/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/091122.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, November 22, 2009, Vol. 13, No. 323 Headlines ACACIA CDO: Fitch Downgrades Ratings on Four Classes of Notes ADVANTA BUSINESS: S&P Downgrades Ratings on All Classes of Notes BANC OF AMERICA: Moody's Upgrades Ratings on Three 2007-4 Tranches BANC OF AMERICA: S&P Downgrades Ratings on 19 2008-1 Securities BARCLAYS GLOBAL: S&P Downgrades Credit Ratings on Six Funds BAYVIEW FINANCIAL: Moody's Downgrades Ratings on Nine Classes BEAR STEARNS: Fitch Downgrades Ratings on Five 2005-TOP18 Certs. BEAR STEARNS: S&P Downgrades Ratings on Class A-1 2007-R3 Certs. BEAR STEARNS: Moody's Affirms Ratings on Eight 2004-TOP 14 Certs. BRASCAN STRUCTURED: Fitch Downgrades Ratings on All 2005-2 Notes BRAZOS STUDENT: Fitch Maintains Ratings on 2004-A Student Loans CAPITAL TRUST: Fitch Downgrades Ratings on All 2005-1 Notes CAPITALSOURCE REAL: Moody's Downgrades Ratings on 12 2006-A Notes CARBON CAPITAL: Moody's Reviews Ratings on All 2005-1 Notes CASTLE HILL: Fitch Downgrades Ratings on Four Classes of Notes COBALT CMBS: S&P Downgrades Ratings on 17 2007-C3 Securities COMMODORE CDO: Fitch Downgrades Ratings on Four Classes of Notes CONFLUENT SENIOR: Moody's Withdraws Ratings on Three Classes CONTINENTAL AIRLINES: Fitch Takes Various Rating Actions on Certs. CREDIT SUISSE: Fitch Takes Actions on All 2005-C5 Certificates CREDIT SUISSE: Moody's Affirms Ratings on 10 2005-C3 Certs. CREDIT SUISSE: Moody's Affirms Ratings on 10 2005-C4 Certificates CSMS 2006-HC1: S&P Affirms Ratings on 14 Classes of Certificates CTX CDO: Moody's Downgrades Ratings on All Classes of Notes CWCAPITAL COBALT: Moody's Downgrades Rating on All Classes DELTA AIR: Fitch Takes Rating Actions on Various Certificates DELTA AIR: Moody's Assigns 'Ba2' Rating on $120 Mil. Certs. DELTA AIR: S&P Assigns Ratings on 2009-1 Class A Certificates DILLON READ: Moody's Downgrades Ratings on All 2006-1 Notes ENERGY FUTURE: Fitch Takes Various Rating Actions on Debt FIRSTPLUS HOME: S&P Downgrades Ratings on 17 Securities to 'D' FORD CREDIT: S&P Assigns Ratings on $1.1022 Bil. 2009-E Notes GLACIER FUNDING: Fitch Downgrades Ratings on Three Classes GS MORTGAGE: Fitch Downgrades Ratings on 2005-GG4 Certificates GSMPS PASS-THROUGH: Moody's Cuts Ratings on Six 2004-2R Certs. JP MORGAN: Fitch Takes Various Rating Actions on 2005-LDP2 Notes JP MORGAN: Moody's Affirms Ratings on Ten 2006-LDP8 Certificates L2L EDUCATION: Moody's Reviews Ratings on Four 2006-1 Tranches LB-UBS COMMERCIAL: S&P Downgrades Ratings on 19 2006-C3 Securities LENOX STREET: Moody's Downgrades Ratings on Nine 2007-1 Notes LONGSHORE CDO: S&P Downgrades Ratings on Six Classes to 'D' MASTR ADJUSTABLE: Moody's Downgrades Ratings on Nine 2002-3 Notes MERCURY CDO: Moody's Downgrades Ratings on Five 2004-1 Notes MERRILL LYNCH: Fitch Takes Various Rating Actions on 14 Classes MERRILL LYNCH: S&P Downgrades Ratings on 24 2008-C1 Securities MERRILL LYNCH: S&P Downgrades Ratings on 2008-LAQ Certificates MICHIGAN STATE HOSPITAL: Fitch Keeps BB+ Rating on $32.38MM Bonds MMA FINANCIAL: Moody's Cuts Ratings on Various Funds to 'Ba2' MMA FINANCIAL: Moody's Downgrades Ratings on Funds to 'Ba3' MONTANA RE: S&P Assigns 'BB-' Rating on Class A Notes MORGAN STANLEY: Fitch Takes Rating Actions on 2005-IQ9 Certs. MORGAN STANLEY: Moody's Affirms Ratings on Eight 2004-TOP13 Certs. NORTHLAKE CDO: Fitch Downgrades Ratings on Three Classes of Notes NORTHWESTERN INVESTMENT: Fitch Affirms Ratings on Two Classes PARCS-R MASTER: S&P Downgrades Rating on 2007-15 Notes to 'CCC' PLENARY PROPERTIES: S&P Assigns 'BB' Rating on Series I Notes PORTER SQUARE: Fitch Downgrades Ratings on Three Classes of Notes PREFERRED TERM: Fitch Junks Ratings on Floating Notes From 'A' PREFERREDPLUS TRUST: S&P Cuts Ratings on Certs. to 'B-' PREFERREDPLUS TRUST: S&P Downgrades Ratings on Certs. to 'B-' PROSPECT FUNDING: S&P Affirms Ratings on 11 Tranches RACE POINT: Fitch Downgrades Ratings on Eight Classes of Notes RELATED CAPITAL: Moody's Cuts Ratings on Series C Funds to 'Ba3' RELATED CAPITAL: Moody's Cuts Ratings on Series B Funds to 'Ba3' RELATED CAPITAL: Moody's Cuts Ratings on Series D Funds to 'Ba3' RELATED CAPITAL: Moody's Downgrades Ratings on Funds to 'Ba3' RFC CDO: Moody's Reviews Ratings on 14 Classes of 2007-1 Notes RIVER LAKE: Moody's Downgrades Ratings on $28 Mil. Notes to 'B3' ROCKALL CLO: Moody's Withdraws Ratings on Three Classes of Notes SANKOFA SHULE: Moody's Withdraws 'Ca' Rating on Certificates SATURN VENTURES: Moody's Downgrades Ratings on Four Classes SMART HOME: Moody's Downgrades Ratings on Eight 2005-1 Tranches SORIN REAL: Moody's Reviews Ratings on Nine Classes of Notes STARTS LTD: S&P Withdraws 'CCC-' Rating on 2007-7 Notes TABERNA PREFERRED: Fitch Downgrades Ratings on Five Classes UBS COMMERCIAL: S&P Downgrades Ratings on 19 2007-FL1 Certificates UNITED AIR: Moody's Assigns 'Ba1' Rating on $698 Mil. Notes UNITED AIR: S&P Assigns 'BB' Rating on Class B 2009-2 Certs. VERMEER FUNDING: Fitch Downgrades Ratings on Four Classes of Notes WACHOVIA AUTO: Fitch Keeps All Classes of 2007-1 & 2008-1 Notes WACHOVIA BANK: Fitch Takes Rating Actions on 2005-C17 Certs. WACHOVIA BANK: Moody's Affirms Ratings on Seven 2005-C21 Certs. WACHOVIA BANK: S&P Downgrades Ratings on 20 2006-C23 Securities WACHOVIA BANK: S&P Downgrades Ratings on 20 2007-C33 Securities * Fitch Downgrades Ratings on 119 Bonds From 85 RMBS Deals to 'D' * S&P Downgrades Ratings on 33 Classes From Four Alt-A RMBS Deals * S&P Downgrades Ratings on 107 Classes From 32 Alt-A RMBS Deals * S&P Downgrades Ratings on 147 Classes From 18 Prime Jumbo RMBS * S&P Downgrades Ratings on 225 Tranches From 48 CLO Transactions ********* ACACIA CDO: Fitch Downgrades Ratings on Four Classes of Notes ------------------------------------------------------------- Fitch Ratings has downgraded four and affirmed two classes of notes issued by Acacia CDO 8, Ltd./Corp. as a result of continued credit deterioration in the portfolio since Fitch's last rating action in February 2009. Approximately 77.3% of the portfolio has been downgraded since the last review. The details of the rating action follow at the end of this press release. The downgrades to the portfolio have left approximately 90.2% of the portfolio (including defaults) with a Fitch derived rating below investment grade and 75.9% with a rating in the 'CCC' rating category or lower, compared to 68.9% and 34.7%, respectively at last review. Defaulted securities, as defined in the transaction's governing documents, now comprise 58.6% of the portfolio, compared to 9.7% at last review. The current balance of the portfolio is $217.5 million including $127.4 million defaulted securities. While the classes A-1, A-2, and B notes are still receiving timely interest distributions, Fitch believes that default is inevitable for these classes. The transaction entered an Event of Default on June 22, 2009 when the class A/B overcollateralization test fell below 100%. Noteholders had not given direction to accelerate the notes at the time of this review. This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model for projecting future default levels for the underlying portfolio. Due to the significant collateral deterioration, credit enhancement levels available to all classes of notes are exceeded by the 'CCC' rating loss rate, the lowest rating level loss projected by PCM. Fitch compared the respective credit enhancement levels to the amount of underlying assets considered distressed (rated 'CCC' and lower). Given the high probability of default of these assets and the expected low recoveries upon default, classes A-1, A-2, B, and C were downgraded to 'C' and classes D and E were affirmed at 'C' rating. Acacia 8 is a structured finance collateralized debt obligation that closed on July 14, 2005 and is monitored by Redwood Asset Management. The portfolio is composed of RMBS (76.7%), CDOs (1.9%), and commercial mortgage-backed securities (21.4%). Fitch has taken various actions on these classes of Acacia CDO 8, Ltd./Corp. as indicated: -- $131,066,144 class A-1 notes downgraded to 'C' from 'BBB-'; -- $15,000,000 class A-2 notes downgraded to 'C' from 'BB'; -- $22,000,000 class B notes downgraded to 'C' from 'B'; -- $20,504,067 class C notes downgraded to 'C' from 'CC'; -- $10,414,507 class D notes affirmed at 'C'; -- $10,572,477 class E notes affirmed at 'C'. ADVANTA BUSINESS: S&P Downgrades Ratings on All Classes of Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on all classes of notes issued out of Advanta Business Card Master Trust and removed them from CreditWatch with negative implications, where they were placed on May 13, 2009. The lowered ratings reflect the continued and accelerating deterioration in the performance of the underlying pool of credit card receivables since ABCMT entered into early amortization in June 2009, as a result of breaching the excess spread amount trigger, and after Advanta Corp. closed the open-to-buy lines associated with cardholder accounts in ABCMT in May 2009. When it closed the open-to-buy lines, Advanta ceased funding new purchases associated with existing cardholders. In S&P's opinion, the marked deterioration in collateral pool performance has increased the likelihood that the class B, C, and D noteholders will not receive full repayment of their original principal. The degradation of key credit metrics has accelerated rapidly during the past five months. The trust's principal payment rate, which is a key indicator of how quickly investors will be paid, fell by more than 75% to 4.2% ($125.1 million) in September 2009 from 19.1% ($846.2 million) in May 2009. Before the trust entered early amortization, its principal payment rate had averaged approximately 18.75% in 2009. The decline in the principal payment rate is likely the result of adverse selection, as stronger obligors with the ability to pay off their balances in full or in amounts greater than the required minimum payment exit the trust, leaving the pool with lower-quality obligors who may be constrained to only make the minimum payment. Based on previous performance trends exhibited during the early amortization of the NextCard Credit Card Master Note and First Consumer Credit Card Master Note trusts following the closure of the open-to-buy lines, S&P believes that ABCMT's principal payment rate could potentially drop to the 3% range. Advanta Bank Corp.'s required minimum payment for cardholders is, generally, the greater of (1) 2.25% of the entire outstanding balance on the account or $10, whichever is greater, and (2) 1.00% of the entire outstanding balance plus the finance charges assessed for that billing cycle. ABC may also include past-due amounts, any newly accrued fees and charges it elects to include, and amounts in excess of the credit limit. From a charge-off perspective, ABC in June 2009 adjusted its charge-off policy to 120 days past due from 180 days past due, which caused default levels to accelerate to 61.5% in June 2009 from 24.5% in May 2009. Between July and September of this year, the charge-off rate improved significantly compared with June 2009 and ranged from 22.4% to 24.6%. However, these levels were temporary, as total delinquencies reached an all-time high of 12.6% in September. S&P believes that losses may rise to 35%-45% in the next six to 12 months -- given current delinquencies and S&P's chief economist's baseline and pessimistic peak unemployment forecasts of 10.4% and 12.1% over the next 12 or 18 months, respectively. ABCMT's exposure to obligors in the high unemployment and high foreclosure states of California and Florida, which currently account for approximately 23% of the trust pool, does not, in S&P's opinion, augur well for a sustained improvement in trust performance. S&P's view is that the ongoing declining pool balance will cause loss rates to continue increasing and become more pronounced on a percentage basis. These expectations are also driven by the current negative economic backdrop as small businesses continue to struggle against the recession, double-digit national unemployment levels, weak consumer spending, and the dearth of funding sources. In addition, ABCMT's portfolio could be exposed to added pressure from what S&P believes will be a less-robust servicing platform as adverse selection increases the number of lower-quality obligors that remain in the trust. While these obligors require more rigorous servicing efforts, the potential risks of additional reduction in servicing personnel and a servicing transition became heightened after Advanta Corp., the parent company of ABC, filed for bankruptcy on Nov. 8, 2009, and because of the potential receivership of ABC (the servicer of the underlying credit card receivables in the master trust). The ABCMT trust began distributing principal collections to pay down its bonds in June 2009. Principal collections were allocated based on a fixed allocation and were distributed sequentially beginning with the class A notes. As of the Oct. 20, 2009, payment date, the original class A invested amount of $2.8 billion had been reduced by approximately 57% to $1.196 billion. Concurrently, the $105 million initial invested amount of the class D notes had been completely written down, while the original invested amount of the class C notes has been written down to $200.8 (84% of its initial invested amount of $240 million). These principal write-downs reflect insufficient monthly allocable finance charge collections available to cover investor default amounts allocated to the trust. S&P currently expect that the class C notes will continue to experience principal write-downs and, given the trust's current performance, expect that the class B notes will also be affected over the course of the next six to 12 months. Despite these write-down amounts, both the class C and D noteholders currently receive and are expected to continue to receive, until the earlier of their respective termination dates or the date on which the sum of the adjusted invested amount for all notes is equal to zero, full and timely interest based on their initial principal balance. S&P's stress cash flow runs show that the class A notes will likely be paid in full in the second or third quarter of 2011. This is based on the remaining credit enhancement available for the notes relative to these assumptions: the charge-off rate will increase to 35%-45% over the next 12-24 months; the principal payment rate will decline from its current level to 3% in the next six months; and yield will drop 15%-20% to 15%-16% from its current levels of 18.8%. S&P also believes that the class B notes will likely receive only a partial repayment of their original principal investment, while S&P expects the class C and D notes to experience a full loss of their original principal investments. S&P's analysis assumes that the principal payment rate and yield remain at their current levels, and that the charge-off rate increases to 30%-35% in the next six to 12 months and then eventually scales back to 25%-30% in 2011 and 2012. As S&P previously mentioned, Advanta Corp.'s bankruptcy filing and the potential FDIC receivership of ABC may adversely affect the quality and cost of servicing for ABCMT. To account for the possibility of a servicing transfer, S&P assumed a higher servicing fee of 4.0%-4.5% instead of the current 2.0% servicing fee, which is paid in senior priority in the cash flow waterfall. Standard & Poor's will continue to monitor the performance of the key risk indicators associated with the ABCMT trust and will continue to inform the market of its views as events unfold. Ratings Lowered And Removed From Creditwatch Negative Advanta Business Card Master Trust AdvantaSeries Rating ------ Class To From ----- -- ---- A(2005-A2) BB BBB-/Watch Neg A(2006-A3) BB BBB-/Watch Neg A(2006-A4) BB BBB-/Watch Neg A(2006-A5) BB BBB-/Watch Neg A(2006-A6) BB BBB-/Watch Neg vA(2006-A7) BB BBB-/Watch Neg A(2007-A1) BB BBB-/Watch Neg A(2007-A2) BB BBB-/Watch Neg A(2007-A3) BB BBB-/Watch Neg A(2007-A4) BB BBB-/Watch Neg A(2007-A5) BB BBB-/Watch Neg A(2008-A3) BB BBB-/Watch Neg B(2005-B1) CCC- BB-/Watch Neg B(2006-B1) CCC- BB-/Watch Neg B(2006-B2) CCC- BB-/Watch Neg B(2007-B1) CCC- BB-/Watch Neg B(2007-B2) CCC- BB-/Watch Neg C(2004-C1) CCC- B-/Watch Neg C(2006-C1) CCC- B-/Watch Neg D(2004-D1) CC CCC/Watch Neg D(2006-D1) CC CCC/Watch Neg D(2006-D2) CC CCC/Watch Neg D(2006-D3) CC CCC/Watch Neg D(2007-D1) CC CCC/Watch Neg BANC OF AMERICA: Moody's Upgrades Ratings on Three 2007-4 Tranches ------------------------------------------------------------------ Moody's Investors Service has upgraded the ratings of 3 tranches from Banc of America Funding 2007-4 Trust. The upgrades reflect newly available individual group performance data now being reported by the trustee, which shows relatively stronger performance on the particular collateral groups backing the upgraded bonds. Issuer: Banc of America Funding 2007-4 Trust Groups 4 through 8 current expected loss: 2.0% of original securitized balance -- Cl. 6-A-1, Upgraded to Ba2; previously on Jul 17, 2009 Downgraded to B3 -- Cl. 7-A-1, Upgraded to Ba2; previously on Jul 17, 2009 Downgraded to B3 -- Cl. S-PO, Upgraded to B3; previously on Jul 17, 2009 Downgraded to Caa1 The collateral backing Groups 4 through 8 of this securitization consists primarily of first-lien, 10yr to 30yr fixed rate, jumbo mortgage loans. For details regarding Moody's approach to estimating losses on Jumbo pools originated in 2005, 2006, 2007 and 2008, please refer to the methodology publication "Prime Jumbo RMBS Loss Projection Update: March 2009" available on moodys.com. 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. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to the current level of credit enhancement. Moody's takes into account credit enhancement provided by seniority, cross-collateralization, time tranching, and other structural features within the senior note waterfalls. Also, for bonds backed by collateral groups with few loans remaining, Moody's applies additional stresses to account for increased loss volatility. BANC OF AMERICA: S&P Downgrades Ratings on 19 2008-1 Securities --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 19 classes of commercial mortgage-backed securities from Banc of America Commercial Mortgage Trust 2008-1 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 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 1.33x and a loan-to-value ratio of 115.7%. S&P further stressed the loans' cash flows under its 'AAA' scenario to yield a weighted average DSC of 0.79x and an LTV of 167.5%. The implied defaults and loss severity under the 'AAA' scenario were 91.8% and 46.4%, respectively. All of the DSC and LTV calculations S&P noted above exclude three ($18.9 million, 1.5%) of the transaction's eight ($62.9 million, 5.0%) specially serviced loans. S&P estimated losses for these three loans separately and included them in the 'AAA' scenario implied default and loss figures. The affirmations of the ratings on the principal and interest certificates reflect subordination levels that are consistent with the outstanding ratings. S&P affirmed its rating on the class XW interest-only certificate 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 rating on the IO certificate S&P affirmed. Credit Considerations As of the November 2009 remittance report, eight loans ($62.9 million, 5.0%) in the pool were with the special servicer, CWCapital Asset Management LLC, including one of the top 10 loans. Five of the specially serviced loans ($27.2 million, 2.1%) are 90- plus-days delinquent, and one ($4.9 million, 0.4%) of the specially serviced loans has an $889,191 appraisal reduction amount in effect. The Vineyard Gate Apartments loan is the eighth-largest loan in the pool and the largest loan with CWCapital. The loan has a trust balance of $28.3 million (2.2%) and is secured by a 280-unit multifamily apartment complex in Roseville, Calif. The reported DSC for year-end 2008 was 1.04x based on net operating income and 1.01x based on net cash flow, down from 1.13x and 1.10x, respectively, at issuance. According to the November remittance report, the special servicer will return the loan to the master servicer. The Hawthorne Suites Orlando Airport loan, the second-largest loan with the CWCapital, has a total exposure of $14.2 million (1.1%). This loan was transferred to CWCapital on Nov. 4, 2009, due to imminent monetary default, and the loan is current. This loan is secured by a 135-room hotel built in 1999 in Orlando, Fla. Each of the remaining six specially serviced loans accounts for less than 0.7% of the pool balance. Transaction Summary As of the November 2009 remittance report, the collateral pool had an aggregate trust balance of $1.26 billion, which represents 99.6% of the balance at issuance. The pool includes 108 loans, which is unchanged since issuance. The master servicer for the transaction is Bank of America N.A., which provided financial information for 98.7% of the loans in the pool; 96.9% of the servicer-provided information was full-year 2008 or interim-2009 data. S&P calculated a weighted average DSC of 1.32x for the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.33x and 115.7%, respectively. S&P's adjusted DSC and LTV figures reflect a positive adjustment for lease-up activity at the property that secures the fourth-largest loan, which S&P discusses in the Top 10 section below. S&P's adjusted figures also exclude three ($18.9 million, 1.5%) of the transaction's eight ($62.9 million, 5.0%) specially serviced loans. S&P estimated losses separately for these three loans. The transaction has not experienced any losses to date. Bank of America reported a watchlist of 19 loans ($238.9 million, 18.9%), including three of the top 10 loans, which S&P discuss in detail below. Seventeen loans ($242.6 million, 19.2%) in the pool have reported DSC below 1.10x, and 11 loans ($159.0 million, 12.6%) have reported DSC of less than 1.00x. Summary of Top 10 Loans The top 10 loan exposures have an aggregate outstanding balance of $592.7 million (46.9%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.23x for the top 10 loans. S&P's adjusted DSC and LTV for the top 10 loans are 1.24x and 124.43%, respectively. Three ($156.2 million, 12.4%) of the top 10 loans appear on the master servicer's watchlist and are discussed below. The 550 West Jackson loan is the second-largest loan in the pool and the largest loan on the master servicer's watchlist. The loan has a trust balance of $97.5 million (7.7%) and is secured by an 18-story, 406,041-sq.-ft. office building in the West Loop district of Chicago. The loan is classified as current and appears on the watchlist due to low DSC. The reported DSC for year-end 2008 was 0.98x, down from 1.27x at issuance. However, a number of new leases commenced during 2008, which resulted in a 1.15x DSC for the three months ended March 31, 2009. Occupancy was 92.9% as of March 2009. The Village at Cascade Station loan is the fourth-largest loan in the pool. The loan has a trust balance of $69 million (5.5%) and is secured by a recently built 392,381-sq.-ft. retail power center in Portland, Ore. As of May 2008, the power center was 85.2% leased to more than 30 tenants. The June 2009 rent roll indicated an increase in occupancy to 91.2%, which resulted in a 31% upward NCF adjustment. The Residence Inn - Irvine loan is the seventh-largest loan in the pool and the second-largest loan on the master servicer's watchlist. The loan has a trust balance of $34.0 million (2.7%) and is secured by a 174-room lodging property in Irvine, Calif. The loan appears on the watchlist due to low DSC. The reported DSC and occupancy as of March 2009 were 0.88x and 66.1%, respectively. The property recently underwent renovations, which resulted in a decline in occupancy. The Pecos I-215 II - Sansone Pecos loan is the ninth-largest loan in the pool and the third-largest loan on the master servicer's watchlist. The loan has a trust balance of $24.7 million (2.0%) and is secured by a 121,201-sq.-ft. office property built in 2006 in Henderson, Nev. The loan appears on the watchlist due to low DSC, which resulted from a decline in rental rates. For the six months ended June 30, 2009, reported DSC and occupancy were 1.03x and 77.4%, respectively, compared with 1.25x and 69.4% at issuance. Standard & Poor's stressed the loans in the pool according to its U.S. conduit/fusion criteria. The resultant credit enhancement levels are consistent with S&P's lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative Banc of America Commercial Mortgage Trust 2008-1 Commercial mortgage pass-through certificates series 2008-C1 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-4 A+ AAA/Watch Neg 30.12 A-1A A+ AAA/Watch Neg 30.12 A-M BBB+ AAA/Watch Neg 20.08 A-J BB+ AAA/Watch Neg 13.80 B BB AA+/Watch Neg 12.68 C BB- AA/Watch Neg 11.55 D B+ AA-/Watch Neg 10.67 E B+ A+/Watch Neg 9.79 F B+ A/Watch Neg 8.91 G B+ A-/Watch Neg 7.91 H B+ BBB+/Watch Neg 6.78 J B BBB/Watch Neg 5.65 K B BBB-/Watch Neg 4.52 L B- BB+/Watch Neg 3.64 M B- BB/Watch Neg 3.26 N B- BB-/Watch Neg 2.76 O B- B+/Watch Neg 2.51 P CCC+ B/Watch Neg 2.13 Q CCC B-/Watch Neg 1.88 Ratings Affirmed Banc of America Commercial Mortgage Trust 2008-1 Commercial mortgage pass-through certificates series 2008-C1 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.12 A-2 AAA 30.12 A-3 AAA 30.12 A-SB AAA 30.12 XW AAA N/A BARCLAYS GLOBAL: S&P Downgrades Credit Ratings on Six Funds ----------------------------------------------------------- Standard & Poor's Ratings Services said that it lowered its fund credit quality ratings on six Barclays Global Investors funds and lowered its volatility rating on one. The rating actions were: -- iShares S&P California Municipal Bond Fund downgraded to 'Af' from 'AA-f'; -- iShares S&P National Municipal Bond Fund downgraded to 'A+f' from 'AA-f'; -- iShares S&P Short Term National Municipal Bond Fund downgraded to 'A+f' from 'AA-f'; -- iShares Barclays Aggregate Bond Fund downgraded to 'A+f' from 'AA-f'; -- iShares JPMorgan US$ Emerging Markets Bond Fund downgraded to 'BB-f' from 'BBf'; and -- iShares Barclays 1-3 Year Credit Bond Fund changed to 'BBB+f/S2' from 'A-f/S1. S&P lowered the credit-quality ratings because of the funds' aggregate exposures to asset classes that have come under stress in the current environment. Each of the funds seeks investment results that correspond generally to the price and yield performance, before fees and expenses, of their corresponding index, which represent their respective asset classes. The current credit quality of those asset classes is generally now lower than it was in the past. The volatility rating on the iShares Barclays 1-3 Year Credit Bond Fund was increased to 'S2' based on the volatility of its monthly returns during the past year. Barclays Global Fund Advisors, the investment adviser to each fund, is a wholly owned subsidiary of Barclays Global Investors N.A., which in turn is a majority-owned subsidiary of Barclays Bank PLC. BGFA uses a passive or indexing approach to achieve the investment funds' objective. The funds are six of more than 152 investment portfolios of the iShares Trust. The Trust was organized as a Delaware statutory trust on Dec. 16, 1999, and is authorized to have multiple series or portfolios. The Trust is an open-end management investment company, registered under the Investment Company Act of 1940 as amended. The offering of the Trust's shares is registered under the Securities Act of 1933 as amended. The shares of the Trust are listed and traded at market prices on national securities exchanges. S&P's credit-quality and volatility ratings are based on S&P's analysis of a fund's eligible portfolio investments and strategy, historical return volatility, and management. The fund credit- quality rating scale ranges from 'AAAf' (highest level of protection) to 'CCCf' (least protection). The ratings from 'AAf' to 'CCCf' may be modified by the addition of a plus (+) or minus (-) sign to show relative standing within the major rating categories. Volatility ratings range from lowest volatility ('S1', with certain funds designated a plus sign [+] to indicate the fund's extremely low sensitivity to changing market conditions) to highest volatility ('S6'). The ratings are based on analysis of a fund's investment strategy and portfolio risk, including interest rate risk, credit quality, liquidity, concentration, call and option risk, and currency risk. S&P also factors into the ratings the effects of various portfolio strategies, such as the use of leverage, hedging, and derivative instruments. BAYVIEW FINANCIAL: Moody's Downgrades Ratings on Nine Classes ------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on nine notes issued in two Bayview resecuritized transactions. The notes in the resecuritizations are backed by several 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 notes 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 notes 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 note in the resecuritization is the same as the probability of default for the lowest rated underlying note. 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 note). Therefore, the ratings on junior notes in the resecuritization are lower than the portfolio rating on the combined underlying bonds. Because the ratings on the notes in the resecuritization are linked to the ratings on the underlying notes and their mortgage pool performance, any rating action on the underlying notes may trigger a further review of the ratings on the notes in the resecuritization. The ratings on the notes 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 notes. Complete Rating Actions are: Issuer: Bayview Financial Asset Trust 2004-SSR1 -- Cl. A1, Downgraded to Ba1; previously on Feb 15, 2005 Assigned Aaa -- Cl. A2A, Downgraded to Ba1; previously on Feb 15, 2005 Assigned Aaa -- Cl. A2B, Downgraded to Ba1; previously on Feb 15, 2005 Assigned Aaa -- Cl. M, Downgraded to Caa2; previously on Feb 15, 2005 Assigned Aa2 Issuer: Bayview Financial Asset Trust 2007-SSR1 -- Cl. A, Downgraded to Baa1; previously on Apr 2, 2007 Assigned Aaa -- Cl. M-1, Downgraded to Ba3; previously on Apr 2, 2007 Assigned Aa1 -- Cl. M-2, Downgraded to Caa1; previously on Apr 2, 2007 Assigned Aa2 -- Cl. M-3, Downgraded to Ca; previously on Apr 2, 2007 Assigned Aa3 -- Cl. M-4, Downgraded to C; previously on Apr 2, 2007 Assigned A1 BEAR STEARNS: Fitch Downgrades Ratings on Five 2005-TOP18 Certs. ---------------------------------------------------------------- Fitch Ratings downgrades five classes of Bear Stearns Commercial Mortgage Securities Trust, commercial mortgage pass-through certificates, series 2005-TOP18. 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 1.4% for this transaction, should market conditions not recover. The rating actions are based on the full losses of 1.4% as a majority of loans mature in the next five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. To determine potential defaults for each loan Fitch assumed cash flow would decline by 10% from year-end 2008, which is consistent with the analysis used in its review of recent vintage transactions whereby cash flow was assumed to decline 15% from year-end 2007 projected over a three-year period. If the stressed cash flow would cause the loan to fall below 0.95 times, Fitch assumed the loan would default during the term. To determine losses, Fitch used the above stressed cash flow, and applied a market cap rate, ranging between 7.5% and 9.5%, for each specific property type. If the loan balance at default is less than the stressed cash flow the loan would realize that loss. These loss estimates were reviewed in more detail for loans representing 53.1% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Loss expectations attributed to loans reviewed in detail represent approximately 60% of the 1.4%. Approximately 93% of the mortgages mature (or have anticipated repayment dates) within the next five years: 10.1% in late 2009, 2.5% in 2010, 0.3% in 2011, 3.2% in 2012, 0.7% in 2013, 14.5% in 2014, and 61.7% in 2015. Fitch identified 29 Loans of Concern (21.4%) within the pool, seven of which are specially serviced (9.4%). Of the specially serviced loans, two are performing (7.3% of the pool). Three of the Fitch Loans of Concern (10.7%) are within the transaction's top 15 loans (50.4% of the pool), and one (6.8%) is specially serviced. Four loans (1.0%) are currently defeased. None of the top 15 loans are assumed to default during the loan term or at maturity with losses expected. One loan in special servicing is a performing matured loan and remains current (6.8% of the pool) with no losses expected. All of the top 15 loans are expected to default at maturity; however, Fitch did not calculate losses based on stressed value being higher than the current loan amount. Of the loans in special servicing, the largest contributors of expected term losses are Whiting Shopping Center (1.0% of the pool), El Camino Square (0.5%), and Ambassador West Apartments (0.3%). Whiting Shopping Center, the largest non-performing specially serviced asset, is a 115,177 square foot anchored retail center located in Whiting, NJ. The asset transferred to special servicing in July 2009 as the borrower was unable to meet debt service obligations due to delinquent rents from tenants. The anchor tenant, a grocery store, is affiliated with the borrower and has been unable to pay rent due to operating losses. El Camino Square is a 27,582 sf unanchored retail center located in Encinitas, CA. The asset transferred to special servicing in September 2009 when the borrower filed for Chapter 11 bankruptcy protection. A subordinate lien holder posted the property for foreclosure, and the borrower filed bankruptcy to stay the foreclosure auction. The loan remains current and property performance has not declined. Ambassador West Apartments is a 104-unit garden style apartment complex located in Urbandale, Iowa. The loan transferred to special servicing in July 2009 due to payment default. The property has experienced a performance decline and is 67% occupied as of September 2009. Fitch downgrades, assigns loss severity ratings and revises Rating Outlooks as indicated: -- $9.8 million class F to 'BBB/LS4' from 'BBB+'; Outlook to Stable from Negative; -- $8.4 million class H to 'BB/LS4' from 'BB+'; Outlook to Stable from Negative; -- $4.2 million class K to 'B/LS5' from 'BB-'; Outlook to Stable from Negative; -- $4.2 million class L to 'B-/LS5' from 'B+'; Outlook Negative; -- $1.4 million class M to 'B-/LS5' from 'B'; Outlook Negative. Fitch revises this Recovery Rating as indicated: -- $2.8 million class O to 'CCC/RR6' from 'CCC/RR1'. Fitch also affirms these classes, assigns LS ratings and revises Rating Outlooks as indicated: -- $7 million class A-1 at 'AAA/LS1'; Outlook Stable; -- $121.9 million class A-2 at 'AAA/LS1'; Outlook Stable; -- $41.6 million class A-3 at 'AAA/LS1'; Outlook Stable; -- $105.7 million class A-AB at 'AAA/LS1'; Outlook Stable; -- $517.2 million class A-4 at 'AAA/LS1'; Outlook Stable; -- $75 million class A-4FL at 'AAA/LS1'; Outlook Stable; -- Interest-only class X at 'AAA'; Outlook Stable; -- $74.3 million class A-J at 'AAA/LS2'; Outlook Stable; -- $29.4 million class B at 'AA/LS3'; Outlook Stable; -- $8.4 million class C at 'AA-/LS4'; Outlook Stable; -- $12.6 million class D at 'A/LS4'; Outlook Stable; -- $11.2 million class E at 'A-/LS4'; Outlook Stable; -- $9.8 million class G at 'BBB-/LS4'; Outlook to Stable from Negative; -- $4.2 million class J at 'BB/LS5'; Outlook to Stable from Negative; -- $1.4 million class N at 'B-/LS5'; Outlook Negative. Fitch does not rate the $6.1 million class P. BEAR STEARNS: S&P Downgrades Ratings on Class A-1 2007-R3 Certs. ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating the class A- 1 certificates from Bear Stearns Structured Products Inc. Trust 2007-R3, a U.S. residential mortgage-backed securities real estate mortgage investment conduit transaction, to 'CCC' from 'AAA.' The downgrade reflects significant deterioration in the performance of the loans backing the underlying certificates. This performance deterioration is so severe that the credit enhancement for BSSP 2007-R3 is insufficient to maintain the previous rating on the re- REMIC class. BSSP 2007-R3, which closed in October 2007, is collateralized by two underlying classes that support the re-REMIC. The loans securing the two underlying classes consist predominantly of adjustable-rate negatively amortizing Alternative-A mortgage loans. The class A-1 certificate from BSSP 2007-R3 is supported by class A-4 (currently rated 'CC') and class III-A-2 (currently rated 'CCC') from Structured Asset Mortgage Investments II Trust 2007- AR7. The performance of the loans securing this trust has declined precipitously in recent months. This pool had experienced losses amounting to 3.97% of the original pool balance as of the October 2009 distribution, and approximately 42.54% of the current pool balance is delinquent. Based on the losses to date, the current pool factor of 0.8841 (88.41%), 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 32.67%, which exceeds the level of credit enhancement available to cover losses. 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 expectation. Rating Lowered Bear Stearns Structured Products Inc. Trust 2007-R3 Series 2007-R3 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 07402KAA2 CCC AAA BEAR STEARNS: Moody's Affirms Ratings on Eight 2004-TOP 14 Certs. ----------------------------------------------------------------- Moody's Investors Service affirmed the ratings of six classes, confirmed three and downgraded eight classes of Bear Stearns Commercial Mortgage Securities Trust 2004-TOP 14, Commercial Mortgage Pass-Through Certificates, Series 2004-TOP14. The downgrades are due to higher expected losses for the pool resulting from increased leverage, increased credit quality dispersion and an estimated loss from a specially serviced loan. The affirmations and confirmations are due to the increase in defeasance and amortization, as well as the maintenance or improvement in two key rating parameters for the pool -- Moody's loan to value ratio and stressed debt service coverage ratio. On August 11, 2009, Moody's placed 19 classes on review for possible downgrade due to the credit uncertainty surrounding Maguire Properties Inc., the sponsor of the U.S. Bank Tower Loan (10% of the outstanding deal balance). Despite the loss of two major tenants at the property, the asset is still generating sufficient income to cover debt service; however, Moody's remains concerned about the availability of funds for future leasing costs. This action concludes that review. The action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the October 13, 2009 distribution date, the transaction's aggregate certificate balance has decreased by 30% to $626.8 million from $895.5 million at securitization. The Certificates are collateralized by 98 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 35% of the pool. The pool contains three loans, representing 7% of the pool, with investment grade underlying ratings. Six loans, representing 12% of the pool, have defeased and are collateralized with U.S. Government securities, an increase over the three loans, representing 7% of the pool, that were defeased at Moody's last review. Seventeen 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 ofMoody's ongoing monitoring of a transaction, Moody's reviews the watchlist to assess which loans have material issues that could impact performance. One loan has been liquidated from the pool resulting in a minimal loss. One loan, representing less than 1% of the pool, is currently in special servicing. Moody's is estimating a $2.1 million loss from the specially serviced loan (47% loss severity). Moody's was provided with partial or full-year 2008 operating results for 98% of the pool. Moody's weighted average LTV ratio for the conduit component, excluding the specially serviced loan, is 83% compared to 79% at Moody's prior review. Moody's stressed DSCR for the conduit component is 1.36X, essentially the same as 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 and loans with underlying ratings, has a Herf of 29 compared to 31 at last review. The largest loan with an underlying rating is Greenville Place Apartments Loan ($19.3 million -- 3.1% of the pool) which is secured by a 519-unit apartment building located in Greenville, Delaware. The property was 73% occupied as of July 2009 compared to 93% at last review. Moody's current underlying rating and stressed DSCR are Baa3 and 1.49X, respectively, compared to Baa2 and 1.52X at last review. The second largest loan with an underlying rating is the 12 E 22nd Street Loan ($12.8 million -- 2.0% of the pool), which is secured by an 89-unit apartment building located in New York City. The property was 100% occupied as of March 2009, similar to last review. Moody's current underlying rating and stressed DSCR are Aa1 and 1.9X, respectively, compared to Aa1 and 1.69X at last review. The third largest loan with an underlying rating is Lincoln Tower Cooperative Loan ($12.1 million -- 1.9% of the pool), which is secured by a 387-unit residential co-op located in the upper west side submarket of New York City. Moody's current underlying rating and stressed DSCR are Aaa and 4.36X, respectively, compared to Aaa and 5.26X at last review. The three largest conduit loans represent 20% of the outstanding pool balance. The largest conduit loan is the U.S. Bank Tower Loan Loan ($64.7 million -- 10% of the pool), which represents a pari passu interest in a $260 million first mortgage loan. The loan is secured by an office tower with 1.4 million square feet of net rentable area and an accompanying parking garage in downtown Los Angeles, California. The loan sponsor is Maguire. The property was 88% occupied as of year-end 2008. The property's largest tenant, Latham & Watkins (20% of the NRA) has provided notice to the borrower that it intends to vacate the premises at its December 2009 lease expiration. Furthermore, the lease for the second largest tenant, Sempra Energy (16% of the NRA) expires in June 2010. Sempra has already vacated a sizable portion of its space although it has sublet much of it to other tenants. Even with the anticipated decline in cash flow when these two tenants vacate, Moody's projects that the property will still generate cash flow in excess of debt service. However, given the softness in the Los Angeles office market, new tenants will likely be paying lower rents than are currently in place. In addition, due to Maguire's current financial issues, Moody's is concerned about the availability of funds for leasing costs. The servicer has indicated that Maguire has experienced some success in re-leasing a portion of the Latham & Watkins space. The loan is interest- only for the entire term. Moody's LTV and stressed DSCR are 103% and 0.97X, respectively, compared to 76% and 1.24X at last review. The second largest conduit loan is the Memorial Drive Loan ($39.7 million -- 6.3% of the pool), which is secured by a 129,000 square foot biotech lab/office building located in Cambridge, Massachusetts. The property was 73% occupied as of September 2009 compared to 53% at last review and 89% at securitization. The largest tenant is Cerulean which occupies 11% of the premises through February 2013. The property has experienced relatively low occupancy levels since securitization. Moody's LTV and stressed DSCR are 130% and 0.79X, respectively, compared to 119% and 0.88X at last review. The third largest conduit loan is the 1401 & 1501 Nolan Ryan Expressway Loan ($20.3 million -- 3.2% of the pool), which is secured by a 234,000 square foot office property located in Arlington, Texas. The property is 100% leased to the Siemes Dematic Postal Automation L.P, a member of the Siemens AG family, through January 2014. Although property performance has been stable, Moody's analysis reflects a downward adjustment to the property's net operating income due to the weakness of the Arlington office market and concerns about the property's occupancy by a single tenant. The loan has amortized 3% since last review. Moody's LTV and stressed DSCR are 90% and 1.08X, respectively, compared to 80% and 1.14X at last review. Moody's rating action is: -- Class A-3, $76,973,947, affirmed at Aaa; previously assigned Aaa on 5/10/2004 -- Class A-4, $442,061,000, affirmed at Aaa; previously assigned Aaa on 5/10/2004 -- Class X-1, Notional, affirmed at Aaa; previously assigned Aaa on 5/10/2004 -- Class X-2, Notional, affirmed at Aaa; previously assigned Aaa on 5/10/2004 -- Class B, $23,482,000, affirmed at Aa2; previously assigned Aa2 on 5/10/2004 -- Class C, $7,827,000, affirmed at Aa3; previously assigned Aa3 on 5/10/2004 -- Class D, $17,890,000, confirmed at A2; previously placed on review for possible downgrade on 8/11/2009 -- Class E, $8,945,000, confirmed at A3; previously placed on review for possible downgrade on 8/11/2009 -- Class F, $10,064,000, confirmed at Baa1; previously placed on review for possible downgrade on 8/11/2009 -- Class G, $5,591,000, downgraded to Baa3 from Baa2; previously placed on review for possible downgrade on 8/11/2009 -- Class H, $7,827,000, downgraded to Ba2 from Baa3; previously placed on review for possible downgrade on 8/11/2009 -- Class J, $4,472,000, downgraded to B1 from Ba1; previously placed on review for possible downgrade on 8/11/2009 -- Class K, $4,473,000, downgraded to B2 from Ba2; previously placed on review for possible downgrade on 8/11/2009 -- Class L, $2,236,000, downgraded to B3 from Ba3; previously placed on review for possible downgrade on 8/11/2009 -- Class M, $2,236,000, downgraded to Caa1 from B1; previously placed on review for possible downgrade on 8/11/2009 -- Class N, $2,237,000, downgraded to Caa2 from B2; previously placed on review for possible downgrade on 8/11/2009 -- Class O, $2,236,000, downgraded to Caa3 from B3; previously placed on review for possible downgrade on 8/11/2009 BRASCAN STRUCTURED: Fitch Downgrades Ratings on All 2005-2 Notes ---------------------------------------------------------------- Fitch Ratings downgrades all classes of Brascan Structured Notes 2005-2, Ltd./Corp. reflecting Fitch's base case loss expectation of 45.7%. Fitch's performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. Brascan 2005-2 is mostly collateralized by subordinate commercial real estate debt (89.2% of total collateral is either B-notes or mezzanine loans). Fitch expects significant losses upon default for these assets since they are generally highly leveraged debt classes. Brascan 2005-2 is a $300 million CRE collateralized debt obligation managed by Brookfield Real Estate Financial Partners, LLC. The transaction has a five-year reinvestment period that will end in December 2010. As of the October 2009 trustee report and per Fitch categorizations, the CDO was substantially invested: CRE mezzanine loans (58%), B-notes (31.2%), A-notes (4%), a defeased CRE loan asset (0.9%), and cash (5.9%). All overcollateralization and interest coverage ratios are currently in compliance. Under Fitch's updated methodology, approximately 58.4% of the portfolio is modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled average cash flow decline is 11.1% from either year end 2008 or second quarter 2009 trailing 12-month cash flows. Fitch estimates that average recoveries will be low at 21.7%, due to the highly leveraged and subordinate nature of the assets. The largest component of Fitch's base case loss expectation is Columbia Sussex, a mezzanine loan (11%) secured by an interest in 14 full service hotels with a total of 5,821 rooms. The hotels are branded under the Sheraton, Westin, Hilton, and Marriot flags. The borrower recently exercised the final extension remaining on the loan. While performance of the portfolio has been stable, the portfolio is highly leveraged. The next largest component of Fitch's base case loss expectation is Peter Cooper Village/Stuyvesant Town, a mezzanine loan (8%) secured by an interest in 56 multi-story buildings, situated on 80 acres, and includes a total of 11,227 apartments located in New York City. Cash flow generated from the property remains significantly below what is needed to service the current outstanding debt, and the borrower continues to use debt service reserves to cover operating shortfalls. The balance of the debt service reserve as of October 2009 was $24.4 million and is unlikely to cover debt service payments past year end. Furthermore, the recent adverse ruling by the New York State Court of Appeals against the loan sponsors is likely to stop the conversion of rent-stabilized units to market rate units and has made the owners liable for repayments of rent overcharges for unit conversions now deemed illegal. A full loss on the position is expected. The third largest component of Fitch's base case loss expectation is Mandarin Oriental Hotel, a mezzanine loan (7.4%) on a 248 room full service luxury hotel located in the Columbus Circle area of Manhattan. Performance at this hotel has declined significantly. Second quarter 2009 trailing 12-month revenue per available room has declined 20% and 22%, respectively, from year end 2008 and 2007. The sponsor is currently coming out of pocket to cover debt service payments. The fourth largest component of Fitch's base case loss expectation is SLS Hotel at Beverly Hills, a B-note secured by a 297 room full service hotel located in Los Angeles. The loan matured on Nov. 9, 2009, and has not yet been extended. Prior to maturity, year to date July 2009 property cash flow was negative and the sponsor had been coming out of pocket to cover debt service payments. A full loss on the position was modeled. This transaction was analyzed according to the 'U.S. CREL CDO Surveillance Criteria', which applies stresses to property cash flows and DSCR tests to project future default levels for the underlying portfolio. Recoveries are based on stressed cash flows and Fitch's long-term capitalization rates. The default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under the various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. Based on this analysis, the class A notes' breakeven rates are generally consistent with the 'BBB' rating category; the class B notes' breakeven rates are generally consistent with the 'BB' rating category; and the class C notes' breakeven rates are generally consistent with the 'B' rating category. Ratings for classes D and E are generally based on a deterministic analysis, which considers the current percentage of defaulted and delinquent assets and any Fitch Loans of Concern, as well as the likelihood for OC test failures. Based on this analysis, classes D and E are consistent with a 'CCC' rating, meaning default is possible given the credit enhancement to each class falls below Fitch's base case loss expectation of 45.7%. The class A-1 through C notes were each assigned a Negative Rating Outlook reflecting Fitch's expectation of further negative credit migration of the underlying collateral. These classes were also assigned Loss Severity ratings ranging from 'LS4' to 'LS5'. The LS ratings indicate each tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the expected loss for the collateral under the 'B' stress. LS ratings 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' or lower. Classes D and E were assigned Recovery Ratings to provide a forward-looking estimate of recoveries on currently distressed or defaulted structured finance securities. The Recovery Ratings are calculated using Fitch's cash flow model, and incorporate Fitch's current 'B' stress expectation for default and recovery rates (58.4% and 21.7%, respectively), the 'B' stress USD LIBOR up stress, and a 24-month recovery lag to determine the present value of all future proceeds to that class. All modeled distributions are discounted at 10% to arrive at a present value and compared to the class' tranche size to determine a recovery rating. The assignment of 'RR2' to class D reflects modeled recoveries of 78.5% of its outstanding balance. The expected recovery proceeds are broken down: -- Present value of expected principal recoveries ($21.1 million); -- Present value of expected interest payments ($5.9 million); -- Total present value of recoveries ($27 million); -- Sum of undiscounted recoveries ($42.8 million). The assignment of 'RR3' to class E reflects modeled recoveries of 51.9% of its outstanding balance. The expected recovery proceeds are broken down: -- Present value of expected principal recoveries ($3.1 million); -- Present value of expected interest payments ($3.8 million); -- Total present value of recoveries ($6.9 million); -- Sum of undiscounted recoveries ($12.7 million). Fitch has downgraded, assigned Loss Severity and Recovery ratings, and assigned Rating Outlooks to the classes: -- $103,050,000 class A to 'BBB/LS4' from 'AAA'; Outlook Negative; -- $29,700,000 class B to 'BB/LS5' from 'AA'; Outlook Negative; -- $34,500,000 class C to 'B/LS5' from 'A'; Outlook Negative; -- $34,500,000 class D to 'CCC/RR2' from 'BBB'; -- $13,350,000 class E to 'CCC/RR3' from 'BBB-'. Additionally, all classes are removed from Rating Watch Negative. BRAZOS STUDENT: Fitch Maintains Ratings on 2004-A Student Loans --------------------------------------------------------------- Fitch Ratings currently maintains ratings as listed below on series 2004-A student loan asset-backed securities (series 2004-A notes) issued by the Brazos Student Finance Corp., Amended and Restated Indenture of Trust, dated as of February 1, 2004 (2001 indenture). BSFC has requested that Fitch confirm the existing ratings of the series 2004-A notes upon the adoption and effectiveness of the Supplemental Indenture dated Nov. 12, 2009 (the Supplement). Consistent with its statements on policies regarding rating confirmations in structured finance transactions (Jan. 13, 2009) and student loan confirms (May 8, 2009), Fitch is treating this request as a confirmation. Amongst other things, the Supplement authorizes BSFC to sell loans held under the 2001 indenture in conjunction with BSFC's voluntary debt exchange offer refinancing. Under the refinancing plan, all series 2004-A noteholders will have the option to exchange existing auction rate notes for new series 2009 notes issued under a new indenture; the new notes will be indexed to three month LIBOR plus a spread. It is expected that series 2009 will consist of senior, senior subordinate and subordinate notes. Class A 2004-A noteholders will be able to exchange their notes for senior 2009 notes, and class B 2004-A noteholders can exchange their notes for the senior subordinate and subordinate 2009 notes. A debt exchange ratio will be applied to determine the allocation between senior subordinate and subordinate notes for class B 2004-A noteholders. In the event that all of the series 2004-A notes are not refinanced, it is expected that the credit enhancement for any remaining series 2004-A notes will be unchanged after the refinancing. As a result, the 2004-A notes that are accepted in the exchange offer could be prorated. Any 2004-A notes not accepted due to the proration will be returned to the noteholder. The student loans that will be transferred from the 2001 indenture to the 2009 indenture will be randomly selected; therefore, any student loans remaining in the 2004 trust after the debt exchange should not be materially different from the student loans existing prior to the debt exchange. The other assets of the 2001 indenture will be allocated to the 2009 indenture using an asset allocation percentage which is based on the proportion of the 2004-A notes exchanged. Based on the information provided and BSFC's execution plan with regard to the debt exchange offer, Fitch has determined that the execution and delivery of the Supplement and the changes to the 2001 indenture contained in the Supplement will not have an impact on the existing ratings of the series 2004-A notes at this time. This determination only addresses the effect of the Supplement on the current ratings assigned by Fitch to the securities listed below. It does not address whether the Supplement is permitted by the terms of the documents nor does it address whether it is in the best interests of, or prejudicial to, some or all of the holders of the securities listed. All of the series 2004-A notes are auction rate notes maturing on March 1, 2040. As of Sept. 30, 2009, the senior and total parity ratios for the 2001 indenture were 138.8%, and 97.7% respectively. The ratings assigned by Fitch are based on the documents and information provided to Fitch by the issuer and other parties, and are subject to receipt of final closing documents. Fitch relies on all of these parties for the accuracy of such information and documents. Fitch did not audit or verify the truth or accuracy of such information. The series 2004-A notes are currently rated by Fitch: -- Series 2004 A-5 senior notes at 'AAA'; -- Series 2004 A-6 senior notes at 'AAA'; -- Series 2004 A-7 senior notes at 'AAA'; -- Series 2004 A-8 senior notes at 'AAA'; -- Series 2004 B-1 subordinate notes at 'BB'; -- Series 2004 B-2 subordinate notes at 'BB'. CAPITAL TRUST: Fitch Downgrades Ratings on All 2005-1 Notes ----------------------------------------------------------- Fitch Ratings downgrades all classes of Capital Trust RE CDO 2005- 1 reflecting Fitch's base case loss expectation of 32.2%. Fitch's performance expectation incorporates prospective views regarding commercial real estate market value and cash flow declines. CT 2005-1 is mostly collateralized by subordinate commercial real estate debt (60% of total collateral is either B-notes or mezzanine loans). Fitch expects significant losses upon default for these assets since they are generally highly leveraged, thin debt classes. Further, six assets (14.1%) are currently defaulted, four (4.8%) of which are B-notes or mezzanine loans, and two (9.3%) of which are real estate bank loans. Fitch expects significant losses on these defaulted assets. Both the A/B and the C/D/E overcollateralization tests have breached their respective covenants. As a result, classes C and below are no longer receiving any proceeds as of the October 2009 trustee report. All excess interest proceeds (after class B) and any principal proceeds are currently being redirected to redeem the class A notes. Given its expectations of further defaults, Fitch considers it unlikely that classes below the C/D/E OC test will receive any further proceeds over the life of the transaction. Additionally, Fitch expects that classes C through E will receive minimal to no proceeds over the remaining life of the transaction. CT 2005-1 is a $332.4 million CRE collateralized debt obligation managed by CT Investment Management Co., LLC. The transaction has a five-year reinvestment period which ends April 2010. As of the October 2009 trustee report and per Fitch categorizations, the CDO was substantially invested: B-notes (46.6%), CRE mezzanine loans (13.5%), commercial mortgage-backed securities (CMBS; 26.0%), real estate bank loans (9.3%), and three classes of a CRE CDO (4.2%). Under Fitch's updated methodology, approximately 45.5% of the portfolio is modeled to default in the base case stress scenario, defined as the 'B' stress. In this scenario, the modeled average cash flow decline is 12.4% from first-quarter 2009 trailing-12- month cash flows. Fitch estimates that average recoveries will be low at 29.1%, due to the highly leveraged and subordinate nature of the assets. The largest component of Fitch's base case loss expectation is a B-note (5.9%) secured by an office property in Manhattan, New York. The property is comprised of three contiguous office buildings, totaling approximately 187,000 square feet, located in the SoHo submarket. Although the performance of the property is reported to be stable, with the sponsor having signed several new leases on expiring space at higher rents, the B-note's position in the debt stack is highly leveraged. The next largest component of Fitch's base case loss expectation is a real estate bank loan (7.2%) that defaulted in May 2009. The term loan is secured by a portfolio of land, residential developments, and commercial properties located in the southeastern United States. The sponsor filed for Chapter 11 bankruptcy protection in June 2009. As a result, the term loan is now junior to $110 million of debtor-in-possession financing. The next largest component of Fitch's base case loss expectation is a B-note (2.5%) that matured in October 2009 and was not repaid. The loan is secured by a 374,000-sf office park located in Menlo Park, California. The property is currently approximately 76% occupied; the leases of its two largest tenants (58% of net rentable sf), which are significantly above market, expire in early 2010. This transaction was analyzed according to the 'U.S. CREL CDO Surveillance Criteria,' which applies stresses to property cash flows and uses debt service coverage ratio tests to project future default levels for the underlying portfolio. Recoveries are based on stressed cash flows and Fitch's long-term capitalization rates. The default levels were then compared to the breakeven levels generated by Fitch's cash flow model of the CDO under the various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. Based on this analysis, the class A notes' breakeven rates are generally consistent with the 'BB' rating category, and the class B notes' breakeven rates are generally consistent with the 'B' rating category. Ratings for classes C through H are generally based on a deterministic analysis, which considers the current percentage of defaulted assets factoring in anticipated recoveries relative to the credit enhancement of the respective class, as well as the likelihood for OC tests to cure. Based on this analysis, classes C and D are consistent with the 'CC' rating category, meaning default is probable given current defaulted assets of 14.1% and Fitch's base case loss expectation of 32.2%. Ratings for classes E through H are deemed to be consistent with the 'C' rating category, as Fitch considers a default on these classes to be inevitable. The current percentage of defaulted assets, factoring in anticipated recoveries, either exceeds or is close to each of these classes' respective credit enhancement. The class A and B notes were each assigned a Negative Rating Outlook reflecting Fitch's expectation of further negative credit migration of the underlying collateral. These classes were also assigned Loss Severity ratings of 'LS3' and 'LS5', respectively. The LS ratings indicate each tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the expected loss for the collateral under the 'B' stress. LS ratings 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' or lower. Classes C through H were assigned Recovery Ratings to provide a forward-looking estimate of recoveries on currently distressed or defaulted structured finance securities. The RRs are calculated using Fitch's cash flow model, and incorporate Fitch's current 'B' stress expectation for default and recovery rates (45.5% and 29.1%, respectively), the 'B' stress US$ LIBOR up-stress, and a 24-month recovery lag to determine the present value of all future proceeds to that class. All modeled distributions are discounted at 10% to arrive at a present value and compared to the class' tranche size to determine a Recovery Rating. The assignment of 'RR6' to these classes reflects the fact that the modeled recovery for each class is less than 10% of its principal balance. Fitch has downgraded, assigned Loss Severity and Recovery ratings, along with Rating Outlooks to these classes: -- $206,573,614 class A to 'BB/LS3' from 'AAA'; Outlook Negative; -- $36,309,000 class B to 'B/LS5' from 'A'; Outlook Negative; -- $21,110,000 class C to 'CC/RR6' from 'BBB'; -- $14,354,000 class D to 'CC/RR6' from 'B'; -- $15,199,000 class E to 'C/RR6' from 'B'; -- $6,755,000 class F to 'C/RR6' from 'CCC'; -- $6,755,000 class G to 'C/RR6' from 'CCC'; -- $10,133,000 class H to 'C/RR6' from 'CCC'. Additionally, classes A through E are removed from Rating Watch Negative. CAPITALSOURCE REAL: Moody's Downgrades Ratings on 12 2006-A Notes ----------------------------------------------------------------- Moody's Investors Service downgraded 12 classes of Notes issued by CapitalSource Real Estate Loan Trust 2006-A. The downgrades are due to the occurrence of a Tax Event on June 18, 2009, and the deterioration in credit quality of the underlying collateral portfolio. The Tax Event was due to the decision by CapitalSource Inc., the parent company of the Collateral Manager (CapitalSource Finance LCC), to elect to revoke its Real Estate Investment Trust status. As a consequence, CapitalSource Real Estate Loan Trust 2006-A (the "Issuer") is no longer treated as a qualified REIT subsidiary or other pass through entity for federal income tax purposes. As a result of this change, all federal and state income taxes are payable pursuant to Article 11, "Application of Monies", per the Indenture dated as of December 20, 2006. This will have a materially adverse impact on the likelihood of the timely and ultimate receipt of interest by the noteholders of each of the rated classes by the legal final maturity date. First and second quarter 2009 taxes due were approximately $7.5 million. Based upon the October 14, 2009 trustee report, approximately $3.8 million of $13.4 million in Scheduled Interest Receipts was classified as a Tax, Filing, and Registration Fee. Going forward, the Collateral Manager expects approximately 35% of Scheduled Interest Receipts to be classified as Tax, Filing, and Registration Fees. CapitalSource Real Estate Loan Trust 2006-A is a revolving commercial real estate collateralized debt obligation transaction backed by a portfolio of whole loan (98% of the pool) and B-note debt (2% of the pool). The aggregate collateral balance of the pool has decreased to $1.16 billion from $1.30 billion at issuance, due to approximately $63 million in pay-down to the Class A Notes. The pay-down was triggered as a result of the failing of the Class A/B, Class C/D/E, and Class F/G/H Par Value Tests. Per the Indenture, the failure of any Par Value Test results in all scheduled interest and principal payments being directed to pay down the most senior notes, until the Par Value Test is satisfied. Seven whole loans totaling approximately $113.2 million (10% of the pool) were listed as defaulted. Moody's currently estimates $67 million in expected losses to the Notes due to losses on the defaulted loans (60% loss severity on average). Moody's has identified these parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor, weighted average life, weighted average recovery rate, and Moody's asset correlation. These parameters are modeled as actual parameters for static deals and covenant for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Tranched WARF is adjusted by the component tranches of the collateral assets. The tranched WARF was 2,106 as of the October 14, 2009 Trustee Report. Moody's have completed updated credit estimates for the entire pool and the results will be reflected in a future Trustee Report. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF, excluding defaulted loans, of 3,852 compared to 2,866 at last review. WAL acts to adjust the credit exposure of the collateral pool. Moody's modeled to the covenanted WAL of seven years, the same as at last review. WARR is the par-weighted average of the mean recovery values for the collateral assets in the pool. The WARR was 44% as of the October 14, 2009 Trustee Report. Moody's modeled a fixed WARR, excluding defaulted loans, of 42% compared to 43% at last review. MAC is a single factor that describes the pair-wise asset correlations among the instruments within the collateral pool (i.e. the measure of diversity). Moody's modeled a MAC, excluding defaulted loans, of 13.6% compared to 24.0% at last review. Moody's average weighted loan to value ratio for the pool is 135.9% compared to 110.5% at Moody's prior review in April 2009. Moody's review also incorporated updated asset correlation assumptions for the commercial real estate sector consistent with one of Moody's CDO rating models, CDOROM v2.5, which was released on February 3, 2009. These correlations were updated in light of the systemic seizure of credit markets and to reflect higher inter- and intra-industry asset correlations. For non-CUSIP collateral (treated in CDOROM v2.5 as secured corporate debt), the updated asset correlations are approximately 30% compared to 15% previously. The updated asset correlations for non-CUSIP collateral reflect a reduction in the maximum over- concentration stress by half in CDOROM v2.5 due to the diversity of tenants, property types and geographic locations inherent in the collateral pool. For non-CUSIP collateral, the additional default probability stress applied to corporate debt was eliminated asMoody's expect the underlying non-CUSIP collateral to experience lower default rates and higher recovery rates compared to corporate debt due to the nature of the secured real estate collateral. The cash flow model, CDOEdge v3.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal. In the cash flow modeling of this transaction, Moody's accounted for the tax obligations resulting from the Tax Event. The rating action is: -- Cl. A-1A, Downgraded to A3; previously on Oct 29, 2009 Aa3 Placed Under Review for Possible Downgrade -- Cl. A-1R, Downgraded to A3; previously on Oct 29, 2009 Aa3 Placed Under Review for Possible Downgrade -- Cl. A-2A, Downgraded to Aa2; previously on Oct 29, 2009 Aa1 Placed Under Review for Possible Downgrade -- Cl. A-2B, Downgraded to Baa3; previously on Oct 29, 2009 A3 Placed Under Review for Possible Downgrade -- Cl. B, Downgraded to B2; previously on Oct 29, 2009 Baa3 Placed Under Review for Possible Downgrade -- Cl. C, Downgraded to Caa2; previously on Oct 29, 2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. D, Downgraded to Caa3; previously on Oct 29, 2009 B1 Placed Under Review for Possible Downgrade -- Cl. E, Downgraded to Caa3; previously on Oct 29, 2009 B2 Placed Under Review for Possible Downgrade -- Cl. F, Downgraded to Caa3; previously on Oct 29, 2009 B3 Placed Under Review for Possible Downgrade -- Cl. G, Downgraded to Caa3; previously on Oct 29, 2009 Caa1 Placed Under Review for Possible Downgrade -- Cl. H, Downgraded to Caa3; previously on Oct 29, 2009 Caa2 Placed Under Review for Possible Downgrade -- Cl. J, Downgraded to Ca; previously on Oct 29, 2009 Caa3 Placed Under Review for Possible Downgrade As always, Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. The rating outcome may differ from the model output. Moody's monitors transactions both on a monthly basis through a review of the available Trustee Reports and a periodic basis through a full review. Moody's prior review is summarized in a press release dated April 15, 2009. CARBON CAPITAL: Moody's Reviews Ratings on All 2005-1 Notes ----------------------------------------------------------- Moody's Investors Service placed all rated classes of Notes issued by Carbon Capital II Real Estate CDO 2005-1, Ltd., on review for possible downgrade due to deterioration in the credit quality of the underlying portfolio. Carbon Capital II Real Estate CDO 2005-1, Ltd., is a collateralized debt obligation backed by a portfolio of whole loans and mezzanine loans which comprise approximately 80% of the portfolio; all are from securitizations completed between 2005 and 2009. The b-notes, preferred equity and CMBS collateral constitute approximately 20% of the portfolio. Several key indicators of declining credit quality of the portfolio have become evident since Moody's last review of the transaction. The Trustee reports a weighted average rating factor of 8,209 as of October 30, 2009 in contrast to a reported WARF of 6,869 as of March 31, 2009. The collateral balance has decreased to $313,666,422 compared to $421,184,340 at last review. The reason for the decrease in the pool balance is the restructuring of loans and assets being removed from the pool with minimal to no recovery; meanwhile the bond balance has only decreased by approximately $4.1 million since last review. This results in the A/B Par Value Test failing with greater magnitude. The current Trustee reported value is 177.37% compared to 220.69% at last review, with a trigger of 249.49%. The actions reflect the increased expected loss associated with each tranche due to the diminished credit quality on the underlying portfolio. Moody's rating action is: -- Cl. A, Aaa Placed Under Review for Possible Downgrade; previously on April 9, 2009 Confirmed at Aaa -- Cl. B, Aa2 Placed Under Review for Possible Downgrade; previously on April 9, 2009 Confirmed at Aa2 -- Cl. C, A1 Placed Under Review for Possible Downgrade; previously on April 9, 2009 Confirmed at A1 -- Cl. D, Baa2 Placed Under Review for Possible Downgrade; previously on April 9, 2009 Downgraded to Baa2 -- Cl. E, Ba1 Placed Under Review for Possible Downgrade; previously on April 9, 2009 Downgraded to Ba1 -- Cl. F, Ba3 Placed Under Review for Possible Downgrade; previously on April 9, 2009 Downgraded to Ba3 -- Cl. G, Caa1 Placed Under Review for Possible Downgrade; previously on April 9, 2009 Downgraded to Caa1 -- Cl. H, Caa2 Placed Under Review for Possible Downgrade; previously on April 9, 2009 Downgraded to Caa2 -- Cl. I, Caa3 Placed Under Review for Possible Downgrade; previously on April 9, 2009 Downgraded to Caa3 -- Cl. J, Caa3 Placed Under Review for Possible Downgrade; previously on April 9, 2009 Downgraded to Caa3 As always, Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. The rating outcome may differ from the model output. Moody's monitors transactions on both a monthly basis through a review of the available Trustee Reports and a periodic basis through a full review. Moody's prior review is summarized in a press release dated April 9, 2009. CASTLE HILL: Fitch Downgrades Ratings on Four Classes of Notes -------------------------------------------------------------- Fitch Ratings downgrades four classes of notes issued by Castle Hill III CLO Ltd./Inc. This review was conducted under the framework described in the report 'Global Structured Finance Rating Criteria'. Cash flow and portfolio default modeling was conducted in accordance with Fitch's 'Global Criteria for Cash Flow Analysis in Corporate CDOs' and 'Global Rating Criteria for Corporate CDOs'. The downgrades are attributed to credit deterioration and increased borrower defaults in the portfolio. The current weighted average credit quality of the portfolio has migrated to 'B-/CCC+' from 'B' at the last rating review. The portion of the performing portfolio that Fitch considers to be rated 'CCC+' and below has also increased meaningfully to 31% from 8% at the last rating review. Moreover, defaulted portfolio assets currently represent 10.5% of the portfolio, which has increased significantly from 2.4%. Since the end of the reinvestment period began in September 2008, the class A-1a and A-1b notes (together, class A-1 notes) have received 17.6% of their initial notional amount. Despite improvement in credit enhancement for the class A-1 notes, the credit deterioration of the portfolio causes additional stress on these notes, which is reflected in the current rating downgrade. The class A-1a notes are insured by Assured Guaranty Municipal Corp. (formerly known as Financial Security Assurance Inc.), which is currently rated 'AA'/Outlook Negative by Fitch. The rating decision by Fitch on the class A-1a notes was reached independently of the credit protection provided by the insurance. The credit enhancement available to the class B notes has improved slightly since the last rating review, but not to the same degree that the portfolio has negatively migrated. The class B notes are considered to be highly speculative as the performance of the portfolio has deteriorated, however, a limited margin of safety remains for these notes. The credit enhancement to the class C-1 notes has decreased, which will impact the notes ability to offset projected portfolio losses. As current losses from defaulted assets have eroded credit enhancement, the class C-1 notes will be most vulnerable to future losses and additional credit deterioration in the portfolio, which makes impairment probably for these notes. In its review, Fitch analyzed the structure's sensitivity to ongoing softness in U.S. corporate recoveries. To accomplish this, Fitch reduced its average recovery rate assumptions for each asset type by 30% in one sensitivity scenario and by 50% in a second sensitivity scenario where explicit Recovery Ratings were not available. The current portfolio has a relatively longer maturity profile, which may result in a slower amortization of the rated notes and a potential prolonged exposure to depressed corporate recovery rates. The class A-1 and B notes displayed considerable sensitivity to lower recovery rates. In addition, approximately 32% of the underlying portfolio ratings currently have a Negative Outlook, which may result in additional future rating volatility. For these reasons, the class A-1 and B notes have been assigned Negative Outlooks. Fitch does not assign Outlooks to notes that are rated in distressed rating categories, rated 'CCC' or below. The class A-1 and B notes were assigned Loss Severity ratings. The LS ratings indicate each tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the base-case loss expectation for the collateral, as explained in Fitch's 'Criteria for Structured Finance Loss Severity Ratings' report. The LS rating should always be considered in conjunction with the probability of default indicated by a class' long-term credit rating. Fitch does not assign LS ratings to tranches rated in the 'CCC' to 'C' rating categories. Castle Hill III is a collateralized loan obligation (CLO) that closed on Aug. 19, 2003 and is managed by Sankaty Advisors, LLC. The reinvestment period for this transaction ended in September 2008. The portfolio is comprised of 93% senior secured loans and 7% junior secured loans. Fitch has affirmed, downgraded, assigned LS ratings and revised Rating Outlooks on these classes as indicated: -- $75,066,462 class A-1a notes downgraded to 'AA/LS2' from 'AAA'; Outlook revised to Negative from Stable; -- $118,854,232 class A-1b notes downgraded to 'AA/LS2' from 'AAA'; Outlook revised to Negative from Stable; -- $30,000,000 class B notes downgraded to 'B/LS4' from 'BBB'; Outlook remains Negative; -- $26,500,000 class C-1 notes downgraded to 'CC' from 'CCC'. COBALT CMBS: S&P Downgrades Ratings on 17 2007-C3 Securities ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 17 classes of commercial mortgage-backed securities from COBALT CMBS Commercial Mortgage Trust 2007-C3 and removed them from CreditWatch with negative implications. Concurrently, S&P affirmed its ratings on five classes from this transaction. The downgrades follow S&P's analysis of the transaction using its 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 1.18x and a loan-to-value ratio of 142.7%. S&P further stressed the loans' cash flows under its 'AAA' scenario to yield a weighted average DSC of 0.67x and an LTV of 204.5%. The implied defaults and loss severity under the 'AAA' scenario were 98.2% and 52.3%, respectively. All of the DSC and LTV calculations S&P noted above exclude three ($30.2 million, 1.5%) of the six specially serviced assets. S&P separately estimated losses for these three loans and included them in S&P's 'AAA' scenario implied default and loss figures. The affirmations of the ratings on the principal and interest classes reflect subordination levels that are consistent with the outstanding ratings through various stress scenarios. S&P affirmed its ratings on the class IO interest-only class 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 Considerations Six loans ($59.2 million, 2.9%) in the pool are with the special servicer, CWCapital Asset Management LLC. A breakdown of the specially serviced loans by payment status is: three ($30.2 million, 1.5%) of these assets are more than 90 days delinquent; one ($3.1 million, 0.2%) is more than 60 days delinquent; and two ($25.8 million, 1.3%) are more than 30 days delinquent. None of the specially serviced loans currently have appraisal reduction amounts in effect. The largest specially serviced loan is the Campus Club Student Housing Complex loan. The Campus Club Student Housing Complex loan ($20.5 million, 1.02%) is secured by a 252-unit student housing complex in at the University of Florida at Gainesville. The loan was transferred to CWCapital on Aug. 26, 2009, due to imminent default. CWCapital is currently exploring a modification of the loan with the borrower. For year-end 2008, reported DSC was 1.15x and occupancy was 90.0%. Standard & Poor's expects a minimal loss upon the resolution of this loan. The remaining specially serviced loans have balances that individually represent less than 1.0% of the total pool balance. S&P estimated losses on three of these loans ranging from 38.0% to 40.4%. Transaction Summary As of the October 2009 remittance report, the collateral pool consisted of 124 loans with an aggregate trust balance of $2.01 billion, which is approximately 99.8% of the issuance balance. The master servicer for the transaction is Wachovia Bank N.A. (Wachovia). Wachovia provided financial information for 98.0% of the loans in the pool, and 95.1% of the servicer-provided information was full-year 2008 or interim-2009 data. S&P calculated a weighted average DSC of 1.23x for loans based on the reported figures. S&P's adjusted DSC and LTV were 1.18x and 142.7%, respectively. S&P's adjusted DSC and LTV figures exclude three (1.5%) specially serviced loans, which S&P stressed separately. Based on the servicer-reported DSC figures, S&P calculated a weighted average DSC of 1.15x for these three loans. To date, the transaction has not experienced principal losses. Twenty-eight loans ($705.8 million, 35.1%) are on Wachovia's watchlist, including five of the Top 10 loans, which S&P discussed below. Nine loans ($313.5 million, 15.6%) have reported DSC between 1.0x and 1.10x, and 14 loans ($332.0 million, 16.5%) have reported DSC of less than 1.0x. Summary Of Top 10 Loans The top 10 exposures have an aggregate outstanding balance of $725.3 million (36.1%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.16x for the top 10 loans. S&P's adjusted DSC and LTV for the top 10 loans were 1.00x and 178.4%, respectively. None of these loans are with CWCapital, and five are on Wachovia's watchlist. The Irvine Portfolio loan ($137.0 million, 6.8%) is the second- largest loan in the pool and the largest loan on the watchlist. The loan is secured by six office properties and one retail property in San Diego, Calif., totaling 380,954 sq. ft. The loan reported a DSC of 0.66x for the six-months ended June 30, 2009. Total occupancy at the seven properties has deteriorated to 69.0% as of June 30, 2009, from 89.9% at issuance. The largest tenant, occupying 33.6% of the gross leasable area (6.3% of the total portfolio GLA) at one of the collateral properties, vacated its space upon its lease expiration in March 2008. The second-largest tenant, occupying 33.3% of GLA (6.3% of the total portfolio GLA) at the same property, vacated its space upon lease expiration in November 2008. The debt service reserve ($1.8 million), capital reserve ($900,000), and tenant improvement reserve ($3.9 million) that were funded at the loan's closing have all been depleted. There are currently two prospective tenants with letters of intent for a combined 12% of portfolio GLA. The 2 Rector Street loan ($100.0 million, 5.0%) is the third- largest loan in the pool and the second-largest loan on the watchlist. The loan is secured by a 26-story, 417,473-sq.-ft. class B office building in New York City's financial district. The loan reported a DSC of 0.84x and 89.4% occupancy for the six- month period ended June 30, 2009. The servicer has indicated that the Department of Transportation, the largest tenant (70,970 sq. ft., 17.0%), exercised its termination option and vacated the property as of July 15, 2009, which decreased occupancy to 73.0%. As a result, Standard & Poor's has determined that DSC for the loan will likely fall to 0.69x. A $1.1 million balance remains in a $5.0 million debt service reserve funded at issuance. The 90 John Street loan ($57.0 million, 2.8%) is the fourth- largest loan in the pool and the third-largest loan on the watchlist. The loan is secured by a 31-story, 185,951-sq.-ft., class B office building in New York City. The loan reported a DSC of 0.79x and 86.5% occupancy for the six-months ended June 30, 2009, down from 1.00x and 89.6%, respectively, at issuance. The decline since 2007 was due to declines in base rent and reimbursements of 25% and 45%, respectively. The Sheraton Suites loan ($56.4 million, 2.8%) is the fifth- largest loan in the pool and the fourth-largest loan on Wachovia's watchlist. The loan is secured by a 247-room full-service hotel in Alexandria, Va., built in 1989 and renovated in 2008. The loan is on the watchlist due to a decline in DSC from 1.42x at issuance. The 12 months ended June 30, 2009, reported DSC was 1.08x and occupancy was 72.3%. The Arbors at Broadland loan ($50.4 million, 2.5%) is the sixth- largest loan in the pool and the fifth-largest loan on the watchlist. The loan is secured by a 240-unit apartment building in Ashburn, Va., 25 miles west of the Washington, D.C. central business district and eight miles northwest of the Washington Dulles International Airport. Full-year 2008 reported DSC was 0.83x and occupancy was 90.8%. At closing, a $1.1 million debt service reserve was funded, which has since been depleted. Standard & Poor's stressed the loans in the pool according to its conduit/fusion criteria. The resultant credit enhancement levels support the lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative COBALT CMBS Commercial Mortgage Trust 2007-C3 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-4 BBB+ AAA/Watch Neg 30.07 A-1A BBB+ AAA/Watch Neg 30.07 A-M BB+ AAA/Watch Neg 20.05 A-J B+ AAA/Watch Neg 12.40 B B+ AA/Watch Neg 10.40 C B+ AA-/Watch Neg 9.40 D B A/Watch Neg 8.14 E B A-/Watch Neg 7.14 F B- BBB+/Watch Neg 5.89 G B- BBB/Watch Neg 4.76 vH B- BBB-/Watch Neg 3.51 J CCC+ BB+/Watch Neg 3.13 K CCC+ BB/Watch Neg 2.88 L CCC+ B+/Watch Neg 2.38 M CCC B/Watch Neg 2.13 N CCC B-/Watch Neg 2.00 0 CCC CCC+/Watch Neg 1.75 Ratings Affirmed COBALT CMBS Commercial Mortgage Trust 2007-C3 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.07 A-2 AAA 30.07 A-3 AAA 30.07 A-PB AAA 30.07 IO AAA N/A N/A - Not applicable. COMMODORE CDO: Fitch Downgrades Ratings on Four Classes of Notes ---------------------------------------------------------------- Fitch Ratings has downgraded four classes and affirmed one class of notes issued by Commodore CDO II, Ltd./Corp. as a result of continued credit deterioration in the portfolio since Fitch's last rating action in August 2008. Approximately 57.4% of the portfolio has been downgraded since the last review. The details of the rating action follow at the end of this press release. The downgrades to the portfolio have left approximately 57.1% of the portfolio with a Fitch derived rating below investment grade and 45.8% with a rating in the 'CCC' rating category or lower, compared to 44.3% and 32.8%, respectively, at last review. Defaulted securities, as defined in the transaction's governing documents, now comprise 34.6% of the portfolio, compared to 25.2% at last review. This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model for projecting future default levels for the underlying portfolio. Based on this analysis, the credit enhancement available to the class A-1MM notes is generally consistent with the PCM rating loss rate for the 'CCC' rating category. The credit deterioration in the portfolio combined with principal collections being used to pay part of class B accrued interest has increased the risk to the class A-IMM notes such that default is a real possibility at or prior to maturity. The short-term rating on the class A-1MM notes is based on the availability of support provided to these notes by the put agreement provided by AIG Financial Products Corp., whose payment obligations are absolutely and unconditionally guaranteed by American International Group, Inc. (rated 'BBB/ F1' with an Evolving Outlook by Fitch). The availability of this put agreement is contingent upon, among other conditions, the continued fulfillment of interest payments and the ultimate payment of principal to the class A-1MM notes. The increased risk of default of the class A-1MM notes decreases the likelihood of the put agreement being available. Therefore, the short-term rating is downgraded to 'C', indicating that default is a real possibility. Due to the significant collateral deterioration, all PCM rating loss rates exceed the credit enhancement available to the class A- 2(a), class A-2(b), class B and class C notes. For these classes, Fitch considered future payment expectations to determine their appropriate ratings. The class A-2(a), class A-2(b) and class B notes are downgraded to 'C' because default appears inevitable. While the notes are still receiving timely interest distributions, based on the credit quality of the portfolio, they are not expected to receive full principal repayment by maturity. The class C notes have not received any payments since June 2008 due to failing overcollateralization tests. They are not expected to receive any interest or principal distributions going forward and are affirmed as 'C'. Commodore II is a structured finance collateralized debt obligation that closed on Dec. 12, 2003 and is managed by Fischer Francis Trees & Watts, Inc. The portfolio is composed of residential mortgage-backed securities (39.3%), asset-backed securities (33.6%), commercial mortgage-backed securities (17.8%), corporate CDOs (7.4%), and SF CDOs (1.9%). Fitch has affirmed and downgraded these ratings as indicated: -- $79,051,100 class A-1MM notes downgraded to 'CCC/C' from 'BBB/F2'; -- $24,336,366 class A-2(a) notes downgraded to 'C' from 'BB'; -- $772,583 class A-2(b) notes downgraded to 'C' from 'BB'; -- $48,600,000 class B notes downgraded to 'C' from 'CC'; -- $10,158,938 class C notes affirmed at 'C'. CONFLUENT SENIOR: Moody's Withdraws Ratings on Three Classes ------------------------------------------------------------ Moody's Investors Service announced that it has withdrawn the ratings of these notes issued by Confluent Senior Loans Opportunities p.l.c.: -- EUR1,575,000,000 Class A Floating Rate Senior Secured Variable Funding Notes due 2016 (current balance of EUR1,360,000,000), Aaa Withdrawn; previously on October 29, 2008 Aaa Placed Under Review for Possible Downgrade; -- EUR460,000,000 Class B-1 Subordinated Notes due 2016 (current balance of EUR 905,800,000), B1 Withdrawn; previously on November 20, 2008 Downgraded to B1 and Placed Under Review for Possible Downgrade; -- US$28,000,000 Class B-2 Subordinated Notes due 2016 (current balance of US 52,750,000), B1 Withdrawn; previously on November 20, 2008 Downgraded to B1 and Placed Under Review for Possible Downgrade; Confluent Senior Loans Opportunities p.l.c. was originally structured at its closing in July 2006 as a market-value master- feeder fund structure arranged by Calyon that invests primarily in leveraged bank loans. Moody's understands that until at least the recent past, the master fund has been managed by Credit Agricole Asset Management as Senior Manager and the five feeder funds have been managed by Ares Private Account Management I, L.P.; AXA Investment Managers Paris S.A.; Intermediate Capital Managers Limited; Loomis Sayles & Company, L.P.; and Morgan Stanley Investment Management Inc each, an Investment Sub-Manager. In 2008, the transaction experienced an initial event of default, which was waived by the requisite noteholders. In the process of seeking the default waiver, the Senior Manager and controlling class began discussions with Moody's concerning a restructuring of the transaction into a CLO transaction that would rely on cash flows from the underlying loan assets to pay the issued liabilities, in place of the existing structure which relied on the market value of the underlying assets. Moody's analyzed various structuring proposals submitted by the Senior Manager and controlling class through mid-2009. In converting the transaction into a cash flow CLO, several structures were proposed where trading activities would not be subject to pro-forma satisfaction of the collateral quality tests as calculated by the Senior Manager prior to execution of the trade. One of the key features for a typical cash flow CLO, based on Moody's observation, is that various collateral quality tests are formally tested to be in compliance on a pro-forma basis prior to trade execution so as to evidence the commitment from an issuer to maintain a set of trading rules. Without this feature, Moody's considers that it is not possible to adequately assess the additional risk posed to noteholders from the trading activity of the managers. As a result, Moody's informed the Senior Manager that Moody's would be unable to provide the ratings requested on the restructuring of the transaction as proposed. CONTINENTAL AIRLINES: Fitch Takes Various Rating Actions on Certs. ------------------------------------------------------------------ Fitch Ratings has taken various rating actions on these classes of Continental Airlines Enhanced Equipment Trust Certificate transactions as detailed below: Aircraft Indebtedness Repackaging Trust 1998-1 -- Class A downgraded to 'B+' from 'BB' and assigned a Stable Rating Outlook. Aircraft Indebtedness Repackaging Trust 1998-2 -- Class A downgraded to 'B+' from 'BB' and assigned a Stable Rating Outlook. Continental Airlines, FEATS Series 2000 -- Class A downgraded to 'BB+' from 'BBB+' and assigned a Stable Rating Outlook; -- Class B affirmed at 'B+' and assigned a Stable Rating Outlook. EETCs are hybrid corporate - structured debt obligations in which payment on the notes is effectively supported by the underlying corporate entity, while structured elements of the transaction provide protection to investors in the event of issuer default. As such, Fitch's ratings on EETC transactions are strongly tied to the Issuer Default Rating of the issuing entity and incorporate credit to the reduced probability of default provided by the collateral and structural enhancements in place. The analysis also incorporates a review of the recovery prospects on the issued securities in the event that they default, similar to Fitch's approach for assigning recovery credit to secured corporate debt. On Nov. 18, 2009, Fitch released its updated 'Surveillance Criteria for Enhanced Equipment Trust Certificates'. Of note, the updated criteria limits EETC ratings from exceeding six notches (or two rating categories) above the IDR of the underlying airline. This represents a change from the approach previously employed by Fitch in this sector. However, the impact of the criteria update on Continental EETCs is no greater than three notches on any class of bonds. While the rating actions are reflective of the updated EETC surveillance criteria, the downgrades on the class A notes in each of the three transactions are largely driven by deterioration in the value of the aircraft collateral in the current aviation market downturn. This has negatively impacted the projected LTV and recovery percentages for the downgraded classes. The class B notes in Continental FEATS have been affirmed as structural enhancement features were found to be consistent with the current rating. Fitch will continue to monitor the transaction and take appropriate rating actions if necessary. CREDIT SUISSE: Fitch Takes Actions on All 2005-C5 Certificates -------------------------------------------------------------- Fitch Ratings takes various rating actions on all rated classes of Credit Suisse First Boston Mortgage Securities Corp. 2005-C5, commercial mortgage pass-through certificates. 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 3.8% for this transaction, should market conditions not recover. The rating actions are based on recognized losses of 3.1% since many of the loans do not mature in the next five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future should full potential losses be realized. To determine potential defaults for each loan Fitch assumed cash flow would decline by 10% from year-end 2008, which is consistent with the analysis used in its review of recent vintage transactions whereby cash flow was assumed to decline 15% from year-end 2007 projected over a three-year period. If the stressed cash flow would cause the loan to fall below 0.95 times, Fitch assumed the loan would default during the term. To determine losses, Fitch used the above stressed cash flow, and applied a market cap rate, ranging between 7.5% and 9.5%, for each specific property type. If the loan balance at default is less than the stressed cash flow the loan would realize that loss. These loss estimates were reviewed in more detail for loans representing 48.4% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Approximately 80% of the recognized losses were from loans reviewed in detail. Approximately 10% of the mortgages mature within the next five years: 5.0% in 2010, 0.3% in 2011 and 4.8% in 2012. After 2012, no loans mature until 2015 when 81% are schedule to mature or have an anticipated refinance date. Fitch identified 49 Loans of Concern (11.3%) within the pool, seven of which (0.8%) are specially serviced. Of the specially serviced loans none are current. Three of the Fitch Loans of Concern (4.8%) are within the transaction's top 15 loans, and none are specially serviced. Fitch's analysis resulted in losses on four of the Top 15 loans. None of the top 15 loans are assumed to default during the term or expected to pay off at maturity. All of the top 15 loans are expected to default at maturity. Fitch calculated losses ranging from 0%-37% on based on stressed value being higher than the current loan amount within the top 15. The largest overall contributors to deal loss are: Del Monte Center (2.9% of pool), Weston Town Center (1.6%), and Black Canyon & Red Mountain Office Buildings (1.4%). Del Monte Town Center is a 677,376 square foot retail center located in Monterey, California. The property lost Mervyn's (12.2% of NRA [net rentable area]) as a tenant in 2009 due to bankruptcy and has yet to re-lease the space. Fitch adjusted the net cash flow to reflect this vacancy that was not accounted for the in the year-end 2008 NCF. The updated occupancy at the property is approximately 85%, down from 97% as of June 2009. Considering the historical occupancy of the property has been above approximately 95%, the limited near-term rollover (only an additional 4% in 2010, 2.5% in 2011, and 3.5% in 2012), and an adjusted debt service coverage ratio well above the 0.95x term default threshold, Fitch expects the loan to reach maturity, but default due to inability to pass stressed refinance tests. Weston Town Center is a 157,932 sf retail center in Weston, Florida (approximately 40 miles northwest of Miami). The property is anchored by Publix supermarket (24.1% of NRA), with a diverse mix of local, national, and restaurant tenants. The property was 88.1% occupied as of June 30, 2009; however, multiple tenants have left the property in 2009, and there is significant upcoming lease rollover in the next three years. In addition, multiple tenants have ceased operations and are requesting either lower rents or rent concessions. Fitch expects the loan to default upon reaching the ARD as current cash flow is insufficient to support principle and interest payments once the interest rate increases to 7%. Black Canyon & Red Mountain Office Buildings is a portfolio of three office buildings on two properties located in Phoenix, Arizona. The Black Canyon property has two buildings, is 100% occupied and has no significant upcoming roll within the next three years. The Red Mountain building however, just lost its largest tenant (30% of total NRA), and has not re-leased any of that space. Fitch adjusted the cash flow to reflect the loss of this tenant, and while the loan is expected to remain above the 0.95x DSCR term default threshold, the loan is expected to default at maturity. Fitch downgrades, removes from Rating Watch Negative, and assigns Rating Outlooks to these classes: -- $47.6 million class C to 'A'/LS4 from 'AA'; Outlook Stable; -- $21.8 million class D to 'A'/LS5 from 'AA-'; Outlook Stable; -- $18.1 million class E to 'A'/LS5 from 'A+'; Outlook Negative; -- $29 million class F to 'BBB'/LS5 from 'A'; Outlook Negative; -- $36.3 million class G to 'BBB-'/LS5 from 'A-'; Outlook Negative; -- $21.8 million class H to 'BB'/LS5 from 'BBB+'; Outlook Negative; -- $32.6 million class J to 'BB'/LS5 from 'BBB'; Outlook Negative; -- $32.6 million class K to 'B'/LS5 from 'BB+'; Outlook Negative; -- $7.3 million class L to 'B-'/LS5 from 'BB'; Outlook Negative; -- $14.5 million class M to 'B-'/LS5 from 'BB-'; Outlook Negative; -- $10.9 million class N to 'B-'/LS5 from 'B'; Outlook Negative. In addition, Fitch downgrades and assigns an Outlook: -- $24.9 million class B to 'AA'/LS5; from 'AA+'; Outlook Stable. Fitch affirms, removes from Rating Watch Negative, and assigns Outlooks: -- $3.6 million class O at 'B-'/LS5; Outlook Negative; -- $7.3 million class P at 'B-'/LS5; Outlook Negative. Fitch also affirms these classes and assigns LS ratings, and Outlooks as indicated: -- $518 million class A-1A at 'AAA'/LS1; Outlook Stable; -- $17.6 million class A-1 at 'AAA'/LS1; Outlook Stable; -- $122 million class A-2 at 'AAA'/LS1; Outlook Stable; -- $149 million class A-3 at 'AAA'/LS1; Outlook Stable; -- $1 billion class A-4 at 'AAA'/LS1; Outlook Stable; -- $136.2 million class A-AB at 'AAA'/LS1; Outlook Stable; -- $290.2 million class A-M at 'AAA'/LS3; Outlook Stable; -- $224.8 million class A-J at 'AAA'/LS3; Outlook Stable; -- Interest-only class A-X at 'AAA'; Outlook Stable; -- Interest-only class A-SP at 'AAA'; Outlook Stable; -- Interest-only class A-Y at 'AAA'; Outlook Stable; -- $5.4 million class 375-A at 'BBB+'; Outlook Negative; -- $9.4 million class 375-B at 'BBB'; Outlook Negative; -- $20.9 million class 375-C at 'BBB-'; Outlook Negative. Fitch affirms this class: -- $3.6 million class Q at 'CCC/RR3'. Fitch does not rate the $33.7 million class S. CREDIT SUISSE: Moody's Affirms Ratings on 10 2005-C3 Certs. ----------------------------------------------------------- Moody's Investors Service affirmed the ratings of ten classes and downgraded 14 classes of Credit Suisse First Boston Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2005-C3. The downgrades are due to higher expected losses for the pool resulting from realized and anticipated losses from loans in special servicing, increased credit quality dispersion and concerns about refinancing risk associated with loans approaching maturity. Nine loans, representing 12% of the pool, mature within the next 12 months and have a Moody's stressed debt service coverage ratio below 1.00X. The affirmations are due to key rating parameters, including Moody's loan to value ratio, stressed DSCR and Herfindahl Index, remaining within acceptable ranges. On August 11, 2009, Moody's placed 14 classes on review for possible downgrade due to the credit uncertainty surrounding Maguire Properties Inc., the sponsor of one loan representing 9% of the outstanding deal balance. Maguire has experienced ongoing levels of high effective leverage, declining operating performance, and an inability to cover dividends from operating cash flow. This action concludes Moody's review of the transaction. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the October 19, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 5% to $1.56 billion from $1.64 billion at securitization. The Certificates are collateralized by 197 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top ten loans representing 39% of the pool. The pool includes 53 loans, representing 12% of the outstanding loan balance, which are secured by residential co-ops located throughout New York City. These loans have underlying ratings of Aaa. Nine loans, representing 5% of the pool, have defeased and are collateralized by U.S. Government securities, the same share of the pool found atMoody's prior review. Twenty-seven loans, representing 8% 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. Not all loans on the watchlist are delinquent or have significant issues. The pool has experienced an aggregate $6.1 million realized loss from the liquidation of two loans (57% loss severity on average). Twelve loans, representing 12% of the pool, are currently in special servicing. The largest specially serviced loan, Southland Center Mall ($107.8 million - 7% of the pool), is secured by a mall owned by an affiliate of General Growth Properties, Inc. This loan was transferred to special servicing due to GGP's bankruptcy filing on April 16, 2009. The second largest specially serviced loan is the Everest MBC Portfolio Loan ($52.2 million -- 3.4% of the pool), which is secured by six cross collateralized and cross defaulted loans on nine mixed-use properties located throughout Massachusetts. The loan is 60+ days delinquent and was transferred to special servicing in July 2009 for non-monetary default. For the remaining five loans, three loans are real estate owned or in the process of foreclosure, one loan is 30+ days delinquent and one loan is 90+ days delinquent. Moody's estimates a $52.8 million aggregate loss (27% loss severity on average) from the specially serviced loans. Moody's was provided with partial or full-year 2008 and partial year 2009 operating results for 97% and 51% of the pool, respectively, excluding defeased loans and loans secured by residential co-ops. Moody's weighted LTV ratio for the conduit pool 107% compared to 105% at last review. Although the overall pool LTV has remained relatively stable, the pool has experienced increased credit quality dispersion. Based on Moody's analysis, 20% of the conduit pool has an LTV in excess of 120% compared to 10% at last review. Moody's stressed DSCR for the conduit component is 1.25X compared to 1.29X 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 and loans with underlying ratings, has a Herf of 30 compared to 32 at last review. The three largest loans represent 18% of the outstanding pool balance. The largest loan is the San Diego Office Park Loan ($133.0 million -- 8.5% of the pool), which is secured by an 11- building Class A office complex totaling 645,000 square feet of net rentable area located in San Diego, California. The loan sponsor is Maguire. The property was 100% occupied as of May 2009 compared to 97% at last review. The two largest tenants are Sony Computer Entertainment (40% of the NRA; lease expiration December 2014) and Qualcomm (14% of the NRA; lease expiration December 2009). Qualcomm is vacating its premises at the end of its lease term, potentially decreasing the complex's occupancy to 86%. Even with the anticipated decline in cash flow when Qualcomm vacates, Moody's project that the property will still generate cash flow in excess of debt service. However, given Maguire's financial issues, Moody's is concerned about the availability of funds for leasing costs. The loan is interest only for the entire term. Moody's LTV and stressed DSCR are 129% and 0.73X compared to 117% and 0.81X at last review. The second largest loan is the 80-90 Maiden Lane Loan ($89.9 million -- 5.8% of the pool), which is secured by two Class B office buildings totaling 545,000 square feet. The properties are located in the Insurance submarket in New York City. As of July 2009, the properties were 99% occupied, the same as at last review. Performance has been stable. Moody's LTV and stressed DSCR are 103% and 0.94X, essentially the same as at last review. The third largest loan is the Och Ziff Portfolio ($52.9 million -- 3.4% of the pool), which is secured by eight limited-service hotels located in Columbus, Ohio and Covington, Kentucky. Performance has declined since last review due to lower revenues and increased expenses. From January to July of 2009, occupancy and RevPAR were $59.24 and 65% compared to 68% and $67.68 for the same period in 2008. Moody's LTV and stressed DSCR are 118% and 1.0X compared to 117% and 1.0X at last review. Moody's rating action is: -- Class A-1, $2,158,694, affirmed at Aaa; previously on 7/11/2005 assigned at Aaa -- Class A-2, $176,757,000, affirmed at Aaa; previously on 7/11/2005 assigned at Aaa -- Class A-3, $79,635,000, affirmed at Aaa; previously on 7/11/2005 assigned at Aaa -- Class A-AB, $61,470,000, affirmed at Aaa; previously on 7/11/2005 assigned at Aaa -- Class A-4, $372,531,000, affirmed at Aaa; previously on 7/11/2005 assigned at Aaa -- Class A-1-A, $378,999,926, affirmed at Aaa; previously on 7/11/2005 assigned at Aaa -- Class A-M, $163,695,000, affirmed at Aaa; previously on 7/11/2005 assigned at Aaa -- Class A-X, Notional, affirmed at Aaa; previously on 7/11/2005 assigned at Aaa -- Class A-Y, Notional, affirmed at Aaa; previously on 7/11/2005 assigned at Aaa -- Class A-SP, Notional, affirmed at Aaa; previously on 7/11/2005 assigned at Aaa -- Class A-J, $135,048,000, downgraded to A1; previously on 8/11/2009 Aaa Placed Under Review for Possible Downgrade -- Class B, $34,785,000, downgraded to A3; previously on 8/11/2009 Aa2 Placed Under Review for Possible Downgrade -- Class C, $16,370,000, downgraded to Baa2; previously on 8/11/2009 A1 Placed Under Review for Possible Downgrade -- Class D, $14,323,000, downgraded to Baa3; previously on 8/11/2009 A2 Placed Under Review for Possible Downgrade -- Class E, $16,370,000, downgraded to Ba3; previously on 8/11/2009 A3 Placed Under Review for Possible Downgrade -- Class F, $20,462,000, downgraded to B3; previously on 8/11/2009 Baa2 Placed Under Review for Possible Downgrade -- Class G, $16,369,000, downgraded to Caa2; previously on 8/11/2009 Baa3 Placed Under Review for Possible Downgrade -- Class H, $18,416,000, downgraded to Ca; previously on 8/11/2009 Ba2 Placed Under Review for Possible Downgrade -- Class J, $6,138,000, downgraded to C; previously on 8/11/2009 B1 Placed Under Review for Possible Downgrade -- Class K, $8,185,000, downgraded to C; previously on 8/11/2009 B2 Placed Under Review for Possible Downgrade -- Class L, $6,139,000, downgraded to C; previously on 8/11/2009 B3 Placed Under Review for Possible Downgrade -- Class M, $4,092,000, downgraded to C; previously on 8/11/2009 Caa1 Placed Under Review for Possible Downgrade -- Class N, $4,092,000, downgraded to C; previously on 8/11/2009 Caa2 Placed Under Review for Possible Downgrade -- Class O, $6,139,000, downgraded to C; previously on 8/11/2009 Caa3 Placed Under Review for Possible Downgrade CREDIT SUISSE: Moody's Affirms Ratings on 10 2005-C4 Certificates ----------------------------------------------------------------- Moody's Investors Service affirmed the ratings of ten classes and downgraded 14 classes of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2005-C4. The downgrades are due to higher expected losses for the pool resulting from increased leverage, increased credit quality dispersion and anticipated losses from loans in special servicing. An overall increase in leverage and a modest decline in debt service coverage were mitigated by an improvement in pool diversity and defeasance resulting in affirmations of eight classes. On November 4, 2009, Moody's placed 14 classes on review for possible downgrade due to higher expected losses for the pool resulting from losses from specially serviced loans and increased leverage for the remainder of the pool. This action concludes that review. The action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the October 19, 2009 distribution date, the transaction's aggregate certificate balance has decreased by 4% to $1.28 billion from $1.33 billion at securitization. The Certificates are collateralized by 157 mortgage loans ranging in size from less than 1% to 5% of the pool, with the top ten non-defeased loans representing 30% of the pool. Eight loans, representing 15% of the pool, have defeased and are collateralized with U.S. Government securities, compared with no defeasance atMoody's last review. Twenty-four loans, representing 7% 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. Not all loans on the watchlist are delinquent or have significant issues. The pool has experienced losses of $1.9 million since securitization from the liquidation of two loans (33% loss severity on average). There are five loans, representing 4% of the pool, currently in special servicing. The largest specially serviced loan is The Pavilion Center ($20.9 million -- 1.6% of the pool), which is secured by a 137,000 square foot retail center located in Vista, California. The loan was transferred to special servicing in February 2009 due to payment default. The loan is currently 90+ days delinquent. Of the remaining four specially serviced loans, three are 90+ days delinquent and one is in foreclosure. Moody's estimates an aggregate $26.3 million loss for all the specially serviced loans (56% loss severity on average). Moody's was provided with full-year 2008 operating results for 81% of the pool, excluding the defeased loans. Moody's weighted average loan to value ratio is 108% compared to 97% at Moody's last review. In addition to an overall increase in leverage, the pool has experienced increased credit quality dispersion. Based on Moody's analysis, 65% of the pool has an LTV in excess of 100% compared to 48% at last review. Approximately 22% of the pool has an LTV in excess of 120% compared to 5% at last review. Moody's stressed debt service coverage ratio is 1.02X compared to 1.05X 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 has a Herf of 53, compared to 48 at last review. The improvement in Herf is due to defeasance of the pool's two largest loans. The three largest conduit loans represent 13% of the pool. The largest loan is the Hilton Gaslamp Quarter Hotel ($59.6 million -- 4.7% of the pool), which is secured by a 282-room full service hotel located in San Diego, California. Recent performance of the hotel has declined due to the decline in tourist and business travel. Revenue per available room for the calendar year 2008 was $174 compared to $159 at last review. RevPAR for the first eight months of 2009 has declined further to $151. Moody's LTV and stressed DSCR are 119% and 0.95X, respectively, compared to 108% and 1.13X at last review. The second largest conduit loan is the Och Ziff Portfolio Loan ($53.1 million -- 4.2% of the pool), which is secured by nine hotel properties located in four Ohio markets: Cleveland, Toledo, Cincinnati and Columbus. The portfolio totals 929 guestrooms. Recent performance of the hotel has declined due to the decline in tourist and business travel. RevPAR for calendar year 2008 was $62, compared to $51 at securitization. RevPAR for the first six months of 2009 has declined further to $49. Moody's expects that the portfolio's property performance could decline even more due to their location in areas particularly impacted by the economic recession. Moody's LTV and stressed DSCR are 180% and 0.66X, respectively, compared to 95% and 1.27X at last review. The third largest conduit loan is the Mansions at Coyote Ridge ($46.5 million -- 3.6% of the pool), which is secured by a 528- unit Class A garden style apartment unit in Carrollton, Texas. The property was 98% occupied as of June 2009. Performance has declined since last review due to lower rent levels. The loan is interest-only for the first five years and amortizes on a 30-year schedule thereafter. Moody's LTV and stressed DSCR are 115% and 0.80X, respectively, compared to 99% and 0.96X at last review. Moody's rating action is: -- Class A-1, $7,167,328, affirmed at Aaa, previously assigned Aaa on 09/06/2005 -- Class A-2, $138,000,000, affirmed at Aaa, previously assigned Aaa on 09/06/2005 -- Class A-3, $88,000,000, affirmed at Aaa, previously assigned Aaa on 09/06/2005 -- Class A-4, $25,000,000, affirmed at Aaa, previously assigned Aaa on 09/06/2005 -- Class A-AB, $45,000,000, affirmed at Aaa, previously assigned Aaa on 09/06/2005 -- Class A-5, $311,000,000, affirmed at Aaa, previously assigned Aaa on 09/06/2005 -- Class A-5M, $44,434,000, affirmed at Aaa, previously assigned Aaa on 09/06/2005 -- Class A-1A, $357,140,152. affirmed at Aaa, previously assigned Aaa on 09/06/2005 -- Class A-X, Notional, affirmed at Aaa, previously assigned Aaa on 09/06/2005 -- Class A-SP, Notional, affirmed at Aaa, previously assigned Aaa on 09/06/2005 -- Class A-J, $93,008,000, downgraded to Aa2 from Aaa, previously placed on review for possible downgrade on 11/4/2009 -- Class B, $23,253,000, downgraded to A1 from Aa2, previously placed on review for possible downgrade on 11/4/2009 -- Class C, $13,286,000, downgraded to A2 from Aa3, previously placed on review for possible downgrade on 11/4/2009 -- Class D, $23,252,000, downgraded to Baa1 from A2, previously placed on review for possible downgrade on 11/4/2009 -- Class E, $16,609,000, downgraded to Baa3 from A3, previously placed on review for possible downgrade on 11/4/2009 -- Class F, $16,609,000, downgraded to Ba3 from Baa1, previously placed on review for possible downgrade on 11/4/2009 -- Class G, $13,287,000, downgraded to B3 from Baa2, previously placed on review for possible downgrade on 11/4/2009 -- Class H, $16,608,000, downgraded to Caa3 from Baa3, previously placed on review for possible downgrade on 11/4/2009 -- Class J, $4,983,000, downgraded to Ca from Ba1, previously placed on review for possible downgrade on 11/4/2009 -- Class K, $8,304,000, downgraded to Ca from Ba2, previously placed on review for possible downgrade on 11/4/2009 -- Class L, $6,643,000, downgraded to Ca from Ba3, previously placed on review for possible downgrade on 11/4/2009 -- Class M, $1,661,000, downgraded to C from B1, previously placed on review for possible downgrade on 11/4/2009 -- Class N, $4,983,000, downgraded to C from B2, previously placed on review for possible downgrade on 11/4/2009 -- Class O, $4,982,000, downgraded to C from B3, previously placed on review for possible downgrade on 11/4/2009 CSMS 2006-HC1: S&P Affirms Ratings on 14 Classes of Certificates ---------------------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on 14 classes of commercial mortgage pass-through certificates from CSMS 2006-HC1 and removed them from CreditWatch with negative implications. The affirmations follow S&P's analysis of the portfolio of 242 health care properties that serve as collateral for the single $1.13 billion mortgage loan in this transaction. S&P analyzed the portfolio's cash flow to derive a Standard & Poor's stressed valuation that is 12% higher than the level at issuance. Although the portfolio's cash flow has improved since issuance, there are potential refinance risks because the loan matures May 9, 2010, and has one one-year extension option remaining. In addition, the health care facilities derive a significant amount of revenue from Medicare and/or Medicaid reimbursements. It is not clear at this time if these reimbursements will be negatively affected by potential government health care reforms. S&P affirmed its ratings on the class A-X-1 and A-X-2 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. After S&P finalizes its criteria review, S&P may revise its IO criteria, which may affect outstanding ratings, including the ratings on the IO certificates that S&P affirmed. As of the Nov. 16, 2009, trustee remittance report, the mortgage loan had a trust and whole-loan balance of $1.13 billion, which consists of two in-trust senior notes totaling $1.07 billion and a $59.8 million in-trust junior note. The principal distribution amount to the class L certificates comes solely from the principal payments received with respect to the junior note. The equity interests of the borrower of the whole loan secure four mezzanine loans totaling $188.1 million. The current collateral for this mortgage loan consists of 242 nursing and assisted-living facilities with a total of 24,972 licensed beds within 8.1 million sq. ft. across 21 states in the U.S. The mortgage loan provides for conditional permitted collateral releases. The release prices are based on release amounts specified in the loan agreement. Since issuance, the sponsors released 18 nursing facilities with a total of 1,803 licensed beds within 528,400 sq. ft. in Arkansas, Nebraska, Minnesota, Kansas, and Pennsylvania as collateral for the loan. At origination, the loan provided for three one-year extension options. Pursuant to the loan terms, after the borrower exercised the second extension option, beginning after May 9, 2009, the mortgage loan converted from an interest-only to an amortizing loan based on a 6% interest rate and 25-year amortization schedule. The loan's final maturity date is May 9, 2011. While the portfolio generates a significant amount of net cash flow, there is a considerable amount of debt to refinance if conditions in the capital markets do not improve. S&P will continue to evaluate the borrower's ability to refinance as the loan's maturity date approaches. The potential that health care reforms may affect portfolio revenues is another transaction risk in that such reforms may have a negative impact on Medicare and/or Medicaid reimbursement revenues and/or cause potential fee reductions in other services at the facilities. This is far from certain at this time and S&P partially mitigated this risk by using more conservative capitalization rates to value the remaining properties. The cap rates S&P used averaged 13.67%. S&P based its analysis for the remaining properties, in part, on a review of the borrower's operating statements for the trailing-12- months ended June 30, 2009, the 12 months ended Dec. 31, 2008, and its 2009 budgets. The master servicer, Wachovia Bank N.A., reported a debt service coverage of 8.98x for the portfolio and an occupancy of 89% as of June 30, 2009. Ratings Affirmed And Removed From Creditwatch Negative CSMS 2006-HC1 Commercial mortgage pass-through certificates Rating ------ Class To From ----- -- ---- A-1 AAA AAA/Watch Neg A-2 AAA AAA/Watch Neg B AA+ AA+/Watch Neg C AA AA/Watch Neg D AA- AA-/Watch Neg E A+ A+/Watch Neg F A A/Watch Neg G A- A-/Watch Neg H BBB+ BBB+/Watch Neg J BBB BBB/Watch Neg K BBB- BBB-/Watch Neg L BB+ BB+/Watch Neg A-X-1 AAA AAA/Watch Neg A-X-2 AAA AAA/Watch Neg CTX CDO: Moody's Downgrades Ratings on All Classes of Notes ----------------------------------------------------------- Moody's Investors Service downgraded the rating of all classes of Notes issued by CTX CDO I, Ltd. The downgrades are due to deterioration in the credit quality of the underlying portfolio of reference obligations and directly held collateral. Moody's also placed Class A and Class B on watch for possible further downgrade due to the uncertainties surrounding both the timing of an Event of Default, which is expected to be triggered by further haircuts to Par Value, and the potential remedies the Trustee may seek upon direction by a Majority of the Controlling Class. On August 14, 2009, Moody's placed all rated classes of Notes on review for possible downgrade due to deterioration in the credit quality of the underlying portfolio and the potential for an EOD triggered by further haircuts to Par Value resulting from additional rating downgrades of the underlying collateral. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation transactions. CTX CDO I, Ltd., is a hybrid collateralized debt obligation backed by a portfolio of cash collateral (13% of the pool) and credit default swaps (87% of the pool) referencing commercial mortgage backed securities, CRE CDOs, and real estate investment trust debt. As of the October 26, 2009 Trustee Report, the Notes are collateralized by 45 classes of CMBS cash collateral and reference obligations (93.7% of the pool) from 28 separate transactions, two classes of CRE CDO cash collateral and reference obligations (3.3% of the pool) from two separate transactions, and one REIT debt. The collateral and reference obligations were issued between 2005 and 2007. One reference obligation totaling $15 million of (3% of the pool) was reported as defaulted. Moody's currently estimates the rate of recovery from this defaulted asset as low. Moody's has identified these parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor, weighted average life, weighted average recovery rate, and Moody's asset correlation. These parameters are modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's have completed updated credit estimates for the entire pool and the results will be reflected in a future Trustee Report. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 4,834, which is the WARF after factoring in potential ratings migration on over 4% of the collateral and reference obligations that are currently on review for possible downgrade by Moody's, compared to a WARF of 2,490 at last review. The distribution of current ratings and credit estimates is: Baa1-Baa3 (16.6% compared to 35.5% at last review), Ba1-Ba3 (8.9% compared to 13.0% at last review), B1-B3 (33.5% compared to 36.5% at last review), Caa1-NR (41.0% compared to 15.0% at last review). WAL acts to adjust the credit exposure of the collateral pool. Moody's modeled to the actual WAL of 6 years, compared to 10 years at last review. WARR is the par-weighted average of the mean recovery values for the collateral assets in the pool. Moody's modeled a fixed WARR of 6.4% compared to 10.4% at last review. MAC is a single factor that describes the pair-wise asset correlations among the instruments within the collateral pool (i.e. the measure of diversity). Moody's modeled a MAC of 24.5% compared to 44.2% at last review. All collateral and reference obligations are now rated at Baa3 or lower, which has resulted in over $80 million in par value haircuts, which have been factored into the calculations of both the Class A/B Overcollateralization Test and Default Par Value Coverage Ratio. As of October 26, 2009, the Trustee reports that the transaction is currently failing its Class A/B Overcollateralization Test (99.15% actual versus a trigger of 112.86%), and passing its Default Par Value Coverage Ratio (116.07% actual versus a trigger of 100.00%). Due to the failure of the transaction's Class A/B Overcollateralization Test, the interest due on the Class C, Class D, Class E, Class F, Class G, Class H, Class J and Class K Notes is being treated as deferred interest payable-in-kind. Even though the current par value haircut amount has not trigger the EOD specified in Section 5.1(j) of the Indenture, as commercial real estate loan performance continues to deteriorate, the risk of such EOD, as triggered by additional haircuts to Par Value from further credit rating downgrades to underlying collateral and reference obligations, is increasing. As provided for in Article V of the Indenture, during the occurrence and continuance of an EOD, a Majority of the Controlling Class to the transaction may direct the Trustee to take particular actions with respect to all or a portion of the collateral or reference obligations or rights of interest therein, including liquidation (or in the case of Synthetic Assets entered into pursuant to the Synthetic Asset Agreement, designate an "Early Termination Date" under such Synthetic Asset Agreement). Moody's notes that the transaction is exposed to a significant concentration of CMBS assets, the majority of which have low investment grade and below investment grade ratings. It is also exposed to CRE CDOs with below investment grade ratings. Both types of assets have shown depressed market valuations recently and thus may result in significant losses to the transaction from any sale of cash collateral and/or any early termination of credit default swap contracts. Moody's will continue to closely monitor the performance of this transaction and the remedies the Trustee may exercise under the direction elected by a Majority of the Controlling Class if and when an EOD occurs. Moody's review incorporated updated asset correlation assumptions for the commercial real estate sector consistent with one of Moody's CDO rating models, CDOROM v2.5, which was released on April 3, 2009. These correlations were updated in light of the systemic seizure of credit markets and to reflect higher inter- and intra-industry asset correlations. The updated asset correlations, depending on vintage and issuer diversity, used for CUSIP collateral (i.e. CMBS, CRE CDOs or REIT debt) within CRE CDOs range from 30% to 60%, compared to 15% to 35% previously. The cash flow model, CDOEdge v3.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal. The rating actions are: -- Cl. A, Downgraded to B2 and Placed Under Review for Possible Further Downgrade; previously on August 14, 2009 Baa3 Placed Under Review for Possible Downgrade -- Cl. B, Downgraded to Caa3 and Placed Under Review for Possible Further Downgrade; previously on August 14, 2009 Ba1 Placed Under Review for Possible Downgrade -- Cl. C, Downgraded to Ca; previously on August 14, 2009 Ba3 Placed Under Review for Possible Downgrade -- Cl. D, Downgraded to Ca; previously on August 14, 2009 Ba3 Placed Under Review for Possible Downgrade -- Cl. E, Downgraded to Ca; previously on August 14, 2009 B1 Placed Under Review for Possible Downgrade -- Cl. F, Downgraded to Ca; previously on August 14, 2009 B1 Placed Under Review for Possible Downgrade -- Cl. G, Downgraded to Ca; previously on August 14, 2009 B1 Placed Under Review for Possible Downgrade -- Cl. H, Downgraded to Ca; previously on August 14, 2009 B2 Placed Under Review for Possible Downgrade -- Cl. J, Downgraded to C; previously on August 14, 2009 Caa2 Placed Under Review for Possible Downgrade -- Cl. K, Downgraded to C; previously on August 14, 2009 Caa3 Placed Under Review for Possible Downgrade As always, Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. The rating outcome may differ from the model output. Moody's monitors transactions both on a monthly basis through a review of the available trustee reports and a periodic basis through a full review. Moody's prior review is summarized in a press release dated March 6, 2009. CWCAPITAL COBALT: Moody's Downgrades Rating on All Classes ---------------------------------------------------------- Moody's Investors Service downgraded the rating of all classes of Notes issued by CWCapital COBALT III Synthetic CDO, Ltd. The downgrades are due to deterioration in the credit quality of the underlying portfolio of reference obligations and directly held collateral. Moody's also placed Class A and Class B on review for possible further downgrade due to the uncertainty about the timing of an Event of Default expected to be triggered by further haircuts to Par Value and potential remedies the Trustee may seek upon direction by a Majority of the Controlling Class. On August 14, 2009, Moody's placed all rated classes of Notes on review for possible downgrade due to deterioration in the credit quality of the underlying portfolio and the potential for an EOD triggered by further haircuts to Par Value resulting from additional rating downgrades of the underlying collateral. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation transactions. CWCapital COBALT III Synthetic CDO, Ltd., is a hybrid collateralized debt obligation backed by a portfolio of cash collateral (14.7% of the pool) and credit linked notes (85.3% of the pool) referencing commercial mortgage backed securities and CRE CDOs. As of the October 27, 2009 trustee report, the Notes are collateralized by 46 classes of CMBS cash collateral and reference obligations (90.4% of the pool) from 45 separate transactions and 8 classes of CRE CDO cash collateral and reference obligations (9.6% of the pool) from 8 separate transactions issued between 2005 and 2007. Five cash collateral and reference obligations totaling $17.9 million (3.6% of the pool) were reported as defaulted. Moody's modelled these defaults assets assuming a 6.6% recovery rate. Moody's has identified these parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor, weighted average life, weighted average recovery rate, and Moody's asset correlation. These parameters are modeled as actual parameters for static deals and covenant for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's have completed updated credit estimates for the entire pool and the results will be reflected in a future Trustee Report. The WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom dollar WARF of 4,318, which is the adjusted WARF after factoring in potential ratings migration on over 12.6% of collateral and reference obligations currently placed on review for possible downgrade by Moody's, compared to 2,401 at last review. The distribution of current ratings and credit estimates is: Baa1-Baa3 (16.1% compared to 38.2% at last review), Ba1-Ba3 (14.6% compared to 12.5% at last review), B1-B3 (36.6% compared to 39.3% at last review), Caa1-NR (32.7% compared to 10.0% at last review). WAL acts to adjust the credit exposure of the collateral pool. Moody's modeled to the actual WAL of 6 years, the same as at last review. WARR is the par-weighted average of the mean recovery values for the collateral assets in the pool. Moody's modeled a fixed WARR of 6.6% compared to 11.1% at last review. MAC is a single factor that describes the pair-wise asset correlations among the instruments within the collateral pool (i.e. the measure of diversity). Moody's modeled a MAC of 27.0% compared to 34.9% at last review. All collateral and reference obligations are now rated at Baa3 or lower, which has resulted in over $113.4 million in par value haircuts, which is factored into the calculations of both the Overcollateralization Test and Default Par Value Coverage Ratio. As of October 27, 2009, the Trustee reports that the transaction is currently failing its Overcollateralization Test (85.88% vs. trigger of 108.94%), and passing its Default Par Value Coverage Ratio (104.09% vs. trigger of 100.00%). When the transaction fails its Overcollateralization Test, the interest due on the Class C Notes, the Class D Notes, the Class E Notes, the Class F Notes, and the Class G Notes is PIKing. Even though the current par value haircut amount has not triggered the EOD specified in Section 5.1(j) of the Indenture, as commercial real estate loan performance continues to deteriorate, the risk of such EOD, as triggered by additional haircuts to Par Value from further credit rating downgrades to underlying collateral and reference obligations, is increasing. As provided for in Article V of the Indenture, during the occurrence and continuance of an Event of Default, a Majority of the Controlling Class to the transaction may direct the Trustee to take particular actions with respect to all or a portion of the collateral or reference obligations or rights of interest therein, including liquidation (in the case of Synthetic Assets entered into pursuant to the Synthetic Asset Agreement, designate an "Early Termination Date" under such Synthetic Asset Agreement). Moody's notes that the transaction is exposed to a significant concentration of CMBS assets, the majority of which have low investment grade and below investment grade ratings. It is also exposed to CRE CDOs with below investment grade ratings. Both types of assets have shown depressed market valuations recently and thus may result in significant losses to the transaction from any sale of cash collateral and/or any early termination of credit default swap contracts. Moody's will continue to closely monitor the performance of this transaction and the remedies the Trustee may exercise under the direction elected by a Majority of the Controlling Class if an EOD occurs. Moody's review incorporated updated asset correlation assumptions for the commercial real estate sector consistent with one of Moody's CDO rating models, CDOROM v2.5, which was released on February 3, 2009. These correlations were updated in light of the systemic seizure of credit markets and to reflect higher inter- and intra-industry asset correlations. The updated asset correlations, depending on vintage and issuer diversity, used for CUSIP collateral (i.e. CMBS, CRE CDOs or real estate investment trust debt) within CRE CDOs range from 30% to 60%, compared to 15% to 35% previously. The rating actions are: -- Cl. A, Downgraded to Caa3 and remains on Review for Possible Downgrade; previously on Aug 14, 2009 Ba3 Placed Under Review for Possible Downgrade -- Cl. B, Downgraded to Ca and remains on Review for Possible Downgrade; previously on Aug 14, 2009 B3 Placed Under Review for Possible Downgrade -- Cl. C, Downgraded to C; previously on Aug 14, 2009 Caa2 Placed Under Review for Possible Downgrade -- Cl. D, Downgraded to C; previously on Aug 14, 2009 Caa2 Placed Under Review for Possible Downgrade -- Cl. E, Downgraded to C; previously on Aug 14, 2009 Caa2 Placed Under Review for Possible Downgrade -- Cl. F, Downgraded to C; previously on Aug 14, 2009 Caa2 Placed Under Review for Possible Downgrade -- Cl. G, Downgraded to C; previously on Aug 14, 2009 Caa3 Placed Under Review for Possible Downgrade As always, Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. The rating outcome may differ from the model output. Moody's monitors transactions both on a monthly basis through a review of the available trustee reports and a periodic basis through a full review. Moody's prior review is summarized in a press release dated March 6, 2009. DELTA AIR: Fitch Takes Rating Actions on Various Certificates ------------------------------------------------------------- Fitch Ratings has taken various rating actions on these classes of Delta Air Lines Enhanced Equipment Trust Certificate transactions as detailed below: Delta Air Lines Pass Through Certificates, series 2000-1: -- Class A1 affirmed at 'BBB-' and assigned a Negative Rating Outlook; -- Class A2 downgraded to 'BB' from 'BBB-' and assigned a Negative Rating Outlook; -- Class B downgraded to 'B' from 'BB-' and assigned a Negative Rating Outlook. Delta Air Lines Pass Through Certificates, series 2001-1: -- Class A1 downgraded to 'BB' from 'BBB-' and assigned a Negative Rating Outlook; -- Class A2 downgraded to 'BB' from 'BBB-' and assigned a Negative Rating Outlook; -- Class B downgraded to 'B' from 'BB-' and assigned a Negative Rating Outlook. Delta Air Lines European Enhanced Equipment Trust Certificates, series 2001-2: -- Class B upgraded to 'BB-' from 'B+' and assigned a Negative Rating Outlook. Delta Air Lines Pass Through Certificates, series 2002-1: -- Class C affirmed at 'B+' and assigned a Negative Rating Outlook. Delta Air Lines Pass Through Certificates, series 2007-1: -- Class A downgraded to 'BBB-' from 'A-' and assigned a Negative Rating Outlook. Additionally, all classes have been removed from Rating Watch Negative. EETCs are hybrid corporate/structured debt obligations in which payment on the notes is effectively supported by the underlying corporate entity, while structured elements of the transaction provide protection to investors in the event of issuer default. As such, Fitch's ratings on EETC transactions are strongly tied to the Issuer Default Rating of the issuing entity and incorporate credit to the reduced probability of default provided by the collateral and structural enhancements in place. The analysis also incorporates a review of the recovery prospects on the issued securities in the event that they default, similar to Fitch's approach for assigning recovery credit to secured corporate debt. On Nov. 18, 2009, Fitch released its updated 'Surveillance Criteria for Enhanced Equipment Trust Certificates'. This criteria, which can be found at 'www.fitchratings.com', was utilized in the review of the Delta EETC portfolio and in determining the rating actions detailed above. Of note, the updated criteria limits EETC ratings from exceeding six notches (or two rating categories) above the IDR of the underlying airline. This represents a change from the approach previously employed by Fitch in this sector. However, the impact of the criteria update on Delta EETCs was no greater than two notches on any class of bonds. On June 26, 2009, Fitch placed all Delta EETCs on Rating Watch Negative, following Fitch's downgrade of Delta's IDR to 'B-', Outlook Negative from 'B', Outlook Negative. Since that time, Fitch has conducted a review of the transactions' structures, the value of the aircraft that serve as collateral, and the impact of the downgrade of Delta consistent with the processes described in the aforementioned surveillance criteria. The downgrades on the class A-2 and B notes of the 2000-1 transaction represent the impact of the June 26th downgrade of Delta as well as deterioration in the value of the aircraft collateral in the current aviation market downturn. The class A-1 notes, while ranking equally with the class A-2 notes, have been affirmed. The affirmation reflects Fitch's view that there is less risk related to both Delta and the future value of the collateral due to the upcoming maturity on these notes (approximately six months away). The 2001-1 transaction largely mirrors the characteristics of the 2000-1. The aircraft in the collateral pools, loan to value ratios on the notes, and expected recoveries are consistent for both transactions. Similarly, the downgrade of these notes reflects the downgrade of Delta and the deterioration in aircraft values. The upgrade of Delta 2001-2 is reflective of the incorporation of Fitch's updated surveillance criteria for EETCs. The transaction does not have a liquidity facility and, as such, does not significantly reduce the probability that the EETC will default if Delta becomes insolvent. However, the strong recovery prospects on the tranche warrant three notches of recovery credit above Delta's IDR, consistent with Fitch's criteria. The affirmation of the 2002-1 class B notes indicates that current and projected over-collateralization and recovery levels for each class are consistent with the current ratings of the notes. The downgrade of the 2007-1 class A notes reflects the impact of the June 26th downgrade of Delta, the recent deterioration in the value of the aircraft collateral and the introduction of Fitch's updated EETC surveillance criteria. The new rating of 'BBB-' is consistent with the maximum level of disconnect (i.e. two rating categories) from Delta's current IDR of 'B-'. Fitch will continue to monitor the transaction and take appropriate rating actions if necessary. DELTA AIR: Moody's Assigns 'Ba2' Rating on $120 Mil. Certs. ----------------------------------------------------------- Moody's Investors Service assigned Baa2 and Ba2 ratings to the about $569 million of Class A and about $120 million of Class B Pass Through Certificates, respectively, of the 2009-1 Pass Through Trusts to be issued by Delta Air Lines, Inc. The transaction documentation provides for the possible issuance of one additional subordinated tranche of certificates at any time after the Deposit Period Termination Date. The subordination provisions of the inter-creditor agreement provide for the payment of interest on the Class B Certificates before payments of principal on the Class A Certificates. Amounts due under the Certificates will, in any event, be subordinated to any amounts due on either of the Class A or Class B Liquidity facilities, each of which provides for three consecutive semi-annual interest payments due the respective Certificate holders. The Class A Equipment Notes and Class B Equipment Notes issued by Delta and acquired with the proceeds of the Certificates will be the sole assets of the Pass Through Trusts. The Certificates' proceeds will fund the refinancing of twenty-two aircraft presently financed by Delta's 2000-1 Enhanced Equipment Trust Certificates, which mature in November 2010 and the five 2009 deliveries that round out the 2009-1 collateral pool. Rating Rationale The ratings of the Certificates consider the credit quality of Delta as obligor under the Notes, Moody's opinion of the collateral protection of the Notes, the credit support provided by the Liquidity Facilities, and certain structural characteristics of the Notes such as the cross-collateralization and cross-default provisions and the protections of Section 1110 of Title 11 of the Delta States Code. The assigned ratings of Baa2 and Ba2 on the Class A and Class B tranches, respectively, reflect Moody's opinion of the ability of the Pass Through Trustees to make timely payment of interest and the ultimate payment of principal at a date no later than December 17, 2019, for the A tranche and December 17, 2016, for the B tranche, each the final maturity dates. "Similar to the EETC's of other U.S. airlines that have recently come to market, Moody's believes that the cross-default feature increases the likelihood of affirmation by Delta of its obligations under the Equipment Notes as the majority of the aircraft types that comprise this transaction are core to Delta's mainline operations and fleet strategy," said Moody's Analyst Jonathan Root. Additionally, the cross-collateralization of the aircraft securing each note underlying the transaction enhances the potential recovery for investors in the event of a default by the Pass Through Trusts of their respective Certificate obligations or of the rejection of the aircraft by Delta in the event of a bankruptcy event and pursuant to the provisions of the Code. Moody's notes that the five 2009 deliveries represent about 50% of the appraised value of the 27 aircraft in the pool. Any combination of future changes in the underlying credit quality or ratings of Delta, material unexpected changes in the value of the aircraft pledged as collateral, and/or changes in the status or terms of the liquidity facilities or the credit quality of the liquidity provider could cause Moody's' to change its ratings of the Certificates. General Structure of the Series 2009-1 EETC's The proceeds of the Certificates will initially be held in escrow and deposited with the Depositary, The Bank of New York Mellon (short-term rating of P-1), until the issuance of each of the twenty-seven equipment notes upon the refinancing of the 2000-1 EETC or the 2009 vintage aircraft. The interest on these funds will be sufficient to pay accrued interest on the outstanding Certificates during the Deposit Period. The collateral pool consists of 27 Boeing aircraft, all owned by Delta: ten B737-800's, nine B757-200's, and three B767-300ER's presently pledged to the 2000-1 EETC and two B737-700's and three B777-200LR's delivered new in 2009. The Certificates issued to finance the aircraft are not obligations of, nor are they guaranteed by Delta. However, the amounts payable by Delta under the Notes will be sufficient to pay in full all principal and interest on the Certificates when due. The Notes will be secured by a perfected security interest in the aircraft. It is the opinion of counsel to Delta that the Notes will be entitled to benefits under Section 1110 of the U.S. Bankruptcy Code. Under Section 1110 of the U.S. Bankruptcy Code, if Delta fails to pay its obligations under the Notes, the collateral trustee has the right to repossess any aircraft which have been rejected by Delta. Scheduled interest payments on the Certificates will be supported by the respective A tranche and B tranche liquidity facilities sized to pay up to three respective consecutive semi-annual interest payments in the event Delta defaults on its obligations under the Notes. The liquidity facilities do not provide for payments of principal due, nor interest on the Certificate proceeds held in escrow during the Deposit Period. The provider of each of the liquidity facilities is Natixis S.A. via its New York Branch (Moody's short- term rating of P-1). The liquidity provider has a priority claim on proceeds from liquidation of the aircraft or Equipment Notes and other Trust collateral ahead of any of the holders of the Certificates and is also the controlling party following default. Cross-Collateralization The ratings of the 2009-1 Certificates benefit from the cross- collateralization of the Notes, a feature which Moody's believes can enhance recovery in the event of a default. The structure provides that, in the event any or all aircraft are sold, any surplus proceeds are made available to cover shortfalls due under the Notes related to the sale of any other aircraft. Importantly, all surplus proceeds are retained until maturity of the Equipment Notes financing or the indentures are cancelled. Moody's considers the number of aircraft and the number of different aircraft models that comprise the collateral pool when assessing the amount of LTV benefit of a cross-collateralized EETC structure. At 27 aircraft, the collateral pool is sizeable and the models diverse. These two factors result in a meaningful LTV benefit. That the included models are integral to Delta's short- and long-haul routes and are mostly the younger equipment in its combined mainline fleet supports the likelihood of affirmation by Delta of its obligations under the related equipment notes, thus minimizing the probability of the cross-collateralization benefit being called upon by creditors over the life of the transaction. Moody's believes that the inclusion of the five 2009 deliveries increases the value of the cross-collateralization feature of this EETC because the appraised value of these five aircraft represents approximately fifty percent of the aggregate value of collateral pool. The last rating action was on September 22, 2009, when Moody's assigned ratings to Delta's new credit facility and secured notes offerings. Assignments: Issuer: Delta Air Lines, Inc. -- Senior Secured Enhanced Equipment Trust, Assigned Ba2 -- Senior Secured Enhanced Equipment Trust, Assigned Baa2 Delta Air Lines, Inc., headquartered in Atlanta, Georgia, is the world's largest airline, providing scheduled air transportation for passengers and cargo throughout the U.S. and around the world. DELTA AIR: S&P Assigns Ratings on 2009-1 Class A Certificates ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary 'A-' rating to Delta Air Lines Inc.'s series 2009-1 Class A pass- through certificates, with an expected maturity of Dec. 17, 2019, and assigned its preliminary 'BBB-' rating to Delta's 2009-1 Class B pass-through certificates, with an expected maturity of Dec. 17, 2016. The final legal maturity will be 18 months after the expected maturity for both classes. Standard & Poor's also reviewed its ratings on existing Delta enhanced equipment trust certificates and lowered ratings on some certificates. Specifically, S&P lowered its ratings on the 2002-1 Class G1 and G2 certificates to 'BB+' from 'BBB-', on the 2007-1 Class A certificates to 'BBB+' from 'A-', and on the 2007-1 Class B certificates to 'BB' from 'BBB-'. S&P also affirmed its ratings on other existing Delta EETCs. The downgrades reflect eroded aircraft values and resulting reduced collateral coverage. Atlanta-based Delta will use the proceeds to refinance a substantial portion of its 2000-1 pass-through certificates and to refinance five additional aircraft. The outlook is negative. "Although Delta currently has liquidity acceptable for the rating and will likely report narrower losses than most other U.S. "legacy carriers," worse-than-expected fuel prices and/or economic weakness could erode the company's financial profile," said Standard & Poor's credit analyst Betsy R. Snyder. The level of liquidity (unrestricted cash, short-term investments, and available committed bank borrowing capacity) below which S&P may lower its rating is $4 billion. In assessing the credit implications of any level of liquidity, S&P would consider also normal seasonal changes in cash and air traffic liability (cash levels fluctuate somewhat with seasonal ticket purchasing patterns, with the end of the second quarter near the high point and the end of the fourth quarter near the low point), upcoming debt maturities and other claims on cash, and the company's expected operating cash flows. "If Delta can weather the downturn and industry conditions improve, and if it makes good progress in its merger integration, S&P could revise the outlook to stable," she continued. DILLON READ: Moody's Downgrades Ratings on All 2006-1 Notes ----------------------------------------------------------- Moody's Investors Service downgraded the rating of all rated classes of Notes issued by Dillon Read CMBS CDO 2006-1 Ltd. The downgrades are due to deterioration in the credit quality of the underlying portfolio of reference obligations and directly held collateral. Moody's also placed Classes A-S1VF, A1, A2, A3 and A4 on watch for possible further downgrade due to the uncertainties surrounding both the timing of an Event of Default, which is expected to be triggered by further haircuts to par value (Haircut Amount), and the potential remedies the Trustee may seek upon direction by a Majority of the Controlling Class. On August 14, 2009, Moody's placed all rated classes of Notes on review for possible downgrade due to deterioration in the credit quality of the underlying portfolio and the potential for an EOD triggered by further Haircut Amounts resulting from additional rating downgrades of the underlying collateral. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation transactions. Dillon Read CMBS CDO 2006-1 Ltd. is a hybrid collateralized debt obligation backed by a portfolio of cash collateral (26.3% of the pool) and credit default swaps (73.7% of the pool) referencing commercial mortgage backed securities, CRE CDOs, and real estate investment trust debt. As of the October 30, 2009 Trustee Report, the Notes are collateralized by 88 classes of CMBS cash collateral and reference obligations (86.8% of the pool) from 56 separate transactions, five classes of CRE CDO cash collateral (9.6% of the pool) from four separate transactions and 12 REIT debt (9.5% of the pool). The collateral and reference obligations were issued between 2004 and 2007. Nine cash collateral and reference obligations totaling $75.0 million of (7.6% of the pool) were reported as defaulted securities or deferred interest payable-in-kind bonds. Moody's currently estimates the rate of recovery from those defaulted assets as low. Moody's has identified these parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor, weighted average life, weighted average recovery rate, and Moody's asset correlation. These parameters are modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's have completed updated credit estimates for the entire pool and the results will be reflected in a future Trustee Report. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom dollar WARF of 2,975, which is the WARF after factoring in potential ratings migration on over 4% of the collateral and reference obligations that are currently on review for possible downgrade by Moody's, compared to a WARF of 1,721 at last review. The distribution of current ratings and credit estimates is: A1-A3 (2.5% compared to 2.5% at last review), Baa1-Baa3 (33.0% compared to 61.1% at last review), Ba1-Ba3 (15.3% compared to 5.0% at last review), B1-B3 (32.4% compared to 22.2% at last review), Caa1-NR (16.7% compared to 9.2% at last review). WAL acts to adjust the credit exposure of the collateral pool. Moody's modeled to the actual WAL of 6.3 years, compared to 8.0 at last review. WARR is the par-weighted average of the mean recovery values for the collateral assets in the pool. Moody's modeled a fixed WARR of 12.5% compared to 18.5% at last review. MAC is a single factor that describes the pair-wise asset correlations among the instruments within the collateral pool (i.e. the measure of diversity). Moody's modeled a MAC of 28.4% compared to 40.0% at last review. Approximately 64% of collateral and reference obligations are now rated below Baa3, which has resulted in over $102.1 million of Haircut Amounts, which have been factored into the calculations of the Class A2, A4 and B2 Overcollateralization Tests. As of October 30, 2009, the Trustee reports that the transaction is currently failing its A2 OC Test (95.5% actual versus a trigger of 107.7%), A4 OC Test (89.9% actual versus a trigger of 105.9%),and B2 OC Test (86.1% actual versus a trigger of 102.3%). Due to the failure of the transaction's OC Tests, the interest due on the Class A3, Class A4, Class B1, Class B2, Class B3, and Class B4 Notes is being treated asing. Even though the current Haircut Amount has not triggered the EOD specified in Section 5.1(d) of the Indenture, as commercial real estate loan performance continues to deteriorate, the risk of such EOD, as triggered by additional Haircut Amounts from further credit rating downgrades to underlying collateral and reference obligations, is increasing. As provided for in Article V of the Indenture, during the occurrence and continuance of an Event of Default, a Majority of the Controlling Class to the transaction may direct the Trustee to take particular actions with respect to all or a portion of the collateral or reference obligations or rights of interest therein, including liquidation (or in the case of Synthetic Assets entered into pursuant to the Synthetic Asset Agreement, designate an "Early Termination Date" under such Synthetic Asset Agreement). Moody's notes that the transaction is exposed to a significant concentration of CMBS assets, the majority of which have low investment grade and below investment grade ratings. It is also exposed to CRE CDOs with below investment grade ratings. Both types of assets have shown depressed market valuations recently and thus may result in significant losses to the transaction from any sale of cash collateral and/or any early termination of credit default swap contracts. Moody's will continue to closely monitor the performance of this transaction and the remedies the Trustee may exercise under the direction elected by a Majority of the Controlling Class if and when an EOD occurs. Moody's review incorporated updated asset correlation assumptions for the commercial real estate sector consistent with one of Moody's CDO rating models, CDOROM v2.5, which was released on April 3, 2009. These correlations were updated in light of the systemic seizure of credit markets and to reflect higher inter- and intra-industry asset correlations. The updated asset correlations, depending on vintage and issuer diversity, used for CUSIP collateral (i.e. CMBS, CRE CDOs or REIT debt) within CRE CDOs range from 30% to 60%, compared to 15% to 35% previously. The cash flow model, CDOEdge v3.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal. The rating actions are: -- Cl. A-S1VF, Downgraded to Ba1 and Placed Under Review for Possible Further Downgrade; previously on August 14, 2009 A3 Placed Under Review for Possible Downgrade -- Cl. A1, Downgraded to B3 and Placed Under Review for Possible Further Downgrade; previously on August 14, 2009 Baa3 Placed Under Review for Possible Downgrade -- Cl. A2, Downgraded to Caa2 and Placed Under Review for Possible Further Downgrade; previously on August 14, 2009 Ba1 Placed Under Review for Possible Downgrade -- Cl. A3, Downgraded to Caa3 and Placed Under Review for Possible Further Downgrade; previously on August 14, 2009 B1 Placed Under Review for Possible Downgrade -- Cl. A4, Downgraded to Caa3 and Placed Under Review for Possible Further Downgrade; previously on August 14, 2009 B2 Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to Ca; previously on August 14, 2009 B3 Placed Under Review for Possible Downgrade -- Cl. B2, Downgraded to Ca; previously on August 14, 2009 Caa1 Placed Under Review for Possible Downgrade -- Cl. B3, Downgraded to Ca; previously on August 14, 2009 Caa1 Placed Under Review for Possible Downgrade -- Cl. B4, Downgraded to Ca; previously on August 14, 2009 Caa1 Placed Under Review for Possible Downgrade As always, Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. The rating outcome may differ from the model output. Moody's monitors transactions both on a monthly basis through a review of the available trustee reports and a periodic basis through a full review. Moody's prior review is summarized in a press release dated March 20, 2009. ENERGY FUTURE: Fitch Takes Various Rating Actions on Debt --------------------------------------------------------- Fitch Ratings has taken various rating actions on the debt of Energy Future Holdings Corp. (Issuer Default Rating 'B' Outlook Negative) to reflect the effect of new EFH secured notes issued pursuant to the recent exchange offer upon the relative seniority of debt in the EFH capital structure. The debt exchange offer will become effective on Nov. 16, 2009. In addition, Fitch has assigned a rating of 'B+' to the new $256.5 million secured notes that will be issued as a result of the debt exchange. Security for the new secured notes due 2019 consists of a pledge of 100% of Energy Future Intermediate Holding Company LLC's membership interests in Oncor Electric Delivery Holdings Company LLC. In the exchange, $357.5 million of old notes of EFH and Texas Competitive Electric Holdings Company LLC (IDR 'B') were tendered and accepted. The consideration for the old notes is $256.5 million of new secured notes to be issued by EFH and EFIH; EFIH previously was unrated. Fitch assigns a 'B' IDR to EFIH as its default probability is closely linked to that of EFH and TCEH; EFIH is a guarantor of outstanding secured and unsecured leveraged buyout debt of EFH. Fitch downgraded the rating of the EFH senior unsecured guaranteed notes by one notch to 'B'/RR4 from 'B+'/RR3 as a result of subordination that stems from the issuance of new secured notes at EFH and EFIH. The new secured notes will have first call on the pledged equity of Oncor Holdings, which is an intermediate holding company that owns EFH's 80% interest in Oncor Electric Delivery Company LLC. EFH's IDR ('B'; Negative Outlook) was unaffected by the nominal $101 million debt reduction that resulted from the exchange offer and is affirmed. The 'CCC/RR6' ratings of the legacy EFH notes (unsecured and non-guaranteed notes) are also affirmed, as their very weak recovery prospects are unchanged. The 'B+/RR1' rating of the new $256.5 million secured notes reflects currently strong recovery prospects and also reflects management's willingness to monetize the equity value in Oncor Holdings as demonstrated in the exchange offer. While Fitch believes recovery prospects for the new secured notes are 100% given their current over-collateralization, Fitch also considers it likely that management will issue new secured debt against the collateral of its Oncor Holdings ownership interests, and the excess collateral coverage of the secured notes could diminish over time as a result. Thus, notching of the new secured notes was constrained to one-notch uplift from the IDR. Fitch stands by its original opinion that this debt exchange was opportunistic rather than coercive. There is no near-term bankruptcy risk despite the inconsequential amount of debt that has actually been exchanged. The relatively nominal debt reduction of about $101 million resulting from the exchange offer is insufficient to improve EFH's high debt leverage, thin interest coverage and longer term exposure to challenging wholesale power market conditions. The debt balance, including the 2014 maturity tower, remains an important rating concern. The ratings of TCEH, Energy Future Competitive Holdings and Oncor Electric Delivery Company LLC ('BBB-', Outlook Stable) are unaffected by the rating actions. Fitch affirms these ratings with a Negative Outlook: EFH -- IDR at 'B'; -- Senior unsecured non-guaranteed notes at 'CCC/RR6'. Fitch downgrades these ratings: EFH -- Senior unsecured guaranteed notes to 'B/RR4' from 'B+/RR3'. Fitch assigns these ratings: EFIH -- IDR 'B', Outlook Negative; -- Senior secured notes 'B+/RR1'. EFH -- Senior secured notes 'B+/RR1'. FIRSTPLUS HOME: S&P Downgrades Ratings on 17 Securities to 'D' -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings to 'D' on 17 classes from six residential mortgage-backed securities transactions issued by FirstPlus Home Loan Owner Trust in 1997 and 1998. The downgrades reflect S&P's assessment of missed interest payments to the classes' certificateholders since the October 2009 distribution date. S&P lowered all of these ratings from investment-grade categories, including three classes that S&P previously rated 'AAA'. The underlying pool of loans backing these transactions consists of fixed-rate mortgage loans secured primarily by junior (second) liens on one- to four-family residential properties originated or purchased by FirstPlus Mortgage Corp. Ratings Lowered FirstPlus Home Loan Owner Trust 1997-2 Series 1997-2 Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 337925BQ3 D AA FirstPlus Home Loan Owner Trust 1997-3 Series 1997-3 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 337925CA7 D AA+ M-2 337925CB5 D AA- B-1 337925CC3 D A- FirstPlus Home Loan Owner Trust 1997-4 Series 1997-4 Rating ------ Class CUSIP To From ----- ----- -- ---- A-8 337925CM1 D AAA M-1 337925CN9 D AA M-2 337925CP4 D A FirstPlus Home Loan Owner Trust 1998-1 Series 1998-1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 337925CY5 D AA M-2 337925CZ2 D A FirstPlus Home Loan Owner Trust 1998-4 Series 1998-4 Rating ------ Class CUSIP To From ----- ----- -- ---- A-8 337925EE7 D AAA M-1 337925EF4 D AA+ M-2 337925EG2 D A B-1 337925EH0 D BBB- FirstPlus Home Loan Owner Trust 1998-5 Series 1998-5 Rating ------ Class CUSIP To From ----- ----- -- ---- A-9 337925ES6 D AAA M-1 337925ET4 D AA M-2 337925EU1 D A B-1 337925EV9 D BBB- FORD CREDIT: S&P Assigns Ratings on $1.1022 Bil. 2009-E Notes ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Ford Credit Auto Owner Trust 2009-E's $1.1022 billion asset-backed notes series 2009-E. The preliminary ratings are based on information as of Nov. 16, 2009. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect S&P's opinion of: * The availability of approximately 17.3%, 14.3%, 12.2%, and 9.6% 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 expected net loss range of 2.95%-3.25% 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 preliminary 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 payment and legal structures. Preliminary Ratings Assigned Ford Credit Auto Owner Trust 2009-E Interest Amount Expected legal Class Rating Type rate (mil. $)* final maturity date ----- ------ ---- -------- --------- ------------------- A-1 A-1+ Senior Fixed 295.00 December 2010 A-2 AAA Senior Fixed 212.00 March 2012 A-3 AAA Senior Fixed 391.00 January 2014 A-4 AAA Senior Fixed 128.60 November 2014 B AA Sub Fixed 32.40 April 2015 C A Sub Fixed 21.60 August 2015 D BB+ Sub Fixed 21.60 May 2016 * The actual size of these tranches will be determined on the pricing date. GLACIER FUNDING: Fitch Downgrades Ratings on Three Classes ---------------------------------------------------------- Fitch Ratings has downgraded three and affirmed two classes of notes issued by Glacier Funding CDO II, Ltd./Corp. as a result of continued credit deterioration in the portfolio since August 2008. Approximately 61.6% of the portfolio has been downgraded since the last review. The downgrades to the portfolio have left approximately 35.8% of the portfolio with a Fitch-derived rating below investment grade and 29.8% with a rating in the 'CCC' rating category or lower, compared to 29.1% and 15.5%, respectively at last review. Defaulted securities, as defined in the transaction's governing documents, now comprise 22.7% of the portfolio, compared to 12.5% at last review. The current balance of the portfolio is $224.6 million including $50.8 million defaulted securities. This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model for projecting future default levels for the underlying portfolio. For class A-1 notes, these default levels were compared to the breakeven levels generated by Fitch's cash flow model under various default timing and interest rate stress scenarios, as described in the report 'Global Criteria for Cash Flow Analysis in CDOs'. Based on this analysis, the class A-1 notes' breakeven rates are generally consistent with the rating assigned below. Fitch assigns a Negative Outlook to the class A-1 given its expectation for the continuing rating volatility in the portfolio. The class A-1 notes are assigned an LS rating of 'LS3'. The LS rating indicates a tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the base- case loss expectation for the collateral, as explained in 'Criteria for Structured Finance Loss Severity Ratings'. This ratio for the class A-1 is in the range of 1.1 to 4. The LS rating should always be considered in conjunction with the probability of default for tranches. The 'CCC' rating loss rate, the lowest rating level loss projected by PCM, exceeded the breakeven rates for all other classes of notes. Further, assets considered distressed and defaulted, at 29.8% and 22.7%, respectively, exceeded these classes' credit enhancement levels. Accordingly, Fitch believes that default is probable for the class A-2 notes and inevitable for all other classes. Glacier II is a structured finance collateralized debt obligation that closed on October 12, 2004. On Aug. 7, 2009 collateral management responsibilities were transferred to Aventine Hill Capital, LLC, from Terwin Money Management LLC. The portfolio is composed primarily of residential mortgage-backed securities 75.8%, commercial mortgage-backed securities 16.9%, CDOs 4.7%, real estate investment trusts 1.3%, and asset-backed securities (ABS) 1.3%. Fitch has affirmed, downgraded, or assigned a Loss Severity (LS) rating and Outlook, as indicated: Glacier Funding II, Ltd./Corp.: -- $105,683,695 class A-1 notes downgrade to 'BBB/LS3' from 'AA- '; Outlook Negative; -- $70,000,000 class A-2 notes downgraded to 'CC' from 'BBB-'; -- $65,750,000 class B notes downgraded to 'C' from 'CCC'; -- $20,485,741 class C notes affirmed at 'C'; -- $4,944,831 class D notes affirmed at 'C'. GS MORTGAGE: Fitch Downgrades Ratings on 2005-GG4 Certificates -------------------------------------------------------------- Fitch Ratings has downgraded, removed from Rating Watch Negative, and assigned Rating Outlooks and Loss Severity ratings to certain classes of commercial mortgage pass-through certificates from GS Mortgage Securities Corporation II series 2005-GG4. 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 5.4% for this transaction, should market conditions not recover. Today's 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 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. To determine potential defaults for each loan, Fitch assumed cash flow would decline by 10% from year-end 2008. That is consistent with the analysis used in its review of recent vintage transactions whereby cash flow was assumed to decline 15% from year-end 2007 projected over a three-year period. If the stressed cash flow would cause the loan to fall below 0.95 times DSCR, Fitch assumed the loan would default during the term. To determine losses, Fitch used the above stressed cash flow and applied a market cap rate by property type, ranging between 7.5% and 9.5%, to derive a value. If the loan balance at default is less than Fitch's derived value, the loan would realize that amount of loss. These loss estimates were reviewed in more detail for loans representing 43.4% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Loss expectations attributed to loans reviewed in detail represent approximately 95% of the recognized losses. Approximately 21.8% of the mortgages mature within the next five years: 12.6% in 2010, 7.9% in 2012 and 0.4% in 2013 and 0.9% in 2014. In 2015, 69.6% of the pool is scheduled to mature. Fitch identified 22 Loans of Concern (20%) within the pool, seven of which (6.2%) are specially serviced. Of the specially serviced loans, two (1.1%) are current. Two of the specially serviced loans are within the transaction's top 15 loans (37.3%) by unpaid principal balance. Six of the Loans of Concern (11.4%) within the top 15 loans are assumed to default during the term, with loss severities ranging from 20% to 40%. Fitch expects that the remaining nine of the top 15 loans may default at maturity based on an insufficient accrued equity position as calculated in Fitch's refinance test. A loan would pass the refinance test if the stressed cash flow would achieve a 1.25x DSCR as calculated based on a 30 year amortization schedule and an 8% coupon. The largest contributors to loss are: Astor Crowne Plaza (2.1%), King's Shops (1.9%) and The District at Green Valley Ranch (1.8%). The Astor Crown Plaza loan is collateralized by a 707 room full- service hotel located in New Orleans, LA. The property sustained minor damage from Hurricane Katrina in September 2005 and was transferred to the special servicer. The loan was briefly transferred back to the master servicer in early 2009 prior to defaulting in June 2009 as a result of the economic downturn. The hotel completed a property improvement plan in 2008. As of YE 2008 Occupancy, ADR and RevPAR were 46.8%, $131.58 and $61.58, respectively, compared to 71.4%, $127.22 and $90.80 at issuance. The King's Shops loan is collateralized by a 73,500 square foot retail center located in Waikoloa, HI. Major tenants include Macy's (14% of net rentable area [NRA]), Blazin Steaks (8% NRA) and Roy's Waikoloa Bar & Grill (7% NRA). As of June 30, 2009 the servicer reported DSCR and occupancy were 1.18x and 89.9%, respectively, compared to 1.51x and 100% at issuance. Tenant sales as of year-end 2008 had declined approximately 30% due primarily to a decline in tourism in the area. Fitch considers it likely that the loan will default at its upcoming maturity date in February 2010. The District at Green Valley Ranch is collateralized by a 212,500 SF anchored retail center located in Henderson, NV. The loan transferred to the special servicer in November 2009 due to imminent default. The property has experienced declining occupancy and increased expenses since issuance as a result of the economic decline which had an outsize impact on Las Vegas and the surrounding area. Major tenants include REI (10% NRA), Pottery Barn (6% NRA) and Anthropologie (5% NRA). As of June 30, 2009 the servicer reported DSCR and occupancy were 0.96x and 87.9%, respectively, compared to 1.29x and 97% at issuance. Fitch has downgraded, removed from Rating Watch Negative, and assigned Rating Outlooks and Loss Severity ratings to these classes as indicated: -- $300.1 million class A-J to 'AA/LS3' from 'AAA'; Outlook Stable; -- $65 million class B to 'A/LS5' from 'AA'; Outlook Stable; -- $35 million class C to 'A/LS5' from 'AA-'; Outlook Stable; -- $75 million class D to 'BB/LS5' from 'A'; Outlook Stable; -- $40 million class E to 'BB/LS5' from 'A-'; Outlook Stable; -- $55 million class F to 'BB/LS5' from 'BBB+'; Outlook Stable; -- $45 million class G to 'B/LS5' from 'BBB'; Outlook Negative; -- $40 million class H to 'B-/LS5' from 'BBB-'; Outlook Negative. -- $20 million class J to 'B-/LS5' from 'BB'; Outlook Negative; -- $20 million class K to 'B-/LS5' from 'BB-'; Outlook Negative; -- $20 million class L to 'B-/LS5' from 'B+'; Outlook Negative; -- $10 million class M to 'B-/LS5' from 'B'; Outlook Negative; -- $10 million class N to 'CCC/RR6' from 'B-'. Fitch has revised the Recovery Rating on this class as indicated: -- $10 million class O to 'CCC/RR6' from 'CCC/RR1'. Fitch has affirmed these classes and assigned LS ratings as indicated: -- $57.9 million class A-1 at 'AAA/LS2'; Outlook Stable; -- $28.9 million class A-1P at 'AAA/LS2'; Outlook Stable; -- $102.4 million class A-DP at 'AAA/LS2'; Outlook Stable; -- $349.9 million class A-2 at 'AAA/LS2'; Outlook Stable; -- $288.7 million class A-3 at 'AAA/LS2'; Outlook Stable; -- $207.3 million class A-ABA at 'AAA/LS2'; Outlook Stable; -- $29.6 million class A-ABB at 'AAA/LS2'; Outlook Stable; -- $500 million class A-4 at 'AAA/LS2'; Outlook Stable; -- $1.2 billion class A-4A at 'AAA/LS2'; Outlook Stable; -- $167.4 million class A-4B at 'AAA/LS2'; Outlook Stable; -- $169 million class A-1A at 'AAA/LS2'; Outlook Stable; -- Interest-only class X-P at 'AAA'; Outlook Stable; -- Interest-only class X-C at 'AAA'; Outlook Stable. Fitch does not rate the $54.4 million class P. GSMPS PASS-THROUGH: Moody's Cuts Ratings on Six 2004-2R Certs. -------------------------------------------------------------- Moody's Investors Service has downgraded the ratings on six certificates issued by GSMPS Pass-Through Trust 2004-2R. The certificates in the resecuritization are backed by several 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. Complete Rating Actions are: Issuer: GSMPS Pass-Through Trust 2004-2R -- Cl. A, Downgraded to A1; previously on April 28, 2004 Assigned Aaa -- Cl. B-1, Downgraded to Ba1; previously on April 28, 2004 Assigned Aa2 -- Cl. B-2, Downgraded to Caa1; previously on April 28, 2004 Assigned A2 -- Cl. B-3, Downgraded to C; previously on April 28, 2004 Assigned Baa2 -- Cl. B-4, Downgraded to C; previously on April 28, 2004 Assigned Ba2 -- Cl. B-5, Downgraded to C; previously on April 28, 2004 Assigned B2 JP MORGAN: Fitch Takes Various Rating Actions on 2005-LDP2 Notes ---------------------------------------------------------------- Fitch Ratings takes various rating actions on all rated classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., Series 2005-LDP2. 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 4.9% for this transaction, should market conditions not recover. The rating actions are based on losses of 4.5%, including 100% of the losses associated with term defaults and any losses associated with maturities within the next five years. 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. To determine potential defaults for each loan Fitch assumed cash flow would decline by 10% from year-end 2008. This is consistent with the analysis used in its review of recent vintage transactions whereby cash flow was assumed to decline 15% from year-end 2007 projected over a three-year period. If the stressed cash flow would cause the loan to fall below 0.95 times, Fitch assumed the loan would default during the term. To determine losses, Fitch used the above stressed cash flow and applied a market cap rate by property type, ranging between 7.5% and 9.5%, to derive a value. If the loan balance at default is less than the stressed cash flow the loan would realize that loss. These loss estimates were reviewed in more detail for loans representing 43.4% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Approximately 90% of the mortgages mature within the next five years: 10.3% in 2010, 0.2% in 2011 and 19.9% in 2012, 3.1% in 2013, and 56.4% in 2015. Fitch identified 53 Loans of Concern (12.4%) within the pool, 11 of which (3.2%) are specially serviced. Of the specially serviced loans, two (0.5%) are current. Losses are expected on five (8.7%) of the loans within the Top 15: three (4%) of these loans are expected to default during the term, while losses on the remaining two loans (4.7%) are expected at maturity. Loss severities associated with these loans range from 3% to 36%. The largest contributors to loss are: Cross Creek Shopping Center (1.6%), Bently Green/Sandpiper - Milestone (1.6%), and Ashwood-Southfield Portfolio (1.3%). Cross Creek Shopping Center is secured by a 363,333 square foot anchored retail center in Memphis, TN, approximately 20 miles southeast of downtown Memphis. The property is represented by a strong national tenant base, including Home Depot (rated 'BBB+' by Fitch) (28.3%), Kroger (rated 'BBB') (17.6%), Babies R Us (11.6%), and Bed, Bath & Beyond (9.6%). These tenants have leases that expire in 2017, 2016, 2012, and 2010, respectively. Property occupancy has declined to 90% as of second quarter-2009 (2Q'09) from 100% at origination, which has resulted in a decline of the DSCR from 1.24x at year-end 2008 to 1.09x as of 2Q'09. In addition, approximately 13.5% and 8.5% of the NRA will expire in 2011 and 2012, respectively. Fitch expects that the loan has a higher probability of defaulting during the term due to the decline in occupancy from origination, location within a market which continues to feel the systemic effects of the weak economy, and cash flow that would be unable to service the debt should continued declines to income occur. Bentley Green/Sandpiper - Milestone consists of an 820-unit apartment complex in Jacksonville, FL. Property performance in 2007 and 2008 decreased from issuance as a result of the poor economy and its effect on rental demand in the Jacksonville region. The Jacksonville multifamily market as of 2Q'09 reported a vacancy of 16.9% and an average asking rent of $761/unit. The subject's average in-place rent of $770/unit is in line with the market rates. The sponsor has been successful in improving occupancy throughout 2009. Occupancy as of 2Q'09 increased to 92%, from 85% at year-end 2008. Fitch expects that the loan may default at maturity as cash flow is not expected to increase to a level that would meet Fitch's refinance criteria. Ashwood-Southfield Portfolio consists of a 334,086 sf, two- property office portfolio, located in Atlanta, GA, and Southfield, MI. Both markets have been particularly hard hit by the recession. Atlanta and Detroit have experienced a significant increase in overall office vacancies and an erosion of market rents. The portfolio's Atlanta property is in the North Atlanta submarket, which is reporting a vacancy of 27% and asking rents of $17.30 psf as of 2Q'09. The Detroit property is located in the Farmington Hills submarket, which is reporting a vacancy of 18% and asking rents of $16.59 psf. The portfolio was 91% occupied as of 2Q'09 with an average in-place rent of $16.37 psf. Fitch expects the loan has a higher probability of defaulting during the term due to the poor market fundamentals the portfolio is subjected to, in addition to future tenant rollover. Fitch has downgraded, removed from Rating Watch Negative, and assigned Loss Severity Ratings and Outlooks to these classes as indicated: -- $216 million class A-J to 'AA/LS3' from 'AAA'; Outlook Stable; -- $18.6 million class B to 'AA/LS5' from 'AA+'; Outlook Negative; -- $41 million class C to 'A/LS5' from 'AA'; Outlook Negative; -- $26.1 million class D to 'BBB/LS5' from 'AA-'; Outlook Negative; -- $26.1 million class E to 'BBB/LS5' from 'A+'; Outlook Negative; -- $29.8 million class F to 'BB/LS5' from 'A'; Outlook Negative; -- $26.1 million class G to 'BB/LS5' from 'A-'; Outlook Negative; -- $44.7 million class H to 'B/LS5' from 'BBB+'; Outlook Negative; -- $29.8 million class J to 'B-/LS5' from 'BBB'; Outlook Negative; -- $37.2 million class K to 'B-/LS5' from 'BBB-'; Outlook Negative. -- $11.2 million class L to 'B-/LS5' from 'BB'; Outlook Negative; -- $14.9 million class M to 'B-/LS5' from 'BB-'; Outlook Negative; -- $11.2 million class N to 'B-/LS5' from 'B+'; Outlook Negative; -- $7.4 million class O to 'B-/LS5' from 'B'; Outlook Negative. In addition, Fitch has affirmed this class, removed from Rating Watch Negative, and assigned an LS Rating and Outlook: -- $7.4 million class P at 'B-/LS5'; Outlook Negative;. Fitch also has affirmed these classes and assigned LS ratings, Outlooks and Recovery Ratings as indicated: -- $542.1 million class A-1A at 'AAA/LS1'; Outlook Stable; -- $250 million class A-2 at 'AAA/LS1'; Outlook Stable; -- $367.4 million class A-3 at 'AAA/LS1'; Outlook Stable; -- $122.7 million class A-3A at 'AAA/LS1'; Outlook Stable; -- $561.3 million class A-4 at 'AAA/LS1'; Outlook Stable; -- $123.4 million class A-SB at 'AAA/LS1'; Outlook Stable; -- $247.9 million class A-M at 'AAA/LS3'; Outlook Stable; -- $50 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; -- $11.2 million class Q at 'CCC/RR1'. Class A-1 has paid in full. Fitch does not rate the $29.4 million class NR. JP MORGAN: Moody's Affirms Ratings on Ten 2006-LDP8 Certificates ---------------------------------------------------------------- Moody's Investors Service affirmed the ratings of ten classes and downgraded 14 classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2006-LDP8. The downgrades are due to higher expected losses for the pool resulting from anticipated losses from loans in special servicing. The affirmations are due to key rating parameters, including Moody's loan to value ratio, stressed debt service coverage ratio and Herfindahl Index, remaining within acceptable ranges. However, the pool is highly concentrated and loans representing 74% of the pool have a Moody's stressed DSCR below 1.00X. There is a high probability of default associated with several of the pool's larger highly levered loans. If one or two of these loans were to default with a loss estimate in excess of 40% of their outstanding balance, the Class A-M would likely be downgraded by one to three notches. On August 11, 2009 Moody's placed 14 classes on review for possible downgrade due to the credit uncertainty surrounding Maguire Properties Inc., the sponsor of the Gas Company Tower Loan (8% of the outstanding loan balance). This action concludes that review. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the October 15, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 1% to $3.0 billion from $3.1 billion at securitization. The Certificates are collateralized by 153 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top 10 loans representing 62% of the pool. Thirty-three loans, representing 12% 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, eight loans, representing 8% of the pool, are in special servicing. The largest specially serviced loan is the Tyson Galleria loan ($173.1 million -- 5.7% of the pool), which is secured by the borrower's interest in an 821,000 square foot regional mall located in McLean, Virginia. The loan is owned by an affiliate of General Growth Properties, Inc. and was transferred to special servicing due to GGP's bankruptcy filing. The property is included in the bankruptcy filing. Moody's does not predict a loss for this loan. Of the remaining seven specially serviced loans, four are either real estate owned or in the process of foreclosure. Moody's estimates an aggregate $35.1 million loss for seven of the specially serviced loans (44% loss severity on average). Moody's was provided with full-year 2008 operating results for 96% of the pool. Moody's weighted average LTV ratio is 108% compared to 132% at Moody's prior review in February 2009. Moody's prior review was part of the first quarter 2009 ratings sweep of 2006- 2009 vintage CMBS transactions. Moody's stressed DSCR is 0.90X compared to 0.80X 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 Herf 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 has a Herf of 20, the same as at last full review. The Tysons Galleria Loan ($173.1 million - 5.7% of the pool), previously had an investment grade underlying rating but is now analyzed as part of the conduit pool because of increased leverage. The loan, which is a pari passu interest in a $254.0 million first mortgage loan, is secured by the borrower's leasehold interest in an 821,000 square foot regional mall located in McLean, Virginia. The property is a dominant mall within its trade area and is anchored by Neiman Marcus, Saks Fifth Avenue and Macy's. The center was 99% leased as of December 2008, the same as at last review. In-line tenant sales were $793 per square foot for 2008 compared to $838 at securitization. The loan sponsor is an affiliate of GGP and the loan was transferred to special servicing in April 2009 due to GGP's bankruptcy filing. Although property performance has been stable, the property has not achieved the increased cash flow that was projected at securitization. Moody's LTV and stressed DSCR are 90% and 0.87X, respectively, compared to 67% and 1.17X at last review. The top four conduit loans represent 38% of the pool. The largest conduit loan is the Park La Brea Apartments Loan ($387.5 million - 12.8% of the pool), which represents a pari pasu interest in a $775.0 million first mortgage loan. The loan is secured by a 4,238-unit multifamily property located in Hollywood, California. The property was 96% occupied as of December 2008. The loan is interest-only for the entire term. Moody's LTV and stressed DSCR are 101% and 0.80X, respectively, compared to 132% and 0.82X at last review. The second largest conduit loan is the 53 State Street Loan ($280.0 million -- 9.2% of the pool), which is secured by a 1.1 million square foot Class A office building located in the financial office submarket in Boston, Massachusetts. The property was 90% occupied as of June 2009. The largest tenants include Goodwin Proctor (34% NRA; lease expiration 2011-2014), Hill Holiday (11.3%; lease expiration January 2018) and Citizens Bank (10.2%; lease expiration July 2010). The loan is interest-only for the entire term. Moody's LTV and stressed DSCR are 111% and 0.83X, respectively, compared to 117% and 0.83X at last review. The third largest conduit loan is the RREEF Silicon Valley Office Portfolio Loan ($250.0 million -- 8.2% of the pool), which represents a pari passu interest in a $700.0 million first mortgage loan. The loan is secured by 18 office/R&D properties located in the Silicon Valley area of California. The loan is interest-only for the entire term. Moody's LTV and stressed DSCR are 121% and 0.85X, respectively, compared to 152% and 0.71X at last review. The fourth largest conduit loan is the Gas Company Tower loan ($229.0 million -- 7.6% of the pool), which represents a pari pasu interest in a $458.0 million first mortgage loan. The loan is secured by Class A office building located in downtown Los Angeles, California. The property was 95% occupied as of June 2009, essentially the same as at securitization. The largest tenant is Southern California Gas Company, which occupies 43% of the premises through November 2011. The sponsor is Maguire. Although performance has been stable, Moody's is concerned about lease rollover exposure within the next three years, given the softness of the Los Angeles office market and Maquire's current financial issues. Moody's LTV and stressed DSCR are 156% and 0.61X, respectively, compared to 137% and 0.71X at last review. Moody's rating action is: -- Class A-1, $13,843,313, affirmed at Aaa; previously assigned at Aaa on 10/2/2006 -- Class A-2, $207,310,000, affirmed at Aaa; previously assigned at Aaa on 10/2/2006 -- Class A-3FL, $150,000,000, affirmed at Aaa; previously assigned at Aaa on 10/2/2006 -- Class A-3A, $50,000,000, affirmed at Aaa, previously assigned at Aaa on 10/2/2006 -- Class A-3B, $184,430,000, affirmed at Aaa, previously assigned at Aaa on 10/2/2006 -- Class A-4, $856,221,000, affirmed at Aaa, previously assigned at Aaa on 10/2/2006 -- Class A-SB, $69,145,000, affirmed at Aaa, previously assigned at Aaa on 10/2/2006 -- Class A-1A, $581,020,672, affirmed at Aaa, previously assigned at Aaa on 10/2/2006 -- Class A-M, $306,603,000, affirmed at Aaa, previously assigned at Aaa on 10/2/2006 -- Class X, Notional, affirmed at Aaa; previously assigned at Aaa on 10/2/2006 -- Class A-J, $260,612,000, downgraded to A3 from A1; previously placed on review for possible downgrade on 8/11/2009 -- Class B, $53,656,000, downgraded to Baa2 from A3; previously placed on review for possible downgrade on 8/11/2009 -- Class C, $22,995,000, downgraded to Baa3 from Baa1; previously placed on review for possible downgrade on 8/11/2009 -- Class D, $42,158,000, downgraded to Ba2 from Baa3; previously placed on review for possible downgrade on 8/11/2009 -- Class E, $34,492,000, downgraded to Ba3 from Ba1, previously placed on review for possible downgrade on 8/11/2009 -- Class F, $38,326,000, downgraded to B2 from Ba3, previously placed on review for possible downgrade on 8/11/2009 -- Class G, $30,660,000, downgraded to Caa1 from B2; previously placed on review for possible downgrade on 8/11/2009 -- Class H, $38,325,000, downgraded to Caa2 from B3; previously placed on review for possible downgrade on 8/11/2009 -- Class J, $11,498,000, downgraded to Caa3 from Caa1; previously placed on review for possible downgrade on 8/11/2009 -- Class K, $7,665,000, downgraded to Caa3 from Caa1; previously placed on review for possible downgrade on 8/11/2009 -- Class L, $11,498,000, downgraded to Ca from Caa2; previously placed on review for possible downgrade on 8/11/2009 -- Class M, $3,832,000, downgraded to Ca from Caa2; previously placed on review for possible downgrade on 8/11/2009 -- Class N, $11,498,000, downgraded to Ca from Caa3; previously placed on review for possible downgrade on 8/11/2009 -- Class P, $11,497,000, downgraded to Ca from Caa3; previously placed on review for possible downgrade on 8/11/2009 L2L EDUCATION: Moody's Reviews Ratings on Four 2006-1 Tranches -------------------------------------------------------------- Moody's has placed on review for possible downgrade four tranches issued by L2L Education Loan Trust 2006-1. The transaction is sponsored, serviced and administered by EduCap Inc. The underlying collateral consists of a pool of private student loans originated by EduCap, Inc. The loans in the pool are not guaranteed by either the Department of Education or a private guarantor. The review of the notes was driven by the deterioration in performance of the underlying collateral pool. Cumulative net losses to date, defined as accounts 120 days past due or greater, have already reached Moody's original loss expectations. Cumulative net losses, as a percent of the original collateral pool balance (adjusted for cumulative loans added during the acquisition period and capitalized interest as of the reporting period ended September 30, 2009) were 12.2%. In comparison, Moody's original lifetime net losses were expected in the range of 12.0% to 13.0%. During the review period, Moody's will assess whether the available credit enhancement is sufficient to support the current ratings of the affected tranches in light of Moody's estimation of future collateral losses. In finalizing the ratings, Moody's analysis will include the estimation of lifetime expected gross defaults, recoveries, the total available credit enhancement such as the reserve account, overcollateralization, subordination and excess spread, and the structural protections built into the transaction. The complete actions are: Issuer: L2L Education Loan Trust 2006-1 -- Cl. A-2, Aaa Placed Under Review for Possible Downgrade; previously on Dec 14, 2006 Assigned Aaa -- Cl. A-3, Aaa Placed Under Review for Possible Downgrade; previously on Dec 14, 2006 Assigned Aaa -- Cl. B, A3 Placed Under Review for Possible Downgrade; previously on Dec 19, 2007 Downgraded to A3 -- Cl. C, Ba2 Placed Under Review for Possible Downgrade; previously on Dec 5, 2008 Downgraded to Ba2 LB-UBS COMMERCIAL: S&P Downgrades Ratings on 19 2006-C3 Securities ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 19 classes of commercial mortgage-backed securities from LB-UBS Commercial Mortgage Trust 2006-C3 and removed them from CreditWatch with negative implications. In addition, S&P affirmed its ratings on 10 classes, including four raked classes, from the same transaction. The downgrades follow S&P's analysis of the transaction using its U.S. conduit and fusion CMBS criteria, which was the primary driver of S&P's rating actions. The downgrades of the subordinate and mezzanine classes also reflect credit support erosion S&P anticipate will occur upon the eventual resolution of several 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 1.22x and a loan-to-value ratio of 124.4%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 0.81x and an LTV of 171.7%. The implied defaults and loss severity under the 'AAA' scenario were 83.3% and 46.6%, respectively. All of the DSC and LTV calculations S&P noted above exclude five ($44.7 million, 2.6%) of the seven specially serviced loans. S&P separately estimated losses for these loans and included them in its 'AAA' scenario implied default and loss figures. The affirmations of the ratings on the pooled principal and interest certificates reflect subordination levels that are consistent with the outstanding ratings. The affirmations of the "NBT" raked certificates reflect S&P's analysis of the Northborough Tower junior nonpooled portion of the loan. The raked certificates derive 100% of their cash flows from the junior nonpooled portion of the loan. The whole loan is secured by a 207,908-sq.-ft. office property in Houston, Texas. As of the trailing six months ended June 30, 2009, the reported DSC was 1.84x and occupancy was 100%. S&P affirmed its ratings on the class X-CL and X-CP interest-only certificates 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 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 Considerations As of the October 2009 remittance report, six loans ($102.8 million, 6.0%) in the pool were with the special servicer, CWCapital Asset Management LLC, including one of the top 10 loans. Four of the specially serviced loans are more than 90 days delinquent ($42.6 million, 2.5%) and have appraisal reduction amounts in effect totaling $18.5 million. The largest loan with CWCapital and the eighth-largest loan in the pool is the Time Hotel loan, which has a total exposure of $55.3 million (3.2%). The loan was transferred to the special servicer on Aug. 26, 2009, due to imminent default. The loan is less than 30 days delinquent and is secured by a 193-room hotel in New York City. For the trailing six months ended June 30, 2009, the reported DSC was negative, down from a 2.11x DSC for year-end 008. The borrower has requested a loan modification. The remaining specially serviced loans have balances that individually represent less than 0.9% of the total pool balance. In addition, S&P deemed the Best Western - Amsterdam loan $2.1 million, 0.1%) to be credit-impaired. This loan was transferred to the special servicer after the October remittance report due to imminent monetary default. The loan is 60 days delinquent, and the reported DSC for year-end 2008 was negative. The loan is secured by a 125-room limited-service hotel built in 1973 in Amsterdam, N.Y. Transaction Summary As of the October 2009 remittance report, the collateral pool consisted of 123 loans with an aggregate trust balance of $1.71 billion, which represents approximately 98.2% 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. (Wachovia), provided financial information for 98.9% of the pool; 95.3% of the financial information was full-year 2008 data or interim-2009 data. S&P calculated a weighted average DSC of 1.33x for the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.22x and 124.4%, respectively. S&P's adjusted DSC and LTV figures exclude five ($44.7 million, 2.6%) of the seven specially serviced loans; S&P separately estimated losses for these loans. Wachovia provided DSC figures for all five of these loans, and based on its figures, S&P calculated a weighted average DSC of 0.91x. Thirty- two loans (29.9%) are on Wachovia's watchlist, including four of the top 10 loans. Twenty-eight loans ($388.1 million, 22.7%) have a reported DSC of less than 1.10x, and 19 of these loans ($174.4 million, 10.2%) have a reported DSC of less than 1.0x. Summary of Top 10 Loans The top 10 exposures have an aggregate outstanding balance of $759.6 million (46.6%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.33x for the top 10 loans. Four of the top 10 loans ($351.7 million, 20.5%) appear on Wachovia's watchlist and one ($55.0 million, 3.2%) is with CWCapital, as S&P discussed in the credit considerations section above. S&P's adjusted DSC and LTV for the top 10 loans are 1.11x and 146.4%, respectively. The two largest loans on Wachovia's watchlist are discussed below. The Station Place II loan is the second-largest loan in the pool and the largest loan on Wachovia's watchlist. The loan is on the watchlist due to low DSC. The loan is current and has a trust balance of $102.0 million (6.0%). The loan is secured by a 362,069-sq.-ft. office building in Washington, D.C., which is 100% occupied by the U.S. Securities and Exchange Commission. For the trailing six months ended June 30, 2009, the reported DSC was 0.69x, down from a 1.08x DSC for year-end 2008; occupancy remained unchanged at 100%. The decline in DSC is due to increased real estate taxes at the property as a result of a new 2008 assessment, which was 86% higher than in 2007. The borrower and the tenant have agreed upon modifications to the SEC's lease. One of the lease modifications is that beginning in tax-year 2010, the tenant will pay its share of any increase in real estate taxes. The 200 South Wacker Drive loan is the third-largest loan in the pool and the second-largest loan on Wachovia's watchlist. The loan is on the watchlist due to low DSC. The loan is current and has a trust balance of $95.5 million (5.6%). The loan is secured by a 758,961-sq.-ft. office building in Chicago's West Loop submarket. For the trailing six months ended June 30, 2009, the reported DSC was 1.12x and occupancy was 81%, up from a DSC of 0.89x and 84.6% occupancy as of year-end 2008. However, Boston Consulting Group, which occupies 12% of the net rentable area , has given notice that it will vacate the property upon its Jan. 31, 2010, lease expiration. Standard & Poor's stressed the loans in the pool according to its conduit/fusion criteria. The resultant credit enhancement levels are consistent with the lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative LB-UBS Commercial Mortgage Trust 2006-C3 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-4 A AAA/Watch Neg 30.55 A-1A A AAA/Watch Neg 30.55 A-M BBB- AAA/Watch Neg 20.37 A-J BB AAA/Watch Neg 14.13 B BB- AA+/Watch Neg 13.24 C B+ AA/Watch Neg 11.84 D B+ AA-/Watch Neg 10.82 E B+ A+/Watch Neg 10.06 F B+ A/Watch Neg 8.78 G B A-/Watch Neg 7.38 H B BBB+/Watch Neg 6.36 J B- BBB/Watch Neg 5.09 K B- BBB-/Watch Neg 3.95 L B- BB+/Watch Neg 3.44 M CCC+ BB/Watch Neg 2.93 N CCC+ BB-/Watch Neg 2.42 P CCC B+/Watch Neg 2.04 Q CCC- B/Watch Neg 1.65 S CCC- B-/Watch Neg 1.40 Ratings Affirmed LB-UBS Commercial Mortgage Trust 2006-C3 Commercial mortgage pass-through certificates Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.55 A-2 AAA 30.55 A-3 AAA 30.55 A-AB AAA 30.55 X-CL AAA N/A X-CP AAA N/A NBT-1 BBB N/A NBT-2 BB N/A NBT-3 B N/A NBT-4 B- N/A N/A - Not applicable. LENOX STREET: Moody's Downgrades Ratings on Nine 2007-1 Notes ------------------------------------------------------------- Moody's Investors Service downgraded nine classes of Notes issued by Lenox Street 2007-1, Ltd. The downgrades are due to deterioration in the credit quality of the underlying collateral portfolio and the triggering of an Event of Default by a failure in the Default Par Value Coverage Ratio resulting from rating downgrades of the underlying collateral. Moody's also placed Class A through Class F on review for possible further downgrade due to the uncertainty about the potential remedies the Trustee may seek upon direction by a Majority of the Controlling Class. Lenox Street 2007-1, Ltd., is a revolving commercial real estate collateralized debt obligation transaction backed by a portfolio of CMBS (20% of the pool) and synthetic assets (80% of the pool). The aggregate collateral balance of the pool has decreased to $999.6 million from $1.0 billion at issuance, due to approximately $0.6 million in pay-down to the Class G, H and I Notes. The pay- down was a result of a provision that 20% of excess interest of the deal goes to pay the Class G, H and J Notes pro rata in each payment period. One CMBS security, one CRE CDO security and one synthetic asset totaling approximately $25.0 million (2.5% of the pool) were listed as defaulted. Moody's currently estimates $20.0 million in expected losses to the Notes due to losses on the defaulted assets (80% loss severity on average). Moody's has identified these parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor, weighted average life, weighted average recovery rate, and Moody's asset correlation. These parameters are modeled as actual parameters for static deals and as covenants for managed deals. WARF is a primary measure of the credit quality of a CRE CDO pool. Moody's have completed updated credit estimates for the entire pool and the results will be reflected in a future Trustee Report. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF, excluding defaulted loans, of 4,088 compared to 2,941 at last review. The distribution of current ratings and credit estimates is: Baa1-Baa3 (4.4% compared to 19.8% at last review), Ba1-Ba3 (14.2% compared to 12.1% at last review), B1-B3 (49.6% compared to 46.5% at last review), Caa1-NR (31.8% compared to 21.6% at last review). WAL acts to adjust the credit exposure of the collateral pool. Moody's modeled to the actual WAL of 7 years, compared to the covenanted WAL of 9 years at last review. WARR is the par-weighted average of the mean recovery values for the collateral assets in the pool. Moody's modeled a fixed WARR, excluding defaulted loans, of 4.9% compared to 7.6% at last review. MAC is a single factor that describes the pair-wise asset correlations among the instruments within the collateral pool (i.e. the measure of diversity). Moody's modeled a MAC, excluding defaulted loans, of 51.4% compared to 51.5% at last review. All collateral and reference obligations are now rated at Baa3 or lower, which has resulted in over $277.1 million in par value haircuts, which have been factored into the calculations of both the Overcollateralization Test and Default Par Value Coverage Ratio. As of October 26, 2009, the Trustee reports that the transaction is currently failing its Class A/B Overcollateralization Test (80.29% actual versus a trigger of 109.96%), Class E/F Overcollateralization Test (100.46% actual versus a trigger of 101.00%) as well as its Default Par Value Coverage Ratio (98.78% actual versus a trigger of 100.00%). Due to the failure of the transaction's Overcollateralization Test, the interest due on the Class C, Class D, Class E, Class F, Class G, Class H, and Class J Notes is being treated as deferred interest payable-in-kind. Per Section 5.1(j) of the Indenture, EOD has been triggered as a result of the Default Par Value Coverage Ratio dropped below 100%. During the occurrence and continuance of an Event of Default, a Majority of the Controlling Class to the transaction may direct the Trustee to take particular actions with respect to all or a portion of the collateral or reference obligations or rights of interest therein, including liquidation (in the case of Synthetic Assets entered into pursuant to the Synthetic Asset Agreement, designate an "Early Termination Date" under such Synthetic Asset Agreement). Moody's notes that the transaction is exposed to a significant concentration of CMBS assets, the majority of which have low investment grade and below investment grade ratings. It is also exposed to CRE CDOs with below investment grade ratings. Both types of assets have shown depressed market valuations recently and thus may result in significant losses to the transaction from any sale of cash collateral and/or any early termination of credit default swap contracts. Moody's review incorporated updated asset correlation assumptions for the commercial real estate sector consistent with one of Moody's CDO rating models, CDOROM v2.5, which was released on April 3, 2009. These correlations were updated in light of the systemic seizure of credit markets and to reflect higher inter- and intra-industry asset correlations. The updated asset correlations, depending on vintage and issuer diversity, used for CUSIP collateral (i.e. CMBS, CRE CDOs or REIT debt) within CRE CDOs range from 30% to 60%, compared to 15% to 35% previously. The cash flow model, CDOEdge v3.2, was used to analyze the cash flow waterfall and its effect on the capital structure of the deal. The rating action is: -- Cl. A, Downgraded to B1 and remains on Review for Possible Downgrade; previously on August 14, 2009 Baa1 Placed Under Review for Possible Downgrade -- Cl. B, Downgraded to B3 and remains on Review for Possible Downgrade; previously on August 14, 2009 Baa3 Placed Under Review for Possible Downgrade -- Cl. C, Downgraded to Caa2 and remains on Review for Possible Downgrade; previously on August 14, 2009 Ba2 Placed Under Review for Possible Downgrade -- Cl. D, Downgraded to Caa2 and remains on Review for Possible Downgrade; previously on August 14, 2009 Ba3 Placed Under Review for Possible Downgrade -- Cl. E, Downgraded to Caa3 and remains on Review for Possible Downgrade; previously on August 14, 2009 Ba3 Placed Under Review for Possible Downgrade -- Cl. F, Downgraded to Caa3 and remains on Review for Possible Downgrade; previously on August 14, 2009 B1 Placed Under Review for Possible Downgrade -- Cl. G, Downgraded to Ca; previously on August 14, 2009 B2 Placed Under Review for Possible Downgrade -- Cl. H, Downgraded to Ca; previously on August 14, 2009 B2 Placed Under Review for Possible Downgrade -- Cl. J, Downgraded to C; previously on August 14, 2009 B2 Placed Under Review for Possible Downgrade As always, Moody's ratings are determined by a committee process that considers both quantitative and qualitative factors. The rating outcome may differ from the model output. Moody's monitors transactions both on a monthly basis through a review of the available Trustee Reports and a periodic basis through a full review. Moody's prior review is summarized in a press release dated March 19, 2009. LONGSHORE CDO: S&P Downgrades Ratings on Six Classes to 'D' ----------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings to 'D' on six classes of notes issued by Longshore CDO Funding 2006-2 Ltd., a cash flow collateralized debt obligation transaction backed predominantly by senior tranches of residential mortgage-backed securities. The downgrades are consistent with the criteria S&P use to assess ratings on CDO transactions subject to acceleration or liquidation following an event of default. Longshore CDO Funding 2006-2 Ltd. triggered an EOD on May 28, 2008; following the EOD, the controlling noteholders elected to liquidate the collateral assets. S&P has received notice from the trustee stating that the liquidation of the portfolio assets is complete and that the available proceeds were insufficient to pay the noteholders in full. Rating Actions Longshore CDO Funding 2006-2 Ltd. Rating ------ Class To From ----- -- ---- A-1 D CC A-2 D CC B D CC C-1 D CC C-2 D CC D D CC MASTR ADJUSTABLE: Moody's Downgrades Ratings on Nine 2002-3 Notes ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of nine classes of notes issued by MASTR Adjustable Rate Mortgages Trust 2002-3. The downgrades are a result of continued performance deterioration of the remaining loans in the pool (19 loans remaining) and the depletion of credit support due to the high loss severity experienced on the loan liquidated in the last reporting period. The ratings are based on the methodology applied to all transactions with small pool factors. Moody's defines low pool factor deals as those that meet one of these two criteria: (1) the outstanding collateral balance is less than $1 million, and the pool factor is less than 5% or (2) the pool has fewer than 50 loans remaining. Moody's uses the following methodology to estimate losses on low pool factor deals. First, gross defaults are determined by applying assumed lifetime roll-rates (probabilities of transition to default) to the transactions' current delinquency buckets ("delinquency pipeline") and a pipeline multiplier. The pipeline multiplier accounts for further possible defaults that might arise from borrowers that are current. The pipeline multiplier differs for each deal based on the number of loans remaining in the pool -- greater the number of loans remaining the higher the multiplier. The estimated defaults are subject to a floor -- a minimum default. The minimum default also differs based on the number loans remaining in the pool. The fewer the number of loans remaining in the pool the higher the minimum default since each loan represents a higher percentage of the pool. The final default number is then multiplied by expected loss severity to arrive atMoody's expected loss estimate. Loss severity also differs by transaction and is higher for more recent vintages. Complete rating actions are: Issuer: MASTR Adjustable Rate Mortgages Trust 2002-3 (Loans Remaining: 19) -- Cl. 1-A-1, Current Balance: $1,017,959, Downgraded to Aa1; previously on Sep 18, 2002 Assigned Aaa -- Cl. 2-A-1, Current Balance: $122,038, Downgraded to Aa1; previously on Sep 18, 2002 Assigned Aaa -- Cl. 2-A-2, IO Class, Downgraded to Aa1; previously on Sep 18, 2002 Assigned Aaa -- Cl. 3-A-1, Current Balance: $469,735, Downgraded to Aa1; previously on Sep 18, 2002 Assigned Aaa -- Cl. 4-A-1, Current Balance: $4,808,977, Downgraded to Aa1; previously on Sep 18, 2002 Assigned Aaa -- Cl. B-1, Current Balance: $872,989, Downgraded to Baa2; previously on Jun 11, 2009 Downgraded to A1 -- Cl. B-2, Current Balance: $340,532, Downgraded to Caa1; previously on Jun 11, 2009 Downgraded to Baa3 -- Cl. B-3, Current Balance: $291,812 Downgraded to C; previously on Jun 11, 2009 Downgraded to Ba3 -- Cl. B-4, Current Balance: $0, Downgraded to C; previously on Jun 11, 2009 Downgraded to B3 MERCURY CDO: Moody's Downgrades Ratings on Five 2004-1 Notes ------------------------------------------------------------ Moody's Investors Service announced that it has downgraded the ratings of 5 classes of Notes issued by Mercury CDO 2004-1, Ltd. The Notes affected by the rating action are: -- US$299,900,000 Class A-1NV First Priority Senior Secured Non- Voting Floating Rate Notes, Downgraded to B3; previously on March 24, 2009 Downgraded to Baa1 -- US$100,000 Class A-1VA First Priority Senior Secured Voting Floating Rate Notes, Downgraded to B3; previously on March 24, 2009 Downgraded to Baa1 -- US$330,000,000 Class A-1VB First Priority Senior Secured Voting Floating Rate Notes, Downgraded to B3; previously on March 24, 2009 Downgraded to Baa1 -- US$25,000,000 Class A-2A Second Priority Senior Secured Floating Rate Notes, Downgraded to Ca; previously on March 24, 2009 Downgraded to Caa3 -- US$31,050,000 Class A-2B Second Priority Senior Secured Floating Rate Notes, Downgraded to Ca; previously on March 24, 2009 Downgraded to Caa3 Mercury CDO 2004-1, Ltd., is a collateralized debt obligation backed primarily by a portfolio of residential mortgage backed securities and collateral debt obligations. The rating downgrade actions reflect deterioration in the credit quality of the underlying portfolio. Credit deterioration of the collateral pool is observed through a decline in the average credit rating. Moody's notes that in the case of Mercury CDO 2004-1, more than 29% of its assets have been the subject of ratings downgrade since Moody's last review of the transaction in March 2009. The OC test has been failing its trigger level and has been deteriorating. Defaults currently total $92,405,631 as compared to $45,738,469 as reported in the March 2009 trustee report. In deriving its ratings, Moody's uses the collateral instrument's current rating-based expected loss, Moody's recovery rate table, and the original rating of the instrument along with its average life to infer an unadjusted default probability. Moody's explained that in addition to the quantitative factors that are explicitly modeled, qualitative factors are part of the Moody's rating committee considerations. These qualitative factors include but are not limited to the structural protections in the transaction, the recent performance of the transaction in the current market environment, how legal risks and issues are addressed in transaction documentation, 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 MERRILL LYNCH: Fitch Takes Various Rating Actions on 14 Classes --------------------------------------------------------------- Fitch Ratings takes various rating actions on 14 rated classes of Merrill Lynch Mortgage Trust 2005-CIP1 commercial mortgage pass- through certificates. 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 5.4% for this transaction, should market conditions not recover. The rating actions are based on the full losses of 5.3% as a majority of loans mature in the next five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future. To determine potential defaults for each loan, Fitch assumed cash flow would decline by 10% from year-end 2008. That is consistent with the analysis used in its review of recent vintage transactions whereby cash flow was assumed to decline 15% from year-end 2007 projected over a three-year period. If the stressed cash flow would cause the loan to fall below 0.95 times debt service coverage ratio, Fitch assumed the loan would default during the term. To determine losses, Fitch used the above stressed cash flow and applied a market cap rate by property type, ranging between 7.5% and 9.5%, to derive a value. If the loan balance at default is less than Fitch's derived value, the loan would realize that amount of loss. These loss estimates were reviewed in more detail for loans representing 58.5% of the non- defeased pool and, in certain cases, revised based on additional information and/or property characteristics. Loss expectations attributed to loans reviewed in detail represent approximately 95% of the 5.3%. Approximately 98% of the mortgages mature within the next five years: 27% in 2010, 10.7% in 2012 and 60.3% in 2015. Fitch identified 23 Loans of Concern (30.3%) within the pool, six of which are specially serviced (14.0%). Of the specially serviced loans, two are current (10.1% of the pool). Six of the Fitch Loans of Concern (23.2%) are within the transaction's top 15 loans (46.3% of the pool), and four (13.2%) are specially serviced. Four loans (8.7%) are currently defeased, including two top 15 loans by balance (8.2%). Four of the top 15 loans are assumed to default during the loan term or at maturity with losses expected. Two loans in special servicing are performing and remain current (10.1% of the pool) with no losses expected. The remaining top 15 loans may default at maturity based on an insufficient accrued equity position as calculated in Fitch's refinance test. A loan would pass the refinance test if the stressed cash flow would achieve a 1.25x DSCR as calculated based on a 30-year amortization schedule and an 8% coupon. Of the loans in special servicing, the largest contributors of expected term losses are University Village (1.6% of the pool) and Holiday Inn Mission Bay SeaWorld (1.5%). The largest contributors of loss by loans not in special servicing are the Highwoods Portfolio (8% of the pool) and Equity Lifestyle Portfolio (2%). University Village, the largest non-performing specially serviced asset, is a 161,090 square foot retail center located in Riverside, CA, near the University of California at Riverside campus. The asset transferred to special servicing in January 2009 and the special servicer is pursuing foreclosure. The servicer-reported occupancy as of July 2009 was 72%, a significant decrease from 95% at issuance. The property is located in the Inland Empire area of Southern California, which has faced a significant economic downturn during the recession. Holiday Inn Mission Bay SeaWorld is a 316-key limited service hotel located in San Diego, CA, near the SeaWorld Resort. The asset transferred to special servicing in May 2009 for imminent default. The trailing 12-month reported occupancy and revenue per available room as of March 2009 was 53% and $45, respectively, compared to 78% and $89, respectively, at issuance. According to PPR, as of third quarter 2009, RevPAR in the San Diego area is down approximately 19% from 2008. The property is no longer affiliated with Holiday Inn (renamed the Mission Plaza Hotel & Suites) and a receiver is in place at the property. Highwoods Portfolio is secured by a pool of 31 cross- collateralized office properties in Charlotte, NC (18 properties) and Tampa, FL (13 properties). The loan is schedule to mature in August 2010. The combined second- quarter 2009 servicer-reported DSCR and portfolio occupancy was 1.57x and 72%, respectively. At issuance, occupancy was 79.9% and the property has not leased vacant space as originally contemplated. The June 2009 rent rolls indicate approximately 39% of the leases expire before year-end 2011. Equity Lifestyle Portfolio is collateralized by three manufactured housing recreational vehicle parks with two located in upstate New York and one located in New Hampshire. The combined servicer- reported YE 2008 DSCR was 0.39x and March 2009 was 0.45x, respectively. At issuance, the underwritten DSCR was 1.30x. The servicer-reported occupancy as of June 2009 was 76.1%. As of October 2009, a total of approximately $7.3 million remained in the debt service reserve and the seasonality reserve. Fitch has downgraded, removed from Rating Watch Negative, and assigned loss severity ratings, Rating Outlooks and Recovery Ratings these: -- $138.8 million class AJ to 'AA/LS3' from 'AAA'; Outlook Stable; -- $43.7 million class B to 'A/LS5' from 'AA'; Outlook Stable; -- $18 million class C to 'A/LS5' from 'AA-'; Outlook Stable; -- $38.6 million class D to 'BBB/LS5' from 'A'; Outlook Negative; -- $25.7 million class E to 'BB/LS5' from 'A-'; Outlook Negative; -- $33.4 million class F to 'B/LS5' from 'BBB+'; Outlook Negative; -- $20.6 million class G to 'B-/LS5' from 'BBB'; Outlook Negative; -- $25.7 million class H to 'B-/LS5' from 'BBB-'; Outlook Negative; -- $10.3 million class J to 'B-/LS5' from 'BB+'; Outlook Negative; -- $5.1 million class K to 'B-/LS5' from 'BB'; Outlook Negative; -- $7.7 million class L to 'B-/LS5' from 'BB-'; Outlook Negative; -- $7.7 million class M to 'B-/LS5' from 'B+'; Outlook Negative; -- $5.1 million class N to 'CCC/RR6' from 'B'; -- $5.1 million class P to 'CCC/RR6' from 'B-'. Fitch also affirms these classes and assigns LS ratings and Outlooks as indicated: -- $16.2 million class A-1 at 'AAA/LS1'; Outlook Stable; -- $533.8 million class A-2 at 'AAA/LS1'; Outlook Stable; -- $157.9 million class A-3A at 'AAA/LS1'; Outlook Stable; -- $50 million class A-3B at 'AAA/LS1'; Outlook Stable; -- $108 million class A-SB at 'AAA/LS1'; Outlook Stable; -- $510.3 million class A-4 at 'AAA/LS1'; Outlook Stable; -- $205.7 million class AM at 'AAA/LS3'; Outlook Stable; -- Interest-only class XC at 'AAA'; Outlook Stable; -- Interest-only class XP at 'AAA'; Outlook Stable. Fitch does not rate the $25.7 million class Q. MERRILL LYNCH: S&P Downgrades Ratings on 24 2008-C1 Securities -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 24 classes of commercial mortgage-backed securities from Merrill Lynch Mortgage Trust 2008-C1 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 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 and excluding loans that S&P considers credit concerns, S&P calculated an adjusted debt service coverage of 1.31x and a loan-to-value ratio of 109.53%. S&P further stressed the loans' cash flows under its 'AAA' scenario to yield a weighted average DSC of 0.83x and an LTV of 156.37%. The implied defaults and loss severity under the 'AAA' scenario were 96.0% and 39.01%, respectively. The DSC and LTV calculations excluded one specially serviced loan ($9.8 million, 1%). S&P separately estimated a loss for this specially serviced loan and included it in its 'AAA' scenario implied default and loss figures. The affirmations of the principal and interest classes reflect subordination levels that are consistent with the outstanding ratings. S&P affirmed the rating on the interest-only class 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 finalizes its criteria review, S&P may revise its current IO criteria, which may affect outstanding ratings, including the rating on the IO certificates S&P affirmed. Credit Considerations Eleven loans ($95.5 million, 10.1%) in the pool, including the eighth-largest loan, are with the special servicer, Midland Loan Services Inc. Ten of the 11 specially serviced loans were transferred after the borrower, DBSI Inc., a tenant-in-common sponsor and master tenant, filed for bankruptcy in November 2008. S&P expects eight of the DBSI loans with the special servicer ($80.9 million, 9%) to be returned to the master servicer as corrected mortgages once new sponsors are in place and DBSI has been replaced as the master lessee, and once the servicer receives any past-due and reinstatement fees. This includes the eighth- largest exposure in the pool ($16.0 million, 2%), which S&P discuss in detail in the top 10 section below. The special servicer is also in the process of negotiating a loan modification for another DBSI loan ($3.1 million, 0.3%). For the remaining DBSI loan ($9.8 million, 2%), a receiver has been appointed. The borrower for the one non-DBSI-related specially serviced loan ($1.6 million, 0.17%) recently signed a new lease with a tenant that will bring occupancy at the property to 100%, and S&P expects this loan to be returned to the master servicer. The payment status of the specially serviced loans is: three loans are 90-plus-days delinquent ($14.5 million), two loans are 30 days delinquent ($14.6 million), five loans are in their grace periods ($57.1 million), and one loan ($9.3 million) is current. Three loans have appraisal reduction amounts totalling $5.9 million. Four loans in the pool have balances that are individually greater than 1% of the total pool balance, including the eighth-largest loan in the pool, which S&P discuss below. The remaining seven loans have balances that individually represent less than 1% of the total pool balance. Transaction Summary As of the October 2009 remittance report, the collateral pool has an aggregate trust balance of $944.1 million, which is approximately 99.5% of the aggregate trust balance at issuance. There are 92 loans in the pool, which is unchanged from issuance. The master servicers for the transaction are Midland Loan Services Inc., Bank of America N.A., and Wachovia National Bank N.A. The master servicers provided financial information for 97.9% of the loans, and 81.6% of the servicer-provided information was full- year 2008 or interim-2009 data. S&P calculated a weighted average DSC of 1.34x for the loans based on the reported figures. S&P's adjusted DSC and LTV were 1.31x and 109.53%, respectively. The DSC and LTV calculations excluded one of the specially serviced loans ($9.8 million, 1%), for which S&P separately estimated a loss. The DSC for this loan was 0.41x based on the servicer- reported numbers. Five loans ($29.1 million, 3.09%) in the pool are delinquent, and 11 are currently with the special servicer. The transaction has not experienced any principal losses to date. Thirteen loans ($70.8 million, 7.5%) are on the master servicer's watchlist. Fourteen loans ($98.2 million, 10.4%) have reported DSCs below 1.10x, and 11 of these loans ($78.7 million, 8%) have reported DSCs of less than 1.0x. Summary of Top 10 Loans The top 10 loan exposures have an aggregate outstanding balance of $487.5 million (52%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.39x for the top 10 loans. S&P's adjusted DSC and LTV for the top 10 loans were 1.33x and 107.93%, respectively. The Landmark Towers office loan is the eighth-largest exposure in the pool and the largest exposure with the special servicer. The loan has an outstanding balance of $16.0 million (2%). The loan was transferred to the special servicer in November 2008 due to the bankruptcy filing of the borrower and master tenant, DBSI. The loan is secured by a 25-story office building containing 212,959 sq. ft., with an adjacent seven-level parking garage. The property was built in 1983 in St. Paul, Minn. Occupancy was 89.9% based on a rent roll dated April 30, 2009; the DSC was 1.23x for the period ended June 30, 2009. The special servicer anticipates that this loan will be returned to the master servicer once a new sponsor is nominated and approved. S&P does not expect a loss upon the resolution of this loan. Standard & Poor's stressed the loans with the special servicer and the remaining 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 Merrill Lynch Mortgage Trust 2008-C1 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-4 AA- AAA/Watch Neg 30.15 A-1A AA- AAA/Watch Neg 30.15 A-1AF AA- AAA/Watch Neg 30.15 AM A- AAA/Watch Neg 20.10 AM-A A- AAA/Watch Neg 20.10 AM-AF A- AAA/Watch Neg 20.10 AJ BBB AAA/Watch Neg 14.19 AJ-A BBB AAA/Watch Neg 14.19 AJ-AF BBB AAA/Watch Neg 14.19 B BBB- AA+/Watch Neg 13.06 C BB+ AA/Watch Neg 11.81 D BB AA-/Watch Neg 10.93 E BB- A+/Watch Neg 10.05 F B+ A/Watch Neg 9.04 G B+ A-/Watch Neg 8.04 H B+ BBB+/Watch Neg 6.91 J B+ BBB/Watch Neg 5.65 K B BBB-/Watch Neg 4.52 L B BB+/Watch Neg 3.64 M B- BB/Watch Neg 3.27 N B- BB-/Watch Neg 2.89 P B- B+/Watch Neg 2.51 Q B- B/Watch Neg 2.26 S CCC+ B-/Watch Neg 1.88 Ratings Affirmed Merrill Lynch Mortgage Trust 2008-C1 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-SB AAA 30.15 X AAA N/A N/A - Not applicable. MERRILL LYNCH: S&P Downgrades Ratings on 2008-LAQ Certificates -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its 'AAA' ratings on three classes of commercial mortgage pass-through certificates from Merrill Lynch Floating Trust's series 2008-LAQ and removed them from CreditWatch with negative implications. The downgrades follow S&P's continued analysis of the hotel properties that serve as collateral for the sole mortgage loan in this transaction. These hotel properties have, in S&P's opinion, experienced significant operating performance declines since issuance. S&P believes that the decline is primarily due to a reduction in business and leisure travel. The downgrades reflect a significant decline in revenue per available room from S&P's expectations at issuance. The resulting net cash flow declines have prompted us to revise S&P's stressed valuation downward by 33% since issuance, resulting in S&P's calculation of an 80% loan- to-value. S&P based its analysis, in part, on a review of the borrower's operating statements for the trailing 12 months ended Sept. 30, 2009, the 12 months ended Dec. 31, 2008, and its 2009 budgets. S&P's analysis factored in the borrower's reported 17% decline in RevPAR for the portfolio for the TTM, compared with the levels S&P assessed at issuance. According to Smith Travel Research, the midscale without food & beverage segment of the hotel industry posted a 15% decline in RevPAR in the first nine months of 2009 compared with the same period in 2008, whereas the general U.S. hotel industry reported an 18% decline in RevPAR for the same period. The master servicer, Bank of America N.A., reported a debt service coverage for the portfolio of 3.32x for year-end 2008 and reported 59% occupancy as of September 2009. As of the Nov. 9, 2009, trustee remittance report, the interest- only mortgage loan has a whole-loan balance of $2.35 billion that consists of 28 in-trust senior notes totaling $1.438 billion and two nontrust junior notes totaling $911.6 million. In addition, the equity interests in the borrower of the whole loan secure five mezzanine loans totaling $750.0 million that do not serve as collateral for the trust. This loan is secured by 355 limited-service hotel properties totaling 44,110 rooms in 35 states in the U.S. The collateral properties operated under one of three flags: La Quinta Inn, La Quinta Inn & Suites, and Baymont Inn and Suites. The loan matures on July 6, 2010, and has two one-year extension options remaining. The loan has property release provisions provided certain conditions are met, which include a payment of a release price that is 100%-120% of the applicable released amount for the mortgaged property. To date, no properties have been released. Ratings Lowered And Removed From Creditwatch Negative Merrill Lynch Floating Trust Commercial mortgage pass-through certificates series 2008-LAQ Rating ------ Class To From ----- -- ---- A-1 AA+ AAA/Watch Neg A-2 BBB- AAA/Watch Neg A-3 BB+ AAA/Watch Neg MICHIGAN STATE HOSPITAL: Fitch Keeps BB+ Rating on $32.38MM Bonds ----------------------------------------------------------------- Fitch Ratings affirms the 'BB+' rating on approximately $32.38 million Michigan State Hospital Finance Authority revenue and refunding bonds series 2005 (Presbyterian Villages of Michigan Obligated Group). The Rating Outlook is Stable. The rating affirmation at 'BB+' reflects Presbyterian Villages of Michigan's but stable liquidity, tighter expense control to offset lower investment income, solid overall occupancy, and adequate debt service coverage. On Sept. 30, 2009, PVM's level of unrestricted cash and investments improved to $12.1 million as compared to $9.4 million on Dec. 31, 2008. As a result liquidity indicators improved with days cash on hand growing to 138 from 104, a cushion ratio of 5.2 times versus 4.1x and cash to debt improving to 39% from 30%. Due to tougher economic conditions, income from contributions and investments in 2009 is expected to be substantially lower compared to the average received over the last four years ($916,000 through Sept. 30 versus $2.7 million from 2005-2008). In response, PVM has implemented various expense reductions (including wage and benefits) and restructured management at the Village of Redford in an effort to improve operating profitability. Aggregate occupancy in the assisted living and nursing units has been stable in 2009 at 87% and 93%, respectively, while occupancy in the independent living units has slipped to 84% in 2009 from 92% in the year earlier period. However, the decline in ILU occupancy has been confined primarily to the Village of Westland campus and management has successfully maintained profitability at that campus. PVM's historical coverage of maximum annual debt service (MADS) has been very stable at 1.6x, 1.7x and 1.7x in 2006, 2007 and 2008, respectively. Through the nine-month interim period, debt service coverage has slipped to 1.2x due primarily to realized losses on investments taken in March 2009. With improved investment performance and expected development fees earned in the fourth quarter, management is forecasting debt service coverage for fiscal 2009 to be around 1.5x. Fitch views PVM's historical debt service coverage as adequate, reflecting the corporation's rental contract type and the moderate income level of its market. The Stable Outlook reflects Fitch's belief that PVM has taken appropriate actions to improve operating profitability and offset the impact of lower investment income and philanthropic contributions. Fitch believes that for the time being maintenance of the rating will be contingent on effective expense control and improving the payor mix in the nursing beds rather than increased occupancy and/or increased philanthropy given the difficult economic environment of southeast Michigan. Headquartered in Southfield, MI, the PVM Obligated Group consists of three rental continuing care retirement communities located in Redford, Westland and Chesterfield Township, MI. Currently, the Obligated Group's three campuses total 328 independent rental apartments (of which 313 are operational), 269 assisted living units, and 178 skilled nursing beds. In addition, PVM owns or manages approximately 1,200 independent living and 28 assisted living units through non-obligated entities. PVM has covenanted to provide annual audited financial statements and quarterly unaudited financials to the to the Municipal Securities Rulemaking Board's EMMA system. Fitch notes that PVM's disclosure practices have been excellent. MMA FINANCIAL: Moody's Cuts Ratings on Various Funds to 'Ba2' ------------------------------------------------------------- Moody's Investors Service has downgraded the underlying ratings of the MMA Financial Guaranteed Affordable Housing Fund 2005-2A, LLC, MMA Financial Guaranteed Affordable Housing Fund 2005-2B, MMA Financial Guaranteed Affordable Housing Fund 2005-2C, and MMA Financial Guaranteed Affordable Housing Fund 2005-2D to Ba2 from A2. The rating outlook on the Funds is negative. The Funds' enhanced A2 ratings are not affected by this rating action. This rating action is primarily due to the adverse market conditions which have substantially weakened the tax credit syndication sector. The demand for tax credits over the past years has significantly diminished, resulting in fewer corporate tax credit investors, and challenges in the real estate and credit markets have weakened the positions of the syndicators. Furthermore, some individual properties within the Funds are underperforming, primarily due to low debt service coverage levels, exacerbated by the soft real estate in many markets. While the Funds' historical performance was adequate, Moody's believes that there is a higher risk associated with tax credit financings due to the current adverse market environment. The last rating action was on March 31, 2009, when the enhanced ratings of the Funds were downgraded to A2 from Aa1 and outlook revised to stable. MMA FINANCIAL: Moody's Downgrades Ratings on Funds to 'Ba3' ----------------------------------------------------------- Moody's Investors Service has downgraded the underlying rating of the MMA Financial Guaranteed Affordable Housing Fund 2005-3A, LLC, MMA Financial Guaranteed Affordable Housing Fund 2005-3B, MMA Financial Guaranteed Affordable Housing Fund 2005-3C, and MMA Financial Guaranteed Affordable Housing Fund 2005-3D to Ba3 from A2. The rating outlook on the Funds is negative. The Funds' enhanced A2 ratings are not affected by this rating action. This rating action is primarily due to the adverse market conditions which have substantially weakened the tax credit syndication sector. The demand for tax credits over the past years has significantly diminished, resulting in fewer corporate tax credit investors, and challenges in the real estate and credit markets have weakened the positions of the syndicators. Furthermore, some individual properties within the Funds are underperforming, primarily due to low debt service coverage levels, exacerbated by the soft real estate in many markets. While the Funds' historical performance was adequate, Moody's believes that there is a higher risk associated with tax credit financings due to the current adverse market environment. The last rating action was on March 31, 2009, when the enhanced ratings of the Funds were downgraded to A2 from Aa1 and outlook revised to stable. MONTANA RE: S&P Assigns 'BB-' Rating on Class A Notes ----------------------------------------------------- Standard & Poor's Ratings Services said it assigned it ratings to the Class A notes exposed to losses from U.S. hurricanes and to the Class B notes exposed to losses from U.S. hurricanes and earthquakes in the covered area issued by Montana Re Ltd. S&P has rated the Class A notes 'BB-' and the Class B notes 'B-'. Montana Re is a special-purpose Cayman Islands exempted company licensed as a Class B insurer in the Cayman Islands. All of its issued and outstanding share capital will be held under a declaration of trust for certain charitable purposes by HSBC Bank (Cayman) Ltd., as share trustee. Flagstone Reassurance Suisses will be the reinsurance company ceding the covered risks to Montana Re. Standard & Poor's does not maintain an interactive rating on Flagstone Re. However, because covered losses are linked to industry losses as calculated by the Property Claims Services, there is no reliance on Flagstone Re's underwriting capabilities. In addition, Flagstone Re will prepay the quarterly reinsurance premium for as long as it does not have a financial strength rating from Standard & Poor's, which mitigates any credit exposure noteholders would have to it. Ratings List Montana Re Ltd. Series 2009-1 Class A notes BB- Series 2009-1 Class B notes B- MORGAN STANLEY: Fitch Takes Rating Actions on 2005-IQ9 Certs. ------------------------------------------------------------- Fitch Ratings takes various rating actions on Morgan Stanley Capital I trust 2005-IQ9, commercial mortgage pass-through certificates. A detailed list of rating actions follows at the end of this press release. The downgrades are the result of Fitch's loss expectations and its prospective views regarding cash flow declines and commercial real estate market values. Fitch forecasts potential losses of 2.7% for this transaction, should market conditions not recover. Today's rating actions are based on the full losses of 2.7% as a majority of loans mature in the next five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future. To determine potential defaults for each loan, Fitch assumed cash flow would decline by 10% from year-end 2008. That is consistent with the analysis used in its review of recent vintage transactions whereby cash flow was assumed to decline 15% from year-end 2007 projected over a three year period. If the stressed cash flow would cause the loan to fall below 0.95 times debt service coverage ratio, Fitch assumed the loan would default during the term. To determine losses, Fitch used the above stressed cash flow and applied a market cap rate by property type, ranging between 7.5% and 9.5%, to derive a value. If the loan balance at default is less than Fitch's derived value, the loan would realize that amount of loss. These loss estimates were reviewed in more detail for loans representing 62.7% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Loss expectations attributed to loans reviewed in detail represent approximately 71% of the 2.7%. Approximately 82.7% of the mortgages mature within the next five years: 6.5% in 2010, 11.7% in 2011 and 1.9% in 2012, 5.5% in 2013, 44.9% in 2014 and 11.5% in 2015. Fitch identified 40 Loans of Concern (18.8%) within the pool, eight of which (10.0%) are specially serviced. Of the specially serviced loans, two (7.9% of the pool) are current. Two of the Fitch Loans of Concern (8.7%) are within the transaction's top 15 loans, and one (7.8%) is specially serviced. Fitch's analysis did not result in loss expectations for the top 15 loans. None of the top 15 loans are assumed to default during the loan term, as the stressed cash flow for each loan exceeds 0.95x DSCR. Fitch expects that 14 of the top 15 loans may default at maturity based on an insufficient accrued equity position as calculated in Fitch's refinance test; however, Fitch's analysis did not result in a loss based on its derived values being higher than the current loan amounts. A loan would pass the refinance test if the stressed cash flow would achieve a 1.25x DSCR as calculated based on a 30 year amortization schedule and an 8% coupon. The largest contributors to loss, are the specially serviced loans, are: Okeechobee Industrial Park (0.7%), Bermuda Run (0.6%), and Mariemont Promenade (0.3%). Okeechobee Industrial Park transferred to the special servicer in June 2009 after the borrower failed to make that months payment. The loan is collateralized by a light industrial facility located in West Palm Beach, Florida, consisting of 11 buildings. Two main factors led to the default; decline in occupancy and lower market rent rates. When the current borrower assumed the loan, occupancy was 72% it has since fallen to 57%. In addition, according to the borrower many tenants are delinquent in rent payments; only 45% of tenants in place are current. The Bermuda Run loan is secured by a 165 unit/532 bed student housing project located in Statesboro, GA, home of Georgia Southern University. The property transferred to the special servicer December 2008. The market has become oversaturated with newer properties offering greater amenities. The borrower turned the property over to the lender. The special servicer worked with the borrower to transition control to a receiver and the receiver was appointed in March 2009. The receiver provided a takeover package and has made some recommendations to help make the property more competitive. The Mariemont Promenade loan is collateralized by a 49,442 square foot strip center in Mariemont, Ohio. A hill behind the property collapsed causing several tenants to vacate. Ongoing issues with the neighboring condo association are preventing the repairs from being completed. The borrower was unable to remediate the situation and a receiver was put in place. Fitch has downgraded, removed from Rating Watch Negative, assigned Loss Severity ratings and Rating Outlooks to these classes as indicated: -- $130.2 million class A-J to 'AA/LS3' from 'AAA'; Outlook Stable; -- $32.6 million class B to 'A/LS4' from 'AA'; Outlook Stable; -- $15.3 million class F to 'BB/LS5' from 'BBB-'; Outlook Stable; -- $17.2 million class H to 'B/LS5' from 'BB-'; Outlook Negative; -- $5.7 million class J to 'B/LS5' from 'B+'; Outlook Negative; -- $7.7 million class K to 'B-'from 'B'; Outlook Negative. Fitch also affirms these classes and assigns LS ratings, Rating Outlooks and Recovery Ratings as indicated: -- $249.7 million class A-1A at 'AAA/LS1'; Outlook Stable; -- $110.3 million class A-2 at 'AAA/LS1'; Outlook Stable; -- $194.7 million class A-3 at 'AAA/LS1'; Outlook Stable; -- $94.4 million class A-4 at 'AAA/LS1'; Outlook Stable; -- $43.8 million class A-AB at 'AAA/LS1'; Outlook Stable; -- $446.2 million class A-5 at 'AAA/LS1'; Outlook Stable; -- Interest-only class X-1 at 'AAA'; Outlook Stable; -- Interest-only class X-2 at 'AAA'; Outlook Stable; -- Interest-only class X-Y at 'AAA'; Outlook Stable; -- $11.5 million class C at 'A/LS5'; Outlook Negative; -- $26.8 million class D at 'BBB+/LS5'; Outlook Stable; -- $15.3 million class E at 'BBB/LS5'; Outlook Negative; -- $11.5 million class G at 'BB/LS5'; Outlook Negative; -- $5.7 million class L at 'B-/LS5'; Outlook Negative; -- $5.7 million class M at 'CCC/RR1'; -- $3.8 million class N at 'CCC/RR1'; -- $5.7 million class O at 'CC/RR4'. Class A-1 has paid in full. Fitch does not rate the $11.5 million class P. MORGAN STANLEY: Moody's Affirms Ratings on Eight 2004-TOP13 Certs. ------------------------------------------------------------------ Moody's Investors Service affirmed the ratings of eight classes, confirmed six classes and downgraded four classes of Morgan Stanley Capital I Trust 2004-TOP13, Commercial Mortgage Pass- Through Certificates, Series 2004-TOP13. The downgrades are due to higher expected losses for the pool resulting from increased credit quality dispersion. The affirmations and confirmations are due to the increase in defeasance and amortization, as well as the maintenance or improvement in two key rating parameters for the pool -- Moody's loan to value ratio and stressed debt service coverage ratio -- despite a decline in pool diversity as evidenced by the Herfindahl Index score. On August 11, 2009, Moody's placed ten classes on review for possible downgrade due to credit concerns regarding surrounding Maguire Properties Inc., the sponsor of the U.S. Bank Tower Loan (6.8% of the outstanding deal balance). Despite the near-term expected loss of two major tenants at the property, the asset is still generating sufficient income to cover debt service; however, Moody's remains concerned about the availability of funds for future leasing costs. This action concludes that review. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the October 13, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 22% to $950 million from $1.21 billion at securitization. The Certificates are collateralized by 160 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top ten loans representing 35% of the pool. The pool contains four loans, representing 15% of the pool, with investment grade underlying ratings. At last review, the Lakeland Square Mall ($54.4 million -- 5.7%) also had an underlying rating. However, because of a decline in performance, the loan is now analyzed as part of the conduit because of its increased leverage. Fourteen loans, representing 17% of the pool, have defeased and are now collateralized by U.S. Government securities compared to 8% atMoody's last review. Eighteen loans, representing 20% 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 and there are currently no loans in special servicing. There are several loans in their respective grace periods, but no loans are currently delinquent. Moody's was provided with full-year 2008 operating results for 98% of the pool. Moody's weighted average LTV ratio is 73% compared to 72% at Moody's prior full review. Although the overall pool LTV has remained similar since last review, the conduit pool has still experienced increased credit quality dispersion. Based on Moody's analysis, 14% of the pool has a LTV greater than 100% compared to 5% at last review. Moody's stressed DSCR is 1.68X compared to 1.55X 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 has a Herf of 38, excluding defeased loans and loans with underlying ratings, compared to 57 at last review. The largest loan with an underlying rating is the GIC Office Portfolio Loan ($89.2 million - 9.4% of the pool), which is a 13% pari passu interest in a $693.8 million first mortgage loan. The loan is secured by 12 office properties totaling 6.4 million square feet of net rentable area and located in seven states. The highest geographic concentrations are Chicago (39% of the NRA), suburban Philadelphia (17%), and San Francisco (12%). As of December 2008, the portfolio was 92% occupied, essentially the same as at last review. The Chicago concentration is comprised of two buildings: the AT&T Corporate Center (1.5 million SF; 24% of the NRA) and the USG Building (928,000 SF; 14%). The performance of these properties has declined significantly since last review due to the weakness of the Chicago office market. The portfolio's largest tenant, AT&T (10% of the NRA), vacated the premises at its March 31, 2009 lease expiration. According to the master servicer, a large portion of the space has been re-leased. The portfolio's reported 2008 year-end NOI was 6% lower than at securitization due to lower rental revenues and increased operating expenses and is expected to decline further in 2009 due to AT&T's lease expiration. The loan sponsor is Prime Plus Investments, Inc., a private REIT wholly owned by the Government of Singapore Investment Corporation (Realty) Pte Ltd. Moody's current underlying rating and stressed DSCR are Baa2 and 1.44X, respectively, compared to A2 and 1.55X at last review. The second largest loan with an underlying rating is the Gallup Headquarters Loan ($30.3 million - 2.6% of the pool), which is secured by a 296,000 square foot office building located in Omaha, Nebraska. The property is 100% leased to Gallup, Inc., under a triple net lease that expires in October 2018. The lease expiration is coterminous with the loan maturity. The loan is fully amortizing and has amortized by approximately 14% since last review. Performance has improved since securitization due to rental escalations and amortization. Moody's current underlying rating and stressed DSCR are A2 and 2.15X, respectively, compared to Baa1 and 1.30X at last review. The third largest loan with an underlying rating is the Hudson Mall Loan ($15.5 million -- 1.6%), which is secured by a 377,000 SF retail center located in Jersey City, New Jersey. The property was 96% occupied as of December 2008. Moody's has stressed the property's cash flow due to concerns about the future performance of retail properties in the current negative economic environment. Moody's current underlying rating and stressed DSCR are A2 and 1.80X, compared to A2 and 1.71X at last review. The fourth largest loan with an underlying rating is the Renaissance Manor Loan ($11.8 million - 1.0% of the pool), which is secured by a 184-unit multifamily property located in North Brunswick, New Jersey. The property was 97% as of December 2008. The property has experienced higher operating expenses in past years, primarily due to increased property taxes. Due to these higher expenses, Moody's current underlying rating and stressed DSCR are Baa3 and 1.43X, compared to A2 and 1.64X at last review. The loan that previously had an underlying rating is the Lakeland Square Mall Loan ($54.4 million - 5.7% of the pool), which is secured by the borrower's interest in an 899,000 SF regional mall located in Lakeland, Florida. The center is anchored by JCPenney, two Dillard's stores and Macy's. JCPenny is the only anchor that is part of the collateral, and it has a lease expiration of November 2010. As of December 2008, the center was 92% occupied, compared to 97% at securitization. The mall shop space was 74% occupied as of this same date. The loan sponsors are General Growth Properties, Inc. and NYS Common Retirement Fund. Moody's LTV and stressed DSCR are 91% and 1.09X, respectively, compared to 73% and 1.27X at last review. The three largest conduit loans comprise 12% of the pool. The largest conduit loan is the U.S. Bank Tower Loan ($65.0 million -- 6.8% of the pool), which represents a pari passu interest in a $260 million first mortgage loan. The loan is secured by a 1.4 million SF office tower and accompanying parking garage in downtown Los Angeles, California. The loan sponsor is Maguire. The property was 88% occupied as of year-end 2008. The property's largest tenant, Latham & Watkins (20% of NRA) has provided notice to the borrower that it intends to vacate the premises at its December 2009 lease expiration. Furthermore, the lease for the second largest tenant, Sempra Energy (16% of the NRA) expires in June 2010. Sempra has already vacated a sizable portion of its space although it has sublet much of it. Even with the anticipated decline in cash flow when these two tenants vacate, Moody's projects that the property will still generate cash flow in excess of debt service. However, given the softness in the Los Angeles office market, new tenants will likely be paying lower rents than currently in place. In addition, due to Maguire's current financial issues, Moody's is concerned about the availability of funds for leasing costs. The servicer has indicated that Maguire has experienced some success in re-leasing a portion of the Latham & Watkins space. The loan is interest- only for the entire term. Moody's LTV and stressed DSCR are 103% and 0.97X, respectively, compared to 73% and 1.29X at last review. The second largest conduit loan is the Galleria Plaza Shopping Center Loan ($26.9 million -- 2.8% of the pool), which is secured by a 168,000 SF shopping center located in Dallas, Texas. The center was 71% leased as of December 2008 compared to 100% at last review. The property lost its two largest tenants since last review, Circuit City and Linens 'n Things, but it was able to re- lease a portion of the vacated space. The loan has amortized 6% since last review. Moody's LTV and stressed DSCR are 94% and 1.08X, respectively, compared to 92% and 1.05X at last review. The third largest conduit loan is 1101 15th Street NW Loan ($19.3 million -- 2.0% of the pool), which is secured by a 164,000 square foot office building in located in Washington DC. The property was 81% occupied as of December 2008 compared to 100% at securitization. There is a diverse tenant mix with staggered lease expiration dates in this building. Performance has declined due to lower occupancy. Moody's LTV and stressed DSCR are 78% and 1.24X, respectively, compared to 63% and 1.51X at last review. Moody's rating action is: -- Class A-2, $86,577,894, affirmed at Aaa, previously on 2/6/2004 assigned Aaa -- Class A-3, $364,878,000, affirmed at Aaa, previously on 2/6/2004 assigned Aaa -- Class A-4, $127,000,000, affirmed at Aaa, previously on 2/6/2004 assigned Aaa -- Class X-1, Notional, affirmed at Aaa, previously on 2/6/2004 assigned Aaa -- Class X-2, Notional, affirmed at Aaa, previously on 2/6/2004 assigned Aaa -- Class B, $31,789,000, affirmed at Aa1, previously on 2/6/2004 assigned Aaa -- Class C, $12,110,000, affirmed at Aa2, previously on 2/6/2004 assigned Aaa -- Class D, $24,220,000, affirmed at A2, previously on 2/6/2004 assigned Aaa -- Class E, $12,109,000, confirmed at A3, previously placed on review for possible downgrade on 8/11/2009 -- Class F, $9,083,000, confirmed at Baa1, previously placed on review for possible downgrade on 8/11/2009 -- Class G, $10,596,000, confirmed at Baa2, previously placed on review for possible downgrade on 8/11/2009 -- Class H, $9,082,000, confirmed at Baa3, previously placed on review for possible downgrade on 8/11/2009 -- Class J, $ 9,083,000, confirmed at Ba1, previously placed on review for possible downgrade on 8/11/2009 -- Class K, $3,027,000, confirmed at Ba2, previously placed on review for possible downgrade on 8/11/2009 -- Class L, $3,028,000, downgraded to B1 from Ba3, previously placed on review for possible downgrade on 8/11/2009 -- Class M, $3,027,000, downgraded to B2 from B1, previously placed on review for possible downgrade on 8/11/2009 -- Class N, $4,542,000, downgraded to Caa1 from B2, previously placed on review for possible downgrade on 8/11/2009 -- Class O, $3,027,000, downgraded to Caa2 from B3, previously placed on review for possible downgrade on 8/11/2009 NORTHLAKE CDO: Fitch Downgrades Ratings on Three Classes of Notes ----------------------------------------------------------------- Fitch Ratings has downgraded three classes and affirmed two classes of notes issued by Northlake CDO I, Ltd./Corp. as a result of continued credit deterioration in the portfolio since Fitch's last rating action in September 2008. Approximately 52.8% of the portfolio has been downgraded since the last review. The details of the rating action follow at the end of this press release. The downgrades to the portfolio have left approximately 56.7% of the portfolio with a Fitch derived rating below investment grade and 40.5% with a rating in the 'CCC' rating category or lower, compared to 39.7% and 27.1%, respectively at last review. Defaulted securities, as defined in the transaction's governing documents, now comprise 27.5% of the portfolio, compared to 13.7% at last review. This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model for projecting future default levels for the underlying portfolio. Fitch considered the PCM rating loss rates and the extent of principal proceeds that will be needed to pay accrued interest to the class I-MM, class I-A and class II notes over the life of the transaction to determine an appropriate rating for the class A-IMM notes. In Fitch's opinion, the class A-1MM notes would still have a limited margin of safety from default based on the portfolio's credit quality; however, the amount of credit enhancement erosion expected from principal proceeds going toward accrued interest payments is significant enough to make default a real possibility. Therefore, the class A-1MM notes are downgraded to 'CCC'. The short-term rating on the class I-MM notes is withdrawn, because the put agreement between Northlake I and AIG Financial Products Corp. has been terminated. The class I-MM notes could not be successfully remarketed on March 6, 2009, and AIG elected to take the term bonds purchase option. Due to the significant collateral deterioration, all PCM rating loss rates exceed the credit enhancement available to class I-A, class II, class III and the preferred shares. For these classes, Fitch considered future payment expectations to determine their appropriate ratings. The class I-A and class II notes are downgraded to 'C' because default appears inevitable for both classes at or prior to maturity. Both classes are still receiving timely interest distributions; however, based on the credit quality of the portfolio and the extent of principal leaking to pay interest, the class I-A notes are not expected to receive full principal repayment by maturity, and the class II notes are not expected to receive any principal repayment. The failing senior coverage tests are unlikely to cure in the future, therefore the class III notes and preferred shares are not expected to receive any interest or principal distributions going forward and are affirmed at 'C'. Northlake I is a structured finance collateralized debt obligation that closed on Feb. 26, 2003 and is managed by Deerfield Capital Management LLC. The portfolio is composed of residential mortgage-backed securities (52.2%), commercial mortgage-backed securities (28.9%), asset-backed securities (11.3%), corporate CDOs (4%), and SF CDOs (3.6%). Fitch has taken various actions on these classes of Northlake CDO I, Ltd./Corp. as indicated: -- $98,587,200 class I-MM notes downgraded to 'CCC/WD' from 'BBB/F2'; -- $49,798,697 class I-A notes downgraded to 'C' from 'CCC'; -- $45,000,000 class II notes downgraded to 'C' from 'CC'; -- $14,009,139 class III notes affirmed at 'C'; -- $14,000,000 preferred shares affirmed at 'C'; 'DR6' withdrawn. NORTHWESTERN INVESTMENT: Fitch Affirms Ratings on Two Classes ------------------------------------------------------------- Fitch Ratings has downgraded one and affirmed two classes of notes issued by Northwestern Investment Management Company CBO I Fund Ltd./Corp. This review was conducted under the framework described in the reports 'Global Structured Finance Rating Criteria', 'Global Rating Criteria for Corporate CDOs', and 'Criteria for Structured Finance Recovery Ratings'. The class A notes of Northwestern CBO I are insured for interest and principal by Financial Security Assurance Inc. On Oct. 12, 2009, Fitch downgraded the rating of FSA to 'AA' from 'AA+', removed the rating from Rating Watch Negative, and assigned a Negative Rating Outlook. Therefore, the rating of the class A notes of Northwestern CBO I is also downgraded to 'AA', removed from Rating Watch Negative, and assigned a Negative Outlook. Northwestern CBO I is a collateralized debt obligation that closed Dec. 15, 1999 and is managed by Mason Street Advisors (formerly known as Northwestern Investment Management Company). The proceeds of the issuance were invested in a static portfolio consisting primarily of high yield corporate bonds. Due to poor collateral performance, the class A overcollateralization test has been failing since 2002. As a result, the classes B-1 and B-2 notes have not received any distributions since this time. As of the Oct. 26, 2009 trustee report, more than 55% of the remaining portfolio assets of $31.4 million are considered defaulted. Given the limited recovery prospects of these defaulted names, Fitch expects insufficient proceeds will be available to meet all of the issuer's obligations. Fitch projects that all future interest and principal proceeds will be directed toward the class A notes after paying certain fees and expenses. The class A notes would likely suffer a principal impairment at maturity without the insurance policy provided by FSA. No future distributions are expected on the classes B-1 and B-2 notes. Fitch has taken these rating actions on these classes of notes issued by Northwestern CBO I: -- $24,439,433 class A notes downgraded to 'AA' from 'AA+'; removed from Rating Watch Negative and assigned Negative Outlook; -- $15,000,000 class B-1 notes affirmed at 'C/RR6'; -- $11,000,000 class B-2 notes affirmed at 'C/RR6'. PARCS-R MASTER: S&P Downgrades Rating on 2007-15 Notes to 'CCC' --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the trust units issued by PARCS-R Master Trust's series 2007-15 to 'CCC' from 'BBB' and removed it from CreditWatch with negative implications. The rating on this transaction is directly linked to the rating on the M-2 notes issued by RASC Series 2006-KS3 Trust (a residential mortgage-backed securities subprime transaction), which Standard & Poor's lowered to 'CCC' and removed from CreditWatch negative on Sept. 25, 2009. PLENARY PROPERTIES: S&P Assigns 'BB' Rating on Series I Notes ------------------------------------------------------------- Standard & Poor's Ratings Services said it assigned its 'BBB' issue-level rating to Plenary Properties NDC GP's series IA, IB, and II senior secured notes. At the same time, Standard & Poor's has assigned its 'BB' rating to Plenary's series I subordinated notes. The outlook is stable. Plenary is a special purpose vehicle owned by Plenary Group (not rated), which the Ontario government selected in 2008 to design, construct, finance, and operate a data center for the Ontario Ministry of Government Services. The project's financing entailed C$82.5 million series IA senior secured notes due Feb. 7, 2040; C$81.6 million series IB senior secured notes due Feb. 7, 2040; C$28.9 million series II senior secured notes due May 14, 2010; and C$15.7 million series I subordinated notes due May 7, 2040. The senior debt tranches rank pari passu and benefit from an identical security package. "In S&P's opinion, the ratings reflect the project's essential nature to the ministry; a highly rated government counterparty in the Province of Ontario; and an experienced project team," said Standard & Poor's credit analyst Mario Angastiniotis. The team includes PCL Constructors Canada Inc. (not rated) as the construction contractor and Johnson Controls L.P. (BBB/Stable/A-2) as the operator. Plenary has worked with PCL and JCLP on other Canadian projects. MGS, as well as its own clients in other areas of the government, will be the facility's main users. The stable outlook reflects S&P's expectation that the construction work will be completed in accordance with specifications, on time and within budget; and that the transition operations will be smooth. S&P could lower the ratings or revise the outlook to negative should there be a material delay in the construction program or significant cost overruns that contractor or third-party support cannot cover. There is limited scope for a higher rating, or an outlook revision to positive, before the construction period ends. PORTER SQUARE: Fitch Downgrades Ratings on Three Classes of Notes ----------------------------------------------------------------- Fitch Ratings has downgraded three and affirmed two classes of notes issued by Porter Square CDO III, Ltd./Inc., as a result of continued credit deterioration in the portfolio since Fitch's last rating action in August 2008. Approximately 95.3% of the portfolio has been downgraded since the last review. The details of the rating action follow at the end of this press release. The downgrades to the portfolio have left approximately 98.5% of the portfolio with a Fitch-derived rating below investment grade and close to 78% with a rating in the 'CCC' rating category or lower, compared to 77% and 46.3%, respectively, at last review. Defaulted securities, as defined in the transaction's governing documents, now comprise 59.4% of the portfolio, compared to 14.5% at last review. The current balance of the portfolio is $203.8 million including $121 million defaulted securities. This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model for projecting future default levels for the underlying portfolio. Due to the significant collateral deterioration, all PCM rating loss rates exceed the credit enhancement available to each class of notes. In addition to credit deterioration of the portfolio, the transaction continues to divert portion of the principal proceeds to pay accrued interest to timely classes, thus reducing the amount of principal proceeds available to pay down the notes. While the class A-1, class A-2 and class B notes are receiving current interest distributions, given the large outstanding amount of the class A-1 notes and expected low recoveries for assets considered as defaulted, only the class A-1 notes are projected to receive some principal by maturity. Accordingly, the class A-2, class B, class C and class D notes are not expected to receive any principal distributions going forward. Porter Square III is a structured finance collateralized debt obligation that closed on Oct. 25, 2005 and is managed by TCW Asset Management Company. Presently 73.5% of the portfolio is composed of residential mortgage-backed securities, 24.5% consists of high yield CDOs 24.5%, and 2.2% of U.S. SF CDOs. Fitch has affirmed and downgraded these as indicated: -- $150,334,642 class A-1 downgraded to 'C' from 'B'; -- $56,000,000 class A-2 downgraded to 'C' from 'CCC'; -- $48,000,000 class B downgraded to 'C' from 'CC'; -- $15,082,629 class C affirmed at 'C'; -- $24,193,226 class D affirmed at 'C'. PREFERRED TERM: Fitch Junks Ratings on Floating Notes From 'A' -------------------------------------------------------------- Fitch Ratings downgrades one class of notes issued by Preferred Term Securities V, Ltd./Inc. Currently, two out of the five issuers in the collateral pool are considered defaulted. As a result, credit enhancement levels to the mezzanine notes have deteriorated. With little or no principal proceeds expected from the two defaulted securities, which together account for 43.1% of the portfolio, default on the mezzanine notes is probable. The details of the rating action follow at the end of this press release. On Oct. 5, 2009, there was an interest shortfall to the mezzanine notes. The periodic interest due to the mezzanine notes was $195,955 while interest paid was $76,499, leaving a capitalized unpaid interest amount of $119,457. As a result of the default of payment of interest to the mezzanine notes, an event of default was declared on Oct. 15, 2009. Due to the defaulted status of the two securities, Fitch does not expect there will be enough interest proceeds in the interest collection account to pay ongoing accrued and unpaid interest and capitalized interest payments to the mezzanine notes. The notes are supported by securities from five bank and bank holding companies, two of which are currently defaulted with a par amount of $19 million. The remaining performing portfolio consists of three securities (two issuers) totaling $25 million. In addition, there is a $5 million principal strip issued by the Federal Home Loan Mortgage Corporation that matures in 2031. Fitch is also aware of an outstanding offer by a defaulted bank issuer to purchase all of its subordinated debentures at 20% of par. The current outstanding amount of debentures from this issuer in PreTSL V is $8.95 million (20.4% of the portfolio). The offer expires Nov. 16, 2009. This review was conducted under the framework described in the report 'Fitch Revises Criteria for Reviewing U.S. CDOs Backed by Bank & Insurance TruPS' using updated bank scores for projecting expected losses for the underlying portfolio. Fitch has downgraded this class of PreTSL V: -- $27,869,457 floating rate mezzanine notes to 'CC' from 'A'. Fitch does not assign Rating Outlooks to classes rated 'CCC' or lower. The Rating Outlook for the floating rate mezzanine notes was Negative prior to the downgrade. PREFERREDPLUS TRUST: S&P Cuts Ratings on Certs. to 'B-' ------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on PreferredPLUS Trust Series BLC-2's $33.53 million 8.0% trust certificates to 'B-' from 'B'. The rating on the certificates is dependent solely on the rating on the underlying security, Belo Corp.'s $250 million 7.25% debentures due Sept. 15, 2027 ('B-'). The rating action reflects the Nov. 9, 2009, lowering of the rating on the underlying security to 'B-' from 'B'. PREFERREDPLUS TRUST: S&P Downgrades Ratings on Certs. to 'B-' ------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on PreferredPLUS Trust Series BLC-1's $33.146 million 7.875% trust certificates to 'B-' from 'B'. The rating on the certificates is dependent solely on the rating on the underlying security, Belo Corp.'s $250 million 7.25% debentures due Sept. 15, 2027. The rating action reflects the Nov. 9, 2009, lowering of the rating on the underlying security to 'B-' from 'B'. PROSPECT FUNDING: S&P Affirms Ratings on 11 Tranches ---------------------------------------------------- Standard & Poor's Ratings Services affirmed its ratings on 11 tranches from Prospect Funding I LLC, a market value collateralized debt obligation transaction, and removed nine of them from CreditWatch with negative implications. The rating actions follow S&P's monthly review of market value CDO performance. The affirmations and CreditWatch removals reflect several months of stable or improving overcollateralization ratios for the affected classes due to an increase in loan prices in the leverage loan markets. S&P will continue to monitor these transactions through its monthly review process. S&P will take negative rating actions when appropriate if S&P see declines in the O/C levels, and S&P will take positive rating actions if tranches reestablish an appropriate cushion above their minimum O/C requirements for several consecutive months. Rating Actions Rating ------ Transaction Class To From ----------- ----- -- ---- Prospect Funding I LLC A-2 BB BB/Watch Neg Prospect Funding I LLC A-3 BB BB/Watch Neg Prospect Funding I LLC A-5A BB BB/Watch Neg Prospect Funding I LLC A-5B BB BB/Watch Neg Prospect Funding I LLC A-6 BB BB/Watch Neg Prospect Funding I LLC A-7 BB BB/Watch Neg Prospect Funding I LLC B-2 CCC CCC/Watch Neg Prospect Funding I LLC C-1 CCC- CCC-/Watch Neg Prospect Funding I LLC SecCredAgr CCC CCC/Watch Neg Ratings Affirmed Transaction Class Rating ----------- ----- ------ Prospect Funding I LLC D-1 CC Prospect Funding I LLC D-2 CC RACE POINT: Fitch Downgrades Ratings on Eight Classes of Notes -------------------------------------------------------------- Fitch Ratings affirms one and downgrades eight classes of notes issued by Race Point II CLO Ltd./Inc. A detailed list of rating actions follows at the end of this press release. This review was conducted under the framework described in the report 'Global Structured Finance Rating Criteria'. Cash flow and portfolio default modeling was conducted in accordance with Fitch's 'Global Criteria for Cash Flow Analysis in Corporate CDOs' and 'Global Rating Criteria for Corporate CDOs'. The affirmation of the class A-1 notes is attributed to the increase in credit enhancement available to the notes as they have paid down from the application of interest proceeds due to prior failure of the class C and D overcollateralization test. Also, since the end of the reinvestment period in May 2009, principal proceeds have been applied to amortize the class A-1 notes. As of the September 2009 trustee report, the class A-1 notes represented 91.5% of the initial notional amount. The CE available to the class A-1 notes is expected to improve as amortization continues, which will further protect against expected losses from current and future defaults as well as from any additional negative credit migration. The CE for the classes A-2, B, C, and D notes has either remained the same or decreased since the last rating review in December 2008. The deterioration in CE is attributed to portfolio losses from defaulted assets, which now represent 8.1% of the portfolio from 1.8% at the last rating review. The overall portfolio credit quality has also deteriorated as measured by the weighted average credit quality, which is currently 'B-/CCC'. The portion of the performing portfolio that Fitch considers to be rated 'CCC+' and below has also increased to 34% from 26% at the last rating review. Fitch expects the class A-2 notes to perform but the additional stress in the portfolio is a cause for concern. The class B notes are considered to be highly speculative as the performance of the portfolio has deteriorated; however, a limited margin of safety remains for these notes. As current losses from defaulted assets have eroded CE, the classes C and D notes will be most vulnerable to future losses and additional credit deterioration in the portfolio, which makes impairment a real possibility. In its review, Fitch analyzed the structure's sensitivity to ongoing softness in U.S. corporate recoveries. To accomplish this, Fitch reduced its average recovery rate assumptions for each asset type by 30% in one sensitivity scenario and by 50% in a second sensitivity scenario where explicit Recovery Ratings were not available. The current portfolio has a relatively longer maturity profile, which may result in a slower amortization of the rated notes and a prolonged exposure to depressed corporate recovery rates. The classes A and B notes displayed considerable sensitivity to lower recoveries. In addition, approximately 34% of the underlying portfolio ratings currently have a Negative Outlook, which may result in additional future rating volatility. For these reasons, the classes A and B notes have been assigned Negative Outlooks. Fitch does not assign Outlooks to notes that are rated in distressed rating categories, rated 'CCC' or below. The class A and B notes were assigned Loss Severity ratings. The LS ratings indicate each tranche's potential loss severity given default, as evidenced by the ratio of tranche size to the base- case loss expectation for the collateral, as explained in Fitch's 'Criteria for Structured Finance Loss Severity Ratings' report. The LS rating should always be considered in conjunction with the probability of default indicated by a class' long-term credit rating. Fitch does not assign LS ratings to tranches rated in the 'CCC' to 'C' rating categories. Race Point II is a collateralized loan obligation that closed on April 16, 2003, and is managed by Sankaty Advisors, LLC. The reinvestment period for this transaction ended in May 2009. The portfolio comprises 94.3% senior secured loans and 4% junior secured loans. Fitch Ratings has taken these rating actions, which include affirmations, downgrades, assignment of Loss Severity ratings and Rating Outlooks: -- $367,648,277 class A-1 notes affirmed at 'AAA/LS2'; Outlook revised to Negative from Stable; -- $15,000,000 class A-2 notes downgraded to 'AA/LS5' from 'AA+'; Outlook revised to Negative from Stable; -- $15,000,000 class B-1 notes downgraded to 'B/LS4' from 'BBB+'; Rating Outlook remains Negative; -- $38,000,000 class B-2 notes downgraded to 'B/LS4' from 'BBB+'; Rating Outlook remains Negative; -- $12,000,000 class C-1 notes downgraded to 'CCC' from 'BB'; -- $5,000,000 class C-2 notes downgraded to 'CCC' from 'BB'; -- $3,500,000 class D-1 notes downgraded to 'CCC' from 'B'; -- $3,000,000 class D-2 notes downgraded to 'CCC' from 'B'; -- $4,000,000 class D-3 notes downgraded to 'CCC' from 'B'. RELATED CAPITAL: Moody's Cuts Ratings on Series C Funds to 'Ba3' ---------------------------------------------------------------- Moody's Investors Service has downgraded the underlying rating of the Related Capital Guaranteed Corporate Partners II, LP- Series C to Ba3 from A2. The rating outlook is negative. The Fund's enhanced A2 rating is not affected by this rating action. The rating downgrade is primarily due to the adverse market conditions which have substantially weakened the tax credit syndication sector. The demand for tax credits over the past years has significantly diminished, resulting in fewer corporate tax credit investors, and challenges in the real estate and credit markets have weakened the positions of the syndicators. Furthermore, some individual properties within the fund are underperforming, primarily due to low debt service coverage levels, exacerbated by the soft real estate in many markets. While the fund's historical performance was adequate, Moody's believes that there is a higher risk associated with tax credit financings due to the current adverse market environment. The last rating action was on March 31, 2009, when the enhanced rating was downgraded to A2 from Aa1 and outlook revised to stable. RELATED CAPITAL: Moody's Cuts Ratings on Series B Funds to 'Ba3' ---------------------------------------------------------------- Moody's Investors Service has downgraded the underlying rating of the Related Capital Guaranteed Corporate Partners II, LP- Series B to Ba3 from A2. The rating outlook is negative. The Fund's enhanced A2 rating is not affected by this rating action. The rating downgrade is primarily due to the adverse market conditions which have substantially weakened the tax credit syndication sector. The demand for tax credits over the past years has significantly diminished, resulting in fewer corporate tax credit investors, and challenges in the real estate and credit markets have weakened the positions of the syndicators. Furthermore, some individual properties within the fund are underperforming, primarily due to low debt service coverage levels, exacerbated by the soft real estate in many markets. While the fund's historical performance was adequate, Moody's believes that there is a higher risk associated with tax credit financings due to the current adverse market environment. The last rating action was on March 31, 2009, when the enhanced rating was downgraded to A2 from Aa1 and outlook revised to stable. RELATED CAPITAL: Moody's Cuts Ratings on Series D Funds to 'Ba3' ---------------------------------------------------------------- Moody's Investors Service has downgraded the underlying rating of the Related Capital Guaranteed Corporate Partners II, LP- Series D to Ba3 from A2. The rating outlook is negative. The Fund's enhanced A2 rating is not affected by this rating action. The rating downgrade is primarily due to the adverse market conditions which have substantially weakened the tax credit syndication sector. The demand for tax credits over the past years has significantly diminished, resulting in fewer corporate tax credit investors, and challenges in the real estate and credit markets have weakened the positions of the syndicators. Furthermore, some individual properties within the fund are underperforming, primarily due to low debt service coverage levels, exacerbated by the soft real estate in many markets. While the fund's historical performance was adequate, Moody's believes that there is a higher risk associated with tax credit financings due to the current adverse market environment. The last rating action was on March 31, 2009, when the enhanced rating was downgraded to A2 from Aa1 and outlook revised to stable. RELATED CAPITAL: Moody's Downgrades Ratings on Funds to 'Ba3' ------------------------------------------------------------- Moody's Investors Service has downgraded the underlying rating of the Related Capital Guaranteed Corporate Partners II, LP- Series F to Ba3 from A2. The rating outlook is negative. The Fund's enhanced A2 rating is not affected by this rating action. The rating downgrade is primarily due to the adverse market conditions which have substantially weakened the tax credit syndication sector. The demand for tax credits over the past years has significantly diminished, resulting in fewer corporate tax credit investors, and challenges in the real estate and credit markets have weakened the positions of the syndicators. Furthermore, some individual properties within the fund are underperforming, primarily due to low debt service coverage levels, exacerbated by the soft real estate in many markets. While the fund's historical performance was adequate, Moody's believes that there is a higher risk associated with tax credit financings due to the current adverse market environment. The last rating action was on March 31, 2009, when the enhanced rating was downgraded to A2 from Aa1 and outlook revised to stable. RFC CDO: Moody's Reviews Ratings on 14 Classes of 2007-1 Notes -------------------------------------------------------------- Moody's Investors Service placed 14 classes of Notes issued by RFC CDO 2007-1, Ltd., on review for possible downgrade due to deterioration in the credit quality of the underlying portfolio. RFC CDO 2007-1, Ltd., is a revolving commercial real estate collateralized debt obligation transaction backed by a portfolio of whole loan debt (52% of the pool), B-note debt (13% of the pool), mezzanine debt (12% of the pool), commercial mortgage backed securities collateral (22% of the pool), and CRE CDO collateral (1% of the pool). As of September 30, 2009, the aggregate Notes balance of the transaction, including the Income Notes and fully drawn amount, has decreased to $959.4 million from $1 billion at issuance, due to approximately $43 million in pay- down to the Class A-1 Notes and Class A-1R Notes. The pay-down was triggered as a result of the failing of the Class A/B, Class C/D/E, and Class F/G/H Par Value Tests. Per the Indenture, the failure of any Par Value Test results in all scheduled interest and principal payments being directed to pay down the most senior notes, until the Par Value Test is satisfied. Six assets totaling over $93 million par amount (10% of the pool) were listed as defaulted. Moody's has identified these parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor, weighted average life, weighted average recovery rate, and Moody's asset correlation. Moody's review will focus on potential losses from defaulted collateral and the key indicators listed above. The rating action is: -- Cl. A-1, Aaa Placed Under Review for Possible Downgrade; previously on April 25, 2007 Assigned Aaa -- Cl. A-1R, Aaa Placed Under Review for Possible Downgrade; previously on April 25, 2007 Assigned Aaa -- Cl. A-2, Baa2 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to Baa2 -- Cl. A-2R, Baa2 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to Baa2 -- Cl. B, B1 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to B1 -- Cl. C, Caa1 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to Caa1 -- Cl. D, Caa2 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to Caa2 -- Cl. E, Caa2 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to Caa2 -- Cl. F, Caa2 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to Caa2 -- Cl. G, Caa3 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to Caa3 -- Cl. H, Caa3 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to Caa3 -- Cl. J, Caa3 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to Caa3 -- Cl. K, Caa3 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to Caa3 -- Cl. L, Caa3 Placed Under Review for Possible Downgrade; previously on April 15, 2009 Downgraded to Caa3 Moody's monitors transactions on both a monthly basis through a review of the available Trustee Reports and a periodic basis through a full review. Moody's prior review is summarized in a press release dated April, 15 2009. RIVER LAKE: Moody's Downgrades Ratings on $28 Mil. Notes to 'B3' ---------------------------------------------------------------- Moody's Investors Service has downgraded these life insurance- linked securities: River Lake Insurance Company IV Limited: -- $28 million of Class B Floating Rate Subordinated Notes to B3 from Baa3. The rating outlook on River Lake IV is stable. This rating action concludes the review for possible downgrade that was initiated on May 26, 2009. The rating will be withdrawn for business reasons. Moody's said the downgrade of the River Lake IV subordinated notes was driven primarily by the adverse impact of increased investment losses on the notes' default probability as well as their contribution to expected losses on the notes. The company's investment portfolio has experienced sizeable impairments and significant ratings migration in residential mortgage-backed securities and other structured finance securities. Somewhat offsetting the weakness in the investment portfolio is the current high allocation to cash and short-term U.S. government securities, which will likely be reinvested in corporate securities. The rating agency further commented that while investment losses are higher than expected, the performance of the underlying insurance risk has generally been consistent with the original expectations, and has not contributed to the credit deterioration of the transaction. River Lake IV is a special purpose captive reinsurer sponsored by and wholly-owned by Genworth Life and Annuity Insurance Company (GLAIC, A2 insurance financial strength, negative outlook), which is an operating company of Genworth Financial, Inc. (Baa3 senior debt, negative outlook). River Lake IV was established for the purpose of funding excess reserve requirements associated with distinct blocks of business ceded by GLAIC. The reinsurance agreement between GLAIC and River Lake IV covers defined blocks of level premium term life policies subject to the statutory reserve requirements of Regulation XXX. The last rating action on the subordinated notes of River Lake IV occurred on May 26, 2009, when Moody's placed the ratings on review for downgrade. The rating on $500 million of River Lake IV's Class A Series A-1 Floating Rate Guaranteed Notes (insured by MBIA Insurance Corporation) was withdrawn on November 4, 2009. River Lake IV's ratings were assigned by evaluating factors believed to be relevant to the credit profile of the subordinated notes such as (i) the demographics and actuarial experience of the referenced block of (re)insurance business, (ii) relevant industry experience for similar products/underwriting, (iii) review of independent actuarial report, including assumptions underlying projected cash flows, (iv) expected loss and probability of default estimated via stochastic and deterministic modeling of the insurance cashflows and the performance of invested assets, and (v) other factors believed to be applicable to the assessment of the creditworthiness of the transaction, such as a review of the structural, legal, and regulatory risks. ROCKALL CLO: Moody's Withdraws Ratings on Three Classes of Notes ---------------------------------------------------------------- Moody's Investors Service announced that it has withdrawn the ratings of these classes of notes issued by Rockall CLO B.V.: -- EUR6,250,000 Class B-1 Second Senior Secured Floating Rate Notes due 2013, Withdrawn; previously on November 11, 2009 Downgraded to Ba1; -- EUR12,250,000 Class C-1 Third Senior Secured Floating Rate Notes due 2013, Withdrawn; previously on November 11, 2009 Downgraded to Ba2; -- EUR12,250,000 Class D-1 Forth Senior Secured Floating Rate Notes due 2013, Withdrawn; previously on November 11, 2009 Downgraded to Ba3. Moody's explained that the withdrawal of the ratings of the above classes of notes was in response to Rockall CLO's request for withdrawal of such ratings. Rockall CLO requested the withdrawl of ratings for business reasons. Rockall CLO B.V. which was issued on June 28, 2006, is a market value collateralized loan obligation transaction backed primarily by a portfolio of senior secured loans. SANKOFA SHULE: Moody's Withdraws 'Ca' Rating on Certificates ------------------------------------------------------------ Moody's Investors Service has withdrawn the Ca rating on the Sankofa Shule Charter School, Michigan, Certificates of Participation, Series 2000. The charter school closed in June 2007 and the certificates are in default. Moody's has withdrawn the Ca rating as a result of Sankofa Shule Charter School's continued status in bankruptcy and the expected absence of meaningful developments in the intermediate term. Moody's will attempt to inform the market when final settlement is rendered by the court. SATURN VENTURES: Moody's Downgrades Ratings on Four Classes ----------------------------------------------------------- Moody's Investors Service announced that it has downgraded the ratings of four classes of notes issued by Saturn Ventures 2004 - Fund America Investors III, Limited. The notes affected by the rating action are: -- US$280,000,000 Class A-1 Floating Rate Senior Notes, Downgraded to B1; previously on February 4, 2009 Downgraded to Baa2 -- US$60,000,000 Class A-2 Floating Rate Senior Notes, Downgraded to Ca; previously on February 4, 2009 Downgraded to B3 -- US$22,000,000 Class A-3 Floating Rate Senior Notes, Downgraded to C; previously on February 4, 2009 Downgraded to Caa2 -- US$10,000,000 Class B Floating Rate Senior Subordinate Notes, Downgraded to C; previously on February 4, 2009 Downgraded to Ca Saturn Ventures 2004 - Fund America Investors III, Limited, is a collateralized debt obligation backed primarily by a portfolio of Residential Mortgage-Backed Securities. RMBS is approximately 66% of the underlying portfolio of which the majority are from 2003 and 2004 vintages. The rating downgrade actions reflect deterioration in the credit quality of the underlying portfolio. Credit deterioration of the collateral pool is observed through a decline in the average credit rating (as measured by an increase in the weighted average rating), an increase in the dollar amount of defaulted securities, and an increase in the proportion of securities rated "Caa1" and below. The ratings of approximately 30% of the underlying assets have been downgraded since Moody's last review of the transaction in February 2009. Currently the Trustee reports the weighted average rating of B3 for the underlying portfolio. Securities rated "Caa1" or lower comprise more than 30% of the underlying portfolio. The Trustee reports that certain coverage tests are failing, including the Class A Principal Coverage Test. SMART HOME: Moody's Downgrades Ratings on Eight 2005-1 Tranches --------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of eight tranches issued by Smart Home Reinsurance 2005-1 Limited due to higher expected losses in relation to remaining tranche-specific credit protection. This transaction is a synthetic securitization backed by mortgage insurance exposure on a reference portfolio of approximately $251 million of subprime and Alt-A mortgage loans. The mortgage insurance is provided by Radian Guaranty Inc. Noteholders are exposed to the risk of future claims under the mortgage insurance policies. The riskiness of the notes is a function of the credit performance of the underlying reference portfolio of mortgage loans and the amount of risk assumed. Credit enhancement for the notes is provided primarily through subordination. The downgrade actions are triggered by higher than anticipated delinquency levels as well as slower than anticipated voluntary prepayments for the reference portfolio, resulting in higher updated loss expectation for the underlying collateral. This translates into higher expected losses for the synthetic transaction and lower coverage for the rated debt given available credit enhancement. The ratings on the securities are monitored by evaluating factors determined to be applicable to the credit profile of the securities, such as i) the nature, sufficiency, and quality of historical performance information regarding the asset class ii) an analysis of the underlying collateral, iii) an analysis of the transaction's allocation of cash flow and capital structure, and (iv) a comparison of these attributes against those of other similar transactions. Loss estimates are subject to variability and, as a result, realized losses could ultimately turn out higher or lower thanMoody'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 if necessary. Complete rating actions are: Issuer: Smart Home Reinsurance 2005-1 Limited -- Cl. M-1, Downgraded to Baa1; previously on Jul 9, 2009 Aa1 Placed Under Review for Possible Downgrade -- Cl. M-2, Downgraded to Ba3; previously on Jul 9, 2009 Aa2 Placed Under Review for Possible Downgrade -- Cl. M-3, Downgraded to B2; previously on Jul 9, 2009 Aa3 Placed Under Review for Possible Downgrade -- Cl. M-4, Downgraded to Ca; previously on Jul 9, 2009 A1 Placed Under Review for Possible Downgrade -- Cl. M-5, Downgraded to C; previously on Jul 9, 2009 A2 Placed Under Review for Possible Downgrade -- Cl. M-6, Downgraded to C; previously on Jul 9, 2009 A2 Placed Under Review for Possible Downgrade -- Cl. M-7, Downgraded to C; previously on Jul 9, 2009 A3 Placed Under Review for Possible Downgrade -- Cl. M-8, Downgraded to C; previously on Jul 9, 2009 Baa1 Placed Under Review for Possible Downgrade SORIN REAL: Moody's Reviews Ratings on Nine Classes of Notes ------------------------------------------------------------ Moody's Investors Service placed nine classes of Notes issued by Sorin Real Estate CDO IV Ltd. on review for possible downgrade due to deterioration in the credit quality of the underlying portfolio. Sorin Real Estate CDO IV Ltd. is a revolving commercial real estate collateralized debt obligation transaction backed by a portfolio of whole loan debt (38% of the pool), B-note debt (1% of the pool), mezzanine debt (16% of the pool), commercial mortgage backed securities collateral (40% of the pool), and CRE CDO collateral (5% of the pool). As of October 21, 2009, the aggregate Notes balance of the transaction, including the Income Notes, has decreased to $375.6 million from $400 million at issuance, due to approximately $26 million in pay-down to the Class A1Notes. The pay-down was triggered as a result of the failing of the Class A/B, Class C/D, and Class E/F Principal Coverage Tests. Per the Indenture, the failure of any Principal Coverage Test results in all scheduled interest and principal payments being directed to pay down the most senior notes, until the Principal Coverage Test is satisfied. Ten assets totaling over $90 million par amount (24% of the pool) were listed as defaulted. Moody's has identified these parameters as key indicators of the expected loss within CRE CDO transactions: weighted average rating factor, weighted average life, weighted average recovery rate, and Moody's asset correlation. Moody's review will focus on potential losses from defaulted collateral and the key indicators listed above. The rating action is: -- Cl. A1, Aaa Placed Under Review for Possible Downgrade; previously on Sep 11, 2006 Assigned Aaa -- Cl. A2, Aa2 Placed Under Review for Possible Downgrade; previously on Mar 19, 2009 Downgraded to Aa2 -- Cl. A3, Aa3 Placed Under Review for Possible Downgrade; previously on Mar 19, 2009 Downgraded to Aa3 -- Cl. B, A1 Placed Under Review for Possible Downgrade; previously on Mar 19, 2009 Downgraded to A1 -- Cl. C, Baa1 Placed Under Review for Possible Downgrade; previously on Mar 19, 2009 Downgraded to Baa1 -- Cl. D, Ba1 Placed Under Review for Possible Downgrade; previously on Mar 19, 2009 Downgraded to Ba1 -- Cl. E, Ba2 Placed Under Review for Possible Downgrade; previously on Mar 19, 2009 Downgraded to Ba2 -- Cl. F, B2 Placed Under Review for Possible Downgrade; previously on Mar 19, 2009 Downgraded to B2 -- Cl. G, Caa3 Placed Under Review for Possible Downgrade; previously on Mar 19, 2009 Downgraded to Caa3 Moody's monitors transactions on both a monthly basis through a review of the available Trustee Reports and a periodic basis through a full review. Moody's prior review is summarized in a press release dated March, 19 2009. STARTS LTD: S&P Withdraws 'CCC-' Rating on 2007-7 Notes ------------------------------------------------------- Standard & Poor's Ratings Services withdrew its 'CCC-' rating on the notes issued by STARTS (Cayman) Ltd.'s series 2007-7, a synthetic collateralized debt obligation of investment-grade corporate bonds transaction. The rating was on CreditWatch with negative implications before the withdrawal. The rating withdrawal follows the complete redemption of the notes on Nov. 3, 2009, after the noteholders received a repurchase notice. Rating Withdrawn STARTS (Cayman) Ltd. Series 2007-7 Rating Balance (mil.) ------ -------------- Class To From Current Previous ----- -- ---- ------- -------- Notes NR CCC-/Watch Neg 0.00 10.0 TABERNA PREFERRED: Fitch Downgrades Ratings on Five Classes ----------------------------------------------------------- Fitch Ratings downgrades five and affirms seven classes of notes issued by Taberna Preferred Funding II, Ltd./Inc. On the Nov. 5, 2009 payment date, the pro rata class A-1A, A-1B, and A-1C (together, class A-1) notes received partial accrued interest, while the class A-2 and B notes did not receive any interest payments. On Nov. 12, 2009 the trustee declared an event of default due to the non-payment of full and timely accrued interest to the class A-1, A-2, and B notes. The details of the rating actions follow at the end of this press release. The class A-1 notes were paid $470,085 in interest payments on the Nov. 5, 2009 payment date, all of which came from the principal collection account as interest proceeds were insufficient to pay the class A-1 notes or the full hedge payment. The interest shortfall amount to the class A-1 notes was $678,656 as the class A-1 notes received 40.9% of the interest due. The pro rata class C-1, C-2, and C-3 (together, class C), class D, pro rata class E-1 and E-2 (together, class E), and the class F notes are all rated to ultimate return of interest and principal and are expected to receive little to no future interest proceeds or principal proceeds. After accounting for losses from defaulted issuers in the underlying portfolio, the class C, D, E, and F notes are undercollateralized indicating that default on these notes is inevitable. The important factor for Fitch's downgrade is the failure to make timely payments to classes whose rating addresses the ability of the issuer to make timely interest payments. Fitch has downgraded these classes of Taberna II: -- $357,749,495 class A-1A notes to 'D' from 'CCC'; -- $95,250,801 class A-1B notes to 'D' from 'CCC'; -- $8,943,738 class A-1C notes to 'D' from 'CCC'; -- $86,500,000 class A-2 notes to 'D' from 'CC'; -- $120,500,000 class B notes to 'D' from 'C'. The class C-1, C-2, C-3, D, E-1, E-2, and F notes are affirmed at 'C'. Fitch does not assign Rating Outlooks to notes rated 'CCC' or lower. UBS COMMERCIAL: S&P Downgrades Ratings on 19 2007-FL1 Certificates ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 19 classes of commercial mortgage pass-through certificates from UBS Commercial Mortgage Trust 2007-FL1 and removed them from CreditWatch with negative implications. S&P's rating actions reflect its assessment of significant declines in S&P's valuations of the remaining loans in the pool. The two major asset types (which make up 79% of the pooled trust balance) that were the primary drivers of S&P's downgrades are: Lodging properties, which constitute 55% ($840.9 million) of the pooled trust balance (according to the Oct. 15, 2009, trustee remittance report), have experienced valuation declines that ranged between 13% and 67% below the levels S&P assessed at issuance. S&P's valuations incorporated actual declines in revenue per available room and its expectations for future declines. Office properties, which make up 24% ($356.5 million) of the pooled trust balance, experienced valuation declines ranging between 24% and 47% below issuance levels. S&P generally attribute the declines to depressed rental rates and/or higher vacancy rates. S&P lowered its ratings on the "MP" raked certificates to 'D' because of ongoing interest shortfalls, resulting primarily from special servicing fees for the Maui Prince Resort loan. S&P expects the interest shortfalls to continue to affect these raked classes in the future. The distribution of interest amounts to the class X interest-only certificate is made pro rata to the class A-1 certificate, which S&P downgraded accordingly. 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 lowered. Lodging Collateral Hotel properties secure 13 loans in the pool totaling $840.9 million (55% of the pooled trust balance). These properties are predominantly in Manhattan (19% of the pooled trust balance); Maui, Hawaii (11%); and Washington, D.C. (8%). S&P based its hotel analyses, in part, on a review of the available borrower's operating statements for year-to-date 2009, the 12 months ended Dec. 31, 2008, and the borrower's 2009 budgets, as well as the Smith Travel Research reports. A reduction in business and leisure travel has, in S&P's opinion, significantly affected the performance of lodging collateral. S&P's analysis factored in its assumption that the overall average RevPAR in the industry would decline between 14% and 16% in 2009. It also considered conditions in the local lodging markets. According to STR, the New York and Washington, D.C., lodging markets posted 31% and 8% declines, respectively, in RevPAR for the first nine months of 2009 compared with 2008, whereas the general U.S. hotel industry reported an 18% decline in RevPAR for the same period. Largest Lodging Loan The Essex House loan, the largest loan in the pool, is secured by a 515-room full-service hotel and 10 sponsor-owned residential condominium units in Manhattan. The current trust balance is $186.5 million (12% of the pooled trust balance), and the whole- loan balance is $317.0 million. In addition, the equity interests in the borrower of the whole loan secure $32.5 million of mezzanine debt. The master servicer, Capmark Finance Inc., reported a 0.87x debt service coverage and 76% occupancy for the 12 months ended June 30, 2009. S&P's adjusted valuation has fallen 58% since issuance, primarily due to the decline in RevPAR and an increase in operating expenses. The loan matures on Sept. 9, 2010, and has two 12-month extension options remaining. Lodging Loan With The Special Servicer The Maui Prince Resort loan is the second-largest loan in the pool and the only lodging loan that is currently with the special servicer. The loan is secured by a 310-room full-service hotel, development rights for the construction of additional hotel rooms, two 18-hole golf courses, and 1,190 acres of developable land in Maui, Hawaii. The trust and whole-loan balance of $192.5 million is divided into a $162.5 million senior pooled component (11% of the pooled trust balance) and a $30.0 million subordinate nonpooled component raked to the "MP" certificates. In addition, the equity interests in the borrower of the whole loan secure four mezzanine loans with a maximum principal balance of $227.5 million. This 90-plus-days delinquent loan was transferred to the special servicer on June 18, 2009, due to imminent maturity default. The loan matured on July 9, 2009. The property cash flow is insufficient to cover operating expenses, and reported occupancy was 51% as of July 2009. The special servicer for this loan, CWCapital Asset Management LLC, has filed foreclosure proceedings. CWCapital indicated that a new property manager and receiver are in place, and the special servicer has ordered an updated appraisal. CWCapital is currently in discussions with the mezzanine lenders. The downgrades of the "MP" raked certificates to 'D' reflect ongoing interest shortfalls due primarily to special servicing fees. Lodging Loan That Was Previously In Special Servicing The Le Meridien San Francisco loan, which was recently with the special servicer, is secured by a 360-room, full-service upscale hotel in San Francisco. This loan, with a current trust balance of $40.0 million (3% of the pooled trust balance) and a whole-loan balance of $92.1 million, was transferred to the special servicer, also Capmark, on May 14, 2009, due to a maturity default on May 9, 2009. The loan did not meet its extension requirements for the borrower to exercise one of its two extension options. The master servicer reported a 5.43x DSC for the 12 months ended March 31, 2009, and 83% occupancy as of August 2009. S&P's adjusted valuation has declined 18% since issuance due primarily to a decrease in RevPAR. According to Capmark, this loan, which is current, has been modified. The modification terms include, among other items, extending the loan's final maturity date to May 9, 2011. As part of the workout, the borrower paid down $7.0 million of the trust balance and repaid the special servicing and workout fees. Capmark indicated that the loan was returned to master servicing in September 2009. Lodging Loans With Maturities Within The Next Three Months Two lodging loans within the pool have maturity dates within the next three months. Details are: The W Hotel Washington, D.C., loan is secured by a 317-room full- service hotel in Washington, D.C. The loan has a whole-loan balance of $140.1 million that is split into a $65.0 million senior pooled component (4% of the pooled trust balance), a $5.0 million subordinate nonpooled component that supports the class "O-HW" raked certificate (not rated), and three subordinate nontrust junior interests with a maximum principal balance of $70.1 million. In addition, the equity interests in the borrower of the whole loan secure three mezzanine loans with a maximum principal balance of $19.9 million. Capmark stated that the property underwent substantial renovations and was completely closed for all of 2008 and the first six months of 2009. The property reopened in July 2009, was fully operational in August 2009, and reported 46% occupancy for the two months ended Aug. 31, 2009. S&P's adjusted valuation, which considers the local lodging market and the recent reopening, has fallen 27% since issuance. The loan matures on Jan. 9, 2010. According to Capmark, the borrower has indicated that it plans to exercise one of its two remaining one-year extension options. The Hilton Westchase loan is secured by a 297-room full-service hotel in Houston, Texas, and has a trust balance of $25.0 million and a whole-loan balance of $32.8 million. Capmark, the master servicer, reported a 6.61x DSC for the 12 months ended March 31, 2009, and 66% occupancy as of July 2009. S&P's adjusted valuation is comparable to the levels S&P assessed at issuance. The loan matures on Feb. 9, 2010, and has two one-year extension options remaining. According to Capmark, the borrower has not yet indicated whether it plans to exercise its extension options. Lodging Loans With Raked Certificates In addition to the "MP" raked certificates, Standard & Poor's also rates the class "O-MD," "O-SA," and "O-HA" raked certificates. Details of the lodging loans that secure these raked certificates are: The Marriott Washington, D.C., loan is secured by a 470-room full- service hotel in Washington, D.C. This loan has a whole-loan balance of $120.4 million, which consists of a $56.1 million senior pooled component, a $1.9 million subordinate nonpooled component raked to the class "O-MD" certificate, and three subordinate nontrust junior participation interests totaling $62.4 million. Capmark reported a DSC of 6.34x for the 12 months ended March 31, 2009, and 70% occupancy as of June 2009. S&P's adjusted valuation has declined 26% since issuance, primarily due to lower-than-expected RevPAR. The loan matures on May 9, 2010, and has two one-year extension options remaining. The St. Anthony Hotel loan is secured by a 352-room full-service hotel in San Antonio, Texas. This loan has a whole-loan balance of $38.3 million, which consists of a $22.3 million senior pooled component, a $2.0 million subordinate nonpooled component raked to the class "O-SA" certificate, and a $14.0 million subordinate nontrust junior participation interest. In addition, the equity interests in the borrower of the whole loan secure $10.0 million of mezzanine debt. Capmark reported a DSC of 1.49x for the 12 months ended June 30, 2009, and 47% occupancy as of July 2009. S&P's adjusted valuation has declined 67% since issuance due to a prolonged renovation contributing to lower-than-expected RevPAR, coupled with an increase in operating expenses. The loan matures on Aug. 9, 2010, and has two one-year extension options remaining. The Hilton Arlington-TX loan is secured by a 308-room full-service hotel in Arlington, Texas. This loan has a whole-loan balance of $24.7 million, which consists of a $15.5 million senior pooled component, a $1.5 million subordinate nonpooled component that supports the class "O-HA" raked certificate, and a $7.7 million subordinate nontrust junior participation interest. Capmark reported a 4.56x DSC for the 12 months ended March 31, 2009, and 55% occupancy as of July 2009. S&P's adjusted valuation has declined 49% since issuance due to significant declines in RevPAR. This loan matures on Nov. 9, 2010, and has one remaining one-year extension option. Office Collateral Office properties secure seven loans totaling $356.5 million (24% of the pooled trust balance). The largest concentrations are in Reston and Fairfax, Virginia (8% of the pooled trust balance), Santa Monica, California (5%), Atlanta, Georgia (4%), and Princeton, N.J. (3%). Most of the office properties have experienced lower rental rates and/or higher vacancies since issuance. Largest Office Loan The 2600-2800 Colorado Avenue loan, the largest office loan and the sixth-largest loan in the pool, has a trust balance of $75.0 million (5% of the pooled trust balance) and a maximum whole-loan balance of $148.0 million. In addition, the equity interests in the borrower of the whole loan secure two mezzanine loans totaling $40.0 million. This loan is secured by two five- story office buildings and one free-standing single-story preschool building in Santa Monica, Calif., totaling 305,750 sq. ft. Capmark, the master servicer, reported a 2.95x DSC for year- end 2008, and 94% occupancy as of June 2009. S&P's adjusted valuation is down 24% since issuance due primarily to lower-than- expected rental revenue. The loan matures on July 9, 2010, and has four one-year extension options remaining. Office Loans With Maturities Within The Next Three Months Two office loans in the pool have maturity dates within the next three months. Details are: The Centerpointe I & II loan is secured by two suburban office buildings totaling 424,700 sq. ft. in Fairfax, Va., and has a trust and whole-loan balance of $55.0 million. In addition, the equity interests in the borrower of the whole loan secure three mezzanine loans with a maximum principal balance of $68.8 million. Capmark reported a 0.38x DSC for year-end 2008 and 57% occupancy as of August 2009. S&P's adjusted valuation has fallen 31% since issuance, mainly due to the departure of a major tenant, CGI (309,000 sq. ft), in June 2008 after its lease expired. The loan matures on Feb. 9, 2010. According to Capmark, the borrower has indicated that it plans to exercise one of its two remaining one- year extension options. The RexCorp Princeton Office Portfolio loan is secured by four suburban office properties in Princeton, N.J., totaling 444,800 sq. ft., and has a trust and whole-loan balance of $48.0 million. In addition, the equity interests in the borrower of the whole loan secure a mezzanine loan with a maximum principal balance of $37.7 million. Capmark reported negative cash flow and 42% occupancy as of August 2009. S&P's adjusted valuation has declined 24% since issuance, due primarily to lower-than-expected occupancy levels. In addition to this loan, two other loans in the pool, RexCorp NJ/Long Island Land and RexCorp Plainview Land, have a related sponsor and maturity dates. Details are below. The RexCorp NJ/Long Island Land loan is secured by four parcels of unimproved land totaling 230 acres in Madison Borough and Chatham Township, New Jersey, and East Patchogue, New York, and has a trust and whole-loan balance of $13.9 million. The equity interests in the borrower of the whole loan secure mezzanine debt with a maximum principal balance of $8.8 million. S&P's adjusted valuation has declined 53% since issuance. The RexCorp Plainview Land loan, secured by two vacant land parcels totaling 165 acres in Plainview, New York, has a trust and whole-loan balance of $13.4 million. The equity interests in the borrower of the whole loan secure mezzanine debt with a maximum principal balance of $15.1 million. S&P's adjusted valuation has fallen 51% since issuance. The three RexCorp-related loans have final maturities on Feb. 11, 2010. According to Capmark, the borrowers for the three RexCorp loans have not yet indicated their refinance plans. Capmark stated that these three loans will be transferred to the special servicer if they are not paid off by their final maturity dates. Other Specially Serviced Loan The Atlantic Towers loan, the other specially serviced loan in the pool, is secured by three land parcels totaling 2.1 acres in Washington, D.C. This 90-plus-days delinquent loan has a trust and whole-loan balance of $21.6 million (1% of the pooled trust balance). In addition, the equity interests in the borrower of the whole loan secure two mezzanine loans totaling $18.4 million. This loan was transferred to the special servicer, Capmark, on May 1, 2009, due to imminent maturity default, and the borrower failed to pay off the loan upon its May 9, 2009, maturity date. Capmark has begun foreclosure proceedings. The master servicer, Capmark, also calculated a $7.2 million appraisal reduction amount based on the July 2009 appraisal, which valued the land parcels at a level that is significantly below the senior trust balance. S&P lowered its rating to 'D' in July 2009 after the related ongoing special servicing fees caused interest shortfalls on class L. Other Loan With Raked Certificates In addition to the raked certificates S&P discussed above, Standard & Poor's also rates one other raked certificate in the pool, the "O-BH" certificate. The Beverly HCPI loan has a whole- loan balance of $35.0 million that consists of a $32.0 million senior pooled component and a $3.0 million subordinate nonpooled component that supports the class "O-BH" raked certificate. This loan is secured by six skilled nursing facilities totaling 852 beds in Indiana and Wisconsin. In addition, the equity interests in the borrower of the whole loan secure a $7.0 million mezzanine loan. Capmark reported a DSC of 5.92x for the 12 months ended March 31, 2009, and 87% occupancy as of June 2009. S&P's adjusted valuation has declined 20% since issuance, primarily due to higher-than-expected operating expenses. This loan matures on April 9, 2010, and has two one-year extension options remaining. Ratings Lowered And Removed From Creditwatch Negative UBS Commercial Mortgage Trust 2007-FL1 Commercial mortgage pass-through certificates Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-1 AA+ AAA/Watch Neg 41.22 A-2 BB+ AAA/Watch Neg 20.81 B BB AA+/Watch Neg 17.03 C BB- AA/Watch Neg 14.98 D B+ AA-/Watch Neg 13.19 E B A+/Watch Neg 11.40 F B- A/Watch Neg 9.60 G CCC+ A-/Watch Neg 7.81 H CCC BBB+/Watch Neg 5.89 J CCC- BBB/Watch Neg 4.10 K CCC- BBB-/Watch Neg 2.30 M-MP D BBB+/Watch Neg N/A N-MP D BBB/Watch Neg N/A O-MP D BBB-/Watch Neg N/A O-MD CCC+ BBB-/Watch Neg N/A O-BH B- BBB-/Watch Neg N/A O-SA CCC- BBB-/Watch Neg N/A O-HA CCC- BBB-/Watch Neg N/A X AA+ AAA/Watch Neg N/A UNITED AIR: Moody's Assigns 'Ba1' Rating on $698 Mil. Notes ----------------------------------------------------------- Moody's Investors Service assigned Ba1 and B1 ratings, to the about $698 million of Class A and the about $112 million of Class B Pass Through Certificates, respectively, of the 2009-2 Pass Through Trusts to be issued by United Air Lines, Inc. The transaction documentation provides for the possible issuance of one additional subordinated tranche of certificates. The subordination provisions of the inter-creditor agreement provide for the payment of interest on the Class B Certificates before payments of principal on the Class A Certificates. Amounts due under the Certificates will, in any event, be subordinated to any amounts due on either of the Class A or Class B Liquidity facilities, each of which provides for three consecutive semi- annual interest payments due the respective Certificate holders. The Class A Equipment Notes and Class B Equipment Notes issued by United and acquired with the proceeds of the Certificates will be the sole assets of the Pass Through Trusts. The Certificates' proceeds will fund the refinancing of United's 2000-2 Enhanced Equipment Trust Certificates maturing in 2011. UAL Corporation (Caa1 Corporate Family Rating, negative outlook) will guarantee United's obligations under the Notes Indentures. Rating Rationale The ratings of the Certificates consider the credit quality of United as obligor under the Notes, Moody's opinion of the collateral protection of the Notes, the credit support provided by the Liquidity Facilities, and certain structural characteristics of the Notes such as the cross-collateralization and cross-default provisions and the protections of Section 1110 of Title 11 of the United States Code. The assigned ratings of Ba1 and B1 on the Class A and Class B tranches, respectively, reflect Moody's opinion of the ability of the Pass Through Trustees to make timely payment of interest and the ultimate payment of principal at a date no later than January 15, 2017 for the A tranche and January 15, 2016, for the B tranche, each the final expected distribution dates. "Same as for United's 2009-1 EETC, Moody's believes that since the majority of the aircraft types that comprise this transaction are core to United's mainline operations and fleet strategy, it is likely that United would affirm its obligations under the Equipment Notes in the event of its reorganization," said Moody's Analyst Jonathan Root. Additionally, the cross-collateralization of the aircraft securing each note underlying the transaction enhances the potential recovery for investors in the event of a default by the Pass Through Trusts of their respective Certificate obligations or of the rejection of the aircraft by United in the event of a bankruptcy event and pursuant to the provisions of the Code. Any combination of future changes in the underlying credit quality or ratings of United, material unexpected changes in the value of the aircraft pledged as collateral, and/or changes in the status or terms of the liquidity facilities or the credit quality of the liquidity provider could cause Moody's' to change its ratings of the Certificates. General Structure of the Series 2009-2 EETC's The proceeds of the Certificates will initially be held in escrow and deposited with the Depositary, JPMorgan Chase Bank, N.A. (short-term rating of P-1), until the issuance of each of the thirty-seven equipment notes upon the refinancing of the 2000-2 EETC. The interest on these funds will be sufficient to pay accrued interest on the outstanding Certificates during the Deposit Period. The collateral pool consists of 37 aircraft: twelve A319-100's, five A320-100's, three B757-200's, four B757-200ETOPS, three B777- 200's, seven B777-200ER's and three B747-400's. The Certificates issued to finance the aircraft are not obligations of, nor are they guaranteed by United. However, the amounts payable by United under the Notes will be sufficient to pay in full all principal and interest on the Certificates when due. The Notes will be secured by a perfected security interest in the aircraft. It is the opinion of counsel to United that the Notes will be entitled to benefits under Section 1110 of the U.S. Bankruptcy Code. Under Section 1110 of the U.S. Bankruptcy Code, if United fails to pay its obligations under the Notes, the collateral trustee has the right to repossess any aircraft which have been rejected by United. Scheduled interest payments on the Certificates will be supported by the respective liquidity facilities sized to pay up to three respective consecutive semi- annual interest payments in the event United defaults on its obligations under the Notes. The liquidity facility does not provide for payments of principal due, nor interest on the Certificate proceeds held in escrow during the Deposit Period. The provider of each of the liquidity facilities is Goldman Sachs Bank USA. The Goldman Sachs Group, Inc. (Moody's short-term rating of P-1), will guarantee Goldman Sachs Bank USA's obligations under the Revolving Credit Facilities for each of the A and B tranches. The liquidity provider has a priority claim on proceeds from liquidation of the Equipment Notes and other Trust collateral ahead of any of the holders of the Certificates and is also the controlling party following default. Cross-Collateralization The ratings of the 2009-2 Certificates benefit from the cross- collateralization of the Notes, a feature which Moody's believes can enhance recovery in the event of a default. The structure provides that, in the event any or all aircraft are sold, any surplus proceeds are made available to cover shortfalls due under the Notes related to the sale of any of the other aircraft. Importantly, all surplus proceeds are retained until maturity of the Equipment Notes financing or the indentures are cancelled. All Notes held by the Subordination Agent will be cross- subordinated such that payments received on the B certificates will be applied in order of the priorities set out in the Intercreditor Agreement. Moody's considers the number of aircraft and the number of different aircraft models that comprise the collateral pool when assessing the amount of LTV benefit of a cross-collateralized EETC structure. The large number of aircraft and aircraft types in the transaction result in a meaningful LTV benefit. That the included models are integral to United's short- and long-haul routes support the likelihood of affirmation by United of its obligations under the related equipment notes, thus minimizing the probability of the cross-collateralization benefit being called upon by creditors over the life of the transaction. The last rating action was on October 5, 2009 when Moody's assigned a Ba1 rating to United's 2009-1A EETC. Assignments: Issuer: United Air Lines, Inc. -- Senior Secured Enhanced Equipment Trust, Assigned B1 -- Senior Secured Enhanced Equipment Trust, Assigned Ba1 United Air Lines, Inc., and its parent UAL Corporation are based in Chicago, Illinois. United is one of the largest passenger airlines in the world. UNITED AIR: S&P Assigns 'BB' Rating on Class B 2009-2 Certs. ------------------------------------------------------------ Standard & Poor's Ratings Services said that it assigned its preliminary 'BBB' rating to United Air Lines Inc.'s series 2009-2 Class A pass-through certificates, with an expected maturity of Jan. 15, 2017, and assigned its preliminary 'BB' rating to the company's 2009-2 Class B pass-through certificates, with an expected maturity of Jan. 15, 2016. The final legal maturity will be 18 months after the expected maturity for both classes. The issues are a drawdown under a Rule 415 shelf registration. "We base the preliminary 'BBB' rating on the 2009-2 Class A certificates and the preliminary 'BB' rating on the 2009-2 Class B certificates on United's credit quality, substantial collateral aircraft coverage, and on legal and structural protections available to the pass-through certificates," said Standard & Poor's credit analyst Betsy R. Snyder. "The company will use the proceeds to refinance most of its 2000-2 pass-through certificates (repaying the class A and class B certificates, leaving a small amount of the C certificates) and to finance four additional aircraft," she continued. The negative outlook reflects S&P's continuing concerns that either renewed economic weakness or another spike in fuel prices could widen losses and drain liquidity. S&P could lower its ratings on parent UAL Corp. and United if unrestricted cash consistently falls below $2.5 billion. In assessing the credit implications of any liquidity level, S&P would also consider normal seasonal changes in cash and air traffic liability (cash levels fluctuate somewhat with seasonal ticket purchasing patterns, with the end of the second quarter near the high point and the end of the fourth quarter near the low point), upcoming debt maturities and other claims on cash, and the company's expected operating cash flows. S&P does not foresee raising the corporate credit rating over the next year, but could revise S&P's outlook to stable if the company returns to profitability and it appears that trend is sustainable. VERMEER FUNDING: Fitch Downgrades Ratings on Four Classes of Notes ------------------------------------------------------------------ Fitch Ratings has downgraded four and affirmed three classes of notes issued by Vermeer Funding II, Ltd./Corp. as a result of continued credit deterioration in the portfolio since Fitch's last rating action in February 2009. Approximately 84.7% of the portfolio has been downgraded since the last review. The details of the rating action follow at the end of this release. The downgrades to the portfolio have left approximately 85.3% of the portfolio (including defaults) with a Fitch derived rating below investment grade, and 64.1% with a rating in the 'CCC' rating category or lower, compared to 41.8% and 12.6%, respectively, at last review. Defaulted securities, as defined in the transaction's governing documents, now comprise 41.8% of the portfolio, compared to 11% at last review. The current balance of the portfolio is $147.2 million, including $61.5 million defaulted securities. The transaction entered an Event of Default on Nov. 4, 2009 when the net outstanding portfolio collateral balance failed to equal at least the aggregate outstanding amount of the classes A-1 and A-2 notes. Noteholders had not given direction to accelerate the notes at the time of this review. This review was conducted under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs' using the Portfolio Credit Model for projecting future default levels for the underlying portfolio. Due to the significant collateral deterioration, credit enhancement levels available to all classes of notes are exceeded by the 'CCC' rating loss rate, the lowest rating level loss projected by PCM. Fitch compared the respective credit enhancement levels to the amount of underlying assets considered distressed (rated 'CCC' and lower). These assets have a high probability of default and low expected recoveries upon default. The class A-1 notes are downgraded to 'CC' and the class A-2 notes are downgraded to 'C' due to the degree of deterioration within the underlying portfolio. While these classes are still receiving timely interest distributions, Fitch believes that default is probable for the class A-1 notes and inevitable for the class A-2 notes at or prior to maturity. This belief is based on the current credit quality of the portfolio and the credit enhancement levels of 50.2% and 31%, respectively, compared to 64.1% of the portfolio being considered distressed. Part of the interest payment due to the class A-2 notes is being fulfilled through the use of principal. Although the class B notes are also still receiving interest distributions, default is inevitable. Therefore the class B notes were downgraded to 'C'. The class C notes and the preference shares are no longer receiving interest distributions and are not expected to receive any proceeds going forward. Therefore the class C notes and the preference shares have been affirmed at 'C' to indicate Fitch's belief that default is inevitable at or prior to maturity. Vermeer II is a structured finance collateralized debt obligation that closed on Dec. 14, 2004 and is monitored by Rabobank International. The portfolio is composed of RMBS (66.9%), CDOs (18.1%), commercial mortgage-backed securities (6.9%), asset- backed securities (5.4%), and corporate bonds (2.7%). Fitch has downgraded and affirmed these ratings as indicated: -- $73,280,948 class A-1 notes downgraded to 'CC' from 'BBB-'; -- $3,000,000 class A-2A notes downgraded to 'C' from 'B'; -- $25,250,000 class A-2B notes downgraded to 'C' from 'B'; -- $35,290,000 class B notes downgraded to 'C' from 'CC'; -- $11,451,859 class C-1 notes affirmed at 'C'; -- $2,628,771 class C-2 notes affirmed at 'C'; -- $6,028,899 preference shares affirmed at 'C'. Fitch does not assign Rating Outlooks to classes rated 'CCC' or lower. The Rating Outlooks for classes A-1, A-2A, and A-2B were Negative prior to the downgrades. WACHOVIA AUTO: Fitch Keeps All Classes of 2007-1 & 2008-1 Notes --------------------------------------------------------------- Fitch Ratings has affirmed all classes of the Wachovia Auto Loan Owner Trust 2007-1 and 2008-1 transactions as part of its on going surveillance process. Current loss performance for both transactions is worse than originally expected and the future, projected performance for the transactions has been revised accordingly. Despite higher than expected cumulative net losses and delinquencies, the cash flows available to service the outstanding debt in the transactions currently continues to allow credit enhancement to build on a nominal basis for both transactions. Fitch analyzed the transactions incorporating stresses of the revised base case CNL assumptions, the timing of the remaining losses and various prepayment assumptions. Based on the analysis, Fitch concluded that CE is currently adequate to support the existing ratings under Fitch's revised assumptions and therefore affirms all classes of outstanding notes for both transactions. The revisions of the Rating Outlooks to Stable from Negative for certain notes reflect the sequential payment structure of these transactions. The securities are backed by a pool of new and used automobile and light-duty truck installment loans originated by WFS, a subsidiary of Wachovia. Fitch affirms and revises Outlooks on Wachovia Auto Loan Owner Trust 2007-1: -- Class A-3a notes at 'AAA'; Outlook to Stable from Negative; -- Class A-3b notes at 'AAA'; Outlook to Stable from Negative; -- Class B notes at 'AA'; Outlook to Stable from Negative; -- Class C notes at 'A'; Outlook to Stable from Negative; -- Class D notes at 'BBB'; Outlook Negative; -- Class E notes at 'BB'; Outlook Negative. Fitch affirms and revises Outlooks on Wachovia Auto Loan Owner Trust 2008-1: -- Class A-2a notes at 'AAA'; Outlook Stable; -- Class A-2b notes at 'AAA'; Outlook Stable; -- Class A-3 notes at 'AAA'; Outlook Stable; -- Class A-4 notes at 'AAA'; Outlook to Stable from Negative; -- Class B notes at 'AA'; Outlook to Stable from Negative; -- Class C notes at 'A'; Outlook Negative; -- Class D notes at 'BBB-'; Outlook Negative; -- Class E notes at 'BB-'; Outlook Negative. WACHOVIA BANK: Fitch Takes Rating Actions on 2005-C17 Certs. ------------------------------------------------------------ Fitch Ratings takes various actions on Wachovia Bank Commercial Mortgage Trust, 2005-C17 commercial mortgage pass-through certificates. The downgrades are the result of Fitch's loss expectations and its prospective views regarding cash flow declines and commercial real estate market values. Fitch forecasts potential losses of 2.9% for this transaction, should market conditions not recover. The rating actions are based on the full losses of 2.9% as a majority of loans mature in the next five years. The bonds with Negative Outlooks indicate classes that may be downgraded in the future. To determine potential defaults for each loan, Fitch assumed cash flow would decline by 10% from year-end 2008. That is consistent with the analysis used in its review of recent vintage transactions whereby cash flow was assumed to decline 15% from year-end 2007 projected over a three-year period. If the stressed cash flow would cause the loan to fall below 0.95 times debt service coverage ratio, Fitch assumed the loan would default during the term. To determine losses, Fitch used the above stressed cash flow and applied a market cap rate by property type, ranging between 7.5% and 9.5%, to derive a value. If the loan balance at default is less than Fitch's derived value, the loan would realize that amount of loss. These loss estimates were reviewed in more detail for loans representing 40.9% of the pool and, in certain cases, revised based on additional information and/or property characteristics. Loss expectations attributed to loans reviewed in detail represent approximately 38% of the 2.9%. Because the top 15 loans had limited losses and there is a small amount of specially serviced loans, the sampled percentage is lower than other deals. Approximately 30.8% of the mortgages mature within the next five years: 7.6% in 2010, 1.1% in 2011, 4.6% in 2012, 1.5% in 2013, and 15.3% in 2014. All losses associated with these loans are fully recognized in the rating actions. Fitch identified 24 Loans of Concern (13.8%) within the pool, two of which (2%) are specially serviced, one of which is current (1.7%) and one (0.3%) that is 90-days delinquent. Fitch's analysis resulted in loss expectations for only one of the top 15 loans. That loan is assumed to default during the loan term, as the stressed cash flow is below 0.95x DSCR. Fitch expects that 12 of the top 15 loans may default at maturity based on an insufficient accrued equity position as calculated in Fitch's refinance test; however, Fitch's analysis did not result in a loss based on its derived values being higher than the current loan amounts. A loan would pass the refinance test if the stressed cash flow would achieve a 1.25x DSCR as calculated based on a 30-year amortization schedule and an 8% coupon. The largest contributors to loss are: Great Wolf Resorts Pool (1.8%), Pine Lake Apartments (0.9%) and The Airport Square Shopping Center (0.6%). Great Wolf Resorts Pool is secured by two full-service hotels with water parks located in Traverse City, MI and Kansas City, KS, totaling 562 rooms. The servicer reported June 2009 DSCR and occupancy were 0.63x and 57.2%, respectively. June 2009 room revenue for the pool was down 42% since issuance. Based on current performance and anticipated declines, losses are expected prior to the loan's maturity in 2011. Pine Lake Apartments is a 320 unit apartment complex located in Port Saint Lucie, FL. The servicer reported year-end 2008 DSCR and occupancy were 0.79x and 84% compared to the DSCR and occupancy of 1.24x and 99% at issuance. The Airport Square Shopping Center is a 187,476 square foot retail center located in Toledo, OH. The servicer reported June 2009 DSCR and occupancy were 0.46x and 89% compared to the DSCR and occupancy of 1.26x and 94.7% at issuance. Fitch has downgraded and assigned a Loss Severity rating to this class: -- $27.2 million class F to 'BBB/LS5' from 'BBB+'; Outlook Stable. Fitch has downgraded, removed from Rating Watch Negative and assigned Rating Outlooks and LS ratings to these classes as indicated: -- $30.6 million class G to 'BBB-/LS5' from 'BBB'; Outlook Stable; -- $37.4 million class H to 'BB/LS5' from 'BBB-'; Outlook Stable; -- $6.8 million class J to 'BB/LS5' from 'BB+'; Outlook Stable; -- $10.2 million class K to 'B/LS5' from 'BB'; Outlook Negative; -- $13.6 million class L to 'B-/LS5' from 'BB-'; Outlook Negative; -- $6.8 million class M to 'B-/LS5' from 'B+'; Outlook Negative; -- $6.8 million class N to 'B-/LS5' from 'B'; Outlook Negative. Fitch has affirmed, removed from Rating Watch Negative and assigned a Rating Outlook and LS rating to this class: -- $6.8 million class O at 'B-/LS5'; Outlook Negative. Also, Fitch has affirmed and assigned LS ratings to these classes: -- $353.4 million class A-1A at 'AAA/LS1'; Outlook Stable; -- $223.9 million class A-2 at 'AAA/LS1'; Outlook Stable; -- $82 million class A-3 at 'AAA/LS1'; Outlook Stable; -- $224.4 million class A-PB at 'AAA/LS1'; Outlook Stable; -- $1.08 billion class A-4 at 'AAA/LS1'; Outlook Stable; -- $187.2 million class A-J at 'AAA/LS3'; Outlook Stable; -- Interest only class X-P at 'AAA/LS1'; Outlook Stable; -- Interest only class X-C at 'AAA/LS1'; Outlook Stable; -- $74.9 million class B at 'AA/LS4'; Outlook Stable; -- $23.8 million class C at 'AA-/LS5'; Outlook Stable; -- $47.7 million class D at 'A/LS4'; Outlook Stable; -- $27.2 million class E at 'A-/LS5'; Outlook Stable. The $37.5 million class P is not rated by Fitch. Class A-1 has paid in full. WACHOVIA BANK: Moody's Affirms Ratings on Seven 2005-C21 Certs. --------------------------------------------------------------- Moody's Investors Service affirmed the ratings of seven classes and downgraded ten classes of Wachovia Bank Commercial Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2005- C21. The downgrades are due to higher expected losses for the pool resulting from anticipated losses from loans in special servicing, increased leverage, increased credit quality dispersion and concerns about refinancing risk associated with five-year loans approaching maturity in an adverse environment. Five loans, representing 6% of the pool, mature within the next 24 months and have a Moody's stressed debt service coverage ratio below 1.00X. The affirmations are due to an increase in defeasance and are due to key rating parameters, including Moody's loan to value ratio, stressed DSCR and Herfindahl Index, remaining within acceptable ranges. On November 4, 2009, Moody's placed ten classes on review for possible downgrade due to higher expected losses for the pool resulting from losses from loans in special servicing, increased leverage and concerns about near-term refinancing risk. This action concludes Moody's review of the transaction. The rating action is the result of Moody's on-going surveillance of commercial mortgage backed securities transactions. As of the October 19, 2009 distribution date, the transaction's aggregate certificate balance has decreased by approximately 15% to $2.76 billion from $3.25 billion at securitization. The Certificates are collateralized by 226 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top ten loans representing 38% of the pool. The pool contains two loans, representing 5% of the pool, with investment grade underlying ratings. At securitization and last review, two additional loans, representing 2% of the pool, also had underlying ratings. The performance of these loans has declined since securitization and they are now analyzed as part of the conduit pool because of increased leverage. Five loans, representing 3% of the pool, have defeased and are collateralized with U.S. Government securities compared to no defeasance atMoody's prior review. Thirty nine loans, representing 10% 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 ofMoody'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 since securitization. Ten loans, representing 4% of the pool, are currently in special servicing. The largest specially serviced loan is the Brook Arbor Apartments Loan ($24.0 million -- 1% of the pool), which is secured by a 302 unit multifamily complex located in Cary, North Carolina. The loan was transferred to special servicing in October 2009 and is current. Of the remaining nine specially serviced loans, two are 90+ days delinquent, four are either real estate owned or in the process of foreclosure, one is 60 days delinquent, and two are 30 days delinquent. Moody's estimates an aggregate loss for all the specially serviced loans of $43.0 million (43% loss severity on average). Moody's was provided with full-year 2008 operating results for 93% of the pool. Moody's weighted average LTV ratio for the conduit pool is 105% compared to 102% at last review. In addition to the overall increase in leverage, the conduit pool has experienced increased credit quality dispersion since last review. Based on Moody's analysis, 62% of the pool has a LTV ratio in excess of 100% compared to 57% at last review. Approximately 23% of the pool has a LTV ratio in excess of 120% compared to 3% at last review. Moody's stressed DSCR for the conduit pool is 0.98X compared to 1.00X 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 Iindex 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 is 40. The pool has a Herf of 39 compared to 41 at last review. The largest loan with an underlying rating is the Extra Space Teamsters Portfolio Loan ($92.1 million -- 3% of the pool), which is secured by a portfolio of 28 self-storage properties located in 16 states. As of June 2009, the weighted average occupancy was 84% compared to 87% at last review. Despite the increased vacancy since last review, the portfolio's performance has been stable. Moody's underlying rating and stressed DSCR are A3 and 1.56X, respectively, compared to A3 and 1.55X at last review. The second loan with an underlying rating is the Extra Space VRS Portfolio Loan ($52.1 million -- 2% of the pool), which is secured by a portfolio of 22 self-storage properties located in 14 states. As of June 2009, the weighted average occupancy was 85% compared to 84% at last review. The portfolio's performance has been stable. Moody's underlying rating and stressed DSCR are Aa1 and 2.13X, respectively, compared to Aa1 and 1.99X at last review. The largest loan that previously had an underlying rating is the 110 North Wacker Drive Loan ($45.1 million -- 2% of the pool), which is secured by a 226,750 square foot office building located in the West Loop submarket in Chicago, Illinois. The building is 100% leased to General Growth Management, Inc, a subsidiary of General Growth Properties, Inc. through October 2019. The bottom $16 million of the loan is guaranteed by GGP. The loan is currently on the watchlist due to GGP's bankruptcy filing, although this property was not included in the filing. Even though the property performance has been stable, Moody's analysis of this loan reflects a significant downward adjustment to the property's net operating income due to weakness in the Chicago office market and concerns about the building's occupancy by a single, non-investment-grade tenant. The loan has amortized 4% since last review and matures in October 2010. Moody's LTV and stressed DSCR are 119% and 0.94X, respectively, compared to 97% and 1.05X at last review. The second loan that previously had an underlying rating is the Presidential Tower Loan ($14.5 million -- 1% of the pool), which is secured by a 145-unit student housing tower located in Champaign, Illinois near the University of Illinois - Champaign/Urban campus. As of June 2009, the property was 96% occupied, essentially the same since last review. Performance has declined due to increased operating expenses. Moody's LTV and stressed DSCR are 73% and 1.14X, respectively, compared to 70% and 1.20X at last review. The three largest conduit loans represent 17% of the pool. The largest conduit loan is the NGP Rubicon GSA Portfolio Loan ($194.5 million -- 7% of the pool), which represents a pari passu interest in a $389 million first mortgage loan. The loan is secured by 14-properties (13 office and one distribution center) located in ten states and the District of Columbia. As of September 2009, the weighted average occupancy was 99%, essentially the same as at last review. Various federal government agencies occupy over 94% of the portfolio's leasable area. Performance has declined due to higher expenses. Moody's LTV and stressed DSCR are 112% and 0.87X, respectively, compared to 91% and 1.02X at last review. The second largest conduit loan is the Abbey Pool Loan ($142.6 million -- 5% of the pool), which is secured by a portfolio of 20 properties located in California. The properties are concentrated in Riverside County (44%) and Los Angeles County (40%). The portfolio was 96% occupied as of June 2009 compared to 90% at last review. Despite the increased occupancy, the portfolio's performance has declined due to higher expenses. Moody's LTV and stressed DSCR are 104% and 0.96X, respectively, compared to 99% and 1.01X at last review. The third largest conduit loan is the Metropolitan Square Loan ($125.5 million -- 5% of the pool), which represents the A-note in a $151 million first mortgage loan. The loan is secured by a 987,300 square foot office building located in St. Louis, Missouri. The property was 76% occupied as of June 2009 compared to 87% at last review. The largest tenants are Bryan Cave, LLP (24% NRA; lease expiration June 2022) and Armstrong Teasdale (14% NRA; lease expiration June 2010). Armstrong Teasdale will be vacating the premises when its lease expires next year, which will potentially decrease the building's occupancy to 62%. Moody's analysis of the property reflects a significant downward adjustment to the property net operating income due to the weakness of the St. Louis office market and the increased vacancy of the property. Moody's LTV and stressed DSCR are 127% and 0.77X, respectively compared to 101% and 0.97X at last review. Moody's rating action is: -- Class A-2PFL, $202,800,627, affirmed at Aaa; previously assigned Aaa on 11/10/2005 -- Class A-3, $183,113,000, affirmed at Aaa; previously assigned Aaa on 11/10/2005 -- Class A-PB, $148,638,000, affirmed at Aaa; previously assigned Aaa on 11/10/2005 -- Class A-4, $917,453,000, affirmed at Aaa; previously assigned Aaa on 11/10/2005 -- Class A-1A, $330,684,886, affirmed at Aaa; previously assigned Aaa on 11/10/2005 -- Class A-M, $325,017,000, affirmed at Aaa; previously assigned Aaa on 11/10/2005 -- Class IO, Notional, affirmed at Aaa; previously assigned Aaa on 11/10/2005 -- Class A-J, $215,323,000, downgraded to Aa2 from Aaa; previously placed on review for possible downgrade on 11/04/2009 -- Class B, $65,003,000, downgraded to A1 from Aa2; previously placed on review for possible downgrade on 11/04/2009 -- Class C, $32,502,000, downgraded to A3 from Aa3; previously placed on review for possible downgrade on 11/04/2009 -- Class D, $60,941,000, downgraded to Baa2 from A2; previously placed on review for possible downgrade on 11/04/2009 -- Class E, $36,564,000, downgraded to Baa3 from A3; previously placed on review for possible downgrade on 11/04/2009 -- Class F, $40,627,000, downgraded to Ba1 from Baa1; previously placed on review for possible downgrade on 11/04/2009 -- Class G, $32,502,000, downgraded to Ba2 from Baa2; previously placed on review for possible downgrade on 11/04/2009 -- Class H, $40,627,000, downgraded to B1 from Baa3; previously placed on review for possible downgrade on 11/04/2009 -- Class J, $16,250,000, downgraded to B2 from Ba1; previously placed on review for possible downgrade on 11/04/2009 -- Class K, $16,251,000, downgraded to B3 from Ba2; previously placed on review for possible downgrade on 11/04/2009 WACHOVIA BANK: S&P Downgrades Ratings on 20 2006-C23 Securities --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 20 classes of commercial mortgage-backed securities from Wachovia Bank Commercial Mortgage Trust's series 2006-C23 and removed them from CreditWatch with negative implications, where they were placed June 26, 2009. In addition, S&P affirmed its ratings on six additional classes from the same transaction. The downgrades reflect S&P's analysis of the transaction using its U.S. conduit and fusion CMBS criteria, which was the primary driver of the rating actions. The downgrades of the mezzanine and subordinate classes also reflect credit support erosion S&P anticipate will occur upon the eventual resolution of several of the transaction's specially serviced assets. S&P's analysis included a review of the credit characteristics of all of the assets in the pool. Using servicer-provided financial information, S&P calculated an adjusted debt service coverage of 1.42x and a loan-to-value ratio of 108.0%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 0.88x and an LTV of 148.2%. The implied defaults and loss severity under the 'AAA' scenario were 86.0% and 38.2%, respectively. All of the DSC and LTV calculations noted above exclude 10 ($124.5 million, 3.0%) of the transaction's 15 specially serviced assets. S&P separately estimated losses for these 10 assets and included them in the 'AAA' scenario implied default and loss figures. The relevant calculations also exclude two ($14.6 million, 0.4%) defeased loans. The affirmations on the principal and interest certificates reflect subordination levels that are consistent with the outstanding ratings. S&P affirmed its ratings on the class X-P and X-C 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 finalizes its criteria review, S&P may revise its current IO criteria, which may affect outstanding ratings, including the ratings on the IO certificates that S&P affirmed. Credit Considerations As of the October 2009 remittance report, 15 assets ($272.9 million, 6.6%) in the pool are with the special servicer, CWCapital Asset Management LLC, including one of the top 10 loans, which S&P discuss below. The payment status of the specially serviced assets are: two ($48.1 million, 1.2%) are real estate owned; two ($13.8 million, 0.3%) are in foreclosure; seven ($43.4 million, 1.0%) are 90-plus days delinquent; two ($37.1 million, 0.9%) are 60 days delinquent; and two ($130.4 million, 3.1%) are late, but less than 30 days delinquent. Eleven of the specially serviced assets have appraisal reduction amounts in effect totaling $56.6 million. The Belmar loan is the fifth-largest loan in the pool and the largest loan with the special servicer. The loan has a total exposure of $127.0 million (3.1%), and is secured by an 813,357- sq.-ft. mixed-use property in Lakewood, Colo. The loan was transferred to the special servicer on March 11, 2009, due to imminent default and is classified as late, but it is less than 30 days delinquent in its payment status. The reported DSC was 1.10x as of year-end 2008, down from 1.32x at issuance. Occupancy was reported at 90.4% as of March 2009. Workout negotiations between the borrower and the special servicer are ongoing. The Monteverde Apartments asset, which has a total exposure of $39.0 million (0.9%), is the second-largest asset with the special servicer. The asset was transferred to the special servicer on April 22, 2009, and became REO on Oct. 8, 2009. The asset is a 435-unit garden-style multifamily property in Phoenix, Ariz. A $17.8 million ARA is in effect on this asset. S&P expects a significant loss upon the eventual resolution of this asset. The 13 remaining specially serviced assets have balances that, individually, represent less than 0.5% of the pool balance. S&P estimated losses for nine of these 13 assets and arrived at minimum and maximum estimated loss severities of 15.8% and 72.9%, respectively, and a weighted average estimated loss severity of 52.9%. Transaction Summary As of the October 2009 remittance report, the collateral pool had an aggregate trust balance of $4.14 billion, down from $4.23 billion at issuance. The pool includes 305 assets, unchanged since issuance. The master servicer, Wachovia Bank N.A., provided financial information for 96.4% of the nondefeased assets in the pool, and 98.4% of the servicer-provided information was full-year 2008 or interim 2009 data. S&P calculated a weighted average DSC of 1.42x for the pool based on the reported figures. S&P's adjusted DSC and LTV were 1.42x and 108.0%, respectively. S&P's adjusted DSC and LTV figures exclude 10 ($124.5 million, 3.0%) of the transaction's 15 specially serviced assets. S&P separately estimated losses for these 10 assets. Servicer-reported financial information was available for eight of these assets, and based on this information, S&P calculated a weighted average DSC of 0.86x for these exposures. The master servicer reported a watchlist of 36 loans ($896.4 million, 21.6%), including three of the top 10 loans. Twenty-eight assets ($793.0 million, 19.1%) in the pool have a reported DSC of less than 1.10x, and 19 assets ($445.0 million, 10.7%) have a reported DSC of less than 1.00x. Summary of Top 10 Loans The top 10 loan exposures have an aggregate outstanding balance of $1.41 billion (34.1%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.27x for the top 10 loans. S&P's adjusted DSC and LTV for the top 10 loans are 1.23x and 122.3%, respectively. Three ($512.0 million, 12.4%) of the top 10 loans appear on the master servicer's watchlist, which S&P discuss in detail below. The 1775 Broadway loan is the second-largest loan in the pool and the largest loan on the master servicer's watchlist. The loan has a trust balance of $250.0 million (6.0%) and is secured by a 618,122-sq.-ft. New York City office property. The asset appears on the watchlist due to low occupancy, which was 23.4% based on the September 2009 rent roll. As per the master servicer's watchlist comments, Newsweek, which occupied 33% of the net rentable area, vacated the space on May 31, 2009. The reported DSC, adjusted for the Newsweek vacancy, is 0.64x. The borrower does not plan to intensely market the vacant space until extensive ongoing renovations at the property are complete. The 620 Avenue of the Americas loan is the third-largest loan in the pool and the second-largest loan on the master servicer's watchlist. The loan has a trust balance of $205.0 million (5.0%) and is secured by a 669,513-sq.-ft. New York City office property. The loan appears on the watchlist due to low DSC, which was 0.99x as of year-end 2008. The Gap occupies 37% of the NRA at an annual rent of approximately $21 per-sq.-ft., which is below the market rent. The Gap's lease is scheduled to expire in November 2010, and as per the master servicer's watchlist comments, they will not be renewing their lease at expiration. The Marriott-Irving, Texas, loan is the ninth-largest loan in the pool and the third-largest loan on the master servicer's watchlist. The loan has a trust balance of $57.0 million (1.4%) and is secured by a 364-room lodging property in Irving, Texas. The loan is classified as current in its payment status. The loan appears on the watchlist due to a decline in DSC, which was 0.81x for the trailing 12 months ended June 2009, down from 1.47x at issuance. As per the master servicer's watchlist comments, the decline in performance is attributable to a decrease in corporate travel. Standard & Poor's stressed the assets in the pool according to its U.S. conduit/fusion criteria. The resultant credit enhancement levels are consistent with S&P's lowered and affirmed ratings. Ratings Lowered And Removed From Creditwatch Negative Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2006-C23 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-4 AA- AAA/Watch Neg 30.62 A-5 AA- AAA/Watch Neg 30.62 A-1A AA- AAA/Watch Neg 30.62 A-M A- AAA/Watch Neg 20.41 A-J BBB- AAA/Watch Neg 13.78 B BB+ AA+/Watch Neg 12.89 C BB AA/Watch Neg 11.61 D BB- AA-/Watch Neg 10.72 E B+ A+/Watch Neg 9.95 F B+ A/Watch Neg 8.93 G B+ A-/Watch Neg 7.66 H B BBB+/Watch Neg 6.38 J B BBB/Watch Neg 4.98 K B- BBB-/Watch Neg 3.70 L B- BB+/Watch Neg 3.44 M B- BB/Watch Neg 2.93 N CCC+ BB-/Watch Neg 2.55 O CCC B+/Watch Neg 2.30 P CCC- B/Watch Neg 1.91 Q CCC- B-/Watch Neg 1.53 Ratings Affirmed Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2006-C23 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.62 A-2 AAA 30.62 A-3 AAA 30.62 A-PB AAA 30.62 X-P AAA N/A X-C AAA N/A WACHOVIA BANK: S&P Downgrades Ratings on 20 2007-C33 Securities --------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 20 classes of commercial mortgage-backed securities from Wachovia Bank Commercial Mortgage Trust's series 2007-C33 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 U.S. conduit and fusion CMBS criteria, which was the primary driver of the rating actions. The downgrades of the mezzanine classes also reflect the credit support erosion S&P anticipate will occur upon the eventual resolution of six specially serviced loans, as well as S&P's analysis of four loans that S&P considers 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 1.22x and a loan-to-value ratio of 136.3%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 0.68x and an LTV of 196.8%. The implied defaults and loss severity under the 'AAA' scenario were 94.3% and 53.1%, respectively. The weighted average DSC and LTV calculations exclude six specially serviced loans ($76.4 million; 2.1%) and four loans that S&P deemed to be credit- impaired ($174.8 million; 4.9%). S&P separately estimated losses for the specially serviced and credit-impaired loans, which were included in S&P's implied default and loss severity figures. The affirmations of the principal and interest certificates reflect subordination levels that are consistent with the outstanding ratings. S&P affirmed its rating on the class IO 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 Considerations As of the Oct. 19, 2009, remittance date, 13 assets ($139.7 million; 3.9%) in the pool were with the special servicer, LNR Partners Inc. The payment status of the assets is: seven are 90-plus-days delinquent (1.9%), four are less than 30 days delinquent (0.7%), and two are in foreclosure (1.3%). S&P estimated losses on six of the specially serviced assets ($76.4 million; 2.1%), and the asset size ranged from 0.5% to 1.1% of the pool balance. Two of the remaining specially serviced loans ($21.2 million; 0.6%) will be returned to the master servicer, and discussions regarding modifications are in progress for two additional specially serviced loans ($13.7 million; 0.4%). Six of the specially serviced assets have appraisal reduction amounts in effect totaling $33.6 million. In addition to the specially serviced assets, S&P deemed four loans ($174.8 million; 4.9%) to be credit-impaired, including the Three Borough Pool loan, which is the seventh-largest loan in the pool ($133.0 million; 3.7%). In S&P's view, the loan is at increased risk of default over its term due to low DSC, and, for that reason, it appears on the master servicer's watchlist. The loan is secured the by the fee interest in 1,646 multifamily units and 24 commercial units across 42 apartment buildings in the Manhattan, Bronx, and Brooklyn boroughs of New York City. The buildings were developed between 1910 and 1969 and are composed of a mix of elevator and walk-up buildings. Each building contains between 17 and 220 apartment units. At issuance, 1,282 of the units were rent stabilized, 320 were Section 8, 29 were rent controlled, and 15 were vacant. At the time of loan origination, S&P expected the subsidized units would be converted to market- rate units. The loan was structured with a $13.4 million renovation reserve and the reserve balance has since been reduced to $1.2 million. Funds have been used to renovate 113 apartments ($3.1 million); to upgrade systems, elevators, and roofs ($8.6 million); and approximately $500,000 was spent to buy out tenants. The loan's DSC has been adversely affected to date because the subsidized units have not been converted to market rate units. The DSC was 0.50x for year-end 2008 and 0.87x for the six months ended June 20, 2009, and the payment status is current. The remaining three credit-impaired loans all have low DSC and/or occupancy issues. Transaction Summary As of the October 2009 remittance report, the aggregate trust balance was $3.60 billion (166 loans), unchanged since issuance. Wachovia Bank N.A., the master servicer, reported financial information for 99% of the pool. Ninety-six percent of the financial information was either full-year 2008 or partial-year 2009 data. S&P calculated a weighted average DSC of 1.22x for the pool based on the master servicer's reported figures. S&P's adjusted DSC and LTV were 1.22x and 136.3%, respectively. Standard & Poor's adjusted DSC and LTV calculations exclude six specially serviced loans ($76.4 million; 2.1%), four loans that S&P deems to be credit-impaired ($174.8 million; 4.9%), and six loans that did not report financial data ($42.8 million; 1.2%). S&P separately estimated losses for the six specially serviced loans and the four credit-impaired loans. Based on the servicer- reported year-end 2008 DSC figures, S&P calculated a weighted average DSC of 0.72 for these 10 loans. The transaction has not experienced any principal losses to date. Thirty-seven loans are on the servicer's watchlist ($1.0 billion; 28.9%). Eight loans ($84.3 million, 2.3%) have a reported DSC between 1.0x and 1.1x, and 18 loans ($834.5 million, 23.2%) have a reported DSC of less than 1.0x. Summary of Top 10 Loans The top 10 loans have an aggregate outstanding balance of $1.9 billion (51.6%). Using servicer-reported information, S&P calculated a weighted average DSC of 1.11x. Four of the top 10 loans appear on the master servicer's watchlist due to low DSC. S&P deems one of these loans, the Three Borough Pool loan ($133.0 million; 3.7%), to be credit-impaired and is discussed above. S&P's adjusted DSC and LTV figures for the top 10 loans were 1.13x and 150.5%, respectively. These figures exclude the Three Borough Pool loan. The remaining three top 10 loans that appear on the watchlist are: The 666 Fifth Avenue loan, the third-largest loan, has a 285.5 million (7.9% of the pool balance) trust balance and a $1.215 billion whole-loan balance that consists of eight pari passu notes. The loan is secured by a 39-story, 1,549,623-sq.-ft. class A office building in Midtown Manhattan. The building includes 1,367,545 sq. ft. of office space, 69,087 sq. ft. of retail and storage space, 17,478 sq. ft. of parking garage space with 90 spaces, and an additional 95,513 sq. ft. of Fifth Avenue retail space. The occupancy and DSC for year-end 2008 were 89% and 0.58x, respectively. The property was 90% occupied as of the June 30, 2009, rent roll. At issuance, a rollover/interest reserve was funded in the amount of $100 million to be used for tenant improvements and leasing commissions, as well as debt service shortfalls. As of Oct. 6, 2009, the rollover/interest reserve balance was approximately $75 million. The 110 East 42nd Street loan, the eighth-largest loan, has a $90.0 million (2.5%) trust and whole-loan balance. In addition, there is a $16.0 million mezzanine loan secured by the equity interests in the borrower. The loan is secured by a 20-story, 190,691-sq.-ft. masonry office building built in 1921 located across 42nd Street from Grand Central Terminal in Midtown Manhattan. The occupancy and DSC for year-end 2008 were 99% and 0.91x, respectively. The property was 99% occupied as of the Sept. 1, 2009, rent roll. The loan is structured with a debt reserve and a letter of credit to support debt service payments that currently provides $5.1 million in support. The Renaissance loan, the 10th-largest loan, has an $84 million (2.3%) trust balance and $93 million whole-loan balance. The whole loan consists of an $84.0 million senior A note that is included in the trust and a $9.0 million B note held outside of the trust. The loan is secured by a 221-unit residential condominium complex situated on floors 14 to 34 of a 34-story mixed-use building in lower Manhattan on John Street just west of Pearl Street. The lower floors function as office and retail space. The property was built in 1931 and renovated in 1999. The occupancy and DSC for year-end 2008 were 96.9% and 0.95x, respectively. There is a debt service reserve that the borrower is required to fund to achieve a 1.1x cover. Standard & Poor's stressed the loans with the special servicer and the remaining loans in the pool according to its 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-C33 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- A-4 BBB AAA/Watch Neg 30.04 A-5 BBB AAA/Watch Neg 30.04 A-1A BBB AAA/Watch Neg 30.04 A-M BB AAA/Watch Neg 20.03 A-J B+ AAA/Watch Neg 13.14 B B+ AA+/Watch Neg 12.14 C B AA/Watch Neg 11.02 D B AA-/Watch Neg 10.01 E B A+/Watch Neg 9.14 F B- A/Watch Neg 8.39 G B- A-/Watch Neg 7.39 H B- BBB+/Watch Neg 6.26 J CCC+ BBB/Watch Neg 4.88 K CCC BBB-/Watch Neg 3.88 L CCC- BB+/Watch Neg 3.13 M CCC- BB/Watch Neg 2.75 N CCC- BB-/Watch Neg 2.50 O CCC- B+/Watch Neg 2.13 P CCC- B/Watch Neg 1.88 Q CCC- B-/Watch Neg 1.63 Ratings Affirmed Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2007-C33 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1 AAA 30.04 A-2 AAA 30.04 A-3 AAA 30.04 A-PB AAA 30.04 IO AAA N/A * Fitch Downgrades Ratings on 119 Bonds From 85 RMBS Deals to 'D' ----------------------------------------------------------------- Fitch Ratings has downgraded 119 bonds in 85 residential mortgage- backed securities transactions to 'D' indicating that the bond has incurred a principal write-down. The bonds being downgraded to 'D' as part of this review were all previously rated 'C' indicating that a default was expected. The action is limited to just the bonds with write-downs. The remaining bonds in these transactions have not been analyzed as part of this review. Of the 119 bonds impacted by these downgrades 80 are subprime and 33 are Alt-A. The remaining six bonds are in other transaction types. Fitch downgrades bonds to 'D' as part of the ongoing surveillance process and will continue to monitor these transactions for additional defaults. A spreadsheet detailing Fitch's rating actions on the affected transactions can be found at 'www.fitchratings.com' by performing a title search for 'Fitch Downgrades 119 bonds to 'D' in 85 U.S. RMBS Transactions'. The spreadsheet also contains Fitch's Recovery Ratings. The Recovery Rating scale is based upon the expected relative recovery characteristics of an obligation. For structured finance, Recovery Ratings are designed to estimate recoveries on a forward- looking basis while taking into account the time value of money. The methodology used to assign Recovery Ratings is described in Fitch's Aug. 17 report, 'Criteria for Structured Finance Recovery Ratings'. * S&P Downgrades Ratings on 33 Classes From Four Alt-A RMBS Deals ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 33 classes from four U.S. Alternative-A residential mortgage-backed securities transactions issued in 2004. Additionally, S&P affirmed S&P's ratings on 12 classes from three of these transactions. The downgrades and affirmations incorporate S&P's current and projected losses based on the dollar amounts of loans currently in the transactions' delinquency, foreclosure, and real estate owned pipelines, as well as S&P's projection of future defaults. S&P also incorporated cumulative losses to date in S&P's analysis when assessing rating outcomes. For information on how S&P derive its loss assumptions, its use of loss curve forecasting methodology, and how S&P incorporates each transaction's current delinquency (including 60- and 90-day delinquencies), default, and loss trends into S&P's analysis, please see the articles listed in the Related Research section below. As part of its analysis, S&P considered the characteristics of the underlying mortgage collateral, as well as macroeconomic influences. For example, S&P's assessment of the risk profile of the underlying mortgage pools influences its default projections, while S&P's outlook for housing price declines and the health of the housing market influence S&P's loss severity assumptions. Furthermore, for each deal, S&P adjusted its loss expectations based on upward trends in delinquencies. The lowered ratings reflect S&P's belief that the amount of credit enhancement available for the downgraded classes is not sufficient to cover losses at the previous rating levels, given S&P's current projected losses. The affirmations reflect S&P's belief that there is sufficient credit enhancement to support the ratings at their current levels. Certain senior classes also benefit from senior-support classes that would provide support to a certain extent before any applicable losses could affect the super-senior certificates. The subordination of classes within each structure provides credit support for the affected transactions. 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 its 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 its base-case loss assumptions 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 S&P's base-case loss assumptions under its analysis. The collateral backing these deals originally consisted predominantly of Alt-A fixed- and adjustable-rate mortgage loans secured by one- to four-family properties. S&P monitors these transactions to incorporate updated losses and delinquency pipeline performance to assess whether, in S&P's view, the applicable credit enhancement features are sufficient to support the current ratings. S&P will continue to monitor these transactions and take additional rating actions as S&P deem appropriate. Ratings Lowered Harborview Mortgage Loan Trust 2004-6 Series 2004-6 Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 41161PFX6 CCC AA B-2 41161PFY4 CC BBB B-3 41161PFZ1 CC CCC HarborView Mortgage Loan Trust 2004-7 Series 2004-7 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A 41161PGF4 BB AAA 2-A-1 41161PGG2 BB AAA 2-A-2 41161PGH0 BB AAA 2-A-3 41161PGJ6 BB AAA 3-A-2 41161PGL1 BB AAA 4-A 41161PGM9 BB AAA X-1 41161PGN7 BB AAA B-1 41161PGR8 CCC AA+ B-2 41161PGS6 CC BB B-3 41161PGT4 CC CCC RALI Series 2004-QA3 Trust Series 2004-QA3 Rating ------ Class CUSIP To From ----- ----- -- ---- CB-I 76110HXM6 BB AAA NB-I-1 76110HXP9 B- AAA NB-I-2 76110HXQ7 B- AAA M-1 76110HXU8 B- AA M-2 76110HXV6 CCC A M-3 76110HXW4 CC CCC Structured Adjustable Rate Mortgage Loan Trust Series 2004-19 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A1 863579JD1 AA AAA 1-A2 863579JE9 AA AAA 1-A2X 863579JF6 AA AAA 2-A1 863579JG4 CCC AAA 2-A2 863579JH2 CCC AAA B1 863579JK5 CC AA B2 863579JL3 CC AA B3 863579JM1 CC A+ B4 863579JN9 CC A B5 863579JP4 CC BBB+ B6 863579JQ2 CC BBB- BX 863579JR0 CC BBB- B7-I 863579JT6 CC CCC B7-II 863579JW9 CC BB Ratings Affirmed Harborview Mortgage Loan Trust 2004-6 Series 2004-6 Class CUSIP Rating ----- ----- ------ 1-A 41161PFP3 AAA 2-A 41161PFQ1 AAA 3-A-1 41161PFR9 AAA 3-A-2A 41161PFS7 AAA 3-A-2B 41161PFT5 AAA 4-A 41161PFU2 AAA 5-A 41161PFV0 AAA HarborView Mortgage Loan Trust 2004-7 Series 2004-7 Class CUSIP Rating ----- ----- ------ 3-A-1 41161PGK3 AAA X-2 41161PGP2 AAA RALI Series 2004-QA3 Trust Series 2004-QA3 Class CUSIP Rating ----- ----- ------ CB-II 76110HXN4 AAA NB-II-1 76110HXR5 AAA NB-II-2 76110HYA1 AAA * S&P Downgrades Ratings on 107 Classes From 32 Alt-A RMBS Deals ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 107 classes from 32 U.S. Alternative-A residential mortgage-backed securities transactions issued between 2001 and 2004. S&P removed 13 of the lowered ratings from CreditWatch with negative implications. Additionally, S&P affirmed its ratings on 240 classes from these transactions and 11 other transactions. S&P removed 29 of the affirmed ratings from CreditWatch with negative implications. The downgrades and affirmations incorporate S&P's current and projected losses based on the dollar amounts of loans currently in the transactions' delinquency, foreclosure, and real estate owned pipelines, as well as S&P's projection of future defaults. S&P also incorporated cumulative losses to date in its analysis when assessing rating outcomes. As part of its analysis, S&P considered both the characteristics of the underlying mortgage collateral and macroeconomic influences. For example, S&P's assessment of the risk profile of the underlying mortgage pools influences its default projections, while its outlook for housing price declines and the health of the housing market influence S&P's loss severity assumptions. Furthermore, for each deal, S&P adjusted its loss expectations based on upward trends in delinquencies. The lowered ratings reflect S&P's belief that the amount of credit enhancement available for the downgraded classes is not sufficient to cover losses at the previous rating levels, given S&P's current projected losses. The affirmations reflect S&P's belief that there is sufficient credit enhancement to support the ratings at their current levels. Certain senior classes also benefit from senior-support classes that would provide support to a certain extent before any applicable losses could affect the super-senior certificates. The subordination of classes within each structure provides credit support for the affected transactions. 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 its view, a class could absorb the base-case loss assumptions S&P used in S&P's analysis. In order to maintain a rating higher than 'B', S&P assessed whether the class could withstand losses exceeding S&P's base-case loss assumptions at a percentage specific to each rating category, up to 150% for an '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 its 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 S&P's base-case loss assumptions under its analysis. The collateral backing these deals originally consisted predominantly of fixed- and adjustable-rate Alt-A mortgage loans secured by one- to four-family properties. S&P monitor these transactions to incorporate updated losses and delinquency pipeline performance to assess whether, in S&P's view, the applicable credit enhancement features are sufficient to support the current ratings. S&P will continue to monitor these transactions and take additional rating actions as S&P deem appropriate. Rating Actions Alternative Loan Trust 2002-17 Series 2002-33 Rating ------ Class CUSIP To From ----- ----- -- ---- B-2 12669DKG2 CCC AA- Alternative Loan Trust 2003-3T1 Series 2003-9 Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 12669D7F9 BBB AA B-2 12669D7G7 CC BBB B-3 12669D3Z9 CC CCC Alternative Loan Trust 2004-J4 Series 2004-J4 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 12667FFR1 BBB- A+ B 12667FFS9 CCC BBB+ American Home Mortgage Investment Trust 2004-4 Series 2004-4 Rating ------ Class CUSIP To From ----- ----- -- ---- VI-M-2 02660TCM3 BBB- A VI-M-3 02660TCN1 B BBB VI-B-1 02660TCP6 CCC B Chevy Chase Funding LLC Series 2004-1 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 16678RAS6 AAA AAA/Watch Neg A-NA AAA AAA/Watch Neg B-3 16678RAX5 CCC BBB B-4 16678RAY3 CC BB B-5 16678RAZ0 CC B Chevy Chase Funding LLC Series 2004-2 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 16678RBC0 AAA AAA/Watch Neg A-NA AAA AAA/Watch Neg B-2 16678RBF3 CCC A+ B-3 16678RBG1 CCC BBB B-4 16678RBH9 CC BB B-5 16678RBJ5 CC B Chevy Chase Funding LLC Series 2004-3 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 16678RBU0 AAA AAA/Watch Neg A-NA AAA AAA/Watch Neg B-1 16678RBW6 BBB AA B-2 16678RBX4 CCC A B-3 16678RBY2 CC BB B-4 16678RBZ9 CC CCC B-5 16678RCA3 CC CCC Compass Residential Mortgage Trust 2004-R1 Series 2004-R1 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 20450NBA9 BBB+ BBB+/Watch Neg A-2 20450NBB7 A A/Watch Neg Credit Suisse First Boston Mortgage Securities Corp. Series 2001-26 Rating ------ Class CUSIP To From ----- ----- -- ---- D-B-3 22540VGB2 BBB A+ D-B-4 22540VEB4 CC BB Deutsche Alt-A Securities Inc Mortgage Loan Trust Series 2003-4XS Series 2003-4XS Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 251510CJ0 B AA M-2 251510CK7 CC CCC Deutsche Mortgage Securities Inc Mortgage Loan Trust Series 2004-3 Series 2004-3 Rating ------ Class CUSIP To From ----- ----- -- ---- I-A-5 251563DW9 AAA AAA/Watch Neg I-A-6 251563DX7 AAA AAA/Watch Neg I-M-1 251563EA6 A AA I-M-2 251563EB4 CCC A I-M-3 251563EC2 CC BBB+ Deutsche Mortgage Securities Inc Mortgage Loan Trust Series 2004-5 Series 2004-5 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 251563GD8 B- AA+ M-2 251563GE6 CCC B DSLA Mortgage Loan Trust 2004-AR2 Series 2004-AR2 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1B 23332UAQ7 AA AAA A-2A 23332UAR5 AA AAA A-2B 23332UAS3 AA AAA B-1 23332UAW4 CCC AA+ B-2 23332UAX2 D B B-3 23332UAY0 D CCC B-4 23332UAZ7 D CC Homestar Mortgage Acceptance Corp. Series 2004-6 Rating ------ Class CUSIP To From ----- ----- -- ---- A-3B 437690CJ7 AAA AAA/Watch Neg M-4 437690CN8 BB A M-5 437690CP3 B- BBB M-6 437690CQ1 CCC BB M-7 437690CR9 CC B M-8 437690CS7 CC CCC Impac CMB Trust Series 2003-1 Series 2003-1 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A-1 45254NDV6 AA+ AA+/Watch Neg 2-A-1 45254NDX2 BBB BBB/Watch Neg Impac CMB Trust Series 2004-10 Series 2004-10 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A-2 45254NLK1 D CC 2-A 45254NLL9 D CC 3-M-1 45254NLR6 A AA+ 3-M-2 45254NLS4 BB- BBB 3-M-3 45254NLT2 B- B 3-M-5 45254NLV7 CC CCC Impac CMB Trust Series 2004-11 Series 2004-11 Rating ------ Class CUSIP To From ----- ----- -- ---- 2-A-1 45254NMB0 AA+ AAA 2-A-2 45254NMC8 B- AAA 2-M-1 45254NMD6 CCC AA+ 2-M-2 45254NME4 CCC AA 2-M-3 45254NMF1 CC A- 2-M-4 45254NMG9 CC BB+ 2-M-5 45254NMH7 CC B Impac CMB Trust Series 2004-7 Series 2004-7 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A-1 45254NKF3 AAA AAA/Watch Neg 1-A-2 45254NKG1 AAA AAA/Watch Neg 2-A 45254NKJ5 AAA AAA/Watch Neg M-1 45254NKK2 A AAA/Watch Neg M-2 45254NKL0 BB AA+/Watch Neg M-3 45254NKM8 CCC AA+/Watch Neg M-4 45254NKN6 CC AA+/Watch Neg Impac CMB Trust Series 2004-8 Series 2004-8 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A1 45254NKQ9 CC CCC 2-A-1 45254NKR7 CCC B/Watch Neg 2-A-2 45254NKS5 CC B/Watch Neg Impac CMB Trust Series 2004-9 Series 2004-9 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A-1 45254NKX4 AAA AAA/Watch Neg 1-A-2 45254NKY2 B AAA/Watch Neg 2-A 45254NKZ9 B AAA/Watch Neg M-1 45254NLB1 CCC AA+/Watch Neg M-2 45254NLC9 CCC AA+/Watch Neg M-3 45254NLD7 CC AA/Watch Neg M-4 45254NLE5 CC AA/Watch Neg Impac Secured Assets Corp. Series 2004-3 Rating ------ Class CUSIP To From ----- ----- -- ---- 2-A-1 45254TPZ1 AAA AAA/Watch Neg 2-A-2 45254TQA5 AAA AAA/Watch Neg M-2 45254TQC1 A- AA+ M-3 45254TQD9 CCC AA+ M-4 45254TQE7 CC AA M-5 45254TQF4 CC AA B 45254TQG2 CC A+ MASTR Alternative Loan Trust 2002-3 Series 2002-3 Rating ------ Class CUSIP To From ----- ----- -- ---- A-7 576434BW3 AAA AAA/Watch Neg RALI Series 2002-QS15 Trust Series 2002-QS15 Rating ------ Class CUSIP To From ----- ----- -- ---- M-3 76110GY88 B A RALI Series 2003-QS8 Trust Series 2003-QS8 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 76110HBE8 CCC A+ M-3 76110HBF5 CC CCC Residential Asset Securitization Trust 2002-A14J Series 2002-N Rating ------ Class CUSIP To From ----- ----- -- ---- B-3 45660NLF0 CCC A+ Residential Asset Securitization Trust 2003-A7 Series 2003-G Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 45660NSQ9 BB AA B-2 45660NSR7 CCC A B-3 45660NSS5 CC CCC B-4 45660NST3 CC CCC B-5 45660NSU0 CC CCC RFMSI Series 2003-S20 Trust Series 2003-S20 Rating ------ Class CUSIP To From ----- ----- -- ---- II-M-3 76111XEV1 B- BBB I-B-1 76111XEM1 B- BB II-B-1 76111XEQ2 CC BB I-B-2 76111XEN9 CC CCC II-B-2 76111XER0 CC B Structured Asset Securities Corp. Series 2003-18XS Rating ------ Class CUSIP To From ----- ----- -- ---- M1 86359AWN9 A AA M2 86359AWP4 CC A Structured Asset Securities Corp. Series 2003-25XS Rating ------ Class CUSIP To From ----- ----- -- ---- M1 86359AK69 CC AA Structured Asset Securities Corp. Series 2003-36XS Rating ------ Class CUSIP To From ----- ----- -- ---- M1 86359BAW1 B- B M2 86359BAX9 CC CCC Structured Asset Securities Corp. Series 2004-4XS Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A3A 86359BHJ3 AAA AAA/Watch Neg 1-A3B 86359BJM4 AAA AAA/Watch Neg 1-A5 86359BHL8 AAA AAA/Watch Neg 1-A6 86359BHM6 AAA AAA/Watch Neg 1-M1 86359BHR5 AA+ AA+/Watch Neg 2-M1 86359BHS3 B AA+ 1-M2 86359BHT1 CCC A+/Watch Neg 2-M2 86359BHU8 CCC A+ Structured Asset Securities Corp. Series 2004-6XS Rating ------ Class CUSIP To From ----- ----- -- ---- M1 86359BJV4 BBB AA+ M2 86359BJW2 CC BB Structured Asset Securities Corp. Series 2004-9XS Rating ------ Class CUSIP To From ----- ----- -- ---- 1-M1 86359BRF0 BB- AA+ 2-M2 86359BRQ6 BB+ A+ 1-M2 86359BRG8 CCC A+ Structured Asset Securities Corp. Series 2004-11XS Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A5B 86359BUF6 AAA AAA/Watch Neg 1-A6 86359BUG4 AAA AAA/Watch Neg 1-M1 86359BUK5 BB+ AA 1-M2 86359BUN9 CCC A M3(1) 86359BUM1 CC B M3(2) CC BBB- Structured Asset Securities Corp. Series 2004-17XS Rating ------ Class CUSIP To From ----- ----- -- ---- A3A 86359BZD6 AAA AAA/Watch Neg A4A 86359BZF1 AAA AAA/Watch Neg M1 86359BZH7 AA- AA+ M2 86359BZJ3 CCC AA- M3 86359BZK0 CC BBB Ratings Affirmed Alternative Loan Trust 2002-17 Series 2002-33 Class CUSIP Rating ----- ----- ------ A-3 12669DJM1 AAA A-4 12669DJN9 AAA A-5 12669DJP4 AAA A-6 12669DJQ2 AAA A-7 12669DJR0 AAA A-8 12669DJS8 AAA A-16 12669DKA5 AAA A-17 12669DKB3 AAA PO 12669DKC1 AAA M 12669DKE7 AAA B-1 12669DKF4 AAA Alternative Loan Trust 2003-3T1 Series 2003-9 Class CUSIP Rating ----- ----- ------ A-1 12669D6S2 AAA A-2 12669D6T0 AAA A-3 12669D6U7 AAA A-4 12669D6V5 AAA A-5 12669D6W3 AAA A-6 12669D6X1 AAA A-7 12669D6Y9 AAA A-8 12669D6Z6 AAA A-9 12669D7A0 AAA A-10 12669D7B8 AAA PO 12669D7C6 AAA M 12669D7E2 AAA Alternative Loan Trust 2004-J4 Series 2004-J4 Class CUSIP Rating ----- ----- ------ 1-A-4 12667FFJ9 AAA 1-A-5 12667FFK6 AAA 1-A-6 12667FFL4 AAA 1-A-7 12667FFV2 AAA 2-A-1 12667FFN0 AAA M-1 12667FFQ3 AA+ American Home Mortgage Investment Trust 2004-4 Series 2004-4 Class CUSIP Rating ----- ----- ------ I-A-1 02660TCC5 AAA I-A-2 02660TCD3 AAA II-A-1 02660TCE1 AAA II-A-2 02660TCF8 AAA III-A 02660TCG6 AAA IV-A 02660TCS0 AAA V-A 02660TCT8 AAA VI-A-1 02660TCJ0 AAA VI-A-2 02660TCK7 AAA M-1 02660TCH4 CCC VI-M-1 02660TCL5 AA VI-B-2 02660TCQ4 CCC VII-A 02660TCU5 BBB+ Chevy Chase Funding LLC Series 2004-1 Class CUSIP Rating ----- ----- ------ A-2 16678RAT4 AAA IO AAA B-1 16678RAV9 AA+ B-2 16678RAW7 A+ Chevy Chase Funding LLC Series 2004-2 Class CUSIP Rating ----- ----- ------ A-2 16678RBD8 AAA IO AAA B-1 16678RBE6 AA+ Chevy Chase Funding LLC Series 2004-3 Class CUSIP Rating ----- ----- ------ A-2 16678RBV8 AAA IO AAA Credit Suisse First Boston Mortgage Securities Corp. Series 2001-11 Class CUSIP Rating ----- ----- ------ III-M-1 22540AY44 BBB Credit Suisse First Boston Mortgage Securities Corp. Series 2001-26 Class CUSIP Rating ----- ----- ------ V-A-1 22540VFQ0 AAA V-A-2 22540VFR8 AAA III-X 22540VFT4 AAA A-P 22540VFU1 AAA D-B-1 22540VFZ0 AAA D-B-2 22540VGA4 AAA Credit Suisse First Boston Mortgage Securities Corp. Series 2001-33 Class CUSIP Rating ----- ----- ------ III-X 22540VRR5 AAA A-P 22540VRT1 AAA III-B-1 22540VRV6 AAA III-B-2 22540VRW4 AA III-B-3 22540VRX2 A Deutsche Alt-A Securities Inc Mortgage Loan Trust Series 2003-4XS Series 2003-4XS Class CUSIP Rating ----- ----- ------ A-4 251510CE1 AAA A-5 251510CF8 AAA A-6A 251510CG6 AAA A-6B 251510CT8 AAA Deutsche Mortgage Securities Inc Mortgage Loan Trust Series 2004-3 Series 2004-3 Class CUSIP Rating ----- ----- ------ I-A-4 251563DV1 AAA I-A-7 251563DY5 AAA II-AR-1 251563ED0 AAA II-AR-2 251563EE8 AAA II-MR-1 251563EF5 AA+ II-MR-2 251563EG3 AA- II-MR-3 251563EH1 BBB+ Deutsche Mortgage Securities Inc Mortgage Loan Trust Series 2004-5 Series 2004-5 Class CUSIP Rating ----- ----- ------ A-3 251563FY3 AAA A-4A 251563FZ0 AAA A-4B 251563GG1 AAA A-5A 251563GA4 AAA A-5B 251563GB2 AAA DSLA Mortgage Loan Trust 2004-AR2 Series 2004-AR2 Class CUSIP Rating ----- ----- ------ Class CUSIP Rating A-1A 23332UAP9 AAA GSAA Home Equity Trust 2004-7 Series 2004-7 Class CUSIP Rating ----- ----- ------ AF-4 36242DDD2 AA+ Homestar Mortgage Acceptance Corp. Series 2004-6 Class CUSIP Rating ----- ----- ------ A-3A 437690CH1 AAA M-1 437690CK4 AA+ M-2 437690CL2 AA M-3 437690CM0 A+ Impac CMB Trust Series 2003-1 Series 2003-1 Class CUSIP Rating ----- ----- ------ 1-B-1 45254NDW4 BBB+ Impac CMB Trust Series 2003-4 Series 2003-4 Class CUSIP Rating ----- ----- ------ 1-A-1 45254NED5 A 1-B-1 45254NEE3 A- 2-A-1 45254NEF0 A 3-A-1 45254NEG8 AAA 3-M-1 45254NEJ2 AA+ 3-M-2 45254NEK9 A+ 3-B-1 45254NEL7 BB Impac CMB Trust Series 2004-10 Series 2004-10 Class CUSIP Rating ----- ----- ------ 1-A-1 45254NLJ4 B 3-A-1 45254NLM7 AAA 3-A-2 45254NLN5 AAA 4-A-1 45254NLP0 AAA 3-M-4 45254NLU9 CCC Impac CMB Trust Series 2004-11 Series 2004-11 Class CUSIP Rating ----- ----- ------ 1-A-1 45254NLZ8 CCC 1-A-2 45254NMA2 CCC Impac CMB Trust Series 2004-8 Series 2004-8 Class CUSIP Rating ----- ----- ------ 3-A 45254NKT3 AAA 3-M-1 45254NKU0 AA 3-M-2 45254NKV8 A 3-B 45254NKW6 BBB Impac Secured Assets Corp. Series 2001-8 Class CUSIP Rating ----- ----- ------ A-6 45254TJZ8 AAA A-7 45254TKA1 AAA A-IO 45254TKB9 AAA A-PO 45254TKC7 AAA M-1 45254TKF0 AAA M-2 45254TKG8 AA M-3 45254TKH6 CCC Impac Secured Assets Corp. Series 2004-3 Class CUSIP Rating ----- ----- ------ 1-A-3 45254TPW8 AAA 1-A-4 45254TPX6 AAA 1-A-5 45254TPY4 AAA M-1 45254TQB3 AA+ MASTR Alternative Loan Trust 2002-3 Series 2002-3 Class CUSIP Rating ----- ----- ------ A-6 576434BR4 AAA RALI Series 2001-QS17 Trust Series 2001-QS17 Class CUSIP Rating ----- ----- ------ A-11 76110GTE1 AAA A-P 76110GTF8 AAA A-V 76110GTG6 AAA RALI Series 2002-QS15 Trust Series 2002-QS15 Class CUSIP Rating ----- ----- ------ CB 76110GX63 AAA NB-2 76110GX89 AAA NB-3 76110GX97 AAA A-P 76110GY21 AAA A-V 76110GY39 AAA M-1 76110GY62 AAA M-2 76110GY70 AA+ RALI Series 2003-QS8 Trust Series 2003-QS8 Class CUSIP Rating ----- ----- ------ A-1 76110HAS8 AAA A-2 76110HAT6 AAA A-3 76110HAU3 AAA A-4 76110HAV1 AAA A-5 76110HAW9 AAA A-6 76110HAX7 AAA A-7 76110HAY5 AAA A-P 76110HAZ2 AAA A-V 76110HBA6 AAA M-1 76110HBD0 AA Residential Asset Securitization Trust 2002-A12 Series 2002-L Class CUSIP Rating ----- ----- ------ A-4 45660NHW8 AAA PO 45660NHX6 AAA A-X 45660NHM0 AAA 2-A-9 45660NJD8 AAA B-1 45660NJA4 AAA B-2 45660NJB2 AAA B-3 45660NJC0 AA+ Residential Asset Securitization Trust 2002-A14J Series 2002-N Class CUSIP Rating ----- ----- ------ A-9 45660NKY0 AAA A-10 45660NKZ7 AAA PO 45660NLA1 AAA A-X 45660NLB9 AAA B-1 45660NLD5 AA+ B-2 45660NLE3 AA Residential Asset Securitization Trust 2003-A7 Series 2003-G Class CUSIP Rating ----- ----- ------ A-3 45660NRZ0 AAA A-4 45660NSA4 AAA A-5 45660NSB2 AAA A-7 45660NSD8 AAA A-8 45660NSE6 AAA A-9 45660NSF3 AAA A-10 45660NSG1 AAA A-11 45660NSH9 AAA A-12 45660NSJ5 AAA PO 45660NSM8 AAA A-X 45660NSN6 AAA RFMSI Series 2003-S20 Trust Series 2003-S20 Class CUSIP Rating ----- ----- ------ I-A-1 76111XDR1 AAA I-A-2 76111XDS9 AAA I-A-3 76111XDT7 AAA I-A-4 76111XDU4 AAA I-A-5 76111XDV2 AAA I-A-6 76111XDW0 AAA I-A-7 76111XDX8 AAA I-A-8 76111XDY6 AAA I-A-9 76111XDZ3 AAA II-A-1 76111XEA7 AAA I-A-P 76111XEW9 AAA I-A-V 76111XEC3 AAA II-A-P 76111XEB5 AAA II-A-V 76111XED1 AAA I-M-1 76111XEJ8 AA II-M-1 76111XET6 AA I-M-2 76111XEK5 A II-M-2 76111XEU3 A I-M-3 76111XEL3 BBB Structured Asset Securities Corp. Series 2003-18XS Class CUSIP Rating ----- ----- ------ A5 86359AWK5 AAA A6 86359AWL3 AAA A7 86359AYB3 AAA Structured Asset Securities Corp. Series 2003-25XS Class CUSIP Rating ----- ----- ------ A5 86359AK36 AAA A6 86359AK44 AAA Structured Asset Securities Corp. Series 2003-28XS Class CUSIP Rating ----- ----- ------ A4 86359AQ48 AAA A5 86359AQ55 BBB A6 86359AQ63 BBB M1 86359AQ71 CCC Structured Asset Securities Corp. Series 2003-36XS Class CUSIP Rating ----- ----- ------ A4 86359BAT8 AAA A5 86359BAU5 AAA Structured Asset Securities Corp. Series 2004-4XS Class CUSIP Rating ----- ----- ------ 2-A2 86359BHP9 AAA Structured Asset Securities Corp. Series 2004-6XS Class CUSIP Rating ----- ----- ------ A3 86359BJR3 AAA A5A 86359BJT9 AAA A5B 86359BMB4 AAA A6 86359BJU6 AAA Structured Asset Securities Corp. Series 2004-9XS Class CUSIP Rating ----- ----- ------ 1-A4A 86359BRB9 AAA 1-A4B 86359BRH6 AAA 1-A4C 86359BRJ2 AAA 1-A4D 86359BRK9 AAA 1-A5 86359BRC7 AAA 1-A6 86359BRD5 AAA 2-A1 86359BRE3 AAA 2-M1 86359BRP8 AA+ Structured Asset Securities Corp. Series 2004-11XS Class CUSIP Rating ----- ----- ------ 1-A4A 86359BUD1 AAA 1-A4B 86359BVC2 AAA 1-A5A 86359BUE9 AAA 2-A2 86359BUJ8 AAA 2-M1 86359BUL3 AA+ 2-M2 86359BVD0 A+ Structured Asset Securities Corp. Series 2004-17XS Class CUSIP Rating ----- ----- ------ A3B 86359BZE4 AAA A4B 86359BZG9 AAA * S&P Downgrades Ratings on 147 Classes From 18 Prime Jumbo RMBS ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 147 classes from 18 U.S. prime jumbo and subprime residential mortgage-backed securities transactions issued in 2001-2004. Additionally, S&P affirmed its ratings on 106 classes from 14 of the affected transactions and one additional transaction. The downgrades and affirmations incorporate S&P's current and projected losses based on the dollar amounts of loans currently in the transactions' delinquency, foreclosure, and real estate owned pipelines, as well as S&P's projection of future defaults. S&P also incorporated cumulative losses to date in its analysis when assessing rating outcomes. As part of its analysis, S&P considered the characteristics of the underlying mortgage collateral, as well as macroeconomic influences. For example, S&P's assessment of the risk profile of the underlying mortgage pools influences its default projections, while S&P's outlook for housing price declines and the health of the housing market influence its loss severity assumptions. Furthermore, for each deal, S&P adjusted its loss expectations based on upward trends in delinquencies. The lowered ratings reflect S&P's belief that the amount of credit enhancement available for the downgraded classes is not sufficient to cover losses at the previous rating levels, given S&P's current projected losses. The affirmations reflect S&P's belief that there is sufficient credit enhancement to support the ratings at their current levels. Certain senior classes also benefit from senior-support classes that would provide support to a certain extent before any applicable losses could affect the super-senior certificates. The subordination of classes within each structure provides credit support for the affected transactions. 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 its view, a class could absorb the base-case loss assumptions S&P used in its analysis. For prime jumbo transactions, in order to maintain a rating higher than 'B', S&P assessed whether the class could withstand losses exceeding S&P's base-case loss assumptions at a percentage specific to each rating category, up to 235% for a 'AAA' rating. For example, in general, S&P would assess whether one class could withstand approximately 127% 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 154% 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 235% of its base-case loss assumptions under its analysis. For subprime transactions, a class may have to withstand approximately 110% of S&P's base-case loss assumptions in order to maintain a 'BB' rating, while a different class may have to withstand approximately 120% of S&P's base-case loss assumptions to maintain a 'BBB' rating. An affirmed 'AAA' rating reflects S&P's opinion that the class can withstand approximately 150% of its base-case loss assumptions. The collateral backing these deals originally consisted predominantly of fixed-rate prime jumbo or subprime mortgage loans secured by one- to four-family properties. S&P monitors these transactions to incorporate updated losses and delinquency pipeline performance to assess whether, in S&P's view, the applicable credit enhancement features are sufficient to support the current ratings. S&P will continue to monitor these transactions and take additional rating actions as S&P deem appropriate. Ratings Lowered Bear Stearns ARM Trust 2003-9 Series 2003-9 Rating ------ Class CUSIP To From ----- ----- -- ---- I-A-1 07384MA85 AA AAA I-X-1 07384MA93 AA AAA I-A-2 07384MB27 AA AAA I-X-2 07384MB35 AA AAA I-A-3 07384MB43 AA AAA I-X-3 07384MB50 AA AAA II-A-1 07384MB68 AA AAA II-X-1 07384MB76 AA AAA II-A-2 07384MB84 AA AAA II-X-2 07384MB92 AA AAA II-A-3 07384MC26 AA AAA II-X-3 07384MC34 AA AAA III-A-1 07384MC42 AA AAA III-X-1 07384MC59 AA AAA III-A-2 07384MC67 AA AAA III-A-3 07384MC75 AA AAA III-X-3 07384MC83 AA AAA IV-A-1 07384MC91 AA AAA IV-X-1 07384MD25 AA AAA B-1 07384MD66 BB- AA+ B-2 07384MD74 CCC A+ B-3 07384MD82 CC BBB B-4 07384MD90 CC B Bear Stearns Asset Backed Securities I Trust 2004-AC7 Series 2004-AC7 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 073879NB0 A AA M-2 073879NC8 CCC B- CHL Mortgage Pass-Through Trust 2004-7 Series 2004-7 Rating ------ Class CUSIP To From ----- ----- -- ---- I-M 12669FXV0 A AA I-B-1 12669FXW8 B+ A I-B-2 12669FXX6 CCC BBB I-B-3 12669FYP2 CC BB I-B-4 12669FYQ0 CC B GSR Mortgage Loan Trust 2004-11 Series 2004-11 Rating ------ Class CUSIP To From ----- ----- -- ---- 1A1 36242DFP3 A+ AAA 1A2 36242DFQ1 A+ AAA 2A1 36242DFS7 A+ AAA 2AX1 36242DFV0 A+ AAA 2A2 36242DFT5 A+ AAA 2AX2 36242DFW8 A+ AAA 2A3 36242DFU2 A+ AAA 3A1 36242DFX6 AA- AAA 4A1 36242DFY4 A+ AAA 5A1 36242DFZ1 A+ AAA B1 36242DGA5 B- AA B2 36242DGB3 CCC B B3 36242DGC1 CC CCC GSR Mortgage Loan Trust 2004-5 Series 2004-5 Rating ------ Class CUSIP To From ----- ----- -- ---- B1 36228FX27 BB- AA B2 36228FX35 CCC A B3 36228FX43 CC BBB B4 36228FX68 CC BB- B5 36228FX76 CC CCC MASTR Adjustable Rate Mortgages Trust 2004-5 Series 2004-5 Rating ------ Class CUSIP To From ----- ----- -- ---- B-2 576433NJ1 BB AA- B-3 576433NK8 CCC A- B-4 576433NL6 CC B Merrill Lynch Mortgage Investors Inc. Series 2003-A5 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 5899293X4 BB+ AA M-3 5899293Y2 CCC BBB+ B-1 5899293Z9 CC BB+ B-2 5899294A3 CC B+ Morgan Stanley Mortgage Loan Trust 2004-7AR Series 2004-7AR Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 61748HCP4 BB AA B-2 61748HCQ2 CCC A B-3 61748HCR0 CC B B-4 61748HCT6 D CC RASC Series 2001-KS2 Trust Series 2001-KS2 Rating ------ Class CUSIP To From ----- ----- -- ---- A-I-5 76110WLL8 B- AAA A-I-6 76110WLM6 B- AAA M-I-1 76110WLN4 CC AA M-I-2 76110WLP9 CC B M-II-1 76110WLS3 CC B- Structured Adjustable Rate Mortgage Loan Trust, Series 2004-1 Series 2004-1 Rating ------ Class CUSIP To From ----- ----- -- ---- B1-I 86359BGS4 A- AA B1X-I 86359BGT2 A- AA B1-II 86359BGW5 CCC AA B1X-II 86359BGX3 CCC AA B2-I 86359BGU9 CCC A B2X-I 86359BGV7 CCC A B2-II 86359BGY1 CCC A B3 86359BHA2 CC BBB B4 86359BHC8 CC BB Structured Adjustable Rate Mortgage Loan Trust, Series 2004-10 Series 2004-10 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A1 86359BYK1 AA AAA 1-A2 86359BXZ9 AA AAA 1-A3 86359BYA3 AA AAA 2-A 86359BYB1 AA AAA 3-A1 86359BYC9 AA AAA 3-A3 86359BYE5 AA AAA 4-A 86359BYF2 AA+ AAA 4-AX 86359BYG0 AA+ AAA B1 86359BYL9 CCC AA B1-X 86359BYH8 CCC AA B2 86359BYM7 CC A B2-X 86359BYJ4 CC A B3 86359BYN5 CC BBB B4 86359BYP0 CC B Structured Asset Securities Corp. Series 2002-14A Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A1 86358RR41 BB- AAA 1-A2 86358RR58 BB- AAA B1-I 86358RR82 CCC BBB B1-I-X 86358RR90 CCC BBB B2-I 86358RS24 CC B B2-I-X 86358RS32 CC B 2-A1 86358RR66 A- AAA B1-II 86358RS40 CC A B2-II 86358RS73 CC B B3 86358RS57 CC CCC Structured Asset Securities Corp. Series 2002-18A Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A1 86358R5E3 B AAA B1-I 86358R5L7 CC AA+ B1-I-X 86358R5M5 CC AA+ B2-I 86358R5N3 CC A B2-I-X 86358R5P8 CC A 2-A1 86358R5G8 BB- AAA 3-A 86358R5J2 A AAA B1-II 86358R5Q6 CC AA+ B2-II 86358R5R4 CC A B3 86358R5S2 CC B Structured Asset Securities Corp. Series 2002-21A Rating ------ Class CUSIP To From ----- ----- -- ---- B1-I 86359ACA9 BBB- AA+ B1-I-X 86359ACB7 BBB- AA+ B2-I 86359ACG6 BBB- AA B2-I-X 86359ACH4 BBB- AA B1-II 86359ACC5 BBB- AA+ B2-II 86359ACD3 BBB- AA B3 86359ACE1 CCC A+ Structured Asset Securities Corp. Series 2002-25A Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A1 86359ADT7 BB AAA B1-I 86359AEB5 CCC AA+ B1-I-X 86359AEC3 CCC AA+ B2-I 86359AED1 CC AA+ B2-I-X 86359AEE9 CC AA+ B1-II 86359AEF6 CC AA+ B2-II 86359AEG4 CC AA+ B3 86359AEH2 CC A+ Structured Asset Securities Corp. Series 2003-2A Rating ------ Class CUSIP To From ----- ----- -- ---- B1-I 86359AKS1 AA+ AAA B1-I-X 86359AKT9 AA+ AAA B2-I 86359AKU6 BB+ AA B2-I-X 86359AKV4 BB+ AA B1-II 86359AKW2 BB+ AAA B2-II 86359AKX0 BB+ AA B3 86359AKY8 B A B4 86359ALA9 CC CCC B5 86359ALB7 CC CCC Structured Asset Securities Corp. Series 2003-9A Rating ------ Class CUSIP To From ----- ----- -- ---- B1-I-X 86359ARK1 CCC AA+ B2-I 86359ARL9 CCC AA- B2-I-X 86359ARM7 CCC AA- B1-II 86359ARN5 CCC AA+ B2-II 86359ARP0 CCC AA- B3 86359ARQ8 CC BBB+ B4 86359ARS4 CC BB B1-I 86359ARJ4 CCC AA+ Structured Asset Securities Corp. Series 2003-17A Rating ------ Class CUSIP To From ----- ----- -- ---- B1-I 86359AXT5 B- AA B1-I-X 86359AXU2 B- AA B2-I 86359AXV0 CCC A B2-I-X 86359AXW8 CCC A B1-II 86359AXX6 CCC AA B2-II 86359AXY4 CCC A B3 86359AXZ1 CC B B4 86359AXA6 CC CCC Ratings Affirmed Bear Stearns Asset Backed Securities I Trust 2004-AC7 Series 2004-AC7 Class CUSIP Rating ----- ----- ------ A-1 073879MY1 AAA A-2 073879MZ8 AAA A-3 073879NA2 AAA M-3 073879ND6 CCC B-1 073879NE4 CCC B-2 073879NF1 CCC CHL Mortgage Pass-Through Trust 2004-7 Series 2004-7 Class CUSIP Rating ----- ----- ------ 1-A-1 12669FXH1 AAA 2-A-1 12669FXJ7 AAA 3-A-1 12669FXK4 AAA 3-X 12669FXL2 AAA 4-A-1 12669FXM0 AAA 4-X 12669FXN8 AAA 5-A-1 12669FXP3 AAA 5-A-3 12669FXR9 AAA 6-A-1 12669FXS7 AAA II-X 12669FXU2 AAA GSR Mortgage Loan Trust 2004-5 Series 2004-5 Class CUSIP Rating ----- ----- ------ 1A1 36228FV94 AAA 1A2 36228FW28 AAA 1A3 36228FW36 AAA 1AX 36228FW44 AAA 2A1 36228FW51 AAA 2AX 36228FW69 AAA 3A2 36228FW85 AAA 3A3 36228FW93 AAA MASTR Adjustable Rate Mortgages Trust 2004-5 Series 2004-5 Class CUSIP Rating ----- ----- ------ 1-A-1 576433MT0 AAA 2-A-1 576433MU7 AAA 2-A-X 576433MV5 AAA 3-A-1 576433MW3 AAA 4-A-1 576433MX1 AAA 5-A-1 576433MY9 AAA 6-A-1 576433MZ6 AAA 6-A-X 576433NA0 AAA 7-A-1 576433NB8 AAA 9-A-2 576433NP7 AAA 9-A-X 576433NE2 AAA B-1 576433NH5 AA+ Merrill Lynch Mortgage Investors Inc. Series 2003-A5 Class CUSIP Rating ----- ----- ------ I-A 5899293M8 AAA II-A-6 5899293T3 AAA II-A-7 5899293U0 AAA II-A-IO 5899293V8 AAA M-1 5899293W6 AAA Morgan Stanley Mortgage Loan Trust 2004-7AR Series 2004-7AR Class CUSIP Rating ----- ----- ------ 1-A 61748HCD1 AAA 2-A-1 61748HCE9 AAA 2-A-2 61748HCF6 AAA 2-A-3 61748HCG4 AAA 2-A-4 61748HCH2 AAA 2-A-5 61748HCJ8 AAA 2-A-6 61748HCK5 AAA 2-A-7 61748HCL3 AAA 3-A 61748HCM1 AAA 4-A 61748HCN9 AAA RASC Series 2001-KS2 Trust Series 2001-KS2 Class CUSIP Rating ----- ----- ------ A-II 76110WLR5 AAA Structured Adjustable Rate Mortgage Loan Trust, Series 2004-1 Series 2004-1 Class CUSIP Rating ----- ----- ------ 1-A 86359BFY2 AAA 2-A 86359BFZ9 AAA 2-AX 86359BGA3 AAA 3-A1 86359BGB1 AAA 3-A2 86359BGC9 AAA 3-A3 86359BGD7 AAA 4-A1 86359BGF2 AAA 4-A2 86359BGG0 AAA 4-A3 86359BGH8 AAA 4-A5 86359BGK1 AAA 5-A 86359BGN5 AAA 6-A 86359BGQ8 AAA 4-A4 86359BGJ4 AAA 6-AX 86359BGR6 AAA Structured Adjustable Rate Mortgage Loan Trust, Series 2004-10 Series 2004-10 Class CUSIP Rating ----- ----- ------ 3-A2 86359BYD7 AAA Structured Asset Securities Corp. Series 2002-8A Class CUSIP Rating ----- ----- ------ 7-A1 86358RE29 AAA 7-A2 86358RE37 AAA B3 86358RE86 BBB Structured Asset Securities Corp. Series 2002-21A Class CUSIP Rating ----- ----- ------ 1-A1 86359ABP7 AAA 1-A3 86359ABR3 AAA 2-A1 86359ABS1 AAA 2-A2 86359ABT9 AAA 4-A1 86359ABW2 AAA Structured Asset Securities Corp. Series 2002-25A Class CUSIP Rating ----- ----- ------ 2-A1 86359ADV2 AAA 3-A1 86359ADX8 AAA 3-A2 86359ADY6 AAA 4-A1 86359ADZ3 AAA 4-A2 86359AEA7 AAA Structured Asset Securities Corp. Series 2003-2A Class CUSIP Rating ----- ----- ------ 1-A1 86359AKJ1 AAA 2-A1 86359AKL6 AAA 2-A2 86359AKM4 AAA 3-A1 86359AKN2 AAA 3-A2 86359AKP7 AAA 4-A1 86359AKQ5 AAA 4-A2 86359AKR3 AAA Structured Asset Securities Corp. Series 2003-9A Class CUSIP Rating ----- ----- ------ 1-A1 86359ARC9 AAA 2-A1 86359ARE5 AAA 2-A2 86359ARF2 AAA 2-A3 86359ARG0 AAA 2-AX 86359ARH8 AAA Structured Asset Securities Corp. Series 2003-17A Class CUSIP Rating ----- ----- ------ 1-A1 86359AXD0 AAA 1-AX 86359AXE8 AAA 2-A1 86359AXF5 AAA 2-A2 86359AXG3 AAA 2-A3 86359AXH1 AAA 2-AX 86359AXJ7 AAA 2-PAX 86359AXK4 AAA 3-A1 86359AXL2 AAA 3-A2 86359AXM0 AAA 3-A3 86359AXN8 AAA 3-AX 86359AXP3 AAA 4-A 86359AXQ1 AAA 4-AX 86359AXR9 AAA 4-PAX 86359AXS7 AAA * S&P Downgrades Ratings on 225 Tranches From 48 CLO Transactions ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 225 tranches from 48 U.S. collateralized loan obligation transactions and removed them from CreditWatch with negative implications. The affected tranches had a total issuance amount of $17.183 billion. S&P also affirmed its ratings on 36 tranches from 19 of these transactions and removed 35 of the ratings from CreditWatch negative. The downgrades reflect two primary factors: * The application of S&P's new corporate collateralized debt obligation criteria; and * Some of the transactions experienced deterioration in the credit quality of the collateral supporting the CLO tranches due to increased exposure to obligors that have either defaulted or have experienced downgrades into the 'CCC' range. The downgrades of 45 classes from 31 transactions resulted from S&P's application of the largest-obligor default test, which is one of the supplemental stress tests S&P introduced as part of its criteria update. The affirmations reflect S&P's view that the tranches have adequate credit support to maintain the current ratings according to its updated criteria. S&P will continue to review the remaining transactions with ratings on CreditWatch following its corporate CDO criteria update and resolve the CreditWatch status of the affected tranches. Rating Actions Rating ------ Transaction Class To From ----------- ----- -- ---- Apidos CDO III Ltd A-1 AA+ AAA/Watch Neg Apidos CDO III Ltd A-2 A+ AA/Watch Neg Apidos CDO III Ltd B BBB+ A/Watch Neg Apidos CDO III Ltd C BB+ BBB/Watch Neg Apidos CDO III Ltd D B+ BB/Watch Neg Atrium IV A-1a AA- AAA/Watch Neg Atrium IV A-1b AA- AAA/Watch Neg Atrium IV A-2 AA- AAA/Watch Neg Atrium IV A-3 A- AA/Watch Neg Atrium IV B BB+ A/Watch Neg Atrium IV C B+ BBB/Watch Neg Atrium IV D-1 CCC+ BB/Watch Neg Atrium IV D-2 CCC+ BB/Watch Neg Aurum CLO 2002-1 Ltd. A-2 AA+ AAA/Watch Neg Aurum CLO 2002-1 Ltd. C BB+ BBB/Watch Neg Aurum CLO 2002-1 Ltd. D-1 CCC- BB/Watch Neg Aurum CLO 2002-1 Ltd. D-2 CCC- BB/Watch Neg Avalon Capital Ltd. 3 A-1 AA AAA/Watch Neg Avalon Capital Ltd. 3 A-2 Var AA AAA/Watch Neg Avalon Capital Ltd. 3 B A+ AA/Watch Neg Avalon Capital Ltd. 3 C Def BBB A/Watch Neg Avalon Capital Ltd. 3 D Def CCC- BB+/Watch Neg Avenue CLO III, Ltd. A1L A+ AAA/Watch Neg Avenue CLO III, Ltd. A2L BBB+ AA/Watch Neg Avenue CLO III, Ltd. A3L CCC- A/Watch Neg Avenue CLO III, Ltd. B1L CCC- BB/Watch Neg Avenue CLO III, Ltd. B2L CCC- B-/Watch Neg Babson CLO Ltd 2006-I A-2 AA+ AAA/Watch Neg Babson CLO Ltd 2006-I A-2B AA+ AAA/Watch Neg Babson CLO Ltd 2006-I A-3 AA+ AAA/Watch Neg Babson CLO Ltd 2006-I B A+ AA/Watch Neg Babson CLO Ltd 2006-I C BBB+ A/Watch Neg Babson CLO Ltd 2006-I D BB+ BBB/Watch Neg Babson CLO Ltd. 2004-I A-1 AA AAA/Watch Neg Babson CLO Ltd. 2004-I A-2A AA AAA/Watch Neg Babson CLO Ltd. 2004-I A-2B AA AAA/Watch Neg Babson CLO Ltd. 2004-I A-2Bv AA AAA/Watch Neg Babson CLO Ltd. 2004-I B A+ AA/Watch Neg Babson CLO Ltd. 2004-I C-1 BBB- A/Watch Neg Babson CLO Ltd. 2004-I C-2 BBB- A/Watch Neg Babson CLO Ltd. 2004-I D BB BBB-/Watch Neg Bridgeport CLO II Ltd A-1 AA+ AAA/Watch Neg Bridgeport CLO II Ltd A-2 A+ AA/Watch Neg Bridgeport CLO II Ltd B BBB+ A/Watch Neg Bridgeport CLO II Ltd C BBB- BBB/Watch Neg Burr Ridge CLO Plus Ltd A-1D AA+ AAA/Watch Neg Burr Ridge CLO Plus Ltd A-1R AA+ AAA/Watch Neg Burr Ridge CLO Plus Ltd A-1T AA+ AAA/Watch Neg Burr Ridge CLO Plus Ltd C BBB+ A/Watch Neg Burr Ridge CLO Plus Ltd D BBB- BBB/Watch Neg Canyon Capital CLO 2004-1 Ltd. A-1-A AA+ AAA/Watch Neg Canyon Capital CLO 2004-1 Ltd. A-1-B AA+ AAA/Watch Neg Canyon Capital CLO 2004-1 Ltd. A-2-A AA+ AAA/Watch Neg Canyon Capital CLO 2004-1 Ltd. A-2-B AA+ AAA/Watch Neg Canyon Capital CLO 2004-1 Ltd. B BBB+ A+/Watch Neg Canyon Capital CLO 2004-1 Ltd. C BB BBB/Watch Neg Canyon Capital CLO 2004-1 Ltd. D CCC+ BB/Watch Neg Carlyle High Yield Partners 2008-1 Ltd A AA+ AAA/Watch Neg Carlyle High Yield Partners VIII Ltd A-1 AA+ AAA/Watch Neg Carlyle High Yield Partners VIII Ltd A-2-a AA+ AAA/Watch Neg Carlyle High Yield Partners VIII Ltd A-2-b AA+ AAA/Watch Neg Carlyle High Yield Partners VIII Ltd B A+ AA/Watch Neg Carlyle High Yield Partners VIII Ltd C BBB A/Watch Neg Carlyle High Yield Partners VIII Ltd D CCC+ BBB-/Watch Neg Centurion CDO VI, Ltd. A AA+ AAA/Watch Neg Centurion CDO VI, Ltd. B-1 BBB- A-/Watch Neg Centurion CDO VI, Ltd. B-2 BBB- A-/Watch Neg Centurion CDO VI, Ltd. C B+ BBB/Watch Neg Centurion CDO VI, Ltd. D-1 CCC- BB/Watch Neg Centurion CDO VI, Ltd. D-2 CCC- BB/Watch Neg Centurion CDO VI, Ltd. D-3 CCC- BB/Watch Neg Chatham Light II CLO Limited A-1 AA+ AAA/Watch Neg Chatham Light II CLO Limited A-2 A+ AA/Watch Neg Chatham Light II CLO Limited B BBB+ A/Watch Neg Chatham Light II CLO Limited C BB BBB/Watch Neg Chatham Light II CLO Limited D B+ BB/Watch Neg CSAM Funding IV A-1 AA+ AAA/Watch Neg CSAM Funding IV A-1NV AA+ AAA/Watch Neg CSAM Funding IV A-1V AA+ AAA/Watch Neg CSAM Funding IV A-2 A+ AA/Watch Neg CSAM Funding IV B-1 BBB+ A/Watch Neg CSAM Funding IV B-2 BBB+ A/Watch Neg CSAM Funding IV C-1 BB+ BBB/Watch Neg CSAM Funding IV C-2 BB+ BBB/Watch Neg CSAM Funding IV D-1 B+ BB/Watch Neg CSAM Funding IV D-2 B+ BB/Watch Neg Denali Capital CLO VI, Ltd. A-1L AA AAA/Watch Neg Denali Capital CLO VI, Ltd. A-1LR AA AAA/Watch Neg Denali Capital CLO VI, Ltd. A-2L A+ AA/Watch Neg Denali Capital CLO VI, Ltd. A-3L BBB+ A/Watch Neg Denali Capital CLO VI, Ltd. B-1L BB+ BBB/Watch Neg Denali Capital CLO VI, Ltd. B-2L B+ BB/Watch Neg Eagle Creek CLO Ltd A-2 AA AAA/Watch Neg Eagle Creek CLO Ltd B BBB+ A/Watch Neg Eagle Creek CLO Ltd C BB- BBB/Watch Neg Eagle Creek CLO Ltd D CCC+ BB/Watch Neg Eaton Vance CDO IX Ltd A-1B AA+ AAA/Watch Neg Eaton Vance CDO IX Ltd A-2 AA+ AAA/Watch Neg Eaton Vance CDO IX Ltd B A+ AA/Watch Neg Eaton Vance CDO IX Ltd C BBB+ A/Watch Neg Eaton Vance CDO IX Ltd D CCC- BBB-/Watch Neg Emporia Preferred Funding II Ltd A-1 AA+ AAA/Watch Neg Emporia Preferred Funding II Ltd A-2 AA+ AAA/Watch Neg Emporia Preferred Funding II Ltd A-3 AA+ AAA/Watch Neg Emporia Preferred Funding II Ltd B A+ AA/Watch Neg Emporia Preferred Funding II Ltd C BBB+ A/Watch Neg Emporia Preferred Funding II Ltd D BB+ BBB/Watch Neg Emporia Preferred Funding II Ltd E CCC+ BB/Watch Neg Flagship CLO IV A FundedAA- AAA/Watch Neg Flagship CLO IV A Rev NoAA- AAA/Watch Neg Flagship CLO IV B BBB+ A/Watch Neg Flagship CLO IV C BB+ BBB/Watch Neg Flagship CLO IV D CCC- BB-/Watch Neg Franklin CLO V Ltd A-1 AA+ AAA/Watch Neg Franklin CLO V Ltd A-2 AA+ AAA/Watch Neg Franklin CLO V Ltd B A+ AA/Watch Neg Franklin CLO V Ltd C BB+ A/Watch Neg Franklin CLO V Ltd D CCC- BBB/Watch Neg Franklin CLO V Ltd E CCC- BB/Watch Neg Franklin CLO VI Ltd A AA+ AAA/Watch Neg Franklin CLO VI Ltd B A+ AA/Watch Neg Franklin CLO VI Ltd C BB+ A/Watch Neg Franklin CLO VI Ltd D CCC- BBB/Watch Neg Franklin CLO VI Ltd E CCC- BB/Watch Neg Galaxy VII CLO Ltd A-1 AA+ AAA/Watch Neg Galaxy VII CLO Ltd A-2 AA+ AAA/Watch Neg Galaxy VII CLO Ltd B A+ AA/Watch Neg Galaxy VII CLO Ltd C BBB+ A/Watch Neg Galaxy VII CLO Ltd D BB+ BBB/Watch Neg Galaxy VII CLO Ltd E CCC+ BB/Watch Neg Granite Ventures II Ltd A-1 AA+ AAA/Watch Neg Granite Ventures II Ltd A-2 AA- AA/Watch Neg Granite Ventures II Ltd B BBB+ A/Watch Neg Granite Ventures II Ltd C B+ BBB/Watch Neg Granite Ventures II Ltd D CCC+ BB/Watch Neg Gulf Stream-Compass CLO 2005-II, Ltd A-1 AA AAA/Watch Neg Gulf Stream-Compass CLO 2005-II, Ltd A-2 AA AAA/Watch Neg Gulf Stream-Compass CLO 2005-II, Ltd B AA- AA/Watch Neg Gulf Stream-Compass CLO 2005-II, Ltd C BBB+ A/Watch Neg Gulf Stream-Compass CLO 2005-II, Ltd D CCC+ BB+/Watch Neg Hewett's Island CLO V Ltd A-R AA- AAA/Watch Neg Hewett's Island CLO V Ltd A-T AA- AAA/Watch Neg Hewett's Island CLO V Ltd B BBB+ AA/Watch Neg Hewett's Island CLO V Ltd C BBB- A/Watch Neg Hewett's Island CLO V Ltd D CCC- BBB/Watch Neg Hewett's Island CLO V Ltd E CCC- BB/Watch Neg ING Investment Management CLO II Ltd A-2 AA- AAA/Watch Neg ING Investment Management CLO II Ltd B BBB+ AA/Watch Neg ING Investment Management CLO II Ltd C BB+ BBB+/Watch Neg ING Investment Management CLO II Ltd D CCC+ BB/Watch Neg ING Investment Management CLO III Ltd A-1 AA- AAA/Watch Neg ING Investment Management CLO III Ltd A-2a AA+ AAA/Watch Neg ING Investment Management CLO III Ltd A-2b AA- AAA/Watch Neg ING Investment Management CLO III Ltd A-3 A+ AA/Watch Neg ING Investment Management CLO III Ltd B BBB- A/Watch Neg ING Investment Management CLO III Ltd C BB+ BBB/Watch Neg ING Investment Management CLO III Ltd D B+ BB/Watch Neg Landmark VI CDO Ltd. A AA+ AAA/Watch Neg Landmark VI CDO Ltd. B A+ AA/Watch Neg Landmark VI CDO Ltd. C BBB+ A/Watch Neg Landmark VI CDO Ltd. D B+ BB+/Watch Neg Landmark VI CDO Ltd. E CCC- B/Watch Neg Landmark VII CDO Ltd. A-1L AA+ AAA/Watch Neg Landmark VII CDO Ltd. A-2L A+ AA/Watch Neg Landmark VII CDO Ltd. A-3L BBB A/Watch Neg Landmark VII CDO Ltd. B-1L BB BBB/Watch Neg Landmark VII CDO Ltd. B-2L CCC+ BB/Watch Neg LightPoint CLO VIII Ltd A-1-B AA AAA/Watch Neg LightPoint CLO VIII Ltd B A+ AA/Watch Neg LightPoint CLO VIII Ltd C BBB+ A/Watch Neg LightPoint CLO VIII Ltd D BB+ BBB/Watch Neg LightPoint CLO VIII Ltd E B+ BB/Watch Neg Long Grove CLO Ltd. A AA+ AAA/Watch Neg Long Grove CLO Ltd. C BBB- BBB/Watch Neg Long Grove CLO Ltd. D CCC+ BB/Watch Neg Longhorn CDO III Ltd D-1 CCC- B-/Watch Neg Longhorn CDO III Ltd D-2 CCC- B-/Watch Neg Marlborough Street CLO Ltd A-1 AA+ AAA/Watch Neg Marlborough Street CLO Ltd A-2A AA+ AAA/Watch Neg Marlborough Street CLO Ltd A-2B AA+ AAA/Watch Neg Marlborough Street CLO Ltd B A+ AA/Watch Neg Marlborough Street CLO Ltd C BBB+ A/Watch Neg Marlborough Street CLO Ltd D B+ BBB/Watch Neg Marlborough Street CLO Ltd E CCC- BB/Watch Neg Morgan Stanley Investment Mgmt Croton A-1 AA+ AAA/Watch Neg Morgan Stanley Investment Mgmt Croton A-2 AA+ AAA/Watch Neg Morgan Stanley Investment Mgmt Croton B(Fltg) AA- AA/Watch Neg Morgan Stanley Investment Mgmt Croton B(Fxd) AA- AA/Watch Neg Morgan Stanley Investment Mgmt Croton C BBB+ A/Watch Neg Morgan Stanley Investment Mgmt Croton D CCC- BB+/Watch Neg Morgan Stanley Investment Mgmt Croton E CCC- B/Watch Neg Mountain View Funding CLO 2006-1, Ltd. A-1 AA- AAA/Watch Neg Mountain View Funding CLO 2006-1, Ltd. A-2 AA- AAA/Watch Neg Mountain View Funding CLO 2006-1, Ltd. B-1 A- AA/Watch Neg Mountain View Funding CLO 2006-1, Ltd. B-2 A- AA/Watch Neg Mountain View Funding CLO 2006-1, Ltd. C-1 BB+ A/Watch Neg Mountain View Funding CLO 2006-1, Ltd. C-2 BB+ A/Watch Neg Mountain View Funding CLO 2006-1, Ltd. D B+ BBB/Watch Neg Mountain View Funding CLO 2006-1, Ltd. E CCC- BB/Watch Neg MT Wilson CLO Ltd A AA- AAA/Watch Neg MT Wilson CLO Ltd B A+ AA/Watch Neg MT Wilson CLO Ltd C BB+ A/Watch Neg MT Wilson CLO Ltd D CCC+ BBB-/Watch Neg MT Wilson CLO Ltd E CCC- BB/Watch Neg Mt. Wilson CLO II, Ltd. A-1 AA+ AAA/Watch Neg Mt. Wilson CLO II, Ltd. A-2 A+ AAA/Watch Neg Mt. Wilson CLO II, Ltd. B BBB+ AA/Watch Neg Mt. Wilson CLO II, Ltd. C BB+ A/Watch Neg Mt. Wilson CLO II, Ltd. D CC BBB/Watch Neg NYLIM Flatiron CLO 2004-1 Ltd. A AA+ AAA/Watch Neg NYLIM Flatiron CLO 2004-1 Ltd. D CCC+ BB/Watch Neg NYLIM Flatiron CLO 2006-1 Ltd A-1 AA+ AAA/Watch Neg NYLIM Flatiron CLO 2006-1 Ltd A-2B AA+ AAA/Watch Neg NYLIM Flatiron CLO 2006-1 Ltd C BB+ BBB/Watch Neg NYLIM Flatiron CLO 2006-1 Ltd D CCC+ BB-/Watch Neg Octagon Investment Partners XI Ltd A-1A AA AAA/Watch Neg Octagon Investment Partners XI Ltd A-1B AA AAA/Watch Neg Octagon Investment Partners XI Ltd A-2 A+ AA/Watch Neg Octagon Investment Partners XI Ltd B BBB+ A/Watch Neg Octagon Investment Partners XI Ltd C BB+ BBB/Watch Neg Octagon Investment Partners XI Ltd D B+ BB/Watch Neg OHA Park Avenue CLO I Ltd A-1a AA+ AAA/Watch Neg OHA Park Avenue CLO I Ltd A-1b AA+ AAA/Watch Neg OHA Park Avenue CLO I Ltd D CCC+ BB/Watch Neg Race Point IV CLO, Ltd. A-1-A AA+ AAA/Watch Neg Race Point IV CLO, Ltd. A-1-B AA- AAA/Watch Neg Race Point IV CLO, Ltd. A-2 AA- AAA/Watch Neg Race Point IV CLO, Ltd. B A- AA/Watch Neg Race Point IV CLO, Ltd. C BBB A/Watch Neg Race Point IV CLO, Ltd. D BB+ BBB/Watch Neg Schiller Park CLO Ltd. A-1-B AA+ AAA/Watch Neg Schiller Park CLO Ltd. A-2 AA+ AAA/Watch Neg Schiller Park CLO Ltd. C A- A/Watch Neg Stanfield Arnage CLO Ltd A-1L AA+ AAA/Watch Neg Stanfield Arnage CLO Ltd A-1LA AA+ AAA/Watch Neg Stanfield Arnage CLO Ltd A-1LB AA+ AAA/Watch Neg Stanfield Arnage CLO Ltd A-2L A+ AA/Watch Neg Stanfield Arnage CLO Ltd A-3L BBB+ A/Watch Neg Stanfield Arnage CLO Ltd B-1L BB+ BBB/Watch Neg Stanfield Arnage CLO Ltd B-2L CCC+ BB/Watch Neg Stanfield Azure CLO, Ltd. A-1L AA+ AAA/Watch Neg Stanfield Azure CLO, Ltd. A-1LV AA+ AAA/Watch Neg Stanfield Azure CLO, Ltd. A-2L A+ AA/Watch Neg Stanfield Azure CLO, Ltd. A-3L BBB+ A/Watch Neg Stanfield Azure CLO, Ltd. B-1L CCC+ BBB/Watch Neg Symphony CLO I Ltd A-1A AA AAA/Watch Neg Symphony CLO I Ltd A-1B AA AAA/Watch Neg Symphony CLO I Ltd A-2 A+ AA/Watch Neg Symphony CLO I Ltd B BBB+ A/Watch Neg Symphony CLO I Ltd C BB+ BBB/Watch Neg Symphony CLO I Ltd D B+ BB/Watch Neg Velocity CLO, Ltd. A AA+ AAA/Watch Neg Velocity CLO, Ltd. B BBB+ A/Watch Neg Velocity CLO, Ltd. C CCC+ BBB/Watch Neg Velocity CLO, Ltd. D CCC- BB/Watch Neg Ratings Affirmed And Removed From Creditwatch Negative Rating ------ Transaction Class To From ----------- ----- -- ---- Aurum CLO 2002-1 Ltd. B A+ A+/Watch Neg Avenue CLO III, Ltd. X AAA AAA/Watch Neg Babson CLO Ltd 2006-I A-1 AAA AAA/Watch Neg Babson CLO Ltd 2006-I E BB BB/Watch Neg Bridgeport CLO II Ltd D BB BB/Watch Neg Burr Ridge CLO Plus Ltd B AA AA/Watch Neg Burr Ridge CLO Plus Ltd E BB BB/Watch Neg Carlyle High Yield Partners 2008-1 Ltd B AA AA/Watch Neg Carlyle High Yield Partners 2008-1 Ltd C A A/Watch Neg Carlyle High Yield Partners 2008-1 Ltd D BBB BBB/Watch Neg Eagle Creek CLO Ltd A-1 AAA AAA/Watch Neg Eaton Vance CDO IX Ltd A-1A AAA AAA/Watch Neg Flagship CLO IV X AAA AAA/Watch Neg ING Investment Management CLO II Ltd A-1A AAA AAA/Watch Neg ING Investment Management CLO II Ltd A-1R AAA AAA/Watch Neg Landmark VII CDO Ltd. X AAA AAA/Watch Neg LightPoint CLO VIII Ltd A-1-A AAA AAA/Watch Neg Long Grove CLO Ltd. B A A/Watch Neg Longhorn CDO III Ltd A-1 AAA AAA/Watch Neg Longhorn CDO III Ltd A-2 AAA AAA/Watch Neg Longhorn CDO III Ltd B AA AA/Watch Neg Longhorn CDO III Ltd C BB+ BB+/Watch Neg Longhorn CDO III Ltd E CCC- CCC-/Watch Neg NYLIM Flatiron CLO 2004-1 Ltd. B AA AA/Watch Neg NYLIM Flatiron CLO 2004-1 Ltd. C A A/Watch Neg NYLIM Flatiron CLO 2006-1 Ltd A-2A AAA AAA/Watch Neg NYLIM Flatiron CLO 2006-1 Ltd A-3 AA AA/Watch Neg NYLIM Flatiron CLO 2006-1 Ltd B A A/Watch Neg OHA Park Avenue CLO I Ltd A-2 AA AA/Watch Neg OHA Park Avenue CLO I Ltd B A A/Watch Neg OHA Park Avenue CLO I Ltd C BBB BBB/Watch Neg Schiller Park CLO Ltd. A-1-A AAA AAA/Watch Neg Schiller Park CLO Ltd. B AA AA/Watch Neg Schiller Park CLO Ltd. D BBB BBB/Watch Neg Stanfield Azure CLO, Ltd. X AAA AAA/Watch Neg Rating Affirmed Transaction Class Rating ----------- ----- ------ Aurum CLO 2002-1 Ltd. A-1 AAA ********* 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. Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Howard C. Tolentino, 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 ***