interest obligations. Additionally, in some cases, even super-senior certificates can be exposed to this risk due to the fact that structures may pay principal pro rata with senior support classes. Although the senior class was not exposed to a write-down in any of the prior periods, it could be susceptible to a write-down in the final period due to the aforementioned issues. Subordination, overcollateralization (prior to its depletion), and excess spread provide credit support for this transaction. The underlying pool of loans backing this transaction consists of option adjustable-rate mortgage Alternative-A mortgage loans. Rating Actions Washington Mutual Mortgage Pass-Through Certificates WMALT Series 2007-OA4 Trust Rating ------ Class CUSIP To From ----- ----- -- ---- A-1A 93936MAA3 B AAA A-1B 93936MAB1 CCC AA A-1C 93936MAC9 CCC BB/Watch Neg A-1D 93936MAD7 CC B/Watch Neg B-1 93936MAF2 CC CCC B-2 93936MAG0 CC CCC B-3 93936MAH8 D CCC B-4 93936MAJ4 D CCC WATERFRONT CLO: Moody's Downgrades Ratings on Various 2007-1 Notes ------------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of these notes issued by Waterfront CLO 2007-1, Ltd.: -- US$32,000,000 Class A-2 Floating Rate Notes Due 2020, Downgraded to Aa3; previously on March 4, 2009 Aa1 Placed Under Review for Possible Downgrade; -- US$9,500,000 Class A-3 Floating Rate Notes Due 2020, Downgraded to A2; previously on March 4, 2009 Aa2 Placed Under Review for Possible Downgrade; -- US$11,500,000 Class C Deferrable Floating Rate Notes Due 2020, Downgraded to B1; previously on March 13, 2009 Downgraded to Ba3 and Placed Under Review for Possible Downgrade; -- US$10,500,000 Class D Deferrable Floating Rate Notes Due 2020, Downgraded to Caa3; previously on March 13, 2009 Downgraded to B3 and Placed Under Review for Possible Downgrade. In addition, Moody's has confirmed the ratings of these notes: -- US$19,000,000 Class B Deferrable Floating Rate Notes Due 2020, Confirmed at Baa3; previously on March 13, 2009 Downgraded to Baa3 and Placed Under Review for Possible Downgrade. According to Moody's, the rating actions taken on the notes are a result of credit deterioration of the underlying portfolio. Such credit deterioration is observed through a decline in the average credit rating (as measured by the weighted average rating factor), an increase in the dollar amount of defaulted securities, an increase in the proportion of securities from issuers rated Caa1 and below, and failure of the Class D Overcollateralization Test. In particular, the weighted average rating factor has increased over the last year and is currently 2776 versus a test level of 2430 as of the last trustee report, dated August 6, 2009. Based on the same report, defaulted securities currently held in the portfolio total about $13.2 million, accounting for roughly 4.5% of the collateral balance, and securities rated Caa1 or lower make up approximately 12.7% of the underlying portfolio. The Class D Overcollateralization Test was reported at 100.37% versus a test level of 101.19%. The rating actions also reflect Moody's revised assumptions with respect to default probability (including certain stresses pertaining to credit estimates) and the calculation of the Diversity Score. These revised assumptions are described in the publication "Moody's Approach to Rating Collateralized Loan Obligations," dated August 12, 2009. Moody's analysis also reflects the expectation that recoveries for high-yield corporate bonds and second lien loans will be below their historical averages, consistent with Moody's research. Other assumptions used in Moody's CLO monitoring are described in the publication "CLO Ratings Surveillance Brief - Second Quarter 2009," dated July 17, 2009. Due to the impact of all aforementioned stresses, key model inputs used by Moody's in its analysis, such as par, weighted average rating factor, diversity score, and weighted average recovery rate, may be different from the trustee's reported numbers. Waterfront CLO 2007-1, Ltd., issued in August of 2007, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, specific documentation features, the collateral manager's track record, and the potential for selection bias in the portfolio. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. WAVE 2007-1: S&P Downgrades Ratings on Five Classes of Notes ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on five classes from WAVE 2007-1. Three of the lowered ratings remain on CreditWatch with negative implications, and S&P removed two of the lowered ratings from CreditWatch negative. The downgrades reflect S&P's analysis of the transaction following S&P's rating actions on 17 commercial mortgage-backed securities certificates that serve as underlying collateral for WAVE 2007-1. The certificates are from 11 transactions totaling $859.5 million (43% of the pool balance). Three of the ratings on WAVE 2007-1 remain on CreditWatch negative due to the transaction's exposure to CMBS collateral that is currently on CreditWatch negative ($880 million, 44%). According to the Aug. 31, 2009, trustee report, WAVE 2007-1 is collateralized by 31 CMBS certificates ($2 billion, 100%) from 31 distinct transactions issued in 2006 and 2007. The transaction failed its class A-1 overcollateralization test due to downgraded CMBS collateral. According to the trustee report, WAVE 2007-1 has significant exposure to Standard & Poor's downgraded CMBS including to these: * CD 2007-CD4 Mortgage Trust (class A-J; $100 million, 5%); * LB-UBS Commercial Mortgage Trust 2007-C1 (class A-J; $100 million, 5%); * COBALT CMBS Commercial Mortgage Trust 2006-C1 (class A-J; $98.8 million, 4.9%); * JPMorgan Chase Commercial Mortgage Securities Trust 2006-LDP9 (class A-M; $89.9 million, 4.5%); and * LB-UBS Commercial Mortgage Trust 2006-C7 (class A-J; $84 million, 4.2%). S&P expects to update or resolve the CreditWatch negative placements on WAVE 2007-1 in conjunction with S&P's CreditWatch resolutions of the underlying CMBS assets. Ratings Lowered And Remaining On Creditwatch Negative WAVE 2007-1 Rating ------ Class To From ----- -- ---- A-1 BBB/Watch Neg AAA/Watch Neg A-2 B+/Watch Neg AA/Watch Neg B CCC/Watch Neg A-/Watch Neg Ratings Lowered And Removed From Creditwatch Negative WAVE 2007-1 Rating ------ Class To From ----- -- ---- C CCC- BBB+/Watch Neg D CCC- BB+/Watch Neg WAVE 2007-1: S&P Downgrades Ratings on Nine 2007-2 Notes -------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on nine classes from WAVE 2007-1's series 2007-2. Seven of the lowered ratings remain on CreditWatch with negative implications, and S&P removed two of the lowered ratings from CreditWatch negative. The downgrades reflect S&P's analysis of the transaction following S&P's rating actions on 26 commercial mortgage-backed securities certificates that serve as underlying collateral for WAVE 2007-2. The certificates are from 13 transactions totaling $857.1 million (28.6% of the pool balance). Seven of the ratings on WAVE 2007-2 remain on CreditWatch negative due to the transaction's exposure to CMBS collateral that is on CreditWatch negative ($1.61 billion, 54%). According to the Aug. 31, 2009, trustee report, WAVE 2007-1 is collateralized by 31 CMBS certificates ($2 billion, 100%) from 31 distinct transactions issued in 2006 and 2007. The transaction failed its class A-1 overcollateralization test due to downgraded CMBS collateral. According to the trustee report, WAVE 2007-1 has significant exposure to Standard & Poor's downgraded CMBS including to these: * CD 2007-CD4 Mortgage Trust (class A-J; $100 million, 5%); * LB-UBS Commercial Mortgage Trust 2007-C1 (class A-J; $100 million, 5%); * COBALT CMBS Commercial Mortgage Trust 2006-C1 (class A-J; $98.8 million, 4.9%); * JPMorgan Chase Commercial Mortgage Securities Trust 2006-LDP9 (class A-M; $89.9 million, 4.5%); and * LB-UBS Commercial Mortgage Trust 2006-C7 (class A-J; $84 million, 4.2%). S&P expects to update or resolve the CreditWatch negative placements on WAVE 2007-1 in conjunction with S&P's CreditWatch resolutions of the underlying CMBS assets. Ratings Lowered And Remaining On Creditwatch Negative WAVE 2007-1 Series 2007-2 Rating ------ Class To From ----- -- ---- A-1 AA-/Watch Neg AAA/Watch Neg A-2 A/Watch Neg AA+/Watch Neg B BBB+/Watch Neg AA+/Watch Neg CFL BB/Watch Neg A-/Watch Neg CFX BB/Watch Neg A-/Watch Neg DFL B-/Watch Neg BBB/Watch Neg DFX B-/Watch Neg BBB/Watch Neg Ratings Lowered And Removed From Creditwatch Negative WAVE 2007-1 Series 2007-2 Rating ------ Class To From ----- -- ---- EFL CCC- BB+/Watch Neg EFX CCC- BB+/Watch Neg WAVE 2007-1: S&P Downgrades Ratings on Five Series 2007-3 Notes --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on five classes from WAVE 2007-1's series 2007-3. The lowered ratings remain on CreditWatch with negative implications. The downgrades reflect S&P's analysis of the transaction following S&P's rating actions on six commercial mortgage-backed securities certificates that serve as underlying collateral for WAVE 2007-3. The certificates are from six transactions totaling $138.9 million (13.9% of the pool balance). The ratings on WAVE 2007-3 remain on CreditWatch negative due to the transaction's exposure to CMBS collateral that is on CreditWatch negative ($755.4 million, 76%). According to the Aug. 31, 2009, trustee report, WAVE 2007-1 is collateralized by 31 CMBS certificates ($2 billion, 100%) from 31 distinct transactions issued in 2006 and 2007. The transaction failed its class A-1 overcollateralization test due to downgraded CMBS collateral. According to the trustee report, WAVE 2007-1 has significant exposure to Standard & Poor's downgraded CMBS including to these: * CD 2007-CD4 Mortgage Trust (class A-J; $100 million, 5%); * LB-UBS Commercial Mortgage Trust 2007-C1 (class A-J; $100 million, 5%); * COBALT CMBS Commercial Mortgage Trust 2006-C1 (class A-J; $98.8 million, 4.9%); * JPMorgan Chase Commercial Mortgage Securities Trust 2006-LDP9 (class A-M; * $89.9 million, 4.5%); and * LB-UBS Commercial Mortgage Trust 2006-C7 (class A-J; $84 million, 4.2%). S&P expects to update or resolve the CreditWatch negative placements on WAVE 2007-1 in conjunction with S&P's CreditWatch resolutions of the underlying CMBS assets. Ratings Lowered And Remaining On Creditwatch Negative WAVE 2007-1 Series 2007-3 Rating ------ Class To From ----- -- ---- A-1 AA+/Watch Neg AAA/Watch Neg A-2 A/Watch Neg AA/Watch Neg B BB/Watch Neg A-/Watch Neg C BB-/Watch Neg BBB+/Watch Neg D CCC/Watch Neg BB/Watch Neg JP MORGAN: S&P Downgrades Ratings on Two 2008-R4 Certificates ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on two classes of certificates from J.P. Morgan Mortgage Trust 2008-R4. S&P initially rated certificates for groups 2 and 3 out of the three group structure within JPMorgan 2008-R4. S&P lowered the ratings on class 2-A-2 to 'CCC' from 'BBB', and S&P lowered the rating on class 3-A-2 to 'CCC' from 'BB-'. At the same time, S&P affirmed its 'AAA' ratings on classes 2-A-1 and 3-A-1. The downgrades reflect the significant deterioration in performance of the loans backing the underlying certificates. Although this performance deterioration is severe, because classes 2-A-2 and 3- A-2 provide additional credit enhancement to classes 2-A-1 and 3- A-1, respectively, the credit enhancement within JPMorgan 2008-R4 is sufficient to maintain the ratings on classes 2-A-1 and 3-A-1. JPMorgan 2008-R4, which closed in December 2008, is a re- securitized real estate mortgage investment conduit RMBS transaction, collateralized by four underlying classes that support three independent groups within the re-REMIC. On the closing date, S&P only rated certificates for collateral groups 2 and 3 within JPMorgan 2008-R4. Classes 2-A-1 and 2-A-2 from JPMorgan 2008-R4 are supported by class III-A-1 from RFMSI Series 2006-SA4 Trust (currently rated 'CCC'). The collateral securing the III-A-1 certificate from this trust consists predominantly of interest-only, adjustable-rate prime mortgage loans. This pool had experienced losses amounting to 3.20% of the original pool balance as of the August 2009 distribution, and currently has delinquencies amounting to approximately 21.70% of the current pool balance. Based on the losses to date, the current pool factor of 0.582 (58.2%), which represents the outstanding pool balance as a proportion of the original pool balance, and the pipeline of delinquent loans, S&P's current projected loss for this pool is 10.2%, which exceeds the level of credit enhancement available to cover losses to the 2-A-2 class of the re-REMIC. Classes 3-A-1 and 3-A-2 from JPMorgan 2008-R4 are supported by classes 2-A-2 and 2-A-3 from WaMu Mortgage Pass-Through Certificates Series 2007-HY6 Trust (both classes are currently rated 'CCC'). The collateral securing the class 2-A-2 and 2-A-3 certificates from this trust consists predominantly of adjustable- rate Alternative-A mortgage loans. This pool had experienced losses amounting to 1.18% of the original pool balance as of the August 2009 distribution, and currently has delinquencies amounting to approximately 20.73% of the current pool balance. Based on the losses to date, the current pool factor of 0.81 (81.0%), and the pipeline of delinquent loans, S&P's current projected loss for this pool is 10.6%, which exceeds the level of credit enhancement available to cover losses to the 3-A-2 class of the re-REMIC. Over the past two years, S&P has revised its RMBS default and loss assumptions, and consequently S&P's projected losses, to reflect the continuing decline in mortgage loan performance and the housing market. The performance deterioration of most U.S. RMBS has continued to outpace the market's expectation. Ratings Lowered J.P. Morgan Mortgage Trust 2008-R4 Rating ------ Class CUSIP To From ----- ----- -- ---- 2-A-2 46633AAD7 CCC BBB 3-A-2 46633AAH8 CCC BB- Ratings Affirmed J.P. Morgan Mortgage Trust 2008-R4 Class CUSIP Rating ----- ----- ------ 2-A-1 46633AAC9 AAA 3-A-1 46633AAG0 AAA * Fitch Puts Ratings on 28 Classes by Eight CDOs on Negative Watch ------------------------------------------------------------------ Fitch Ratings has placed 28 classes in eight collateralized debt obligations backed primarily by trust preferred securities and subordinated debt issued by real estate investment trusts, homebuilders, and specialty finance companies on Rating Watch Negative. Fitch's rating actions are the result of a combination of deterioration of principal and interest coverage for some transactions and negative portfolio credit migration in other transactions. Principal coverage has deteriorated primarily through defaults while debt exchanges and defaults were responsible for interest coverage deterioration. Three of the eight REIT TruPS CDOs placed on Rating Watch are currently failing senior overcollateralization or interest coverage tests. Negative credit migration has resulted from rating downgrades, defaults and deferrals. For the eight CDOs with notes placed on Rating Watch, on average 9.8% of their portfolios has been downgraded since January 2009. Between January and July 2009, Fitch has observed 22 unique issuers restructure or exchange their debt across these eight Fitch-rated REIT TruPS CDOs. On average, nearly 17.3% of the portfolios have undergone an exchange, which have resulted in an average increase in portfolio notional of $4.1 million. At the same time, the weighted average coupon for these portfolios decreased from an average of 6.5% to 4.9% while the weighted average spreads decreased from an average of 2.5% to 2.3%. Issuers that participated in the exchanges have shadow ratings centered in the 'CCC' category. Resolution of the current Rating Watch Negative status will consider the potential implications of observed defaults, expectations for further debt exchanges undertaken by the asset manager and additional ratings downgrades. Fitch has taken these actions: Attentus CDO I, Ltd. -- US$237,211,012 class A-1 first priority senior secured floating rate notes due May 2036, 'BB' placed on Rating Watch Negative; -- US$20,000,000 class A-2 second priority senior secured floating rate notes due May 2036, 'B' placed on Rating Watch Negative. Attentus CDO III, Ltd. -- US$124,960,315 class A-1A first priority delayed draw senior secured floating rate notes due 2042, 'A' placed on Rating Watch Negative; -- US$100,000,000 class A-2 third priority senior secured floating rate notes due 2042, 'BB' placed on Rating Watch Negative; -- US$34,335,562 class B fourth priority deferrable secured floating rate notes due 2042, 'B' placed on Rating Watch Negative. Kodiak CDO I, Ltd./Corp -- US$276,106,781 class A-1 first priority senior secured floating rate notes due 2039, 'BBB' placed on Rating Watch Negative; -- US$103,500,000 class A-2 second priority senior secured floating rate notes due 2039, 'BB' placed on Rating Watch Negative; -- US$83,000,000 class B third priority senior secured floating rate notes due 2039, 'B' placed on Rating Watch Negative. Kodiak CDO II, Ltd./Corp -- US$323,564,830 class A-1 senior secured floating rate notes due 2042, 'BBB' placed on Rating Watch Negative; -- US$53,000,000 class A-2 senior secured floating rate notes due 2042, 'BB+' placed on Rating Watch Negative; -- US$80,000,000 class A-3 senior secured floating rate notes due 2042, 'BB' placed on Rating Watch Negative; -- US$81,000,000 class B-1 senior secured floating rate notes due 2039, 'B' placed on Rating Watch Negative; -- US$5,000,000 class B-2 senior secured fixed/floating rate notes due 2042, 'B' placed on Rating Watch Negative. TABERNA PREFERRED FUNDING I, LTD -- US$303,296,877 class A-1A first priority senior secured floating rate notes due 2035, 'BB' placed on Rating Watch Negative; -- US$12,779,363 class A-1B first priority senior secured floating rate notes due 2035, 'BB' placed on Rating Watch Negative. TABERNA PREFERRED FUNDING V, LTD -- US$92,080,228 class A-1LA floating rate notes due August 2036, 'BB+' placed on Rating Watch Negative; -- US$230,200,567 class A-1LAD delayed draw floating rate notes due August 2036 , 'BB+' placed on Rating Watch Negative; -- US$60,000,000 class A-1LB floating rate notes due August 2036, 'B' placed on Rating Watch Negative. TABERNA PREFERRED FUNDING VIII, LTD -- US$154,228,747 class A-1A first priority delayed draw senior secured floating rate notes due 2037, 'BBB' placed on Rating Watch Negative; -- US$207,244,881 class A-1B first priority senior secured floating rate notes due 2037, 'BBB' placed on Rating Watch Negative; -- US$120,000,000 class A-2 second priority senior secured floating rate notes due 2037, 'BB' placed on Rating Watch Negative; -- US$75,000,000 class B deferrable third priority secured floating rate notes due 2037, 'B' placed on Rating Watch Negative; -- US$40,000,000 class C deferrable fourth priority secured floating rate notes due 2037, 'B-' placed on Rating Watch Negative. TABERNA PREFERRED FUNDING IX, LTD -- US$267,969,723 class A-1LA first priority delayed draw floating rate notes due 2038, 'BBB' placed on Rating Watch Negative; -- US$97,443,536 class A-1LAD first priority floating rate notes due 2038, 'BBB' placed on Rating Watch Negative; -- US$116,000,000 class A-1LB second priority floating rate notes due 2038, 'BB' placed on Rating Watch Negative -- US$25,000,000 class A-2LA third priority floating rate notes due 2038, 'B+' placed on Rating Watch Negative; -- US$53,325,440 class A-2LB deferrable fourth priority floating rate notes due 2038, 'B' placed on Rating Watch Negative. * S&P Downgrades Ratings on Five Tranches From Two CDO Deals ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on five tranches from two U.S. cash flow collateralized debt obligation transactions. S&P also withdrew its ratings on five tranches from two transactions. The ratings on four of the downgraded tranches are on CreditWatch with negative implications, indicating a significant likelihood of further downgrades. The CDO downgrades reflect a number of factors, including an increase in the amount of defaulted assets in the transactions' collateral pools, as well as deterioration in the overall credit quality of the performing assets within the respective collateral pools. An increase in downgrades of speculative-grade U.S. companies has resulted in an increase in the proportion of 'CCC' and 'CC' rated assets in the underlying portfolios held within the collateral pools. The five downgraded U.S. cash flow CDO tranches have a total issuance amount $1.167 billion. One of the affected transactions is a CDO of CDOs that was collateralized at origination primarily by notes from collateralized loan obligation transactions. The other transaction is a cash flow collateralized bond obligation transaction. Standard & Poor's will continue to monitor the transactions it rates and take rating actions, including CreditWatch placements, when appropriate. Rating Actions Rating ------ Transaction Class To From ----------- ----- -- ---- Berkeley Street CDO (Cayman) Ltd. A-1 BBB/Watch Neg AAA/Watch Neg Berkeley Street CDO (Cayman) Ltd. A-2 CCC/Watch Neg AA/Watch Neg Castle Hill III CLO Ltd. RmkdCrt AAA/NR AAA/A-1+ CBO Holdings III Series Angel CDO II A-1 NR AA CBO Holdings III Series Angel CDO II A-2 NR A CBO Holdings III Series Angel CDO II B-1 NR BBB CBO Holdings III Series Angel CDO II B-2 NR BB Pioneer Valley Struct Credit CDO I A-1A CCC-/Watch Neg BB/Watch Neg Pioneer Valley Struct Credit CDO I A-2 CC CCC+/WatchNeg Pioneer Valley Struct Credit CDO I X BB/Watch Neg AAA Other Outstanding Ratings Transaction Class Rating ----------- ----- ------ Pioneer Valley Structured Credit CDO I B CC Pioneer Valley Structured Credit CDO I C CC Pioneer Valley Structured Credit CDO I D CC * S&P Downgrades Ratings on 10 Tranches From Seven Hybrid CDOs -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 10 tranches from seven U.S. cash flow and hybrid collateralized debt obligation transactions. At the same time, S&P removed five of the lowered ratings from CreditWatch with negative implications. S&P's ratings on three of the downgraded tranches remain on CreditWatch with negative implications, indicating a significant likelihood of further downgrades. These 10 tranches have a total issuance amount of $4.273 billion. At the same time, S&P lowered its ratings on three tranches from one U.S. synthetic CDO transaction, which have a total issuance amount of $337 million. Four of the seven affected U.S. cash flow and hybrid CDO transactions are mezzanine structured finance CDOs of asset-backed securities, which are collateralized in large part by mezzanine tranches of residential mortgage-backed securities and other SF securities. Two of the seven transactions are high-grade SF CDOs of ABS that were collateralized at origination primarily by 'AAA' through 'A' rated tranches of RMBS and other SF securities. The other transaction is a retranching of other CDO tranches. The CDO downgrades reflect a number of factors, including credit deterioration and recent negative rating actions on U.S. subprime RMBS. The CreditWatch placements primarily affect transactions for which a significant portion of the collateral assets currently have ratings on CreditWatch with negative implications or have significant exposure to assets rated in the 'CCC' category. Standard & Poor's will continue to monitor the CDO transactions it rates and take rating actions, including CreditWatch placements, when appropriate. Rating And Creditwatch Actions Rating ------ Transaction Class To From ----------- ----- -- ---- Commodore CDO II Ltd. A-1MM BB/A-1/WatchNeg AA/A-1/WatchNeg Commodore CDO II Ltd. A-2 (a) CC B+/Watch Neg Commodore CDO II Ltd. A-2 (b) CC B+/Watch Neg Forge ABS High Grade CDO I A1 CC CCC-/Watch Neg Ischus Synthetic X CCC B+/Watch Neg ABS CDO 2006-1 Ixion HELD 2006-1 Series 1 CC BBB Ixion HELD 2006-1 Series 2 CC BBB- Ixion HELD 2006-1 Series 3 CC BB Klio Structured Investments C CC BBB 2005-1 Long Hill 2006-1 Ltd. S1VF CCC/Watch Neg B/Watch Neg Tierra Alta Funding I Ltd. A-1 CC CCC- Tierra Alta Funding I Ltd. F CC B-/Watch Neg Tourmaline CDO I Ltd. I CCC-/Watch Neg BB+/Watch Neg Other Outstanding Ratings Transaction Class Rating ----------- ----- ------ Commodore CDO II Ltd. B CC Commodore CDO II Ltd. C CC Forge ABS High Grade CDO I A2 CC Forge ABS High Grade CDO I A3 CC Forge ABS High Grade CDO I A4 CC Forge ABS High Grade CDO I B CC Forge ABS High Grade CDO I C CC Forge ABS High Grade CDO I D CC Forge ABS High Grade CDO I E CC Ischus Synthetic ABS CDO 2006-1 A-1LB CC Ischus Synthetic ABS CDO 2006-1 A-2L CC Ischus Synthetic ABS CDO 2006-1 A-3L CC Ischus Synthetic ABS CDO 2006-1 B-1L CC Long Hill 2006-1 Ltd. A1 CC Long Hill 2006-1 Ltd. A2 CC Long Hill 2006-1 Ltd. A3 CC Long Hill 2006-1 Ltd. B CC Long Hill 2006-1 Ltd. C CC Long Hill 2006-1 Ltd. Combo Nts CC Long Hill 2006-1 Ltd. S2T CC Tierra Alta Funding I Ltd. A-2 CC Tierra Alta Funding I Ltd. A3A CC Tierra Alta Funding I Ltd. A3B CC Tierra Alta Funding I Ltd. B1A CC Tierra Alta Funding I Ltd. B1B CC Tierra Alta Funding I Ltd. C CC Tourmaline CDO I Ltd. II CC Tourmaline CDO I Ltd. III CC Tourmaline CDO I Ltd. IV CC * S&P Downgrades Ratings on 19 Tranches From Tobacco Manufacturers ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 19 tranches and affirmed its ratings on 57 tranches from 19 trusts backed by payments from participating tobacco manufacturers under the Master Settlement Agreement. At the same time, S&P removed all of the ratings from CreditWatch with negative implications and assigned negative outlooks to all of the affected ratings. The negative outlooks reflect S&P's opinion that significant industry and litigation event risks will likely be present in these deals for approximately five years or more. The downgrades and affirmations follow Standard & Poor's revisions of its base-case and stress-case volume decline assumptions for U.S. cigarette sales and S&P's stress-case assumptions for domestic cigarette manufacturer market share. The revisions to S&P's criteria assumptions followed the passage of federal legislation that resulted in a $0.62-per-pack increase in the federal tax on cigarettes, to $1.01 from $0.39. The government implemented the tax increase, which went into effect on April 1, 2009, to help expand funding for the Children's Health Insurance Program. In S&P's review of the underlying ratings, S&P considered qualitative and quantitative factors, including its view of current industry trends and developments; litigation event risks; MSA payments due and made by the participating tobacco manufacturers; actual annual volume declines in cigarette consumption; and the current market share of the participating manufacturers. In addition, S&P ran various cash flow stress scenarios using its revised volume decline and market share assumptions. S&P affirmed its ratings on the classes that were able to withstand S&P's stress tests at their current rating levels. The classes that S&P downgraded exhibited an inability to pay timely interest or full principal under the stresses commensurate with their prior rating levels. Consequently, S&P downgraded these classes to rating levels commensurate with the stress they could withstand. S&P downgraded the A and B classes from California County Tobacco Securitization Agency (Gold Country Settlement Funding Corp.) to 'B+' from 'BBB'. In S&P's view, Gold Country Settlement Funding Corp. is unlike the other affected transactions in that it has payment priorities such that the B class capital appreciation bond receives principal payments, while the A class current interest- paying bond is locked out from any principal distributions until the B class is paid in full. Failure to pay principal at maturity constitutes an event of default under the transaction's indenture, and if an EOD occurs, principal payments are distributed pro rata among the classes. S&P's assessment of the combination of the transaction's structure and more stressful assumptions resulted in the downgrade of both classes to 'B+'. Negative Outlook On Remaining Tobacco Settlement-Backed Bonds S&P's negative outlooks on all of the remaining rated tobacco settlement-backed bonds reflect S&P's belief that significant industry and litigation event risks will be likely present for approximately five years or more, which could lead to downgrades in the future. Rating And Creditwatch Actions Buckeye Tobacco Settlement Financing Authority US$5,531 million tobacco settlement asset-backed bonds series 2007 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2007A-2 6/01/2024 200.000 BBB/Negative BBB/Watch Neg 2007A-2 6/01/2024 949.530 BBB/Negative BBB/Watch Neg 2007A-2 6/01/2030 687.600 BBB/Negative BBB/Watch Neg 2007A-2 6/01/2034 505.200 BBB/Negative BBB/Watch Neg 2007A-2 6/01/2042 250.000 BBB/Negative BBB/Watch Neg 2007A-2 6/01/2047 750.000 BBB/Negative BBB/Watch Neg 2007A-2 6/01/2047 1383.72 BBB/Negative BBB/Watch Neg 2007A-3 6/01/2037 274.751 BBB/Negative BBB/Watch Neg California County Tobacco Securitization Agency (Fresno County Tobacco Funding Corp.) US$93 million tobacco settlement asset-backed bonds series 2002 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2035 6/01/2035 35.265 BBB/Negative BBB/Watch Neg 2038 6/01/2038 18.500 BBB/Negative BBB/Watch Neg California County Tobacco Securitization Agency (Gold Country Settlement Funding Corp.) US$59 million tobacco settlement asset-backed bonds series 2006 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2006A 6/01/2046 45.000 B+/Negative BBB/Watch Neg 2006B 6/01/2033 14.372 B+/Negative BBB/Watch Neg California County Tobacco Securitization Agency (Kern County Tobacco Funding Corp.) US$105 million tobacco settlement asset-backed bonds series 2002 A B C Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2002A 6/01/2043 40.960 BBB/Negative BBB/Watch Neg 2002B 6/01/2037 29.010 BBB/Negative BBB/Watch Neg California County Tobacco Securitization Agency (Sonoma County Settlement Securitization Corp.) US$83 million tobacco settlement asset-backed bonds series 2005-1 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2005 6/01/2026 9.920 BBB/Negative BBB/Watch Neg 2005 6/01/2038 31.045 BBB/Negative BBB/Watch Neg 2005 6/01/2045 27.260 BBB/Negative BBB/Watch Neg Erie Tobacco Asset Securitization Corp. US$83 million tobacco settlement asset-backed bonds series 2005 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2005A 6/01/2038 74.685 BBB/Negative BBB/Watch Neg 2005A 6/01/2045 111.480 BBB/Negative BBB/Watch Neg Golden State Tobacco Securitization Corp. US$4,446 million tobacco settlement asset-backed bonds series 2007 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2007A-1 6/01/2027 863.100 BBB/Negative BBB/Watch Neg 2007A-1 6/01/2033 610.525 BBB/Negative BBB/Watch Neg 2007A-2 6/01/2037 389.193 BBB/Negative BBB/Watch Neg 2007A-1 6/01/2047 1250.000 BBB/Negative BBB/Watch Neg 2007A-1 6/01/2047 693.750 BBB/Negative BBB/Watch Neg 2007-B 6/01/2047 271.957 BB/Negative BBB/Watch Neg 2007-C 6/01/2047 78.547 BB-/Negative BBB-/Watch Neg Tobacco Settlement Authority (Iowa) US$839 million tobacco settlement asset-backed bonds series 2005 A B C D Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2005A 6/01/2046 229.910 BBB/Negative BBB/Watch Neg 2005B 6/01/2034 159.369 BBB/Negative BBB/Watch Neg 2005C 6/01/2033 103.475 BBB/Negative BBB/Watch Neg 2005C 6/01/2042 135.120 BBB/Negative BBB/Watch Neg 2005C 6/01/2046 174.130 BBB/Negative BBB/Watch Neg 2005D 6/01/2046 15.775 BBB-/Negative BBB-/Watch Neg Michigan Tobacco Settlement Finance Authority US$490 million tobacco settlement asset-backed bonds series 2006 A B C Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2006A 6/01/2034 363.115 mil BBB/Negative BBB/Watch Neg Michigan Tobacco Settlement Finance Authority US$523 million tobacco settlement asset-backed bonds series 2007 A B C Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2007A 6/01/2034 112.855 BBB/Negative BBB/Watch Neg 2007A 6/01/2048 290.0855 BBB/Negative BBB/Watch Neg 2007-B 6/01/2052 35.650 BB/Negative BBB/Watch Neg 2007-C 6/01/2052 7.217 BB-/Negative BBB-/Watch Neg New York Counties Tobacco Trust IV US$539 million tobacco settlement pass-through bonds series 2005 A B C Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2005A 6/01/2042 84.975 BBB/Negative BBB/Watch Neg 2005A 6/01/2045 83.875 BBB/Negative BBB/Watch Neg Tobacco Settlement Financing Corp. (New Jersey) US$3,622 million tobacco settlement asset-backed bonds series 2007-1 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2007-1A 6/01/2023 623.710 BBB/Negative BBB/Watch Neg 2007-1A 6/01/2026 287.620 BBB/Negative BBB/Watch Neg 2007-1A 6/01/2029 332.270 BBB/Negative BBB/Watch Neg 2007-1A 6/01/2034 672.945 BBB/Negative BBB/Watch Neg 2007-1A 6/01/2041 1263.590 BBB/Negative BBB/Watch Neg 2007-1B 6/01/2041 126.198 BB/Negative BBB/Watch Neg 2007-1C 6/01/2041 59.785 BB-/Negative BBB-/Watch Neg Tobacco Settlement Financing Corp. (Rhode Island) US$685 million tobacco settlement asset-backed bonds series 2002A and 2002B Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2002-A 6/01/2042 371.700 BBB/Negative BBB/Watch Neg Tobacco Settlement Financing Corp. (Rhode Island) US$194 million tobacco settlement asset-backed bonds series 2007 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2007A 6/01/2052 176.194 BB/Negative BBB/Watch Neg 2007B 6/01/2052 17.336 BB-/Negative BBB-/Watch Neg Tobacco Securitization Corporation of Northern California US$255 million asset backed bonds series 2005 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2005A-1 6/01/2023 45.825 BBB/Negative BBB/Watch Neg 2005A-1 6/01/2038 87.290 BBB/Negative BBB/Watch Neg 2005A-1 6/01/2045 86.570 BBB/Negative BBB/Watch Neg 2005A-2 6/01/2027 12.469 BBB/Negative BBB/Watch Neg 2005B 6/01/2045 11.674 BB+/Negative BBB-/Watch Neg 2005C 6/01/2045 11.659 BB-/Negative BB/Watch Neg San Diego County Tobacco Asset Securitization Corp. US$558 million tobacco settlement asset-backed bonds series 2006 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2006A 6/01/2025 111.860 BBB/Negative BBB/Watch Neg 2006A 6/01/2037 186.440 BBB/Negative BBB/Watch Neg 2006A 6/01/2046 236.310 BBB/Negative BBB/Watch Neg 2006B 6/01/2046 19.770 BBB-/Negative BBB/Watch Neg 2006C 6/01/2046 8.686 BB+/Negative BBB-/Watch Neg 2006D 6/01/2046 20.565 BB-/Negative BB/Watch Neg TSASC Inc. US$1,361 million tobacco settlement asset-backed bonds series 2006-1 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2006 6/01/2022 284.070 BBB/Negative BBB/Watch Neg 2006 6/01/2026 137.765 BBB/Negative BBB/Watch Neg 2006 6/01/2034 372.650 BBB/Negative BBB/Watch Neg 2006 6/01/2042 559.025 BBB/Negative BBB/Watch Neg Tobacco Settlement Financing Corp. (VA) $1,149 million tobacco settlement asset-backed bonds series 2007 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2007A-1 6/01/2046 682.650 BBB/Negative BBB/Watch Neg 2007B-1 6/01/2047 335.625 BBB/Negative BBB/Watch Neg 2007B-2 6/01/2047 26.808 BBB/Negative BBB/Watch Neg 2007-C 6/01/2047 77.104 BB/Negative BBB/Watch Neg 2007-D 6/01/2047 27.086 BB-/Negative BBB-/Watch Neg Westchester Tobacco Asset Securitization Corp. $216 million tobacco settlement asset-backed bonds series 2005 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2005 6/01/2021 29.600 BBB/Negative BBB/Watch Neg 2005 6/01/2026 24.100 BBB/Negative BBB/Watch Neg 2005 6/01/2038 81.200 BBB/Negative BBB/Watch Neg 2005 6/01/2045 81.700 BBB-/Negative BBB/Watch Neg Tobacco Settlement Finance Authority (West Virginia) US$911 million taxable tobacco settlement asset-backed bonds series 2007 Rating ------ Class Maturity Original bal.(mil. $) To From ----- -------- --------------------- -- ---- 2007A 6/01/2047 845.810 BBB/Negative BBB/Watch Neg 2007B 6/01/2047 65.332 BB+/Negative BBB-/Watch Neg * S&P Downgrades Ratings on 130 Classes From Four Prime Jumbo RMBS ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 130 classes from four U.S. prime jumbo residential mortgage-backed securities transactions issued in 2005 and 2006 and removed 23 of the lowered ratings from CreditWatch with negative implications. At the same time, S&P affirmed its ratings on nine classes from these transactions and removed six of the affirmed ratings from CreditWatch negative. Standard & Poor's has established loss projections for each prime jumbo transaction rated in 2005 and 2006. S&P derived these losses using the criteria that S&P outlined in "Standard & Poor's Revises U.S. Prime Jumbo RMBS Lifetime Loss Projections For Transactions Issued In 2005, 2006, And 2007," published June 16, 2009. S&P's lifetime projected losses have changed for each of the transactions in this release: Orig. bal. Lifetime Transaction (mil. $) exp. loss (%) ----------- ---------- ------------- CHL Mtg Pass-Through Trust 2006-16 1,000 6.40 GSR Mortgage Loan Trust 2005-9F 686 4.90 GSR Mortgage Loan Trust 2005-9F 138 7.61 GSR Mortgage Loan Trust 2006-1F 539 5.93 Structured Asset Sec. Corp.Trust 2005-15 1,048 2.83 The downgrades reflect S&P's opinion that the projected credit support for the affected classes is insufficient to maintain the previous ratings, given S&P's current projected losses. For more information about the methodology S&P used to review these transactions, see the "Related Research" section of this press release. To assess the creditworthiness of each class, S&P reviews the respective transaction's ability to withstand additional credit deterioration and the impact that projected losses will have on each class. In order to maintain a 'B' rating on a class, S&P assesses whether the class can withstand the base-case loss assumptions S&P uses in its analysis. To maintain an 'AAA' rating, S&P assesses whether the class can withstand approximately 235% of S&P's base-case loss assumptions, subject to individual caps and qualitative factors applied to specific transactions. To maintain a rating in categories between 'B' (the base case) and 'AAA', S&P assesses whether the class can withstand losses exceeding the base-case assumption at a percentage specific to each rating category, up to 235% for a 'AAA' rating. For example, S&P would assess whether one class could withstand approximately 130% of S&P's base-case loss assumptions to maintain a 'BB' rating, while S&P would assess whether a different class could withstand approximately 155% of S&P's base-case loss assumptions to maintain a 'BBB' rating. S&P also lowered its ratings on certain senior classes due to principal shortfalls/write-downs in the final period of particular cash flow scenarios. These classes may not have experienced any principal shortfalls/write-downs in any of the prior periods of the particular stress scenario; however, the structural mechanics of the transaction created circumstances in which one or more classes within a transaction may have relied on principal proceeds to satisfy interest amounts due in earlier periods, thus resulting in a write-down in the final period. The use of principal to satisfy interest obligations is generally created within structures that utilize cross-collateralization and contain multiple loan groups. Based on certain stress scenarios, if a particular group is performing worse than another group or set of groups, that group can become undercollateralized when S&P compare the group collateral balance with the related senior class balance(s). Based on the defined interest amount needed to satisfy the interest liability of the related class(es), interest shortfalls may occur due to a group collateral balance that is insufficient to produce the necessary interest obligations of the related liabilities. Generally, cross-collateralization is designed to allow overcollateralized groups to provide cash flow to undercollateralized groups in order to mitigate this issue. However, if the overcollateralized group has a pass-through rate that is lower than the pass-through rate of the ndercollateralized group, available interest may not be sufficient to satisfy the undercollateralized group's interest requirement. Therefore, the principal portion of available funds may be used to satisfy interest obligations based on the interest-principal payment priority within the structure. In the final period, a situation may occur in which available funds are not sufficient to satisfy the interest and principal requirements necessary to pay the bond in full, as principal in prior periods was used to satisfy interest obligations. Additionally, in some cases, even super-senior certificates can be exposed to this issue due to the fact that structures may pay principal pro rata with senior support classes. Although the senior class was not exposed to a write-down in any of the prior periods, the senior class could be susceptible to a write-down in the final period due to the aforementioned issues. The affirmed ratings reflect S&P's belief that the amount of credit enhancement available for these classes is sufficient to cover losses associated with these rating levels. Subordination provides credit support for the affected transactions. The underlying pool of loans backing these transactions consists of fixed- and adjustable-rate, first-lien, prime jumbo mortgage loans. Rating Actions CHL Mtg Pass-Through Trust 2006-16 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A-1 170257AA7 CCC B 1-X 170257AB5 CCC B 2-A-1 170257AC3 CCC B 2-X 170257AD1 CCC B 3-A-1 170257AE9 CCC B 3-A-2 170257AF6 CCC B 3-A-3 170257AG4 CCC B 3-A-4 170257AH2 CCC B 3-A-5 170257AJ8 CCC B 3-A-6 170257AK5 CCC B 3-A-7 170257AV1 CCC B 3-X 170257AL3 CCC B PO 170257AM1 CCC B M-1 170257AP4 CC CCC GSR Mortgage Loan Trust 2005-9F Rating ------ Class CUSIP To From ----- ----- -- ---- 1A-1 362341Q36 CCC AAA 1A-2 362341Q44 CCC AAA 1A-3 362341Q51 CCC AAA 1A-4 362341Q69 CCC AAA 1A-5 362341Q77 CCC AAA 1A-6 362341Q85 CCC AAA 1A-7 362341Q93 CCC AAA 1A-9 362341R35 CCC AAA 1A-10 362341R43 CCC AAA 1A-11 362341R50 CCC AAA 1A-12 362341R68 CCC AAA 1A-13 362341R76 CCC AAA 1A-14 362341R84 CCC AAA 1A-15 362341R92 CCC AAA 1A-16 362341X46 CCC AAA 2A-1 362341S26 CCC AAA 2A-2 362341S34 CCC AAA 2A-3 362341S42 CCC AAA 2A-4 362341S59 CCC AAA 2A-5 362341S67 CCC AAA 2A-6 362341S75 CCC AAA 2A-7 362341S83 CCC AAA 2A-8 362341S91 CCC AAA 3A-1 362341T25 CCC AAA 3A-2 362341T33 CCC AAA 3A-3 362341T41 CCC AAA 1A-P 362341U56 CCC AAA 1A-X 362341U72 CCC AAA 4A-1 362341T58 CCC AAA 4A-2 362341T66 CCC AAA 5A-1 362341T74 CCC AAA 5A-2 362341T82 CCC AAA 6A-1 362341T90 CCC AAA 6A-2 362341U23 CCC AAA 2A-X 362341U80 CCC AAA 2A-P 362341U64 CCC AAA GSR Mortgage Loan Trust 2006-1F Rating ------ Class CUSIP To From ----- ----- -- ---- 1A-2 3623416J3 A AAA 1A-3 3623416K0 B BBB- 1A-5 3623416M6 B BBB- 1A-6 3623416N4 B BBB- 1A-7 3623416P9 B BBB- 1A-8 3623416Q7 B BBB- 1A-10 3623416S3 B BBB- 1A-11 3623416T1 B BBB- 1A-13 3623416V6 B BBB- 1A-14 3623416W4 B BBB- 1A-16 3623416Y0 B BBB- 1A-17 3623418W2 B BBB- 2A-2 3623417A1 B BBB- 2A-3 3623417B9 B BBB- 2A-4 3623417C7 B BBB- 2A-5 3623417D5 B AAA 2A-6 3623417000 B BBB- 2A-7 3623417F0 B A 2A-8 3623417G8 B A 2A-9 3623417H6 B AAA 2A-10 3623417J2 B BBB- 2A-11 3623417K9 B BBB- 2A-12 3623417L7 B BBB- 2A-14 3623417N3 B BBB- 2A-15 3623417P8 B BBB- 2A-16 362334AN4 B AAA 2A-17 362334AP9 B BBB- 3A-1 3623417Q6 CCC BBB- 3A-2 3623417R4 CCC BBB- 7A-1 3623418J1 CCC BBB- 7A-2 3623418K8 CCC BBB- 1A-P 3623418L6 B BBB- 2A-P 3623418M4 B BBB- 1A-X 3623418N2 CCC AAA 4A-1 3623417S2 BB A+ 4A-2 3623417T0 CCC B 5A-1 3623417Z6 BBB AAA 5A-2 3623418A0 CCC B 5A-8 362334AQ7 B AAA 6A-1 3623418F9 CCC B 6A-2 3623418G7 CCC B 6A-3 3623418H5 CCC B 1A-1 3623416H7 B BBB- 1A-4 3623416L8 B BBB- 1A-12 3623416U8 B BBB- 2A-1 3623416Z7 CCC BBB- 2A-13 3623417M5 B BBB- 4A-3 3623417U7 BB A+ 4A-4 3623417V5 BB A+ 4A-5 3623417W3 BB A+ 4A-6 3623417X1 BB A+ 4A-7 3623417Y9 BB A+ 5A-3 3623418B8 BB AAA 5A-4 3623418C6 BB AAA 5A-5 3623418D4 BB AAA 5A-6 362341800 BB AAA 5A-7 3623418X0 BB AAA Structured Asset Securities Corporation Trust 2005-15 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A1 86359DND5 AAA AAA/Watch Neg 1-A2 86359DNE3 A AAA/Watch Neg 1-A3 86359DNF0 A AAA/Watch Neg 1-A4 86359DNG8 A AAA/Watch Neg 1-A5 86359DNH6 A AAA/Watch Neg 1-A6 86359DNJ2 A AAA/Watch Neg 2-A1 86359DNK9 AAA AAA/Watch Neg 2-A2 86359DNL7 BBB AAA/Watch Neg 2-A3 86359DNM5 BBB AAA/Watch Neg 2-A4 86359DNN3 BBB AAA/Watch Neg 2-A5 86359DNP8 BBB AAA/Watch Neg 2-A6 86359DNQ6 AAA AAA/Watch Neg 2-A7 86359DNR4 BBB AAA/Watch Neg 2-A8 86359DNS2 BBB AAA/Watch Neg 2-A9 86359DNT0 BBB AAA/Watch Neg 3-A1 86359DNU7 AAA AAA/Watch Neg 3-A2 86359DNV5 BBB AAA/Watch Neg 4-A1 86359DNW3 BBB AAA/Watch Neg 4-A2 86359DNX1 BBB AAA/Watch Neg 5-A1 86359DNY9 BBB AAA/Watch Neg AP 86359DPC5 BBB AAA/Watch Neg AX 86359DPD3 AAA AAA/Watch Neg PAX 86359DPE1 AAA AAA/Watch Neg M 86359DPF8 CCC AA+/Watch Neg B1 86359DPG6 CCC AA/Watch Neg B2 86359DPH4 CC A/Watch Neg B3 86359DPJ0 CC BBB/Watch Neg B4 86359DPK7 CC BBB-/Watch Neg B5 86359DLZ8 CC BB/Watch Neg Ratings Affirmed GSR Mortgage Loan Trust 2006-1F Class CUSIP Rating ----- ----- ------ 1A-9 3623416R5 AAA 1A-15 3623416X2 AAA 5A-9 362334AR5 B * S&P Downgrades Ratings on 204 Classes From 37 RMBS Transactions ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 204 classes from 37 residential mortgage-backed securities transactions backed by U.S. subprime mortgage loan collateral issued in 2003 and 2005. S&P removed one of the lowered ratings from CreditWatch with negative implications. S&P also downgraded 31 of these classes to 'D'. In addition, S&P affirmed its ratings on 156 classes from 34 of the transactions with lowered ratings and removed two of the affirmed ratings from CreditWatch negative. The downgrades reflect S&P's opinion that projected credit support for the affected classes is insufficient to maintain the previous ratings, given S&P's current projected losses. The downgrades to 'D' reflect S&P's assessment of interest shortfalls being consistently sustained on the affected classes during previous remittance periods. To assess the creditworthiness of each class, S&P reviewed the individual delinquency and loss trends of each transaction for changes, if any, in risk characteristics, servicing, and the ability to withstand additional credit deterioration. In order to maintain a 'B' rating on a class, S&P assessed whether, in S&P's view, a class could absorb the base-case loss assumptions S&P used in its analysis. In order to maintain a rating higher than 'B', S&P assessed whether the class could withstand losses exceeding the base-case assumption at a percentage specific to each rating category, up to 150% for a 'AAA' rating. For example, in general, S&P would assess whether one class could withstand approximately 110% of S&P's base-case loss assumptions to maintain a 'BB' rating, while S&P would assess whether a different class could withstand approximately 120% of S&P's base-case loss assumptions to maintain a 'BBB' rating. Each class with an affirmed 'AAA' rating can, in S&P's view, withstand approximately 150% of its base-case loss assumptions under S&P's analysis. S&P also lowered its ratings on certain senior classes due to principal shortfalls/write-downs in the final period of particular cash flow scenarios. These classes may not have experienced any principal shortfalls/write-downs in any of the prior periods of the particular stress scenario; however, the structural mechanics of the transaction created circumstances in which one or more classes within a transaction may have relied on principal proceeds to satisfy interest amounts due in earlier periods, thus resulting in a write-down in the final period. The use of principal to satisfy interest obligations is generally created within structures that utilize cross-collateralization and contain multiple loan groups. Based on certain stress scenarios, if a particular group is performing worse than another group or set of groups, that group can become undercollateralized when S&P compare the group collateral balance with the related senior class balance(s). Based on the defined interest amount needed to satisfy the interest liability of the related class(es), interest shortfalls may occur due to a group collateral balance that is insufficient to produce the necessary interest obligations of the related liabilities. Generally, cross-collateralization is designed to allow overcollateralized groups to provide cash flow to undercollateralized groups in order to mitigate this issue. However, if the overcollateralized group has a pass-through rate that is lower than the pass-through rate of the undercollateralized group, available interest may not be sufficient to satisfy the undercollateralized group's interest requirement. Therefore, the principal portion of available funds may be used to satisfy interest obligations based on the interest- principal payment priority within the structure. In the final period, a situation may occur in which available funds are not sufficient to satisfy the interest and principal requirements necessary to pay the bond in full, as principal in prior periods was used to satisfy interest obligations. Additionally, in some cases, even super-senior certificates can be exposed to this issue due to the fact that structures may pay principal pro rata with senior support classes. Although the senior class was not exposed to a write-down in any of the prior periods, the senior class could be susceptible to a write-down in the final period due to the aforementioned issues. Subordination provides credit support for the affected transactions. In addition, some classes also benefit from overcollateralization (prior to its depletion) and excess spread. The underlying pool of loans backing these transactions consist of fixed- and adjustable-rate U.S. subprime mortgage loans that are secured by first and second liens on one- to four-family residential properties. * S&P Puts Ratings on 3,076 CDO Deals on CreditWatch Negative ------------------------------------------------------------- Standard & Poor's Ratings Services placed 3,076 ratings on 957 U.S. corporate collateralized debt obligation transactions on CreditWatch with negative implications. The aggregate issuance amount of the affected tranches is $319.55 billion. S&P took these CreditWatch actions after S&P updated the criteria and assumptions S&P use to rate corporate CDO transactions. S&P expects this update to result in downgrades of many rated CDOs that are backed by, or reference, corporate debt. The CreditWatch placements affect nearly all of S&P's ratings on U.S. corporate CDO transactions, including collateralized loan obligations, collateralized bond obligations, CDOs of corporate CDOs, synthetic corporate CDOs, CDOs backed by trust preferred assets, and other CDO transactions collateralized by or referencing corporate credits. S&P did not place some ratings on tranches with credit support provided by a monoline insurance company or other third-party on CreditWatch negative. Additionally, S&P affirmed its ratings on some senior tranches from corporate CDO transactions because, in S&P's opinion, the high level of credit enhancement available to support these tranches indicates that these tranches are likely to maintain their current ratings following the application of S&P's updated criteria. In all, S&P affirmed its ratings on 82 tranches from 67 CDO transactions. With respect to the tranches with affirmed ratings based on S&P's assessment of the credit enhancement available to support them, it is important to note that these tranche ratings will be subject to a full review by surveillance committee in coming months as S&P review the ratings on the other tranches within the transactions. If, as a result of these reviews, S&P determine that a rating assigned to one of these affirmed tranches is not, in S&P's view, consistent with the rating indicated by analysis under S&P's updated criteria, S&P will lower the rating at that time without first placing it on CreditWatch negative. Additionally, S&P has not placed on CreditWatch negative the ratings on the CDO tranches that S&P expects will be paid in full on or before Dec. 31, 2009. This press release discusses CreditWatch placements affecting CDO transactions monitored in the U.S.; S&P will publish separate releases and rating action lists for transactions monitored in Europe, Asia-Pacific (excluding Japan), and Japan. The tables at the end of this article provide a summary breakdown of the U.S. CDO ratings placed on CreditWatch by year of transaction origination and current rating. S&P's process for reviewing cash flow and hybrid CDOs (which rely on excess spread for credit support and require cash flow analysis when assessing the ratings assigned) differs from the process S&P use to review synthetic CDO transactions, which S&P monitor through S&P's monthly synthetic rated overcollateralization ratio review. Review Of Cash Flow And Hybrid Cdo Transactions S&P will resolve the CreditWatch placements affecting each cash flow and hybrid CDO transaction affected by the criteria update after S&P completes its cash flow and credit analysis and conduct a review via rating committee. Given the volume of transactions S&P will review in connection with the criteria update, S&P anticipates that the reviews may require six months or more to complete. In general, S&P expects to issue multiple press releases per week to resolve the CreditWatch placements as S&P reviews the affected transactions. Additionally, S&P will issue periodic press releases summarizing the rating actions S&P has taken to date in connection with the application of the updated criteria. When S&P reviews CDO transactions that are backed by tranches from other corporate CDOs, S&P will adjust the ratings assigned to the underlying CDO tranches as appropriate if they have not yet been reviewed pursuant to the criteria update. S&P will base these adjustments on an abridged review that takes into account the average rating impact of the updated corporate CDO criteria on like-rated tranches from similar transactions, as well as the performance of the specific CDO issuing the tranche held as collateral. S&P will review and update the rating actions that result from this abridged review of the underlying CDO tranches, as appropriate, once S&P completes its full review of those tranches pursuant to the criteria update. S&P will prioritize its reviews of cash flow and hybrid CDOs according to several parameters, including: * The frequency with which the tranches of a given CDO are held by other corporate CDO transactions. S&P will review those CDOs with tranches held most widely earlier in the process; * The proportion of underlying collateral consisting of other corporate CDO tranches. S&P will review CDOs that hold greater numbers of tranches of other CDOs later in the process; and * The event of default provisions in the transaction documents. S&P will review CDOs earlier in the process if they have par- based EOD triggers that include rating-based haircuts and provisions allowing controlling noteholders to liquidate the transaction. Although S&P expects the rating changes that result from its reviews to primarily reflect the application of its updated criteria to existing corporate CDO transactions, the credit quality of the collateral pools backing some CDO transactions have deteriorated because of speculative-grade corporate loan issuer downgrades and defaults. Many tranche ratings from these CDO transactions were on CreditWatch negative before S&P implemented the updated criteria. The rating actions resulting from its reviews of these transactions will reflect both the application of S&P's updated criteria and its views regarding the credit deterioration that the CDO has experienced to date. Trustees and collateral managers for the affected transactions should continue to use their current version of CDO Monitor during the review period and after. Standard & Poor's CDO Monitor is a model that helps to determine whether a given CDO transaction is in compliance with its Standard & Poor's CDO Monitor test. Trustees and collateral managers for actively managed cash flow and hybrid CDO transactions typically run CDO Monitor on certain dates during the reinvestment period. If a transaction is failing Standard & Poor's CDO Monitor test, the transaction documents often provide for subsequent trades only if they "maintain or improve" the test results. S&P is keeping the current CDO Monitor test for the outstanding transactions in order to maintain the link between a transaction's test results (that is, whether the transaction is currently passing or failing the CDO Monitor test) and the performance of the transaction's collateral since origination. This is consistent with S&P's normal practice to not provide new CDO Monitor models to transactions as a result of downgrades of the CDO tranches. Review Of Synthetic Cdo Transactions Through S&P's Sroc Process For synthetic CDO transactions that S&P monitor as part of its monthly SROC review, S&P does not anticipate conducting extensive cash flow analysis to resolve the CreditWatch placements. Instead, S&P will focus on the revised SROC ratios incorporating the updated criteria. A rating committee will determine the final rating decisions. Once S&P has completed its review of synthetic CDO transactions, S&P will publish a consolidated press release for the affected transactions. S&P expects to complete its reviews within the next 90 days. Until that time, S&P will not include corporate CDO transactions in its monthly SROC report, although S&P does intend to continue publishing the SROC report for other (noncorporate) synthetic CDO transactions, including synthetic CDOs of asset- backed securities. S&P's reviews of the affected synthetic CDOs will consider both the updated criteria and also any credit deterioration the transactions have experienced since their last review. After S&P completes its reviews, S&P expects to resume publishing the monthly Global SROC Report, which will include SROC ratios for synthetic corporate CDO transactions under the updated criteria. Summary Of U.S. Corporate Cdo Ratings Placed On Creditwatch Negative U.S. Corporate CDO Tranches With Ratings Placed On CreditWatch Negative (No.) RATING ------ AAA AA A BBB BB B CCC Total --- -- - --- -- - --- ----- 2000 & Prior 18 3 2 6 3 5 4 41 2001 20 12 1 6 3 3 45 2002 30 4 23 6 9 4 2 78 2003 74 32 32 21 20 18 4 201 2004 118 45 52 25 31 24 3 298 2005 205 118 82 46 40 23 23 537 2006 381 157 121 78 47 23 43 850 2007 367 153 117 96 58 30 52 873 2008 61 30 24 15 8 1 3 142 2009 9 2 11 ----- ----- --- --- --- --- --- --- ----- Total 1,283 554 454 301 219 128 137 3,076 U.S. Corporate CDO Tranches With Ratings Placed On CreditWatch Negative (US$ billions issuance amount) Rating ------ AAA AA A BBB BB B CCC Total --- -- - --- -- - --- ----- 2000 & Prior 3.20 0.12 0.06 0.13 0.08 0.70 0.09 4.37 2001 4.13 2.03 0.02 0.10 0.03 0.03 6.34 2002 5.80 0.36 0.60 0.31 0.49 0.12 0.04 7.71 2003 11.30 1.14 0.93 1.66 1.33 0.74 0.05 17.15 2004 17.03 1.73 1.09 2.16 2.84 0.63 0.09 25.55 2005 33.61 3.07 2.16 1.94 3.45 1.73 1.03 47.00 2006 64.76 5.77 3.99 5.88 4.62 1.42 1.33 87.77 2007 73.74 5.22 4.67 6.25 3.64 1.87 1.93 97.33 2008 21.08 0.80 0.63 0.24 0.35 0.01 0.09 23.20 2009 2.75 0.38 3.12 ----- ------ ----- ----- ----- ----- ---- ---- ------ Total 237.40 20.22 14.15 19.04 16.83 7.22 4.68 319.55 ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers' public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com/ On Thursdays, the TCR delivers a list of recently filed Chapter 11 cases involving less than $1,000,000 in assets and liabilities delivered to nation's bankruptcy courts. The list includes links to freely downloadable images of these small-dollar petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. The Sunday TCR delivers securitization rating news from the week then-ending. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors' Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Danilo Munnoz, Joseph Medel C. Martirez, Denise Marie Varquez, Philline Reluya, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2009. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $775 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***