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T R O U B L E D C O M P A N Y R E P O R T E R
Sunday, December 19, 2010, Vol. 14, No. 351
Headlines
1ST FINANCIAL: S&P Assigns Ratings on Various Classes of Notes
505 CLO: S&P Raises Ratings on Various Classes of Notes
ADAMS OUTDOOR: Moody's Assigns Ratings to $355 Mil. Revenue Notes
AERCO LIMITED: Moody's Downgrades Ratings on Three Classes
AIMCO CLO: S&P Raises Ratings on Various Classes of Notes
AIRPLANES PASS: Moody's Downgrades Ratings on Two Classes
ALLIANCE SECURITIES: Moody's Downgrades Ratings on 69 Tranches
ALPS CAPITAL: Moody's Reviews Ratings on Three Classes of Notes
ANTARES FUNDING: Fitch Affirms Ratings on Three Classes of Notes
ARCAP 2004-RR3: S&P Downgrades Ratings on Eight Securities
ARCAP 2006-RR7: S&P Downgrades Ratings on 11 Securities
AURUM CLO: Moody's Upgrades Ratings on Various Classes of Notes
AVENUE CLO: S&P Raises Ratings on Various Classes of Notes
AVERY STREET: Moody's Upgrades Ratings on Class E to 'Caa3'
AVIATION CAPITAL: Moody's Reviews Ratings on Various Classes
BABSON CLO: S&P Raises Ratings on Various Classes of Notes
BALLYROCK ABS: S&P Withdraws Ratings on Five Classes of Notes
BANC OF AMERICA: Moody's Downgrades Ratings on 17 Certificates
BANC OF AMERICA: Moody's Downgrades Ratings on 16 2005-6 Certs.
BEAR STERNS: Moody's Downgrades Ratings on 15 2005-PWR9 Certs.
BEAR STEARNS: Moody's Downgrades Ratings on Seven 2007-BBA8 Notes
BOSTON BIOMEDICAL: Moody's Cuts Rating on 1999 Bonds to 'Ba1'
BRASCAN STRUCTURED: Fitch Reviews Ratings on Four Classes of Notes
CALLIDUS DEBT: S&P Raises Ratings on Various Classes of Notes
CAPITAL TRUST: Fitch Downgrades Ratings on Four Classes of Notes
CASTLE HILL: Fitch Takes Rating Actions on Four Classes
CD 2005-CD1: Moody's Reviews Ratings on 12 Classes of Certs.
CHARITABLE LEADERSHIP: Moody's Cuts 2002A Bond Rating to 'Caa2'
CHEVY CHASE: Moody's Downgrades Ratings on Seven Tranches
CICERO LOCAL: Moody's Withdraws 'C' Rating on 2001A Bonds
CITIGROUP COMMERCIAL: Moody's Reviews Ratings on 14 2006-C5 Certs.
CITIMORTGAGE ALTERNATIVE: Moody's Takes Various Rating Actions
CITY OF SPARKS: Moody's Cuts Ratings on Bonds to 'B2'
COMM 2001-J2: S&P Downgrades Ratings on Rakes Certificates
COMM 2003-LNB1: Moody's Reviews Ratings on Seven Certificates
COMM 2003-LNB1: S&P Downgrades Ratings on Seven Securities
COMM 2007-FL14: Moody's Downgrades Ratings on 19 Certificates
COMMERCIAL MORTGAGE: Moody's Downgrades Ratings on Seven Notes
CONCORD REAL: Moody's Downgrades Ratings on Seven Classes
CREDIT SUISSE: Moody's Downgrades Ratings on Seven 2003-C4 Certs.
CRHMFA HOMEBUYERS: Moody's Downgrades Ratings on 2006 FH-1 Bonds
CT CDO: S&P Downgrades Ratings on 13 Classes of CRE CDO Deals
CWALT INC: Moody's Downgrades Ratings on 94 Tranches
CWCAPITAL COBALT: Moody's Downgrades Ratings on Eight Classes
DB MASTER: S&P Withdraws Ratings on Three Classes of Notes
EMBARCADERO AIRCRAFT: Moody's Downgrades Ratings on Two Notes
FALL CREEK: Fitch Affirms Ratings on 10 Classes of Notes
FANNIE MAE: Moody's Downgrades Ratings on Three 2005-W2 Tranches
FIRSTPLUS HOME: Fitch Affirms Ratings on All Classes of Notes
FIRST UNION-LEHMAN: S&P Affirms Ratings on Four 1997-C1 Notes
FREDDIE MAC: Moody's Downgrades Ratings on Series M017 Notes
FRESNO PACIFIC: Moody's Confirms 'Ba2' Rating on Series A Bonds
GALAXY VIII: S&P Raises Ratings on Various Classes of Notes
GE CAPITAL: Moody's Takes Rating Actions on 2003-C1 Certs.
GE COMMERCIAL: Fitch Downgrades Ratings on 14 2006-C1 Certs.
GE COMMERCIAL: Moody's Takes Rating Actions on Various Certs.
GMAC COMMERCIAL: S&P Downgrades Ratings on Eight 2002-C1 Notes
GOLDMAN SACHS: S&P Raises Ratings on Various Classes of Notes
GREENPOINT MORTGAGE: Moody's Downgrades Ratings on 18 Tranches
GREENWICH CAPITAL: Moody's Reviews Ratings on 12 2005-GG3 Certs.
GS MORTGAGE: Fitch Downgrades Ratings on 19 2007-GG10 Certs.
GS MORTGAGE: Fitch Issuer Presale Report on 2010-C2 Certs.
GS MORTGAGE: Moody's Downgrades Ratings on 12 2004-GG2 Certs.
GS MORTGAGE: Moody's Puts (P)B2 (sf) Rating on Class F Certificate
HARTFORD MEZZANINE: Fitch Cuts Ratings on Three Classes of Notes
HARTFORD MEZZANINE: Moody's Downgrades Ratings on 11 Notes
HEDGED MUTUAL: Moody's Takes Rating Actions on Two Series
HERTZ CORPORATION: Moody's Confirms Ratings on Two Notes
INDYMAC INDX: Moody's Downgrades Ratings on 15 Tranches
JP MORGAN: Fitch Downgrades Ratings on 10 2006-LDP7 Certs.
JP MORGAN: Moody's Downgrades Ratings on 12 2004-CIBC10 Certs.
JP MORGAN: Moody's Downgrades Ratings on 13 Tranches
JPMORGAN COMMERCIAL: S&P Affirms Ratings on Four 1998-C6 Certs.
KIMBERLITE CDO: Moody's Takes Rating Actions on Two Notes
KIMBERLITE CDO: S&P Downgrades Ratings on Four Classes of Notes
LASALLE COMMERCIAL: S&P Downgrades Ratings on Three Certificates
LB COMMERCIAL: Moody's Upgrades Ratings on Three 1998-C4 Certs.
LB UBS: Moody's Upgrades Ratings on Two 2003-C7 Certificates
LB-UBS COMMERCIAL: Moody's Upgrades Ratings on Two 2002-C1 Notes
LB-UBS COMMERCIAL: S&P Downgrades Ratings on 15 2004-C1 Certs.
LB-UBS COMMERCIAL: Moody's Downgrades Ratings on 12 2004-C4 Certs.
LEASE INVESTMENT: Moody's Reviews Ratings on Various Classes
LEHMAN BROTHERS: Moody's Affirms Ratings on Two 2005-LLF Notes
LUMINENT MORTGAGE: Moody's Downgrades Ratings on 15 Tranches
LUMINENT MORTGAGE: Moody's Downgrades Ratings on 38 Tranches
MERRILL LYNCH: Moody's Downgrades Ratings on 13 Tranches
MERRILL LYNCH: Moody's Downgrades Ratings on 15 2006-C2 Certs.
MOMENTUM CAPITAL: S&P Raises Ratings on Various Classes of Notes
MORGAN STANLEY: Moody's Downgrades Ratings on 11 2007-XLC1 Notes
MORGAN STANLEY: Moody's Upgrades Ratings on Three Classes of Notes
MORGAN STANLEY: S&P Cuts Ratings on Two 1998-WF2 Notes to 'D'
MORGAN STANLEY: S&P Raises Ratings on Two 2003-TOP11 Certs.
MORGAN STANLEY: S&P Raises Rating on Class H Certs. From 'BB'
MORGAN STANLEY: S&P Raises Ratings on Various Classes of Notes
MORTGAGEIT MORTGAGE: Moody's Downgrades Ratings on 11 Tranches
MSDWCC HELOC: Moodyu's Downgrades Ratings on Four Tranches
N-STAR REL: Moody's Downgrades Ratings on 12 Classes of Notes
N-STAR REL: Moody's Downgrades Ratings on Six Classes of Notes
NEW ENGLAND: Moody's Affirms 'Ba3' Rating on $3.7 Mil. Bonds
NOMURA CRE: Fitch Downgrades Ratings on Three Classes of Notes
OLYMPIC CLO: Moody's Upgrades Ratings on Various Classes of Notes
OPTION ARM: Moody's Downgrades Ratings on 94 Tranches
PERRY COUNTY: Fitch Assigns 'BB' Rating to Hospital Revenue Bonds
PHOENIX CLO: S&P Raises Ratings on Various Classes of Notes
PNC MORTGAGE: S&P Downgrades Ratings on Six 2000-C2 Notes to 'D'
PROJECT FUNDING: S&P Withdraws Ratings on Class II Notes
PRUDENTIAL COMMERCIAL: S&P Cuts Ratings on 11 2003-PWR1 Notes
RACE POINT: Fitch Upgrades Ratings on Four Classes of Notes
RACE POINT: S&P Raises Ratings on Various Classes of Notes
RAIT CRE: Moody's Downgrades Ratings on Nine Classes of Notes
RAIT PREFERRED: Moody's Confirms Ratings on Two Classes of Notes
RALI-QA SERIES: Moody's Downgrades Ratings on 48 Tranches
RESI FINANCE: Moody's Reviews Ratings on 51 Tranches
RESIDENTIAL FUNDING: Moody's Downgrades Ratings on 16 Tranches
RESIX FINANCE: Fitch Withdraws Ratings on All Classes of Notes
RESOURCE REAL: Moody's Downgrades Ratings on 12 Classes of Notes
RESOURCE REAL: Moody's Downgrades Ratings on Eight Classes
RFMSI SERIES: Moody's Downgrades Ratings on 18 Tranches
ROCK 1: Moody's Affirms Ratings on 14 Classes of Notes
ROCK 2001-C1: Moody's Reviews Ratings on Eight Classes of Notes
ROSEMONT CLO: Fitch Takes Rating Actions on Various Classes
SAN JOAQUIN: Moody's Affirms 'Ba2' Rating on Revenue Bonds
SARGAS CLO: Fitch Affirms Ratings on Five Classes of Notes
SILVER CREEK: S&P Raises Ratings on Two Classes of Notes
SORIN REAL: Moody's Downgrades Ratings on Nine Classes of Notes
SPIRIT MASTER: S&P Downgrades Ratings on Four Classes of Notes
STRUCTURED ADJUSTABLE: Moody's Cuts Ratings on Three Tranches
STRUCTURED ADJUSTABLE: Moody's Downgrades Ratings on 15 Tranches
STRUCTURED ASSET: Moody's Downgrades Ratings on 430 Tranches
STRUCTURED ASSET: Moody's Reviews Ratings on 39 Tranches
STRUCTURED ENHANCED: Fitch Affirms Ratings on Six Classes
TCW GLOBAL: S&P Downgrades Ratings on Five Classes of Notes
TIAA REAL: Fitch Affirms Ratings on Five Classes of Notes
US AIRWAYS: Moody's Assigns Low-B Ratings on Two 2010-1 Certs.
US AIRWAYS: S&P Assigns 'B+' Rating to Class B Certificates
VEGA CAPITAL: Moody's Assigns 'Ba3' Rating to Class C Notes
VELOCITY CLO: Moody'S Upgrades Ratings on Five Classes of Notes
VILLAGE OF RIVERDALE: Moody's Cuts Ratings on Bonds to 'Ba2'
WACHOVIA BANK: Moody's Upgrades Ratings on Three 2002-C2 Certs.
WACHOVIA BANK: Moody's Downgrades Ratings on 17 2004-C34 Certs.
WACHOVIA BANK: Moody's Downgrades Ratings on Nine 2005-C18 Certs.
WACHOVIA BANK: Moody's Downgrades Ratings on 16 2006-C25 Certs.
WACHOVIA BANK: Moody's Downgrades Ratings on 16 2006-C29 Certs.
WACHOVIA BANK: Moody's Reviews Ratings on 15 2006-C26 Certs.
WACHOVIA BANK: Moody's Downgrades Ratings on 12 2006-WHALE 7 Notes
WACHOVIA BANK: Moodys' Downgrades Ratings on 11 2007-WHALE 8 Notes
WASHINGTON MUTUAL: Moody's Downgrades Ratings on 26 Tranches
WELLS FARGO: Moody's Reviews Ratings on 13 Tranches
WRIGHTWOOD CAPITAL: Moody's Downgrades Ratings on Three Classes
* Moody's Downgrades Ratings on 35 Tranches from 17 Housing Loans
* Moody's Upgrades Ratings on Nine Rental Car Asset Backed Notes
* Moody's Withdraws Ratings on 29 Tranches From 11 RMBS Deals
* S&P Downgrades Ratings on 42 Certs. From Six CMBS Transactions
*********
1ST FINANCIAL: S&P Assigns Ratings on Various Classes of Notes
--------------------------------------------------------------
Standard & Poor's Ratings Services assigned its preliminary
ratings to 1st Financial Credit Card Master Note Trust II's asset-
backed notes series 2010-D.
The preliminary ratings are based on information as of Dec. 13,
2010. Subsequent information may result in the assignment of
final ratings that differ from the preliminary ratings.
The preliminary ratings reflect:
S&P's view that the credit support for each class of notes, 40.00%
for class A, 28.75% for class B, 19.25% for class C, 6.50% for
class D, 3.50% for the senior CCA, and 2.25% for the intermediate
CCA, is sufficient to withstand the simultaneous stresses S&P
apply for each respective preliminary rating category to S&P's
9.5%-11.5% base-case loss rate assumption, 7.25%-9.25% base-case
payment rate assumption, and 17.0%-19.0% base-case yield
assumption. In addition, S&P use stressed purchase rate and
excess spread assumptions to determine if sufficient credit
support is available for each preliminary rating category. All of
the stress assumptions outlined above are based on its current
criteria and assumptions;
S&P's expectation that under a moderate ('BBB') stress scenario,
all else being equal, its preliminary 'AAA (sf)' and 'AA (sf)'
ratings on the class A and B notes, respectively, will remain
within one rating category of the assigned ratings in the next 12
months and S&P's preliminary 'A (sf)' and 'BBB- (sf)' ratings on
the class C and D notes, respectively, will remain within two
rating categories of the assigned ratings in the next 12 months
based on S&P's credit stability criteria;
S&P's view of the credit risk inherent in the collateral loan pool
quality, based on its economic forecast, the trust portfolio's
historical performance, the collateral characteristics, and
vintage performance data;
1st Financial Bank USA's servicing experience; and S&P's opinion
of the quality and consistency of its account origination,
underwriting, account management, collections, and general
operational practices;
S&P's expectation of the timely interest and ultimate payment of
principal by the June 2019 legal final maturity date based on
stressed cash flow modeling scenarios using assumptions
commensurate with the assigned preliminary rating categories; and
The series 2010-D notes' underlying payment structure and cash
flow mechanics, and legal structure.
Preliminary Ratings Assigned
1st Financial Credit Card Master Note Trust II
Series 2010-D
Class Rating* Amount (mil. $)
----- ------- ---------------
A AAA (sf) 56.525
B AA (sf) 9.562
C A (sf) 8.075
D BBB- (sf) 10.838
Senior CCA loan** BBpNRi (sf)*** 2.550
Intermediate CCA loan** BB-pNRi (sf)*** 1.063
Subordinate CCA loan N/R 1.913
* All notes will benefit from a spread account that traps cash
when the three-month average excess spread is equal to or less
than 6.0%.
** Loans made by CCA lenders to fund CCAs that support classes A,
B, C, and D.
*** The 'p' subscript indicates that the rating addresses only the
principal portion of the obligation.
CCA -- Cash collateral account.
N/R -- Not rated.
505 CLO: S&P Raises Ratings on Various Classes of Notes
-------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
B, C, D, and E notes from 505 CLO IV Ltd., a collateralized loan
obligation transaction managed by CIT Investment Management. At
the same time, S&P affirmed its rating on the class A-1 notes and
the class A-2 notes and removed the class B notes from CreditWatch
with positive implications.
The upgrades reflect the $184 million of pay down of the notes S&P
has observed since its last rating action in February 2010, the
analysis for which was based on the trustee reports dated Nov. 15,
2010; Aug. 13, 2010; and May 13, 2010. The affirmation of the
ratings on the class A-1 notes and class A-2 notes reflects the
availability of sufficient credit support at the current rating
level.
The transaction has also benefited from an increase in
overcollateralization available to support the rated notes.
According to the trustee report dated Nov. 15, 2010, based on
which S&P completed its analysis:
* The class A/B O/C ratio was 180.83%, compared with a reported
ratio of 152.84% in December 2009;
* The class C O/C ratio was 157.17%, compared with a reported
ratio of 139.21% in December 2009.
Standard & Poor's will continue to review whether, in its view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as S&P deem necessary.
Rating And Creditwatch Actions
505 CLO IV Ltd.
Rating
------
Class To From
----- -- ----
A-1 AAA (sf) AAA (sf)
A-2 AAA (sf) AAA (sf)
B AAA (sf) AA (sf)/Watch Pos
C AAA (sf) A (sf)
D AA (sf) BBB (sf)
E A (sf) BB (sf)
ADAMS OUTDOOR: Moody's Assigns Ratings to $355 Mil. Revenue Notes
-----------------------------------------------------------------
Moody's Investors Service has assigned definitive ratings to the
$355 million of Secured Billboard Revenue Notes issued by Adams
Outdoor Advertising Limited Partnership, an indirect wholly owned
subsidiary of AOA Management Company Limited Partnership. The
Notes are collateralized primarily by 10,172 billboard faces and
associated assets and rights. The Class A Notes partially
amortize over a seven year period while the other classes of notes
are interest only for seven years. At the payment date in
December 2017 (the Anticipated Repayment Date or ARD), if the
Notes have not been repaid in full then available cash flow going
forward will be applied to repay each class in full, in alphabetic
order. The legal final maturity for the Notes is December 2040.
The complete rating action is:
Issuer: Adams Outdoor Advertising Limited Partnership
-- $253,750,000 Class A Fixed Rate Secured Billboard Revenue
Notes, Series 2010-1, rated A2 (sf)
-- $44,000,000 Class B Fixed Rate Secured Billboard Revenue
Notes, Series 2010-1, rated Ba2 (sf)
-- $57,250,000 Class C Fixed Rate Secured Billboard Revenue
Notes, Series 2010-1, rated B3 (sf)
Ratings Rationale
The ratings of the Notes are derived from an assessment of the
present value of the net cash flow that the collateral pool is
anticipated to generate, compared to the cumulative debt being
issued at each rating category. The collateral for the Notes
consist primarily of 10,172 billboards which are associated with
4,928 outdoor advertising structures and related permits,
licenses, ground leases, and parcels of real estate on which the
structures are located. As of September 30, 2010, the billboard
portfolio generated over $98,000,000 in trailing twelve month
revenue with an operating margin of approximately 61%.
The primary risks for the collateral are overall economic
conditions which correlate with spending by advertisers, and the
competitiveness of billboards as an advertising medium against
alternative advertising mediums. The Issuer focuses its
operations on providing outdoor advertising services to
advertisers in non-major markets. The Issuer's billboards
are located across 12 markets spanning 11 states and 133
counties in the Midwest, Southeast and Mid-Atlantic States.
The three largest markets by percentage of the Issuer's total
revenue are Charlotte, NC (~22.3%), Lehigh Valley, PA (~11.9%)
and Charleston, SC (~10.9%). In each of the 12 markets, the
Issuer is a leading, if not dominant, provider of billboard
advertising services with an average 82% market share based on
face count. In addition,significant federal, state and local
regulations limit construction of new billboards, limiting
prospective competition. Finally, Moody's would like to note
that while this pool is not nationally diversified Moody's view
it as fairly fully diversified given the number of billboards
and the diverse geographic footprint of the assets.
Moody's assessed asset value for the portfolio is approximately
$404 million. Based on Moody's assessed asset value, the Class A
notes have an LTV ratio of approximately 62.7%, the Class B notes
have an LTV ratio of approximately 73.6% and the Class C notes
have an LTV ratio of approximately 87.8%.
While the Issuer is incented to refinance the Notes at or prior to
the ARD, Moody's ratings do not assume or place any likelihood on
such event; instead Moody's ratings address repayment by the legal
final maturity. Similarly Moody's ratings do not address any
Post-ARD additional interest which may accrue if the Notes are not
fully repaid at or prior to the ARD.
Moody's Investors Service received and took into account a third
party due diligence report on the underlying assets or financial
instruments in this transaction and the due diligence report had a
neutral impact on the rating.
Finally, it should be noted that Moody's ratings address only the
credit risks associated with the transaction. Other non-credit
risks, such as those associated with repayment on the anticipated
repayment date, the timing of any principal prepayments, the
payment of prepayment penalties and the payment of Post-ARD
additional interest have not been addressed and may have a
significant effect on yield to investors.
Moody's V-Score And Parameter Sensitivities
Moody's V Score. The V Score for this transaction is Medium/High.
The V Score indicates below "Average" structure complexity and
uncertainty about critical assumptions. The Medium/High score for
this transaction is driven by a variety of factors. This is the
first billboard-backed securitization rated by Moody's. As such
Moody's have neither historical performance variability nor
historical downgrade rates. Nevertheless, the issuer provided in
depth historical data which included more than fifteen years of
revenue performance drivers for each of the Issuer's twelve
markets, and almost ten years of expens break down. In addition,
the issuer has disclosed many relevant characteristics for the
securitized pool. Additionally, noteholders are protected only
through UCC filing on the assets and pledge of the equity of the
SPEs, and do not benefit from mortgages on the real property
assets. The absence of mortgages is a weakness. Finally, The
servicer of the notes will be Midland Loan Services, Inc., wholly
owned subsidiary of PNC Bank, National Association (A2). While
Midland is highly experienced with servicing securitizations, it
has very limited experience with servicing billboard-backed
transactions.
Moody's Parameter Sensitivities. In the ratings analysis Moody's
use various assumptions to assess the present value of the net
cash flow that the billboard pool is anticipated to generate.
Based on these cash flows, the quality of the collateral and the
transaction's structure, the total amount of debt that can be
issued at a given rating level is determined. Hence, a material
change in the assessed net present value could result in a change
in the ratings. Therefore Moody's focuses on the sensitivity to
this variable in the parameter sensitivity analysis. For the
Class A notes, if the net cash flows that the billboard pool is
anticipated to generate is reduced by 5%, 10% and 15% compared to
the net cash flows used in determining the initial rating, the
potential model-indicated ratings would change from A2 (sf) to A3,
Baa1, and Baa2, respectively. For the Class B notes, if the net
cash flows that the billboard pool is anticipated to generate is
reduced by 5%, 10% and 15% compared to the net cash flows used in
determining the initial rating, the potential model-indicated
ratings would change from Ba2 (sf) to Ba3, B1, and B2,
respectively. For the Class C notes, if the net cash flows that
the billboard pool is anticipated to generate is reduced by 5%,
10% and 15% compared to the net cash flows used in determining the
initial rating, the potential model-indicated ratings would change
from B3 (sf) to
Principal Ratings Methodology
In broad terms, Moody's first assign a value to the assets
(Moody's value) and then determine the amount of debt that can be
issued against those assets at a given rating level with reference
to a loan-to-value. In doing so, Moody's factors in adjustments
based on the results of Moody's qualitative assessment of the
transaction characteristics, from strength of legal structure to
operational risk to security repayment terms. Moody's asset value
is calculated by first simulating an annual net cash flow based on
projections for revenue minus the sum of operating expenses,
management fees, and maintenance capital expenses. Moody's also
simulate two stresses, one in which the Manager defaults and one
that accounts for industry down-cycles. The asset value is the
discounted value of 30 years of annual cash flow plus a terminal
value.
In detail, Moody's develops its analysis. Moody's assesses the
historical operating performance of the Issuer and evaluates and
analyzes comparable public company data and market information
from various third party sources. Emphasis is placed on analyzing
expense components as well as future revenue growth potential for
the sector in general and for the Issuer in particular. To
calculate the value of the entire portfolio, Moody's conducted a
scenario based cash flow simulation analysis using the portfolio's
annualized data as of June 30, 2010 and historical financials.
Moody's simulated the revenue for eleven markets (we treated Ann
Arbor and Lansing as one market). For each market Moody's
simulated the revenue for each type of billboard (i.e. posters,
bulletin and digital) and added those to generate the total
revenue for each market. Moody's then added all those revenues to
come up with the overall revenue for the pool each year. In
Moody's simulation, Moody's assumed that the price per face for
each type of billboard is constant at the current price, which
itself represents a stress level in comparison to where prices
were in 2007 and 2008. Moody's also assumed that the number of
faces for each type of billboard remains constant at current
levels. Historically, the fluctuation in the number of faces has
been relatively small. The utilization rate assumptions provide
the variability in Moody's revenue model; Moody's used a
triangular distribution based on the calculated average, maximum
and minimum utilization rate produced in each market for each type
of billboard over a period of up to seventeen years. For
instance, for Charlotte, NC posters Moody's used a minimum
utilization rate per year of 60%, an average utilization rate of
69%, and a maximum utilization rate of 78%. In addition, assuming
that long-term growth in revenue should generally track GDP
growth, Moody's assumed that revenues escalate according to a
triangular distribution with a minimum increase per year of 1.5%,
an average increase of 2.5%, and a maximum increase of 3.5%.
Analysis was also done on the potential impact on revenues should
the Manager default or if a recession were to occur. Moody's
simulated the default of the Manager based on its credit
worthiness. In the event of a Manager default, Moody's assumes
that revenue will decline to 60% of pre-default levels in the year
following the default, recover to 80% of pre-default levels in the
second year following the default, and revert to 100% of pre-
default levels in the third year following the Manager default.
The assumption stems from Moody's expectation that at the time of
a Manager default there are advertising contracts in place and
that a replacement manager will eventually be found and be able to
utilize the assets in the same efficiency as the initial Manager.
To account for the possibility of an economic downturn Moody's
simulate down-cycle scenarios. Moody's assumes a 20% probability
of occurrence and when a down cycle occurs, Moody's haircut the
revenue by 20%. Historically, on static asset pools, the outdoor
advertising sector has experienced a decline in revenue every five
years on average, with the magnitude of such decline in those
years ranging between 5% and 25%. On the expense side of the
asset value calculation, Moody's separately incorporated operating
expenses, management fees, and maintenance capital expenses. The
historical operating expenses for the portfolio were relatively
stable (based on dollar amount). However, in Moody's analysis
Moody's incorporated higher levels and higher volatility, which
were generally consistent with the current and historical
performance of other outdoor advertising companies. Based on that
Moody's assumed operating expenses as percentage of revenue to
vary at a triangular distribution of (42%, 45%, 50%).
Historically, maintenance capital expenses were relatively stable
(based on a dollar amount) and accounted for very small portion of
the revenue. Based on that, Moody's assumed maintenance capital
expenses as a percentage of the revenue to vary at a triangular
distribution centering around 1.3%. Finally, for management fee
Moody's used the contractual obligation of the Issuer: the higher
of 5% of revenue or $6.1 million per annum. In conjunction to the
revenue and expense stresses, Moody's applied a series of
different discount rates based on the riskiness of the future cash
flow stream. Discount rates used varied between 10% and 13%.
Based on the above assumptions, Moody's assessed asset value for
the portfolio is approximately $404 million. From this number
ratings can be determined at varying Loan-to-Values based on these
levels: for Aaa ratings LTV ranges between 30% and 41%, for Aa2
ratings LTV ranges between 39% and 49%, for A2 ratings LTV ranges
between 48% and 57%, for Baa2 ratings LTV ranges between 57% and
63% , for Ba2 ratings LTV ranges between 71% and 75%, and for Ba3
and below ratings LTV is =76% The above LTV ranges are based on a
"typical" transaction structure. The advanced levels may be
adjusted upward or downward based on the specific characteristics
of a transaction.
Based on the foregoing, and given the structure of the proposed
transaction, adjustments were made to the total amount of debt
that can be issued at the requested rating levels as a result of
certain transaction features. In particular, the Class A benefits
from scheduled principal amortization totaling $56 million prior
to the ARD; such amortization will reduce Class A's LTV over such
period of time. The scheduled payments to the Class A Notes also
benefit, indirectly, the Class B and Class C Notes by reducing the
overall debt associated with the pool of assets. Additionally,
the Class A Notes account for a much larger percentage of the
total debt outstanding compared to the "typical" assumed
transaction at its ratings level. Therefore the Class A has lower
severity of loss risk compared to the "typical" assumed
transaction. The Class B and Class C are also somewhat larger
than the "typical" assumed subordinated class and also have
somewhat lower severity of loss compared to the "typical" assumed
subordinated tranches. As a result, Moody's was comfortable with
somewhat higher LTVs than would otherwise have been the case.
AERCO LIMITED: Moody's Downgrades Ratings on Three Classes
----------------------------------------------------------
Moody's Investors Service has downgraded three classes of pooled
aircraft lease-backed notes issued by AerCo Limited Trust.
The complete rating action is:
Issuer: AerCo Limited Trust
-- Class C-1 Floating Rate Notes due July 2023, Downgraded to C
(sf); previously on Feb. 23, 2007 Downgraded to Ca (sf);
-- Class C-2 Floating Rate Notes due July 2025, Downgraded to C
(sf); previously on Feb. 23, 2007 Downgraded to Ca (sf);
-- Class D-2 Fixed Rate Notes due July 2025, Downgraded to C
(sf); previously on June 28, 2004 Downgraded to Ca (sf);
Ratings Rationale
Following the refinancing of the vehicle in 2000 the notes were
backed by a pool of 63 aircraft. As of September 15, 2010 the
portfolio comprised of 35 aircraft and one airframe with a total
appraised base value of approximately $351 million. This current
portfolio comprises a large number of older-vintage aircraft; a
segment which has experienced accelerated decline in demand and
lease rates as a result of the global recession. As a result of
revenue decline, the Classes C-1, C-2 and D-2 Notes have stopped
receiving interest payments. The current loan-to-value ratios on
the Class C and Class D Notes are 158% and 186% respectively,
indicating a remote chance for any possible recovery.
AIMCO CLO: S&P Raises Ratings on Various Classes of Notes
---------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A-2, B, C, and D notes from AIMCO CLO Series 2006-A, a
collateralized loan obligation transaction managed by Allstate
Investment Management Co. At the same time, S&P affirmed its
rating on the class A-1 notes and removed it from CreditWatch with
positive implications.
The upgrades reflect the improved performance S&P has observed in
the transaction's underlying asset portfolio since S&P's last
rating action in December 2009. The affirmation of the rating on
the class A-1 notes reflects the availability of sufficient credit
support at the current rating level.
According to the Nov. 9, 2010, trustee report, the transaction
held $7.4 million in defaulted assets and $24.5 million in 'CCC'
rated assets, down from $31.8 million defaulted and $29.1 million
'CCC' assets as of the Nov. 9, 2009, trustee report.
The transaction has also benefited from an increase in
overcollateralization available to support the rated notes. The
trustee reported these O/C ratios in the Nov. 9, 2010, trustee
report:
* The class A O/C ratio was 121.65%, compared with a reported
ratio of 116.91% in October 2009;
* The class B O/C ratio was 114.53%, compared with a reported
ratio of 110.07% in October 2009;
* The class C O/C ratio was 108.50%, compared with a reported
ratio of 104.28% in October 2009; and
* The class D O/C ratio was 105.44%, compared with a reported
ratio of 100.79% in October 2009.
Standard & Poor's will continue to review whether, in its view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as S&P deem necessary.
Rating And Creditwatch Actions
AIMCO CLO Series 2006-A
Rating
------
Class To From
----- -- ----
A-1 AA+ (sf) AA+/Watch Pos (sf)
A-2 AA (sf) AA-
B A (sf) BBB+ (sf)
C BBB (sf) B+ (sf)
D B+ (sf) CCC+ (sf)
AIRPLANES PASS: Moody's Downgrades Ratings on Two Classes
---------------------------------------------------------
Moody's Investors Service has downgraded two classes of pooled
aircraft lease-backed certificates issued by Airplanes Pass
Through Trust.
The complete rating action is:
Issuer: Airplanes Pass Through Trust
-- Class B Floating Rate Certificate due March 2019, Downgraded
to C (sf); previously on June 28, 2004 Downgraded to Ca (sf);
-- Class C Fixed Rate Certificates due March 2019, Downgraded to
C (sf); previously on June 28, 2004 Downgraded to Ca (sf);
Ratings Rationale
At closing in 1996 the certificates were backed by a pool of 229
aircraft. As of September 30, 2010, the portfolio comprised 99
aircraft, 9 engines and 4 airframes, with an average appraised
base value of approximately $772 million. This remaining
portfolio consists of old-vintage aircraft; a segment which has
experienced accelerated decline in demand and lease rates as a
result of the global recession. As a result of revenue decline,
the Class B and Class C Certificates have stopped receiving
interest payments. The current loan-to-value ratios on the Class
B and Class C Certificates are 126% and 171% respectively,
indicating a remote chance for any possible recovery.
ALLIANCE SECURITIES: Moody's Downgrades Ratings on 69 Tranches
--------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 69
tranches from 11 RMBS transactions issued by Alliance Securities
Corp., Banc of America, BankUnited, Bella Vista, Citigroup,
Goldman Sachs, and Zuni. The collateral backing these
transactions consists primarily of first-lien, adjustable-rate,
Alt-A and Option Arm residential mortgage loans.
Ratings Rationale
The actions are a result of the rapidly deteriorating performance
of Alt-A and Option Arm pools in conjunction with macroeconomic
conditions that remain under duress. The actions reflect Moody's
updated loss expectations on Alt-A and option arm pools issued in
2005 to 2007.
This individual pool level analysis incorporates performance
variances across the different pools and the structural features
of the transaction including priorities of payment distribution
among the different tranches, average life of the tranches,
current balances of the tranches and future cash flows under
expected and stressed scenarios. The scenarios include ninety-six
different combinations comprising of six loss levels, four loss
timing curves and four prepayment curves. The volatility in
losses experienced by a tranche due to small increments in losses
on the underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approaches, "Alt-A RMBS Loss Projection
Update: February 2010" and "Option ARM RMBS Loss Projection
Update: April 2010", are adjusted slightly when estimating losses
on pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 1.8 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: Alliance Securities Corp., Mortgage Backed Pass-Through
Certificates, Series 2007-OA1.
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Banc of America Funding Corporation, Mortgage Pass-Through
Certificates, Series 2005-E
-- Cl. 7-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 7-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 7-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 8-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 8-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 8-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 9-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 9-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Banc of America Funding Corporation, Mortgage Pass-Through
Certificates, Series 2005-F
-- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X, Downgraded to C (sf); previously on Jan. 27, 2010 B3
(sf) Placed Under Review for Possible Downgrade
Issuer: BankUnited Trust 2005-1
-- Cl. I-A-1, Downgraded to B2 (sf); previously on Jan. 27, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-X, Downgraded to B2 (sf); previously on Jan. 27, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Bella Vista Mortgage Trust 2005-1
-- Cl. I-A-1, Downgraded to B2 (sf); previously on Jan. 27, 2010
Aa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to Ca (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-X, Downgraded to C (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B-X, Downgraded to C (sf); previously on Feb. 19, 2009
Downgraded to B2 (sf)
-- Cl. B-1, Downgraded to C (sf); previously on Feb. 19, 2009
Downgraded to B2 (sf)
-- Cl. B-2, Downgraded to C (sf); previously on Feb. 19, 2009
Downgraded to Ca (sf)
-- Cl. II-A, Downgraded to Caa3 (sf); previously on Feb. 19,
2009 Downgraded to Ba1 (sf)
-- Cl. II-A-X, Downgraded to Caa3 (sf); previously on Feb. 19,
2009 Downgraded to Ba1 (sf)
-- Cl. III-A, Downgraded to Caa2 (sf); previously on Feb. 19,
2009 Downgraded to Ba1 (sf)
-- Cl. IV-A, Downgraded to Caa2 (sf); previously on Feb. 19,
2009 Downgraded to Ba1 (sf)
-- Cl. IV-A-X, Downgraded to Caa2 (sf); previously on Feb. 19,
2009 Downgraded to Ba1 (sf)
Issuer: Bella Vista Mortgage Trust 2005-2
-- Cl. I-A, Downgraded to Caa1 (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-X, Downgraded to Caa1 (sf); previously on Jan. 27,
2010 B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B-X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. B-1, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-X, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-PO, Downgraded to C (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B-PO, Downgraded to C (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
Issuer: Citigroup Mortgage Loan Trust, Series 2005-1
-- Cl. III-A1, Downgraded to Baa3 (sf); previously on Nov. 19,
2010 Confirmed at Baa2 (sf)
-- Cl. III-PO, Downgraded to Baa3 (sf); previously on Nov. 19,
2010 Confirmed at Baa2 (sf)
-- Cl. III-B1, Downgraded to Caa1 (sf); previously on Nov. 19,
2010 Downgraded to B2 (sf)
-- Cl. III-A2, Downgraded to Ba1 (sf); previously on Nov. 19,
2010 Confirmed at Baa2 (sf)
-- Cl. III-XS, Downgraded to Baa3 (sf); previously on Nov. 19,
2010 Confirmed at Baa2 (sf)
Issuer: GSR Mortgage Loan Trust 2006-OA1
-- Cl. 1-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to B2 (sf); previously on Jan. 27, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSR Mortgage Loan Trust 2007-OA1
-- Cl. 1A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A-2, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A-3A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A-3B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A-4, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A-M, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GSR Mortgage Loan Trust 2007-OA2
-- Cl. 1A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Zuni Mortgage Loan Trust 2006-OA1, Mortgage Loan Pass-
Through Certificates, Series 2006-OA1
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to C (sf); previously on Jan. 27, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to C (sf); previously on Jan. 27, 2010 Aaa
(sf) Placed Under Review for Possible Downgrade
-- Cl. B-1, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. B-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
ALPS CAPITAL: Moody's Reviews Ratings on Three Classes of Notes
---------------------------------------------------------------
Moody's Investors Service announced that it has placed the ratings
of these notes issued by ALPS Capital II plc under review for
possible further upgrade:
-- US$90,000,000 Series B Floating Rate Notes due September 30,
2025(current outstanding balance of $48,125,115.08), Placed
under review for possible further upgrade; previously on
March 20, 2008 Upgraded to A2 (sf);
-- US$30,000,000 Series C Fixed Rate Notes due September 30,
2025, Placed under review for possible further upgrade;
previously on December 28, 2005 Rated at Baa1 (sf);
-- US$30,000,000 Series D Fixed Rate Notes due September 30,
2025, Placed under review for possible further upgrade;
previously on December 28, 2005 Rated at Ba1 (sf);
Ratings Rationale
According to Moody's, the rating actions taken on the notes result
primarily from the delevering of the Series A Notes and Series B
Notes. The Series A Notes have been paid in full and the Series B
Notes have been paid down by approximately 47% or $41.9 million
since the last rating action in August 2008. The Series B, Series
C, and Series D Notes are being left under review for possible
further upgrade while Moody's assesses the full impact of
delevering, which Moody's expects will continue.
Moody's also notes that the deal has benefited from improvement
in the actuarial experience of the referenced block of insurance
business. Based on the annual report of the ALPS Capital II plc
transaction dated on September 28, 2010, the Subject Business
generated $58.8 million of net cash proceeds to the Issuer for
the year ended June 30, 2010, compared to the original projection
of $45.4 million, or 29.5% more than projected. Cumulatively,
the Subject Business has generated $311.4 million of net cash
proceeds since closing, compared to the original projection of
$274.5 million.
Improvement in the actuarial experience is primarily driven by a
favorable mortality experience and a higher than expected
persistency in the Subject Business. In particular, as of the
latest annual report for the year ended June 30, 2010, mortality
was 92% of expected for the period, and premiums were $4.5 million
higher than originally projected.
ALPS Capital II plc, issued in December 2005, is a Embedded Value
Insurance-Linked Securitization backed by a closed block of life
insurance policies. It contains approximately 60% of traditional
life Insurance and 40% of non-traditional life insurance, which
includes interest sensitive life, fixed deferred annuities and
corporate owned life insurance.
The ratings on the notes issued by ALPS Capital II plc were
originally assigned and are monitored by evaluating factors
believed to be relevant to the credit profile of the notes
like (i) the actuarial experience of the referenced block of
insurance business; (ii) risk analysis and projection performed
by Milliman USA, a consulting firm that specializes in the
insurance industry, based on relevant industry experience for
similar products/underwriting; (iii) review of actuarial reports,
including actual underlying cash flows; (iv) performance of
invested assets ; and (v) other factors believed to be applicable
to the assessment of the creditworthiness of the transaction, like
a review of the structural, legal, and regulatory risks.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
ANTARES FUNDING: Fitch Affirms Ratings on Three Classes of Notes
----------------------------------------------------------------
Fitch Ratings has affirmed three classes of notes issued by
Antares Funding, LP/Corp. In addition, Recovery Ratings have also
been revised or maintained:
-- $14,275,606 class D-1 notes affirmed at 'CCsf'/RR revised to
'RR1' from 'RR3';
-- $8,397,415 class D-2 notes affirmed at 'CCsf'/RR revised to
'RR1' from 'RR3';
-- $9,372,583 class E notes affirmed at 'Csf/RR6'.
The affirmations reflect the continued performance issues in the
collateral as the deal enters its final year before the scheduled
maturity in December 2011. While significant amortization has
occurred since Fitch's last review in September 2009, classes D-1
and D-2 are highly dependent upon strong performance of the
remaining collateral in order for the class D notes to pay in full
at maturity.
On the payment date in September 2010, the class C notes were paid
in full. The class D notes received a total of $15.3 million in
principal payments for the September and December 2010 payment
dates. However, some principal proceeds have been allocated to
pay class D interest since the March 2009 payment date,
highlighting the interest shortfall risk to these notes.
The ratings of the class D notes address the likelihood that
investors will receive ultimate and compensating interest
payments, as per the governing documents, as well as the stated
balance of principal by the legal final maturity date. The full
return of principal is dependent on the remaining collateral to
perform, but class D remains subject to market value risk due to
long-dated securities comprising 14.2% of the collateral.
The rating of the class E notes addresses the likelihood that
investors will receive the stated balance of principal by the
legal final maturity date. To date, the class E notes have
received 77.7% of their original stated balance. The remaining
collateral balance is insufficient to repay the class E principal
at maturity.
Antares is a cash flow collateralized debt obligation that closed
on Dec. 14, 1999 and is managed by GE Asset Management. The
transaction's substitution period ended on Dec. 4, 2009, and the
notes are scheduled to mature on Dec. 14, 2011. The portfolio is
composed of 63.3% loans, 18.1% bonds and 20% non-performing
securities as of the Nov. 19, 2010 trustee report.
The majority of the underlying loans are publicly rated. Fitch
used model-based shadow credit opinions in its default probability
analysis of the CDO portfolio for approximately 31% of the
portfolio where a public rating was unavailable. Fitch did not
utilize the cash flow analysis in this review. However, it
considered the changes in the portfolio credit quality and
concentration as well as the paydown to capital structure since
the last review.
ARCAP 2004-RR3: S&P Downgrades Ratings on Eight Securities
----------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on eight
classes of commercial mortgage-backed securities pass-through
certificates from ARCap 2004-RR3 Resecuritization Inc., a U.S.
resecuritized real estate mortgage investment conduit transaction.
At the same time, S&P affirmed its ratings on five classes from
the same transaction.
The downgrades and affirmations primarily reflect S&P's analysis
of the transaction following interest shortfalls to the
transaction. S&P also considered the potential liquidity
interruption to classes A-2 and B that have not experienced
interest shortfalls. S&P downgraded classes M and N to 'D (sf)'on
June 30, 2010, to reflect interest shortfalls that S&P expected to
continue for the foreseeable future.
According to the Nov. 22, 2010 trustee report, cumulative interest
shortfalls to the transaction totaled $3.4 million affecting class
C and the classes subordinate to it. The interest shortfalls
resulted from interest shortfalls on eight of the underlying CMBS
transactions primarily due to the master servicer's recovery of
prior advances, appraisal subordinate entitlement reductions,
servicers' nonrecoverability determinations for advances, and
special servicing fees. If the interest shortfalls to ARCAP 2004-
RR3 continue, S&P will evaluate the shortfalls and may take
further rating actions as S&P determine appropriate.
According to the Nov 22, 2010 trustee report, ARCAP 2004-RR3 was
collateralized by 51 CMBS classes ($435.7 million, 100%) from 17
distinct transactions issued between 1999 and 2004.
Our analysis also reflects the downward revision of its credit
estimates on a portion of the CMBS collateral not rated by
Standard & Poor's ($90.3 million, 20.7%). In addition, ARCAP
2004-RR3 has exposure to Salomon Brothers Commercial Mortgage
Trust series 2002-KEY2 (class L; $2 million, 0.5%), a certificate
that Standard & Poor's has downgraded.
Standard & Poor's analyzed ARCAP 2004-RR3 and its underlying
collateral according to its current criteria. S&P's analysis is
consistent with the lowered and affirmed ratings.
Ratings Lowered
ARCap 2004-RR3 Resecuritization Inc.
Rating
------
Class To From
----- -- ----
A-2 BB- (sf) BBB+ (sf)
B B- (sf) BBB- (sf)
C CCC+ (sf) BB (sf)
D CCC (sf) BB- (sf)
E CCC- (sf) B (sf)
F CCC- (sf) B- (sf)
G CCC- (sf) CCC+ (sf)
H CCC- (sf) CCC (sf)
Ratings Affirmed
ARCap 2004-RR3 Resecuritization Inc.
Class Rating
----- ------
J CCC- (sf)
K CCC- (sf)
L CCC- (sf)
M D (sf)
N D (sf)
ARCAP 2006-RR7: S&P Downgrades Ratings on 11 Securities
-------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 11
classes of commercial mortgage-backed securities pass-through
certificates from ARCap 2006-RR7 Resecuritization Inc., a U.S.
resecuritized real estate mortgage investment conduit transaction.
At the same time, S&P affirmed its ratings on four classes from
the same transaction.
The downgrades and affirmations reflect S&P's analysis of the
transaction following interest shortfalls to the transaction. S&P
downgraded classes D through L to 'D (sf)' due to interest
shortfalls that S&P expects will occur for the foreseeable future.
S&P also considered the potential liquidity interruption to
classes A-D, A, and B that have not experienced interest
shortfalls. S&P had previously downgraded classes M, N, and O to
'D (sf)'on Aug. 20, 2010, to reflect interest shortfalls that S&P
expected to continue for the foreseeable future.
According to the Nov. 22, 2010, trustee report, cumulative
interest shortfalls to the transaction totaled $21.7 million,
affecting class C and the classes subordinate to it. The interest
shortfalls resulted from interest shortfalls on 19 of the
underlying CMBS transactions primarily due to the master
servicer's recovery of prior advances, appraisal subordinate
entitlement reductions, servicers' nonrecoverability
determinations for advances, and special servicing fees. If the
interest shortfalls to ARCAP 2006-RR7 continue, S&P will evaluate
the shortfalls and may take further rating actions as S&P
determine appropriate.
According to the Nov 29, 2010, trustee report, ARCAP 2006-RR7 was
collateralized by 38 CMBS classes ($625.6 million, 100%) from 23
distinct transactions issued between 1999 and 2004.
Standard & Poor's analyzed ARCAP 2006-RR7 and its underlying
collateral according to its current criteria. S&P's analysis is
consistent with the lowered and affirmed ratings.
Ratings Lowered
ARCap 2006-RR7 Resecuritization Inc.
Rating
------
Class To From
----- -- ----
A-D B+ (sf) BBB- (sf)
A B+ (sf) BBB- (sf)
B CCC- (sf) CCC (sf)
D D (sf) CCC- (sf)
E D (sf) CCC- (sf)
F D (sf) CCC- (sf)
G D (sf) CCC- (sf)
H D (sf) CCC- (sf)
J D (sf) CCC- (sf)
K D (sf) CCC- (sf)
L D (sf) CCC- (sf)
Ratings Affirmed
ARCap 2006-RR7 Resecuritization Inc.
Class Rating
----- ------
C CCC- (sf)
M D (sf)
N D (sf)
O D (sf)
AURUM CLO: Moody's Upgrades Ratings on Various Classes of Notes
---------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of these notes issued by Aurum CLO 2002-1 Ltd.:
-- US$60,000,000 Class A-2 Senior Secured Floating Rate Notes
Due 2014, Upgraded to Aaa (sf); previously on November 23,
2010 Aa1(sf) Placed Under Review for Possible Upgrade;
-- US$30,000,000 Class B Senior Secured Floating Rate Notes
Due 2014, Upgraded to A3 (sf); previously on November 23,
2010 Baa2 (sf) Placed Under Review for Possible Upgrade;
-- US$14,000,000 Class C Senior Secured Floating Rate Notes
Due 2014, Upgraded to Ba3 (sf); previously on November 23,
2010 B1 (sf) Placed Under Review for Possible Upgrade;
-- US$10,000,000 Class D-1 Senior Secured Floating Rate Notes
Due 2014, Upgraded to Caa3(sf); previously on November 23,
2010 Ca (sf) Placed Under Review for Possible Upgrade;
-- US$3,000,000 Class D-2 Senior Secured Floating Rate Notes
Due 2014, Upgraded to Caa3(sf); previously on November 23,
2010 Ca (sf) Placed Under Review for Possible Upgrade.
Ratings Rationale
According to Moody's, the rating actions taken on the notes result
primarily from the delevering of the Class A-1 Notes, which have
been paid down by approximately 45% or $34.6 million since the
rating action in July 2010. As a result of the delevering, the
overcollateralization ratios have increased since the rating
action in July 2010. As of the latest trustee report dated
November 1, 2010, the Class A, Class B, Class C and Class D
overcollateralization ratios are reported at 162.3%, 125.3%,
113.3% and 104.0%, respectively, versus June 2010 levels of
145.4%, 119.2%, 110.0% and 102.6%, respectively.
While the transaction has benefited from delevering, Moody's noted
that the portfolio includes a number of investments in securities
that mature after the maturity date of the notes. Based on the
trustee report dated November 1, 2010, securities that mature
after the maturity date of the notes make up approximately 22.2%
of the underlying portfolio versus 19.4% in June 2010. These
investments potentially expose the notes (especially the junior
notes) to market risk in the event of liquidation at the time of
the notes' maturity.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs," key
model inputs used by Moody's in its analysis, such as par,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool to have a performing par and principal
proceeds of $165.8 million, defaulted par of $5.5 million,
weighted average default probability of 22.5% (implying a WARF of
3875), a weighted average recovery rate upon default of 43.81%,
and a diversity score of 45. These default and recovery
properties of the collateral pool are incorporated in cash flow
model analysis where they are subject to stresses as a function of
the target rating of each CLO liability being reviewed. The
default probability is derived from the credit quality of the
collateral pool and Moody's expectation of the remaining life of
the collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Aurum CLO 2002-1, Ltd., issued on June 2002, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
In addition to the base case analysis described above, Moody's
also performed a number of sensitivity analyses to test the impact
on all rated notes, including these:
1. Various default probabilities to capture potential defaults in
the underlying portfolio.
2. A range of recovery rate assumptions for all assets to capture
variability in recovery rates.
A summary of the impact of different default probabilities
(expressed in terms of WARF levels) on all rated notes (shown in
terms of the number of notches' difference versus the current
model output, where a positive difference corresponds to lower
expected loss), assuming that all other factors are held equal:
Moody's Adjusted WARF -- 20% (3100)
-- Class A-1: 0
-- Class A-2: 0
-- Class B: +2
-- Class C: +2
-- Class D-1: +1
-- Class D-2: +1
Moody's Adjusted WARF + 20% (4650)
-- Class A-1: 0
-- Class A-2: 0
-- Class B: -2
-- Class C: -2
-- Class D-1: 0
-- Class D-2: 0
A summary of the impact of different recovery rate levels on all
rated notes (shown in terms of the number of notches' difference
versus the current model output, where a positive difference
corresponds to lower expected loss), assuming that all other
factors are held equal:
Moody's Adjusted WARR + 2% (45.81%)
-- Class A-1: 0
-- Class A-2: 0
-- Class B: +1
-- Class C: +1
-- Class D-1: 0
-- Class D-2: 0
Moody's Adjusted WARR - 2% (41.81%)
-- Class A-1: 0
-- Class A-2: 0
-- Class B: 0
-- Class C: 0
-- Class D-1: 0
-- Class D-2: 0
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior, 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Delevering: The main source of uncertainty in this transaction
is whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to
high prepayment levels in the loan market and/or collateral
sales by the manager, which may have significant impact on the
notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus selling defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
3) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation
risk on those assets. Moody's assumes an asset's terminal value
upon liquidation at maturity to be equal to the lower of an
assumed liquidation value (depending on the extent to which the
asset's maturity lags that of the liabilities) and the asset's
current market value.
AVENUE CLO: S&P Raises Ratings on Various Classes of Notes
----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the
class A-1L, A-2L, and A-3L notes from Avenue CLO III Ltd., a
collateralized loan obligation managed by Avenue Capital
Management II L.P. At the same time, S&P removed its ratings
on the class A-1L and A-2L notes from CreditWatch with positive
implications. In addition, S&P affirmed its ratings on the class
X, B-1L, and B-2L notes.
The upgrades reflect the improved performance S&P has observed in
the transaction's underlying asset portfolio since its last rating
action in November 2009. The affirmations reflect the
availability of sufficient credit support at the current rating
levels.
According to the Nov. 10, 2010 trustee report, the transaction
held $25.3 million in defaulted assets and $22.4 million in 'CCC'
rated assets, down from $56.2 million defaulted and $43.3 million
'CCC' assets as of the Oct. 8, 2009 trustee report. Additionally,
since November 2009, the class A-1 notes have experienced
$20.4 million in paydowns, which have reduced their current
outstanding amount to 89.8% of the original balance.
The transaction has also benefited from an increase in
overcollateralization available to support the rated notes. The
trustee reported the following O/C ratios in the Nov. 10, 2010,
trustee report:
* The class A O/C ratio was 108.19%, compared with a reported
ratio of 102.45% in October 2009;
* The class B-1L O/C ratio was 102.17%, compared with a reported
ratio of 97.20% in October 2009; and
* The class B-2L O/C ratio was 96.39%, compared with a reported
ratio of 91.69% in October 2009.
Standard & Poor's will continue to review whether, in its view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as S&P deems necessary.
Rating And Creditwatch Actions
Avenue CLO III Ltd.
Rating
------
To From
-- ----
Class A-1L AA+ (sf) A+/Watch Pos (sf)
Class A-2L A (sf) BBB+/Watch Pos (sf)
Class A-3L BB+ (sf) CCC- (sf)
Ratings Affirmed
Avenue CLO III Ltd.
Rating
------
Class X AAA (sf)
Class B-1L CCC- (sf)
Class B-2L CCC- (sf)
AVERY STREET: Moody's Upgrades Ratings on Class E to 'Caa3'
-----------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
rating of these notes issued by Avery Street CLO, Ltd.:
-- $8,000,000 Class E Deferrable Junior Floating Rate Notes Due
2018, Upgraded to Caa3 (sf); previously on November 23, 2010
Ca (sf) Placed Under Review for Possible Upgrade.
Ratings Rationale
According to Moody's, the rating action taken on the notes
results primarily from improvement in the credit quality of the
underlying portfolio, which is observed through an improvement
in the average credit rating (as measured by the weighted average
rating factor) and a decrease in the proportion of securities
from issuers rated Caa1 and below. In particular, as of the
latest trustee report dated November 10, 2010, the weighted
average rating factor is currently 2703 compared to 2892 in the
April 2009 report, and securities rated Caa1/CCC+ or lower make
up approximately 3.78% of the underlying portfolio versus 8.36%
in April 2009. Additionally, defaulted securities total about
$4.1 million of the underlying portfolio compared to $12.5 million
in April 2009.
The overcollateralization ratios of the rated notes have also
improved slightly since the last rating action. The senior and
mezzanine overcollateralization ratios are reported at 117.83% and
106.22%, respectively, versus April 2009 levels of 116.9% and
105.39%, respectively, and all related overcollateralization tests
are currently in compliance.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs," key
model inputs used by Moody's in its analysis, such as par,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool to have a performing par and principal
proceeds of $283 million, defaulted par of $5 million, weighted
average default probability of 27.33% (implying a WARF of 3614), a
weighted average recovery rate upon default of 43.24%, and a
diversity score of 55. These default and recovery properties of
the collateral pool are incorporated in cash flow model analysis
where they are subject to stresses as a function of the target
rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Avery Street CLO, Ltd., issued in March 2006, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months
In addition to the base case analysis described above, Moody's
also performed a number of sensitivity analyses to test the impact
on all rated notes, including these:
1. Various default probabilities to capture potential defaults in
the underlying portfolio.
2. A range of recovery rate assumptions for all assets to capture
variability in recovery rates.
A summary of the impact of different default probabilities
(expressed in terms of WARF levels) on all rated notes (shown in
terms of the number of notches' difference versus the current
model output, where a positive difference corresponds to lower
expected loss), assuming that all other factors are held equal:
Moody's Adjusted WARF -- 20% (2891)
-- Class A: +1
-- Class A-2: +1
-- Class B-1: +2
-- Class B-2: +2
-- Class C: +2
-- Class D: +4
-- Class E: +2
Moody's Adjusted WARF + 20% (4337)
-- Class A: -2
-- Class A-2: -2
-- Class B-1: -2
-- Class B-2: -2
-- Class C: -2
-- Class D: -2
-- Class E: -1
A summary of the impact of different recovery rate levels on all
rated notes (shown in terms of the number of notches' difference
versus the current model output, where a positive difference
corresponds to lower expected loss), assuming that all other
factors are held equal:
Moody's Adjusted WARR + 2% (45.24%)
-- Class A: 0
-- Class A-2: 0
-- Class B-1: 0
-- Class B-2: 0
-- Class C: +1
-- Class D: +1
-- Class E: 0
Moody's Adjusted WARR - 2% (41.24%)
-- Class A: -1
-- Class A-2: -1
-- Class B-1: -1
-- Class B-2: -1
-- Class C: 0
-- Class D: 0
-- Class E: 0
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus selling defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming lower
of reported and covenanted values for weighted average rating
factor, weighted average spread, and weighted average coupon.
Additionally, however, in light of the large positive
difference between the reported and covenant levels for
weighted average spread, Moody's believes that the manager's
ability to deteriorate these collateral quality metrics is more
limited. As a result, Moody's base case analysis incorporates
the impact of assuming the midpoint of reported and covenanted
values for the weighted average spread.
AVIATION CAPITAL: Moody's Reviews Ratings on Various Classes
------------------------------------------------------------
Moody's Investors Service has placed on review for possible
downgrade the Class A-1 and B-1, and downgraded the Class C-1 and
D-1 of pooled aircraft lease-backed notes issued by Aviation
Capital Group Trust, Series 2000-1. The sponsor is Aviation
Capital Group.
The complete rating action is:
Issuer: Aviation Capital Group Trust, Series 2000-1
-- Class A-1 Floating Rate Notes due November 15, 2025, Ba3 (sf)
placed on Review for Possible Downgrade; previously on
March 23, 2007 downgrade to Ba3 (sf);
-- Class B-1 Floating Rate Notes due November 15, 2025, B3 (sf)
placed on Review for Possible Downgrade; previously on
March 23, 2007 downgrade to B3 (sf);
-- Class C-1 Floating Rate Notes due November 15, 2025,
downgraded to C (sf); previously on Mar 23, 2007 downgrade to
Caa3 (sf);
-- Class D-1 Fixed Rate Notes due November 15, 2025, downgraded
to C (sf); previously on March 23, 2007 downgrade to Ca (sf);
Ratings Rationale
At closing in 2000 the Notes were backed by a pool of 30 aircraft.
As of November 15, 2010 the pool had 25 aircraft with an average
appraised base value of approximately $286 million, comprised
mainly of old-vintage and/or old generation (i.e. "classic")
aircraft which have experienced accelerated declines in demand and
lease rates as a result of the global recession. Aircraft
maintenance expenses have completely depleted the Investment
Agreement Account from $30 million to zero as of early 2009.
The Class A-1 Notes were placed on review because the current
Loan-to-Value ratio of these notes is approximately 92%, up from
approximately 80% at the time of the prior ratings action due to
the declines in demand and lease rates. The Class B-1 Notes were
placed on review for possible downgrade because they have ceased
receiving interest payments, and their LTV ratio is approximately
120%; both metrics suggest the likelihood that noteholders may
suffer a loss.
The review will focus on the current status and valuation of the
ACG fleet, projected portfolio income and expenses, and the level
of remaining reserves available to provide structural support to
noteholders.
The Class C-1 and Class D-1 Notes have stopped receiving interest
payments due to the decline in revenue and the deterioration in
the portfolio's value; furthermore, due to their subordinated
position in the waterfall, the both classes are unlikely to
receive any future cash flows. The current LTV ratios on the
Class C-1 and Class D-1 Notes are 131% and 138% respectively, and
are junior to Class B with an LTV ratio of approximately 120%
indicating a low likelihood of any recovery of principal.
Moody's Investors Service received and took into account third
party due diligence reports on the underlying assets or financial
instruments in this transaction and the due diligence reports had
a negative impact on the rating.
BABSON CLO: S&P Raises Ratings on Various Classes of Notes
----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
B, C-1, C-2, D, and E notes from Babson CLO Ltd. 2008-I, a
collateralized loan obligation transaction managed by Babson
Capital Management LLC. At the same time, S&P removed its ratings
on all of the notes from CreditWatch, where S&P placed them with
positive implications on Nov. 9, 2010. Concurrently, S&P affirmed
its 'AA+ (sf)' rating on the class A notes and removed it from
CreditWatch positive.
The upgrades reflect an improvement in the credit quality
available to support the notes since S&P downgraded the notes
on Nov. 19, 2009. As of the Nov. 10, 2010, trustee report,
the transaction had $9.51 million in defaulted assets, down
from $41.39 million noted in the Oct. 7, 2009, trustee report,
which S&P referenced in S&P's November 2009 rating actions.
Furthermore, assets from obligors rated in the 'CCC' category
were reported at $6.59 million in November 2010, down from
$38.22 million in October 2009.
The transaction's improvement is also reflected in the increase in
overcollateralization available to support the rated notes. The
class C, D, and E O/C ratios that were failing their triggers in
October 2009 have come back into compliance. As of the Nov. 10,
2010 report, all of the O/C tests were passing their trigger
levels.
The trustee reported the following O/C ratios in the Nov. 10, 2010
monthly report:
* The class A/B O/C ratio was 125.69%, compared with a reported
ratio of 117.86% in October 2009;
* The class C O/C ratio was 118.42%, compared with a reported
ratio of 111.20% in October 2009;
* The class D O/C ratio was 114.32%, compared with a reported
ratio of 107.34% in October 2009; and
* The class E O/C ratio was 109.51%, compared with a reported
ratio of 102.79% in October 2009.
The affirmation reflects S&P's belief that the class has
sufficient credit support to maintain its current rating.
Standard & Poor's will continue to review whether, in its view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as S&P deem necessary.
Rating And Creditwatch Actions
Babson CLO Ltd. 2008-I
Rating
------
Class To From
----- -- -----
A AA+ (sf) AA+ (sf)/Watch Pos
B AA (sf) A+ (sf)/Watch Pos
C-1 A (sf) BBB+ (sf)/Watch Pos
C-2 A (sf) BBB+ (sf)/Watch Pos
D BBB+ (sf) BBB- (sf)/Watch Pos
E BB+ (sf) B+ (sf)/Watch Pos
Transaction Information
-----------------------
Issuer Babson CLO Ltd. 2008-I
Co-issuer Babson CLO 2008-I LLC
Collateral manager Babson Capital Management LLC
Underwriter Bank of America Merrill Lynch
Trustee State Street Bank and Trust Co.
Transaction type Cash flow CLO
BALLYROCK ABS: S&P Withdraws Ratings on Five Classes of Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on five
classes from Ballyrock ABS CDO 2007-1 Ltd. and on one class from
Lehman Bros. Treasury Co. B.V.
S&P withdrew its ratings because S&P has not been receiving the
required information on the performance of these transactions.
S&P has determined that it is unlikely that any new information
will become available within the foreseeable future to enable us
to continue to provide its credit opinions on these transactions.
Given these limitations, Standard & Poor's withdrew the
outstanding credit ratings assigned to these transactions.
Ballyrock ABS CDO 2007-1 Ltd. is a hybrid collateralized debt
obligation transaction collateralized in large part by mezzanine
tranches from residential mortgage-backed securities. Lehman
Bros. Treasury Co. B.V. is a synthetic CDO collateralized by
investment-grade corporate bonds.
Ratings Withdrawn
Ballyrock ABS CDO 2007-1 Ltd.
Rating
------
Class To From
----- -- ----
S NR D (sf)
A-2 NR D (sf)
B NR D (sf)
C NR CC (sf)
D NR CC (sf)
Lehman Bros Treasury Co. B.V.
Rating
------
Class To From
----- -- ----
Notes NR CC (sf)
NR - Not rated.
BANC OF AMERICA: Moody's Downgrades Ratings on 17 Certificates
--------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 17 classes and
affirmed seven classes of Banc of America Commercial Mortgage
Trust Commercial Mortgage Pass-Through Certificates, Series 2007-
1:
-- Cl. A-1A, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-AB, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. XW, Affirmed at Aaa (sf); previously on March 8, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-MFX, Downgraded to Aa2 (sf); previously on Oct. 13,
2010 Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-MFL, Downgraded to Aa2 (sf); previously on Oct. 13,
2010 Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to Baa3 (sf); previously on Oct. 13, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Ba1 (sf); previously on Oct. 13, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Ba3 (sf); previously on Oct. 13, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to B2 (sf); previously on Oct. 13, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Caa1 (sf); previously on Oct. 13, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Caa2 (sf); previously on Oct. 13, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to C (sf); previously on Oct. 13, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to C (sf); previously on Oct. 13, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Oct. 13, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Oct. 13, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Oct. 13, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Oct. 13, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Oct. 13, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. O, Downgraded to C (sf); previously on Oct. 13, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Oct. 13, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed debt service coverage ratio and
the Herfindahl Index, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
On October 13, 2010 Moody's placed 17 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
8.6% of the current balance. At last review, Moody's cumulative
base expected loss was 3.3%. Moody's stressed scenario loss is
25.9% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the credit estimate of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the credit estimate level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 2% to $3.08 billion
from $3.14 billion at securitization. The Certificates are
collateralized by 158 mortgage loans ranging in size from less
than 1% to 9% of the pool, with the top ten loans representing 55%
of the pool. At securitization the Inland -- Bradley Portfolio
Loan ($156.6 million -- 5.1% of the pool) had an investment grade
credit estimate. However, due to a decline in performance and
increased leverage this loan is now analyzed as part of conduit
pool.
Forty-one loans, representing 16% 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 CRE
Finance Council 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 experienced an aggregate realized loss of
$6.7 million, resulting from a partial loan liquidation, a loan
modification and a non-recoverable trust expense. The pool had
not experienced any losses at Moody's last review. Eighteen
loans, representing 17% of the pool, are currently in special
servicing. At last review only 5 loans, representing 1% of the
pool, were in special servicing. The largest specially serviced
loan is the Solana Loan ($220.0 million -- 7.1% of the pool),
which represents a pari passu interest in a $360.0 million first
mortgage loan. The loan is secured by a 1.9 million square foot
mixed use complex consisting of office, retail and a 198-room full
service hotel located in Westlake, Texas. The loan was
transferred to special servicing in March 2009 for imminent
default but has remained current. The property's performance has
been impacted by declines in both the office and hotel components.
The most recent appraisal (May 2010) values the property at
$227.3 million.
The second largest specially serviced loan is the 575 Lexington
Avenue Loan ($162.5 million - 5.3% of the pool), which is secured
by a 34-story office building located in Manhattan, New York. The
loan was transferred to special servicing in March 2010 for
imminent default but has remained current. The borrower has
requested a loan modification.
The remaining 16 specially serviced loans are secured by a mix of
property types. The master servicer has recognized an aggregate
$65.3 million appraisal reduction for 14 of the specially serviced
loans. Moody's has estimated an aggregate $149.7 million loss
(29% expected loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for 12 poorly
performing loans representing 3.6% of the pool and has estimated a
$27.4 million loss (25% expected loss based on a 50% probability
default) from these troubled loans.
Based on the most recent remittance statement, Classes J through
Q have experienced cumulative interest shortfalls totaling
$4.1 million. Moody's anticipates that the pool will continue to
experience interest shortfalls because of the high exposure to
specially serviced loans. Interest shortfalls are caused by
special servicing fees, including workout and liquidation fees,
appraisal entitlement reductions and extraordinary trust expenses.
Moody's was provided with full year 2009 and partial year 2010
operating results for 95% and 61% of the pool, respectively.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 110% compared to 115% at securitization. The pool
is characterized by significant LTV dispersion. Approximately 65%
of the pool has a LTV over 100% and 29% of the pool has a LTV over
120%. Moody's net cash flow reflects a weighted average haircut
of 10% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
8.8%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.32X and 0.89X, respectively, compared to
1.25X and 0.84X at securitization. Moody's actual DSCR is based
on Moody's net cash flow and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 28 compared to 30 at securitization.
The loan that previously had a credit estimate is the Bradley
Crossed Portfolio Loan ($156.6 million -- 5.1% of the pool), which
is secured by a diverse portfolio of 25 industrial / retail /
office properties located in 12 states. Performance has declined
since securitization due to lower revenues. Moody's LTV and
stressed DSCR are 79% and 1.20X, respectively, compared to 70% and
1.34X at securitization.
The top three performing conduit loans represent 20% of the pool
balance. The largest loan is the Skyline Portfolio Loan
($236.0 million -- 6.3% of the pool), which is secured by a
portfolio of eight cross-collateralized and cross-defaulted office
buildings located in Falls Church, Virginia. This loan represents
a 40% pari-passu interest in a $678 million first mortgage loan.
The properties were 94% leased as of June 2010 compared to 97% at
securitization. Despite the decline in occupancy, performance has
improved since securitization. The loan sponsor is Vornado Realty
Trust. Moody's LTV and stressed DSCR are 119% and 0.79X,
respectively, compared to 126% and 0.75X at securitization.
The second largest loan is the StratReal Industrial Portfolio I
Loan ($190.0 million -- 6.2% of the pool), which is secured by a
portfolio of 12 industrial properties, totaling 5.5 million SF,
located in Ohio (8), Tennessee (3) and California (1). Net
Operating Income (NOI) has decreased by 8% since securitization.
Moody's LTV and stressed DSCR are 126% and 0.75X, respectively,
compared to 114% and 0.78X at securitization.
The third largest loan is the Hirschfield Portfolio Loan
($167.0 million -- 5.4% of the pool), which is secured by four
multifamily complexes, totaling 1,841 units, located in three
submarkets in the Baltimore metropolitan area. Performance has
been stable for the last two years, but is still below the
performance level at securitization. Moody's LTV and stressed
DSCR are 137% and 0.67X, respectively, compared to 124% and 0.74X
at securitization.
BANC OF AMERICA: Moody's Downgrades Ratings on 16 2005-6 Certs.
---------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 16 classes and
affirmed six classes of Banc of America Commercial Mortgage Inc.,
Commercial Mortgage Pass-Through Certificates, Series 2005-6:
-- Cl. A-2, Affirmed at Aaa (sf); previously on Jan. 3, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Jan. 3, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-SB, Affirmed at Aaa (sf); previously on Jan. 3, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Jan. 3, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-M, Affirmed at Aaa (sf); previously on Jan. 3, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-J, Downgraded to A1 (sf); previously on Nov. 11, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to A2 (sf); previously on Nov. 11, 2010 Aa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to A3 (sf); previously on Nov. 11, 2010 Aa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Baa1 (sf); previously on Nov. 11, 2010
Aa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Baa2 (sf); previously on Nov. 11, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Ba1 (sf); previously on Nov. 11, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Ba3 (sf); previously on Nov. 11, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to B2 (sf); previously on Nov. 11, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to Caa1 (sf); previously on Nov. 11, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to Caa2 (sf); previously on Nov. 11, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to Ca (sf); previously on Nov. 11, 2010 Ba1
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Nov. 11, 2010 Ba2
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Nov. 11, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. O, Downgraded to C (sf); previously on Nov. 11, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Nov. 11, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. Q, Downgraded to C (sf); previously on Nov. 11, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. XW, Affirmed at Aaa (sf); previously on Jan. 3, 2006
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from actual and anticipated losses from specially
serviced and troubled loans and interest shortfalls. The
affirmations are due to key parameters, including Moody's loan to
value ratio, Moody's stressed debt service coverage ratio and the
Herfindahl Index, remaining within acceptable ranges. Based on
Moody's current base expected loss, the credit enhancement levels
for the affirmed classes are sufficient to maintain their current
ratings.
On November 11, 2010, Moody's placed 16 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
5.7% of the current balance. At last review, Moody's cumulative
base expected loss was 1.5%. Moody's stressed scenario loss is
15% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
(Herf), a measure of loan level diversity, is a primary
determinant of pool level diversity and has a greater impact on
senior certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated August 7, 2008.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 10, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 12% to $2.4 billion
from $2.7 billion at securitization. The Certificates are
collateralized by 155 mortgage loans ranging in size from less
than 1% to 11% of the pool, with the top ten loans representing
44% of the pool. One loan, representing 1% of the pool, has
defeased and is collateralized by U.S. Government securities. The
pool includes three loans, representing 21% off the pool, with an
investment grade credit estimate. At last review three additional
loans had investment grade credit estimates. However, due to
declines in performance and increased leverage the 2001 K Street
Loan ($62.3 million -- 2.6% of the pool), the Flagstaff Mall Loan
($37 million -- 1.5% of the pool) and the 150 East 57th Street
Loan ($25.9 million -- 1.1% of the pool) are now analyzed as part
of the conduit pool.
Thirty-three loans, representing 18% 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 CRE Finance Council 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.
Five loans have been liquidated from the trust since
securitization, resulting in a $22.1 million loss (68% loss
severity on average). There were no realized losses at last
review. Twenty loans, representing 11% of the pool, are currently
in special servicing. The largest delinquent specially serviced
loan is the Audubon Park Apartments Loan ($17.1 million -- 0.7% of
the pool), which is secured by a 264 unit multifamily property
located in Daphne, Alabama. The loan was transferred to special
servicing in October 2010 for maturity default.
The remaining 19 specially serviced loans are secured by a mix of
property types. The master servicer has recognized an aggregate
$26.7 million appraisal reduction for nine of the remaining
specially serviced loans. Moody's has estimated an aggregate
$58.9 million loss (50% expected loss on average) for 17 of the
specially serviced loans.
Moody's has assumed a high default probability for ten poorly
performing loans representing 5% of the pool and has estimated an
aggregate $25.4 million loss (23% expected loss based on a 50%
probability of default) from these troubled loans.
Based on the most recent remittance statement, Classes L through
S have experienced cumulative interest shortfalls totaling
$3.4 million. Moody's anticipates that the pool will continue
to experience interest shortfalls because of the high exposure to
specially serviced loans. Interest shortfalls are caused by
special servicing fees, including workout and liquidation fees,
appraisal entitlement reductions and extraordinary trust expenses.
Moody's was provided with full year 2009 operating results for 86%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV for the conduit component is 105%
compared to 99% at Moody's prior full review. Moody's net cash
flow reflects a weighted average haircut of 11% to the most
recently available net operating income (NOI). Moody's value
reflects a weighted average capitalization rate of 9.6%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs for the performing conduit loans are 1.48X and
1.07X, respectively, compared to 1.48X and 1.04X at last full
review. Moody's actual DSCR is based on Moody's net cash flow and
the loan's actual debt service. Moody's stressed DSCR is based on
Moody's NCF and a 9.25% stressed rate applied to the loan balance.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 44, compared to 46 at Moody's prior review.
The largest loan with a credit estimate is the 277 Park Avenue
Loan ($260 million -- 10.7% of the pool), which represents a 52%
pari passu interest in a first mortgage loan. The loan is secured
by 1.8 million square feet Class A office tower located in the
Plaza District office sub market of midtown Manhattan. The
largest tenants include JP Morgan Chase Bank NA (Moody's senior
unsecured rating Aa1, negative outlook; 75% of the net rentable
area; lease expiration October 2012) and Sumitomo Mitsui Banking
Corporation (Moody's senior unsecured rating Aa2, stable outlook;
lease expiration June 2021). The property was 97% leased as of
June 2010, the same as at last review. The loan is interest only
for the full ten year term. Moody's credit estimate and stressed
DSCR are A2 and 1.34X, respectively, compared to A2 and 1.43X at
last review.
The second loan with a credit estimate is the Kindercare Portfolio
Loan ($142.6 million -- 5.9% of the pool), which represents a 33%
pari passu interest in a first mortgage loan. The loan is secured
by 713 childcare facilities located in 37 states. The largest
state concentration is California, with 12% of the portfolio.
Moody's credit estimate and stressed DSCR are A3 and 1.88X,
respectively, compared to A3 and 1.43X at last review.
The third loan with a credit estimate is the Paramus Park Mall
Loan ($101.1 million -- 4.2% of the pool), which is secured by a
771,000 SF regional shopping center located in Paramus, New
Jersey. The mall is anchored by Macy's and Sears. The in-line
shops were 97.1% occupied as of December 2007 compared to 96.9% at
securitization. The sponsor is General Growth Properties, Inc.
The loan is currently in special servicing due to GGP's bankruptcy
filing in 2009 but is current and should be returned to the master
servicer soon. Moody's credit estimate and stressed DSCR are Baa2
and 1.23X, respectively, compared to Baa2 and 1.26X at last
review.
The top three performing conduit loans represent 14% of the pool
balance. The largest loan is the InTown Suites Portfolio Loan
($112.7 million -- 4.7% of the pool), is secured by a portfolio
of 40 extended stay hotels located in 16 states. The portfolio
totals 5,073 rooms with the highest concentration of rooms
located in Texas with 45.4% of the portfolio's total room count.
Performance has improved due to amortization. The loan has a
25 year amortization schedule and has amortized 10% since
securitization. Moody's LTV and stressed DSCR are 81% and 1.57X,
respectively, compared to 85% and 1.58X at last review.
The second largest loan is the Burnett Plaza Loan ($109.9 million
-- 4.5% of the pool), which is secured by a 1 million SF Class A
office building located in Fort Worth, Texas. The property was
87% leased as of September 2010 compared to 97% at last. The loan
is on the servicer's watchlist due to low debt service coverage.
Moody's LTV and stressed DSCR are 128% and 0.80X, respectively,
compared to 93% and 1.17X at last review.
The third largest loan is the Omni Hotel-San Diego Loan
($103.1 million -- 4.3% of the pool), which is secured by a 511
room full service hotel located in San Diego, California. The
property is located in the Marina District and it adjacent to
PETCO Park and the San Diego Convention Center. Performance has
declined due to a decrease in occupancy and revenue. Moody's LTV
and stressed DSCR are 107% and 1.06X, respectively, compared to
68% and 1.76X at last review.
BEAR STERNS: Moody's Downgrades Ratings on 15 2005-PWR9 Certs.
--------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 15 classes and
affirmed eight classes of Bear Sterns Commercial Mortgage
Corporation, Commercial Mortgage Pass-Through Certificates, Series
2005-PWR9:
-- Cl. A-2, Affirmed at Aaa (sf); previously on Oct. 12, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Oct. 12, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-AB, Affirmed at Aaa (sf); previously on Oct. 12, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4A, Affirmed at Aaa (sf); previously on Oct. 12, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4B, Affirmed at Aaa (sf); previously on Oct. 12, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1-A, Affirmed at Aaa (sf); previously on Oct. 12, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-J, Downgraded to A3 (sf); previously on Nov. 17, 2010
Aa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Baa1 (sf); previously on Nov. 17, 2010
Aa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Ba1 (sf); previously on Nov. 17, 2010 A1
(sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to B1 (sf); previously on Nov. 17, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Caa1 (sf); previously on Nov. 17, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Caa2 (sf); previously on Nov. 17, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Ca (sf); previously on Nov. 17, 2010 Ba1
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to C (sf); previously on Nov. 17, 2010 Ba2
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Nov. 17, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Nov. 17, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Nov. 17, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Nov. 17, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Nov. 17, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Nov. 17, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. Q, Downgraded to C (sf); previously on Nov. 17, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Affirmed at Aaa (sf); previously on Oct. 12, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. X-2, Affirmed at Aaa (sf); previously on Oct. 12, 2005
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans, interest shortfalls and concerns
about loans approaching maturity in an adverse environment. Five
loans, representing 14% of the pool, have either matured or mature
within the next 24 months and have a Moody's stressed debt service
coverage ratio less than 1.0X.
The affirmations are due to key parameters, including Moody's loan
to value ratio, the Herfindahl Index and Moody's stressed DSCR,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
On November 17, 2010, Moody's placed 15 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
8.4% of the current balance. At last review, Moody's cumulative
base expected loss was 3.4%. Moody's stressed scenario loss is
16.8% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 9% to $1.96 billion
from $2.15 billion at securitization. The Certificates are
collateralized by 192 mortgage loans ranging in size from less
than 1% to 7% of the pool, with the top ten loans representing 31%
of the pool. There is one loan, representing 0.8% of the pool,
with an investment grade credit estimate. At last review the 200
Glen Cove Road Loan also had a credit estimate. However, due to a
decline in property performance and increased leverage, this loan
is now analyzed as part of the conduit pool. Nine loans,
representing 5.3% of the pool, have defeased and are
collateralized with U.S. Government securities, the same as at
last review.
Fifty-six loans, representing 29% 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 CRE
Finance Council 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.
Three loans have been liquidated from the pool since
securitization, resulting in an aggregate $14.9 million loss (46%
loss severity on average). Fourteen loans, representing 13% of
the pool, are currently in special servicing. The largest
specially serviced loan is the Trilogy Apartments Loan ($133.3
million -- 6.8% of the pool), the largest loan in the pool, which
is now known as the Towers at Wyncote. This loan is secured by a
1,086-unit apartment complex located north of Philadelphia in
Wyncote, Pennsylvania. The loan was transferred to special
servicing in April 2009 due to imminent default. The property's
net operating income has declined over 50% since securitization
due to decreased rental income and increased operating expenses.
The property is currently 95% leased compared to 87% at last
review and 92% at securitization. The borrower is negotiating a
possible modification of the loan which could include a
significant infusion of equity. The master servicer recognized a
$43.7 million appraisal reduction on this property in September
2010.
The remaining 13 specially serviced loans are secured by a mix of
property types. The master servicer has recognized an aggregate
$16.4 million appraisal reduction for seven of the remaining
specially serviced loans. Moody's has estimated an aggregate
$99.8 million loss (40% expected loss on average) for all of the
specially serviced loans.
Moody's has assumed a high default probability for 16 poorly
performing loans representing 11% of the pool and has estimated an
aggregate $41.5 million loss (20% expected loss based on an 50%
default probability) from these troubled loans.
Based on the most recent remittance statement, Classes J through
S have experienced cumulative interest shortfalls totaling
$2.7 million. Moody's anticipates that the pool will continue to
experience interest shortfalls because of the high exposure to
specially serviced loans. Interest shortfalls are caused by
special servicing fees, including workout and liquidation fees,
appraisal subordinate entitlement reductions and extraordinary
trust expenses.
Moody's was provided with full year 2009 operating results for 88%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 98% compared to 103% at last
review. Moody's net cash flow reflects a weighted average haircut
of 12% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.2%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.47X and 1.08X, respectively, compared to
1.32X and 0.98X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 45 compared to 55 at last review.
The loan with a credit estimate is the Lakeside II Loan
($16.3 million -- 0.8% of the pool), which is secured by a 130,265
square foot office property located in Chantilly, Virginia. The
property is 100.0% leased to Integic Corporation through September
2012. Moody's credit estimate and stressed DSCR are Baa3 and
1.34X, the same as at last review.
The top three performing conduit loans represent 12% of the pool
balance. The largest loan is the DRA - Ahwatukee Foothill Towne
Center Loan ($108.9 million -- 5.5% of the pool), which is secured
by a 671,300 SF retail center located in Phoenix, Arizona. The
property was 95% leased as of August 2010, compared to 97% at last
review. Property performance has declined slightly since last
review due to a decrease in revenue. The loan was extended one
year through August 2011 and has an additional one-year extension
option through August 2012. Moody's LTV and stressed DSCR are
119% and 0.82X, respectively, compared to 110% and 0.88X at last
review.
The second largest loan is the Boston Design Center Loan
($68.6 million -- 3.5% of the pool), which is secured by a
leasehold interest in a 552,344 SF retail/showroom/office design
center located in Boston, Massachusetts. The property is subject
to a ground lease which expires in 2035 with renewal options for
an additional 25 years. The property was 97% leased as of June
2010 compared to 95% at last review. Property performance has
improved since last review. Moody's LTV and stressed DSCR are 83%
and 1.14X, respectively, compared to 93% and 1.01X at last review.
The third largest loan is the Riverside on the James Retail Note
Loan ($55.3 million -- 2.8% of the pool), which is secured by a
263,000 SF Class A office building located in Richmond, Virginia.
The property was 89% leased as of June 2010, the same as at last
review. The largest tenant is Troutman Sanders LLP (54% of the
net rentable area, lease expiration April 2021). The property
performance has improved since last review due to a slight
increase in rental revenue. Moody's LTV and stressed DSCR are 91%
and 1.13X, respectively, compared to 103% and 1.00X at last
review.
BEAR STEARNS: Moody's Downgrades Ratings on Seven 2007-BBA8 Notes
-----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of seven classes,
including three pooled classes and four non-pooled, or rake,
classes, and affirmed the ratings of 27 classes, including 13
pooled classes and 14 non-pooled classes of Bear Stearns
Commercial Mortgage Securities Inc. Commercial Pass-Through
Certificates, Series 2007-BBA8:
-- Cl. A-1, Affirmed at Aaa (sf); previously on April 26, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on April 26, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X-1B, Affirmed at Aaa (sf); previously on April 26, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X-2, Affirmed at Aaa (sf); previously on April 26, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X-4, Affirmed at Aaa (sf); previously on April 26, 2007
Assigned Aaa (sf)
-- Cl. X-2M, Affirmed at Aaa (sf); previously on April 26, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Affirmed at Aa2 (sf); previously on Dec. 3, 2009
Downgraded to Aa2 (sf)
-- Cl. C, Affirmed at A1 (sf); previously on Dec. 3, 2009
Downgraded to A1 (sf)
-- Cl. D, Affirmed at A3 (sf); previously on Dec. 3, 2009
Downgraded to A3 (sf)
-- Cl. E, Affirmed at Baa2 (sf); previously on Dec. 3, 2009
Downgraded to Baa2 (sf)
-- Cl. F, Affirmed at Ba1 (sf); previously on Dec. 3, 2009
Downgraded to Ba1 (sf)
-- Cl. G, Affirmed at Ba3 (sf); previously on Dec. 3, 2009
Downgraded to Ba3 (sf)
-- Cl. H, Affirmed at B1 (sf); previously on Dec. 3, 2009
Downgraded to B1 (sf)
-- Cl. J, Downgraded to B3 (sf); previously on Dec. 3, 2009
Downgraded to B2 (sf)
-- Cl. K, Downgraded to Caa2 (sf); previously on Dec. 3, 2009
Downgraded to Caa1 (sf)
-- Cl. L, Downgraded to Caa3 (sf); previously on Dec. 3, 2009
Downgraded to Caa2 (sf)
-- Cl. MS-1, Affirmed at Aaa (sf); previously on April 16, 2008
Upgraded to Aaa (sf)
-- Cl. MS-2, Affirmed at Aaa (sf); previously on April 16, 2008
Upgraded to Aaa (sf)
-- Cl. MS-3, Affirmed at Aa1 (sf); previously on April 16, 2008
Upgraded to Aa1 (sf)
-- Cl. MS-4, Affirmed at A3 (sf); previously on Dec. 3, 2009
Downgraded to A3 (sf)
-- Cl. MS-5, Affirmed at Baa3 (sf); previously on Dec. 3, 2009
Downgraded to Baa3 (sf)
-- Cl. MS-6, Affirmed at Ba3 (sf); previously on Dec. 3, 2009
Downgraded to Ba3 (sf)
-- Cl. MS-7, Affirmed at B1 (sf); previously on Dec. 3, 2009
Downgraded to B1 (sf)
-- Cl. MS-X, Affirmed at Aaa (sf); previously on April 16, 2008
Upgraded to Aaa (sf)
-- Cl. PH-1, Affirmed at B2 (sf); previously on Dec. 3, 2009
Downgraded to B2 (sf)
-- Cl. PH-2, Affirmed at B3 (sf); previously on Dec. 3, 2009
Downgraded to B3 (sf)
-- Cl. PH-3, Affirmed at Caa1 (sf); previously on Dec. 3, 2009
Downgraded to Caa1 (sf)
-- Cl. MA-1, Affirmed at B1 (sf); previously on Dec. 3, 2009
Downgraded to B1 (sf)
-- Cl. MA-2, Affirmed at B2 (sf); previously on Dec. 3, 2009
Downgraded to B2 (sf)
-- Cl. MA-3, Affirmed at B3 (sf); previously on Dec. 3, 2009
Downgraded to B3 (sf)
-- Cl. MA-4, Downgraded to Caa2 (sf); previously on Dec. 3, 2009
Downgraded to Caa1 (sf)
-- Cl. CA-1, Downgraded to B3 (sf); previously on Oct. 28, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. CA-2, Downgraded to Caa1 (sf); previously on Oct. 28,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. CA-3, Downgraded to Caa2 (sf); previously on Oct. 28,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The downgrades of the pooled classes were due to the deterioration
in the performance of six loans in the trust, the Ashford MIP
Portfolio Loan, the Felcor Lodging Trust Loan, the 980 Madison
Avenue Loan, the Thanksgiving Tower Loan, the Larkspur Hotel
Portfolio Loan and the Carr America Portfolio Loan. The
downgrades of the non-pooled classes were due to the deterioration
in the performance of the Carr America Portfolio Loan. The
affirmations were due to key parameters, including Moody's loan to
value ratio remaining within an acceptable range. Moody's placed
three non-pooled classes, Class CA-1, Class CA-2 and Class CA-3,
on review for possible downgrade on October 28, 2010. These
classes are associated with the Carr America Portfolio Loan. This
action concludes Moody's review.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS Large
Loan Model v 8.0 which is used for both large loan and single
borrower transactions. The large loan model derives credit
enhancement levels based on an aggregation of adjusted loan level
proceeds derived from Moody's loan level LTV ratios. Major
adjustments to determining proceeds include leverage, loan
structure, property type, and sponsorship. These aggregated
proceeds are then further adjusted for any pooling benefits
associated with loan level diversity, other concentrations and
correlations. The model also incorporates a supplementary tool to
allow for the testing of the credit support at various rating
levels. The scenario or "blow-up" analysis tests the credit
support for a rating assuming that loans in the pool default with
an average loss severity that is commensurate with the rating
level being tested.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 15, 2010 Payment Date, the transaction's
aggregate certificate balance has decreased by 47% to
$934.8 million from $1.8 billion at securitization. The
certificates are collateralized by 12 mortgage loans ranging in
size 15% to 2%, with the top two loans representing 30% of the
pool.
Moody's weighted average pooled loan to value ratio is 85%,
compared to 82% at last review. Moody's stressed debt service
coverage ratio is 1.55x, compared to 1.64x at last review.
There are currently three loans in special servicing, the MeriStar
Portfolio Loan, the Thanksgiving Tower Loan and the One Riverwalk
Place Loan. The pool has incurred $37,856 in cumulative bond
losses, affecting Class L.
The MeriStar Portfolio Loan ($47.9 million -- 7% of the pooled
balance) is secured by cross -collateralized and cross-defaulted
mortgages on 11 full-service hotel properties containing a total
of 4,059 keys. Since securitization 24 of the original 35
properties were released, resulting in a 92% reduction in the
pooled mortgage balance and a 65% reduction in the trust mortgage
balance. The loan pay downs affected only the pooled debt.
The $284.5 whole loan includes non-pooled trust debt of
$236.6 million, certificate Classes MS-X, MS-1, MS-2, MS-3, MS-4
and MS-5. There is also $266.6 million in mezzanine debt.
The loan was transferred to special servicing February 2, 2010
when the borrower indicated that they anticipated difficulty
refinancing the loan at the May 2011 maturity date. An extension
of the maturity date beyond 2011 is in negotiation. The hotel
collateral was appraised in May 2010 for $460.8 million. Moody's
LTV ratio for the $47.9 million pooled balance is 14%, the same as
at last review. Moody's credit estimate is Aaa, the same as at
last review. Moody's $345.6 million valuation is 25% less than
the appraised value. The loan sponsor is Blackstone Real Estate
Partners.
The Prime Hospitality Portfolio Loan ($99.3 million -- 15%) is
secured by cross-collateralized and cross-defaulted mortgages on
two full-service and 12 limited-service hotels with a total of
1,954 keys. The two full-service hotels are flagged by Hilton and
are located in Hasbrouck Heights, New Jersey (355 keys) and
Saratoga Springs, New York (240 keys). The remaining 12 hotels
have Wellesley Inn flags, nine of which are located in Florida;
the balance is located in New York and New Jersey. Since
securitization, three of the original 17 hotels in the portfolio
were released, resulting in a 19% pay down of the trust balance.
The whole loan balance of $141.6 million includes $16.4 million in
non-pooled trust debt, certificate Classes PH-1, PH-2 and PH-3,
and a $25.9 million non-trust junior component. There is also
$36.0 million in mezzanine debt.
Revenue per available room for calendar year 2009 was $59.65, a
17% decline from $72 in 2008. However, there has been improvement
in 2010. RevPAR for the year-to-date period ending in June 2010
increased by 5% to $61 from $58 in the same period in 2009, an
increase of 2% over Moody's RevPAR at last review. Moody's LTV
ratio for the pooled debt is 85%, the same as last review.
Moody's credit estimate is B1, the same as last review. The loan
sponsor is WH Hotels, L.L.C. and BREP IV.
The Felcor Lodging Trust ($96.2 million -- 15%) is a 52% pari
passu interest secured by 12 full-service hotels located in 12
states with a total of 2,930 keys. Brand affiliations include
Embassy Suites (seven properties -- 1,739 keys), Doubletree (two
properties -- 406 keys), Holiday Inn (one property -- 214 keys),
Holiday Inn Select (one property -- 397 keys) and Hilton Suites
(one property -- 174 keys). The $130 million whole loan includes
$33.8 million of non-trust junior debt. RevPAR for the trailing
12-month period ending June 2010 was $78, a slight decline from
calendar year 2009, but a 20% decline from calendar year 2008.
Moody's credit estimate is B1, compared to Ba2 at last review.
The Carr California Portfolio Loan ($11.6 million -- 1.2%) is a
50% pari passu interest secured by two office properties located
in Sunnyvale and Mountain View, California with total net rentable
area of 300,128 square feet. At securitization the portfolio
included a third property in San Diego. The $13.5 million whole
loan includes $1.9 million in non-pooled trust, certificate
Classes CA1, CA2 and CA3. There is also $18.2 million in
mezzanine debt. The portfolio is currently approximately 43%
leased. The largest tenant is Nokia, leasing 22% of total net
rentable area with a lease expiration date of December 31, 2010.
The loan sponsor is The Blackstone Group, BREP V. Moody's LTV is
86%. Moody's credit estimate is B2, compared to Ba3 at last
review.
BOSTON BIOMEDICAL: Moody's Cuts Rating on 1999 Bonds to 'Ba1'
-------------------------------------------------------------
Moody's Investors Service has downgraded Boston Biomedical
Research Institute's rating on $13.8 million of outstanding Series
1999 bonds to Ba1 from Baa3. The bonds were issued through the
Massachusetts Development Finance Agency. The outlook remains
negative. The downgrade and negative outlook reflect a highly
competitive environment for federal research funding, a multi-year
decline in unrestricted financial resources and operating
deficits, breach of debt service coverage covenant within the loan
agreement, weak fundraising, and continued budget pressure in FY
2011.
Rating Rationale: The Ba1 rating reflects BBRI's role as a small
independent research organization, heavily reliant on federal
funding. Multi-year operating deficits and past investment losses
have pressured the Institute's financial resource base. An
inability to grow grant revenue and stabilize operations could
pressure the rating further.
Legal Security: General obligation; security interest in BBRI's
Gross Receipts; first mortgage on the Institute's facility in
Watertown, Massachusetts; debt service reserve fund.
Interest Rate Derivatives: None. The Series 1999 bonds are fixed-
rate, and BBRI has not entered into any interest rate swap
agreements.
Challenges
* Past multi-year decline in grant and contract revenue and
resulting operating deficits. Per the audited financial
statements, grant and contract revenue declined from
$11.8 million in FY 2006 to $9.5 million in FY 2009, but
increased to $10.5 million in FY 2010. The Institute is heavily
dependent on federal research funding, with approximately 80% of
funding coming from the National Institutes of Health. In light
of flattening of federal research funding, BBRI will face the
challenge of longer-term growth of grants in a highly
competitive environment. In FY 2010, grants and contracts
represented nearly 88% of operating revenue. An ability to grow
alternative revenue streams, including gifts, grants from
foundations and private supporters, and technology transfer, and
diversify the revenue base would be positive credit factors.
* The Institute generated operating deficits in FY 2006-2010, by
Moody's calculation (including depreciation as an operating
expense and including a spending amount of 5% of cash and
investments as annual operating revenue). During FY 2008-2010,
the Institute's three-year average operating margin was a very
weak negative 21.3%. Management has taken steps to contain
expenses including salary and benefit cuts for non-grant funded
staff. In order to balance the budget and make strategic
investments, the Board approved approximately $3.9 million of
supplemental endowment spending in both FY 2008 and 2009
(equating to a more than a 20% draw from the investment pool).
BBRI is budgeting for a further decline in unrestricted net
assets in FY 2011.
* Significant decline in financial resources as a result of
operating deficits and past investment losses. Total financial
resources of $9.2 million in FY 2010 represent a 52% decline
from FY 2007. The Institute incurred investment losses in FY
2008 (-0.4%) and FY 2009 (-12.3%), but a positive investment
return in FY 2010 (17.5%). Expendable financial resources of
$7.05 million cover debt 0.5 times and expenses 0.5 times in FY
2010 (compared to much stronger coverage in FY 2007 of 1.1 times
expendable financial resources to debt and 1.3 times expendable
financial resources to operations).
* Breach of debt service coverage covenant contained within the
Loan and Trust Agreement. In FY 2008, 2009, and 2010 BBRI did
not meet the debt service coverage covenant (110% requirement,
compared to coverage of negative 260% in FY 2009 and positive
74% in FY 2010). Per the Agreement, the Institute has hired and
is working with a financial consultant. The Institute met the
liquidity ratio covenant within the Loan and Trust Agreement
(50% requirement, compared to 70.5% in FY 2009 and 69.2% in FY
2010).
* Small operating size ($12 million of operating revenue in FY
2010) leaves the Institute vulnerable to modest swings in
revenues and expenses combined with high operating leverage.
Debt to operating revenue is high at 1.18 times in FY 2010, and
debt service (including payment of capital leases) increased to
a high 10.3% of operating expenses in FY 2010.
* The Institute's fundraising has been weak, with gift revenue
averaging $572,000 annually during FY 2006-2010. The Institute
is recruiting a new director of institutional advancement and
has hired a consultant to help evaluate and improve fundraising
initiatives.
Strengths
* Additional bondholder security provided by a debt service
reserve fund, security interest in gross receipts, and first
mortgage on the research facility located in Watertown, MA.
* Expansion of its research activities and focus on more disease-
based translational research (not as narrowly focused on muscle
protein research) could help stimulate fundraising and grant
revenue longer-term. In 2008, BBRI established a research center
on muscular dystrophy (the Senator Paul D. Wellstone Muscular
Dystrophy Cooperative Research Center). The Center is funded by
the National Institutes of Health.
* Expansion of the board of trustees, adding new members who bring
scientific and technology transfer expertise.
* Although BBRI's balance sheet has weakened, monthly liquidity
provides a good cushion for the Institute's expense base. As of
October 31, 2010, the Institute's long-term investment pool of
$11 million included an allocation of approximately: 25%
domestic equity, 22% international equity, 34% fixed income and
cash, 5% in a hedge fund, and a combined 14% in two private
investments. Management reports unrestricted cash and
investments which could be liquidated in one month as of FYE
2010 of $8.9 million which would cover 256 days of cash
expenses.
* All fixed rate debt structure with no interest rate swap
agreements.
Outlook
The negative outlook reflects Moody's concerns about the decline
in the Institute's expendable financial resource base as a result
of investment losses and cash flow deficits, including a budgeted
decline in unrestricted net assets again in FY 2011. An inability
to rebalance operations in the next one to two years, placing
further pressure on financial resources, could result in a rating
downgrade.
What Could Change the Rating -- Up
Significant growth of liquid financial resource base coupled with
balanced operating performance and diversification of revenue
sources
What Could Change the Rating -- Down
Further deterioration of financial resources and further decline
in grant and contract revenue
Key Facts (FY 2010 audited financial results; 6/30/10 fiscal year
end):
-- Expendable Financial Resources: $7.05 million
-- Total Financial Resources: $9.2 million
-- Direct Debt: $14.1 million (Series 1999 bonds and capital
leases)
-- Expendable Financial Resources to Direct Debt: 0.5 times
-- Expendable Financial Resources to Operations: 0.5 times
-- Three-Year Average Operating Deficit: -21.3%
-- Operating Cash Flow Margin in FY 2010: 1.8%
-- Reliance on Grant Revenue: 88%
-- Monthly Liquidity: $8.9 million
-- Monthly Days Cash on Hand: 256 days
The Rating was assigned by evaluating factors believed to be
relevant to the credit profile of Boston Biomedical Research
Institute, such as i) the business risk and competitive position
of the issuer versus others within its industry or sector, ii) the
capital structure and financial risk of the issuer, iii) the
projected performance of the issuer over the near to intermediate
term, iv) the issuer's history of achieving consistent operating
performance and meeting budget or financial plan goals, v) the
nature of the dedicated revenue stream pledged to the bonds, vi)
the debt service coverage provided by such revenue stream, vii)
the legal structure that documents the revenue stream and the
source of payment, and viii) and the issuer's management and
governance structure related to payment. These attributes were
compared against other issuers both within and outside of the
Institute's core peer group and the rating is believed to be
comparable to ratings assigned to other issuers of similar credit
risk.
BRASCAN STRUCTURED: Fitch Reviews Ratings on Four Classes of Notes
------------------------------------------------------------------
Fitch Ratings has placed four classes of Brascan Structured Notes
2005-2 on Rating Watch Positive and affirmed one class as the
transaction is scheduled to exit its reinvestment period.
The placement of classes A through D on Rating Watch Positive
is the result of the collateralized debt obligation exiting its
reinvestment period at the close of business. The CDO currently
has uninvested principal proceeds totaling approximately
$124 million, which, according to the collateral manager,
Brookfield Real Estate Financial Partners LLC, are expected to
be used to pay down the senior liabilities of the transaction
resulting in the expected full payoff of the Class A notes,
partial payoff of the Class B notes, and increased credit
enhancement to all the remaining classes.
Class E is affirmed as the credit characteristics are consistent
with the 'CCC' category, meaning default is still possible. The
expected credit enhancement of this class after paydown provides
minimal cushion to Fitch's base case loss expectation.
After issuance of the next trustee report, Fitch will conduct a
full rating review. It is anticipated that the Rating Watch will
be resolved in early 2011.
Fitch has placed these classes on Rating Watch Positive:
-- $103,050,000 class A 'BBBsf/LS4';
-- $29,700,000 class B 'BBsf/LS5';
-- $34,500,000 class C 'Bsf/LS5';
-- $34,500,000 class D 'CCCsf/RR2'.
Fitch has affirmed this class:
-- $13,350,000 class E at 'CCCsf/RR3'.
CALLIDUS DEBT: S&P Raises Ratings on Various Classes of Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A-1D, A-1T, A-2, B, C, and D notes from Callidus Debt Partners CLO
Fund VI Ltd., a collateralized loan obligation transaction managed
by GSO/Blackstone Debt Funds Management LLC. In addition, S&P
removed its ratings on the class A-1D, A-1T, and A-2 notes from
CreditWatch with positive implications.
The upgrades reflect the improved performance we've observed in
the transaction's underlying asset portfolio since January 2010.
At that time, S&P lowered the ratings on all of the rated notes
following a review of the transaction under its updated criteria
for rating corporate collateralized debt obligations that S&P
published in September 2009.
At the time of S&P's last rating action, based on the trustee
report dated Dec. 11, 2009, the transaction was holding
approximately $16.5 million in defaulted obligations and
$69 million in underlying assets from obligors with a rating in
the 'CCC' range. Given the 'CCC' related haircuts applied to the
calculation of the transaction's coverage ratios, Callidus Debt
Partners CLO Fund VI Ltd. was failing its class C and D
overcollateralization tests and was using interest proceeds to pay
down the class A-1D and A-1T notes to bring the tests into
compliance. Since that time, a number of defaulted obligors whose
assets are held in the deal emerged from the bankruptcy process,
and some of the proceeds received were higher than their carrying
value in the O/C ratio test calculations. This, in combination
with a reduction in the amount of 'CCC' range assets, and
$14 million in pro rated paydowns to the class A-1D and A-1T notes
to date, benefited all of the transaction's O/C ratios.
As of Nov. 12, 2010, Callidus Debt Partners CLO Fund VI Ltd.
was holding just $0.65 million in defaulted obligations and
$29 million in assets from underlying obligors with ratings in the
'CCC' range. Also, the transaction was passing all of its O/C
tests. To date, the transaction has paid down the class A-1D and
A-1T notes to approximately 95% of their original outstanding
balances.
S&P will continue to review whether, in its view, the ratings
currently assigned to the notes remain consistent with the credit
enhancement available to support them and take rating actions as
S&P deems necessary.
Rating And Creditwatch Actions
Callidus Debt Partners CLO Fund VI Ltd.
Rating
------
Class To From
----- -- ----
A-1D AA+ (sf) A+ (sf)/Watch Pos
A-1T AA+ (sf) A+ (sf)/Watch Pos
A-2 AA- (sf) A- (sf)/Watch Pos
B A (sf) BBB (sf)
C BBB (sf) BB (sf)
D BB (sf) CCC+ (sf)
CAPITAL TRUST: Fitch Downgrades Ratings on Four Classes of Notes
----------------------------------------------------------------
Fitch Ratings downgrades four classes of Capital Trust RE CDO
2005-1 due to further deterioration of performance and higher than
expected realized losses. Fitch's base case loss expectation has
increased to 45.9% from 32.5% at the previous review.
The transaction is primarily collateralized by subordinate
commercial real estate debt (66% of total collateral is either B-
notes or mezzanine loans) and CMBS certificates (34%). Fitch
expects significant losses upon default for these assets since
they are generally highly leveraged, thin debt classes. Four
commercial real estate assets (6.7%) are currently defaulted. One
real estate bank loan which was previously in default has been
resolved. The resolution, however, resulted in significant
realized losses.
Both the A/B and the C/D/E overcollateralization tests have
breached their respective covenants. As a result, classes C and
below continue to not receive any proceeds as of the November 2010
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.
Under Fitch's updated methodology, approximately 54.7% 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 9.9%, generally from year-end 2009 or mid-
year 2010 cash flows. Fitch estimates average recoveries to be
low (16.1%), due to the highly leveraged and subordinate nature of
the assets.
The three largest components of Fitch's base case loss expectation
are B-notes (11.7%) secured by properties which have experienced
declines in performance and value since issuance. Given the
positions of these B-notes within each respective loan's capital
structure, losses are likely given the inability to refinance the
debt at these leverage points.
CT 2005-1 is a CRE collateralized debt obligation managed by CT
Investment Management Co., LLC. The transaction had a five-year
reinvestment period which ended in April 2010. As of the November
2010 trustee report and per Fitch categorizations, the CDO was
invested: B-notes (51.7%), CRE mezzanine loans (14.3%), commercial
mortgage-backed securities (CMBS; 28.3%), real estate bank loans
(1%), and three classes of a CRE CDO (4.8%).
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. Cash flow stresses
have been updated to reflect more recently available CRE
performance and outlooks. 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' (Sept. 17,
2010).
The ratings for bonds rated 'CCC' or lower, which are based on a
deterministic analysis, were assigned Recovery Ratings in order to
provide a forward-looking estimate of recoveries on currently
distressed or defaulted structured finance securities.
Fitch has downgraded and assigned Recovery Ratings to these
classes:
-- $174.8 million class A to 'CCCsf/RR2' from 'BB/LS3';
-- $36.3 million class B to 'CCsf/RR6' from 'B/LS5';
-- $21.1 million class C to 'Csf/RR6' from 'CC/RR6';
-- $14.4 million class D to 'Csf/RR6' from 'CC/RR6'.
In addition, Fitch affirms these classes:
-- $15.2 million class E at 'Csf/RR6';
-- $6.8 million class F at 'Csf/RR6';
-- $6.8 million class G at 'Csf/RR6';
-- $10.1 million class H at 'Csf/RR6'.
CASTLE HILL: Fitch Takes Rating Actions on Four Classes
-------------------------------------------------------
Fitch Ratings has upgraded one class of notes and affirmed three
classes of notes issued by Castle Hill III CLO and revised or
assigned Rating Outlooks, Loss Severity ratings, and Recovery
Ratings:
-- $43,648,322 class A-1a notes affirmed at 'AAsf/LS1'; Outlook
to Stable from Negative;
-- $69,109,262 class A-1b notes affirmed at 'AAsf/LS1'; Outlook
to Stable from Negative;
-- $30,000,000 class B notes upgraded to 'BBsf/LS3' from
'B/LS4'; Outlook to Stable from Negative;
-- $26,500,000 class C-1 notes affirmed at 'CCsf/RR3'.
The affirmations for class the A-1a and A-1b (class A) and C-1
notes in addition to the upgrade to the class B notes reflect the
relatively strong performance of the underlying loan portfolio,
while accounting for the risk of the maturity profile of the
portfolio and the generally uncertain U.S. economic recovery.
Since Fitch's last review in November 2009, the class A notes have
received approximately $81 million of principal payments,
representing 35% of their initial balance. This amortization has
led to increasing credit enhancement levels across the capital
structure. Additionally, Fitch recognizes the improving
collateral quality of the underlying loan portfolio. The amount
of performing assets Fitch considers rated 'CCC+' or below has
decreased to 13% from 32% over this same time period, while the
latest trustee report dated Oct. 29, 2010, indicates that
defaulted assets now represent 3.8% of the entire portfolio,
compared to 10.5% at the last review.
While the amortization has benefited all rated notes,
approximately 75.4% of the underlying portfolio is scheduled to
mature in 2013 or 2014. Fitch is aware that a significant volume
of leveraged loans in the high yield market also has maturities
during this time window.
The class A notes have been affirmed and their Outlook has been
revised to Stable, as they should continue to perform in line with
their current ratings.
The performance of the underlying loan portfolio since Fitch's
last review has led to improved credit quality for the class B
notes. At the time of Fitch's last review, the U.S. economy was
in the midst of a severe economic downturn, experiencing near-
record highs in corporate default rates and record lows in
recovery rates. Castle Hill III's underlying portfolio has since
reflected the improved U.S. corporate performance. While the
credit profile of the portfolio has improved, Fitch recognizes
that the class B notes remain exposed to risk of the portfolio's
maturity profile and a generally uncertain economic recovery. As
such, a speculative rating is maintained for the notes, while the
Outlook has been revised to Stable.
The class C-1 notes maintain only minimal overcollateralization,
and are highly vulnerable to the potential default of any of the
underlying obligors. An ultimate principal impairment to these
notes remains a possibility. Fitch has affirmed the notes and
assigned a Recovery Rating based on the total discounted future
cash flows projected to be available to these bonds in a base-case
default scenario. These discounted cash flows of approximately
$18 million yielded an ultimate recovery projection in a range
between 51% and 70%, which is representative of an 'RR3' on
Fitch's Recovery Rating scale. Recovery Ratings are designed to
provide a forward-looking estimate of recoveries on currently
distressed or defaulted structured finance securities rated 'CCC'
or below. For further detail on Recovery Ratings, please see
Fitch's report 'Criteria for Structured Finance Recovery Ratings'.
The class A and B notes have been assigned a Loss Severity (LS)
rating. 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'. The LS rating should always be considered in
conjunction with the notes' long-term credit rating.
Castle Hill III is a collateralized loan obligation 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 90% senior secured loans and 10%
second lien loans and bonds.
The majority of the underlying loans are publicly rated. Fitch
used model-based shadow ratings in its default probability
analysis of the CDO portfolio for approximately 15% of the
portfolio where a public rating was unavailable.
CD 2005-CD1: Moody's Reviews Ratings on 12 Classes of Certs.
------------------------------------------------------------
Moody's Investors Service placed 12 classes of CD 2005-CD1
Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2005-CD1:
-- Cl. A-J, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to Aa1 (sf)
-- Cl. B, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to Aa2 (sf)
-- Cl. C, A1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to A1 (sf)
-- Cl. D, A2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to A2 (sf)
-- Cl. E, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to Baa1 (sf)
-- Cl. F, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to Baa3 (sf)
-- Cl. G, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to Ba2 (sf)
-- Cl. H, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to B2 (sf)
-- Cl. J, Caa1 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to Caa1 (sf)
-- Cl. K, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to Caa3 (sf)
-- Cl. L, Ca (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to Ca (sf)
-- Cl. M, Ca (sf) Placed Under Review for Possible Downgrade;
previously on Jan. 6, 2010 Downgraded to Ca (sf)
The classes were placed on review for possible downgrade due to
higher expected losses for the pool resulting from realized and
anticipated losses from specially serviced and troubled loans.
Deal And Performance Summary
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 6% to $3.63 billion
from $3.88 billion at securitization. The Certificates are
collateralized by 216 mortgage loans ranging in size from less
than 1% to 8% of the pool, with the top ten loans representing 33%
of the pool.
Fifty-five loans, representing 22% 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 CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Six loans have been liquidated from the pool, resulting in an
aggregate realized loss of $17.4 million (57% loss severity on
average). Twenty-one loans, representing 10% of the pool, are
currently in special servicing. The master servicer has
recognized an aggregate $85.4 million appraisal reduction for 16
of the specially serviced loans
Moody's review will focus on potential losses from specially
serviced and troubled loans and the performance of the overall
pool.
CHARITABLE LEADERSHIP: Moody's Cuts 2002A Bond Rating to 'Caa2'
---------------------------------------------------------------
Moody's Investors Service has downgraded the rating to Caa2 from
Caa1 on Charitable Leadership Foundation's $50 million of fixed-
rate Series 2002A bonds (Center for Medical Science Project) which
were issued through the City of Albany Industrial Development
Agency. The rating has been placed on watchlist for further
possible downgrade and Moody's expects to review the rating again
within 90 days. Over the next 90 days, Moody's plan to focus on
the potential resumption of lease payments by Ordway and future
need to draw on the debt service reserve fund.
Bond proceeds were used to construct a biomedical research
facility in the University Heights district of Albany, with
Charitable Leadership Foundation ultimately providing a guaranty
of debt service payments. The Center for Medical Science is a New
York state not-for-profit corporation, which was formed by CLF to
own and operate the bond-financed research facility.
Rating Rationale: The rating reflects the precipitous decline in
CLF's financial resource base and lack of cash or liquid
investments as well as the delay in lease rental payments from one
of the building's major tenants resulting in the likely need to
partially use the debt service reserve fund for the January 2011
debt service payment. Although the Foundation's guaranty and past
large portfolio of marketable assets were originally the key
factors in assignment of the rating on the bonds, the rating now
relies mainly on the continued receipt of lease payments from
tenants in the facility and the potential for recovery for
bondholders should there be a debt service payment default or
acceleration of the bonds by bondholders.
Legal Security: Obligations under the Installment Sale Agreement
are a general obligation of the Foundation; debt service reserve
fund (Citigroup Guaranteed Investment Contract); mortgage lien on
the leasehold interest in facility and a security interest in the
equipment; pursuant to the Assignment of Rents, the Foundation and
the Issuer (City of Albany IDA) pledge and assign to the Trustee
all right, title, and interest to all Leases. Although the
expectation is that lease payments from building tenants will
adequately cover debt service, the Foundation also entered into a
Guaranty Agreement with the Trustee. Under this agreement, which
is unconditional and remains in effect for the life of the bonds,
the Foundation guarantees debt service on the bonds. The lease
payments made by tenants inhabiting the research facility do not
flow through the Foundation's audited financial statements.
Rather, the lease payments and the offsetting debt service
payments on the bonds are captured within the audit of the Center
for Medical Science.
Debt-Related Derivatives: none
Recent Developments/Results
Moody's remains very concerned about timeliness and accuracy of
financial information received from CLF. For example, the
Foundation's FY 2009 audited financial statements were published
nearly 11 months after the close of the fiscal year end. CLF's
management reports that the Foundation currently has little cash
or liquid investments. The Foundation, which provides a guaranty
of the bonds, would not be able to cover any shortfall in upcoming
debt service payment if one is needed.
Ordway Research Institute, Inc., a tenant in the Center for
Medical Science building, makes lease payments covering nearly
half of the annual debt service payments. Ordway is a not-for-
profit research organization which was created by Charitable
Leadership Foundation and has received significant start-up
funding from CLF over the years. During FY 2009, Ordway invested
in renovation of laboratory space for a newly recruited scientist.
Ordway borrowed approximately $4 million as a bank loan to finance
the capital project. CLF management reports that due to cash flow
problems at Ordway, Ordway has not made lease payments on the
Center for Medical Science Facility since July 2010. Management
reports that the other building tenants are current on all
required lease payments. Management reports that Ordway expects
to begin to receive grant revenue in January which would enable
them to begin to make current lease payments.
The next scheduled debt service payment on the Series 2002A bonds
is a $1.4 million interest only payment scheduled for January 1,
2011. CLF management reports that it will likely need to use a
portion of the debt service reserve fund to temporarily cover a
portion of the debt service payment.
Key Indicators For Charitable Leadership Foundation: (Audited FY
2009 financial data unless otherwise noted; CLF has a 12/31 fiscal
year end):
-- Total cash, cash equivalents, and publicly traded equity
securities: $46,000
-- Total Net Assets: $18.67 million, including $3.7 million of
loans receivable and $12.78 million of program related
investments
-- Amount of Series 2002A bonds outstanding: $50 million
-- Total debt including guaranty of Series 2002A bonds and other
loans payable: $53 million
Rated Debt:
-- Series 2002A Civic Facility Revenue Bonds: Caa2
The rating on the Series 2002A bonds was assigned by evaluating
factors believed to be relevant to the credit profile of
Charitable Leadership Foundation such as 1) the business risk and
competitive position of the issuer versus others within its
industry or sector, ii) the capital structure and financial risk
of the issuer, iii) the projected performance of the issuer over
the near to intermediate term, iv) the issuer's history of
achieving consistent operating performance and meeting budget or
financial plan goals, v) the nature of the dedicated revenue
stream pledged to the bonds, vi) the debt service coverage
provided by such revenue stream, vii) the legal structure that
documents the revenue stream and the source of payment, and vii)
the issuer's management and governance structure related to
payment.
CHEVY CHASE: Moody's Downgrades Ratings on Seven Tranches
---------------------------------------------------------
Moody's Investors Service has downgraded the ratings of seven
tranches and confirmed the ratings of seven tranches from two RMBS
transactions issued by Chevy Chase Funding LLC. The collateral
backing these transactions primarily consists of first-lien,
adjustable-rate, negative amortization residential mortgages.
Ratings Rationale
The actions are a result of the rapidly deteriorating performance
of option arm pools in conjunction with macroeconomic conditions
that remain under duress. The actions reflect Moody's updated
loss expectations on option arm pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on
option arm RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
Certain securities, as noted below, are insured by financial
guarantors. The Cl. A-1, Cl. A-1I and Cl. A-NA tranches,
contained in both transactions in this rating action, are wrapped
by Ambac Assurance Corporation (Segregated Account -- Unrated).
For securities insured by a financial guarantor, the rating on the
securities is the higher of (i) the guarantor's financial strength
rating and (ii) the current underlying rating (i.e., absent
consideration of the guaranty) on the security. The principal
methodology used in determining the underlying rating is the same
methodology for rating securities that do not have a financial
guaranty and is as described earlier. RMBS securities wrapped by
Ambac Assurance Corporation are rated at their underlying rating
without consideration of Ambac's guaranty.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates,
Series 2007-1
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Underlying Rating: Downgraded to Caa3 (sf); previously on
March 30, 2010 Caa2 (sf) Placed Under Review for Possible
Downgrade
-- Cl. A-1I, Downgraded to Caa3 (sf); previously on April 16,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Underlying Rating: Downgraded to Caa3 (sf); previously on
March 30, 2010 Caa2 (sf) Placed Under Review for Possible
Downgrade
-- Cl. A-NA, Downgraded to Caa3 (sf); previously on April 16,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Underlying Rating: Downgraded to Caa3 (sf); previously on
March 30, 2010 Caa2 (sf) Placed Under Review for Possible
Downgrade
-- Cl. A-2, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2I, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IO, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. NIO, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Chevy Chase Funding LLC, Mortgage-Backed Certificates,
Series 2007-2
-- Cl. A-1, Confirmed at Caa3 (sf); previously on April 16, 2010
Downgraded to Caa3 (sf) and Placed Under Review for Possible
Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Underlying Rating: Confirmed at Caa3 (sf); previously on
March 30, 2010 Caa3 (sf) Placed Under Review for Possible
Downgrade
-- Cl. A-1I, Confirmed at Caa3 (sf); previously on April 16,
2010 Downgraded to Caa3 (sf) and Placed Under Review for
Possible Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Underlying Rating: Confirmed at Caa3 (sf); previously on
March 30, 2010 Caa3 (sf) Placed Under Review for Possible
Downgrade
-- Cl. A-NA, Confirmed at Caa3 (sf); previously on April 16,
2010 Downgraded to Caa3 (sf) and Placed Under Review for
Possible Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Underlying Rating: Confirmed at Caa3 (sf); previously on
March 30, 2010 Caa3 (sf) Placed Under Review for Possible
Downgrade
-- Cl. A-2, Confirmed at Caa3 (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2I, Confirmed at Caa3 (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IO, Confirmed at Caa3 (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. NIO, Confirmed at Caa3 (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
CICERO LOCAL: Moody's Withdraws 'C' Rating on 2001A Bonds
---------------------------------------------------------
Moody's Investors Service has withdrawn the C rating on the Cicero
Local Development Corporation's (New York) Revenue Annual Lease
Appropriation Bonds, Series of 2001A. Moody's has withdrawn the
rating given that the Town of Cicero (G.O. rated A2) has failed to
appropriate for the rental payments securing the debt since fiscal
2004 and the mortgages securing the obligations were foreclosed in
October of 2005. Ultimately, bondholders recovered $1.57 million
of the outstanding debt, or 10.3% of the par value.
The last rating action was on February 13, 2004, when rating on
the Cicero Local Development Corporation's Revenue Annual Lease
Appropriation Bonds was downgrade to C from Caa1.
Moody's adopts all necessary measures so that the information it
uses in assigning a credit rating is of sufficient quality and
from sources Moody's considers to be reliable including, when
appropriate, independent third-party sources. However, Moody's is
not an auditor and cannot in every instance independently verify
or validate information received in the rating process.
CITIGROUP COMMERCIAL: Moody's Reviews Ratings on 14 2006-C5 Certs.
------------------------------------------------------------------
Moody's Investors Service placed 14 classes of Citigroup
Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2006-C5, on review for possible downgrade:
-- Cl. A-J, A1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to A1 (sf)
-- Cl. B, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to A3 (sf)
-- Cl. C, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to Baa1 (sf)
-- Cl. D, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to Baa3 (sf)
-- Cl. E, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to Ba1 (sf)
-- Cl. F, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to B1 (sf)
-- Cl. G, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to B2 (sf)
-- Cl. H, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to B3 (sf)
-- Cl. J, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to Caa2 (sf)
-- Cl. K, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to Caa2 (sf)
-- Cl. L, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to Caa2 (sf)
-- Cl. M, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to Caa3 (sf)
-- Cl. N, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to Caa3 (sf)
-- Cl. O, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 9, 2009 Downgraded to Caa3 (sf)
The classes were placed on review for possible downgrade due to
higher expected losses for the pool resulting from realized and
anticipated losses from specially serviced and troubled loans.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated February 9, 2009.
Deal And Performance Summary
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 4% to $2.03 billion
from $2.13 billion at securitization. The Certificates are
collateralized by 196 mortgage loans ranging in size from less
than 1% to 6% of the pool.
Fifty-seven loans, representing 19.7% 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 CRE Finance Council 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.
Twelve loans have been liquidated from the trust since
securitization, resulting in an aggregate realized loss of
$26 million (57% loss severity). Currently 15 loans, representing
6% of the pool, are in special servicing. The largest specially
serviced loan is the Canyon Corporate Center loan ($23.4 million
-- 1.2% of the pool), which was transferred to special servicing
in August 2009. The master servicer has recognized an appraisal
reduction of $12.9 million for this loan and an aggregate
$46.5 million appraisal reduction for 13 of the specially serviced
loans.
Moody's review will focus on potential losses from specially
serviced and troubled loans and the performance of the overall
pool.
CITIMORTGAGE ALTERNATIVE: Moody's Takes Various Rating Actions
--------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 1 tranche,
downgraded the ratings of 188 tranches and confirmed the ratings
of 30 tranches from 14 RMBS transactions, backed by Alt-A loans,
issued by CitiMortgage Alternative Loan Trust in 2006 and 2007.
Ratings Rationale
The collateral backing these transactions consists primarily of
first-lien, fixed-rate, Alt-A residential mortgage loans. The
actions are a result of the rapidly deteriorating performance of
Alt-A pools in conjunction with macroeconomic conditions that
remain under duress. The actions reflect Moody's updated loss
expectations on Alt-A pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on
Alt-A RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: CitiMortgage Alternative Loan Trust 2006-A1
-- Cl. IA-1, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-PO, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Upgraded to A3 (sf); previously on Jan. 14, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-PO, Downgraded to B2 (sf); previously on Jan. 14,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust 2006-A2
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-6, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-7, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-8, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust 2006-A3
-- Cl. IA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-9, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-11, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-12, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-13, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Downgraded to B3 (sf); previously on Jan. 14, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-IO, Downgraded to B3 (sf); previously on Jan. 14,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust 2006-A4
-- Cl. IA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-9, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-10, Downgraded to C (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-PO, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-IO, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B1 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust 2006-A5
-- Cl. IA-1, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Confirmed at Caa1 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Confirmed at Caa2 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Confirmed at Caa1 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Confirmed at Caa2 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-8, Confirmed at Caa2 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-9, Confirmed at Caa1 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-10, Confirmed at B3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-11, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-12, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-13, Confirmed at Caa1 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Confirmed at B3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-PO, Downgraded to C (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-IO, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIIA-1, Downgraded to Ca (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIIA-2, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIIA-3, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIIA-IO, Downgraded to Ca (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust 2006-A6
-- Cl. IA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Confirmed at B3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-IO, Confirmed at B3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust 2006-A7
-- Cl. IA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-9, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-11, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-12, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-13, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Downgraded to Caa1 (sf); previously on Jan. 14,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-IO, Downgraded to Caa1 (sf); previously on Jan. 14,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust 2007-A1
-- Cl. IA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-9, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-10, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Confirmed at B3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-PO, Confirmed at B3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-IO, Confirmed at B3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust 2007-A3
-- Cl. IA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-9, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-11, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-12, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust 2007-A4
-- Cl. IA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-9, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-11, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-12, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-13, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-14, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Confirmed at B3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-IO, Confirmed at B3 (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust 2007-A5
-- Cl. IA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-9, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-11, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-12, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-14, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-PO, Downgraded to C (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Downgraded to B2 (sf); previously on Jan. 14, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-IO, Downgraded to B2 (sf); previously on Jan. 14,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust 2007-A6
-- Cl. IA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-8, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-9, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-11, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-12, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-13, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-14, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-15, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-16, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-18, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-19, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-20, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-21, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-IO, Downgraded to Caa2 (sf); previously on Jan. 14,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust Series 2007-A7
-- Cl. IA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-3, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-4, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIIA-1, Confirmed at Baa2 (sf); previously on Jan. 14,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIIA-2, Downgraded to Ba2 (sf); previously on Jan. 14,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIIA-IO, Confirmed at Baa2 (sf); previously on Jan. 14,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
Issuer: CitiMortgage Alternative Loan Trust, Series 2007-A2
-- Cl. IA-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-2, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-3, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-4, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-5, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-6, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-7, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-8, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-9, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-10, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-12, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-13, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-14, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-15, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-16, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IA-IO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-PO, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-1, Downgraded to Caa1 (sf); previously on Jan. 14,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IIA-IO, Downgraded to Caa1 (sf); previously on Jan. 14,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
CITY OF SPARKS: Moody's Cuts Ratings on Bonds to 'B2'
-----------------------------------------------------
Moody's Investors Service has downgraded to B2 from Ba3 the City
of Sparks, Nevada's Tourism Improvement District No. 1 (Legends at
Sparks Marina) Senior Sales Tax Anticipation Revenue Bonds, Series
A (the senior STAR bonds); the outlook has been changed to
negative from stable. The bonds were issued in June 2008 as
fixed-rate obligations and are secured by a net 4.8384% sales tax
to be collected within the 147.7 acre district, which encompasses
a retail shopping and entertainment project adjacent to Interstate
80 in the City of Sparks, Nevada (not rated). The bonds are
currently outstanding in the amount of $82.005 million.
Ratings Rationale
The downgrade to B2 reflects Moody's view that the weak regional
economy, combined with lackluster project performance, will result
in sales tax collections that are insufficient to meet scheduled
debt service requirements over the near- to medium-term, and will
require regular draws on the Reserve Fund. Further, according to
Moody's assumptions and calculations, the Reserve Fund will become
depleted and the bonds are expected to default on June 15, 2018,
with an estimated 84% recovery rate thereafter through final
maturity in 2028. The negative outlook reflects Moody's view
that, absent significant near-term economic recovery and improved
project performance, sales tax growth will be insufficient to
overcome the combination of already weak debt service coverage and
escalating debt service requirements. Debt service coverage is
projected to total only 0.88 times in 2011 while scheduled debt
service escalates by approximately 2.5% annually through final
maturity.
Moody's notes that senior lien debt service is expected to be paid
in full as scheduled on December 15, 2010 with the assistance of
an approximate $599,848 draw on the $7.96 million Reserve Fund,
thereby reducing the Reserve Fund balance to approximately
$7.36 million. A draw on the Reserve Fund does not constitute a
technical default under the senior STAR bond indenture.
Replenishment of the Reserve Fund is made from the first available
sales taxes received after the draw, which would otherwise have
accrued to the Bond Fund for the next scheduled debt service
payment. Nevertheless, the presence of a liquid Reserve Fund,
which is currently invested by the city with other overnight
funds, is expected to provide the supplemental cash needed to pay
debt service as scheduled until the projected default date of June
15, 2018. It is noted that the pledged sales taxes are subject to
potential statutory impairment and the authorization to collect
the taxes sunsets in 2028, leaving few debt restructuring options.
In the near-term, key rating factors will include Moody's
assessment of regional economic indicators, the performance of the
retail project itself and, ultimately, the influence these factors
have on the trend of monthly sales tax collections and the
magnitude of additional draws on the Reserve Fund. Longer-term
rating factors will include the timing and strength of Reno's
economic recovery and the project's ability to retain existing
tenants and secure additional commitments from project
participants. All of these factors will be important contributors
to Moody's assessment of future sales tax collections, the
likelihood and timing of default, and the recovery rate to
bondholders should default occur.
Transaction Initially Structured To Achieve
1.65 Times Senior Lien Coverage,
But Actual Performance Falls Well Short
Of Early Estimates
Moody's calculation of future sales tax collections, debt service
coverage and draws on the Reserve Fund indicates that the bonds
are expected to default on June 15, 2018 with approximately 84%
recovery to bondholders thereafter through final maturity in 2028.
While an 84% recovery rate is consistent with ratings in the mid-
Caa category for bonds that are already in default, the B2 rating
assigned to the senior STAR bonds reflects a combination of the
longer time horizon until projected default (2018) and the
potential for improved sales tax performance over the next several
years. Key assumptions underlying Moody's calculation include 3%
annual growth in sales taxes, minimal Reserve Fund interest
earnings reflecting currently low investment rates, and
approximately 2.5% annual debt service escalation.
The senior STAR bonds were originally issued to provide a major
portion of the financing for development of the project. The
bonds were issued under the authority granted by Nevada's 2005
Tourism Improvement District Law, which enabled the City's
creation of the Sparks, Nevada, Tourism Improvement District
No. 1 on June 23, 2007. Under the authorizing statute, the
"preponderance" of sales tax collections within the district must
be attributable to tourism activity, subject only to a one-time
certification with no look-back test. The senior STAR bonds were
issued concurrently with $36.6 million of subordinate STAR bonds
(not rated) and $26.4 million of local improvement district bonds
(not rated).
In addition to senior STAR bond proceeds, the overall project
financing plan reflected a variety of additional public financing
sources including the subordinate sales tax bonds (purchased by
the the developer (RED Development) with funds borrowed under the
KeyBank Bridge Loan) and local improvement district (assessment)
bonds mentioned above, as well as tax increment financing. The
primary private sources of financing include equity from RED,
KeyBank predevelopment and construction loans, and contributions
by Scheels, Target, Olympia Gaming, Lowe's and JC Penney, among
other participants, to build their facilities. Lowe's and JC
Penney have yet to make firm commitments to the project.
The original offering was sized based on leases signed as of
March 14, 2008 (the Phase IA Leases). Debt service on the
original transaction was structured to reflect a ramp-up in sales
tax collections through 2011 as the various project phases came on
line. Thereafter, the bonds were structured with 2.5% annual debt
service escalation, which mirrored the assumed annual sales tax
growth rate for the 20-year term of the bonds. The bond structure
also reflected a mandatory "turbo" feature which, under the
original "moderate" projection, resulted in early retirement of
all senior STAR bonds in 2021.
Moody's notes that the issuer's long-term expectation is to
combine all of the currently signed leases with additional Phase
IB and Phase II leases to be factored into the sizing of a second
series of parity senior STAR bonds. This second series was
originally expected to be issued in the amount of $78.3 million in
September 2008, but weaker-than-expected project performance has
delayed the issuance of additional bonds indefinitely.
Major Retail And Entertainment Project
Designed To Attract Tourism And Serve The Washoe County Region
The Legends at Sparks Marina is a 1.93 million sq. ft.
retail/entertainment project developed by RED on a 147.7-acre site
adjacent to Interstate 80 on the east side of the Reno-Sparks MSA.
RED is an established developer that has successfully built and
owned a variety of similar projects throughout the Midwest and
West. The project is expected to be developed in two phases:
Phase I consists of approximately 1.18 million square feet of
retail, restaurant and hotel space, the retail portion of which
has been constructed and is in the ramp-up phase of operations.
Phase I also includes development of a 578,000 square foot
hotel/casino component (the Olympia Hotel/Casino) that is
currently on hold with no definitive completion date. Phase II
consists of 168,699 square feet of additional retail space which
was originally expected to open in May 2009, but is currently
delayed. To date, the project's principal occupants include
Scheels All Sports, Target, Best Buy and a host of factory stores.
In addition to the delayed Olympia Gaming project, a number of
other Phase IB and Phase II participants that have yet to
construct and occupy their facilities include Lowe's, JC Penney,
Heritage Inn Hotels, Mountain Family RV, a movie theater and a
variety of other proposed retail stores and restaurants. In
addition, some tenants have recently closed their stores including
Samsonite, Kasper, Easy Spirit and Nine West in 2010; Saks Off
Fifth is scheduled to close in January 2011. Positively, BJ's
Brewhouse and Popeye's both opened in 2010 and Discount Tire is
scheduled to open in the Fall of 2011. Officials also report that
the developer is in the process of rebranding the project to an
outlet center in hopes of attracting more business.
Retailers Ramped Up Operations During Severe Recession
In addition to attracting tourists traveling along adjacent
Interstate 80, the project intends to serve the greater Washoe
County (GO rated Aa1) region. Washoe County is the second largest
economic region in Nevada, after the Las Vegas metropolitan area,
and is located in the northwestern section of the state bordering
California and Oregon. The county contains the Cities of Reno (GO
rated Aa2/negative) and Sparks (not rated) and portions of Lake
Tahoe. The regional economy has been mired in a severe recession
and recovery is expected to be slow and spotty. The area remains
somewhat dependent on gaming and recreation, though the
warehousing and manufacturing sectors have provided some
diversification in recent years. Area wealth levels are also
favorable with per capita and median family incomes measuring
110.4% and 106.7% of state levels, respectively.
High Taxpayer Concentration
An important consideration in the assigned rating is the
relatively high concentration of sales tax collections expected to
be derived from the district's largest taxpayers. In the original
projections provided by the independent sales tax feasibility
consultant, Real Estate Research Consultants, Inc., approximately
72.1% of the projected Phase IA sales taxes to be collected in
2015 were to be derived from the five largest taxpayers
(collectively, Best Buy, Forever 21, Mountain Family RV, Target
and Scheels All Sports). At projected build out, including all of
the Phase I and Phase II components of the development, the five
largest taxpayers' share of total projected 2015 collections was
to fall to a lower, but still concentrated 41.1%. Though recent
RERC projections are not available, Moody's estimates that
taxpayer concentration remains high and is in line with original
estimates.
Satisfactory Legal Provisions
Legal provisions are satisfactory and reflect a 1.65 times
additional bonds test and a cash-funded debt service reserve sized
at 10% of original proceeds. Mezzanine and subordinate bond
indentures outline additional bonds tests of 1.25 times and 1.10
times, respectively. Importantly, a default on the mezzanine or
subordinate bonds does not trigger a cross-default on the senior
bonds.
What Could Make The Rating Go -- Up
-- A sustained trend of higher tax collections that produces
coverage at or above the 1.0x
-- Further project expansion, including delivery of certain
Phase II projects that are currently on hold
What Could Make The Rating Go -- Down
-- Depletion of the Reserve Fund at a rate faster than currently
estimated
-- Continued lackluster sales tax performance, especially in the
near-term through 2011
-- Longer-term adverse changes in the tenant mix
Last Rating Action
The last rating action with respect to the Sparks Tourism
Improvement District No. 1, NV was on June 10, 2010, when the
district's senior STAR bond rating was affirmed at Ba3 with a
stable outlook.
Regulatory Disclosures
Information sources used to prepare the credit rating are these:
parties involved in the ratings, public information, confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information
available on the credit satisfactory for the purposes of assigning
a credit rating.
Outlook
The negative outlook reflects Moody's view that, absent
significant near-term economic recovery and improved project
performance, sales tax growth will be insufficient to overcome the
combination of already weak debt service coverage and escalating
debt service requirements. In the near-term, key rating factors
will include Moody's assessment of regional economic indicators,
the performance of the retail project itself and, ultimately, the
influence these factors have on the trend of monthly sales tax
collections and the magnitude of additional draws on the Reserve
Fund. Longer-term rating factors will include the timing and
strength of Reno's economic recovery and the project's ability to
retain existing tenants and secure additional commitments from
project participants. All of these factors will be important
contributors to Moody's assessment of future sales tax
collections, the likelihood and timing of default, and the
recovery rate to bondholders should default occur.
Moody's adopts all necessary measures so that the information it
uses in assigning a credit rating is of sufficient quality and
from sources Moody's considers to be reliable including, when
appropriate, independent third-party sources. However, Moody's is
not an auditor and cannot in every instance independently verify
or validate information received in the rating process.
COMM 2001-J2: S&P Downgrades Ratings on Rakes Certificates
----------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on the
class OM-2 and OM-3 raked certificates from COMM 2001-J2, a U.S.
commercial mortgage-backed securities transaction. Concurrently,
S&P affirmed its ratings on 15 classes of commercial mortgage
pass-through certificates from the same transaction. In addition,
S&P affirmed its ratings on three classes of commercial mortgage
pass-through certificates from COMM 2001-CITI, also a U.S. CMBS
transaction. Lastly, S&P affirmed its ratings on four classes of
CMBS trust certificates from COMM Resecuritization 2003-J2R, a
U.S. resecuritized real estate mortgage investment conduit
transaction.
S&P's rating actions follow its analysis of the COMM 2001-J2
transaction, which included the revaluation of the mortgage
collateral securing the seven nondefeased fixed-rate loans in the
pool. S&P's analysis also considered the refinancing risks
associated with five ($691.3 million; 53.2% of the pool) of the
seven loans; five of these loans have final maturities or
anticipated repayment dates in the first half of 2011. In
addition, three loans from COMM 2001-J2 totaling $452.9 million
(34.9%) were previously with the special servicer and have been
returned to the master servicer. It is S&P's understanding from
the special servicer, Berkadia Commercial Mortgage LLC, that the
workout fees will be waived as long as these three loans continue
to perform.
The largest loan in the COMM 2001-J2 transaction is a
$293.1 million senior participation secured by the Citigroup
Center in New York City. A $51.1 million subordinate
participation interest also secured by the Citigroup Center
serves as the sole collateral for the COMM 2001-CITI transaction.
S&P's ratings on the COMM Resecuritization 2003-J2R transaction
are based on its rating on the class A-1 pooled certificate in
COMM 2001-J2.
S&P downgraded the class OM-2 and OM-3 raked certificates from
COMM 2001-J2. These certificates derive 100% of their cash flow
from a subordinate nonpooled component of the Oakdale Mall loan.
S&P affirmed its ratings on the class B, C, and D certificates
from COMM 2001-CITI based on its analysis of the Citigroup Center
loan, which serves as the sole collateral for the COMM 2001-CITI
transaction. S&P discusses additional details on the Citigroup
Center loan below.
S&P affirmed its ratings on the class A-1A and A-1B certificates
from COMM Resecuritization 2003-J2R following its affirmation of
the class A-1 pooled certificate from the COMM 2001-J2
transaction, the sole collateral for COMM Resecuritization 2003-
J2R. The sole collateral for the COMM Resecuritization 2003-J2R
transaction is the class A-1 certificate in COMM 2001-J2.
S&P also affirmed its 'D (sf)' rating on class H from the COMM
2001-J2 transaction because it has experienced recurring interest
shortfalls since June 2002.
S&P affirmed its ratings on the class E-IO, X, and XC interest-
only certificates from COMM 2001-J2 and the class A-1AIO and A-
1BIO IO certificates from COMM Resecuritization 2003-J2R to
reflect its current criteria.
The COMM 2001-J2 pool collateral consists of three defeased loans
($390.6 million, 30.1%) and seven loans secured by office
($614.1 million, 47.3%) and retail ($294.2 million, 22.6%)
properties.
Office Collateral
Office properties secure four loans (including the mixed-use
office/retail Landmark Center loan) in the COMM 2001-J2 pool
totaling $614.1 million (47.3% of the pooled trust balance),
according to the Nov. 16, 2010, trustee remittance report. Two of
the properties are in New York City (31.7% of the COMM 2001-J2
pool trust balance), one is in Boston (9.0%), and one is in
Chicago (6.6%). S&P based its office analyses, in part, on a
review of the borrowers' operating statements available for year-
to-date 2010 and the 12 months ended Dec. 31, 2009, 2010 budgets,
and 2010 rent rolls. The borrowers for these office loans have
reported steady performance for the past two years. Based on
S&P's analysis, its office property valuation yielded an average
stressed in-trust loan-to-value ratio of 44.6%.
The Largest Office Loan
The Citigroup Center loan, the largest loan in the COMM 2001-J2
pool, is secured by three buildings: a 59-story office tower, a
six-story office and retail building, and a church building that
is owned and occupied by St. Peter's Lutheran Church of Manhattan.
The property totals 1.6 million sq. ft. of net rentable area in
Manhattan. The largest tenants include Citibank (29% of the NRA),
Kirkland & Ellis L.P. (24%), and Citadel Investment Group, LLC
(13%). The loan has a whole-loan balance of $457.5 million, which
consists of a $293.1 million senior pooled component (22.6% of the
COMM 2001-J2 pool trust balance) and a $51.1 million subordinate
participation interest that serves as the sole collateral for the
COMM 2001-CITI transaction. In addition, there are two junior
participations totaling $113.3 million that are held outside the
COMM 2001-J2 and COMM 2001-CITI transactions. The $51.1 million
participation interest is subordinate to the interest in COMM
2001-J2 but senior to all other components of the whole loan. The
master servicer for this whole loan, Midland Loan Services Inc.
(Midland), reported a debt service coverage (DSC) for the senior
loan of 1.60x for year-end 2009 and an occupancy of 95.6% as of
Sept. 30, 2010. (The senior loan includes the $293.1 million loan
included in COMM 2001-J2 and the $51.1 million subordinate
participation interest in COMM 2001-CITI). S&P's adjusted
valuation, which yielded a stressed in-trust LTV ratio of 37.6%,
is on par with the levels S&P assessed in its last review of COMM
2001-CITI on Nov. 9, 2009. The loan matures on May 11, 2011, and
has no extension options remaining.
Retail Collateral
Retail properties secure three loans in the COMM 2001-J2 pool
totaling $294.2 million (22.6% of the pooled trust balance).
These properties are in Wayne, New Jersey (11.8% of the pooled
trust balance); Grandville, Michigan (7.6%), and Johnson City, New
York (3.2%). S&P based its retail analyses, in part, on a review
of the borrowers' operating statements available for year-to-date
2010 and the 12 months ended Dec. 31, 2009, 2010 budgets, and 2010
rent rolls. With the exception of the Oakdale Mall loan, the
borrowers of these retail loans have reported steady performance
for the past two years. Based on S&P's analysis, its retail
property valuations yielded an average LTV ratio of 52.2% for the
COMM 2001-J2 pool.
The Largest Retail Loan
The Willowbrook Mall loan, the second largest loan in the COMM
2001-J2 pool, is secured by 496,656 sq. ft. of a 1.5 million-sq.-
ft. super-regional mall, in Wayne, N.J. The loan has a trust and
whole-loan balance of $154.0 million (11.9%). The master
servicer, Berkadia, reported an in-trust DSC of 2.58x for year-end
2009 and an occupancy of 99.3% as of June 30, 2010. S&P's
adjusted valuation yielded a stressed in-trust LTV ratio of 50.3%.
The loan matures on June 30, 2016, and has no extension options
remaining.
Retail Loan With Rated Raked Certificates
Standard & Poor's rates the "OM" raked certificates in COMM 2001-
J2. The Oakdale Mall loan, the smallest loan in the pool, is
secured by 483,482 sq. ft. of an 848,876-sq.-ft. retail shopping
mall in Johnson City, N.Y. The loan has a whole-loan balance of
$47.7 million that consists of a $41.1 million senior pooled
component that makes up 3.2% of the COMM 2001-J2 pooled trust
balance and a $6.6 million subordinate nonpooled component that is
raked to the "OM" certificates. The borrower has reported a
decline in base rental income and an increase in operating
expenses for the past two years. The master servicer, Berkadia,
reported an in-trust DSC of 1.34x for year-end 2009 and an 84.5%
occupancy as of July 2, 2010. S&P's adjusted valuation yielded an
in-trust stressed LTV ratio of 68.4%. Based on its revised
valuation, S&P lowered its ratings on the class OM-2 and OM-3
raked certificates. The anticipated repayment date is April 11,
2011, with a final maturity date of April 11, 2026.
Ratings Lowered
COMM 2001-J2
Commercial mortgage pass-through certificates
Class To From Credit enhancement (%)
----- -- ---- ----------------------
OM-2 A (sf) AA- (sf) N/A
OM-3 BBB (sf) BBB+ (sf) N/A
Ratings Affirmed
COMM 2001-J2
Commercial mortgage pass-through certificates
Class Rating Credit enhancement (%)
----- ------ ----------------------
A-1 AAA (sf) 25.85
A-1F AAA (sf) 25.85
A-2 AAA (sf) 25.85
A-2F AAA (sf) 25.85
B AAA (sf) 18.78
C AAA (sf) 9.85
D AA (sf) 7.42
E A+ (sf) 5.29
E-CS A+ (sf) 4.52
E-IO A+ (sf) N/A
F A- (sf) 3.48
G BB+ (sf) 0.92
H D (sf) 0.00
X AAA (sf) N/A
XC AAA (sf) N/A
COMM 2001-CITI
Commercial mortgage pass-through certificates
Class Rating
----- ------
B AA+ (sf)
C AA (sf)
D AA- (sf)
COMM Resecuritization 2003-J2R
CMBS trust certificates
Class Rating
----- ------
A-1A AAA (sf)
A-1AIO AAA (sf)
A-1B AAA (sf)
A-1BIO AAA (sf)
N/A - Not applicable.
COMM 2003-LNB1: Moody's Reviews Ratings on Seven Certificates
-------------------------------------------------------------
Moody's Investors Service placed seven classes of COMM 2003-LNB1,
Commercial Mortgage Pass-Through Certificates, on review for
possible downgrade:
-- Cl. D, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 2, 2007 Upgraded to Aa3 (sf)
-- Cl. E, A1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 2, 2007 Upgraded to A1 (sf)
-- Cl. F, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 2, 2007 Upgraded to A3 (sf)
-- Cl. G, Ba1 (sf) Placed Under Review for Possible Downgrade;
previously on Oct. 7, 2010 Downgraded to Ba1 (sf)
-- Cl. H, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Oct. 7, 2010 Downgraded to B2 (sf)
-- Cl. J, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Oct. 7, 2010 Downgraded to Caa2 (sf)
-- Cl. K, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Oct. 7, 2010 Downgraded to Caa3 (sf)
The classes were placed on review for possible downgrade due to
interest shortfalls.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated Oct. 7, 2010.
Deal And Performance Summary
As of the November 10, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 19% to
$684.9 million from $846 million at securitization. The
Certificates are collateralized by 79 mortgage loans ranging in
size from less than 1% to 11% of the pool.
Fifteen loans, representing 21% 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 CRE
Finance Council 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.
Three loans have been liquidated from the pool since
securitization, resulting in an aggregate $4.8 million loss (41%
loss severity on average). Currently, seven loans, representing
5% of the pool, are in special servicing. The largest specially
serviced loan is the Quality Inn & Holiday Inn Loan ($11.4 million
-- 1.7% of the pool), which is secured by two limited service
hotels, totaling 451 rooms, located in Hampton, Virginia. The
loan was transferred to special servicing in May 2007 due to
imminent default and is currently in the process of foreclosure.
On September 23, 2010, the master servicer declared the loan non-
recoverable and would no longer be advancing interest payments.
This was reflected in the October remittance statement. In
addition the master servicer is recouping approximately $81,000 of
funds previously advanced on this loan, which will be reflected in
the December and January remittance statement. An additional
$185,000 in trust expenses associated with this loan will be
recouped by the special servicer beginning with the December
remittance statement. The trust expenses have been submitted by
the special servicer roughly every 90 days instead of on a monthly
basis which has contributed to the sudden increase in interest
shortfalls. The winter season has also traditionally been marked
by a decrease in the properties performance, causing the elevated
amount of trust expenses to continue for the forseeable future.
As a result, it is anticipated that interest shortfalls will
increase significantly beginning in December, affecting Classes E
through P.
Moody's review will focus on the current reduced interest payments
available to the trust as well as the potential impact future
interest shortfalls will have on the trust certificates.
COMM 2003-LNB1: S&P Downgrades Ratings on Seven Securities
----------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on seven
classes of commercial mortgage-backed securities from COMM 2003-
LNB1. S&P placed five of these ratings on CreditWatch with
negative implications and lowered the class K and L certificate
ratings to 'D (sf)'. Concurrently, S&P placed its ratings on one
additional class from the same transaction on CreditWatch with
negative implications.
The downgrades and CreditWatch placements reflect recurring
interest shortfalls and these classes' increased susceptibility to
future interest shortfalls, resulting primarily from the lack of
advancing of trust expenses related to the Hampton Inn & Holiday
Inn loan. The downgrades and CreditWatch placements affecting the
class G, H, J, K, and L certificates reflect recurring interest
shortfalls. S&P downgraded the class K and L certificates to 'D
(sf)' due to recurring interest shortfalls that S&P expects to
continue for the foreseeable future.
The lowered ratings and CreditWatch placements on the class D, E,
and F certificates reflect these classes' increased susceptibility
to future interest shortfalls and a reduction in the liquidity
available to the classes to absorb any future interest shortfalls.
As of the Nov. 10, 2010 remittance report, the transaction's
current interest shortfalls totaled $228,327 and have affected all
of the classes subordinate to and including class G. The interest
shortfalls are primarily due to interest not advanced, and the
recoup of prior advances by the master servicer, related to the
Hampton Inn & Holiday Inn loan. In addition, there are appraisal
reduction amounts totaling $15.8 million currently in effect for
four of the seven specially serviced assets. The reported
appraisal subordinate entitlement reductions for these four assets
totaled $23,729.
The master servicer, Berkadia Commercial Mortgage LLC, made a
nonrecoverable advance declaration on Sept. 22, 2010, relating to
the Hampton Inn & Holiday Inn loan. Berkadia commenced the
recovery of approximately $500,000 of $3.0 million outstanding
advances, over three months, which commenced in October. In
addition, it is S&P's understanding from Berkadia that the
December 2010 trust expenses related to this asset will total
approximately $299,344, due to interest not advanced, recovery of
prior advances, and operating expenses submitted by the special
servicer, CWCapital Asset Management for September, October, and
November. These shortfalls could potentially affect classes E and
F.
The Hampton Inn & Holiday Inn loan ($14.8 million total exposure,
2.2%) is the largest loan with the special servicer and is secured
by two lodging properties comprising 451 rooms in Hampton City,
Va. The loan was transferred to the special servicer in May 2007
for imminent monetary default and was reported to be in
foreclosure on the October 2010 remittance report. There is a
$9.6 million ARA in effect for this asset and approximately
$3.0 million in advances outstanding on the loan.
There are seven assets ($30.7 million, 4.5%) with the special
servicer. The payment status of these seven assets is: two are
real estate owned ($3.5 million, 0.5%); two are in foreclosure
($17.8 million, 2.6%); two are 90-plus days delinquent
($3.3 million, 0.5%); and one is 30 days delinquent ($6.1 million,
0.9%).
Standard & Poor's expects to resolve the CreditWatch placements
after completing a full review of the transaction, which will
include an analysis of current and potential interest shortfalls,
as well as a review of the credit characteristics of the remaining
loans in the pool.
Ratings Lowered
COMM 2003-LNB1
Commercial mortgage pass-through certificates
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
K D (sf) CCC- (sf) 3.63
L D (sf) CCC- (sf) 2.85
Ratings Lowered And Placed On Creditwatch Negative
COMM 2003-LNB1
Commercial mortgage pass-through certificates
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
E BBB-/Watch Neg (sf) BBB+ (sf) 11.35
F BB+/Watch Neg (sf) BBB- (sf) 9.80
G B+/Watch Neg (sf) BB (sf) 8.57
H B-/Watch Neg (sf) B+ (sf) 6.71
J CCC-/Watch Neg (sf) CCC+ (sf) 4.24
Rating Placed On Creditwatch Negative
COMM 2003-LNB1
Commercial mortgage pass-through certificates
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
D A/Watch Neg (sf) A (sf) 12.89
COMM 2007-FL14: Moody's Downgrades Ratings on 19 Certificates
-------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 19 classes,
including ten pooled classes and nine non-pooled, or rake,
classes, affirmed the ratings of 11 classes, including six pooled
classes and five non-pooled classes, and confirmed the ratings of
three rake classes of COMM 2007-FL14 Commercial Pass-Through
Certificates, Series 1007-FL14:
-- Cl. A-1, Affirmed at Aaa (sf); previously on May 24, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X-2, Affirmed at Aaa (sf); previously on May 24, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X-3-DB, Affirmed at Aaa (sf); previously on May 24, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X-3-SG, Affirmed at Aaa (sf); previously on May 24, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X-5-DB, Affirmed at Aaa (sf); previously on May 24, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X-5-SG, Affirmed at Aaa (sf); previously on May 24, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-J, Downgraded to Aa3 (sf); previously on Oct. 28, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to A2 (sf); previously on Oct. 28, 2010 Aa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Baa1 (sf); previously on Oct. 28, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Baa3 (sf); previously on Oct. 28, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Ba2 (sf); previously on Oct. 28, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to B1 (sf); previously on Oct. 28, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to B2 (sf); previously on Oct. 28, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to B3 (sf); previously on Oct. 28, 2010 Ba1
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to Caa1 (sf); previously on Oct. 28, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to Caa2 (sf); previously on Oct. 28, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. GLB1, Downgraded to B1 (sf); previously on Oct. 28, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. GLB2, Downgraded to B2 (sf); previously on Oct. 28, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. GLB4, Downgraded to Caa1 (sf); previously on Oct. 28,
2010 B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. AOA1, Confirmed at Ba3 (sf); previously on Oct. 28, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. AOA2, Confirmed at B2 (sf); previously on Oct. 28, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. AOA4, Confirmed at Caa1 (sf); previously on Oct. 28, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. PG1, Affirmed at Ba1 (sf); previously on Feb. 24, 2009
Downgraded to Ba1 (sf)
-- Cl. PG2, Affirmed at Ba2 (sf); previously on Feb. 24, 2009
Downgraded to Ba2 (sf)
-- Cl. PG3, Affirmed at Ba3 (sf); previously on Feb. 24, 2009
Downgraded to Ba3 (sf)
-- Cl. PG4, Affirmed at B1 (sf); previously on Feb. 24, 2009
Downgraded to B1 (sf)
-- Cl. PH1, Downgraded to B1 (sf); previously on Oct. 28, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. PH2, Downgraded to B2 (sf); previously on Oct. 28, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. PH3, Downgraded to B3 (sf); previously on Oct. 28, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. CA1, Downgraded to B3 (sf); previously on Oct. 28, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. CA2, Downgraded to Caa1 (sf); previously on Oct. 28, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. CA3, Downgraded to Caa2 (sf); previously on Oct. 28, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. SA1, Affirmed at Ba3 (sf); previously on Feb. 24, 2009
Downgraded to Ba3 (sf)
Ratings Rationale
The downgrades of the pooled classes were due to the deterioration
in the performance of the majority of the assets in the trust.
The downgrades of the rake classes were due to the deterioration
in performance of the MSREF/Glenborough Portfolio Loan, the San
Francisco Parc 55 Loan and the CARR California Portfolio Loan.
The affirmations and confirmation were due to key parameters,
including Moody's loan to value ratio remaining within an
acceptable range. Moody's placed 22 classes on review for
possible downgrade on October 28, 2010. This action concludes
Moody's review.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS Large
Loan Model v 8.0 which is used for both large loan and single
borrower transactions. The large loan model derives credit
enhancement levels based on an aggregation of adjusted loan level
proceeds derived from Moody's loan level LTV ratios. Major
adjustments to determining proceeds include leverage, loan
structure, property type, and sponsorship. These aggregated
proceeds are then further adjusted for any pooling benefits
associated with loan level diversity, other concentrations and
correlations. The model also incorporates a supplementary tool to
allow for the testing of the credit support at various rating
levels. The scenario or "blow-up" analysis tests the credit
support for a rating assuming that loans in the pool default with
an average loss severity that is commensurate with the rating
level being tested. Moody's Investors Service did not receive or
take into account a third-party due diligence report on the
underlying assets or financial instruments related to the
monitoring of this transaction in the past six months.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Deal Performance
As of the November 15, 2010 Payment Date, the transaction's
aggregate certificate balance has decreased by 55% to $1.1 billion
from $2.5 billion at securitization. The certificates are
collateralized by ten mortgage loans ranging in size 36% to 3%,
with the top two loans representing 55% of the pool.
Moody's weighted average pooled loan to value ratio is 84%,
compared to 76% at last review. Moody's stressed debt service
coverage ratio is 1.21x, compared to 1.38x at last review.
There are currently no loans in special servicing. The pool has
incurred $3,410 in cumulative bond losses, affecting Class K.
The MSREF/Glenborough Portfolio Loan ($343.7 million -- 36% of the
pooled balance) is secured by 16 class A and B office buildings
with a total of 2.9 million square feet, located in five states,
California, Virginia, Colorado, Nevada and Florida. The
properties range in size from 79,690 square feet to 301,357 square
feet, with an average size of 179,096 square feet. Since
securitization four properties, totaling 432,388 square feet, were
released from the loan collateral. The $526.5 million whole loan
includes non-pooled trust debt of $71.8 million, certificate
Classes GLB1, GLB2, BLB3 and GLB4, and a $111.0 million non-trust
junior component. The trust debt has paid down by 4.3% since
securitization due to premiums paid for the release of collateral.
There is also approximately $311 million in mezzanine debt. The
loan sponsor is Morgan Stanley Real Estate Fund V. The sponsor
has posted a $15.0 million letter of credit that serves as an
interest reserve.
As of March 2010 portfolio occupancy was approximately 88%,
compared to 97% at securitization. Moody's LTV ratio for the
pooled debt is 89%. Moody's credit estimate is Ba3, compared to
Baa2 at last review.
The 1330 Avenue of the Americas Loan ($187.0 million -- 19.3%) is
secured by a 456,800 square foot (net rentable area) Class A
office building located in midtown Manhattan. The $240 million
whole loan includes $54.0 million of non-pooled trust debt,
certificate Classes AOA1, AOA2, AOA3 and AOA4. The property is
currently approximately 75% leased. It is in lease-up after Otera
Capital, a unit of Casse de depot et placement du Quebec
foreclosed on its mezzanine interest. The two largest tenants,
Pearson, LLC, and Silvercrest Asset Management, account for 32% of
total net rentable area and 57% of total base rent. Lease
expirations for Pearson and Silvercrest Asset Management are in
2013 and 2017, respectively. A purchase contract was signed in
November 2010 by RXR Realty to acquire 1330 Avenue of the Americas
for approximately $400 million after the property was put out for
bid. Moody's expects a sale of the property to be concluded in
the near term.
San Francisco Parc 55 ($67.6 million -- 7%) is secured by a 1,009-
unit Wynhdam hotel located in downtown San Francisco, California.
Net Cash Flow after a furniture, fixture and replacement reserve
declined 43% to $7.8 million in 2009 from $13.7 million in 2008.
Revenue per available room for the twelve month period ending
March 2010 declined 3% to $122, from $126 during the same period
in the previous year. The hotel has a RevPAR index of
approximately 95. The $123.1 million whole loan includes
$$14.4 million in non-pooled trust debt, certificate Classes PH1,
PH2 and PH3, and a $42.1 million non-trust junior component.
There is also $88.4 million in mezzanine debt. The loan sponsor
is Rockpoint Group, L.L.C., and Highgate Holdings. Moody's LTV is
74%. Moody's credit estimate is Ba3, compared to Baa3 at last
review.
The Carr California Portfolio Loan ($11.6 million -- 1.2%) is a
50% pari passu interest secured by two office properties located
in Sunnyvale and Mountain View, California with total net rentable
area of 300,128 square feet. At securitization the portfolio
included a third property in San Diego. The $13.5 million whole
loan includes $1.9 million in non-pooled trust, certificate
Classes CA1, CA2 and CA3. There is also $18.2 million in
mezzanine debt. The portfolio is currently approximately 43%
leased. The largest tenant is Nokia, leasing 22% of total net
rentable area with a lease expiration date of December 31, 2010.
The loan sponsor is The Blackstone Group, BREP V. Moody's LTV is
86%. Moody's credit estimate is B2, compared to Ba3 at last
review.
COMMERCIAL MORTGAGE: Moody's Downgrades Ratings on Seven Notes
--------------------------------------------------------------
Moody's Investors Service downgraded the ratings of seven classes
and affirmed 13 classes of Commercial Mortgage Pass-Through
Certificates, Series 2006-C2 Credit Suisse Commercial Mortgage
Trust Series 2006-C2:
-- Cl. A-1, Affirmed at Aaa (sf); previously on July 5, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on July 5, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on July 5, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1-A, Downgraded to Aa3 (sf); previously on Sept. 29,
2010 Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-M, Downgraded to Baa2 (sf); previously on Sept. 29,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to Caa3 (sf); previously on Sept. 29,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Ca (sf); previously on Sept. 29, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to C (sf); previously on Sept. 29, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to C (sf); previously on Sept. 29, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to C (sf); previously on Sept. 29, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. F, Affirmed at C (sf); previously on Oct. 29, 2009
Downgraded to C (sf)
-- Cl. G, Affirmed at C (sf); previously on Oct. 29, 2009
Downgraded to C (sf)
-- Cl. H, Affirmed at C (sf); previously on Oct. 29, 2009
Downgraded to C (sf)
-- Cl. J, Affirmed at C (sf); previously on Oct. 29, 2009
Downgraded to C (sf)
-- Cl. K, Affirmed at C (sf); previously on Oct. 29, 2009
Downgraded to C (sf)
-- Cl. L, Affirmed at C (sf); previously on Oct. 29, 2009
Downgraded to C (sf)
-- Cl. M, Affirmed at C (sf); previously on Oct. 29, 2009
Downgraded to C (sf)
-- Cl. N, Affirmed at C (sf); previously on Oct. 29, 2009
Downgraded to C (sf)
-- Cl. O, Affirmed at C (sf); previously on Oct. 29, 2009
Downgraded to C (sf)
-- Cl. A-X, Affirmed at Aaa (sf); previously on July 5, 2006
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The affirmations are due to key
parameters, including Moody's loan to value ratio, Moody's
stressed debt service coverage ratio and the Herfindahl Index,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain the existing rating.
On September 29, 2010, Moody's placed seven classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
15.4% of the current balance. At last review, Moody's cumulative
base expected loss was 11.3%. Moody's stressed scenario loss is
26.1% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a pay down analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
(Herf), a measure of loan level diversity, is a primary
determinant of pool level diversity and has a greater impact on
senior certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade underlying ratings is melded with the
conduit model credit enhancement into an overall model result.
Fusion loan credit enhancement is based on the credit estimate of
the loan which corresponds to a range of credit enhancement
levels. Actual fusion credit enhancement levels are selected
based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar credit estimates in
the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated October 29, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 6% to $1.36 billion
from $1.44 billion at securitization. The Certificates are
collateralized by 192 mortgage loans ranging in size from less
than 1% to 12% of the pool, with the top ten loans representing
35% of the pool. The pool does not contain any defeased loans or
loans with credit estimates.
Sixty loans, representing 22% 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 CRE
Finance Council 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.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $2.2 million (48% loss severity on
average). Eighteen loans, representing 24% of the pool, are
currently in special servicing. The largest specially serviced
loan is the Babcock & Brown FX1 Loan ($157.4 million -- 11.7% of
the pool), which is secured by 13 Class B multifamily properties
with 4,990 units. The majority of the portfolio is located in
Houston, Texas with the remainder located in South Carolina and
Alabama. The properties were built between 1962 and 1985. The
loan was transferred to special servicing on March 3, 2009, for
imminent default. The special servicer appointed a receiver for
the properties in August 2009, and the receiver is currently
overseeing the properties and making capital repairs. The master
servicer recognized a $59.9 million appraisal reduction on
April 12, 2010.
The second largest specially serviced loan is the Fortunoff
Portfolio Loan ($69.9 million - 5.2% of the pool), which is
secured by two stand-alone retail buildings adjacent to regional
malls. The properties are located in Woodbridge, New Jersey and
Westbury, New York. The loan was transferred to special servicing
on January 14, 2009 due to the bankruptcy filing and subsequent
liquidation of Fortunoff Department Stores in February 2009.
Currently both properties are vacant. The master servicer
recognized a $56.4 million appraisal reduction on September 9,
2009.
The remaining 16 specially serviced loans are secured by a mix of
property types. Moody's has estimated an aggregate $167.6 million
loss (52% expected loss on average) for all of the specially
serviced loans.
Based on the most recent remittance statement, Classes B through
P have experienced cumulative interest shortfalls totaling
$10.5 million. The largest contributor to interest shortfalls
are appraisal reductions. The master servicer has recognized
an aggregate $144.4 million appraisal reduction for 12 of the
specially serviced loans. Moody's anticipates that the pool will
continue to experience interest shortfalls because of the high
exposure to specially serviced loans. Interest shortfalls are
caused by special servicing fees, including workout and
liquidation fees, appraisal subordinate entitlement reductions
and extraordinary trust expenses.
Moody's has assumed a high default probability for 22 poorly
performing loans representing 8.4% of the pool and has estimated
an aggregate $23 million loss (20% expected loss based on a 50%
probability default) from these troubled loans. Moody's rating
action recognizes potential uncertainty around the timing and
magnitude of loss from these troubled loans.
Moody's was provided with full year 2009 operating results for 80%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 106% compared to 112% at Moody's
last review. Moody's net cash flow reflects a weighted average
haircut of 12% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.22X and 0.96X, respectively, compared to
1.24X and 0.96X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 35 compared to 42 at Moody's prior review.
The top three performing conduit loans represent 9% of the
pool balance. The largest loan is Lincoln Road Retail Loan
($49.0 million -- 3.6% of the pool), which is secured by three
office and retail buildings totaling 53,200 square feet (SF)
located in Miami Beach, Florida. The properties were 91% leased
as of September 2010 compared to 98% at last review. The loan
is interest-only for its entire term. Moody's LTV and stressed
DSCR are 122% and 0.80X, respectively, compared to 121% and 0.81X
at last review.
The second largest loan is the Gettysburg Village Loan
($41.6 million -- 3.1% of the pool), which is secured by a
310,000 SF shopping center located in Gettysburg, Pennsylvania.
The center was 93% leased as of June 2010, essentially the same
as last review. Moody's LTV and stressed DSCR are 119% and 0.84X,
respectively, compared to 113% at last and 0.96X at last review.
The third largest loan is the 75 Maiden Lane Loan ($29.8 million
-- 2.2% of the pool), which is secured by a 172,000 SF office
building in the Insurance District of New York City. The property
was 87% leased as of March 2010 compared to 96% at last review.
Moody's LTV and stressed DSCR is 112% and 0.91X, respectively,
compared to 117% and 0.88X at last review.
CONCORD REAL: Moody's Downgrades Ratings on Seven Classes
---------------------------------------------------------
Moody's has downgraded seven classes of Notes issued by Concord
Real Estate CDO 2006-1, Ltd. due to the deterioration in the
credit quality of the underlying portfolio as evidenced by an
increase in the weighted average rating factor, the current level
of Defaulted Securities, and the sensitivity of the transaction to
recovery rates. The rating action is the result of Moody's on-
going surveillance of commercial real estate collateralized debt
obligation transactions.
-- Cl. A-1, Downgraded to A1 (sf); previously on March 25, 2009
Confirmed at Aaa (sf)
-- Cl. A-2, Downgraded to Baa3 (sf); previously on March 25,
2009 Downgraded to Aa2 (sf)
-- Cl. B, Downgraded to Ba3 (sf); previously on March 25, 2009
Downgraded to A1 (sf)
-- Cl. C, Downgraded to B2 (sf); previously on March 25, 2009
Downgraded to A3 (sf)
-- Cl. D, Downgraded to Caa1 (sf); previously on March 25, 2009
Downgraded to Baa3 (sf)
-- Cl. E, Downgraded to Caa2 (sf); previously on March 25, 2009
Downgraded to Ba2 (sf)
-- Cl. F, Downgraded to Caa3 (sf); previously on March 25, 2009
Downgraded to B1 (sf)
Ratings Rationale
Concord Real Estate CDO 2006-1, Ltd., is a revolving cash CRE CDO
transaction backed by a portfolio of whole loans (12.2% of the
pool balance), commercial mortgage backed securities (22.1%), CRE
CDO debt (2.1%), B-note debt (33.0%), mezzanine debt (24.0%), and
Rake bonds (6.6%). As of the November 19, 2010 Trustee report,
the aggregate Note balance of the transaction, including Preferred
Shares, is $465 million, the same as at issuance.
On January 13, 2010, Moody's received "Notice of Request for
Cancellation of Notes" from the Trustee, indicating the
cancellation of portions of the junior Notes in Concord Real
Estate CDO 2006-1, Ltd., consisting of 52% of Class C Notes, 30%
of Class D Notes, 23% of Class E Notes, 8% of Class F Notes and
100% of Class G Notes, collectively the "Subject Notes". On
May 14, 2010, the Delaware Court of Chancery ruled that the
Subject Notes were validly delivered for cancellation and were no
longer Outstanding as of January 5, 2010. The decision was
appealed by the Trustee on June 11, 2010. Per Moody's special
comment, "Junior CDO Note Cancellations Should Concern Senior
Noteholders in Structured Transactions", dated June 14, 2010,
there is a concern that the cancellation of junior notes can lead
to a diversion of cash flow away from the senior notes. During
the current review of Concord Real Estate CDO 2006-1, Ltd.,
holding all key parameters static, the partial cancellations of
the Subject Notes results in slightly higher expected losses and
longer weighted average lives on the senior Notes, while having
the opposite effect on mezzanine and junior Notes. However, this
does not cause, in and of itself, a downgrade or upgrade of any
classes of Notes.
There are six assets with par balance of $66.3 million (15.4% of
the current collateral pool balance) that are classified as
Defaulted Securities as of the November 19, 2010 Trustee report.
Moody's expects meaningful losses from those Defaulted Securities
to occur once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 5,818 (including Defaulted
Securities) compared to 3,490 at last review. The distribution of
current ratings and credit estimates is: Aaa-Aa3 (0.9% compared to
2.1% at last review), A1-A3 (4.1% compared to 0.0% at last
review), Baa1-Baa3 (5.2% compared to 4.4% at last review), Ba1-Ba3
(2.4% compared to 35.3% at last review), B1-B3 (15.9% compared to
37.2% at last review), and Caa1-C (71.5% compared to 21.0% at last
review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 4.1 years compared
to 8.3 years at last review. Moody's are modeling the WAL,
including remaining revolving period, in the current 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 15.1% (excluding Defaulted Securities) compared to 18.0% at
last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
11.4% compared to 15.0% at last review.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 15.1% to 5.4% or up to 25.0% would result in average
rating movement on the rated tranches of 0 to 5 notches downward
or 0 to 3 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
CREDIT SUISSE: Moody's Downgrades Ratings on Seven 2003-C4 Certs.
-----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of seven classes,
confirmed two classes and affirmed six classes of Credit Suisse
First Boston Mortgage Securities Corp., Commercial Mortgage Pass-
Through Certificates, Series 2003-C4:
-- Cl. A-3, Affirmed at Aaa (sf); previously on Oct. 9, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Oct. 9, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1-A, Affirmed at Aaa (sf); previously on Oct. 9, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on Jan. 24, 2007
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on Jan. 24, 2007
Upgraded to Aaa (sf)
-- Cl. D, Confirmed at Aa2 (sf); previously on Oct. 20, 2010 Aa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. E, Confirmed at A1 (sf); previously on Oct. 20, 2010 A1
(sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Baa2 (sf); previously on Oct. 20, 2010
A3 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Ba3 (sf); previously on Oct. 20, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Caa1 (sf); previously on Oct. 20, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to Caa2 (sf); previously on Oct. 20, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to Ca (sf); previously on Oct. 20, 2010 Ba2
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Oct. 20, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. O, Downgraded to C (sf); previously on Oct. 20, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-X, Affirmed at Aaa (sf); previously on Oct. 9, 2003
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The confirmation and affirmations
are due to key parameters, including Moody's loan to value ratio,
Moody's stressed debt service coverage ratio and the Herfindahl
Index, remaining within acceptable ranges. Based on Moody's
current base expected loss, the credit enhancement levels for the
affirmed classes are sufficient to maintain the existing rating.
On October 20, 2010, Moody's placed nine classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
5.0% of the current balance. At last review, Moody's cumulative
base expected loss was 1.7%. Moody's stressed scenario loss is
10.6% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a pay down analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
(Herf), a measure of loan level diversity, is a primary
determinant of pool level diversity and has a greater impact on
senior certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade underlying ratings is melded with the
conduit model credit enhancement into an overall model result.
Fusion loan credit enhancement is based on the credit estimate of
the loan which corresponds to a range of credit enhancement
levels. Actual fusion credit enhancement levels are selected
based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar credit estimates in
the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated March 11, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 27% to
$978.3 million from $1.34 billion at securitization. The
Certificates are collateralized by 145 mortgage loans ranging in
size from less than 1% to 7% of the pool, with the top ten loans
representing 36% of the pool. The pool contains two loans,
representing 12% of the pool, with investment grade credit
estimates. Twenty two loans, representing 18% of the pool, have
defeased and are collateralized with U.S. Government securities.
Thirty-six loans, representing 22% 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 CRE
Finance Council 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.
Thirteen loans have been liquidated from the pool since
securitization, resulting in a $16.6 million loss (42% loss
severity on average). Seven loans, representing 6% of the pool,
are currently in special servicing. The specially serviced loans
are secured by a mix of property types. The master servicer has
recognized an aggregate $11 million appraisal reduction for four
of the specially serviced loans. Moody's has estimated an
aggregate $25.4 million loss (42% expected loss on average) for
all of the specially serviced loans.
Moody's has assumed a high default probability for eight poorly
performing loans representing 1.3% of the pool and has estimated
an aggregate $2.4 million loss (20% expected loss based on a 50%
probability default) from these troubled loans. Moody's rating
action recognizes potential uncertainty around the timing and
magnitude of loss from these troubled loans.
Moody's was provided with full year 2009 operating results for 80%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 82% compared to 91% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 11.8% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.76X and 1.54X, respectively, compared to
1.24X and 1.18X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 37 compared to 44 at Moody's prior review.
The largest loan with a credit estimate is the Circle Centre Mall
Loan ($70.1 million -- 7.2% of the pool), which is secured by an
800,000 square foot (SF) regional mall located in Indianapolis,
Indiana. The mall is anchored by Nordstrom and Carson Pirie
Scott. As of June 2010 the property had an inline occupancy of
85% compared to 80% at last review. The loan sponsor is Simon
Property Group. Moody's current credit estimate and stressed DSCR
are Aa3 and 1.97X, respectively, compared to A2 and 1.62X at last
review.
The second loan with a credit estimate is the 540 Madison Avenue
Loan ($44.1 million -- 4.5% of the pool), which is secured by a
281,000 SF office building located in the Plaza District office
submarket of New York City. The property was 92% occupied as of
June 2010, essentially the same as at last review. The property
performance has improved due to a decrease in expenses. Moody's
current credit estimate and stressed DSCR are Aa1 and 2.63X,
respectively, compared to Baa1 and 1.86X at last review.
The top three performing conduit loans represent 14% of the
pool balance. The largest loan is Wanamaker Building Loan
($58.8 million -- 6.1% of the pool), which is secured by a 974,000
SF office property located in Philadelphia, Pennsylvania. The
largest tenants are Children's Hospital of Philadelphia, United
Health Services and U.S. Army Corp. of Engineers. The property
was 99% leased as of September 2010 compared to 97% at last
review. Moody's LTV and stressed DSCR are 62% and 1.65X,
respectively, compared to 70% and 1.41X at last review.
The second largest loan is Jefferson Point Shopping Center Loan
($57.0 million -- 5.9% of the pool), which is secured by a 410,000
SF retail center located in Fort Wayne, Indiana. Major tenants
include Rave Theater, Bed Bath & Beyond and Barnes & Noble. The
property was 81% leased as of June 2010 compared to 89% at last
review. Moody's LTV and stressed DSCR are 123% and 0.84X,
respectively, compared to 121% at last and 0.85X at last review.
The third largest loan is the Town & Country Apartments Loan
($22.6 million -- 2.3% of the pool), which is secured by a 618
unit multifamily property located near the University of Illinois
Champaign campus in Urbana, Illinois. The property was 89% leased
as of September 2010 compared to 92% at last review. Moody's LTV
and stressed DSCR are 104% and 0.94X, respectively, compared to
95% and 1.02X at last review.
CRHMFA HOMEBUYERS: Moody's Downgrades Ratings on 2006 FH-1 Bonds
----------------------------------------------------------------
Moody's Investors Service has downgraded the rating of CRHMFA
Homebuyers Fund Senior Single Family Mortgage Revenue Bonds Series
2006 FH-1 (original principal amount $14,380,000) to Ca from Caa1,
and affirmed the rating of CRHMFA Homebuyers Fund Subordinate
Single Family Mortgage Revenue Bonds Series 2006-FH-1 (the
"Subordinate Bonds" - original principal amount $920,000) at C.
This action is based on the continued high level of delinquencies
and defaults in this very small pool of whole mortgage loans
reflecting the distress in the California home mortgage market.
The outlook remains negative on the Senior Bonds rating.
Ratings Rationale
Program Background
The Single Family Mortgage Revenue Bonds Series 2006 FH-1 (the
Bonds) were issued in May of 2006 by CRHMFA Homebuyers Fund (the
Fund), a joint exercise of powers agency the members of which are
local jurisdictions within the State of California. The Bonds are
limited obligations of the Fund, payable solely from the mortgage
loans, reserves, and revenues pledged under the Indenture.
Although the Indenture permitted additional issuance, only one
series of bonds have been issued.
The Bonds consist of $14,380,000 original par amount of Senior
Bonds and $920,000 original par amount of Subordinate Bonds.
Proceeds of the Bonds, along with other funds available at closing
(an issuer advance, a servicer advance, and bond issuance premium)
were issued to fund whole loans, as well as make deposits in
reserve funds and pay costs of the program. Sixty-one loans with
an original principal balance of of $14.9 million were originated.
The loans are first lien mortgage loans to first-time homebuyers
solely for owner-occupied residences. Each loan was underwritten
according to the issuer's standards and is either a fixed-rate
loan with 40-year level amortization, or a fixed-rate loan with
interest only for seven years and then 33-year level amortization.
Credit strengths that contributed to the rating included asset to
debt ratios of 1.06 for the Senior Bonds (provided in part by
subordination of the Subordinate Bonds) and 1.00 for the
Subordinate Bonds; a Liquidity Reserve equal to 2% of outstanding
Mortgage Loans, and an additional Mortgage Reserve covering an
additional 45 days of debt service on mortgages; primary mortgage
insurance on each of the mortgage loans from Radian Guaranty, Inc.
(Radian, rated Ba3/Positive), a 5% pool insurance policy from
Radian, and liquidity support from the Servicer, CitiMortgage,
Inc. The issuer also provided a series of cash flows
demonstrating the ability of the program to perform under a
variety of stress scenarios.
Because the loans are whole loans, the PMI coverage and pool
coverage from Radian were key elements in protection against
losses from delinquency and/or foreclosure for the program. In
addition, because of the small size of the program and the
potential for delays in obtaining recovery from PMI and/or
foreclosure for non-performing loans, the liquidity provided by
the servicer obligations from CitiMortgage, and the Advance Claim
Rider to the Radian Policy were important elements in rating
analysis. Although CitiMortgage is obligated as servicer to
advance payment on each of the mortgages (regardless of whether it
first receives payment from the borrower), CitiMortgage itself
does not have an applicable rating, and its obligation may be
limited to the extent it concludes amounts advanced are not
reasonably recoverable. Furthermore, CitiMortgage has the right
to recover its advances from foreclosure proceeds before remitting
to the bond trustee. The Advance Claim Rider from Radian also was
considered to be key to liquidity support. Under this Rider, the
Trustee can make advance claims on the pool policy to the extent
that it needs funds to pay bond debt service due to mortgage loans
being at least 60 days delinquent and in foreclosure.
Losses Have Begun to Accrue And May Deepen With Rising
Foreclosures
Delinquencies and defaults in the loan portfolio have continued to
rise. As of the end of November 2010 (most recent information
available to Moody's) 17 of the 61 loans in the pool (28%) are in
some stage of delinquency or foreclosure; 26 loans (42%) have been
sold through foreclosure or short-sale, or are real estate-owned
with pending sale approvals; 17 loans (28%) are current; and one
loan (2%) has been paid back in full. This represents a further
deterioration of the loan portfolio since Moody's last review in
June 2009. Moody's understands that CitiMortgage has continued to
make advances on all of the mortgages pending the ultimate outcome
of foreclosure. So long as CitiMortgage makes such advances, the
trustee should continue to receive sufficient funds to make
scheduled debt service payments on the bonds. However, given the
high number of loans that are delinquent, in foreclosure or that
have been foreclosed, the decline in house prices being
experienced in the California market, and the time required to
resolve delinquencies and foreclosures, Moody's loss projections
indicate that losses may accrue to the program in line with the
rating assigned and potentially exceeding the levels of loss
reserves available to cover shortfalls.
Outlook
The negative outlook on the Senior Bonds is based on the
continuing trend of delinquencies, defaults and foreclosure
liquidations in the loan portfolio.
What could change the rating -- Up
* Significant improvement in performance of the loan portfolio,
reducing potential losses to the program after recoveries,
resulting in improvement in asset-to- debt ratios
What could change the rating -- Down
* Further deterioration in performance of the loan portfolio,
increasing losses and decreasing asset-to-debt ratios
* An instance indicating limitations on the program's resources to
pay debt service, including the tapping of Trustee-held mortgage
and liquidity reserve funds
* Decline in the credit quality of Radian Guaranty, Inc., and
delays of or shortfalls in payments of insurance claims
CT CDO: S&P Downgrades Ratings on 13 Classes of CRE CDO Deals
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 13
classes from CT CDO III Ltd., a commercial real estate
collateralized debt obligation transaction. At the same time,
S&P affirmed its 'CCC- (sf)' rating on one additional class
from the same transaction.
The downgrades and affirmations primarily reflect S&P's analysis
of the interest shortfalls affecting the transaction. S&P
downgraded classes A-1 through B due to their susceptibility to
experience interest shortfalls, as class C and all of the classes
subordinate to it did not receive full interest according to the
Nov. 22, 2010 remittance report. S&P's analysis considered the
underlying collateral, as well as the transaction structure.
According to the Nov. 22, 2010 remittance report, cumulative
interest shortfalls to the transaction total $1.1 million, which
affected class C and all of the classes subordinate to it. The
interest shortfalls primarily resulted from shortfalls on the
underlying CMBS collateral. The interest shortfalls primarily
reflect the master servicer's recovery of prior advances,
appraisal subordinate entitlement reductions, servicers'
nonrecoverability determinations for advances, and special
servicing fees.
The interest shortfalls also reflect the reclassification of
$41,409 of the interest payments received on impaired securities
as principal proceeds according to the Nov. 22, 2010, remittance
report. Based on S&P's understanding of the indenture, any
downgrade or CreditWatch placements on the underlying collateral
would cause the affected collateral to be considered impaired
securities. Given the susceptibility of the underlying collateral
to additional downgrades or CreditWatch placements, S&P determined
CT CDO III Ltd. has exposure to an increase in the amount of
impaired securities in the future.
In addition, although the underling CT CDO III Ltd. collateral (21
CMBS classes from 13 distinct transactions, $307.5 million) was
issued between 1996 and 1999 and benefits from seasoning,
additional defaults could arise due to refinancing pressure on and
adverse selection in the underlying loans.
These factors could give rise to increased interest shortfalls to
CT CDO III Ltd. Depending on the magnitude of the shortfalls,
S&P's analysis considered potential interest payment interruptions
to the nondeferrable classes, which would trigger an event of
default under the indenture. If this occurs, S&P will lower the
affected class' rating to 'D (sf)'.
The potential for interest shortfalls to CT CDO III Ltd. is
partially offset by S&P's understanding that principal proceeds
may be used to pay interest due to classes A-1 and A-2
certificates. Additionally, S&P determined that $103,996 of the
interest shortfalls affecting CT CDO III Ltd. are not recurring
based on S&P's analysis of the underlying GMAC Commercial Mortgage
Securities Inc.'s series 1998-C1 transaction.
Additionally, S&P's analysis of CT CDO III Ltd. also reflects the
exposure to downgraded CMBS collateral, as well as lowered credit
estimates on CMBS that S&P does not rate. The transaction has
exposure to Chase Commercial Mortgage Securities Corp.'s series
1997-1 (classes F and G; $6.5 million, 2.1%), which Standard &
Poor's downgraded on Sept. 17, 2010. S&P also lowered its credit
estimates on a portion of the CMBS collateral not rated by
Standard & Poor's ($45.6 million, 14.9%).
Standard & Poor's analyzed CT CDO III Ltd. according to its
current criteria. S&P's analysis is consistent with the lowered
and affirmed ratings.
Ratings Lowered
CT CDO III Ltd.
Collateralized debt obligations
Rating
------
Class To From
----- -- ----
A-1 A (sf) AAA (sf)
A-2 BBB- (sf) AA+ (sf)
B B (sf) AA- (sf)
C CCC+ (sf) A (sf)
D CCC (sf) A- (sf)
E CCC- (sf) BBB+ (sf)
F CCC- (sf) BBB (sf)
G CCC- (sf) BBB- (sf)
H CCC- (sf) BB+ (sf)
J CCC- (sf) BB (sf)
K CCC- (sf) BB- (sf)
L CCC- (sf) B+ (sf)
M CCC- (sf) B- (sf)
Rating Affirmed
CT CDO III Ltd.
Collateralized debt obligations
Rating
------
N CCC- (sf)
CWALT INC: Moody's Downgrades Ratings on 94 Tranches
----------------------------------------------------
Moody's Investors Service has downgraded the ratings of 94
tranches, upgraded the rating of 1 tranche and confirmed the
ratings on 2 tranches from 12 RMBS transactions, backed by option
arm loans, issued by Countrywide.
Ratings Rationale
The collateral backing these transactions consists primarily of
first-lien, adjustable-rate, negative amortization, Alt-A
residential mortgage loans. The actions are a result of the
rapidly deteriorating performance of option arm pools in
conjunction with macroeconomic conditions that remain under
duress. The actions reflect Moody's updated loss expectations on
option arm pools issued from 2005 to 2007.
The rating action also reflects a correction to the ratings of
Cl. 3-A-1, Cl. 3-A-2 , and Cl. 3-A-3 of the CWALT, Inc. Mortgage
Pass-Through Certificates, Series 2005-56. The prior rating
action taken on these classes in February 2009 assumed that
there is a "loss allocation limitation" which does not allow
losses to be allocated to senior tranches from pools that are
overcollateralized once the mezzanine tranches are fully written
down. According to the deal documents, however, losses are
allocated to senior tranches from all pools once the mezzanine
tranches have been fully written down.
To assess the rating implications of the updated loss levels on
option arm RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
Certain securities, as noted below, are insured by financial
guarantors. For securities insured by a financial guarantor, the
rating on the securities is the higher of (i) the guarantor's
financial strength rating and (ii) the current underlying rating
(i.e., absent consideration of the guaranty) on the security. The
principal methodology used in determining the underlying rating is
the same methodology for rating securities that do not have a
financial guaranty and is as described earlier. RMBS securities
wrapped by Ambac Assurance Corporation are rated at their
underlying rating without consideration of Ambac's guaranty.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2005-56
-- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-4, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X-1, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-X, Downgraded to C (sf); previously on Jan. 27, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. 5-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 5-A-2, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 5-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 5-A-4, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B2 (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2005-62
-- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X-1, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-4, Currently Rating at Aa3 (sf); previously on Nov 9,
2009 Confirmed at Aa3 (sf)
-- Underlying Rating: Downgraded to C (sf); previously on Mar
30, 2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Financial Guarantor: Assured Guaranty Municipal Corp
(Confirmed at Aa3, Outlook Negative on Nov 12, 2009)
-- Cl. 2-X-1, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2005-81
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on April 16, 2010
Downgraded to Ca (sf) and Placed Under Review for Possible
Downgrade
-- Underlying Rating: Downgraded to C (sf); previously on Mar
30, 2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Cl. A-4, Confirmed at Ca (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2005-82
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2006-OA11
-- Cl. A-1B, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1C, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3A, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3B-1, Upgraded to Baa2 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2006-OA8
-- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Confirmed at B3 (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-4, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-5, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2006-OA9
-- Cl. 1-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X-1P, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. X-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1A, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1B, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2007-OA10
-- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Currently Rating at Aa3 (sf); previously on
Dec. 18, 2009 Confirmed at Aa3 (sf)
-- Underlying Rating: Downgraded to C (sf); previously on
March 30, 2010 Ca (sf) Placed Under Review for Possible
Downgrade
-- Financial Guarantor: Assured Guaranty Corp (Confirmed at Aa3,
Outlook Negative on Dec. 18, 2009)
-- Cl. 2-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Currently Rating at Aa3 (sf); previously on
Dec. 18, 2009 Confirmed at Aa3 (sf)
-- Underlying Rating: Downgraded to C (sf); previously on
March 30, 2010 Ca (sf) Placed Under Review for Possible
Downgrade
-- Financial Guarantor: Assured Guaranty Corp (Confirmed at Aa3,
Outlook Negative on Dec. 18, 2009)
-- Cl. 2-A-3, Currently Rating at Aa3 (sf); previously on
Dec. 18, 2009 Confirmed at Aa3 (sf)
-- Underlying Rating: Downgraded to C (sf); previously on
March 30, 2010 Ca (sf) Placed Under Review for Possible
Downgrade
-- Financial Guarantor: Assured Guaranty Corp (Confirmed at Aa3,
Outlook Negative on Dec. 18, 2009)
-- Cl. X, Downgraded to C (sf); previously on Jan. 27, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2007-OA11
-- Cl. A-1A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1B, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X-P, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2007-OA6
-- Cl. A-1-A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1-B, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2007-OA8
-- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: CWALT, INC.Mortgage Pass-Through Certificates, Series
2007-OA2
-- Cl. 1-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
CWCAPITAL COBALT: Moody's Downgrades Ratings on Eight Classes
-------------------------------------------------------------
Moody's has downgraded eight classes of Notes issued by CWCapital
Cobalt Vr, Ltd. due to the deterioration in the credit quality of
the underlying portfolio as evidenced by an increase in the
weighted average rating factor, decrease in the weighted average
recovery rate and an increase in interest shortfalls on the
underlying collateral. The rating action is the result of Moody's
on-going surveillance of commercial real estate collateralized
debt obligation transactions.
-- CL. A-1, Downgraded to Caa3 (sf); previously on Feb. 19, 2010
Downgraded to Ba1 (sf)
-- CL. A-2, Downgraded to C (sf); previously on Feb. 19, 2010
Downgraded to Ca (sf)
-- CL. B, Downgraded to C (sf); previously on Feb. 19, 2010
Downgraded to Ca (sf)
-- CL. C, Downgraded to C (sf); previously on Feb. 19, 2010
Downgraded to Ca (sf)
-- CL. D, Downgraded to C (sf); previously on Feb. 19, 2010
Downgraded to Ca (sf)
-- CL. E, Downgraded to C (sf); previously on Feb. 19, 2010
Downgraded to Ca (sf)
-- CL. F, Downgraded to C (sf); previously on Feb. 19, 2010
Downgraded to Ca (sf)
-- CL. G, Downgraded to C (sf); previously on Feb. 19, 2010
Downgraded to Ca (sf)
Ratings Rationale
CWCapital Cobalt Vr is a static CRE CDO transaction backed by a
portfolio of commercial mortgage backed securities (73% of the
pool balance) and CRE CDOs (27%). As of the November 26, 2010
Trustee report, the aggregate Note balance of the transaction has
decreased to $3.26 billion from $3.45 billion at issuance, with
the paydown directed to the Class A1 Notes.
Assets with a par balance of $2.89 billion (98% of the current
pool balance) are considered Impaired Securities as of the
November 26, 2010 Trustee report. Per the Indenture, interest
payments received on Impaired Securities are treated as principal
payments directed to paydown the Notes in order of the priority of
distribution. As a result, interest shortfalls have reached Class
A2.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, WARR, and Moody's asset correlation. These parameters are
typically 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 non-
Moody's rated collateral. The bottom-dollar WARF is a measure of
the default probability within a collateral pool. Moody's modeled
a bottom-dollar WARF of 9,515 compared to 8,680 at last review.
The distribution of current ratings and credit estimates is: Baa1-
Baa3 (0.0% compared to 3.4% at last review), Ba1-Ba3 (0.7%
compared to 4.5% at last review), B1-B3 (3.9% compared to 5.8% at
last review), and Caa1-C (95.4% compared to 86.3% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 6.7 years compared
to 7.2 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 0.3% compared to 2.7% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 99.9%, the same as that at last review.
The high MAC is due to the large number of high default
collateral.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
up from 0.3% to 5.3% would result in average rating movement on
the rated tranches of 0 to 2 upward.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
DB MASTER: S&P Withdraws Ratings on Three Classes of Notes
----------------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on three
classes of notes from DB Master Finance LLC's series 2006-1. The
transaction is a U.S. corporate securitization that repays the
rated notes through substantially all of the revenue-generating
assets and associated cash flows of the company. Revenues
available to service the rated debt include franchise royalties,
license income, net rental income, and rights to certain other
fees.
S&P withdrew the ratings on the notes because the issuer of the
securitization exercised its option to redeem the outstanding
principal amount of each class of notes on Dec. 3, 2010. The
execution of the optional prepayment of the notes was in
accordance with the securitization's base indenture.
Ratings Withdrawn
DB Master Finance, LLC
US$1.7 bil senior and subordinated notes series 2006-1
Rating
------
Class To From
----- -- ----
A-1 NR BB+ (sf)
A-2 NR BB+ (sf)
M-1 NR BB- (sf)
EMBARCADERO AIRCRAFT: Moody's Downgrades Ratings on Two Notes
-------------------------------------------------------------
Moody's Investors Service has downgraded two classes pooled
aircraft lease-backed notes and has placed on review for possible
downgrade one additional class of notes, all issued by Embarcadero
Aircraft Securitization Trust, Series 2000-1.
The complete rating action is:
Issuer: Embarcadero Aircraft Securitization Trust
-- Class A-1 Floating Rate Notes due August 2025, B3 (sf) Placed
on Review for Possible Downgrade; previously on June 25, 2004
downgraded to B3 (sf)
-- Class B Floating Rate Notes due August 2025, Downgraded to C
(sf); previously on June 25, 2004 downgraded to Ca (sf)
-- Class C Floating Rate Notes due August 2025, Downgraded to C
(sf); previously on June 25, 2004 downgraded to Ca (sf)
Ratings Rationale
At closing in 2000 the certificates were backed by a pool of
34 aircraft. As of November 2010 the portfolio had only 16
aircraft with an average appraised base value of approximately
$136 million, comprised predominantly of old-vintage aircraft;
these aircraft have experienced accelerated decline in demand and
lease rates as a result of the global recession; this is evident
as four of aircraft in the pool are off-lease. Additionally,
given the lower desirability of the aircraft in the remaining pool
compared with their newer generation counterparts, Moody's expect
future cash flows generated by the pool to remain weak, with
limited prospect for rebound.
As a result of revenue decline, the Class B and Class C Notes have
stopped receiving interest payments and due to their subordinate
position in the waterfall are unlikely to receive any future cash
flows. The current loan-to-value ratios on the Class B and Class
C Notes are approximately 215% and 287% respectively, indicating
remote chance for any possible recovery.
Class A-1 was placed on review because principal repayment has
slowed dramatically, including some months in recent years in
which no principal payments were mad. Furthermore, the current
LTV ratio of the Class A-1 is approximately 120%, indicating the
distinct possibility that noteholders may suffer a loss. The
review will focus on the future lease rental rates and assessment
of the potential loss to noteholders.
Moody's Investors Service received and took into account third
party due diligence reports on the underlying assets or financial
instruments in this transaction and the due diligence reports had
a negative impact on the rating.
FALL CREEK: Fitch Affirms Ratings on 10 Classes of Notes
--------------------------------------------------------
Fitch Ratings has affirmed the ratings of 10 classes of notes
issued by Fall Creek CLO Ltd. Loss Severity ratings and Recovery
Ratings have been assigned and Rating Outlooks revised:
-- $133,619,542 class A-2 notes at 'BBsf/LS2'; Outlook to Stable
from Negative;
-- $29,170,000 class B notes at 'CCCsf/RR2';
-- $47,000,000 class C notes at 'Csf/RR5';
-- $9,732,000 class C-1 notes at 'Csf/RR5';
-- $2,000,000 class D-1 notes at 'Csf/RR6';
-- $3,160,000 class D-1A notes at 'Csf/RR6';
-- $1,697,000 class D-1B notes at 'Csf/RR6';
-- $2,092,000 class D-1C notes at 'Csf/RR6';
-- $8,319,000 class D-1D notes at 'Csf/RR6';
-- $5,167,000 class D-2 notes at 'Csf/RR6'.
The affirmations for the notes are attributed to the improved
credit enhancement levels resulting from the paydown of the class
A-2 notes as well as the improved performance of the underlying
loan portfolio; while accounting for the negative excess spread
present in the transaction, the maturity profile of the portfolio
and the generally uncertain U.S. economic recovery.
Since Fitch's last review in November 2009, the class A-2 notes
have received approximately $117 million of principal payments,
representing 42% of their initial balance. This amortization has
led to increasing credit enhancement levels for the class A-2, B
and C notes. Additionally, Fitch recognizes the improving
collateral quality of the underlying loan portfolio. The amount
of performing assets Fitch considers rated 'CCC+' or below has
decreased to 12% from 30% over this same time period. The latest
trustee report dated Nov. 8, 2010, indicates an improvement in the
average portfolio rating to 'B/B-' from 'B-' and a marginal
decrease in defaulted assets to 5.4% of the entire portfolio,
compared to 5.8% at the last review.
The class A-2 notes accrued interest component is sizeable
relative to the weighted average spread of the underlying
portfolio. As a result, interest proceeds have been insufficient
to pay the interest due to the class B notes and since the last
review $0.2 million of principal proceeds were used to make
interest payments to the class B notes prior to redeeming class A-
2 principal. Applying principal proceeds to offset interest
shortfalls reduces the principal available to the rated notes and
lowers their overall asset coverage. Additionally, approximately
80% of the portfolio is scheduled to mature in 2013 and 2014.
Fitch is aware that a significant volume of leveraged loans in the
high yield market also have maturities during this time window.
While the amortization has benefited all rated notes, the maturity
profile of the underlying loans and the negative excess spread
component remain key risks that could impact the notes in the
future.
The affirmation of the class A-2 notes is attributed to the
paydown of the notes from portfolio amortization and asset sales;
while considering that the class A-2 notes are rated to the
receipt of timely interest and given the high interest component
the notes are more sensitive to spikes in defaults and/or slowed
portfolio amortization. As such, Fitch maintained a speculative
rating for the notes, while the Outlook has been revised to
Stable.
The class B notes have improved their credit enhancement yet
remain highly vulnerable to the potential default of any of the
underlying obligors. Loss of asset coverage from the leakage of
principal proceeds for interest payments further impacts the
performance of the class B notes. Fitch has affirmed the notes
and assigned a Recovery Rating based on the total discounted
future cash flows projected to be available to these bonds in a
base-case default scenario. The discounted cash flows of
approximately $25 million yielded an ultimate recovery projection
in a range between 71% and 90%, which is representative of an
'RR2' on Fitch's Recovery Rating scale.
The class C and C-1 (class C), D-1, D-1A, D-1B, D-1C, D-1D and D-2
(class D) notes are undercollateralized. Fitch considers an
ultimate principal impairment to these notes to be imminent.
Fitch has affirmed the notes and assigned a Recovery Rating based
on the total discounted future cash flows projected to be
available to these bonds in a base-case default scenario. The
discounted cash flows of approximately $15 million yielded an
ultimate recovery projection in a range between 51% and 70%, which
is representative of an 'RR5' on Fitch's Recovery Rating scale for
the class C notes. No future distributions are expected for the
class D notes which would yield an ultimate recovery in the range
between 0% and 10%, which is representative of an 'RR6'. Recovery
Ratings are designed to provide a forward-looking estimate of
recoveries on currently distressed or defaulted structured finance
securities rated 'CCC' or below. For further detail on Recovery
Ratings, please see Fitch's report 'Criteria for Structured
Finance Recovery Ratings'.
The class A-2 notes have been assigned a Loss Severity rating.
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'.
The LS rating should always be considered in conjunction with the
notes' long-term credit rating.
Fall Creek is a collateralized loan obligation that closed on
Sept. 8, 2005, and was amended and restructured on Nov. 24, 2008.
The portfolio is comprised of leveraged loans and is monitored by
40|86 Advisors, Inc. The Indenture for the transaction was amended
and restated to remove the market value-based Threshold Value
Event trigger, effectively converting Fall Creek into a static
cash flow CLO structure from the original market value CLO
structure.
The majority of the underlying loans are publicly rated. Fitch
used model-based shadow ratings in its default probability
analysis of the CDO portfolio for approximately 10% of the
portfolio where a public rating was unavailable. Fitch did not
utilize the cash flow analysis in this review. However, it
considered the changes in the portfolio credit quality and
concentration as well as the paydown to capital structure since
the last review.
FANNIE MAE: Moody's Downgrades Ratings on Three 2005-W2 Tranches
----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 3 tranches
issued by Fannie Mae REMIC Trust 2005-W2.
Issuer: Fannie Mae REMIC Trust 2005-W2
* Pool current expected loss: 7% of original balance
-- CL. M, Downgraded to C (sf); previously on April 25, 2005
Assigned Aa3 (sf)
-- CL. B-1, Downgraded to C (sf); previously on April 25, 2005
Assigned A3 (sf)
-- CL. B-2, Downgraded to C (sf); previously on April 25, 2005
Assigned Baa3 (sf)
Ratings Rationale
The collateral backing the transaction consists primarily of
first-lien, fixed-rate, Alt-A residential mortgage loans. The
actions are a result of the rapidly deteriorating performance of
Alt-A pools in conjunction with macroeconomic conditions that
remain under duress. The actions reflect Moody's updated loss
expectations on Alt-A pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on
Alt-A RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
FIRSTPLUS HOME: Fitch Affirms Ratings on All Classes of Notes
-------------------------------------------------------------
Fitch Ratings has affirmed all classes in eight FirstPlus Home
Loan Owner Trust residential mortgage backed security transactions
at 'Csf'. The affected classes have an aggregate balance of
approximately $34 million.
These ratings are a result of the ongoing suspension of interest
and principal to bondholders by US Bank National Association (as
the Trustee). Amounts otherwise payable to bondholders are being
retained in the trust pending further developments resulting from
litigation involving the transactions. The ratings reflect both
the increased likelihood of both permanent interest shortfalls and
principal writedowns. Since bond loss amounts can not be
estimated at this time, Recovery Ratings have not been assigned to
the bonds. In addition, the bonds have been assigned an Evolving
Rating Outlook and will continue to be monitored for ongoing
settlement developments.
At this time, it is undetermined when or if these transactions
will receive distributions of interest and principal. In
addition, all funds that are retained will first be distributed as
a payment of fees and costs incurred by the Trustee in performing
its duties. The fees and costs due to the Trustee will increase
the likelihood that the bonds will incur non-recoverable interest
shortfalls and/or principal writedowns resulting in a default.
Fitch will continue to monitor these transactions for ongoing
developments and their potential impact on the bonds' outstanding
ratings.
Fitch has affirmed these:
FirstPlus Home Loan Owner Trust 1997-2
-- Class B1 affirmed at 'Csf', Outlook Evolving;
-- Class B2 affirmed at 'Csf', Outlook Evolving.
FirstPlus Home Loan Owner Trust 1997-3
-- Class M1 affirmed at 'Csf', Outlook Evolving;
-- Class M2 affirmed at 'Csf', Outlook Evolving;
-- Class B1 affirmed at 'Csf', Outlook Evolving;
-- Class B2 affirmed at 'Csf', Outlook Evolving.
FirstPlus Home Loan Owner Trust 1997-4
-- Class A8 affirmed at 'Csf', Outlook Evolving;
-- Class M1 affirmed at 'Csf', Outlook Evolving;
-- Class M2 affirmed at 'Csf', Outlook Evolving;
-- Class B1 affirmed at 'Csf', Outlook Evolving;
-- Class B2 affirmed at 'Csf', Outlook Evolving.
FirstPlus Home Loan Owner Trust 1998-1
-- Class M1 affirmed at 'Csf', Outlook Evolving;
-- Class M2 affirmed at 'Csf', Outlook Evolving;
-- Class B1 affirmed at 'Csf', Outlook Evolving;
-- Class B2 affirmed at 'Csf', Outlook Evolving.
FirstPlus Home Loan Owner Trust 1998-2
-- Class A8 affirmed at 'Csf', Outlook Evolving;
-- Class M1 affirmed at 'Csf', Outlook Evolving;
-- Class M2 affirmed at 'Csf', Outlook Evolving;
-- Class B1 affirmed at 'Csf', Outlook Evolving;
-- Class B2 affirmed at 'Csf', Outlook Evolving.
FirstPlus Home Loan Owner Trust 1998-3
-- Class A8 affirmed at 'Csf', Outlook Evolving;
-- Class M1 affirmed at 'Csf', Outlook Evolving;
-- Class M2 affirmed at 'Csf', Outlook Evolving;
-- Class B1 affirmed at 'Csf', Outlook Evolving;
-- Class B2 affirmed at 'Csf', Outlook Evolving.
FirstPlus Home Loan Owner Trust 1998-4
-- Class A8 affirmed at 'Csf', Outlook Evolving;
-- Class M1 affirmed at 'Csf', Outlook Evolving;
-- Class M2 affirmed at 'Csf', Outlook Evolving;
-- Class B1 affirmed at 'Csf', Outlook Evolving;
-- Class B2 affirmed at 'Csf', Outlook Evolving.
FirstPlus Home Loan Owner Trust 1998-5
-- Class A9 affirmed at 'Csf', Outlook Evolving;
-- Class M1 affirmed at 'Csf', Outlook Evolving;
-- Class M2 affirmed at 'Csf', Outlook Evolving;
-- Class B1 affirmed at 'Csf', Outlook Evolving;
-- Class B2 affirmed at 'Csf', Outlook Evolving.
FIRST UNION-LEHMAN: S&P Affirms Ratings on Four 1997-C1 Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on four
classes of commercial mortgage-backed securities from First Union-
Lehman Brothers Commercial Mortgage Trust's series 1997-C1.
The affirmations of the ratings on the class F, G, H, and J
certificates reflect S&P's analysis of the remaining collateral in
the transaction, the transaction structure, and the liquidity
available to the certificates.
S&P's analysis included a review of the credit characteristics of
all of the remaining assets in the transaction. Using servicer-
provided financial information, Standard & Poor's calculated an
adjusted debt service coverage of 1.29x and a loan-to-value ratio
of 61.8%. Both of the DSC and LTV calculations S&P noted above
exclude five ($7.8 million, 7.7%) defeased loans and one
($2.3 million, 2.2%) specially serviced loan.
Credit Considerations
As of the November 2010 remittance report, one loan ($2.3 million,
2.2%) was with the special servicer, CWCapital Asset Management
LLC. The Quality Inn Petaluma loan is the 10th-largest loan in
the pool and is secured by a 110-room full-service hotel in
Petaluma, Calif. The loan was transferred to CWCapital on May 14,
2009, due to monetary default, and the borrower filed for
bankruptcy on Sept. 8, 2009. A modification is currently under
negotiation; however, S&P anticipates a minimal loss upon the
ultimate resolution of the loan should the modification not occur.
Transaction Summary
As of the November 2010 remittance report, the collateral balance
was $101.4 million, which is 7.8% of the balance at issuance. The
collateral includes 31 loans, down from 283 loans at issuance.
Five ($7.8 million, 7.7%) of the loans are defeased. The master
servicer, Wells Fargo Bank N.A., has provided financial
information, of which 97.7% was interim- or full-year 2009 data,
for 96.0% of the nondefeased loans in the pool. S&P calculated a
weighted average DSC of 1.23x for the pool based on the reported
figures. S&P's adjusted DSC and LTV were 1.29x and 61.8%,
respectively. These figures exclude the specially serviced loan
discussed above and the five defeased loans. In addition, S&P's
adjusted figures include normalizing adjustments made to certain
property cash flows. Among these adjustments were positive cash
flow changes to two of the top 10 loans to reflect increased
occupancy since the last reporting period.
Eight loans ($20.8 million, 20.5%), including four of the top
10 loans, are on the master servicer's watchlist. Ten loans
($37.8 million, 37.3%) have a reported DSC below 1.1x. Of
these loans, nine ($33.2 million, 32.7%) have a DSC below 1.0x.
To date, the pool has experienced principal losses totaling
$16.6 million in connection with 19 loans.
Summary of Top 10 Loans
The top 10 real estate exposures have an aggregate outstanding
balance of $70.5 million (69.5%). Using servicer-reported
numbers, S&P calculated a weighted average DSC of 1.25x for the
top 10 loans. S&P's adjusted DSC and LTV for the top 10 loans
were 1.31x and 63.3%, respectively. These adjusted figures
exclude the one top 10 loan that is currently with the special
servicer and include the cash flow adjustments noted in the Credit
Considerations section above. Three of the top 10 loans are on
the master servicer's watchlist.
The Holiday Inn-Virginia Beach loan ($4.8 million, 4.7%) is the
third-largest loan in the pool and is secured by a 143-room
limited-service hotel in Virginia Beach. The loan appears on the
master servicer's watchlist due to low DSC. In 2009, the property
underwent a renovation, and it has been rebranded as a Holiday Inn
Express. For the six months ended June 30, 2010, the property was
54.5% occupied with an average daily rate of $121.60, and revenue
per available room of $65.93. For the 12 months ended March 31,
2010, DSC for the property was 0.70x.
The Palm Terrace loan ($4.6 million, 4.5%) is the fifth-largest
loan in the pool and is secured by a 180-unit multifamily complex
in Chandler, Ariz. The loan appears on the master servicer's
watchlist due to low DSC. As of the six months ended June 30,
2010, DSC for the property was 1.05x. As of Sept. 30, 2010, the
property was 81.1% occupied.
The Canyon Place loan ($2.5 million, 2.5%) is the seventh-largest
loan in the pool and is secured by a 109-unit multifamily complex
in St. George, Utah. The loan appears on the master servicer's
watchlist due to low DSC. As of the six months ended June 30,
2010, DSC for the property was 0.91x. As of Sept. 22, 2010, the
property was 74.3% occupied.
Standard & Poor's analyzed the transaction according to its
current criteria. The affirmations are consistent with S&P's
analysis.
Ratings Affirmed
First Union-Lehman Brothers Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 1997-C1
Class Rating Credit enhancement (%)
----- ------ ----------------------
F A (sf) 60.86
G BBB (sf) 47.99
H BB (sf) 22.23
J CCC+ (sf) 9.36
FREDDIE MAC: Moody's Downgrades Ratings on Series M017 Notes
------------------------------------------------------------
Moody's has downgraded one class of Notes issued by Freddie Mac
Multifamily Variable Rate Certificates Series M017 due to the
deterioration of certain assets and the related increased default
probability, and increased asset correlations. The rating action
is the result of Moody's on-going surveillance of commercial real
estate collateralized debt obligation transactions.
-- CL. B, Downgraded to B2 (sf); previously on Sept. 29, 2008
Assigned Ba1 (sf)
Ratings Rationale
Freddie Mac Multifamily Variable Rate Certificates Series M017 is
a CRE CDO transaction backed by a portfolio of multifamily
affordable housing bonds. The bonds are issued by state and local
government entities and are secured by first liens on multifamily
affordable housing properties and certain other assets pledged by
certain municipal and state housing authorities, and government
entities.
While there are no defaulted assets in the pool, there is
considerable stress on several of the assets in the portfolio.
Five multifamily properties (15.4% of the balance) have Moody's
debt service coverage ratios that are below 1.0X. In addition, a
total of 12 multifamily properties (23.7% of the balance) have
DSCRs less than 1.10X. Since the rated tranche is the first-loss
tranche, any loss given default will result in principal losses.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 2,666 compared to 1,706 at
last review. The distribution of current ratings and credit
estimates is: Aaa-Aa3 (8.5% compared to 10.5% at last review), A1-
A3(5.4% compared to 2.5%), Baa1-Baa3 (1.8% compared to 28.6% at
last review), Ba1-Ba3 (6.4% compared to 25.5% at last review), B1-
B3 (11.3% compared to 20.4% at last review), and Caa1-C (66.2%
compared to 12.4% at last review).
WAL acts to adjust the probability of default of the reference
obligations in the pool for time. Moody's modeled to a WAL of
25.7 years compared to 28.0 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 50.0% compared to 50.0% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
0.0% compared to 18.8% at last review. the high level of default
probability dispersion within the collateral names.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 50% to 40% or up to 60% would result in average rating
movement on the rated tranches of 0 to 1 notches downward and 0 to
1 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
FRESNO PACIFIC: Moody's Confirms 'Ba2' Rating on Series A Bonds
---------------------------------------------------------------
Moody's Investor's Service has confirmed the Ba2 the rating on
Fresno Pacific University. The rating has been removed from
Watchlist for potential downgrade and the rating outlook has been
revised to negative. The rating applies to $5.6 million of 2000
Series A bonds issued through the California Educational
Facilities Authority. The negative outlook reflect Moody's
ongoing concern regarding the University's low level of liquidity,
availability of financial resources as well as a challenging debt
structure, including $7.8 million of loans maturing in February
2012.
Legal Security: The rated Series 2000 bonds are secured by a
pledge of gross revenues and a mortgage on certain Real Property
of the University. The bonds are further secured by an
irrevocable guarantee of the Fresno Pacific University Foundation.
The guarantee is limited to the unrestricted assets of the
Foundation, which Moody's consider fairly illiquid given the
majority of unrestricted assets is art held for sale ($8.9 million
(net of 60% value allowance)) in FY 2010). Up to $4 million of
the Foundation's obligations are indemnified or supported by the
AIMS Educational Foundation, a separate not-for-profit
organization affiliated with FPU.
Interest Rate Derivatives: FPU has entered into two variable to
fixed rate swap agreements with the Bank of the West (rated A1/P-
1) for the notional amounts of $3 million and $2.1 million to
manage its variable rate exposure on a term loan with the Bank.
As long as loans are performing as agreed, the termination of the
swap is at the discretion of the University and there are no
provisions which require collateral posting or allow the
counterparty the right to terminate if the University's rating is
downgraded below Baa3. According to the University's financial
audit, the fair value of the swap as of April 30, 2010 was
approximately negative $495,000 to the University.
Challenges
* Fresno Pacific University continues to struggle with limited
financial resources and liquidity. In FY2010, the University
maintained $7.2 million of expendable financial resources
providing a weak 0.38 times coverage of outstanding debt and
0.19 times coverage of annual operations. Expendable financial
resource calculations do not include the University's
Foundation. Please see RECENT DEVELOPMENTS for further
information. Although improved, liquidity remains thin as well.
In FY2010, the University maintained $6.7 million of
unrestricted monthly liquidity, which provided just 67 monthly
days cash on hand, compared to $3.9 million (41 monthly days) in
FY 2009.
* In light of the University's thin liquidity, the current debt
structure causes a concern as the University maintains a
$7.8 million three-year loan with the Mennonite Brethren
Foundation, a foundation through the Mennonite church, the
University's affiliated religious background, and an additional
$6.3 million of bank debt and loans to individuals. This
remains a weakness as these loans are typically for shorter
terms than long-term bonds.
Management notes the University is actively looking to restructure
the entire debt portfolio to long term debt. Should the
University be unable to restructure the MB Foundation debt by the
February 2012 maturity debt, there could be further pressure on
the University's rating.
* Challenging market position for traditional undergraduate
students, as FPU competes against numerous private and public
universities in California including the nearby University of
California at Merced campus, offering programs at a lower price
than Fresno Pacific. Net tuition per student has fluctuated as
the enrollment mix across traditional undergraduates, graduate
students, and degree completion students shifts. In FY2010,
despite a positive operating margin, net tuition per student
declined by 2.7% to $14,899 compared to a 5% increase the year
before. Moody's believes continued growth of student charges is
essential as they represent over 90% of the University's
operating revenue.
Strengths
* FPU maintains a mixture of program offerings on its main campus
in Fresno and three regional campuses as well as the
University's growing enrollment of degree-completion students.
In Fall 2010, the University had a total enrollment count of
2,895 full-time equivalents, a substantial 27% increase from the
prior year. This increase has been driven by growth in all of
FPU's programs, including the traditional undergraduate program
which had seen declines over the past several years, as well as
the inclusion of 65 FTE from a newly acquired seminary program
on its main campus. Freshman applications increased by over 20%
from the prior year, while the University maintained a healthy
matriculation rate of 51% in fall 2010. The new seminary program
is a small private institution that has worked closely with the
University in the past. Management expects the inclusion of this
program will be budget neutral to the University's operations.
* Improving operating performance with a 4.1% operating margin in
FY2010, compared to negative 6% just two years prior. Improved
results in FY2010 are in large part due to increased net tuition
revenues from enrollment growth, the one-time infusion of cash
($1.7 million) from a sale of property, and implementation of
operational efficiencies. For FY2011, management expects similar
results, but Moody's note continued reliance on an $1 million
operating line of credit from the Mennonite Brethren Foundation.
The University has drawn on the line in July 2010 for
approximately $260,000 to support operations, but is not
expecting to rely on the line for the rest of the fiscal year.
The limited draw compares to $8 million of outstanding draws on
operating lines in FY2008. Management further notes the
University is expecting to completely stop its reliance on the
line by FY2012. Moody's expects further negative pressure on the
rating should operations weaken over the next several years.
Recent Developments
Prior to FY2009, the Fresno Pacific University's Foundation had
been consolidated into the University's audited financial
statements. The Foundation, has substantial holdings of real
estate and collections of art that hold value and were captured in
Moody's expendable financial resource calculations in the past.
Moody's believed these investments were far less liquid however
than publicly traded securities and had therefore re -- Classified
them from unrestricted net assets to temporarily restricted net
assets. Starting in FY2009, management chose not to include the
Foundation's assets in the University's audit. Given this
accounting change and the substantially illiquid nature of the
Foundation's assets, Moody's have chosen to re-categorize the
Foundation's assets from temporarily restricted net assets to
permanently restricted net assets. This shift considerably
changes the University's expendable resource calculation from
$21 million to $7.2 million, but Moody's believes provides a more
accurate picture of the University's financial cushion.
Outlook
The negative outlook is based on the continued low levels of
liquidity at Fresno Pacific University, challenging debt
structure, continued reliance on an operating line of credit,
combined with a dynamic enrollment history and challenging market
for traditional undergraduate students.
What Could Change The Rating -- Up
Unlikely in the near-term given outlook; longer term stability and
growth in traditional undergraduate enrollment; large increases in
unrestricted liquidity and cash flow adequately covering debt
service over several years.
What Could Change The Rating -- Down
Inability to restructure the debt and need to pay off $7.7million
of loans in early 2012 and resulting pressure on liquidity;
weakening of liquidity; enrollment challenges that lead to
continued decline in net tuition growth; additional borrowing;
sustained deterioration of operating cash flow
Key Indicators (FY2010 financial data, Fall 2010 enrollment data):
-- Total Enrollment: 2,895 full-time equivalents
-- Total Direct Debt: $19.2 million
-- Total Financial Resources: $28.6 million
-- Expendable Financial Resources: $5.6 million
-- Expendable Resources to Debt: 0.38 times
-- Expendable Resources to Operations: 0.19 times
-- Three-Year Average Operating Margin: 0.5%
-- Three-Year Average Debt Service Coverage: 1.68 times
-- Operating Cash Flow Margin: 12.9%
-- Monthly Unrestricted Liquidity: $6.7 million
-- Monthly Days Cash on Hand: 67 days
Rated Debt:
-- CEFA Series 2000A: Ba2
Methodology
The last rating action was on August 18, when the long-term Ba2
rating was placed on watchlist for possible downgrade.
GALAXY VIII: S&P Raises Ratings on Various Classes of Notes
-----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
B, C, D, and E notes from Galaxy VIII CLO Ltd., a collateralized
loan obligation transaction managed by PineBridge Investments LLC.
At the same time, S&P removed its rating on the class B notes from
CreditWatch, where it was placed with positive implications on
Nov. 8, 2010. Concurrently, S&P affirmed its rating on the class
A notes.
The upgrades reflect an improvement in credit quality available
to support the notes since S&P lowered its ratings on the notes
on Oct 23, 2009. As of the Oct. 13, 2010, trustee report,
the transaction had $0.00 in defaulted assets, down from
$18.89 million noted in the Aug. 25, 2009, trustee report, which
S&P referenced in its October 2009 rating actions. Furthermore,
assets from obligors rated in the 'CCC' category were reported
at $25.57 million in October 2010, compared with $61.33 million
reported in August 2009.
The upgrades also reflect an increase in overcollateralization
available to support the rated notes since S&P downgraded them.
The trustee reported the following O/C ratios in the Oct. 13, 2010
monthly report:
* The senior (class B) O/C ratio was 119.11%, compared with a
reported ratio of 116.03% in August 2009;
* The class C O/C ratio was 112.28%, compared with a reported
ratio of 109.38% in August 2009;
* The class D O/C ratio was 107.55%, compared with a reported
ratio of 104.77% in August 2009; and
* The interest reinvestment test ratio was 104.61%, compared with
a reported ratio of 101.87% in August 2009.
Standard & Poor's will continue to review whether, in its view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as S&P deem necessary.
Rating And Creditwatch Actions
Galaxy VIII CLO Ltd
Rating
------
Class To From
----- -- ----
B AA (sf) A+ (sf)/Watch Pos
C A (sf) BBB+ (sf)
D BBB (sf) B+ (sf)
E B+ (sf) CCC+ (sf)
Rating Affirmed
Galaxy VIII CLO Ltd
Class Rating
----- ------
A AA+ (sf)
Transaction Information
-----------------------
Issuer: Galaxy VIII CLO Ltd.
Co-Issuer: Galaxy VIII CLO Inc.
Collateral manager: PineBridge Investments LLC
Underwriter: Morgan Stanley & Co. Inc.
Trustee: Bank of New York Mellon (The)
Transaction type: Cash flow CLO
GE CAPITAL: Moody's Takes Rating Actions on 2003-C1 Certs.
----------------------------------------------------------
Moody's Investors Service upgraded the rating of three classes,
affirmed seven classes, confirmed three classes and downgraded
four classes of GE Capital Commercial Mortgage Corporation,
Commercial Mortgage Pass-Through Certificates, Series 2003-C1:
-- Cl. A-3, Affirmed at Aaa (sf); previously on April 15, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on April 15, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on April 15, 2003
Assigned Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on June 29, 2006
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on Oct. 23, 2006
Upgraded to Aaa (sf)
-- Cl. D, Affirmed at Aaa (sf); previously on Feb. 19, 2008
Upgraded to Aaa (sf)
-- Cl. E, Upgraded to Aa1 (sf); previously on Feb. 19, 2008
Upgraded to Aa2 (sf)
-- Cl. F, Upgraded to Aa2 (sf); previously on Feb. 19, 2008
Upgraded to Aa3 (sf)
-- Cl. G, Upgraded to A1 (sf); previously on Feb. 19, 2008
Upgraded to A2 (sf)
-- Cl. H, Confirmed at Baa1 (sf); previously on Oct. 7, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. J, Confirmed at Ba1 (sf); previously on Oct. 7, 2010 Ba1
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Confirmed at Ba2 (sf); previously on Oct. 7, 2010 Ba2
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to B3 (sf); previously on Oct. 7, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to Caa1 (sf); previously on Oct. 7, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to Caa3 (sf); previously on Oct. 7, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. O, Downgraded to Ca (sf); previously on Oct. 7, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Affirmed at Aaa (sf); previously on April 15, 2003
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The upgrades are due to overall improved pool performance and a
significant increase in subordination levels since Moody's last
review. The downgrades are due to interest shortfalls and higher
expected losses for the pool resulting from realized and
anticipated losses from specially serviced and troubled loans.
The confirmations and affirmations are due to key parameters,
including Moody's loan to value ratio, Moody's stressed debt
service coverage ratio and the Herfindahl Index, remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
On October 7, 2010, Moody's placed seven classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
4.1% of the current balance. At last review, Moody's cumulative
base expected loss was 2.3%. Moody's stressed scenario loss is
8.1% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a pay down analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 41 compared to 46 at last review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the ratings.
Deal Performance
As of the November 10, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 35% to
$769.4 million from $1.2 billion at securitization. The
Certificates are collateralized by 106 mortgage loans ranging in
size from less than 1% to 5% of the pool, with the top ten loans
representing 31% of the pool. Thirty-nine loans, representing 24%
of the pool, have defeased and are collateralized by U.S.
Government securities. There are no loans with investment grade
credit estimates.
Nineteen 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 CRE
Finance Council 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.
Five loans have been liquidated from the pool since
securitization, resulting in a $4.7 million loss (13% loss
severity on average). Three loans, representing 3% of the pool,
are currently in special servicing. The master servicer has
recognized an aggregate appraisal reduction of $14.8 million for
these loans. Moody's has estimated an aggregate $15.3 million
loss (61% expected loss on average) for all of the specially
serviced loans.
Moody's has assumed a high default probability for three poorly
performing loans representing 2% of the pool and has estimated a
$6 million loss (35% expected loss based on a 71% probability
default) from these troubled loans.
Moody's was provided with full year 2009 operating results for
100% of the pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 81% compared to 88% at
Moody's prior review. Moody's net cash flow reflects a weighted
average haircut of 10.9% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.4%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.73X and 1.35X, respectively, compared to
1.43X and 1.22X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The top three performing conduit loans represent 13% of the pool
balance. The largest loan is the 801 Market Street Loan
($39.3 million -- 5.1% of the pool), which is secured by a 370,000
square foot office condominium situated within a one million SF
office building located in Philadelphia, Pennsylvania. The
condominium includes part of the basement, ground floor retail and
all of floors seven through 13. The office building was built in
1928 and renovated in 2002. The building is located in the Market
Street East office market of Center City Philadelphia. The
property was 100% leased as of June 2010 compared to 94% at last
review. This loan has amortized 5% since last review. Moody's
LTV and stressed DSCR are 82% and 1.32X, respectively, compared to
118% and 0.91X at last review.
The second largest loan is the Centennial Center I Loan
($37.3 million -- 4.9% of the pool), which is secured by a 355,000
SF community shopping center located in Las Vegas, Nevada. Anchor
tenants as part of the loan collateral include Home Depot and Ross
Stores while Wal-Mart and Sam's Club shadow anchor the center and
are excluded from the loan collateral. The property's financial
performance has improved since last review due to an increase in
revenue. Moody's LTV and stressed DSCR are 91% and 1.07X,
respectively, compared to 96% and 1.01X at last review.
The third largest loan is the Laguna Gateway Loan ($22.3 million -
- 2.9% of the pool), which is secured by a 270,500 SF retail
center located in Elk Grove, California. Property performance has
declined since last review due to higher operating expenses. The
property was 98% leased as of June 2010 compared to 96% in
December 2008. Moody's LTV and stressed DSCR are 79% and 1.26X,
respectively, compared to 70% and 1.43X at last review.
GE COMMERCIAL: Fitch Downgrades Ratings on 14 2006-C1 Certs.
------------------------------------------------------------
Fitch Ratings has downgraded 14 classes of GE Commercial Mortgage
Corporation commercial mortgage pass-through certificates series
2006-C1 due to further performance deterioration and an increase
in expected losses on the specially serviced loans.
The downgrades reflect an increase in Fitch expected losses across
the pool. Fitch modeled losses of 7.2% of the remaining pool,
with expected losses totaling 7% of the original pool balance.
The pool has experienced no realized losses to date. Fitch has
designated 26 loans or crossed loan groupings (21.8%) as Fitch
Loans of Concern, which includes seven specially serviced loans
and portfolios (8.9%). Fitch expects classes J through P may be
fully depleted from eventual losses associated with the specially
serviced loans.
As of the November 2010 distribution date, the pool's aggregate
principal balance has been paid down by approximately 3.1% to
$1.56 billion from $1.61 billion at issuance. One loan (0.1%) has
defeased since issuance. Interest shortfalls are currently
affecting classes G through P.
The largest contributor to expected losses is the Beyman
Multifamily Portfolio III (5.3% of the pool), which consists of
three cross-collateralized, cross-defaulted loans secured by three
multifamily properties totaling 850 units and located in the
Memphis, TN metropolitan statistical area and Charlotte, North
Carolina. The balance of the partial interest-only loan (first
five years) was $82.85 million as of November 2010. The loan
transferred to special servicing in January 2010 after the
borrower failed to make its Nov. 1, 2009 payment. According to
the special servicer, forbearance negotiations are ongoing.
The next largest contributor to expected losses is the Atlanta
Mall Area Portfolio (1.9%), which is secured by seven retail
buildings comprising a total of 158,297 square feet and located
across two submarkets of Atlanta, Georgia. The balance of the
partial interest-only loan (first five years) was $29.12 million
as of November 2010. The loan transferred to special servicing in
January 2010 for imminent default due to vacancy issues. The
special servicer is pursuing foreclosure.
The third largest contributor to expected losses is the 33
Washington Street loan (3.5%), which is secured by a 410,693 sf
class B office building in Newark, New Jersey. As of the November
2010 distribution, the balance of the loan was $55 million. Fitch
expects the loan, which has a stressed Fitch Loan to Value of
137%, will not refinance at maturity, as it does not pass Fitch's
maturity stress. As of September 2010, the property was 64.5%
leased, down from 94.6% at issuance. In addition, nearly 53% of
the net rentable area is month-to-month or expires within the next
12 months.
In addition, Fitch's analysis included a deterministic test to
assess low-probability/high-loss event risk in the pool. Fitch
identified the second largest loan, the KinderCare Portfolio
(9.2%), as presenting such risk due to its exposure to a single,
nonrated tenant and the nontraditional property type of the
underlying real estate, which may have limited alternative uses.
Fitch downgrades these classes and revises the Outlooks, Loss
Severity ratings, and Recovery Ratings as indicated:
-- $146.8 million class A-J to 'BBB-sf/LS3' from 'Asf/LS3';
Outlook Stable;
-- $36.2 million class B to 'BBsf/LS5' from 'Asf/LS4'; Outlook
Stable;
-- $14.1 million class C to 'BBsf/LS5' from 'Asf/LS5'; Outlook
Negative;
-- $24.1 million class D to 'B-sf/LS5' from 'BBB-sf/LS5';
Outlook Negative;
-- $14.1 million class E to 'CCCsf/RR1' from 'BBsf/LS5';
-- $14.1 million class F to 'CCCsf/RR1' from 'BBsf/LS5';
-- $14.1 million class G to 'CCCsf/RR1' from 'Bsf/LS5';
-- $14.1 million class H to 'CCCsf/RR6' from 'B-sf/LS5';
-- $6 million class J to 'CCsf/RR6' from 'B-sf/LS5';
-- $6 million class K to 'CCsf/RR6' from 'B-sf/LS5';
-- $6 million class L to 'CCsf/RR6' from 'B-sf/LS5';
-- $2 million class M to 'CCsf/RR6' from 'B-sf/LS5';
-- $4 million class N to 'CCsf/RR6' from 'B-sf/LS5';
-- $2 million class O to 'Csf/RR6' from 'B-sf/LS5'.
Fitch also affirms these classes and revises the LS ratings as
indicated:
-- $9.9 million class A-1 at 'AAAsf/LS2'; Outlook Stable;
-- $54.4 million class A-2 at 'AAAsf/LS2'; Outlook Stable;
-- $47.2 million class A-3 at 'AAAsf/LS2'; Outlook Stable;
-- $53.2 million class A-AB at 'AAAsf/LS2'; Outlook Stable;
-- $620.1 million class A-4 at 'AAAsf/LS2'; Outlook Stable;
-- $290.9 million class A-1A at 'AAAsf/LS2'; Outlook Stable;
-- $160.9 million class A-M at 'AAAsf/LS3'; Outlook Stable.
Fitch does not rate the $18.1 million class P.
Fitch withdraws the rating on the interest-only class X-W.
GE COMMERCIAL: Moody's Takes Rating Actions on Various Certs.
-------------------------------------------------------------
Moody's Investors Service upgraded the rating of one class,
affirmed nine classes and downgraded five classes of GE Commercial
Mortgage Corp., Commercial Mortgage Pass-Through Certificates,
Series 2002-1:
-- Cl. A-3, Affirmed at Aaa (sf); previously on April 18, 2002
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on Dec. 8, 2006
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on July 9, 2007
Upgraded to Aaa (sf)
-- Cl. D, Affirmed at Aaa (sf); previously on Aug. 13, 2007
Upgraded to Aaa (sf)
-- Cl. E, Affirmed at Aaa (sf); previously on Sept. 25, 2008
Upgraded to Aaa (sf)
-- Cl. F, Upgraded to Aaa (sf); previously on Sept. 25, 2008
Upgraded to Aa2 (sf)
-- Cl. G, Affirmed at A2 (sf); previously on Sept. 25, 2008
Upgraded to A2 (sf)
-- Cl. H, Affirmed at Baa1 (sf); previously on Aug. 13, 2007
Upgraded to Baa1 (sf)
-- Cl. J, Affirmed at Ba1 (sf); previously on April 18, 2002
Definitive Rating Assigned Ba1 (sf)
-- Cl. K, Downgraded to B1 (sf); previously on April 18, 2002
Definitive Rating Assigned Ba2 (sf)
-- Cl. L, Downgraded to Caa1 (sf); previously on April 18, 2002
Definitive Rating Assigned Ba3 (sf)
-- Cl. M, Downgraded to Caa3 (sf); previously on April 18, 2002
Definitive Rating Assigned B1 (sf)
-- Cl. N, Downgraded to C (sf); previously on April 18, 2002
Definitive Rating Assigned B2 (sf)
-- Cl. O, Downgraded to C (sf); previously on April 18, 2002
Definitive Rating Assigned B3 (sf)
-- Cl. X-1, Affirmed at Aaa (sf); previously on April 18, 2002
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The upgrades are due to overall improved pool performance and a
significant increase in subordination levels since Moody's last
review. The downgrades are due to higher expected losses for the
pool resulting from interest shortfalls and realized and
anticipated losses from specially serviced and troubled loans.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed debt service coverage ratio and
the Herfindahl Index, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
Moody's rating action reflects a cumulative base expected loss of
4.1% of the current balance. At last review, Moody's cumulative
base expected loss was 1.3%. Moody's stressed scenario loss is
7.0% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a pay down analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 38 compared to 51 at last review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the ratings.
Deal Performance
As of the November 10, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 25% to
$780.6 million from $1.04 billion at securitization. The
Certificates are collateralized by 122 mortgage loans ranging in
size from less than 1% to 5% of the pool, with the top ten loans
representing 26% of the pool. Thirty-five loans, representing 33%
of the pool, have defeased and are collateralized by U.S.
Government securities. There are no loans with investment grade
credit estimates.
Nineteen loans, representing 18% 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 CRE
Finance Council 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.
Five loans have been liquidated from the pool since
securitization, resulting in a $6.0 million loss (14% loss
severity on average). Four loans, representing 6% of the pool,
are currently in special servicing. The largest specially
serviced loan is the 38 Chauncy Street Loan ($19.9 million -- 2.6%
of the pool) which is secured by a 130,000 square foot (SF) office
building located in Boston, Massachusetts. The loan was
transferred to special servicing April 2010 due to the borrower's
request for a loan modification.
The remaining three specially serviced loans are secured by a
mix of property types. The master servicer has recognized a
$9.1 million appraisal reduction for one of the remaining
specially serviced loans. Moody's has estimated an aggregate
$18.5 million loss (38% expected loss on average) for all of the
specially serviced loans.
Moody's has assumed a high default probability for four poorly
performing loans representing 4% of the pool and has estimated a
$4.3 million loss (15% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 64%
of the pool's non-defeased loans. Excluding specially serviced
and troubled loans, Moody's weighted average LTV is 77% compared
to 78% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 12.0% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.53X and 1.43X, respectively, compared to
1.41X and 1.44X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The top three performing conduit loans represent 12% of the pool
balance. The largest loan is the 15555 Lundy Parkway Loan
($34.9 million -- 4.5% of the pool), which is secured by a two
Class A suburban office buildings located in Dearborn, Michigan.
The two buildings are connected by a center lobby/atrium and
contain 453,000 SF. The property is 100% leased to the Ford Motor
Company under a 15-year bondable net lease through December 2016.
The loan is coterminous with the lease term and fully amortizes.
Moody's LTV and stressed DSCR are 55% and 1.78X, respectively,
compared to 99% and 0.62X at last review.
The second largest loan is the Scholls Ferry Boulevard Loan
($28.2 million -- 3.6% of the pool), which is secured by a 203,000
SF Class A mixed-use development located in Beaverton, Oregon.
The property's financial performance has declined slightly due to
declining occupancy since last review. The property was 87%
leased as of December 2009 compared to 95% at last review. The
loan has amortized 5% since last review. Moody's LTV and stressed
DSCR are 85% and 1.24X, respectively, compared to 87% and 1.21X at
last review.
The third largest loan is the Fresh Pond Shopping Center Loan
($27.6 million -- 3.5% of the pool), which is secured by a 213,000
SF community retail center located in Cambridge, Massachusetts.
Property performance has improved since last review and occupancy
has been stable at 95%. The loan has amortized 5% since last
review. Moody's LTV and stressed DSCR are 64% and 1.56X,
respectively, compared to 82% and 1.23X at last review.
GMAC COMMERCIAL: S&P Downgrades Ratings on Eight 2002-C1 Notes
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on eight
classes of commercial mortgage-backed securities from GMAC
Commercial Mortgage Securities Inc.'s series 2002-C1. S&P placed
five of these ratings on CreditWatch with negative implications
and lowered the class M, N, and O certificate ratings to 'D (sf)'.
Concurrently, S&P placed its ratings on the class E and F
certificates on CreditWatch with negative implications.
The downgrades and CreditWatch placements reflect interest
shortfalls that have affected the trust, as well as these classes'
increased susceptibility to future interest shortfalls, resulting
primarily from a nonrecoverable advance declaration made by the
master servicer, Berkadia Commercial Mortgage LLC, on the Crowne
Commerce Center loan. The downgrades and CreditWatch placements
affecting the class J, K, and L certificates reflect interest
shortfalls that have affected the trust. S&P downgraded the class
M, N and O certificates to 'D (sf)' due to recurring interest
shortfalls that S&P expects to continue for the foreseeable
future.
The rating actions taken on the class E, F, G, and H certificates
reflect these classes' increased susceptibility to future interest
shortfalls and a reduction in the liquidity available to the
classes to absorb any future interest shortfalls.
As of the November 2010 remittance report, the transaction's
current interest shortfalls totaled $282,377 and have affected all
of the classes subordinate to and including class J. The interest
shortfalls are primarily all related to the Crown Commerce Center
loan and are due to:
* Interest not advanced;
* The recovery of prior advance amounts; and
* Property protection advances.
In addition, there are appraisal reduction amounts totaling
$10.3 million currently in effect for the four specially serviced
assets. The reported appraisal subordinate entitlement reductions
for these four assets totaled $64,394.
The master servicer made a nonrecoverable advance declaration in
August 2010, relating to the Crowne Commerce Center loan.
Berkadia commenced the recovery of outstanding PPAs, which as of
the November 2010 remittance report, totaled $476,000.
The Crowne Commerce Center loan ($12.0 million total exposure,
2.1%) is the second-largest loan with the special servicer, also
Berkadia, and is secured by a 244,501-sq.-ft. industrial property
in Los Angeles. The loan was transferred to the special servicer
in March 2009 for payment default and was reported as 90-plus days
delinquent as of the November 2010 remittance report. The loan
has approximately $1.9 million of total advances outstanding, in
excess of its principal balance.
In addition to the Crowne Commerce Center loan, there are three
assets ($20.5 million, 3.6%) with the special servicer. The
payment status of these three assets is: one is real estate owned
($3.2 million, 0.6%); one is in foreclosure ($14.3 million, 2.5%);
and one is 90-plus days delinquent ($3.0 million, 0.5%).
Standard & Poor's expects to resolve the CreditWatch placements
after completing a full review of the transaction, which will
include an analysis of current and potential interest shortfalls,
as well as a review of the credit characteristics of the remaining
assets in the pool.
Ratings Lowered
GMAC Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates, series 2002-C1
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
M D (sf) CCC+ (sf) 3.29
N D (sf) CCC- (sf) 1.87
O D (sf) CCC- (sf) 1.24
Ratings Lowered And Placed On Creditwatch Negative
GMAC Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates, series 2002-C1
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
G A (sf)/Watch Neg A+ (sf) 11.49
H BBB- (sf)/Watch Neg A (sf) 9.91
J B (sf)/Watch Neg BBB+ (sf) 7.39
K CCC (sf)/Watch Neg BB+ (sf) 5.18
L CCC- (sf)/Watch Neg B+ (sf) 4.24
Ratings Placed On Creditwatch Negative
GMAC Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates, series 2002-C1
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
E AA+ (sf)/Watch Neg AA+ (sf) 15.59
F AA (sf)/Watch Neg AA (sf) 13.38
GOLDMAN SACHS: S&P Raises Ratings on Various Classes of Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A-1, A-2, B, C, D, and E notes from Goldman Sachs Asset Management
CLO PLC, a collateralized loan obligation transaction managed by
Goldman Sachs Asset Management. At the same time, S&P removed the
ratings on class A-2, B, C, D, and E from CreditWatch with
positive implications. The upgrades reflect the improved
performance S&P has observed in the deal since March 2010, when
S&P downgraded the class A-1, A-2, B, C, D, and E notes following
a review of the transaction under S&P's updated criteria for
rating corporate collateralized debt obligations.
At the time of S&P's last rating action, according to the trustee
report, the transaction held $17.88 million in defaulted
obligations and more than $84.49 million in underlying obligors
with a rating, either by Standard & Poor's or another rating
agency, in the 'CCC' range compared with $8.91 million defaulted
assets and $46.80 million in 'CCC' assets as of the Nov. 15, 2010,
trustee report. In combination with a reduction in the 'CCC'
range assets the deal has also had an increase it its
overcollateralization ratios. Class A/B O/C ratio improved to
121.42% from 117.80%; class C ratio to 113.57% from 110.37%; class
D ratio to 107.61% from 104.62%; and class E to 103.52% from
99.67%.
Standard & Poor's will continue to review whether, in its view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as S&P deem necessary.
Rating And Creditwatch Actions
Goldman Sachs Asset Management CLO PLC
Rating
------
Class To From
----- -- ----
A-1 notes AAA (sf) AA+
A-2 notes AA+ (sf) AA-/Watch Pos (sf)
B notes AA (sf) A-/Watch Pos (sf)
C notes A (sf) BBB+/Watch Pos (sf)
D notes BBB- (sf) BB+/Watch Pos (sf)
E notes B+ (sf) CCC+/Watch Pos (sf)
NR - Not rated.
GREENPOINT MORTGAGE: Moody's Downgrades Ratings on 18 Tranches
--------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 18
tranches from 1 RMBS transaction, backed by Option ARM loans,
issued by Greenpoint Mortgage Funding Trust in 2005.
Ratings Rationale
The collateral backing these transactions consists primarily of
first-lien, adjustable-rate, negative amortization, Alt-A
residential mortgage loans. The actions are a result of the
rapidly deteriorating performance of option arm pools in
conjunction with macroeconomic conditions that remain under
duress. The actions reflect Moody's updated loss expectations on
option arm pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on
option arm RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: Greenpoint Mortgage Funding Trust 2005-AR4
-- Cl. I-A-1, Downgraded to Caa1 (sf); previously on Jan. 27,
2010 Aa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2a, Downgraded to Ca (sf); previously on Jan. 27,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2b Grantor Trust, Downgraded to Ca (sf); previously
on Jan. 27, 2010 Baa1 (sf) Placed Under Review for Possible
Downgrade
-- Cl. I-A-2b Underlying, Downgraded to Ca (sf); previously on
Jan. 27, 2010 Baa1 (sf) Placed Under Review for Possible
Downgrade
-- Cl. I-A-3, Downgraded to Ca (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-1, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-2, Downgraded to C (sf); previously on Jan. 27,
2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-1a, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-1b Grantor Trust, Downgraded to Caa3 (sf);
previously on Jan. 27, 2010 B3 (sf) Placed Under Review for
Possible Downgrade
-- Cl. IV-A-1b Underlying, Downgraded to Caa3 (sf); previously
on Jan. 27, 2010 B3 (sf) Placed Under Review for Possible
Downgrade
-- Cl. IV-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Downgraded to C (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. X-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. X-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. X-4, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
GREENWICH CAPITAL: Moody's Reviews Ratings on 12 2005-GG3 Certs.
----------------------------------------------------------------
Moody's Investors Service placed 12 classes of Greenwich Capital
Commercial Funding Corp., Commercial Mortgage Pass-Through
Certificates, Series 2005-GG3 on review for possible downgrade:
-- Cl. A-J, Aa2 Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to Aa2
-- Cl. B, A1 Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to A1
-- Cl. C, A2 Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to A2
-- Cl. D, Baa1 Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to Baa1
-- Cl. E, Baa2 Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to Baa2
-- Cl. F, Baa3 Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to Baa3
-- Cl. G, Ba2 Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to Ba2
-- Cl. H, Ba3 Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to Ba3
-- Cl. J, B2 Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to B2
-- Cl. K, B3 Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to B3
-- Cl. L, Caa2 Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to Caa2
-- Cl. M, Ca Placed Under Review for Possible Downgrade;
previously on Aug. 27, 2009 Downgraded to Ca
The classes were placed on review due to higher expected losses
for the pool resulting from actual and anticipated losses from
specially serviced and troubled loans.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated August 27, 2009.
Deal And Performance Summary
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 21% to
$2.84 billion from $3.59 billion at securitization. The
Certificates are collateralized by 130 mortgage loans ranging in
size from less than 1% to 8% of the pool, with the top ten loans
representing 51% of the pool. Nine loans, representing 4% of the
pool, have defeased and are collateralized with U.S. Government
securities, essentially the same as at last review.
Forty-eight loans, representing 29% 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 CRE
Finance Council (formerly the Commercial Mortgage Securities
Association) 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.
Five loans have been liquidated from the pool, resulting in an
aggregate realized loss of $21.5 million (46% loss severity).
Thirteen loans, representing 5% of the pool, are currently in
special servicing. The specially serviced loans are secured by a
mix of multifamily, retail, hotel and office property types. The
master servicer has recognized an aggregate $46.2 million in
appraisal reductions for eight of the specially serviced loans.
Moody's review will focus on potential losses from specially
serviced and troubled loans and the performance of the overall
pool.
GS MORTGAGE: Fitch Downgrades Ratings on 19 2007-GG10 Certs.
------------------------------------------------------------
Fitch Ratings downgrades 19 classes of GS Mortgage Securities
Corporation II series 2007-GG10, commercial mortgage pass through
certificates, primarily due to an increase in specially serviced
loans.
The downgrades reflect an increase in Fitch modeled losses
across the pool, which includes assumed losses on loans in
special servicing and on performing loans with declines in
performance indicative of a higher probability of default.
Fitch modeled losses of 17.5% (17.9% cumulative transaction
losses which includes losses realized to date). Fitch expects
classes G through S to be fully depleted by losses on specially
serviced loans and class F to be significantly impacted. As of
November 2010, there are cumulative interest shortfalls in the
amount of $35.3 million currently affecting classes F through S.
As of the November 2010 distribution date, the pool's aggregate
principal balance has been paid down by 1.2% to $7.47 billion
from $7.56 billion at issuance. There are no defeased loans.
Fitch has identified 71 loans (50.1%) as Fitch Loans of Concern,
which includes 33 specially serviced loans (21%).
The largest contributor to losses, the Two California Plaza loan
(6.3%), is secured by a 1,329,810 square foot office property
located in downtown Los Angeles, California. Maguire Properties
is the loan sponsor. At issuance, the loan was underwritten to a
stabilized cash flow based on the expectation that below market
leases expiring during the term of the loan would be re-signed at
higher rates, providing for potential upside in future cash flows.
Based on YE 2009 performance, the property is behind the
stabilization schedule. One of the largest tenants at the
property filed bankruptcy and vacated its space in mid 2009. The
largest tenant downsized its space in 2010 leaving the property
approximately 80% occupied. The servicer-reported YE 2009 debt
service coverage ratio was 0.92 times.
The second largest contributor to loss is the 119 West 40th Street
loan, which is secured by a 22-story, 333,901 sf office building
located in Midtown Manhattan, New York. At issuance, the loan was
underwritten to a stabilized cash flow based on the expectation
that below market leases expiring during the loan term and the yet
to be completed building upgrades would provide upside in future
cash flows.
The loan transferred to the special servicer in June 2009 for
imminent default after the debt service reserves posted at
issuance were depleted and the property had failed to achieve
positive cash flow. Cost overruns associated with building
renovations have resulted in uncompleted construction at the
property, including the main lobby, and have caused tenants to
withhold rents. A receiver is in place and working to complete
the unfinished construction. A recent appraisal indicates
significant losses
The third largest contributor to losses is the Wells Fargo Tower
loan (7.4%) which is collateralized by a 1.4 million sf 53 story
office property with a five-level subterranean parking garage
located in downtown Los Angeles. At issuance the loan was
underwritten to a stabilized cash flow which anticipated below
market leases rolling to market levels. The anticipated increases
have not happened. The resulting reported NOI DSCR for the fiscal
YE 2009 was 1.10x versus 1.22x at issuance.
There exists significant roll at the property in the next couple
of years; 25% of the space rolls in 2012 followed by another 27%
in 2013. A $2.6 million leasing reserve established at closing
has been largely depleted. As ongoing deposits into a leasing
costs reserve are not required, large leasing expenditures may
result in decreased net cash flow and the borrower's ability to
service the debt. The sponsor is Maguire Properties, Inc.
In total, there are currently 33 assets (21%) in special servicing
which consist of six assets (3.2%) that are real estate owned, 15
assets (9.1%) in foreclosure, nine assets (5%) that are delinquent
and three assets (3.7%) that are current.
At Fitch's last review there were 15 loans (9.6%) in special
servicing consisting of six loans (3%) in foreclosure, four loans
(1.3%) that were delinquent and five loans (5.3%) that were
current.
Fitch removes from Rating Watch Negative, downgrades, and assigns
Recovery Ratings and Rating Outlooks to these classes as
indicated:
-- $756.3 million class A-M to 'BBsf/LS5' from 'AAAsf/LS3';
Outlook Negative;
-- $519.9 million class A-J to 'CCCsf/RR1' from 'BBBsf/LS4'
-- $75.6 million class B to 'CCCsf/RR1' from 'BBsf/LS5';
-- $94.5 million class C to 'CCCsf/RR1' from 'BBsf/LS5';
-- $56.7 million class D to 'CCsf/RR3' from 'Bsf/LS5';
-- $56.7 million class E to 'CCsf/RR5' from 'Bsf/LS5';
-- $75.6 million class F to 'CCsf/RR6' from 'Bsf/LS5';
-- $75.6 million class G to 'CCsf/RR6' from 'B-sf/LS5';
-- $104 million class H to 'CCsf/RR6' from 'B-sf/LS5';
-- $94.5 million class J to 'Csf/RR6' from 'B-sf/LS5';
-- $75.6 million class K to 'Csf/RR6' from 'B-sf/LS5';
-- $37.8 million class L to 'Csf/RR6' from 'B-sf/LS5';
-- $18.9 million class M to 'Csf/RR6' from 'B-sf/LS5';
-- $28.4 million class N to 'Csf/RR6' from 'CCC/RR1';
-- $18.9 million class O to 'Csf/RR6' from 'CCC/RR6';
-- $18.9 million class P to 'Csf/RR6' from 'CCC/RR6';
-- $18.9 million class Q to 'Csf/RR6' from 'CCC/RR6'.
Additionally, Fitch affirms these classes and revises Rating
Outlooks as indicated:
-- $17.2 million class A-1 at 'AAAsf/LS2'; Outlook Stable;
-- $725.3 million class A-2 at 'AAAsf/LS2'; Outlook Stable;
-- $246.6 million class A-3 at 'AAA/LS2'; Outlook Stable;
-- $72 million class A-AB at 'AAA/LS2'; Outlook Stable;
-- $3,661 million class A-4 at 'AAAsf/LS2'; Outlook to Negative
from Stable;
-- $513.8 million class A-1A to 'AAAsf/LS2'; Outlook Stable.
Fitch does not rate the $110.8 million class S. Fitch withdraws
the ratings of the interest only class X.
GS MORTGAGE: Fitch Issuer Presale Report on 2010-C2 Certs.
----------------------------------------------------------
Fitch Ratings has issued a presale report on GS Mortgage
Securities Trust commercial mortgage pass-through certificates,
series 2010-C2.
Fitch expects to rate the transaction and assign Loss Severity
ratings, with a Stable Outlook:
-- $347,000,000 class A-1 'AAAsf/LS1';
-- $376,072,000 class A-2 'AAAsf/LS1';
-- $723,072,000* class X-A 'AAAsf';
-- $26,293,000 class B 'AAsf/LS4';
-- $29,580,000 class C 'Asf/LS4';
-- $47,110,000 class D 'BBB-sf/LS4';
-- $12,051,000 class E 'BBsf/LS5';
-- $9,860,000 class F 'Bsf/LS5'.
* Notional amount and interest only.
Fitch does not rate classes X-B and G.
The expected ratings are based on information provided by the
issuer as of Dec. 8, 2010.
The certificates represent the beneficial ownership in the trust,
primary assets of which are 43 loans secured by 108 commercial
properties having an aggregate principal balance of approximately
$876.5 million as of the cutoff date. The loans were originated
by Goldman Sachs Commercial Mortgage Capital, L.P., Goldman Sachs
Mortgage Company and Citigroup Global Markets Realty Corporation.
Fitch reviewed a comprehensive sample of the transaction's
collateral, including site inspections on 72.3% of the properties
by balance, cash flow analysis of 86.1% of the pool and asset
summary reviews on 86.1% of the pool.
The transaction has a Fitch stressed debt service coverage ratio
(DSCR) of 1.37 times, a Fitch stressed loan-to value of 89%, and a
Fitch debt yield of 9.57%. Fitch's aggregate net cash flow
represents a variance of 6.9% to issuer cash flows and 5.2% below
full-year 2009 performance.
The transaction is concentrated by loan and sponsor. The largest
10 loans account for 51.7% of the pool and the largest 15 account
for 65%. Additionally, Cole Credit Property Trust III, an
affiliate vehicle of Cole Real Estate Investments, sponsors the
fifth, sixth, and seventh largest loans by balance which account
for 11.9% of the pool.
The Master Servicer will be Wells Fargo Bank, N.A. (rated 'CMS2-'
by Fitch) and the Special Servicer will be Midland Loan Services,
Inc. (rated 'CSS1' by Fitch).
GS MORTGAGE: Moody's Downgrades Ratings on 12 2004-GG2 Certs.
-------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 12 classes,
confirmed one and affirmed seven classes of GS Mortgage Securities
Corp. II, Commercial Mortgage Pass-Through Certificates, Series
2004-GG2:
-- Cl. A-3, Affirmed at Aaa (sf); previously on Sept. 28, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Sept. 28, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-5, Affirmed at Aaa (sf); previously on Sept. 28, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-6, Affirmed at Aaa (sf); previously on Sept. 28, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on Sept. 28, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Confirmed at Aa2 (sf); previously on Nov. 11, 2010 Aa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to A1 (sf); previously on Nov. 11, 2010 Aa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Baa2 (sf); previously on Nov. 11, 2010
A3 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Ba1 (sf); previously on Nov. 11, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to B1 (sf); previously on Nov. 11, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Caa1 (sf); previously on Nov. 11, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Caa3 (sf); previously on Nov. 11, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to Ca (sf); previously on Nov. 11, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Nov. 11, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Nov. 11, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Nov. 11, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Nov. 11, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. O, Downgraded to C (sf); previously on Nov. 11, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. X-P, Affirmed at Aaa (sf); previously on Sept. 28, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. X-C, Affirmed at Aaa (sf); previously on Sept. 28, 2004
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans and interest shortfalls.
The confirmation and affirmations are due to key parameters,
including Moody's loan to value ratio, the Herfindahl Index and
Moody's stressed DSCR, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
On November 11, 2010 Moody's placed 13 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
5.2% of the current balance. At last review, Moody's cumulative
base expected loss was 4.3%. Moody's stressed scenario loss is
10.8% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months
Deal Performance
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 18% to
$2.14 billion from $2.61 billion at securitization. The
Certificates are collateralized by 121 mortgage loans ranging in
size from less than 1% to 8% of the pool, with the top ten loans
representing 43% of the pool. The pool includes four loans with
investment grade credit estimates, representing 24% off the pool.
Eight loans, representing 13% of the pool, have defeased and are
collateralized with U.S. Government securities, essentially the
same as at last review.
Twenty-five loans, representing 11% 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 CRE
Finance Council monthly reporting package. As part of Moody's
ongoing monitoring of a transaction, Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance.
Six loans have been liquidated from the pool, resulting in an
aggregate $16.1 million loss (47% loss severity on average). Nine
loans, representing 6% of the pool, are currently in special
servicing. The largest specially serviced loan is the University
Mall Loan ($36.7 million -- 1.7% of the pool), which is secured by
the borrower's interest in a 560,000 square foot mall located in
Carbondale, Illinois. The loan was transferred to special
servicing in July 2008 due to imminent default. The two largest
tenants at the center were Steve and Barry's and Goody's, both of
which filed for bankruptcy protection in 2008 and subsequently
vacated the center. The master servicer recognized a
$18.7 million appraisal reduction on this property in November
2010.
The remaining eight specially serviced loans are a mix of property
types. The master servicer has recognized an aggregate
$32.8 million appraisal reduction for six of the remaining
specially serviced loans. Moody's estimates an aggregate $52
million loss (52% expected loss on average) for all of the
specially serviced loans.
Moody's has assumed a high default probability for ten poorly
performing loans representing 5% of the pool and has estimated an
aggregate $19.9 million loss (20% expected loss based on an 50%
default probability) from these troubled loans.
Based on the most recent remittance statement, Classes H through
P have experienced cumulative interest shortfalls totaling
$3.0 million. Moody's anticipates that the pool will continue
to experience interest shortfalls because of the high exposure
to specially serviced loans. Interest shortfalls are caused by
special servicing fees, including workout and liquidation fees,
appraisal subordinate entitlement reductions and extraordinary
trust expenses.
Moody's was provided with full year 2009 operating results for 81%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 96% compared to 105% at last
review. Moody's net cash flow reflects a weighted average haircut
of 10% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.7%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.44X and 1.17X, respectively, compared to
1.33X and 1.08X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 35 compared to 38 at last review.
The largest loan with a credit estimate is the Grand Canal Shoppes
at the Venetian Loan ($169.6 million -- 7.9% of the pool), which
represents a 45% pari-passu interest in a first mortgage loan.
The loan is secured by a 537,000 SF mall located within the
Venetian Casino Resort in Las Vegas, Nevada. The property was 94%
leased as of June 2010 compared to 100% at last review. The loan
sponsor is GGP. At last review, the loan was in special servicing
due to maturity default, however, the loan has been extended
through May 2014. Due to the loan's status in special servicing,
there are no reported financials for 2009. Moody's credit
estimate and stressed DSCR are A3 and 1.32X, the same as at last
review.
The second loan with a credit estimate is the Daily News Building
($141.9 million -- 6.6% of the pool), which is secured by a
1.1 million SF office building located in the Grand Central area
of New York City. The property was 98% leased as of September
2010 compared to 99% at last review. The largest tenants at the
property include United Nations Population Fund (10% of the net
rentable area; lease expiration December 2010), WPIX, Inc. /
Tribune (9% of the NRA; lease expiration March 2012) and Martin,
Clearwater & Bell (3% of the NRA; lease expiration December 2017).
Performance at the property has improved since securitization.
There is near term rollover risk, however, this is partially
mitigated by low in place average rents compared to current market
rents. The property is also encumbered by a $56 million B Note.
The loan sponsor is SL Green Realty Corp. Moody's credit estimate
and stressed DSCR are Baa1 and 1.69X, respectively, compared to
Baa2 and 1.60X at last review.
The third loan with a credit estimate is the Garden State Plaza
Loan ($130 million -- 6.1% of the pool), which represents a 25%
pari-passu interest in a first mortgage loan. The loan is secured
by a 2.0 million SF super-regional mall located in Paramus, New
Jersey. The mall is anchored by Macy's, Nordstrom, J.C. Penney,
Neiman Marcus and Lord & Taylor. The property was 98% leased as
of June 2010 compared to 96% at last review. Property performance
has improved slightly since last review. The loan is interest-
only for its entire 10-year term. The loan sponsors are Westfield
America Inc. and affiliates of Prudential Assurance Co. Ltd.
Moody's credit estimate and stressed DSCR are A1 and 1.47X,
respectively, compared to A1 and 1.44X at last review.
The fourth loan with a credit estimate is the 111 Eight Avenue
Loan ($74.9 million -- 3.5% of the pool), which represents a 17.8%
pari-passu interest in a first mortgage loan. The loan is secured
by a 2.9 million SF office and telecom building located in the
Chelsea area of New York City. The property was 99% leased as of
March 2010, essentially the same as at last review. The three
largest tenants at the property are Google (8% of the NRA; lease
expiration February 2021), Sprint (9% of the NRA; lease expiration
December 2014) and CCH Legal Information (6% of the NRA; lease
expirations in July 2015 and February 2019). Performance has
improved since last review due to increased rental revenues and
amortization. The property is also encumbered by a B Note, a
portion of which is the collateral for the non-pooled and non-
Moody's rated Classes OEA-B1 and OEA-B2. The loan sponsors are
Jamestown and the New York Common Retirement Fund. Moody's credit
estimate and stressed DSCR are Aa1 and 1.94X, respectively,
compared to Baa1 and 1.49X at last review.
The top three performing conduit loans represent 12% of the pool
balance. The largest loan is the Stony Point Fashion Park Loan
($105.6 million -- 4.9% of the pool), which is secured by a
665,000 SF regional mall located in Richmond, Virginia. The mall
is anchored by Dillard's, Dick Sporting Goods, and Saks Fifth Ave.
The property was 72% leased as of June 2010 compared to 87% at
last review. The mall was constructed in 2003 and performance has
declined as the leases for several tenants expired in 2008 and the
tenants did not renew. Moody's LTV and stressed DSCR are 123% and
0.77X, respectively, compared to 118% and 0.80X at last review.
The second largest loan is the Destin Commons Loan ($77.2 million
-- 3.6% of the pool), which is secured by a 480,000 SF regional
shopping center located in Destin, Florida. The shopping center
is anchored by Belk Resort Store, Rave Motion Pictures, and Bass
Pro Shops. The property was 100% leased as of June 2010, the same
as at last review. Property performance has improved since last
review. Moody's LTV and stressed DSCR are 96% and 1.02X,
respectively, compared to 99% and 0.98X at last review.
The third largest loan is the Town & Country Resort Loan
($63 million -- 2.9% of the pool), which is secured by a 966-room
full service hotel located in San Diego, California. Occupancy
for the trailing 12 months ending June 2010 was 59% compared to
65% at last review. Moody's valuation at last review reflected
concerns over the declining market conditions of the property,
however, the property performance has been stable despite the
decline in occupancy since last review. The loan has amortized 3%
since last review. Moody's LTV and stressed DSCR are 87% and
1.36X, respectively, compared to 101% and 1.18X at last review.
GS MORTGAGE: Moody's Puts (P)B2 (sf) Rating on Class F Certificate
------------------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to nine
classes of CMBS securities, issued by GS Mortgage Securities Trust
2010-C2, Commercial Mortgage Pass-Through Certificates Series
2010-C2.
-- US$347M Cl. A-1 Certificate, Assigned (P)Aaa (sf)
-- US$376.072M Cl. A-2 Certificate, Assigned (P)Aaa (sf)
-- Cl. X-A Certificate, Assigned (P)Aaa (sf)
-- Cl. X-B Certificate, Assigned (P)Aaa (sf)
-- US$26.293M Cl. B Certificate, Assigned (P)Aa2 (sf)
-- US$29.58M Cl. C Certificate, Assigned (P)A2 (sf)
-- US$47.11M Cl. D Certificate, Assigned (P)Baa3 (sf)
-- US$12.051M Cl. E Certificate, Assigned (P)Ba2 (sf)
-- US$9.86M Cl. F Certificate, Assigned (P)B2 (sf)
Ratings Rationale
The Certificates are collateralized by 43 fixed rate loans secured
by 108 properties. The ratings are based on the collateral and
the structure of the transaction.
Moody's CMBS ratings methodology combines both commercial real
estate and structured finance analysis. Based on commercial real
estate analysis, Moody's determines the credit quality of each
mortgage loan and calculates an expected loss on a loan specific
basis. Under structured finance, the credit enhancement for each
certificate typically depends on the expected frequency, severity,
and timing of future losses. Moody's also considers a range of
qualitative issues as well as the transaction's structural and
legal aspects.
The credit risk of loans is determined primarily by two factors:
1) Moody's assessment of the probability of default, which is
largely driven by each loan's DSCR, and 2) Moody's assessment of
the severity of loss upon a default, which is largely driven by
each loan's LTV ratio. The Moody's Actual DSCR of 1.74X is higher
than the 2007 conduit/fusion transaction average of 1.31X. The
Moody's Stressed DSCR of 1.21X is higher than the 2007
conduit/fusion transaction average of 0.92X. Moody's Trust LTV
ratio of 88.7% is lower than the 2007 conduit/fusion transaction
average of 110.6%. Moody's Total LTV ratio (inclusive of
subordinated debt) of 94.8% is also considered when analyzing
various stress scenarios for the rated debt.
The transaction benefits from six loans, representing
approximately 16.1% of the pool balance in aggregate, assigned an
investment grade credit estimate. Loans assigned investment grade
credit estimates are not expected to contribute any loss to a
transaction in low stress scenarios, but are expected to
contribute minimal amounts of loss in high stress scenarios.
Property type composition and correlations also affect transaction
performance. Loans collateralized solely, or in part, by retail
properties or land improved with retail properties represent 49.0%
of the pool. Despite a challenging retail environment, the loans
collateralized by retail properties experienced low historical net
operating income volatility. However, property type
concentrations increase asset correlations which affect pool
default and loss distributions. Loans collateralized solely, or
in part, by office properties represent 43.1% of the pool.
Historically, office properties have experienced a high degree of
net operating income volatility compared to other commercial real
estate sectors.
Moody's analysis employs the excel-based CMBS Conduit Model v2.50
which derives credit enhancement levels based on an aggregation of
adjusted loan level proceeds derived from Moody's loan level DSCR
and LTV ratios. Major adjustments to determining proceeds include
loan structure, property type, sponsorship and diversity.
The V Score for this transaction is assessed as Medium, the same
as the V score assigned to the U.S. Conduit and CMBS sector. This
reflects typical volatility with respect to the critical
assumptions used in the rating process as well as an average
disclosure of securitization collateral and ongoing performance.
Moody's V Scores provide a relative assessment of the quality of
available credit information and the potential variability around
the various inputs to a rating determination. The V Score ranks
transactions by the potential for significant rating changes owing
to uncertainty around the assumptions due to data quality,
historical performance, the level of disclosure, transaction
complexity, the modeling, and the transaction governance that
underlie the ratings. V Scores apply to the entire transaction
(rather than individual tranches).
Moody's Parameter Sensitivities: If Moody's value of the
collateral used in determining the initial rating were decreased
by 5%, 15%, or 23%, the model-indicated rating for the currently
rated Aaa classes would be Aa1, Aa2, A1, respectively. Parameter
Sensitivities are not intended to measure how the rating of the
security might migrate over time; rather they are designed to
provide a quantitative calculation of how the initial rating might
change if key input parameters used in the initial rating process
differed. The analysis assumes that the deal has not aged.
Parameter Sensitivities only reflect the ratings impact of each
scenario from a quantitative/model-indicated standpoint.
Qualitative factors are also taken into consideration in the
ratings process, so the actual ratings that would be assigned in
each case could vary from the information presented in the
Parameter Sensitivity analysis.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
HARTFORD MEZZANINE: Fitch Cuts Ratings on Three Classes of Notes
----------------------------------------------------------------
Fitch Ratings has downgraded three and affirmed nine classes of
Hartford Mezzanine Investors I CRE CDO 2007-1 reflecting Fitch's
increased base case loss expectation of 31%. Fitch's performance
expectation incorporates prospective views regarding commercial
real estate market value and cash flow declines.
The downgrades to the bottom three rated classes are a result
of the increased base case expected loss of 31% from 28.4% at
last review; and decreased credit enhancement due to realized
losses. Total realized losses since last review are approximately
$32 million. As of the Nov. 23, 2010 trustee report, total
collateral was $438.2 million compared to total liabilities of
$463.5 million, leaving the transaction under-collateralized.
HMI I 2007-1 is a commercial real estate collateralized debt
obligation co-managed by Hartford Investment Management Company
and KeyBank Real Estate Equity Capital Inc. The transaction has a
five-year reinvestment period that ends in August 2012. As of the
Nov. 23, 2010 trustee report, all overcollateralization and
interest coverage ratios were in compliance.
Under Fitch's methodology, approximately 54.6% 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 8.7% from, generally, trailing 12-month second quarter
2010.
The largest component of Fitch's base case loss expectation is a
mezzanine loan secured by interests in a portfolio of luxury
hospitality properties located in five states and the Caribbean.
The portfolio has undergone extensive renovations over the past
five years; however, cash flow remains well below expectations.
Fitch modeled a term default and full loss on this overleveraged
position in its base case scenario.
The next largest component of Fitch's base case loss expectation
is a junior mezzanine loan secured by interests in a 2.8 million
square foot office portfolio. The loan matures early next year
and the special servicer is negotiating a modification that would
result in significant paydown of the senior debt. The remaining
portfolio would still be overleveraged, and Fitch modeled a
substantial loss in its base case scenario.
The third largest component of Fitch's base case loss expectation
is a whole loan secured by an office park located in Costa Mesa,
California. While the property is 100% leased, a large tenant
(31% of NRA) is marketing its space for sublease. Fitch modeled a
term default with a significant loss in its base case scenario.
This transaction was analyzed according to the 'Surveillance
Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate
Transactions', which applies stresses to property cash flows and
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-1 through G notes' credit
characteristics are generally consistent with the rating
categories assigned below.
The ratings for classes H through K are based on a deterministic
analysis, which considers Fitch's base case loss expectation for
the pool, and the current percentage of defaulted assets and Fitch
Loans of Concern factoring in anticipated recoveries relative to
each class' credit enhancement. Based on this analysis, classes H
and J are consistent with the 'CCC' rating category while class K
is consistent with the 'CC' rating category. Fitch's base case
loss expectation of 31% exceeds these classes' respective current
credit enhancement levels.
The Rating Outlooks for classes A-1 and A-2 are revised to Stable
from Negative reflecting the classes senior positions in the
capital stack, and positive cushion in the cash flow modeling.
Classes A-3 through G maintain a Negative Rating Outlook
reflecting Fitch's expectation of further negative credit
migration of the underlying collateral. These classes maintain
Loss Severity (LS) 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.
Classes H through K are assigned Recovery Ratings to provide a
forward-looking estimate of recoveries on currently distressed or
defaulted structured finance securities. Recovery Ratings are
calculated using Fitch's cash flow model, and incorporate Fitch's
current 'B' stress expectation for default and recovery rates, the
'B' stress US$ LIBOR up-stress, and a 24-month recovery lag. 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.
Classes H through K are assigned a Recovery Ratings of 'RR6' as
the present value of the recoveries is less than 10% of the
class's principal balance.
Fitch has affirmed and revised Outlooks for these classes, as
indicated:
-- $100,951,320 class A-1 at 'Asf/LS4'; Outlook revised to
Stable from Negative;
-- $50,000,000 class A-2 at 'BBBsf/LS5'; Outlook revised to
Stable from Negative;
-- $52,500,000 class A-3 at 'BBBsf/LS5'; Outlook Negative;
-- $35,000,000 class B at 'BBsf/LS5'; Outlook Negative;
-- $10,000,000 class C a at 'BBsf/LS5'; Outlook Negative;
-- $10,000,000 class D at 'BBsf/LS5'; Outlook Negative;
-- $15,000,000 class E at 'BBsf/LS5'; Outlook Negative;
-- $25,000,000 class F at 'BBsf/LS5'; Outlook Negative;
-- $20,000,000 class G at 'Bsf/LS5'; Outlook Negative.
Fitch has downgraded and assigned RR ratings to these classes, as
indicated:
-- $21,250,000 class H to 'CCCsf/RR6' from 'Bsf/LS5';
-- $23,750,000 class J to 'CCCsf/RR6' from 'Bsf/LS5';
-- $38,750,000 class K to 'CCsf/RR6' from 'CCCsf/RR6'.
HARTFORD MEZZANINE: Moody's Downgrades Ratings on 11 Notes
----------------------------------------------------------
Moody's has affirmed one and downgraded eleven classes of Notes
issued by Hartford Mezzanine Investors I -- CRE CDO 2007-1, Ltd.,
due to the deterioration in the credit quality of the underlying
portfolio as evidenced by an increase in the weighted average
rating factor and the sensitivity of the transaction to recovery
rates. The rating action is the result of Moody's on-going
surveillance of commercial real estate collateralized debt
obligation transactions.
-- Cl. A-1, Affirmed at Aaa (sf); previously on April 20, 2009
Confirmed at Aaa (sf)
-- Cl. A-2, Downgraded to Aa1 (sf); previously on April 20, 2009
Confirmed at Aaa (sf)
-- Cl. A-3, Downgraded to A2 (sf); previously on April 20, 2009
Downgraded to Aa3 (sf)
-- Cl. B, Downgraded to Baa2 (sf); previously on April 20, 2009
Downgraded to A3 (sf)
-- Cl. C, Downgraded to Ba1 (sf); previously on April 20, 2009
Downgraded to Baa2 (sf)
-- Cl. D, Downgraded to Ba2 (sf); previously on April 20, 2009
Downgraded to Baa3 (sf)
-- Cl. E, Downgraded to Ba3 (sf); previously on April 20, 2009
Downgraded to Baa3 (sf)
-- Cl. F, Downgraded to B3 (sf); previously on April 20, 2009
Downgraded to Ba2 (sf)
-- Cl. G, Downgraded to Caa1 (sf); previously on April 20, 2009
Downgraded to B1 (sf)
-- Cl. H, Downgraded to Caa2 (sf); previously on April 20, 2009
Downgraded to B2 (sf)
-- Cl. J, Downgraded to Caa3 (sf); previously on April 20, 2009
Downgraded to Caa1 (sf)
-- Cl. K, Downgraded to Caa3 (sf); previously on April 20, 2009
Downgraded to Caa2 (sf)
Ratings Rationale
Hartford Mezzanine Investors I -- CRE CDO 2007-1, Ltd., is a
revolving cash CRE CDO transaction backed by a portfolio of
mezzanine debt (49.6% of the pool balance), whole loans (39.3%),
B-Note debt (8.7%), and commercial mortgage backed securities
(2.4%). As of the November 22, 2010 Trustee report, the aggregate
Note balance of the transaction has decreased to $463.5 million
from $500.0 million at issuance, with the paydown directed to the
Class A-1 Notes. The revolving period is set to end August 2012.
There is one asset with par balance of $9.0 million (2.2% of the
current collateral pool balance) that is classified as a Defaulted
Security as of the November 22, 2010 Trustee report. Moody's
expects moderate losses from this Defaulted Security to occur once
they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 6,520 compared to 2,818 at
last review. The distribution of current ratings and credit
estimates is: A1-A3 (0.0% compared to 3.0% at last review), Baa1-
Baa3 (2.4% compared to 2.0% at last review), Ba1-Ba3 (1.8%
compared to 17.2% at last review), B1-B3 (13.7% compared to 75.7%
at last review), and Caa1-C (82.1% compared to 2.2% at last
review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 6.8, reflecting
the remaining revolving period, compared to 8.5 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 29.8% compared to 23.5% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
99.9% compared to 22.6% at last review. The high MAC is due to a
small number of collateral names concentrated in higher risk
collateral.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 29.8% to 19.8% or up to 39.8% would result in average
rating movement on the rated tranches of 0 to 6 notches downward
or 0 to 4 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
HEDGED MUTUAL: Moody's Takes Rating Actions on Two Series
---------------------------------------------------------
Moody's Investors Service has taken rating actions on two series
of notes issued by Hedged Mutual Fund Fee Trusts. These
transactions represent securitizations of 12(b)1 fees and
contingent deferred sales charges generated by specified pools of
mutual fund shares commonly known as "B" shares. Citibank, N.A.,
the sponsor, has been a major financier of such fees.
Complete rating actions are:
Issuer: Hedged Mutual Fund Fee Trust 2005-1
-- Ser. 2005-1 Placed Under Review for Possible Upgrade;
previously on August 20, 2009 Downgraded to Baa1 (sf)
Issuer: Hedged Mutual Fund Fee Trust 2005-2
-- Ser. 2005-2 Downgraded to Ca (sf); previously on August 20,
2009 Downgraded to Caa2 (sf)
Ratings Rationale
The rating actions are based on a review of cash flow modeling
results. Volatility in the market values of most stocks and bonds
in major financial markets this year affected the cash flows
expected to be received from the mutual fund shares underlying
these transactions. Since changes in the current value of a fund
alter the future stream of 12b1 fees, which are the primary source
of cash flow in these transactions, the changes in market values
have affected the fees expected to be generated by those funds.
These are seasoned deal which no longer benefit from hedges in the
form of put options on selected equity indices, that have expired.
Series 2005-1, which is placed on review for possible upgrade, was
previously downgraded to Baa1 from A3 on August 20, 2009, due to
the sharp decline in market values of most stocks and bonds in
major financial markets in latter 2008. Since then, this deal has
recovered well and periodic modeling results in 2010 have
consistently shown strength in excess of the current rating. The
transaction is steadily paying down and none of the underlying
assets which remain in the pool will autoconvert (become
ineligible to produce fee income) for roughly one or more years.
The legal final of April 2013 suggests there is considerable time
available for repayment.
Series 2005-2, which is being downgraded, originally consisted of
assets which included assets subordinate to Series 2003-3. These
subordinated assets were more at risk for market volatility.
Although Series 2003-3 has paid off and these assets are now
providing cash flow to Series 2005-2, they did not have sufficient
remaining life to recover from the 2008/2009 market downturn. The
rated ABS is currently paying down steadily but due to the age of
the assets, cash flow will attenuate to zero over the course of
2011. As such, the rated ABS will likely experience a substantial
write-off at legal final in October 2011.
Both of the transactions with rating actions listed above are
wrapped by a financial guarantor (FGIC). The current ratings on
the securities are consistent with Moody's practice of rating
insured securities at the higher of (1) the guarantor's insurance
financial strength rating and (2) the underlying rating, based on
Moody's modified approach to rating structured finance securities
wrapped by financial guarantors.
The financial guarantor, FGIC, does not carry a current Moody's
rating. As part of evaluating the current rating for the
security, Moody's Investors Service reviewed the underlying
rating. The underlying rating reflects the intrinsic credit
quality of the security in the absence of the guarantee.
Moody's Investors Service did receive and take into account a
third party due diligence report on the underlying assets related
to the monitoring of this transaction in the past six months.
HERTZ CORPORATION: Moody's Confirms Ratings on Two Notes
--------------------------------------------------------
Moody's Investors Service announced that it has confirmed the
ratings of these certificates issued by The Hertz Corporation
Debenture Backed Series 2003-15:
-- US$25,000,000 of 7.00% Class A Callable Units due June 1,
2012; Confirmed at B3; Previously on October 1, 2010 B3,
Placed on review downgrade
-- US$25,000,000 Notional Amount of Interest-Only 0.581% Class
B Callable Units Due June 1, 2012; Confirmed at B3;
Previously on October 1, 2010 B3, Placed on review downgrade
The transaction is a structured note whose rating is based on the
rating of the Underlying Securities and the legal structure of the
transaction. The rating action is a result of the change of the
rating of 7.625% debentures due June 1, 2012, issued by The Hertz
Corporation, which were confirmed by Moody's on November 30, 2010.
INDYMAC INDX: Moody's Downgrades Ratings on 15 Tranches
-------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 15
tranches from two RMBS transactions issued by IndyMac. The
collateral backing these transactions primarily consists of
first-lien, adjustable-rate, negative amortization residential
mortgages.
Ratings Rationale
The actions are a result of the rapidly deteriorating performance
of option arm pools in conjunction with macroeconomic conditions
that remain under duress. The actions reflect Moody's updated
loss expectations on option arm pools issued in 2005.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: IndyMac INDX Mortgage Loan Trust 2005-AR14
-- Cl. 1-A-1A, Downgraded to Caa1 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-1B2, Downgraded to C (sf); previously on Jan. 27,
2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1A, Downgraded to B3 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1B, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1C, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: IndyMac INDX Mortgage Loan Trust 2005-AR2
-- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-X-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1A, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Aa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1B, Downgraded to C (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2B, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-4, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
JP MORGAN: Fitch Downgrades Ratings on 10 2006-LDP7 Certs.
----------------------------------------------------------
Fitch Ratings has downgraded 10 classes of J.P. Morgan Chase
Commercial Mortgage Securities Corp., series 2006-LDP7 commercial
mortgage pass-through certificates, due to further deterioration
of performance, most of which involves increased losses on the
specially serviced loans.
The downgrades reflect an increase in Fitch expected losses across
the pool. Fitch modeled losses of 7.30% of the remaining pool;
expected losses of the original pool are at 7.5%, including losses
already incurred to date. Fitch has designated 86 loans (30%) as
Fitch Loans of Concern, which includes 25 specially serviced loans
(10.4%). Fitch expects classes K through NR may be fully depleted
from losses associated with the specially serviced assets and
class J will also be affected.
As of the November 2010 distribution date, the pool's aggregate
principal balance has decreased by approximately 3.5% to
$3.8 billion from $3.9 billion at issuance. Interest shortfalls
totaling $6.4 million are affecting classes J through NR.
The largest contributor to loss is a specially serviced loan
(1.3%) secured by a 393,533 square foot office property located in
Atlanta, GA. The collateral consists of three buildings built in
1980 and renovated in 1997. The loan transferred to special
servicing in June 2010 due to imminent default. Two of the top
three tenants, Great West occupying 102,693 sf (26% of GLA) and
Xerox Corp. occupying 59,476 sf (15% of the GLA) vacated at lease
expiration. The property is 40% occupied per the September 2010
rent roll. The special servicer is proceeding with foreclosure.
The second largest contributor to loss is a specially serviced
loan (1.4%) secured by a 552,927 sf office property located in
Shoreview, MN, approximately 12 miles north of the Minneapolis
CBD. The collateral consists of five buildings built in 1973 and
most recently renovated in 2005. The loan was transferred to
special servicing in October 2009 due to imminent default. The
largest tenant, occupying 41% of the net rentable area, vacated at
lease expiration. The property is 58% occupied per the September
2010 rent roll. The special servicer is working towards a deed in
lieu of foreclosure.
The third largest contributor to loss (5%) is a 663,923 sf retail
center located in Huntington Beach, CA. The property underwent a
major redevelopment in 2004, which transformed the property from
an indoor mall to an open-air lifestyle center. Major tenants
include Burlington Coat Factory (19.2% of NRA) and Kohl's (12.6%
of NRA). There is limited near term roll during 2010-2011. As of
the September 2010 rent roll, the property was 86.7% occupied,
compared to 93.3% at issuance. The decline in occupancy is a
result of tenant vacancies which included the loss of Circuit City
which vacated in 2009. The vacant Circuit City space was recently
leased in September 2010 to Whole Foods Market with lease
expiration in 2030. As of year-end 2009 the reported debt service
coverage ratio was 1.53 times.
Fitch downgrades, revises Outlooks and assigns Recovery ratings:
-- $78.8 million class B to 'BBB-/LS5' from 'BBB/LS5'; Outlook
Stable;
-- $44.3 million class C to 'BB/LS5' from 'BBB-/LS5'; Outlook
Stable;
-- $39.4 million class E to 'B/LS5' from 'BB/LS5'; Outlook
Negative;
-- $39.4 million class F to 'B/LS5' from 'BB/LS5'; Outlook
Negative;
-- $49.2 million class G to 'CCC/RR1' from 'B/LS5';
-- $39.4 million class H to 'CCC/RR1' from 'B-/LS5';
-- $44.3 million class J to 'CC/RR2' from 'B-/LS5';
-- $14.8 million class K to 'C/RR6' from 'B-/LS5';
-- $14.8 million class L to 'C/RR6' from 'B-/LS5';
-- $19.7 million class M to 'C/RR6' from 'B-/LS5'.
Fitch also affirms these classes and revises the Outlooks and LS
ratings as indicated:
-- $243.7 billion class A-2 at 'AAA/LS2'; Outlook Stable;
-- $75 million class A-3A at 'AAA/LS2'; Outlook Stable;
-- $100 million class A-3FL at 'AAA/LS2'; Outlook Stable;
-- $94.1 billion class A-3B at 'AAA/LS2'; Outlook Stable;
-- $1,616.1 million class A-4 at 'AAA/LS2'; Outlook Stable;
-- $170.2 million class A-SB at 'AAA/LS2'; Outlook Stable.
-- $338.5 million class A-1A at 'AAA/LS2'; Outlook Stable;
-- $393.9 million class A-M at 'AAA/LS3'; Outlook Stable;
-- $310.3 million class A-J at 'A/LS4' Outlook Stable;
-- $14.8 million class D at 'BB/LS5'; Outlook Negative.
Class A-1 has paid in full. Fitch does not rate classes N, O, P,
and NR.
Fitch withdraws the rating on the interest-only class X.
JP MORGAN: Moody's Downgrades Ratings on 12 2004-CIBC10 Certs.
--------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 12 classes and
affirmed ten classes of J.P. Morgan Chase Commercial Mortgage
Securities Corp., Commercial Mortgage Pass-Through Certificates,
Series 2004-CIBC10:
-- Cl. A-3, Affirmed at Aaa (sf); previously on Dec. 7, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Dec. 7, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-5, Affirmed at Aaa (sf); previously on Dec. 7, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-6, Affirmed at Aaa (sf); previously on Dec. 7, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on Dec. 7, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-J, Downgraded to Aa1 (sf); previously on Oct. 7, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to A2 (sf); previously on Oct. 7, 2010 Aa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Baa1 (sf); previously on Oct. 7, 2010 A1
(sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Baa2 (sf); previously on Oct. 7, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Baa3 (sf); previously on Oct. 7, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Ba3 (sf); previously on Oct. 7, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Caa3 (sf); previously on Oct. 7, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Ca (sf); previously on Oct. 7, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Oct. 7, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Oct. 7, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Oct. 7, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Oct. 7, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Affirmed at C (sf); previously on Nov 19, 2009
Downgraded to C (sf)
-- Cl. P, Affirmed at C (sf); previously on Nov 19, 2009
Downgraded to C (sf)
-- Cl. Q, Affirmed at C (sf); previously on Nov 19, 2009
Downgraded to C (sf)
-- Cl. X-1, Affirmed at Aaa (sf); previously on Dec. 7, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. X-2, Affirmed at Aaa (sf); previously on Dec. 7, 2004
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The affirmations are due to key
parameters, including Moody's loan to value ratio, Moody's
stressed debt service coverage ratio and the Herfindahl Index,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain the existing rating.
On October 7, 2010, Moody's placed 12 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
8.1% of the current balance. At last review, Moody's cumulative
base expected loss was 3.9%. Moody's stressed scenario loss is
15.9% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a pay down analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
(Herf), a measure of loan level diversity, is a primary
determinant of pool level diversity and has a greater impact on
senior certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade underlying ratings is melded with the
conduit model credit enhancement into an overall model result.
Fusion loan credit enhancement is based on the credit estimate of
the loan which corresponds to a range of credit enhancement
levels. Actual fusion credit enhancement levels are selected
based on loan level diversity, pool leverage and other
concentrations and correlations within the pool. Negative
pooling, or adding credit enhancement at the underlying rating
level, is incorporated for loans with similar credit estimates in
the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated November 17, 2009.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the ratings.
Deal Performance
As of the November 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 18% to
$1.60 billion from $1.96 billion at securitization. The
Certificates are collateralized by 190 mortgage loans ranging in
size from less than 1% to 6% of the pool, with the top ten loans
representing 23% of the pool. Twenty five loans, representing 18%
of the pool, have defeased and are collateralized with U.S.
Government securities, compared to 19% at last review.
Thirty-three loans, representing 13% 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 CRE Finance Council 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.
Five loans have been liquidated from the pool, resulting in an
aggregate realized loss of $296,565 (1% loss severity on average).
Thirteen loans, representing 13% of the pool, are currently in
special servicing. The largest specially serviced loan is the
Continental Plaza Loan ($88.0 million - 5.5% of the pool). The
loan is secured by three office buildings and a single story
retail center totaling 640,000 square feet and is located in
Hackensack, New Jersey. The property was transferred to special
servicing in April 2009 due to payment default. The master
servicer recognized a $25.5 million appraisal reduction for the
loan in June 2010.
The remaining 12 specially serviced loans are represented by a mix
of property types. The master servicer has recognized an
aggregate $32.5 million appraisal reduction for 10 of the
remaining specially serviced loans. Moody's has estimated an
aggregate $91.4 million loss (42% expected loss on average) for
all of the specially serviced loans.
Moody's has assumed a high default probability for 11 poorly
performing loans representing 4% of the pool and has estimated an
aggregate $14.1 million loss (20% expected loss based on a 50%
probability default) from these troubled loans. Moody's rating
action recognizes potential uncertainty around the timing and
magnitude of loss from these troubled loans.
Moody's was provided with full year 2009 operating results for 88%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 93%, essentially the same as at
Moody's prior review. Moody's net cash flow reflects a weighted
average haircut of 11.2% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.31X and 1.14X, respectively, compared to
1.35X and 1.14X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 61 compared to 68 at Moody's prior review.
The top three performing conduit loans represent 7% of the pool
balance. The largest loan is The Walden Pond at East Moriches
Loan ($35.8 million -- 2.2% of the pool), which is secured by a
324 unit multifamily property located in East Moriches, New York.
The property was 96% leased as of December 2009 compared to 93% at
last review. Moody's LTV and stressed DSCR are 110% and 0.83X,
respectively, compared to 103% and 0.89X at last review.
The second largest loan is the Sherman Tower Center Loan
($35.6 million -- 2.2% of the pool), which is secured by a
285,000 SF anchored retailing shopping center located in Sherman,
Texas. The center is part of a larger 678,000 SF retail center.
The center is anchored by Target, Home Depot and Wal-Mart. The
property was 100% leased as of June 2010, the same as at last
review. Moody's LTV and stressed DSCR are 104% and 0.94X,
respectively, compared to 99% and 0.98X at last review.
The third largest loan is the Fountain Square Loan ($34.3 million
-- 2.1% of the pool), which is secured by three office buildings,
totaling 242,100 SF, located in Boca Raton, Florida. The
properties were 82% leased as of June 2010, the same as at last
review. Moody's LTV and stressed DSCR is 113% and 0.86X,
respectively, compared to 110% and 0.88X at last review.
JP MORGAN: Moody's Downgrades Ratings on 13 Tranches
----------------------------------------------------
Moody's Investors Service has downgraded the ratings of 13
tranches, and confirmed the ratings of 9 tranches, from 4 RMBS
transactions issued by J.P. Morgan. The collateral backing this
deal primarily consists of first-lien, fixed and adjustable-rate
subprime residential mortgages.
Ratings Rationale
The actions reflect the continued performance deterioration in
Subprime pools in conjunction with home price and unemployment
conditions that remain under duress. The actions reflect Moody's
updated loss expectations on subprime pools issued from 2005 to
2007.
To assess the rating implications of the updated loss levels on
subprime RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The principal methodology used in this rating was "Subprime RMBS
Loss Projection Update: February 2010", published in February
2010. In addition, for the deals affected by the actions, when
calculating the rate of new delinquencies, Moody's took into
account loans that were re -- Classified from delinquent to
current due to modification in order to not understate the rate of
new delinquencies.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Complete rating actions are:
Issuer: J.P. Morgan Mortgage Acquisition Corp. 2006-RM1
-- Cl. A-1A, Downgraded to Caa2 (sf); previously on Jan. 13,
2010 B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1B, Downgraded to C (sf); previously on Jan. 13, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 13, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Confirmed at Ca (sf); previously on Jan. 13, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Confirmed at Ca (sf); previously on Jan. 13, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Confirmed at Ca (sf); previously on Jan. 13, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: J.P. Morgan Mortgage Acquisition Corp. 2006-WMC3
-- Cl. A-1SS, Downgraded to B2 (sf); previously on Jan. 13, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1MZ, Downgraded to C (sf); previously on Jan. 13, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Ca (sf); previously on Jan. 13, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Confirmed at Ca (sf); previously on Jan. 13, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Confirmed at Ca (sf); previously on Jan. 13, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: J.P. Morgan Mortgage Acquisition Trust 2006-NC2
-- Cl. A-1A, Downgraded to Aa3 (sf); previously on Jan. 13, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1B, Downgraded to Baa3 (sf); previously on Jan. 13,
2010 A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Confirmed at Baa2 (sf); previously on Jan. 13, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to B3 (sf); previously on Jan. 13, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to Caa2 (sf); previously on Jan. 13, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. M-1, Downgraded to C (sf); previously on Jan. 13, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: J.P. Morgan Mortgage Acquisition Trust 2006-WMC4
-- Cl. A-1A, Downgraded to Caa3 (sf); previously on Jan. 13,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 13, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Confirmed at Ca (sf); previously on Jan. 13, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Confirmed at Ca (sf); previously on Jan. 13, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Confirmed at Ca (sf); previously on Jan. 13, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
JPMORGAN COMMERCIAL: S&P Affirms Ratings on Four 1998-C6 Certs.
---------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on four
classes of mortgage pass-through certificates from JPMorgan
Commercial Mortgage Finance Corp.'s series 1998-C6.
S&P's affirmed ratings reflect its analysis of the remaining
collateral in the pool, the transaction structure, and the
liquidity available to the trust.
S&P's analysis included a review of the credit characteristics of
all of the remaining loans. Using servicer-provided financial
information, Standard & Poor's calculated an adjusted debt service
coverage of 1.82x and a loan-to-value ratio of 34.3%. The
adjusted DSC and LTV calculations exclude one specially serviced
loan ($24.9 million, 37.2%), for which S&P separately estimated a
loss.
Credit Considerations
As of the November 2010 remittance report, one loan
($24.9 million, 37.2%) was with the special servicer, CWCapital
Asset Management LLC, which S&P discuss in detail below.
The Court at Deptford I loan ($26.7 million total exposure, 37.2%)
is the one loan currently with the special servicer and is the
largest loan in the pool. The loan is secured by a 361,945-sq.-
ft. anchored retail center in Deptford Township, New Jersey. The
loan was transferred to the special servicer on Feb. 20, 2009,
due to imminent default since two large tenants, Sam's Club (33%
of the net rentable area) and Circuit City (9%), vacated the
subject property prior to their lease expirations. Sam's Club
moved to a new competing shopping center. A forbearance agreement
has been executed and a receiver was appointed in April 2010. The
special servicer is evaluating the asset while the receiver
continues to lease and manage the property. The master servicer
has advanced nearly $2.0 million on the loan to date. In
addition, an appraisal reduction amount (ARA) of $10.5 million,
based on a June 2010 appraisal of $17.4 million, is in effect
against the loan. The master servicer has not made a
nonrecoverable determination on this loan to date. However, S&P
considered the exposure of this loan and the related potential
future interest shortfalls to the trust in S&P's analysis.
Standard & Poor's expects a significant loss upon the resolution
of this asset.
Transaction Summary
As of the November 2010 remittance report, there were 12 loans
remaining (down from 91 at issuance), with an aggregate trust
balance of $66.8 million, which represents 8.4% of the aggregate
trust balance at issuance. The master servicer for the
transaction, Midland Loan Services Inc., provided financial
information for 100% of the pool, and all of the servicer-provided
information was full-year 2008, interim-2009, or full-year 2009
data.
S&P calculated a weighted average DSC of 1.74x for the pool based
on the reported figures. S&P's adjusted DSC and LTV were 1.82x
and 34.3%, respectively. All of the adjusted DSC and LTV
calculations exclude one specially serviced loan ($24.9 million,
37.2%), for which S&P separately estimated a loss. S&P's adjusted
DSC figure would be 1.65x if S&P included this loan in its
calculations. Two of the loans ($1.4 million, 2.1%) have a
reported DSC of less than 1.10x, one of which ($841,752, 1.3%) has
a reported DSC of less than 1.0x. To date, the transaction has
experienced $17.6 million in realized losses related to six
assets.
Summary of Remaining Loans
The top three loans have an aggregate outstanding balance of
$53.5 million (80.1%). Using servicer-reported numbers, S&P
calculated a weighted average DSC of 1.65x for the top three
loans. S&P's adjusted DSC and LTV for the top three loans
were 1.70x and 35.5%, respectively. The adjusted DSC and LTV
calculations exclude the one specially serviced loan
($24.9 million, 37.2%). S&P's adjusted DSC figure would be 1.54x
if S&P included this loan in its calculations. Details regarding
the three largest loans are:
The Court at Deptford I loan ($24.9 million, 37.2%) is the largest
loan in the pool and S&P has discussed this in more detail in the
"Credit Considerations" section.
The Hoechst Celanese Corp. loan ($20.2 million, 30.3%) is the
second-largest loan remaining and is secured by a 210,524-sq.ft.
office property in Warren, New Jersey. The property is 100%
occupied by Verizon Wireless through April 2012. According to the
master servicer, terms have been agreed to for an extension of the
lease after its 2012 expiration and tenant and borrower are in the
latter stages of lease negotiations. As of Dec. 31, 2009, the DSC
and occupancy were 1.74x and 100%, respectively.
The 1149 Chess Drive loan ($8.4 million, 12.6%) is the third-
largest loan in the pool and is secured by a 120,942-sq.-ft.
industrial building located in San Mateo, Calif. The property is
100% occupied by Applied BioSystems through June 2015 with a five-
year renewal option remaining. As of Dec. 31, 2009, the DSC and
occupancy were 2.25x and 100%, respectively.
The remaining loans each represent less than 5.5% of the pool
balance and have current loan balances less than $3.7 million.
Ratings Affirmed
JPMorgan Commercial Mortgage Finance Corp.
Mortgage pass-through certificates series 1998-C6
Class Rating Credit enhancement (%)
----- ------ ----------------------
E A (sf) 94.85
F B+ (sf) 34.02
G D (sf) 3.60
H D (sf) N/A
N/A - Not applicable.
KIMBERLITE CDO: Moody's Takes Rating Actions on Two Notes
---------------------------------------------------------
Moody's has affirmed one and downgraded one class of Notes issued
by Kimberlite CDO I, Ltd., due to the deterioration in the credit
quality of the underlying portfolio as evidenced by an increase in
the weighted average rating factor, and decrease in weighted
average recovery rate. The rating action is the result of Moody's
on-going surveillance of commercial real estate collateralized
debt obligation transactions.
-- Cl. A, Downgraded to Ca (sf); previously on Dec. 17, 2009
Downgraded to Caa2 (sf)
-- Cl. B, Affirmed at Ca (sf); previously on Dec. 17, 2009
Downgraded to Ca (sf)
Ratings Rationale
Kimberlite CDO I, Ltd., is a currently static hybrid CRE CDO
transaction backed by a portfolio of commercial mortgage backed
securities (92% of the pool balance) and CRE CDOs (8%). The
current pool consists of 12% cash collateral and 88% synthetic
reference obligations. On November 13, 2009, the transaction
entered into an Event of Default as a result of failing the EOD
par value test. As of the November 3, 2010 Note Valuation Report,
the aggregate Note balance of the transaction has increased to
$254.2 million from $250.0 million at issuance, due the
capitalization of deferred interest on the PIK-able classes due to
failure of the Class A/B Par Value Coverage Test.
There are fifteen assets with par balance of $94.9 million (12.7%
of the current pool balance) that are considered Defaulted
Securities as of the October 27, 2010 Trustee report. While there
have been no realized losses to date, Moody's does expect
significant losses to occur once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life (WAL), WARR, and Moody's asset correlation. These parameters
are typically 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 non-
Moody's rated reference obligations and collateral. The bottom-
dollar WARF is a measure of the default probability within a
collateral pool. Moody's modeled a bottom-dollar WARF of 7,171
compared to 3,373 at last review. The distribution of current
ratings and credit estimates is: Baa1-Baa3 (8.7% compared to 22.0%
at last review), Ba1-Ba3 (5.4% compared to 18.0% at last review),
B1-B3 (15.3% compared to 30.0% at last review), and Caa1-C (70.6%
compared to 30.0% at last review).
WAL acts to adjust the probability of default of the reference
obligations and collateral in the pool for time. Moody's modeled
to a WAL of 5.5 years compared to 6.2 years at last review.
WARR is the par-weighted average of the mean recovery values for
the reference obligations and collateral assets in the pool.
Moody's modeled a variable WARR with a mean of 3.5% compared to
8.1% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 99.9% compared to 30.1% at last review.
The high MAC is due to higher default probability collateral
concentrated within a small number of collateral names.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. However, in
light of the performance indicators noted above, Moody's believes
that it is unlikely that the ratings announced are sensitive to
further change.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
KIMBERLITE CDO: S&P Downgrades Ratings on Four Classes of Notes
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on four
classes from Kimberlite CDO I Ltd., a hybrid collateralized debt
obligation of commercial mortgage-backed securities, and removed
them from CreditWatch negative. Simultaneously, S&P affirmed its
rating on an additional class from the same transaction and
removed it from CreditWatch negative.
The rating actions reflect the nonpayment of interest on a
nondeferrable class and deterioration in the quality of the
collateral.
According to the trustee, Kimberlite CDO I experienced an event of
default on Oct. 27, 2009, under section 5.1.(d) of its indenture.
The EOD occurred when the par balance of the collateral (as
defined in the indenture) represented less than 100% of the sum of
the outstanding notional amount of the super senior notes and the
outstanding balance of the class A notes.
Standard & Poor's has not received any notice of acceleration.
According to the most recent trustee payment report, the
transaction continues to pay interest on the class A and B notes.
Based on its current payment sequence, the transaction will divert
all proceeds after the payment of the class B interest to reduce
the super senior notional amount because of the continuing failure
of the class A/B coverage tests. As a result, the interest
payments to the classes subordinate to class B will continue to be
deferred, according to the terms of the transaction.
However, during the November 2010 payment period, the proceeds
were insufficient to pay the class B interest in full. Since the
class B note cannot defer its interest, S&P lowered its rating on
the class to 'D (sf)'.
The other rating actions are primarily due to the deterioration in
the credit quality of the assets that support the tranches at
their prior ratings and an increase in the level of defaults. The
affirmed rating on class A indicates sufficient credit enhancement
at its current rating.
Ratings Lowered And Removed From Creditwatch Negative
Kimberlite CDO I Ltd.
Rating
------
Class To From
----- -- ----
Super senior B (sf) BB (sf)/Watch Neg
B D (sf) CCC (sf)/Watch Neg
C CC (sf) CCC-(sf)/Watch Neg
D CC (sf) CCC-(sf)/Watch Neg
Rating Affirmed And Removed From Creditwatch Negative
Rating
------
Class To From
----- -- ----
A CCC (sf) CCC (sf)/Watch Neg
Other Outstanding Ratings
Kimberlite CDO I Ltd.
Class Rating
----- ------
E CC (sf)
F CC (sf)
G CC (sf)
H CC (sf)
Combo notes CC (sf)
Transaction Information
-----------------------
Issuer: Kimberlite CDO I Ltd.
Co-issuer: Kimberlite CDO I LLC
Collateral manager: BlackRock Financial Management Inc.
Transaction type: Hybrid CDO of CMBS
LASALLE COMMERCIAL: S&P Downgrades Ratings on Three Certificates
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on the
class A, B, and C certificates of commercial mortgage pass-through
certificates from LaSalle Commercial Mortgage Securities Inc.'s
series 2005-MF1 due to recurring interest shortfalls, which S&P
expects to continue, and overall poor collateral performance.
S&P downgraded the class B and C certificates to 'D (sf)'
following four and 10 consecutive months of interest shortfalls,
respectively. S&P expects these shortfalls to continue for the
foreseeable future, and as a result, S&P lowered its ratings to 'D
(sf)'. In addition, S&P lowered its rating on the class A
certificates to 'CCC- (sf)', as S&P believes this class is
susceptible to future interest shortfalls. While class A has not
experienced any interest shortfalls to date, S&P believes it is at
increased risk of experiencing shortfalls in the future due to
poor collateral performance. To date, six of the 12 classes
subordinate to class A have experienced 100% principal loss, and
one has experienced a 73.8% principal loss. Four of the remaining
five classes have experienced consecutive interest shortfalls for
12 or more months, and the remaining class has experienced
interest shortfalls for four consecutive months.
The recurring interest shortfalls are primarily due to appraisal
subordinate entitlement reductions in effect for the specially
serviced assets, special servicing fees, and assets with servicer
nonrecoverable advance determinations.
Standard & Poor's analysis primarily considered ASERs based on
appraisal reduction amounts calculated using recent Member of the
Appraisal Institute appraisals. S&P also considered servicer
trust expenses and special servicing fees that are likely, in its
view, to cause recurring interest shortfalls.
As of the November 2010 remittance report, ARAs were in effect for
27 of the 40 assets with the special servicer. The total reported
ASER amount was $41,396, and the reported cumulative ASER amount
was $845,657. Standard & Poor's considered all of these ASERs,
which were based on MAI appraisals, as well as current special
servicing fees, in taking S&P's rating actions. The reported
interest shortfalls total $144,198 and have affected all classes
subordinate to and including class B.
The collateral pool for the LaSalle 2005-MF1 transaction consists
of 243 loans with an aggregate trust balance of $241.8 million.
As of the November 2010 remittance report, 40 assets
($47.3 million; 19.6%) in the pool were with the special servicer.
The payment status of these assets is: 16 loans are REO
($25.7 million, 10.6%), 10 loans are in foreclosure ($9.7 million,
4.0%), three are 90-plus-days delinquent ($2.5 million, 1.1%),
three are 60 days delinquent ($2.6 million, 1.1%), one is 30 days
delinquent ($519,027, 0.2%), and seven are current ($6.2 million,
2.6%).
Ratings Lowered
LaSalle Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates series 2005-MF1
Reported
Rating interest shortfalls ($)
------ -----------------------
Class To From Credit enhancement (%) Current Accumulated
----- -- ---- ---------------------- ------- -----------
A CCC- (sf) B- (sf) 12.96 0 0
B D (sf) CCC (sf) 9.95 33,146 133,659
C D (sf) CCC- (sf) 5.74 46,403 387,017
LB COMMERCIAL: Moody's Upgrades Ratings on Three 1998-C4 Certs.
---------------------------------------------------------------
Moody's Investors Service upgraded the ratings of three classes,
downgraded three classes and affirmed two classes of LB Commercial
Mortgage Trust, Commercial Mortgage Pass-Through Certificates,
Series 1998-C4:
-- X, Affirmed at Aaa (sf); previously on Nov. 10, 1998 Assigned
Aaa (sf)
-- F, Upgraded to Aaa (sf); previously on Jan. 16, 2008 Upgraded
to A2 (sf)
-- G, Upgraded to Aa3 (sf); previously on Nov. 14, 2006 Upgraded
to Ba1 (sf)
-- H, Upgraded to Ba1 (sf); previously on Nov. 24, 1998 Assigned
Ba3 (sf)
-- J, Affirmed at B1 (sf); previously on Nov. 24, 1998 Assigned
B1 (sf)
-- K, Downgraded to Caa1 (sf); previously on Feb. 28, 2005
Downgraded to B3 (sf)
-- L, Downgraded to C (sf); previously on Feb. 28, 2005
Downgraded to Caa2 (sf)
-- M, Downgraded to C (sf) previously on Jan. 15, 2003
Downgraded to Caa3 (sf)
Ratings Rationale
The upgrades are due to increased credit subordination levels
resulting from paydowns and amortization and overall stable pool
performance. The downgrades are due to interest shortfalls and
higher expected losses resulting from realized and anticipated
losses from specially serviced loans.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed DSCR and the Herfindahl Index,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
Moody's rating action reflects a cumulative base expected loss of
5.0% of the current balance. At last review, Moody's cumulative
base expected loss was 1.1%. Moody's stressed scenario loss is
11.3% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the credit estimate of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the credit estimate level, is incorporated for
loans with similar credit estimates in the same transaction.
For deals that include a pool of CTL loans, Moody's currently uses
a Gaussian copula model, incorporated in its public CDO rating
model CDOROMv2.6 to generate a portfolio loss distribution to
assess the ratings. Under Moody's CTL approach, the rating of a
transaction's certificates is primarily based on the senior
unsecured debt rating (or the corporate family rating) of the
tenant, usually an investment grade rated company, leasing the
real estate collateral supporting the bonds. This tenant's credit
rating is the key factor in determining the probability of default
on the underlying lease. The lease generally is "bondable", which
means it is an absolute net lease, yielding fixed rent paid to the
trust through a lock-box, sufficient under all circumstances to
pay in full all interest and principal of the loan. The leased
property should be owned by a bankruptcy-remote, special purpose
borrower, which grants a first lien mortgage and assignment of
rents to the securitization trust. The dark value of the
collateral, which assumes the property is vacant or "dark", is
then examined to determine a recovery rate upon a loan's default.
Moody's also considers the overall structure and legal integrity
of the transaction.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 27 compared to 29 at Moody's prior review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 95% to
$111.7 million from $2.03 billion at securitization. The
Certificates are collateralized by 51 mortgage loans ranging in
size from less than 1% to 7% of the pool, with the top ten non-
defeased loans representing 42% of the pool. Nine loans,
representing 11% of the pool, have defeased and are collateralized
with U.S. Government securities. At last review defeasance
represented 32% of the pool balance. The pool contains 20 loans,
representing 30% of the pool, that are CTL loans.
Eight loans, representing 25% 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 CRE
Finance Council 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.
Twenty-four loans have been liquidated from the pool, resulting in
an aggregate realized loss of $39.2 million (29% loss severity on
average). The pool had experienced $16.0 million in realized
losses at last review. Five loans, representing 8% of the pool,
are currently in special servicing. The master servicer has
recognized an aggregate $1.6 million appraisal reduction for two
of the specially serviced loans. Moody's has estimated an
aggregate $3.6 million loss (40% expected loss on average) for
these loans.
Based on the most recent remittance statement, Classes J through N
have experienced cumulative interest shortfalls totaling $8.2
million. Moody's anticipates that the pool will continue to
experience interest shortfalls because of the high exposure to
specially serviced loans. Interest shortfalls are caused by
special servicing fees, including workout and liquidation fees,
appraisal entitlement reductions and extraordinary trust expenses.
Moody's was provided with full year 2009 and partial year 2010
operating results for 94% and 81% of the pool, respectively.
Excluding specially serviced and CTL loans, Moody's weighted
average LTV is 68% compared to 82% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 11%
to the most recently available net operating income. Moody's
value reflects a weighted average capitalization rate of 10.1%.
Excluding specially serviced and CTL loans, Moody's actual and
stressed DSCRs are 1.39X and 1.79X, respectively, compared to
1.46X and 1.55X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The top three performing conduit loans represent 19% of the pool
balance. The largest loan is the 1800 West Valencia Road Loan
($7.8 million -- 7.0% of the pool), which is secured by a 191,000
square foot retail property located in Tucson, Arizona. The
property is 100% leased to Lowe's Home Center through August 2019.
Performance has been stable. The loan has amortized 26% since
securitization. Moody's LTV and stressed DSCR are 69% and 1.53X,
respectively, compared to 65% and 1.64X at last review.
The second largest loan is the Pinnacle Center Loan ($7.1 million
-- 6.4% of the pool), which is secured by a 230,000 SF retail
property located in Thornton, Colorado. As of July 2010 the
property was 77% leased compared to 91% at securitization.
Performance has improved in the first 6 months of 2010 compared to
the previous year. The loan has amortized 16% since
securitization. Moody's LTV and stressed DSCR are 82% and 1.31X,
respectively, compared to 83% and 1.31X at last review.
The third largest loan is the Chesterfield Meadows Shopping Center
Loan ($5.8 million -- 5.2% of the pool) which is secured by a
70,000 SF retail center located in Richmond, Virginia. As of
March 2010 the center was 96% leased compared to 98% at
securitization. Performance has been stable. The loan has
amortized 16% since securitization. Moody's LTV and stressed DSCR
are 48% and 2.20X, respectively, compared to 54% and 1.95X at last
review.
The CTL component includes 20 loans secured by properties leased
under bondable leases. The largest CTL exposures are Sweetbay
Supermarket ($8.8 million, 7.9% of the pool; parent Delhaize
America, Inc; Moody's senior unsecured rating Baa3; stable
outlook), CVS/Caremark Corp. ($6.1 million, 5.5% of the pool;
Moody's senior unsecured rating Baa2; stable outlook) and Walgreen
Co. ($5.6 million, 5.0% of the pool; Moody's senior unsecured
rating A2; stable outlook).
LB UBS: Moody's Upgrades Ratings on Two 2003-C7 Certificates
------------------------------------------------------------
Moody's Investors Service upgraded the rating of two classes,
downgraded the ratings of three classes and affirmed 16 classes of
LB UBS Commercial Mortgage Trust Commercial Mortgage Pass-Through
Certificates, Series 2003-C7:
-- Cl. A-2, Affirmed at Aaa (sf); previously on Oct. 15, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Oct. 15, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Oct. 15, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on April 20, 2006
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on April 20, 2006
Upgraded to Aaa (sf)
-- Cl. D, Upgraded to Aaa (sf); previously on April 20, 2006
Upgraded to Aa2 (sf)
-- Cl. E, Upgraded to Aa1 (sf); previously on April 20, 2006
Upgraded to Aa3 (sf)
-- Cl. F, Affirmed at A2 (sf); previously on Oct. 15, 2003
Definitive Rating Assigned A2 (sf)
-- Cl. G, Affirmed at A3 (sf); previously on Oct. 15, 2003
Definitive Rating Assigned A3 (sf)
-- Cl. H, Affirmed at Baa1 (sf); previously on Oct. 15, 2003
Definitive Rating Assigned Baa1 (sf)
-- Cl. J, Affirmed at Baa2 (sf); previously on Oct. 15, 2003
Definitive Rating Assigned Baa2 (sf)
-- Cl. K, Affirmed at Ba1 (sf); previously on June 18, 2009
Downgraded to Ba1 (sf)
-- Cl. L, Affirmed at Ba3 (sf); previously on June 18, 2009
Downgraded to Ba3 (sf)
-- Cl. M, Affirmed at B1 (sf); previously on June 18, 2009
Downgraded to B1 (sf)
-- Cl. N, Affirmed at B2 (sf); previously on June 18, 2009
Downgraded to B2 (sf)
-- Cl. P, Downgraded to Caa1 (sf); previously on June 18, 2009
Downgraded to B3 (sf)
-- Cl. Q, Downgraded to Ca (sf); previously on June 18, 2009
Downgraded to Caa2 (sf)
-- Cl. S, Downgraded to C (sf); previously on June 18, 2009
Downgraded to Caa3 (sf)
-- Cl. BA, Affirmed at Baa3 (sf); previously on June 18, 2009
Downgraded to Baa3 (sf)
-- Cl. A-1b, Affirmed at Aaa (sf); previously on Oct. 15, 2003
Definitive Rating Assigned Aaa (sf)
-- Cl. X-CL, Affirmed at Aaa (sf); previously on Oct. 15, 2003
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The upgrades are due to the significant increase in subordination
due to loan payoffs and amortization and overall stable pool
performance. The pool has paid down by 12% since Moody's last
review. The downgrades are due to higher expected losses for the
pool resulting from realized and anticipated losses from specially
serviced and troubled loans.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed debt service coverage ratio and
the Herfindahl Index, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
Moody's rating action reflects a cumulative base expected loss of
3.7% of the current balance. At last review, Moody's cumulative
base expected loss was 3.0%. Moody's stressed scenario loss is
5.3% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 8 compared to 12 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.0 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 44% to
$820.3 million from $1.5 billion at securitization. The
Certificates are collateralized by 38 mortgage loans ranging in
size from less than 1% to 25% of the pool, with the top ten loans
representing 81% of the pool. The pool contains four loans with
investment grade credit estimates that represent 50% of the pool.
Four loans, representing 6% of the pool, have defeased and are
collateralized with U.S. Government securities, compared to 17% at
last review.
Four loans, representing 1% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council 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.
Two loans have been liquidated from the pool, resulting in an
aggregate realized loss of $604,000 (18% loss severity overall).
Four loans, representing 19% of the pool, are currently in special
servicing. The largest specially serviced loan is The Parklawn
Building Loan ($100.0 million -- 12.3%), which is secured by a 18
story class B office building with 1.3 million square feet located
in Rockville, Maryland. The property is occupied by GSA. The
loan was transferred to Special Servicing due to imminent maturity
default. The GSA has extended their lease until 2015 from 2010
and the borrower has been granted a three year loan extension.
The loan is current. No losses are estimated at this time.
Moody's LTV and stressed DSCR are 94% and 1.06X, respectively,
compared to 97% and 1.03X at last review.
The second largest specially serviced loan is the Shops at Gainey
Village Loan ($35.8 million -- 4.4%), which is secured by a
138,000 square foot unanchored shopping center located in
Scottsdale, Arizona. The property was 78% leased as of March
2010, compared to 94% at last review. The loan was transferred to
Special Servicing due to imminent default. The loan matures in
June 2011.
The remaining two specially serviced loans are secured by a
multifamily and unanchored retail property. The master servicer
has recognized appraisal reductions totaling $34.7 million for two
of the specially serviced loans. Moody's has estimated an
aggregate $24.4 million loss (45% expected loss on average) for
all of the specially serviced loans.
Moody's was provided with full year 2009 operating results for
100% of the pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 89% essentially the same as
at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 14% to the most recently available net
operating income. Moody's value reflects a weighted average
capitalization rate of 9.3%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.53X and 1.15X, respectively, compared to
1.55X and 1.14X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The largest loan with a credit estimate is the Bank of America
Building Loan ($206.7 million -- 25.3%), which is secured by
1.1 million square feet of office space in midtown Manhattan. The
top three tenants are Bank of America (Moody's senior unsecured
rating A2, 18.6% of the net rentable area (NRA), lease expiration
in 2013), Towers Perrin Forster & Crosby (9% of the NRA, lease
expiration in 2018), and Sithe Energies/Dynergy Inc (8% of the
NRA, lease expiration in October 2011). The property was 100%
leased as of December 2009, compared to 89% at last review.
Moody's current credit estimate and stressed DSCR are Baa3 and
1.32X, respectively, essentially the same as at last review.
The second loan with a credit estimate is the Valley Plaza
Shopping Center Loan ($91.7 million -- 11.2%), which is secured by
a 1.1 million square foot super-regional mall located in
Bakersfield, California. The top three tenants are JC Penny (13%
of the NRA, lease expiration in 2016), Macy's (13% of the NRA,
lease expiration in 2021), and Sears (19% of the NRA, lease
expiration in October 2064). Occupancy was 90% as of June 2010,
compared to 94% at last review. The loan has amortized 4% since
last review. Performance has improved due to increase in rental
revenue and amortization. Moody's current credit estimate and
stressed DSCR are A3 and 1.7X, respectively, compared to Baa1 and
1.68X at last review.
The third loan with a credit estimate is the Westfield
Shoppingtown Santa Anita Loan ($67.0 million -- 8.2%), which is
secured by a 1.1 million square foot regional mall located 18
miles east of downtown Los Angles, California. The top three
tenants are JC Penny (18% of the NRA, lease expiration in 2037),
Macy's (17% of the NRA, lease expiration in 2037), and Nordstrom
(13% of the NRA, lease expiration in 2014). Occupancy was 97% as
of September 2010, compared to 92% at last review. Moody's
current credit estimate and stressed DSCR are Aaa and 3.51X,
respectively, compared to Aaa and 3.29X at last review.
The fourth loan with a credit estimate is the Visalia Mall Loan
($39.4 million -- 4.8%), which is secured by a 440,000 square foot
single level regional mall located in Visalia, California. The
top two tenants are Macy's ( 34% of the NRA, lease expiration in
2013), and JC Penny (24% of the NRA, lease expiration in 2024).
The property was 95% leased as of June 2010, compared to 98% at
last review. Performance is stable with a benefit from
amortization. The loan has amortized 4% since last review.
Moody's current credit estimate and stressed DSCR are A3 and
1.71X, respectively, compared to Baa1 and 1.7X at last review.
The top three performing conduit loans represent 13% of the
pool balance. The largest loan is the Moorestown Mall Loan
($56.4 million -- 6.9%), which is secured by a 1.1 million square
foot regional mall located in Moorestown Township, New Jersey.
The top three tenants are Boscov's (19% of the NRA, lease
expiration in 2015), Macy's (18% of NRA, lease expiration in
2098), and Lord & Taylor (11% of the NRA, lease expiration in
2098). The property was 92% leased as of September 2010, similar
to last review. Performance declined due to increase in expenses.
Moody's LTV and stressed DSCR are 94% and 1.06X, respectively,
compared to 84% and 1.18X at last review.
The second largest loan is the Shepherd Office Center Loan
($31.0 million -- 3.8%), which is secured by a 637,000 square foot
office property in Oklahoma City, Oklahoma. The property was 84%
leased as of June 2010, compared to 84% at last review. Moody's
LTV and stressed DSCR are 95% and 1.13X, respectively, compared to
140% and 0.77X at last review.
The third largest loan is the Gotham Park Loan ($21.6 million -
2.7%), which is secured by a 93,000 square foot office located in
New York, New York. The property has been 100% leased as of June
2010, which is similar to last review and securitization.
Performance has been stable. Moody's LTV and stressed DSCR are
70% and 1.48X, respectively, compared to 67% and 1.53X at last
review.
LB-UBS COMMERCIAL: Moody's Upgrades Ratings on Two 2002-C1 Notes
----------------------------------------------------------------
Moody's Investors Service upgraded the ratings of two classes,
affirmed 11 classes and downgraded four classes of LB-UBS
Commercial Mortgage Pass-Through Certificates, Series 2002-C1:
-- Cl. A-4, Affirmed at Aaa (sf); previously on April 2, 2002
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on March 23, 2006
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on March 23, 2006
Upgraded to Aaa (sf)
-- Cl. D, Affirmed at Aaa (sf); previously on March 23, 2006
Upgraded to Aaa (sf)
-- Cl. E, Affirmed at Aaa (sf); previously on March 23, 2006
Upgraded to Aaa (sf)
-- Cl. F, Affirmed at Aaa (sf); previously on June 11, 2007
Upgraded to Aaa (sf)
-- Cl. G, Affirmed at Aa1 (sf); previously on June 11, 2007
Upgraded to Aa1 (sf)
-- Cl. H, Upgraded to Aa2 (sf); previously on June 11, 2007
Upgraded to A1 (sf)
-- Cl. J, Upgraded to A3 (sf); previously on March 23, 2006
Upgraded to Baa1 (sf)
-- Cl. K, Affirmed at Baa3 (sf); previously on March 23, 2006
Upgraded to Baa3 (sf)
-- Cl. L, Affirmed at Ba1 (sf); previously on March 23, 2006
Upgraded to Ba1 (sf)
-- Cl. M, Affirmed at Ba2 (sf); previously on March 23, 2006
Upgraded to Ba2 (sf)
-- Cl. N, Downgraded to B3 (sf); previously on March 23, 2006
Upgraded to Ba3 (sf)
-- Cl. P, Downgraded to Caa3 (sf); previously on April 2, 2002
Definitive Rating Assigned B2 (sf)
-- Cl. Q, Downgraded to Ca (sf); previously on April 2, 2002
Definitive Rating Assigned B3 (sf)
-- Cl. S, Downgraded to C (sf); previously on April 2, 2002
Definitive Rating Assigned Caa2 (sf)
-- Cl. X-CL, Affirmed at Aaa (sf); previously on April 2, 2002
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The upgrades are due to overall improved pool performance and a
significant increase in subordination levels since Moody's last
review. The downgrades are due to higher expected losses for the
pool resulting from interest shortfalls and realized and
anticipated losses from specially serviced and troubled loans.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed debt service coverage ratio and
the Herfindahl Index, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
Moody's rating action reflects a cumulative base expected loss of
1.6% of the current balance. At last review, Moody's cumulative
base expected loss was 1.0%. Moody's stressed scenario loss is
3.1% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a pay down analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl
score, a measure of loan level diversity, is a primary determinant
of pool level diversity and has a greater impact on senior
certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 17 compared to 32 at last review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel based Large Loan Model v 8.0 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the ratings.
Deal Performance
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 45% to
$682.5 million from $1.2 billion at securitization. The
Certificates are collateralized by 94 mortgage loans ranging in
size from less than 1% to 7% of the pool, with the top ten loans
representing 27% of the pool. Thirty-four loans, representing 54%
of the pool, have defeased and are collateralized by U.S.
Government securities. The pool contains one loan, representing
7% of the pool, with an investment grade credit estimate.
Seventeen 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 CRE
Finance Council 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.
Nine loans have been liquidated from the pool since
securitization, resulting in a $14.4 million loss (40% loss
severity on average). Three loans, representing 1.3% of the pool,
are currently in special servicing. Moody's has estimated an
aggregate $4.3 million loss (50% expected loss on average) for the
three specially serviced loans.
Moody's has assumed a high default probability for three poorly
performing loans representing 2% of the pool and has estimated a
$1.5 million loss (13% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 69%
of the pool's non-defeased loans. Excluding specially serviced
and troubled loans, Moody's weighted average LTV is 73% compared
to 84% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 10.6% to the most recently available
net operating income. Moody's value reflects a weighted average
capitalization rate of 9.8%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.71X and 1.56X, respectively, compared to
1.31X and 1.20X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The loan with a credit estimate is the U-Haul Pool Portfolio Loan
($45.8 million -- 6.7% of the pool), which consists of four cross-
collateralized loans secured by 16,520 self-storage units in 37
separate locations across 20 states. The loan has amortized 5%
since last review. Moody's current credit estimate and stressed
DSCR are Aa1 and 2.3X, respectively, compared to A3 and 1.6X at
last review.
The top three performing conduit loans represent 11% of the pool
balance. The largest loan is the First Bank and Trust Center Loan
($35.7 million -- 5.2% of the pool), which is secured by a 455,000
square foot (SF), 22-story, Class A office building located in
Metairie, Louisiana. Financial performance has improved since
last review due to the completion of Hurricane Katrina related
wind and water damage repairs and leasing activity. The property
was 96% leased as of June 2010 versus 92% as of last review. The
loan has amortized 5% since last review. Moody's LTV and stressed
DSCR are 79% and 1.38X, respectively, compared to 115% and 0.94X
at last review.
The second largest loan is the Metro Park North Loan
($22.1 million -- 3.2% of the pool), which is secured by an
189,000 SF office building located in Rockville, Maryland. The
property's financial performance has declined since last review
due to lower occupancy. The property was 85% leased as of June
2010 compared to 100% at last review. Moody's LTV and stressed
DSCR are 84% and 1.29X, respectively, compared to 82% and 1.31X
at last review.
The third largest loan is the Key Plaza Shopping Center Loan
($16.2 million -- 2.4% of the pool), which is secured by a 229,000
SF retail center located in Key West, Florida. Anchor tenants
include Kmart, Albertsons and OfficeMax. The property's financial
performance has declined since last review due to a decrease in
revenue. Moody's LTV and stressed DSCR are 96% and 1.04X,
respectively, compared to 69% and 1.44X at last review.
LB-UBS COMMERCIAL: S&P Downgrades Ratings on 15 2004-C1 Certs.
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 15
classes of commercial mortgage pass-through certificates from LB-
UBS Commercial Mortgage Trust 2004-C1. S&P downgraded classes Q
and S to 'D (sf)' due to recurring interest shortfalls.
Concurrently, S&P affirmed its ratings on six other classes from
the same transaction.
The downgrades reflect credit support erosion that S&P anticipate
will occur upon the resolution of five specially serviced assets.
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
1.79x and a loan-to-value ratio of 80.2%. S&P further stressed
the loans' cash flows under its 'AAA' scenario to yield a weighted
average DSC of 1.34x and an LTV ratio of 95.2%. The implied
defaults and loss severity under the 'AAA' scenario were 39.9% and
33.9%, respectively. All of the DSC and LTV calculations S&P
noted above exclude seven defeased loans ($62.2 million, 5.9%),
and five of the seven specially serviced assets ($79.5 million,
7.5%). S&P separately estimated losses for these five specially
serviced assets and included them in the 'AAA' scenario implied
default and loss figures.
As of the November 2010 remittance report, the trust experienced
monthly interest shortfalls totaling $117,707. The shortfalls
were primarily related to appraisal subordinate entitlement
reduction amounts ($77,840) associated with three of the specially
serviced loans, and special servicing fees ($18,460). The
interest shortfalls affected all classes subordinate to and
including class M. Classes Q and S have experienced cumulative
shortfalls for the past three and eight months, respectively, and
S&P expects them to experience recurring shortfalls in the future.
As a result, S&P downgraded these classes to 'D (sf)'.
The affirmations of the ratings on the principal and interest
certificates reflect subordination levels and liquidity that are
consistent with the outstanding ratings. S&P affirmed its ratings
on the class X-CL, X-CP, and X-ST interest-only certificates based
on its current criteria.
Credit Considerations
As of the November 2010 remittance report, seven assets
($88.0 million, 8.3%) in the pool were with the special servicer,
CWCapital Asset Management. The payment status of the specially
serviced assets is: three loans ($25.7 million, 2.4%) are 90-plus-
days delinquent, one loan ($42.4 million, 4.0%) is in foreclosure,
one loan ($11.5 million, 1.1%) is real estate owned, one loan
($2.9 million, 0.3%) is current, and one loan ($5.6 million, 0.5%)
is a matured balloon. Four ($77.1 million, 7.2%) of the specially
serviced assets have appraisal reduction amounts in place,
totaling $40.5 million.
The Passaic Street Industrial loan ($42.4 million; 4.0%), the
largest specially serviced loan in the pool, is secured by
2.2 million sq. ft. of industrial space in Wood-Ridge, New Jersey,
built in 1942 and renovated in 1980. The reported DSC as of the
nine months ended September 2009 was 0.53x with 86% occupancy.
However, occupancy had declined to 60% by year-end 2009. The loan
was transferred to the special servicer in March 2010 due to
imminent monetary default. The significant decrease in revenue is
attributed to several tenant vacancies. The borrower continues to
market the vacant spaces, however, new leases are short-term (one-
year or month-to-month) and the largest tenant, Warehouse Express
USA (12% of the GLA), has a lease expiring in less than a year
(March 31, 2011). The borrower has requested a loan modification.
The special servicer is pursuing foreclosure and/or a discounted
payoff. An ARA of $25.7 million is in effect against this loan.
Standard & Poor's expects a significant loss upon the eventual
resolution of this asset.
The Colonial Bank loan ($15.9 million; 1.5%), the second-largest
specially serviced loan and the ninth-largest loan in the pool, is
secured by 109,786 sq. ft. of office space in Las Vegas. The
reported DSC as of year-end 2009 was 0.82x with 55% occupancy,
down from 1.16x and 76% as of year-end 2008, respectively. The
loan was transferred to the special servicer in August 2010 due to
imminent default. An ARA of $7.3 million is in effect against
this loan. Standard & Poor's expects a moderate loss upon the
eventual resolution of this asset.
500 & 700 Parker Square ($11.5 million; 1.1%), is a mixed-use
development consisting of nine two-story office/retail buildings
with a total of 103,661 sq. ft. in Flower Mound, Texas. The
property was built in 2002. The property became REO via
foreclosure on May 4, 2010. Overall occupancy as of June 2010 was
27%, and building 500 is reported as 100% vacant. Building 700 is
50% leased as of November 2010. An inspection from May 2010
indicated the properties are in 'good' condition, with a few items
of deferred maintenance. An ARA of $6.1 million is in effect
against this loan. Standard & Poor's expects a significant loss
upon the eventual resolution of this asset.
The remaining four specially serviced loans have balances that
individually represent less than 0.7% of the transaction balance.
S&P estimated losses for two of these loans, which resulted in a
weighted average loss severity of 27.5%. The remaining two loans
are matured balloon loans, were both recently transferred to
special servicing, and modifications are being considered by
CWCapital for both.
One loan ($2.0 million, 0.1%) that was previously with the special
servicer has been returned to the master servicer. According to
the transaction documents, the special servicer is entitled to a
workout fee equal to 1.0% of all future principal and interest
payments on the corrected loans, provided the loans continue to
perform and remain with the master servicer.
Transaction Summary
As of the Nov. 15, 2010, remittance report, the transaction had an
aggregate trust balance of $1.064 billion (87 loans), compared
with a $1.4 billion trust balance (103 loans) at issuance. Wells
Fargo, the master servicer, provided financial information for 88%
of the nondefeased loans. All of the servicer-provided financial
information was full-year 2008, partial-year 2009, full-year 2009,
or partial-year 2010 data. S&P calculated a weighted average DSC
of 2.05x for the nondefeased loans in the pool based on the
reported figures. S&P's adjusted DSC was 1.79x and its adjusted
LTV was 80.2%, and exclude five of the seven specially serviced
loans ($79.5 million, 7.5%), and seven defeased loans
($62.2 million; 5.9%). S&P separately estimated losses for these
five specially serviced loans. Seventeen loans are on the master
servicer's watchlist ($192.7 million; 18.1%). The master
servicer, Wells Fargo, reported that 12 loans ($107.3 million,
10.1%) have a reported DSC of less than 1.0x. The trust has
experienced three principal losses to date totaling $6.0 million.
Summary of Top 10 Loans
The top 10 loans secured by real estate have an aggregate
outstanding trust balance of $661.4 million (62.2%). Using
servicer-reported information, S&P calculated a weighted average
DSC of 2.02x. S&P's adjusted DSC and LTV figures for the top 10
loans were 1.91x and 82.0%, respectively. These figures exclude
the Passaic Street Industrial Park loan ($42.4 million; 4.0%) and
the Colonial Bank loan ($15.9 million; 1.5%), which are with the
special servicer and discussed above. One of the top 10 loans
appears on the master servicer's watchlist and is discussed below.
The MGM Tower loan ($115.2 million; 10.8%) is the third-largest
loan in the pool and is secured by a 35-story, class A office
building containing 776,801 sq. ft. and a seven-level parking
structure with 2,311 parking spaces, located in Century City,
approximately 10 miles west of downtown Los Angeles, and
constructed in 2003. This loan appears on the master servicer's
watchlist due to concerns surrounding Metro Goldwyn Mayer's
current financial condition. MGM is the largest tenant at the
property at 44% of gross leasable area and 40% of effective gross
income. The reported DSC was 2.30x for year-end 2009, while the
reported occupancy was 98% as of August 2010.
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
LB-UBS Commercial Mortgage Trust 2004-C1
Commercial mortgage pass-through certificates
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
B AA (sf) AA+ (sf) 16.51
C AA- (sf) AA (sf) 15.34
D A+ (sf) AA- (sf) 13.83
E A- (sf) A+ (sf) 11.83
F BBB+ (sf) A (sf) 10.65
G BBB (sf) A- (sf) 8.31
H BB (sf) BBB+ (sf) 6.47
J B (sf) BBB (sf) 5.13
K CCC (sf) BBB- (sf) 3.62
L CCC- (sf) BB+ (sf) 2.95
M CCC- (sf) BB (sf) 2.45
N CCC- (sf) BB- (sf) 2.12
P CCC- (sf) B+ (sf) 1.45
Q D (sf) B (sf) 1.11
S D (sf) B- (sf) 0.94
Ratings Affirmed
LBUBS Commercial Mortgage Trust 2004-C1
Commercial mortgage pass-through certificates
Class Rating Credit enhancement (%)
----- ------ ----------------------
A-2 AAA (sf) 17.68
A-3 AAA (sf) 17.68
A-4 AAA (sf) 17.68
X-CL AAA (sf) N/A
X-CP AAA (sf) N/A
X-ST AAA (sf) N/A
N/A - Not applicable.
LB-UBS COMMERCIAL: Moody's Downgrades Ratings on 12 2004-C4 Certs.
------------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 12 classes,
confirmed three classes and affirmed five classes of LB-UBS
Commercial Mortgage Pass-Through Certificates, Series 2004-C4:
-- Cl. A-1B, Affirmed at Aaa (sf); previously on June 11, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on June 11, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on June 11, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on June 11, 2004
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Confirmed at Aaa (sf); previously on Oct. 7, 2010 Aaa
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Confirmed at Aa1 (sf); previously on Oct. 7, 2010 Aa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. D, Confirmed at Aa2 (sf); previously on Oct. 7, 2010 Aa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to A2 (sf); previously on Oct. 7, 2010 A1
(sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to A3 (sf); previously on Oct. 7, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Baa2 (sf); previously on Oct. 7, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Ba2 (sf); previously on Oct. 7, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to Caa2 (sf); previously on Oct. 7, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to Ca (sf); previously on Oct. 7, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Oct. 7, 2010 Ba1
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Oct. 7, 2010 Ba2
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Oct. 7, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Oct. 7, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. Q, Downgraded to C (sf); previously on Oct. 7, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. S, Downgraded to C (sf); previously on Oct. 7, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. X, Affirmed at Aaa (sf); previously on June 11, 2004
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from interest shortfalls and realized and anticipated
losses from specially serviced and troubled loans. The
confirmations and affirmations are due to key parameters,
including Moody's loan to value ratio, Moody's stressed debt
service coverage ratio and the Herfindahl Index, remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
On October 7, 2010, Moody's placed 15 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
4.4% of the current balance. At last review, Moody's cumulative
base expected loss was 0.9%. Moody's stressed scenario loss is
7.9% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a pay down analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
(Herf), a measure of loan level diversity, is a primary
determinant of pool level diversity and has a greater impact on
senior certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 29, the same as at last review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated March 30, 2007.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the ratings.
Deal Performance
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 30% to
$987.4 million from $1.4 billion at securitization. The
Certificates are collateralized by 86 mortgage loans ranging in
size from less than 1% to 26% of the pool, with the top ten loans
representing 54% of the pool. Seven loans, representing 5% of the
pool, have defeased and are collateralized by U.S. Government
securities. The pool includes four loans, representing 48% of the
pool, with investment grade credit estimates.
Nineteen loans, representing 31% 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 CRE
Finance Council 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.
Five loans have been liquidated from the pool since
securitization, resulting in a $6.4 million loss (42% loss
severity on average). Seven loans, representing 8% of the pool,
are currently in special servicing. The largest specially
serviced loan is the Enterprise Technology Center Loan
($32 million -- 8.3% of the pool) which is secured by a 344,000
square foot office complex located in Scotts Valley, California.
The loan was transferred to special servicing April 2010 due to
imminent default and is presently in foreclosure. The master
servicer recognized an appraisal reduction of $43.3 million for
this loan in November 2010.
The remaining six specially serviced loans are secured by a mix of
property types. The master servicer has recognized an aggregate
$3.8 million appraisal reduction for two of the remaining
specially serviced loans. Moody's has estimated an aggregate
$26.7 million loss (33% expected loss on average) for all of the
specially serviced loans.
Moody's has assumed a high default probability for eight poorly
performing loans representing 5% of the pool and has estimated a
$10.6 million loss (21% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 87%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 88% compared to 91% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 13.7% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.4%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.52X and 1.21X, respectively, compared to
1.46X and 1.11X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The largest loan with a credit estimate is the Westfield
Shoppingtown Garden State Plaza Loan ($260 million -- 26.3% of the
pool), which represents a 50% pari-passu interest in a first
mortgage loan. The loan is secured by the borrower's interest in
an enclosed 2.0 million SF super-regional shopping mall located in
Paramus, New Jersey. The mall is anchored by Macy's, Nordstrom,
J.C. Penney, Neiman Marcus and Lord and Taylor. Westfield is the
loan sponsor. The loan is interest-only for its entire 10-year
term. Moody's current credit estimate and stressed DSCR are A1
and 1.47X, respectively, compared to A2 and 1.27X at last review.
The second loan with a credit estimate is the Two Penn Plaza Loan
($109.8 million -- 11.3% of the pool), which represents a 50%
participation interest in a $219.6 million first mortgage loan.
The loan is secured by a 1.5 million SF Class A office building
located in New York, New York. The property was 98% leased as of
December 2009 compared to 98% at last review. Vornado is the loan
sponsor. Moody's current credit estimate and stressed DSCR are A1
and 1.75X, compared to Baa1 and 1.15X at last review.
The third loan with a credit estimate is the Town East Mall Loan
($100.9 million -- 10.2% of the pool) which is secured by a
1.2 million SF regional shopping mall in Mesquite, Texas. The
mall is anchored by Macy's, Sears, Dillard's and J.C. Penney.
Financial performance improved since last review. Mall occupancy
also increased to 98% as of December 2009 compared to 93% at last
review. GGP is the loan sponsor. Moody's current credit estimate
and stressed DSCR are Baa1 and 1.59X, respectively, compared to
Baa2 and 1.32X at last review.
The top three performing conduit loans represent 8% of the pool
balance. The largest loan is the Ritz-Carlton Chicago Hotel Loan
($38.5 million -- 3.9% of the pool), which is secured by a 435-
room full-service hotel located in the Watertower Complex on the
Magnificent Mile in downtown Chicago, Illinois. Financial
performance has declined since last review due to recent hotel
renovation activity and a highly competitive hospitality market.
Occupancy for the trailing twelve months ending June 2010 was 55%,
compared to 72% at last review. Moody's LTV and stressed DSCR are
117% and 0.92X, respectively, compared to 66% and 1.64X at last
review.
The second largest loan is the Park Parthenia Apartments Loan
($22.1 million -- 2.2% of the pool), which is secured by a 399-
unit apartment property in Northridge, California. The property's
financial performance has improved due to an increase in revenues.
The property was 93% leased as of June 2010 compared to 95% in
December 2009. Moody's LTV and stressed DSCR are 87% and 1.08X,
respectively, compared to 109% and 1.02X at last review.
The third largest loan is the Sirata Beach Resort and Conference
Center Loan ($21.8 million -- 2.2% of the pool), which is secured
by a 380-room hotel and conference center in St. Pete Beach,
Florida. Property performance has been stable. Occupancy for the
trailing twelve months ending June 2010 was 72%, compared to 70%
in December 2008. Moody's LTV and stressed DSCR are 63% and
1.98X, respectively, compared to 86% and 1.45X at last review.
LEASE INVESTMENT: Moody's Reviews Ratings on Various Classes
------------------------------------------------------------
Moody's Investors Service has placed on review for possible
downgrade the Class A-1 and A-2 notes, and downgraded the Class B-
1 and B-2 notes of pooled aircraft lease-backed notes issued by
Lease Investment Flight Trust.
The complete rating action is:
Issuer: Lease Investment Flight Trust, Series 2001-1
-- Class A-1 Floating Rate Notes due July 15, 2031, B2 (sf)
placed on Review for Possible downgrade; previously on
July 20, 2007 downgraded to B2 (sf)
-- Class A-2 Floating Rate Notes due July 15, 2031, B2 (sf)
placed on Review for Possible downgrade; previously on
July 20, 2007 downgraded to B2 (sf)
-- Class B-1 Floating Rate Notes due July 15, 2031, downgraded
to C (sf), previously on July 20, 2007 downgraded to Ca (sf)
-- Class B-2 Fixed Rate Notes due July 15, 2031 downgraded to C
(sf), previously on July 20, 2007 downgraded to Ca (sf)
Ratings Rationale
At closing in 2001, the notes were backed by a pool of 39
aircraft. As of November 15, 2010, the portfolio had 29 aircraft
with an average appraised base value of approximately $613million.
Approximately half of the remaining portfolio are old-vintage
and/or old generation (i.e. "classic") aircraft. Such aircraft
have experienced accelerated decline in demand and lease rates as
a result of the global recession along with a greater-than-
expected decline in value. Given the lower desirability for such
aircraft compared with their newer generation, Moody's expect
future cash flows generated by the pool to remain relatively weak,
with limited prospect for rebound.
At this time, the combined balances of the Classes A-1, A-2, and
A-3 Notes result in an overall Class A Loan-to-Value ratio of
roughly 119%. The Class A-1 and A-2 Notes were placed on review
for possible downgrade because given the current revenue generated
by the pool and the LTV ratio it is foreseeable that noteholders
will suffer a loss. The review will focus on the current status
and valuation of the LIFT fleet, projected portfolio income and
expenses, and the level of remaining reserves available to provide
structural support to noteholders.
As a result of the payment structure the Class A-3 is senior to
Classes A-1 and A-2. The Class A-3 notes have paid down to
roughly 17% of their original balance; the class A-3 will continue
to receive all principal payments until October 2011, after which
the Class A-1 and A-2 Notes are scheduled to start receiving
principal payments. In the event that revenue generated by the
pool is not sufficient to fully repay the Class A-3 Notes by
October 2011, scheduled principal payments to the Class A-3 Notes
will begin to be paid on a pro-rata basis with scheduled principal
payments due on the Class A-1 and A-2 Notes. In light of this,
Moody's view the Class A-3 Notes as adequately protected for its
ratings.
The Class B-1 and B-2 Notes have stopped receiving interest
payments due to the decline in revenue and the substantial decline
in the portfolio's value. Due to their subordinate position in
the waterfall, the Class B-1 and B-2 Notes are unlikely to receive
any future cash flows, and the current LTV ratio on the Class B-1
and B-2 Notes is roughly 138% which indicates a remote chance for
any possible recovery.
LEHMAN BROTHERS: Moody's Affirms Ratings on Two 2005-LLF Notes
--------------------------------------------------------------
Moody's Investors Service affirmed the rating of two classes of
Lehman Brothers Floating Rate Commercial Mortgage Trust 2005-LLF
C4, Commercial Mortgage Pass-Through Certificates Series 2005-LLF
C4:
-- Cl. X-2 Certificate, Affirmed at Aaa (sf); previously on
August 17, 2005 Definitive Rating Assigned Aaa (sf)
-- Cl. K Certificate, Affirmed at Caa3 (sf); previously on
March 4, 2009 Downgraded to Caa3 (sf)
Ratings Rationale
The affirmation is due to key parameters, including Moody's loan
to value ratio and Moody's stressed debt service coverage ratio
remaining within acceptable ranges.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the
previous review. Even so, deviation from the expected range will
not necessarily result in a rating action. There may be
mitigating or offsetting factors to an improvement or decline in
collateral performance, such as increased subordination levels due
to amortization and loan payoffs or a decline in subordination due
to realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "Hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.0. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Deal Performance
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased to $8.4 million from
$81.8 million at last review. The certificates are collateralized
by a single loan remaining in the pool that is currently in
special servicing. The outstanding interest shortfalls for Class
K total $13,801 and cumulative bond loss total $62,154 as of
November 2010.
The 321-329 Riverside Avenue Loan ($8.4 million -- 100% of trust
balance) is secured by five two-story office buildings totaling
49,690 square feet located in Westport, Connecticut. The loan
sponsor is InvestCorp. Initially, Investcorp had intended to
convert the property from office to residential use, and as such,
leases had been allowed to expire without a re-leasing effort.
However, the borrower has since abandoned its residential
conversion plan. The loan was transferred to special servicing
in March 2008 due to balloon maturity default, and interest
payments were current until October 2009. The new appraisal
valued the property at $6.4 million, and an appraisal reduction
of $1.6 million has been taken. The borrower and special servicer
are still in discussion over the next course of action. There is
a junior loan component of $5.7 million outside of the trust.
Moody's loan to value ratio for the pooled trust is 131% and
Mody's LTV for the first mortgage is 219%.
LUMINENT MORTGAGE: Moody's Downgrades Ratings on 15 Tranches
------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 15
tranches and confirmed the rating of 1 tranche from 3 RMBS
transactions issued by Luminent Mortgage Trust. The collateral
backing these deals primarily consists of first-lien, adjustable-
rate Alt-A residential mortgages.
Ratings Rationale
The actions are a result of the continued performance
deterioration in Alt-A pools in conjunction with home price and
unemployment conditions that remain under duress. The actions
reflect Moody's updated loss expectations on Alt-A pools issued
from 2005 to 2007.
To assess the rating implications of the updated loss levels on
Alt-A RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
A list of updated estimated pool losses, sensitivity analysis, and
tranche recovery details is being posted on an ongoing basis for
the duration of this review period and may be found at:
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: Luminent Mortgage Trust 2006-3
-- Cl. II-1A-1, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1A-2, Downgraded to C (sf); previously on Jan. 27,
2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1X-1, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-2A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-2A-2, Downgraded to C (sf); previously on Jan. 27,
2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-2X-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-3A-1, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-3A-2, Downgraded to C (sf); previously on Jan. 27,
2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-3X-1, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Luminent Mortgage Trust 2007-1
-- Cl. I-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: Luminent Mortgage Trust 2007-2
-- Cl. I-A-1, Confirmed at B3 (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-4, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-5, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
LUMINENT MORTGAGE: Moody's Downgrades Ratings on 38 Tranches
------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 38
tranches from 9 RMBS transactions issued by Luminent Mortgage
Trust. The collateral backing these transactions primarily
consists of first-lien, adjustable-rate, negative amortization
residential mortgages.
Ratings Rationale
The actions are a result of the rapidly deteriorating performance
of option arm pools in conjunction with macroeconomic conditions
that remain under duress. The actions reflect Moody's updated
loss expectations on option arm pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on
option arm RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
Certain securities, as noted below, are insured by financial
guarantors. For securities insured by a financial guarantor, the
rating on the securities is the higher of (i) the guarantor's
financial strength rating and (ii) the current underlying rating
(i.e., absent consideration of the guaranty) on the security. The
principal methodology used in determining the underlying rating is
the same methodology for rating securities that do not have a
financial guaranty and is as described earlier.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: Luminent Mortgage Trust 2006-1
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Luminent Mortgage Trust 2006-2
-- Cl. A1A, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A1B, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A1C, Current Rating at Aa3 (sf); previously on Nov. 12,
2009 Confirmed at Aa3 (sf)
-- Underlying Rating: Downgraded to C (sf); previously on
March 30, 2010 Ca (sf) Placed Under Review for Possible
Downgrade
-- Financial Guarantor: Assured Guaranty Municipal Corp
(Confirmed at Aa3, Outlook Negative on Nov 12, 2009)
-- Cl. X, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Luminent Mortgage Trust 2006-3
-- Cl. I-1A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-1A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-1A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2A-1, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2A-2, Confirmed at Ca (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Luminent Mortgage Trust 2006-4
-- Cl. A-1A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1C, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Luminent Mortgage Trust 2006-5
-- Cl. A1A, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A1B, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A1C, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. PO, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Luminent Mortgage Trust 2006-6
-- Cl. A-1, Downgraded to Caa2 (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2A, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2B, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Luminent Mortgage Trust 2006-7
-- Cl. II-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: Luminent Mortgage Trust 2007-1
-- Cl. II-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: Luminent Mortgage Trust 2007-2
-- Cl. II-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
MERRILL LYNCH: Moody's Downgrades Ratings on 13 Tranches
--------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 13
tranches from 5 RMBS transactions issued by Merrill Lynch
Alternative Note Asset Trust. The collateral backing these
transactions primarily consists of first-lien, adjustable-rate,
negative amortization residential mortgages.
Ratings Rationale
The actions are a result of the rapidly deteriorating performance
of option arm pools in conjunction with macroeconomic conditions
that remain under duress. The actions reflect Moody's updated
loss expectations on option arm pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on
option arm RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The ratings of Merrill Lynch Alternative Note Asset Trust, Series
2007-OAR4 Class A-1 and Class A-2, are based on the loss
allocations rules outlined in the Pooling and Servicing Agreement.
Moody's notes that there is a discrepancy between the loss
allocation rules in the Prospectus, and those outlined in the PSA.
The trustee has stated that they will follow the loss allocation
rules set forth in the PSA.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: Merrill Lynch Alternative Note Asset Trust, Series 2007-
OAR1
-- Cl. A-1, Downgraded to Ba3 (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Merrill Lynch Alternative Note Asset Trust, Series 2007-
OAR2
-- Cl. A-1, Downgraded to B1 (sf); previously on Jan. 27, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Merrill Lynch Alternative Note Asset Trust, Series 2007-
OAR3
-- Cl. A-1, Downgraded to Caa2 (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Merrill Lynch Alternative Note Asset Trust, Series 2007-
OAR4
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Merrill Lynch Alternative Note Asset Trust, Series 2007-
OAR5
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
MERRILL LYNCH: Moody's Downgrades Ratings on 15 2006-C2 Certs.
--------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 15 classes and
affirmed six classes of Merrill Lynch Mortgage Trust 2006-C2,
Commercial Mortgage Pass-Through Certificates, Series 2006-C2:
-- Cl. A-1, Affirmed at Aaa (sf); previously on Aug. 22, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on Aug. 22, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Aug. 22, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Aug. 22, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on Aug. 22, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. AM, Downgraded to A2 (sf); previously on Oct. 28, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. AJ, Downgraded to Baa3 (sf); previously on Oct. 28, 2010
Aa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Ba2 (sf); previously on Oct. 28, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to B1 (sf); previously on Oct. 28, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Caa1 (sf); previously on Oct. 28, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Caa3 (sf); previously on Oct. 28, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Ca (sf); previously on Oct. 28, 2010 Ba2
(sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to C (sf); previously on Oct. 28, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to C (sf); previously on Oct. 28, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Oct. 28, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Oct. 28, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Oct. 28, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Oct. 28, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Oct. 28, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Oct. 28, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. X, Affirmed at Aaa (sf); previously on Aug. 22, 2006
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from actual and anticipated losses from specially
serviced and troubled loans and interest shortfalls.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed debt service coverage ratio and
the Herfindahl Index, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
On October 28, 2010, Moody's placed 15 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
13.5% of the current balance. At last review, Moody's cumulative
base expected loss was 5.3%. Moody's stressed scenario loss is
24.6% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
(Herf), a measure of loan level diversity, is a primary
determinant of pool level diversity and has a greater impact on
senior certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated July 3, 2008.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 12, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 16% to
$1.29 billion from $1.54 billion at securitization. The
Certificates are collateralized by 124 mortgage loans ranging in
size from less than 1% to 8% of the pool, with the top ten loans
representing 40% of the pool. The pool includes one loan,
representing 8% off the pool, with an investment grade credit
estimate.
Fifty loans, representing 47% 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 CRE
Finance Council 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.
Two loans have been liquidated from the trust since
securitization, resulting in a $6.2 million loss (61% loss
severity on average). A $7.1 million loss has also been incurred
due to the modification of two loans that remain in the pool.
There were no realized losses at last review. Fifteen loans,
representing 13% of the pool, are currently in special servicing.
The largest specially serviced loan is the Mall at Whitney Field
Loan ($74.4 million -- 5.7% of the pool), which is secured by a
664,974 square feet mall located in Leominster, Massachusetts.
The loan was transferred to special servicing in April 2009 for
imminent default and is now real estate owned. The master
servicer recognized an appraisal reduction of $43.3 million for
this loan in November 2010.
The remaining 14 specially serviced loans are secured by a mix of
property types. The master servicer has recognized an aggregate
$34.3 million appraisal reduction for nine of the remaining
specially serviced loans. Moody's has estimated an aggregate
$100.3 million loss (58% expected loss on average) for all of the
specially serviced loans.
Moody's has assumed a high default probability for 15 poorly
performing loans representing 16% of the pool and has estimated an
aggregate $60.8 million loss (29% expected loss based on a 64%
probability of default) from these troubled loans.
Based on the most recent remittance statement, Classes H through
Q have experienced cumulative interest shortfalls totaling
$2.7 million. Moody's anticipates that the pool will continue to
experience interest shortfalls because of the high exposure to
specially serviced loans. Interest shortfalls are caused by
special servicing fees, including workout and liquidation fees,
appraisal entitlement reductions and extraordinary trust expenses.
Moody's was provided with full year 2009 operating results for 86%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV for the conduit component is 116%
compared to 108% at Moody's prior full review. Moody's net cash
flow reflects a weighted average haircut of 11.7% to the most
recently available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.7%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs for the performing conduit loans are 1.18X and
0.93X, respectively, compared to 1.20X and 1.10X at last full
review. Moody's actual DSCR is based on Moody's net cash flow and
the loan's actual debt service. Moody's stressed DSCR is based on
Moody's NCF and a 9.25% stressed rate applied to the loan balance.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 39, compared to 40 at Moody's prior review.
The loan with an investment grade credit estimate is the
California Market Center Loan ($106.0 million -- 8.2% of the
pool), which is secured by a 1.9 million SF office/design showroom
building located in downtown Los Angeles, California. The
property was 100% occupied as of June 2010. The property has a
diverse tenant mix within the apparel and gift markets.
Performance has been stable. Moody's credit estimate and stressed
DSCR are Baa3 and 1.44X, respectively, compared to Baa3 and 1.57X
at last review.
The top three performing conduit loans represent 16% of the pool
balance. The largest loan is the RLJ Hotel Portfolio Loan
($94.5 million -- 7.3% of the pool), which represents a 18.9% pari
passu interest in a $500.0 million first mortgage loan. The loan
is secured by 43 hotels located in eight states. The portfolio
includes a variety of limited and full service flags and totals
5,427 guest-rooms. The portfolio's RevPAR for the trailing twelve
months ending June 2010 was $62.74 compared to $83.50 at last
review. The loan is on the master servicer's watchlist due to low
DSCR. Moody's considers this loan to be a high default risk and
has identified it as a troubled loan. Moody's LTV and stressed
DSCR are 190% and 0.64X, respectively, compared to 106% and 1.18X
at last review.
The second largest loan is the Embassy Suites -- San Diego Loan
($69.1 million -- 5.3% of the pool), which is secured by a 337-
room full service hotel located in downtown San Diego, California.
Property performance has declined due to the overall downturn in
the hospitality sector. The loan is on the servicer's watchlist
due to low debt service coverage. Moody's LTV and stressed DSCR
are 130% and 0.91X, respectively, compared to 112% and 1.10X at
last review.
The third largest loan is The Promenade of Westlake Loan
($40.1 million -- 3.1% of the pool), which is secured by a 258,054
SF grocery anchored retail center located in Westlake, Ohio. The
property was 96% leased as of June 2010, compared to 99% at last
review. Moody's LTV and stressed DSCR are 104% and 0.94X,
respectively, compared to 146% and 0.68X at last review.
MOMENTUM CAPITAL: S&P Raises Ratings on Various Classes of Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
B, C, D, and E notes from Momentum Capital Fund Ltd., a
collateralized loan obligation transaction managed by TCW Asset
Management Co. At the same time, S&P removed the ratings on class
B and C from CreditWatch with positive implications. The upgrades
reflect the improved performance S&P has observed in the deal
since November 2009, when S&P downgraded the class B, C, D, and E
notes following a review of the transaction under S&P's updated
criteria for rating corporate collateralized debt obligations. At
the same time, S&P affirmed its ratings on classes A-1 and A-2.
At the time of S&P's last rating action, according to the trustee
report, the transaction held $13.91 million in defaulted
obligations and more than $54.35 million in underlying obligors
with a rating, either by Standard & Poor's or another rating
agency, in the 'CCC' range compared with zero currently defaulted
assets and $22.13 million in 'CCC' assets as of the Oct. 7, 2010,
trustee report. In combination with a reduction in the 'CCC'
range assets the deal has also had an increase it its
overcollateralization ratios. Class A/B O/C ratio improved to
118.54% from 112.54%; class C ratio to 112.08% from 106.44%; class
D ratio to 107.92% from 102.48%; and class E to 104.76% from
99.38%.
Standard & Poor's will continue to review whether, in its view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as S&P deems necessary.
Rating And Creditwatch Actions
Momentum Capital Fund Ltd.
Rating
------
Class To From
----- -- ----
B notes AA+ (sf) A+/Watch Pos (sf)
C notes A+ (sf) BB+/Watch Pos (sf)
D notes BBB+ (sf) CCC+ (sf)
E notes B+ (sf) CCC- (sf)
NR - Not rated.
Ratings Affirmed
Momentum Capital Fund Ltd.
Class Rating
----- ------
A-1 notes AAA (sf)
A-2 notes AA+ (sf)
MORGAN STANLEY: Moody's Downgrades Ratings on 11 2007-XLC1 Notes
----------------------------------------------------------------
Moody's has downgraded eleven classes of Notes issued by Morgan
Stanley 2007-XLC1, Ltd., due to the deterioration in the credit
quality of the underlying portfolio as evidenced by an increase in
the weighted average rating factor, the sensitivity of the
transaction to recovery rates, and the increase in Defaulated
Collateral Interests. The rating action is the result of Moody's
on-going surveillance of commercial real estate collateralized
debt obligation transactions.
-- Cl. A-1, Downgraded to Ba1 (sf); previously on March 25, 2009
Confirmed at Aaa (sf)
-- Cl. A-2, Downgraded to B3 (sf); previously on March 25, 2009
Downgraded to Baa1 (sf)
-- Cl. B, Downgraded to Caa2 (sf); previously on March 25, 2009
Downgraded to Ba1 (sf)
-- Cl. C, Downgraded to Caa3 (sf); previously on March 25, 2009
Downgraded to Ba3 (sf)
-- Cl. D, Downgraded to Caa3 (sf); previously on March 25, 2009
Downgraded to B1 (sf)
-- Cl. E, Downgraded to Ca (sf); previously on March 25, 2009
Downgraded to B1 (sf)
-- Cl. F, Downgraded to C (sf); previously on March 25, 2009
Downgraded to B1 (sf)
-- Cl. G, Downgraded to C (sf); previously on March 25, 2009
Downgraded to B2 (sf)
-- Cl. H, Downgraded to C (sf); previously on March 25, 2009
Downgraded to B2 (sf)
-- Cl. J, Downgraded to C (sf); previously on March 25, 2009
Downgraded to B2 (sf)
-- Cl. K, Downgraded to C (sf); previously on March 25, 2009
Downgraded to Caa2 (sf)
Ratings Rationale
Morgan Stanley 2007-XLC1, Ltd., is a static cash CRE CDO
transaction backed by a portfolio of mezzanine debt (64.5% of
the pool balance), whole loans (12.4%), B-Note debt (12.1%),
and commercial mortgage backed securities (11.0%). As of the
November 9, 2010 Trustee report, the aggregate Note balance of the
transaction has decreased to $592.7 million from $826.8 million at
issuance.
There are four assets with par balance of $88.4 million (16.3% of
the current collateral pool balance) that are classified as a
Defaulted Collateral Interests as of the November 9, 2010 Trustee
report. Moody's expects losses from those Defaulted Collateral
Interests to occur once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 6,007 compared to 1,786 at
last review. The distribution of current ratings and credit
estimates is: Aaa-Aa3 (0.5% compared to 3.5% at last review),
Baa1-Baa3 (4.3% compared to 10.6% at last review), Ba1-Ba3 (0.0%
compared to 31.6% at last review), B1-B3 (25.8% compared to 54.3%
at last review), and Caa1-C (69.3% compared to 0.0% at last
review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 2.1 compared to
2.6 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 9.4% compared to 14.7% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
16.2% compared to 28.0% at last review.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 9.4% to 0% or up to 19.4% would result in average rating
movement on the rated tranches of 0 to 1 notches downward or 0 to
2 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
MORGAN STANLEY: Moody's Upgrades Ratings on Three Classes of Notes
------------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of these notes issued by Morgan Stanley Investment
Management Croton, Ltd.:
-- $14,000,000 Class B Senior Floating Rate Notes Due 2018
Notes, Upgraded to A2 (sf); previously on July 6, 2009
Downgraded to A3 (sf);
-- $4,000,000 Class B Senior Fixed Rate Notes Due 2018 Notes,
Upgraded to A2 (sf); previously on July 6, 2009 Downgraded to
A3 (sf);
-- $4,000,000 Class E Deferrable Mezzanine Floating Rate Notes
Due 2018 Notes, Upgraded to Caa3 (sf); previously on
November 23, 2010 Ca (sf) Placed Under Review for Possible
Upgrade.
Ratings Rationale
According to Moody's, the rating actions taken on the notes result
primarily from improvement in the credit quality of the underlying
portfolio and an increase in the overcollateralization ratios of
the notes since the last rating action in July 2009. Improvement
in the credit quality is observed through an improvement in the
average credit rating (as measured by the weighted average rating
factor) and a decrease in the proportion of securities from
issuers rated Caa1 and below. In particular, as of the latest
trustee report dated November 5, 2010, the weighted average rating
factor is currently 2414 compared to 2704 in the June 2009 report,
and securities rated Caa1/CCC+ or lower make up approximately
7.4% of the underlying portfolio versus 13.4% in June 2009.
Additionally, defaulted securities total about $4.5 million of
the underlying portfolio compared to $10.8 million in June 2009.
The overcollateralization ratios of the rated notes have also
improved since the last rating action. The senior and mezzanine
overcollateralization ratios are reported at 118.35% and 104.84%,
respectively, versus June 2009 levels of 111.42% and 98.91%,
respectively, and all overcollateralization tests are currently in
compliance. Moody's also notes that the Class E Notes are no
longer deferring interest and that all previously deferred
interest has been paid in full.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs," key
model inputs used by Moody's in its analysis, such as par,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool to have a performing par and principal
proceeds of $279 million, defaulted par of $4.5 million, weighted
average default probability of 25.66% (implying a WARF of 3266), a
weighted average recovery rate upon default of 44.33%, and a
diversity score of 68. These default and recovery properties of
the collateral pool are incorporated in cash flow model analysis
where they are subject to stresses as a function of the target
rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends and collateral manager latitude for trading the
collateral are also factors.
Morgan Stanley Investment Management Croton, Ltd., issued in
December 2005, is a collateralized loan obligation backed
primarily by a portfolio of senior secured loans.
Moody's Investors Service did not receive or take into account
a third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in August 2009. In addition, due to the low
diversity of the collateral pool, CDOROM 2.6 was used to simulate
a default distribution that was then applied as an input in the
cash flow model.
In addition to the base case analysis described above, Moody's
also performed a number of sensitivity analyses to test the impact
on all rated notes, including these:
1. Various default probabilities to capture potential defaults in
the underlying portfolio.
2. A range of recovery rate assumptions for all assets to capture
variability in recovery rates.
A summary of the impact of different default probabilities
(expressed in terms of WARF levels) on all rated notes (shown in
terms of the number of notches' difference versus the current
model output, where a positive difference corresponds to lower
expected loss), assuming that all other factors are held equal:.
Moody's Adjusted WARF -- 20% (2613)
-- Class A-1: +1
-- Class A-2: +1
-- Class B Fixed: +2
-- Class B Floating: +3
-- Class C: +2
-- Class D: +1
-- Class E: +2
Moody's Adjusted WARF + 20% (3919)
-- Class A-1: -2
-- Class A-2: -2
-- Class B Fixed: -2
-- Class B Floating: -2
-- Class C: -2
-- Class D: -3
-- Class E: -1
A summary of the impact of different recovery rate levels on all
rated notes (shown in terms of the number of notches' difference
versus the current model output, where a positive difference
corresponds to lower expected loss), assuming that all other
factors are held equal:
Moody's Adjusted WARR + 2% (46.33%)
-- Class A-1: 0
-- Class A-2: 0
-- Class B Fixed: +1
-- Class B Floating: +1
-- Class C: 0
-- Class D: 0
-- Class E: +1
Moody's Adjusted WARR - 2% (42.33%)
-- Class A-1: -1
-- Class A-2: -1
-- Class B Fixed: 0
-- Class B Floating: 0
-- Class C: -1
-- Class D: -1
-- Class E: 0
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deal's
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus selling defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
2) Weighted average life: The notes' ratings are sensitive to the
weighted average life assumption of the portfolio, which may be
extended due to the manager's decision to reinvest into new
issue loans or other loans with longer maturities and/or
participate in amend-to-extend offerings. Moody's tested for a
possible extension of the actual weighted average life in its
analysis.
3) Other collateral quality metrics: The deal is allowed to
reinvest and the manager has the ability to deteriorate the
collateral quality metrics' existing cushions against the
covenant levels. Moody's analyzed the impact of assuming lower
of reported and covenanted values for weighted average rating
factor, weighted average spread, weighted average coupon, and
diversity score. Additionally, however, in light of the large
positive difference between the reported and covenant levels
for weighted average spread, Moody's believes that the
manager's ability to deteriorate these collateral quality
metrics is more limited. As a result, Moody's analysis
incorporates the impact of assuming spread levels between the
reported and covenanted values for the weighted average spread.
MORGAN STANLEY: S&P Cuts Ratings on Two 1998-WF2 Notes to 'D'
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings to 'D (sf)'
on two classes of commercial mortgage-backed securities from
Morgan Stanley Capital I Inc.'s series 1998-WF2. In addition,
S&P affirmed its ratings on eight other classes from the same
transaction.
The downgrades reflect S&P's analysis of the cumulative interest
shortfalls that have affected the trust. S&P lowered its ratings
on classes L and M to 'D (sf)' because of existing accumulated
interest shortfalls that S&P expects to remain outstanding for the
foreseeable future.
As of the November 2010 remittance report, cumulative interest
shortfalls totaled $1.2 million. Classes L and M have experienced
cumulative interest shortfalls for the past 11 consecutive months.
The affirmed ratings reflect S&P's analysis of the remaining
collateral in the transaction, the transaction structure, and the
liquidity available to the certificates. S&P affirmed its rating
on the class X interest-only certificate based on its current
criteria.
Credit Considerations
As of the November 2010 remittance report, one loan ($1.9 million,
1.6%) was with the special servicer, Wells Fargo Bank N.A.
The Hawthorn Plaza loan ($1.9 million total exposure, 1.6%) is the
only loan with the special servicer and is the 10th-largest loan
in the pool. The property is an 47,550-sq.-ft. retail shopping
center in Indianapolis, Ind. The loan was originally transferred
to the special servicer on June 28, 2010, due to imminent default,
and the payment status is 90-plus-days delinquent. As of Dec. 31,
2009, the reported DSC was 0.73x, and as of June 20, 2010, the
reported occupancy was 70.2%. According to the special servicing
notes, the third-party phase I assessment recommended that a Phase
II report be completed. Wells Fargo noted that it will not
proceed with foreclosure until receiving the phase II report.
Standard & Poor's anticipates a moderate loss upon the eventual
resolution of this asset.
In addition to the specially serviced asset, S&P deemed one loan
($15.5 million, 13.3%) to be credit-impaired. This loan is at
increased risk of default and loss due to vacancy and income
issues. The Catamaran Resort Hotel loan is the third-largest loan
in the pool and is secured by a 313-room full-service, luxury
resort in San Diego, Calif. Per the master servicer's watchlist
comments, year-to-date occupancy level was 78% as of Dec. 31,
2009, compared with 80% a year earlier. RevPAR has also decreased
to $130.58 year-to-date as of Dec. 31, 2009, from the year-to-date
level of $153.08 as of Dec. 31, 2008. In addition, EGI decreased
13% from last year.
Transaction Summary
As of the November 2010 remittance report, the collateral balance
was $116.7 million, which is 11.0% of the balance at issuance.
The collateral includes 28 loans, down from 219 loans at issuance.
One ($10.5 million, 9.0%) of the loans is defeased. As of the
November 2010 remittance report, the master servicer, Wells Fargo,
had provided financial information for 100.0% of the nondefeased
loans in the pool, all of which was full-year 2008, full-year
2009, or interim 2010 data. S&P calculated a weighted average
debt service coverage of 1.55x for the pool based on the reported
figures. S&P's adjusted DSC and LTV, which exclude one defeased
loan ($10.5 million, 9.0%), one specially serviced loan
($1.8 million, 1.6%), and one additional loan that S&P deemed to
be credit-impaired ($15.5 million, 13.3%), were 1.53x and 50.4%,
respectively. S&P separately estimated losses for the two
specially serviced and credit-impaired loans and included them in
S&P's 'AAA' scenario implied default and loss figures.
Six loans ($21.2 million, 18.2%) are on the master servicer's
watchlist. Three loans ($17.8 million, 15.3%) have a reported DSC
below 1.10x, and two of these loans ($17.4 million, 14.9%) have a
reported DSC of less than 1.00x. To date, the pool has
experienced principal losses totaling $7.4 million on four loans.
Summary of Top 10 Loans
The top 10 Real Estate exposures, which include one specially
serviced loan ($1.8 million total exposure, 1.6%) discussed in
the Credit Considerations section above and two loans on the
master servicer's watchlist ($18.6 million, 15.9%), have an
aggregate outstanding balance of $91.0 million (78.0%). Using
servicer-reported numbers, S&P calculated a weighted average
DSC of 1.47x for the top 10 loans. S&P's adjusted DSC and LTV
for the top 10 loans are 1.44x and 54.5%, respectively.
The master servicer reported a watchlist of six loans
($21.2 million, 18.2%). The largest loan on the watchlist and the
third-largest loan in the pool is the Catamaran Resort Hotel loan,
which S&P described as credit-impaired in the Credit
Considerations section above.
The High Desert Villas Apartments loan ($3.1 million, 2.6%) is
the sixth-largest loan in the pool and the second-largest on the
watchlist due to occupancy below 80.0%. This loan is secured by
a 232-unit 55-plus senior apartment community in Victorville,
California. The reported DSC for year-end 2009 was 1.81x, and
occupancy was 78.0%.
The Hollywood Video-Pad (2A) loan ($800,478, 0.70%) is the fourth-
largest on the watchlist. This loan is secured by a 7,800-sq.-ft.
single-tenant Hollywood Video with a lease expiration of June 30,
2013, and loan maturity of Feb 1, 2013. Per the watchlist notes,
based on the third-quarter 2010 rent roll, the property is dark
with Hollywood Video, who filed bankruptcy, and is still paying
the full rent for the total space. The reported third-quarter
2010 DSC was 0.96x and occupancy was 0%.
Standard & Poor's analyzed the transaction according to its
current criteria. The rating actions are consistent with S&P's
analysis.
Ratings Lowered
Morgan Stanley Capital I Inc.
Commercial mortgage pass-through certificates series 1998-WF2
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
L D (sf) B- (sf) 5.04
M D (sf) CCC- (sf) 0.49
Ratings Affirmed
Morgan Stanley Capital I Inc. Commercial mortgage pass-through
certificates series 1998-WF2
Class Rating Credit enhancement (%)
----- ------ ----------------------
D AAA (sf) 98.29
E AA+ (sf) 80.09
F AA- (sf) 61.90
G BBB+ (sf) 41.43
H BBB (sf) 32.33
J BB+ (sf) 25.51
K BB- (sf) 18.68
X AAA (sf) N/A
N/A - Not applicable.
MORGAN STANLEY: S&P Raises Ratings on Two 2003-TOP11 Certs.
-----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on two
classes of commercial mortgage pass-through certificates from
Morgan Stanley Capital I Trust 2003-TOP11, a U.S. commercial
mortgage-backed securities transaction. Concurrently, S&P lowered
its ratings on two other classes and affirmed its ratings on 11
other classes from the same transaction.
S&P's rating actions follow its analysis of the transaction and
included a review of the remaining collateral in the transaction,
the transaction structure, and the liquidity available to the
trust. The raised ratings reflect increased credit enhancement
levels due to the deleveraging of the pool and seasoning of the
remaining loans in the pool.
S&P lowered its ratings on the class L and M certificates due to
their susceptibility to future interest shortfalls and anticipated
credit support erosion upon the eventual resolution of two of the
three specially serviced loans.
The affirmations of S&P's ratings on the remaining nine principal
and interest certificates reflect subordination and liquidity
support levels that are consistent with the outstanding ratings.
S&P affirmed its ratings on the class X-1 and X-2 interest-only
certificates based on its current criteria.
S&P's analysis included a review of the credit characteristics of
all of the remaining loans in the pool. Using servicer-provided
financial information, S&P calculated an adjusted debt service
coverage of 2.03x and a loan-to-value ratio of 65.1%. S&P further
stressed the loans' cash flows under its 'AAA' scenario to yield a
weighted average DSC of 1.60x and an LTV ratio of 82.5%. The
implied defaults and loss severity under the 'AAA' scenario were
12.1% and 46.2%, respectively. The DSC and LTV calculations noted
above exclude 20 defeased loans ($131.4 million, 17.3%) and two of
the three specially serviced assets ($13.2 million, 1.7%). S&P
separately estimated losses for these two specially serviced
assets and included them in its 'AAA' scenario implied default and
loss figures.
Transaction Summary
As of the Nov. 15, 2010, trustee remittance report, the collateral
pool balance was $759.4 million, which is 63.6% of the balance at
issuance. The pool includes 155 loans and one real estate owned
asset, down from 188 loans at issuance. The master servicer,
Wells Fargo Bank N.A., provided financial information for 99.2% of
the nondefeased loans in the pool, all of which was full-year
2008, full-year 2009, and partial-year 2010 data.
S&P calculated a weighted average DSC of 2.07x for the loans
in the pool based on the servicer-reported figures. S&P's
adjusted DSC and LTV ratio were 2.03x and 65.1%, respectively.
S&P's adjusted DSC and LTV figures exclude 20 defeased loans
($131.4 million, 17.3%), and two of the three specially serviced
assets ($13.2 million, 1.7%). S&P separately estimated losses
for these two specially serviced assets and included them in its
'AAA' scenario implied default and loss figures. The transaction
has experienced $3.4 million in principal losses to date. Twenty-
seven loans ($77.5 million, 10.2%) in the pool are on the master
servicer's watchlist. Twelve loans ($51.0 million, 6.7%) have
reported DSC below 1.10x, 10 of which ($38.9 million, 5.1%) have a
reported DSC of less than 1.0x.
Credit Considerations
As of the Nov. 15, 2010, trustee remittance report, three assets
($22.9 million, 3.0%) in the pool were with the special servicer,
C-III Asset Management LLC. The payment status of the specially
serviced assets, as reported in the November 2010 trustee
remittance report, is: one is REO ($4.9 million, 0.6%), one is in
foreclosure ($8.3 million, 1.1%), and one is a matured balloon
loan ($9.7 million, 1.3%). Two of the three specially serviced
assets ($13.2 million, 1.7%) have appraisal reduction amounts in
effect totaling $4.6 million. Details on the three specially
serviced assets are:
The Holiday Inn - Independence loan ($9.7 million, 1.3%) is
secured by a 364-room full-service hotel in Independence, Ohio.
The matured balloon loan was transferred to the special servicer,
C-III, on June 28, 2010, due to imminent maturity default. The
loan matured on July 1, 2010, and the borrower was not able to
payoff the loan. C-III stated that an updated appraisal has been
ordered and that it is currently working on a loan modification
with the borrower. C-III reported a 1.11x DSC and 49.0% occupancy
for the 10 months ended Oct. 31, 2010.
The Hamstra Square loan ($8.3 million, 1.1%) is secured by an
80,930-sq.-ft. retail strip center in Chandler, Ariz. The
loan, which is in foreclosure, was transferred to the special
servicer on October 16, 2009 due to imminent default. An ARA of
$3.5 million, based on a December 2009 appraisal of $5.6 million,
is in effect against the loan. C-III reported a 22.6% occupancy
as of February 2010. C-III indicated that the borrower is
currently working on leasing the vacant space. S&P expects a
significant loss upon the eventual resolution of this loan. The
Lone Tree Commons Retail Center asset ($4.9 million, 0.6%), a
45,025-sq.-ft. retail strip center in Lone Tree, Colo., was
transferred to the special servicer on April 10, 2009, due to
payment default and became REO on May 24, 2010. C-III reported
that it plans to lease the vacant space before marketing the
property for sale. The property was 62.0% occupied as of November
2010 and did not generate sufficient cash flow to pay operating
expenses. An ARA of $1.1 million, based on a May 2010 appraisal
of $4.7 million, is in effect against the asset. S&P expects a
moderate loss upon the eventual resolution of this loan.
Two loans totaling $33.3 million (4.4%) were previously with the
special servicer and have been returned to the master servicer.
Pursuant to the transaction documents, the special servicer is
entitled to a workout fee that is 1% of future principal and
interest payments if the loans perform and remain with the master
servicer. According to Wells Fargo, the workout fee will be
collected on these two loans.
Summary of Top 10 Real Estate Exposures
The top 10 real estate exposures have an aggregate outstanding
balance of $206.7 million (27.2%). Using servicer-reported
numbers, S&P calculated a weighted average DSC of 2.25x for the
top 10 real estate exposures. S&P's adjusted DSC and LTV ratio
for the top 10 real estate exposures are 2.08x and 64.3%,
respectively. Details on the three largest real estate exposures
are below:
The Center Tower loan ($61.7 million, 8.1%) is the largest
nondefeased loan in the pool. The loan is secured by a 462,200-
sq.-ft. suburban office building in Costa Mesa, Calif. Wells
Fargo reported a DSC of 1.77x for year-end 2009 and occupancy
of 82.0% as of July 2010. The 516 West 34th street loan
($22.5 million, 3.0%) is the second-largest nondefeased loan
in the pool. This loan is secured by a 264,450-sq.-ft. office
building in Manhattan. Wells Fargo reported a DSC of 3.00x and
occupancy of 100% for the 12 months ended June 30, 2010.
The Rexmere Village MHC loan ($19.5 million, 2.6%) is the third-
largest nondefeased loan in the pool. The loan is secured by a
manufactured home community of 774 doublewide mobile home sites in
Davie, Fla. Wells Fargo reported a DSC of 3.62x for year-end 2009
and occupancy of 88.6% as of June 2010. Standard & Poor's
stressed the collateral in the pool according to its current
criteria. The resultant credit enhancement levels are consistent
with S&P's raised, lowered, and affirmed ratings.
Ratings Raised
Morgan Stanley Capital I Trust 2003-TOP11
Commercial mortgage pass-through certificates
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
B AA+ (sf) AA (sf) 14.31
C A+ (sf) A (sf) 9.98
Ratings Lowered
Morgan Stanley Capital I Trust 2003-TOP11
Commercial mortgage pass-through certificates
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
L CCC+ (sf) B- (sf) 1.52
M CCC (sf) CCC+ (sf) 1.13
Ratings Affirmed
Morgan Stanley Capital I Trust 2003-TOP11
Commercial mortgage pass-through certificates
Class Rating Credit enhancement (%)
----- ------ ----------------------
A-3 AAA (sf) 18.44
A-4 AAA (sf) 18.44
D A- (sf) 8.21
E BBB+ (sf) 6.24
F BBB (sf) 5.26
G BBB- (sf) 4.28
H BB- (sf) 2.70
J B+ (sf) 2.31
K B (sf) 1.92
X-1 AAA (sf) N/A
X-2 AAA (sf) N/A
N/A - Not applicable.
MORGAN STANLEY: S&P Raises Rating on Class H Certs. From 'BB'
-------------------------------------------------------------
Standard & Poor's Ratings Services raised its rating to 'A+ (sf)'
from 'BB (sf)' on the class H commercial mortgage-backed
securities certificates from Morgan Stanley Capital I Inc.'s
series 1997-WF1.
S&P's upgrade of the class H certificates reflects increased
credit enhancement, as well as S&P's analysis of the remaining
collateral and transaction structure. S&P also considered the
lack of diversity in its analysis, which constrained the level of
the upgrade.
S&P's analysis included a review of the credit characteristics of
all of the loans in the transaction, which includes seven (68.3%
of the pool) fully amortizing loans. Using servicer-provided
financial information, Standard & Poor's calculated an adjusted
debt service coverage of 1.27x and a loan-to-value ratio of 43.2%.
Credit Considerations
As of the November 2010 remittance report, none of the loans were
with the special servicer, CWCapital Asset Management LLC, or on
the master servicer's watchlist.
Transaction Summary
As of the November 2010 remittance report, there were eight loans
remaining in the pool, with an aggregate pooled trust balance of
$14.6 million, which represents 2.6% of the aggregate pooled trust
balance at issuance. There are eight assets in the pool, down
from 132 at issuance. The master servicer for the transaction,
Wells Fargo Bank N.A., provided financial information for 100% of
the pool, and all of the servicer-provided information was full-
year 2009 or interim-2010 data.
S&P calculated a weighted average DSC of 1.41x for the pool based
on the reported figures. S&P's adjusted DSC and LTV were 1.27x
and 43.2%, respectively. None of the loans have a reported DSC of
less than 1.10x. To date, the transaction has realized two
principal losses totaling $2.7 million.
Summary of Remaining Loans
The top three loans have an aggregate outstanding pooled balance
of $12.2 million (83.4%). Using servicer-reported numbers, S&P
calculated a weighted average DSC of 1.23x for the remaining
loans. S&P's adjusted DSC and LTV for the remaining loans were
1.08x and 48.2%, respectively. Details regarding the three
largest loans are:
The 7010 Mineral Point Road loan ($5.0 million, 34.1%) is the
largest loan in the pool and is secured by a 134,500-sq.-ft.
office property in Madison, Wisconsin. The property is 100%
leased through June 2016 to Brown Shoes, which subleased 100% of
the space to Madison Area Technical College for its new West
Campus, also through June 2016. The subtenant has remodeled most
of the space into classrooms and common student areas. Demolition
and remodeling are underway for the remaining space. For the
trailing-12-months ended Sept. 30, 2010, the reported DSC and
occupancy were 1.17x and 100%, respectively.
The Humphries Half Moon Inn loan ($4.6 million, 31.7%) is the
second-largest loan in the pool and is secured by a 182-room
boutique resort in San Diego (Shelter Island), California. The
property amenities include a 10,000-sq.-ft., open-air concert
area, restaurant, pool and spa, golf greens, and 6,993 sq. ft. of
meeting/banquet space. As of Dec. 31, 2009, the occupancy and
average daily rate were 74% and $128.90, respectively.
The ABCO Desert Market Shopping Center ($2.6 million, 17.6%) is
the third-largest loan in the pool and is secured by a 61,804-sq.-
ft. retail center in Phoenix, Arizona. The center is anchored by
a 42,500-sq.-ft. Safeway, which is currently dark. According to
the master servicer, Wells Fargo, the tenant continues to pay rent
according to its lease terms through December 2016. As of Dec.
31, 2010, the DSC and occupancy were 1.19x and 93.0%,
respectively.
The remaining five loans each represent less than 4.75% of the
pool balance and have current loan balances less than $700,000.
Rating Raised
Morgan Stanley Capital I Inc.
Commercial mortgage pass-through certificates series 1997-WF1
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
H A+ (sf) BB (sf) 77.59
MORGAN STANLEY: S&P Raises Ratings on Various Classes of Notes
--------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
J and K commercial mortgage-backed securities from Morgan Stanley
Capital I Inc.'s series 1998-WF1.
The upgrades reflect increased credit enhancement, as well as
S&P's analysis of the remaining collateral and the transaction
structure.
S&P's analysis included a review of the credit characteristics of
all of the loans in the transaction. Using servicer-provided
financial information, Standard & Poor's calculated an adjusted
debt service coverage of 1.93x and a loan-to-value ratio of 40.6%.
Transaction Summary
As of the November 2010 remittance report, the aggregate pooled
trust balance was $34.0 million, which represents 2.4% of the
aggregate pooled trust balance at issuance. Twenty-five loans
remain in the pool, down from 306 at issuance. The master
servicer for the transaction, Wells Fargo Bank N.A., provided
financial information for 100% of the pool, and all of the
servicer-provided information was full-year 2009, or interim
2010 data. S&P calculated a weighted average DSC of 2.11x for
the pool based on the reported figures. S&P's adjusted DSC and
LTV were 1.93x and 40.6%, respectively. Five loans ($7.3 million,
21.4%) are on the master servicer's watchlist. Three loans
($5.2 million, 15.3%) have a reported DSC of less than 1.10x, and
two of these loans ($3.0 million, 8.7%) have a reported DSC of
less than 1.0x. To date, the transaction has realized 13
principal losses totaling $11.8 million.
The transaction benefits from seasoning and also has a significant
amount of fully amortizing loans (43% by balance). The deal lacks
diversity, however, with a 45% retail concentration and 52% of the
remaining collateral in California.
Credit Considerations
As of the November 2010 remittance report, no loans are with the
special servicer, CWCapital Asset Management LLC. Three of the
top 10 loans appear on the master servicer's watchlist and are
discussed below. S&P's analysis considered near-term maturing
loans with final maturities in 2012 ($4.3 million, 12.6%).
S&P considered the transaction's lack of diversity in its analysis
and constrained the magnitude of the upgrades.
Summary of Top 10 Loans
The top 10 exposures secured by real estate have an aggregate
outstanding pooled balance of $22.2 million (65.5%). Using
servicer-reported numbers, S&P calculated a weighted average DSC
of 1.88x for the top 10 loans. S&P's adjusted DSC and LTV for the
top 10 loans were 1.61x and 51.5%, respectively. Three of the top
10 loans appear on the master servicer's watchlist. Details
regarding these loans are:
The Broadway Shoppes loan ($2.0 million, 5.9%) is the sixth-
largest loan in the pool and the largest loan on the watchlist.
The loan is secured by a 146,248-sq.-ft. retail property in
Cleveland, Ohio. The loan appears on the master servicer's
watchlist due to low DSC and occupancy. The reported occupancy as
of June 30, 2010, was 67.9%, and the reported DSC as of Dec. 31,
2009, was 0.60x. The borrower is in negotiations with several
potential tenants.
The 1703-1735 Stewart Street loan ($1.9 million, 5.7%) is the
seventh-largest loan in the pool and the second-largest loan on
the watchlist. The loan is secured by a 73,367-sq.-ft. industrial
property in Santa Monica, California. The loan appears on the
master servicer's watchlist due to upcoming lease expirations.
The property reported a year-end 2009 DSC of 3.16x.
The Auburn Town Center loan ($1.6 million, 4.6%) is the 10th-
largest loan in the pool and the third-largest loan on the
watchlist. The loan is secured by a 20,700-sq.-ft. retail
property in Auburn, Ca. The loan appears on the master servicer's
watchlist due to a drop in occupancy. The reported occupancy as
of Sept. 21, 2010, was 78.0%, and the reported DSC as of Dec. 31,
2009, was 1.81x.
Standard & Poor's stressed the loans in the pool according to its
U.S. conduit/fusion criteria. The resultant credit enhancement
levels support the raised ratings.
Ratings Raised
Morgan Stanley Capital I Inc.
Commercial mortgage pass-through certificates series 1998-WF1
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
J A (sf) BB (sf) 67.72
K BB (sf) B-(sf) 36.98
MORTGAGEIT MORTGAGE: Moody's Downgrades Ratings on 11 Tranches
--------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 11
tranches from 2 transactions issued by MortgageIT Mortgage Loan
Trust in 2005-2006.
Ratings Rationale
The collateral backing the transactions consists of Option ARM
residential mortgage loans. The actions are a result of the
rapidly deteriorating performance of Option ARM pools in
conjunction with macroeconomic conditions that remain under duress
and Moody's updated loss expectations on Option ARM pools issued
from 2005 to 2007.
To assess the rating implications of the updated loss levels on
Option ARM RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete Rating Actions are:
Issuer: MortgageIT Mortgage Loan Trust, Mortgage Loan Pass-Through
Certificates, Series 2006-1
-- Cl. 1-A2, Downgraded to Ca (sf); previously on Oct. 20, 2010
Confirmed at Caa3 (sf)
-- Cl. 1-X, Downgraded to Ca (sf); previously on Oct. 20, 2010
Confirmed at Caa3 (sf)
-- Cl. 2-A1A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A1B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A1C, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-PO, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: MortgageIT Trust 2005-AR1, Mortgage Pass-Through
Certificates, Series 2005-AR1
-- Cl. I-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-X-1, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed
MSDWCC HELOC: Moodyu's Downgrades Ratings on Four Tranches
----------------------------------------------------------
Moody's Investors Service has downgraded the ratings of four
tranches from four RMBS transactions issued by MSDWCC HELOC
Trusts. The collateral backing these deals primarily consists of
home equity lines of credit.
Ratings Rationale
The actions are a result of the continued performance
deterioration in second lien pools in conjunction with home price
and unemployment conditions that remain under duress. The actions
reflect Moody's updated loss expectations on second lien pools.
For securities insured by a financial guarantor, the rating on the
securities is the higher of (i) the guarantor's financial strength
rating and (ii) the current underlying rating (i.e., absent
consideration of the guaranty) on the security.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
If expected losses on the each of the collateral pools were to
increase by 10%, model implied results indicate that most of the
deals' ratings would remain stable, with the exception of Class A
from MSDWCC HELOC Trust 2003-2, for which model implied results
would be one notch lower (for example, Ba2 versus Ba1, or Ca
versus Caa3).
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: MSCC HELOC Trust 2007-1, HELOC Asset-Backed Notes, Series
2007-1
* Expected Losses (as a % of Original Balance): 9%
-- Cl. A, Downgraded to B3 (sf); previously on March 18, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Issuer: MSDWCC HELOC Trust 2003-1
* Expected Losses (as a % of Original Balance): 1%
-- Cl. A, Downgraded to Ba1 (sf); previously on March 18, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Financial Guarantor: MBIA Insurance Corporation (Downgraded
to B3, Outlook Negative on June 25, 2009)
Issuer: MSDWCC HELOC Trust 2003-2
* Expected Losses (as a % of Original Balance): 1%
-- Cl. A, Downgraded to Baa3 (sf); previously on March 18, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Financial Guarantor: MBIA Insurance Corporation (Downgraded
to B3, Outlook Negative on June 25, 2009)
Issuer: MSDWCC HELOC Trust 2005-1
* Expected Losses (as a % of Original Balance): 2%
-- Cl. A, Downgraded to B3 (sf); previously on March 18, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
N-STAR REL: Moody's Downgrades Ratings on 12 Classes of Notes
-------------------------------------------------------------
Moody's has downgraded twelve classes of Notes issued by N-Star
REL CDO VI Ltd. due to the deterioration in the credit quality of
the underlying portfolio as evidenced by an increase in the
weighted average rating factor and the sensitivity of the
transaction to recovery rates. The rating action is the result of
Moody's on-going surveillance of commercial real estate
collateralized debt obligation transactions.
-- CL. A-1, Downgraded to A1 (sf); previously on April 21, 2009
Confirmed at Aaa (sf)
-- CL. A-R, Downgraded to A1 (sf); previously on April 21, 2009
Confirmed at Aaa (sf)
-- CL. A-2, Downgraded to Baa3 (sf); previously on April 21,
2009 Confirmed at Aaa (sf)
-- CL. B, Downgraded to Ba2 (sf); previously on April 21, 2009
Confirmed at Aa2 (sf)
-- CL. C, Downgraded to B1 (sf); previously on April 21, 2009
Confirmed at A1 (sf)
-- CL. D, Downgraded to B3 (sf); previously on April 21, 2009
Confirmed at A3 (sf)
-- CL. E, Downgraded to Caa1 (sf); previously on April 21, 2009
Confirmed at Baa1 (sf)
-- CL. F, Downgraded to Caa2 (sf); previously on April 21, 2009
Confirmed at Baa2 (sf)
-- CL. G, Downgraded to Caa3 (sf); previously on April 21, 2009
Confirmed at Baa3 (sf)
-- CL. H, Downgraded to Caa3 (sf); previously on April 21, 2009
Confirmed at Ba2 (sf)
-- CL. J, Downgraded to Caa3 (sf); previously on April 21, 2009
Confirmed at Ba3 (sf)
-- CL. K, Downgraded to Caa3 (sf); previously on April 21, 2009
Confirmed at B2 (sf)
Ratings Rationale
N-Star REL CDO VI Ltd. is a revolving CRE CDO transaction backed
by a portfolio A-Notes and whole loans (45.9% of the pool
balance), mezzanine loans (27.7%), CDOs (12.4%), B-Notes (8.0%)
and commercial mortgage backed securities (6.0%). As of the
October 29, 2010 Trustee report, the aggregate Note balance of the
is $432.9 million, less than the from $450.0 million at issuance.
The difference pertains to the amount outstanding of the A-R
notes, which is currently $52 million of a maximum of $70 million
at issuance. The revolving period is set to end in June 2011.
There are three assets with a par balance of $21.2 million (4.6%
of the current pool balance) that are considered Defaulted
Securities as of the October 29, 2010 Trustee report. One of
these assets (70.7% of the defaulted balance) is CMBS and two
assets are mezzanine loan (29.3%). Defaulted Securities that are
not CMBS are defined as assets which are in default. While there
have been no realized losses to date, Moody's does expect
significant losses to occur once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. For non-CUSIP collateral, Moody's is reducing the
maximum over concentration stress applied to correlation factors
due to the diversity of tenants, property types, and geographic
locations inherent in the pooled transactions. These parameters
are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 7,559 compared to 3,927 at
last review. The distribution of current ratings and credit
estimates is: Aaa-Aa3 (1.3% compared to 3.8% at last review), A1-
A3 (3.0% compared to 0.0% at last review), Baa1-Baa3 (0.0%
compared to 0.3% at last review), Ba1-Ba3 (4.4% compared to 0.0%
at last review), B1-B3 (0.0% compared to 62.1% at last review),
and Caa1-C (91.3% compared to 33.9% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 5.0 years compared
to 7.0 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 30.2% compared to 32.9% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 0.0% compared to 20.9% at last review.
The low MAC is due to higher default probability collateral
concentrated within a small number of collateral names.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 30% to 20% or up to 40% would result in average rating
movement on the rated tranches of 1 to 6 notches downward and 1 to
7 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
N-STAR REL: Moody's Downgrades Ratings on Six Classes of Notes
--------------------------------------------------------------
Moody's has affirmed one and downgraded six classes of Notes
issued by N-Star REL CDO IV Ltd. due to the deterioration in the
credit quality of the underlying portfolio as evidenced by an
increase in the weighted average rating factor and the sensitivity
of the transaction to recovery rates. The rating action is the
result of Moody's on-going surveillance of commercial real estate
collateralized debt obligation transactions.
-- CL. A, Downgraded to A1 (sf); previously on April 7, 2009
Confirmed at Aaa (sf)
-- CL. B, Downgraded to Baa3 (sf); previously on April 7, 2009
Downgraded to A3 (sf)
-- CL. C, Downgraded to Ba3 (sf); previously on April 7, 2009
Downgraded to Baa3 (sf)
-- CL. D, Downgraded to B3 (sf); previously on April 7, 2009
Downgraded to Ba3 (sf)
-- CL. E, Downgraded to Caa2 (sf); previously on April 7, 2009
Downgraded to B3 (sf)
-- CL. F, Downgraded to Caa3 (sf); previously on April 7, 2009
Downgraded to Caa1 (sf)
-- CL. G, Affirmed at Caa3 (sf); previously on April 7, 2009
Downgraded to Caa3 (sf)
Ratings Rationale
N-Star REL CDO IV Ltd. is a now static CRE CDO transaction
backed by a portfolio A-Notes and whole loans (44.4% of the
pool balance), B-Notes (23.6%), mezzanine loans (13.9%), CDOs
(10.4%)and commercial mortgage backed securities (6.1%). As
of the October 27, 2010 Trustee report, the aggregate Note
balance of the transaction has decreased to $393.5 million from
$400.0 million at issuance, with the paydown directed to the
Class A Notes. This transaction is no longer in its reinvestment
period.
There are thirteen assets with par balance of $34.2 million (7.5%
of the current pool balance) that are considered Defaulted
Securities as of the October 27, 2010 Trustee report. Three of
these assets (50.7% of the defaulted balance) are CMBS, one asset
is a mezzanine loan (29.2%) and one asset is a B-Note (20.0%).
Defaulted Securities that are not CMBS are defined as assets which
are in default. While there have been limited realized losses to
date, Moody's does expect significant losses to occur once they
are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 7,034 compared to 3,902 at
last review. The distribution of current ratings and credit
estimates is: Aaa-Aa3 (0.9% compared to 0.0% at last review), A1-
A3 (3.6% compared to 0.3% at last review), Baa1-Baa3 (0.6%
compared to 1.4% at last review), Ba1-Ba3 (1.8% compared to 19.6%
at last review), B1-B3 (7.5% compared to 5.0% at last review), and
Caa1-C (85.6% compared to 73.8% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 2.1 years compared
to 6.5 years at last review. The lower WAL is the actual
remaining WAL.
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 29.0% compared to 20.0% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
99.9% compared to 18.7% at last review. The high MAC is due to
higher default probability collateral concentrated within a large
number of collateral names.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 29% to 19% or up to 39% would result in average rating
movement on the rated tranches of 1 to 5 notches downward and 1 to
5 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
NEW ENGLAND: Moody's Affirms 'Ba3' Rating on $3.7 Mil. Bonds
------------------------------------------------------------
Moody's Investors Service has affirmed the Ba3 rating of New
England College. This rating applies to $3.7 million of Series
1999 bonds issued through the New Hampshire Higher Educational and
Health Facilities Authority. The outlook has been revised to
stable from positive reflecting the 8% dip in fall 2010 enrollment
and the continued decline in net tuition per student, The stable
outlook continues to reflect the consistently positive operations
and modest but stable growth of financial resources.
Rating Rationale: The Ba3 rating and stable outlook are based on
the College's small size, recently robust graduate-level
enrollment growth despite a fall 2010 enrollment decline,
comparably challenged demand statistics resulting in vulnerability
of the revenue base, a long trend of positive operating margins
which have resulted in modest but consistent resource growth, and
a very low, fixed rate debt profile.
Legal Security: General obligation of the College secured by gross
receipts subject to prior lien of HUD on revenues generated by
certain dormitory facilities; mortgage interest in certain campus
facilities. Debt service covenant of 1.25 times (6.25 times at
6/30/2010) and MADS to Revenues covenant of up to 0.15 times (0.08
times at 6/30/2010). There is a cash funded debt service reserve
fund.
Interest Rate Derivatives: None.
Challenges
* Challenged market position. While the College saw higher
enrollment in graduate programs during the economic downturn,
graduate enrollment declined moderately in the fall of 2010 and
undergraduate enrollment declined for the fourth straight year.
With the entering Class of undergraduates increased modestly in
the fall, total undergraduate enrollment continued to decline as
a result of challenged retention of upper-Classmen. Currently
the College has under 1,000 undergraduate students, a challenged
sophomore retention rate of under 60% and a comparably weak six-
year graduation rate of 42%. Freshman demand statistics are
modest but relatively stable over the last five years with a
selectivity rate of 80% and yield on accepted students of 18%.
The College faces significant competition for New England
students. Total full-time equivalent students of 1,893
represents an 8% decline over fall 2009 FTE.
* Significant revenue vulnerability as a result of declining net
tuition per student. While total net tuition revenue has
increased at a healthy rate in recent years, up 37% since FY2006
as a result of considerable enrollment growth, net tuition per
student has declined 21% since FY2005 to $10,319 in FY2010.
While total revenues have continued to grow as a result of
enrollment increases, perpetual revenue growth will likely be
challenged going forward as robust enrollment growth seen in
recent years is not likely to continue. Management reports that
total net tuition revenue for the current 2011 fiscal year is
expected to increase by 5%, despite the decline in enrollment
for year. Variability in student demand and net tuition pricing
are key credit factors as student charges represent 91% of
operating revenues as calculated by Moody's.
* Modest level of financial resources and liquidity to support
operations. Expendable financial resources, at $4.6 million,
provide a modest 0.16 times coverage of operations. Liquidity
remains very low with $3.2 million of monthly liquidity in FY
2010, equating to a thin 43 days cash on hand. Assets are
allocated between equities (48%) fixed income (36%), marketable
alternatives (10%) and emerging markets (6%). Moody's notes
concentration of investment management, with 76% of endowment
investments held in two Commonfund funds and the remainder with
TD Bank.
* Annual rollover of revenue anticipation notes issued through the
New Hampshire Health and Education Facilities Authority
represents potential draw on liquid resources if not refinanced.
In April 2006, the College issued $1.5 million in revenue
anticipation notes to fund capital projects. Since that time,
the College has annually re-issued this debt, with a maturity of
one year at each issuance. In Moody's opinion, the College is
subject to market risk that the RANs could not be renewed or
replaced and could be required to utilize the majority of its
most liquid resources to pay bondholders. The currently
outstanding RANs mature in April 2011.
* Growing age of plant, at 12.4 years may result in additional
debt issuance in the next few years. The College is currently in
the process of developing a new facilities master plan and have
not ruled out the possibility of additional debt.
Strengths
* Long trend of positive operating results supported by prudent
fiscal management practices. The College has produced a positive
operating margin since FY 2003 under Moody's methodology, with
the three-year average operating margin at 3.3% for FY2008
through FY2010. These solid results stem from increased net
tuition and fee revenue (37% increase in annual amount from FY
2006 through 2010) as well as sound fiscal management practices.
The College budgets to add approximately $500,000 of
unrestricted funds to net assets each year in addition to a
$500,000 annual contingency reserve. Good cash flow margins (at
9.7% in FY 2010) have resulted in healthy average debt service
coverage of over 4.0 times (FY2008-FY2010). The College
maintains a $1.5 million operating line of credit with TD Bank,
but has not had to utilize the line since 2007.
* Past enrollment growth at this highly residential, rural college
in central New Hampshire. Between fall 2003 and 2009, full-time
equivalent enrollment increased to 2,055 FTE primarily on the
strength of increased graduate enrollment, which rose to 1,053
FTEs from 118 during this time. Approximately half of graduate
enrollment is on-line. Moody's views this multi-year trend of
enrollment growth as a significant credit strength despite a dip
in this upward growth in the fall 2010 semester. While freshman
enrollment continued to grow, retention of undergraduate upper-
Classmen and graduate students declined; resulting in an 8%
decline of total enrollment at 1,893 FTE. Continued enrollment
growth in the coming years would be viewed as a significant
credit positive.
* Fixed rate debt profile with relatively low amount of debt
outstanding, supported by modest, but growing financial
resources. As a result of annual operating surpluses, supported
by enrollment growth, the College has been able to grow reserves
on a relatively consistent basis. At the close of the 2010
fiscal year, expendable financial resources were $4.6 million,
up from $2.7 million four years earlier - resulting in a
relatively healthy 0.8 times coverage of total debt. Even modest
additional debt issuance would cause this ratio to drop
dramatically. Management notes potential for additional debt
issuance in the coming years.
* Notable growth of gift revenue. While still comparably low, the
College experienced material growth in annual gift revenues in
FY2010 at $2.6 million; up from approximately $1 million each of
the last four years. A substantial portion of revenues were
largely utilized for a new turf field. Management notes
increased attention to prospects for alumni giving.
Outlook
The stable outlook reflects Moody's expectation that the College
will continue to produce a positive operating performance,
maintain enrollment with a diversity of program offerings, and has
no near term debt plans.
What could change the rating -- Up
Significant strengthening of financial resources coupled with
stability or growth in enrollment accompanied by increase in net
tuition per student; stronger fundraising results
What could change the rating -- Down
Volatility or decline in enrollment or tuition pricing strategies
that negatively affect financial performance; lack of growth in
financial resources; future borrowing that outpaces growth in
financial resources
Key Indicators (FY 2010 financial data and fall 2010 enrollment
data):
-- Total Enrollment: 1,893 full time equivalent students
-- Total Direct Debt: $5.9 million
-- Expendable Financial Resources to Debt: 0.78 times
-- Expendable Financial Resources to Operations: 0.16 times
-- Monthly Liquidity: $3.2 million
-- Monthly Days Cash on Hand: 43 days
-- Three-Year Average Operating Margin: 3.3%
-- Operating Cash Flow Margin: 9.7%
-- % of Revenues from Student Charges: 90.9%
Rated Debt:
-- Series 1999: Ba3
The last rating action was on July 6, 2009, when the long-term Ba3
rating was affirmed and the positive outlook assigned.
NOMURA CRE: Fitch Downgrades Ratings on Three Classes of Notes
--------------------------------------------------------------
Fitch Ratings has downgraded three classes of Nomura CRE CDO 2007-
2, Ltd./LLC, reflecting Fitch's increased base case loss
expectation of 45.2% compared to 35.8% at last review. Fitch's
performance expectation incorporates prospective views regarding
commercial real estate market value and cash flow declines.
The transaction is primarily collateralized by senior commercial
real estate debt (79.5% of the total collateral is either whole
loans or A-notes). Many of these assets are secured by
transitional properties that have been lagging behind their
original business plans. Fourteen assets (36.7%) are currently
defaulted, including 11 CRE assets (31.6%) and three commercial
mortgage-backed securities (CMBS: 5.1%). Fitch expects
significant losses on the defaulted assets. In addition, the
percentage of Fitch Loans of Concern has also increased to 13.1%
from 0% at last review.
Since last review, three assets have been removed from the
collateralized debt obligation (including two full loan payoffs
and one at a deminimis realized loss) and three assets were newly
contributed to the CDO (including two CRE loans and one CRE CDO
bond).
As of the November 2010 trustee report, all overcollateralization
ratios breached their covenants. On the most recent payment date,
interest proceeds were insufficient to pay interest on the timely
rated classes A-1 through C due to swap termination payments. As
a result, approximately $1.1 million of principal proceeds was
applied to pay interest on these classes. All remaining principal
proceeds continue to be redirected to redeem the class A-1 and A-R
notes due to the OC test failures.
Under Fitch's methodology, approximately 69.6% 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 7.8% from, generally, either year end 2009 or trailing
12-month second or third quarter 2010. Fitch estimates recoveries
to average 35.2%.
This transaction was analyzed according to the 'Surveillance
Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate
Transactions', which applies stresses to property cash flows and
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 breakevens for all classes do not meet
Fitch's base case loss expectation.
The largest component of Fitch's base case loss expectation is a
whole loan (11.4%) secured by an eight property multifamily
portfolio located in Texas, Indiana, Florida, North Carolina, and
Tennessee. In the fourth quarter of 2008, the collateral manager
took title to the property via the default of a mezzanine loan
held outside the CDO. The whole loan matured in October 2009 and
was not repaid. The collateral manager is currently marketing the
properties for sale. Fitch modeled a term default with a
substantial loss in its base case scenario.
The next largest component of Fitch's base case loss expectation
is a B-note (5.8%) on a portfolio of 20 office properties in
Washington, DC and Seattle, WA, whereby the loan is secured by the
first mortgages on 16 office properties, the pledge of the
mortgage and the borrower's ownership interest in one office
property, and the pledge of cash flows from three office
properties. The senior loan and B-note were both transferred to
special servicing in April 2010 for imminent default. The
borrower and the special servicer have negotiated a modification.
The asset manager expects little to no cash flows to the B-note
position during the extension period. Fitch modeled a full loss
on this B-note position.
The third largest component of Fitch's base case loss expectation
is classes H and K (4.9%) of MSCI 2007-IQ14, a $4.8 billion
conduit CMBS transaction. These bonds have a derived rating of
'D' and are currently experiencing interest shortfalls. Fitch
modeled a substantial loss on these rated securities.
Nomura 2007-2 is a CRE CDO managed by C-III Asset Management LLC.
The transaction has a five-year reinvestment period that ends in
February 2013. As of the November 2010 trustee report and per
Fitch categorizations, the CDO was substantially invested: whole
loans/A-note (79.5%), B-notes (8.7%), CRE mezzanine loans (3%),
CMBS (4.9%), and CRE CDOs (3.9%).
The ratings for bonds rated 'CCC' or lower were assigned Recovery
Ratings in order to provide a forward-looking estimate of
recoveries on currently distressed or defaulted structured finance
securities.
The assignment of 'RR2' to classes A-1 and A-R reflect modeled
recoveries of 81% of their outstanding balance. The expected
recovery proceeds are broken down:
-- Present value of expected principal recoveries
($423 million);
-- Present value of expected interest payments ($12.3 million);
-- Total present value of recoveries ($435.3 million);
-- Sum of undiscounted recoveries ($537.3 million).
Classes A-2 and B are assigned a 'RR6' and classes C through O
maintains a 'RR6' as the present value of the recoveries is less
than 10% of the class's principal balance.
Fitch has downgraded and assigned RRs to these classes:
-- $463,201,637 class A-1 downgraded to 'CCCsf/RR2' from
'BBsf/LS3';
-- $75,000,000 class A-R downgraded to 'CCCsf/RR2' from
'BBsf/LS3';
-- $60,681,250 class A-2 downgraded to 'CCCsf/RR6' from
'Bsf/LS5';
In addition, Fitch has affirmed these classes:
-- $70,537,500 class B at 'CCCsf/RR6';
-- $26,600,000 class C at 'CCCsf/RR6';
-- $27,352,569 class D at 'CCsf/RR6';
-- $20,647,496 class E at 'CCsf/RR6';
-- $21,875,681 class F at 'CCsf/RR6'.
-- $25,305,305 class G at 'Csf/RR6';
-- $20,537,270 class H at 'Csf/RR6';
-- $25,676,193 class J at 'Csf/RR6';
-- $23,789,186 class K at 'Csf/RR6';
-- $9,226,725 class L at 'Csf/RR6';
-- $6,022,698 class M at 'Csf/RR6';
-- $8,640,055 class N at 'Csf/RR6';
-- $13,960,027 class O at 'Csf/RR6'.
OLYMPIC CLO: Moody's Upgrades Ratings on Various Classes of Notes
-----------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of these notes issued by Olympic CLO I Ltd.:
-- US$101,000,000 Class A-1L Floating Rate Notes Due May 2016
(current outstanding balance of $44,484,132), Upgraded to Aaa
(sf); previously on November 23, 2010 A1 (sf) Placed Under
Review for Possible Upgrade;
-- US$25,000,000 Class A-1LB Floating Rate Notes Due May 2016,
Upgraded to Aaa (sf); previously on November 23, 2010 A2 (sf)
Placed Under Review for Possible Upgrade;
-- US$16,000,000 Class A-2L Floating Rate Notes Due May 2016,
Upgraded to Aa2 (sf); previously on November 23, 2010 Baa2
(sf) Placed Under Review for Possible Upgrade;
-- US$19,000,000 Class A-3L Floating Rate Notes due May 2016,
Upgraded to Baa2 (sf); previously on November 23, 2010 Ba3
(sf) Placed Under Review for Possible Upgrade;
-- US$15,000,000 Class B-1L Floating Rate Notes due May 2016,
Upgraded to B3 (sf); previously on November 23, 2010 Ca (sf)
Placed Under Review for Possible Upgrade;
-- US$4,400,000 Class B-2L Floating Rate Notes due May 2016,
Upgraded to Caa3 (sf); previously on November 23, 2010 C (sf)
Placed Under Review for Possible Upgrade.
Ratings Rationale
According to Moody's, the rating actions taken on the notes result
primarily from substantial amortization of the Class A-1LA and
Class A-1L Notes since the last rating action in June 2009. The
deal also benefited from improvement in the credit quality of the
underlying portfolio since the last rating action.
The overcollateralization ratios of the rated notes have improved
as a result of delevering of the Class A-1LA and Class A-1L Notes,
which were paid down by approximately $123 million or 62% since
the previous rating action in June 2009. As of the November 2010
trustee report, the Senior Class A, Class A, Class B-1L, and Class
B-2L overcollateralization ratios are reported at 131.7%, 116.0%,
106.0%, and 103.5%, respectively, versus May 2009 levels of
118.3%, 109.6%, 103.6%, and 95.4%, respectively, and all related
overcollateralization tests are currently in compliance. Moody's
expects delevering to continue as a result of the end of the
deal's reinvestment period in May 2009.
Improvement in the credit quality is observed through an
improvement in the average credit rating (as measured by the
weighted average rating factor) and a decrease in the proportion
of securities from issuers rated Caa1 and below. Based on the
November 2010 trustee report, the weighted average rating factor
is 2605 compared to 3165 in May 2009, and securities rated Caa1
and below make up approximately 8% of the underlying portfolio
versus 19.5% in May 2009. The deal also experienced a decrease in
defaults. In particular, the dollar amount of defaulted
securities reported by the trustee has decreased to $6.0 million
from approximately $24.9 million in May 2009.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs," key
model inputs used by Moody's in its analysis, such as par,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool to have a performing par and principal
proceeds of $156.7 million , defaulted par of $8 million, weighted
average default probability of 23.12% (implying a WARF of 3415), a
weighted average recovery rate upon default of 41.31%, and a
diversity score of 42. These default and recovery properties of
the collateral pool are incorporated in cash flow model analysis
where they are subject to stresses as a function of the target
rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends, and collateral manager latitude for trading
the collateral are also factors.
Olympic CLO I Ltd., issued in March 2004, is a collateralized loan
obligation backed primarily by a portfolio of senior secured
loans.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in August 2009.
In addition to the base case analysis described above, Moody's
also performed a number of sensitivity analyses to test the impact
on all rated notes, including these:
1. Various default probabilities to capture potential defaults in
the underlying portfolio.
2. A range of recovery rate assumptions for all assets to capture
variability in recovery rates.
A summary of the impact of different default probabilities
(expressed in terms of WARF levels) on all rated notes (shown in
terms of the number of notches' difference versus the current
model output, where a positive difference corresponds to lower
expected losses), assuming that all other factors are held equal:
Moody's Adjusted WARF -- 20% (2732)
-- Class A-1L: 0
-- Class A-1LA: 0
-- Class A-1LB: 0
-- Class A-2L: +2
-- Class A-3L: +2
-- Class B-1L: +3
-- Class B-2L: +1
Moody's Adjusted WARF + 20% (4098)
-- Class A-1L: 0
-- Class A-1LA: 0
-- Class A-1LB: 0
-- Class A-2L: -1
-- Class A-3L: -2
-- Class B-1L: -3
-- Class B-2L: -1
A summary of the impact of different recovery rate levels on all
rated notes (shown in terms of the number of notches' difference
versus the current model output, where a positive difference
corresponds to lower expected losses), assuming that all other
factors are held equal:
Moody's Adjusted WARR + 2% (43.31%)
-- Class A-1L: 0
-- Class A-1LA: 0
-- Class A-1LB: 0
-- Class A-2L: +1
-- Class A-3L: +1
-- Class B-1L: 0
-- Class B-2L: 0
Moody's Adjusted WARR - 2% (39.31%)
-- Class A-1L: 0
-- Class A-1LA: 0
-- Class A-1LB: 0
-- Class A-2L: 0
-- Class A-3L: -1
-- Class B-1L: -2
-- Class B-2L: -1
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are described
below:
1) Delevering: The main source of uncertainty in this transaction
is whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to
high prepayment levels in the loan market and/or collateral
sales by the manager, which may have significant impact on the
notes' ratings.
2) Recovery of defaulted assets: Market value fluctuations in
defaulted assets reported by the trustee and those assumed to
be defaulted by Moody's may create volatility in the deals'
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus selling defaulted
assets create additional uncertainties. Moody's analyzed
defaulted recoveries assuming the lower of the market price and
the recovery rate in order to account for potential volatility
in market prices.
3) Long-dated assets: The presence of assets that mature beyond
the CLO's legal maturity date exposes the deal to liquidation
risk on those assets. Moody's assumes an asset's terminal
value upon liquidation at maturity to be equal to the lower of
an assumed liquidation value (depending on the extent to which
the asset's maturity lags that of the liabilities) and the
asset's current market value
OPTION ARM: Moody's Downgrades Ratings on 94 Tranches
-----------------------------------------------------
Moody's Investors Service has downgraded the ratings of 94
tranches and confirmed the ratings of 13 tranches from 14 RMBS
transactions, backed by Option ARM loans, issued by Greenpoint
Mortgage Funding Trust in 2005, 2006 and 2007.
Ratings Rationale
The collateral backing these transactions consists primarily of
first-lien, adjustable-rate, negative amortization, Alt-A
residential mortgage loans. The actions are a result of the
rapidly deteriorating performance of option arm pools in
conjunction with macroeconomic conditions that remain under
duress. The actions reflect Moody's updated loss expectations
on option arm pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on
option arm RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
Certain securities, as noted below, are insured by financial
guarantors. For securities insured by a financial guarantor, the
rating on the securities is the higher of (i) the guarantor's
financial strength rating and (ii) the current underlying rating
(i.e., absent consideration of the guaranty) on the security. The
principal methodology used in determining the underlying rating is
the same methodology for rating securities that do not have a
financial guaranty and is as described earlier. RMBS securities
wrapped by Ambac Assurance Corporation are rated at their
underlying rating without consideration of Ambac's guaranty.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: GreenPoint Mortgage Funding Trust 2006-AR4
-- Cl. A1-A, Confirmed at Caa1 (sf); previously on June 25, 2010
Downgraded to Caa1 (sf) and Remained On Review for Possible
Downgrade
-- Cl. A2-A, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A2-B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A3-A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A3-B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A4-A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A4-B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A5, Confirmed at Caa3 (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A6-A, Downgraded to Caa1 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A6-B, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A6-C, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GreenPoint Mortgage Funding Trust 2006-AR6
-- Cl. 1-A1A, Downgraded to B3 (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A1AU, Downgraded to B3 (sf); previously on Jan. 27,
2010 B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2A1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2A2U, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2A2, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2BU, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A3A, Confirmed at Ca (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A1, Confirmed at Caa2 (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GreenPoint Mortgage Funding Trust 2006-AR7
-- Cl. 1-A1A, Confirmed at Caa2 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A1B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2A1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2A2, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A3A1, Confirmed at Ca (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A3A2, Confirmed at Ca (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A1, Confirmed at Caa2 (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: GreenPoint Mortgage Funding Trust 2006-AR8
-- Cl. 1-A1A, Downgraded to B3 (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A1B, Downgraded to C (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A3A, Confirmed at Ca (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
Issuer: GreenPoint Mortgage Funding Trust 2006-OH1
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Greenpoint MTA Trust 2005-AR1
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Caa1 (sf); previously on Jan. 27, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to C (sf); previously on Jan. 27, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. M-X, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. M-1, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. M-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Greenpoint MTA Trust 2005-AR2
-- Cl. A-1, Downgraded to Caa2 (sf); previously on Jan. 27, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Downgraded to Caa2 (sf); previously on Jan. 27, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Greenpoint MTA Trust 2005-AR3
-- Cl. I-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Ca (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Greenpoint Mortgage Funding Trust 2006-AR1
-- Cl. A-1A, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1B, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2A, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2B, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. M-1, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Greenpoint Mortgage Funding Trust 2006-AR2
-- Cl. I-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to C (sf); previously on April 16, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Underlying Rating: Downgraded to C (sf); previously on
March 30, 2010 Caa2 (sf) Placed Under Review for Possible
Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Cl. II-A-1, Downgraded to B2 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on April 16,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Underlying Rating: Downgraded to C (sf); previously on
March 30, 2010 Caa2 (sf) Placed Under Review for Possible
Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Cl. II-X, Downgraded to B2 (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Grantor Trust Cl. III-A-1, Downgraded to Caa2 (sf);
previously on Jan. 27, 2010 Ba1 (sf) Placed Under Review for
Possible Downgrade
-- Underlying Cl. III-A-1, Downgraded to Caa2 (sf); previously
on Jan. 27, 2010 Ba1 (sf) Placed Under Review for Possible
Downgrade
-- Cl. III-A-2, Downgraded to C (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-3, Downgraded to C (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-X, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Issuer: Greenpoint Mortgage Funding Trust 2006-AR3
-- Cl. I-A, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on April 16,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Underlying Rating: Downgraded to C (sf); previously on
March 30, 2010 Caa2 (sf) Placed Under Review for Possible
Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Cl. III-A-1, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-2, Downgraded to C (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-3, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-X, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
Issuer: Greenpoint Mortgage Funding Trust 2007-AR1
-- Cl. 1-A1A, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A1B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2A, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A3, Confirmed at Ca (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A1A, Confirmed at Caa2 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A1B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A2, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A4, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A1, Confirmed at Caa1 (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Greenpoint Mortgage Funding Trust 2007-AR2
-- Cl. 1-A1, Confirmed at Caa2 (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A3, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A4A, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A4B, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A4C, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Greenpoint Mortgage Funding Trust 2007-AR3
-- Cl. A1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A2, Downgraded to C (sf); previously on Jan. 27, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. A3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
PERRY COUNTY: Fitch Assigns 'BB' Rating to Hospital Revenue Bonds
-----------------------------------------------------------------
Fitch Ratings has assigned a 'BB' rating to these bonds issued on
behalf of Perry County Memorial Hospital:
-- $45,740,000 Indiana Finance Authority hospital revenue bonds,
series 2010.
The series 2010 bonds are expected to price the week of Jan. 18,
and will be used to construct a 25-bed replacement hospital, fully
fund a debt service reserve, and pay costs of issuance.
The Rating Outlook Stable.
Rating Rationale:
-- Perry County Memorial Hospital's designation as a
Critical Access Hospital provides a mitigating factor
for the project's increased capital costs, as Medicare
related costs garner enhanced reimbursement, including
additional depreciation.
-- The construction project has significant associated risks,
including delays, cost overruns and scope changes. These
risks are exacerbated by PCMH's small revenue size and heavy
pro forma debt burden.
-- PCMH has demonstrated some inconsistency in levels of
profitability coupled with a significant pro forma debt
level, which compare unfavorably to Fitch's investment grade
rated CAHs.
-- PCMH has adequate liquidity metrics compared to expenses,
which should provide for certain flexibility in meeting
financial obligations through the construction period.
The CAH designation somewhat offsets the risks inherent to small
rural facilities, including a small revenue base, a high
concentration of admissions from the top admitting physicians and
the challenges of recruiting and retaining physicians to a rural
market.
Key Rating Drivers:
-- Fitch expects that PCMH will complete the replacement project
on time and budget. Further, PCMH will need to successfully
recruit and retain the necessary physicians to support
operations in the new facility and to meet projections
through 2014.
-- Fitch expects PCMH to maintain CAH designation. Any material
change to the CAH program could have an impact on the 'BB'
rating.
Security:
The bonds are secured by a pledge of gross revenues, a debt
service reserve, and a mortgage lien.
Credit Summary:
Perry County Memorial Hospital plans to issue approximately $45.7
million in fixed-rate, tax-exempt bonds to construct a 25-bed
replacement hospital. Construction will begin in January 2011 on
a two-story 117,000 square foot facility, with completion and
occupation in summer of 2012. A guaranteed maximum price contract
is in place for $30.85 million which Fitch believes mitigates
concerns regarding project and construction risks. Maximum annual
debt service is estimated at $3.8 million as provided by the
underwriter.
PCMH received CAH designation in 2004, which provides for cost-
based reimbursement for Medicare-related expenses. Despite the
enhanced revenue base which helped generate solid profitability in
2007 and 2008, PCMH's operating loss in 2009 demonstrates an
inconsistency in operating profitability which compares
unfavorably to Fitch's rated CAH peer group, and presents certain
credit risk when entering into a large construction project.
Specifically, PCMH generated a -0.3% operating margin in 2009,
following a stronger 9.4% margin in 2008 and 3.0% margin in 2007.
Further, PCMH's operating EBITDA dropped to 4.2% in 2009, from
14.0% in 2008 and 8.2% in 2007. The fluctuation was largely due
to the timing in which disproportionate share payments were
recorded, reflecting a lag in the receipt of revenue from the year
in which the patient care expense was incurred. As a result of
positive settlements in fiscal 2010, PCMH has since returned to
profitable operations, generating an 11.8% operating margin and
15.8% operating EBTIDA margin at Oct. 31, 2010. The non-
investment grade rating reflects PCMH's inconsistent profitability
despite having CAH status.
Additional credit risks include PCMH's high pro forma debt burden,
its small revenue base, and the regulatory risk associated with
any potential changes to the critical-access hospital program.
PCMH's debt profile will change significantly with the series 2010
bond issuance. Pro forma MADS was a high 12.0% of revenue as of
Oct. 31, 2010, and is projected to remain above 8% through 2014.
With the 2010 issuance, PCMH's leverage metrics will be high,
which is also indicative of a non-investment grade rating. Debt-
to-capitalization is projected to be at 61.5% in fiscal 2010, well
above Fitch's 'BBB' rated median of 50.1%. Further, PCMH will
generate a low 3.2 times cushion ratio and 27.3% cash-to-debt
ratio, as calculated by Fitch at Dec. 31, 2010, which reflects the
significant strain of the debt issuance. PCMH currently has
adequate unrestricted cash levels which should provide for certain
flexibility in meeting financial obligations through the
construction period. Still, after the $5.4 million planned equity
contribution for the project, days of cash on hand will decline
from 229.2 as of Oct. 31, 2010, to 171.4 at fiscal year end
Dec. 31, 2010.
PCMH's small revenue base of $33.7 million for 2009 limits
operational flexibility and makes the credit inherently more
vulnerable to future adverse events, including fluctuations in
patient volumes and physician complement. Additionally, the scale
of the replacement project heightens PCMH's exposure to
construction risks including delays, cost overruns and scope
changes. However, CAH status will afford PCMH additional
reimbursement capacity upon completion, as a portion of the
additional operating expenses (including depreciation) is
reimbursable under the Medicare cost-plus formula. Finally, while
Fitch does not anticipate that PCMH will be in any danger of
losing its CAH designation, the 'BB' is dependent upon the
continuation of that designation.
The Stable Rating Outlook is based primarily on PCMH's CAH
designation, which should provide for some revenue stability going
forward. The current replacement projects, with expected
completion in 2012, should significantly enhance PCMH's
marketplace position and allow the organization to grow into its
current debt burden.
Perry County Memorial Hospital is a 25-bed critical access
hospital located in Tell City, Indiana, approximately 75 miles
west of Louisville, KY. Services include primary acute care
services and a full range of outpatient specialties, including
cardiac rehab, home health, physical and occupational therapies,
cancer care, sleep lab, and radiology. Total revenues were
$33.7 million in fiscal 2009. PCMH will covenant to disclose
audited annual statements no later than six months after the close
of the fiscal year, and quarterly financial statements no later
than 60 days after the close of each quarter to EMMA. Disclosure
will include balance sheet, income statement, cash flows, changes
in fund balance, and operating data, as well as compare current to
prior year data. There is currently no provision for a management
discussion & analysis, which is viewed negatively. However,
starting Jan. 20, 2011, PCMH will also disclose a construction
progress report no later than 20 days after each month end until
construction of the replacement facility is complete. Fitch
believes PCMH's disclosure practices are adequate for the rating
category.
PHOENIX CLO: S&P Raises Ratings on Various Classes of Notes
-----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A-2, B, C, and D notes from Phoenix CLO III Ltd., a collateralized
loan obligation transaction managed by ING Alternative Asset
Management. At the same time, S&P affirmed its rating on the
class A-1 notes. S&P removed the class A-1, A-2, B, and C notes
from CreditWatch with positive implications. S&P affirmed its
'CCC- (sf)' rating on the class E notes. Phoenix CLO III Ltd. was
formerly known as Avenue CLO VI Ltd.
The upgrades reflect the improved performance S&P has observed in
the transaction's underlying asset portfolio since S&P's last
rating action in November 2009. The affirmations reflect the
availability of sufficient credit support at the current rating
levels.
According to the Nov. 4, 2010, trustee report, the transaction
held $9.4 million in defaulted and $28.1 million in 'CCC' rated
assets, down from $32.8 million defaulted and $61.5 million in
'CCC' rated assets noted in the Oct. 16, 2009, trustee report.
Additionally, since November 2009, the class A-1 notes have
experienced $8.3 million in pay downs, and the class D and class
E deferrable balances have been paid down.
The transaction has also benefited from an increase in
overcollateralization available to support the rated notes. The
trustee reported these O/C ratios in the Nov. 4, 2010, trustee
report:
* The class A/B O/C ratio was 117.8%, compared with a reported
ratio of 111.6% in October 2009;
* The class C O/C ratio was 111.0%, compared with a reported ratio
of 105.3% in October 2009; and
* The class D O/C ratio was 106.1%, compared with a reported ratio
of 100.7% in October 2009.
Standard & Poor's will continue to review whether, in its view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as S&P deems necessary.
Rating And Creditwatch Actions
Phoenix CLO III Ltd.
Rating
------
To From
-- ----
Class A-1 AA+ (sf) AA+/Watch Pos (sf)
Class A-2 AA+ (sf) A+/Watch Pos (sf)
Class B A+ (sf) BBB+/Watch Pos (sf)
Class C BBB+ (sf) BB+/Watch Pos (sf)
Class D BB+ (sf) CCC- (sf)
Rating Affirmed
Phoenix CLO III Ltd. Rating
-------------------- ------
Class E CCC- (sf)
PNC MORTGAGE: S&P Downgrades Ratings on Six 2000-C2 Notes to 'D'
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on six
classes of commercial mortgage-backed securities from PNC Mortgage
Acceptance Corp.'s series 2000-C2. S&P downgraded classes M and N
to 'D (sf)'. S&P also affirmed its ratings on seven other classes
from the same transaction.
The lowered ratings reflect recurring interest shortfalls that
have affected the trust, as well as the potential for future
interest shortfalls. As of the November 2010 remittance report,
the trust experienced monthly interest shortfalls totaling
$129,865 primarily related to appraisal subordinate entitlement
reduction amounts on six of the transaction's 15 specially
serviced loans. These six loans had appraisal reduction amounts
totaling $14.9 million in effect, which generated aggregate ASERs
of $101,278.
Interest shortfalls have affected all of the classes subordinate
to and including class M. As a result, interest available to the
rated classes to absorb additional shortfalls has been reduced,
leaving them more susceptible to future shortfalls.
The affirmations of the ratings on classes B through G reflect
subordination levels and available liquidity that are consistent
with the outstanding ratings. S&P affirmed its rating on the
class X interest-only certificate based on its current criteria.
Credit Considerations
As of the November 2010 remittance report, 15 loans
($120.5 million, 58.5%) in the pool were with the special
servicer, C-III Asset Management. The status of the specially
serviced assets is: one ($1.8 million, 0.9%) is in foreclosure;
three ($34.7 million, 16.9%) are 90-plus days delinquent;
eight ($43.8 million, 21.3%) are matured balloon loans; and
three ($40.2 million, 19.5%) are in their grace period. Six
($36.9 million, 17.9%) of the specially serviced loans have
ARAs in effect totaling $14.9 million.
The AppleTree Business Park loan ($33.8 million total exposure,
16.4%) is the largest loan in the pool, and the largest loan with
the special servicer. The loan is secured by a 434,593-sq.-ft.
office in Cheektowaga, New York. The loan was transferred to the
special servicer in June 2010 for imminent payment default.
According to the special servicer, the borrower submitted a
modification request, which was denied. Reported DSC and
occupancy were 1.19x and 89.8% as of December 2009 and March 2010,
respectively. Standard & Poor's expects a moderate loss upon the
eventual resolution of this asset.
The Continental Teves Building loan ($21.2 million total exposure,
10.3%) is the third-largest loan in the pool, and the second-
largest loan with the special servicer. The loan is secured by a
236,770-sq.-ft. office property in Auburn Hills, Mich. The loan
was transferred to the special servicer in June 2010 due to
impending maturity default. According to the special servicer, a
purchase agreement for the sale of the building has fallen
through, and the borrower is now requesting a maturity extension.
The property is fully occupied by a single tenant, Continental
Teves Inc., whose lease expires in July 2020. Reported DSC was
1.34x as of December 2009.
The Northside Marketplace loan ($14.7 million total exposure,
7.1%) is the fourth-largest loan in the pool, and the third-
largest loan with the special servicer. The loan is secured by a
189,299-sq.-ft. retail property in Nashville, Tenn. The loan was
transferred to the special servicer in January 2010 and is
classified as 90-plus-days delinquent. According to the special
servicer, it has ordered all necessary third-party reports in
preparation for a potential foreclosure. Reported DSC and
occupancy were 0.57x and 70.9% as of December 2009 and December
2008, respectively. There is an ARA of $3.5 million
in effect. Standard & Poor's expects a significant loss upon the
eventual resolution of this asset.
The Taconic Corporate Park loan ($13.6 million total exposure,
6.6%) is the fifth-largest loan in the pool, and the fourth-
largest loan with the special servicer. The loan is secured by a
210,000-sq.-ft. office property in Yorktown Heights, N.Y. The
loan was transferred to the special servicer in January 2010 and
is classified as 90-plus-days delinquent. According to the
special servicer, required environmental assessment reports have
been obtained as part of a possible deed-in-lieu of foreclosure.
A discounted payoff is also possible. Reported DSC and occupancy
were 0.75x and 43.5% as of December 2009 and February 2010,
respectively. Standard & Poor's expects a significant loss upon
the eventual resolution of this asset.
The remaining 11 specially serviced loans include two of the top
10 loans. S&P estimated losses on seven of the remaining 11
specially serviced loans, resulting in a weighted-average loss
severity rate of 47.8%. The loans for which S&P didn't estimate
losses had a weighted-average reported DSC of 1.11x as of December
2009.
In addition to the specially serviced loans, S&P determined one
exposure to be credit-impaired. The Waterford at Portage exposure
($9.1 million, 4.4%) appears on the master servicer's watchlist
for low DSC, which was 0.63x as of December 2009. The exposure
consists of two cross-collateralized and cross-defaulted loans
secured by multifamily assets in Akron, Ohio. Given the
exposure's low DSC, S&P considers it to be at an increased risk of
default and loss.
Transaction Summary
As of the November 2010 remittance report, the collateral pool
had an aggregate trust balance of $206.0 million, down from
$1.08 billion at issuance. The pool includes 32 loans, down from
190 loans at issuance. The master servicer, Midland Loan Services
Inc., provided full-year 2008, interim 2009, or full-year 2009
financial information for all of the loans in the pool. S&P
calculated a weighted average DSC of 1.07x for the pool based on
the reported figures. S&P's adjusted DSC and loan-to-value ratio
were 1.14x and 75.8%, respectively. S&P's adjusted DSC and LTV
figures exclude 10 of the 15 specially serviced loans, as well as
the one exposure that S&P determined to be credit-impaired. S&P
separately estimated losses for these loans, which had a weighted-
average reported DSC of 0.84x. If S&P included these loans in the
calculations, its adjusted DSC and LTV would have been 1.01x and
125.1%, respectively. The master servicer reported a watchlist of
eight loans ($53.5 million, 26.0%), which includes two of the top
10 loan exposures. S&P discuss one of the exposures (which
consists of two loans) above, while the remaining exposure is
discussed below. Sixteen loans ($90.5 million, 43.9%) in the
pool have a reported DSC of less than 1.10x, and 13 loans
($71.1 million, 34.5%) have a reported DSC of less than 1.00x.
Summary of Top 10 Loan Exposures
The top 10 exposures secured by real estate have an aggregate
outstanding trust balance of $147.1 million (71.4%). Using
servicer-reported numbers, S&P calculated a weighted average
DSC of 0.99x for the top 10 real estate loans. S&P's adjusted
DSC and LTV ratio for the top 10 exposures were 1.01x and 83.1%,
respectively. S&P's adjusted DSC and LTV figures exclude five
of the six specially serviced top 10 loans, as well as one top
10 exposure that S&P determined to be credit-impaired. S&P
separately estimated losses for these loans, which had a weighted-
average reported DSC of 0.80x. If S&P included these loans in the
calculations, its adjusted DSC and LTV would have been 0.91x and
147.8%, respectively.
The Sweetheart Cup Distribution Center loan is the second-largest
loan in the pool and the largest loan on the master servicer's
watchlist. The loan has a balance of $24.3 million (11.8%) and is
secured by a 1,034,470-sq.-ft. industrial property in Hampstead,
Maryland. The property is fully occupied by a single tenant, Solo
Cup Co., whose lease expires in July 2020. Reported DSC was 1.35x
as of December 2009. The loan appears on the master servicer's
watchlist due to its October 1, 2010 anticipated repayment date.
The watchlist comments do not contain any updates related to the
loan's maturity situation.
The Waterford at Spencer Oaks Apartments loan is the eighth-
largest loan in the pool and the third-largest exposure on
the master servicer's watchlist. The loan has a balance of
$8.0 million (3.9%) and is secured by a 208-unit multifamily
property in Denton, Texas. The loan appears on the master
servicer's watchlist for low DSC. As of December 2009, reported
DSC and occupancy were 1.03x and 83.2%, respectively.
Standard & Poor's analyzed the transaction according to its
current criteria, and the lowered and affirmed ratings are
consistent with its analysis.
Ratings Lowered
PNC Mortgage Acceptance Corp.
Commercial mortgage pass-through certificates series 2000-C2
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
H A+ (sf) AA- (sf) 37.12
J BB (sf) BBB (sf) 22.75
K B- (sf) BBB- (sf) 18.84
L CCC- (sf) BB+ (sf) 14.92
M D (sf) BB- (sf) 9.69
N D (sf) B+ (sf) 7.08
Ratings Affirmed
PNC Mortgage Acceptance Corp.
Commercial mortgage pass-through certificates series 2000-C2
Class Rating Credit enhancement (%)
----- ------ ----------------------
B AAA (sf) 99.80
C AAA (sf) 76.29
D AAA (sf) 69.76
E AAA (sf) 63.23
F AA+ (sf) 54.09
G AA (sf) 46.26
X AAA (sf) N/A
N/A - Not applicable.
PROJECT FUNDING: S&P Withdraws Ratings on Class II Notes
--------------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on the
class II notes from Project Funding Corp. I and Project Funding
Corp. II. At the same time, S&P affirmed its ratings on the class
III and IV notes from Project Funding Corp. I. Concurrently, S&P
affirmed its ratings on the class III and class IV notes from
Project Funding Corp. II and removed them from CreditWatch with
negative implications.
The rating withdrawals on these two project finance collateralized
debt obligation transactions follow complete paydowns of the rated
notes. The affirmations reflect the availability of sufficient
credit support at the current rating levels.
Ratings Withdrawn
Project Funding Corp. I
Rating
------
Class To From
----- -- ----
II NR CCC- (sf)/Watch Neg
Project Funding Corp. II
Rating
------
Class To From
----- -- ----
II NR BBB- (sf)/Watch Neg)
Ratings Affirmed
Project Funding Corp. I
Class Rating
----- ------
III CC (sf)
IV CC (sf)
Rating And Creditwatch Actions
Project Funding Corp. II
Rating
------
Class To From
----- -- ----
III B+ (sf) B+ (sf)/Watch Neg
IV CCC- (sf) CCC- (sf)/Watch Neg
NR - Not rated.
PRUDENTIAL COMMERCIAL: S&P Cuts Ratings on 11 2003-PWR1 Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 11
classes of commercial mortgage-backed securities from Prudential
Commercial Mortgage Trust 2003-PWR1. In addition, S&P affirmed
its ratings on five other classes from the same transaction.
The rating actions follow S&P's analysis of the transaction using
its U.S. conduit and fusion CMBS criteria. The downgrades reflect
credit support erosion that S&P anticipates will occur upon the
resolution of two specially serviced assets.
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
1.45x and a loan-to-value ratio of 79.3%. S&P further stressed
the loans' cash flows under S&P's 'AAA' scenario to yield a
weighted average DSC of 1.17x and an LTV ratio of 117.4%. The
implied defaults and loss severity under the 'AAA' scenario were
28.2% and 46.0%, respectively. The DSC and LTV calculations S&P
noted above exclude two ($50.3 million; 6.6%) of the three
specially serviced loans, and 14 defeased loans ($156.4 million;
20.6%). S&P separately estimated losses for the two specially
serviced loans, which S&P included in its 'AAA' scenario implied
default and loss severity 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 ratings on the class X-1 and X-2 interest-only
certificates based on its current criteria.
Credit Considerations
As of the Nov. 12, 2010, remittance report, three loans
($54.1 million; 7.1%) in the pool were with the special servicer,
C-III Asset Management LLC. The payment status of these loans is:
one ($4.7 million; 0.6%) is 60 days delinquent, one ($3.9 million;
0.5%) is late but within its grace period, and one ($45.6 million;
6.0%) is current. S&P describe the largest of these loans, which
is the second-largest loan in the pool, below.
The Brandywine Office Building and Garage loan ($45.6 million;
6.0%) is secured by a 405,844-sq.-ft. office building and the
related 37,788-sq.-ft. garage (660 spaces) in Wilmington, Del.,
that was built in 1970 and renovated in 2000. This loan was
transferred to special servicing on Dec. 22, 2009, due to imminent
payment default. The reported DSC and occupancy were 0.99x and
42% for year-end 2008, respectively, and 0.41x and 51% for the
nine months ended Sept. 30, 2009, respectively. Standard & Poor's
estimated value of the property is just over half of the
outstanding loan amount. The borrower and the special servicer
are discussing a possible loan modification. S&P expects a
significant loss upon the eventual resolution of this loan.
Both of the remaining specially serviced loans ($7.0 million,
1.1%) have balances that individually represent 0.6% or less of
the total pool balance. For one of these loans ($4.7 million;
0.6%), S&P estimated a loss of 26.5%. S&P expects the other loan
($3.9 million; 0.5%) to be returned to the master servicer soon.
Two loans ($5.4 million; 0.7%) were previously with the special
servicer but have since been returned to the master servicer.
According to the transaction documents, the special servicer is
entitled to a workout fee equal to 1.0% of all future principal
and interest payments on these loans (including the balloon
maturity payment), provided that they continue to perform and
remain with the master servicer.
Transaction Summary
As of the Nov. 12, 2010, remittance report, the transaction
had an aggregate trust balance of $757.6 million (89 loans),
compared with $960.0 million (100 loans) at issuance.
Prudential Asset Resources and Wells Fargo Commercial Mortgage
Servicing, the master servicers, provided financial information
for all of the loans in the pool. Approximately 2% of this
financial information was full-year 2008 data, 7% was partial-year
2009 data, 75% was full-year 2009 data, and 16% was partial-year
2010 data. S&P calculated a weighted average DSC of 1.38x for the
loans in the pool based on the reported figures. S&P's adjusted
DSC and LTV were 1.45x and 79.3%, respectively, and exclude two
($50.3 million; 6.6%) of the three specially serviced loans and
14 defeased loans ($156.4 million; 20.6%). S&P's weighted
average DSC would be 1.37x if S&P include these two specially
serviced loans in its calculation. The trust has experienced
one $4.5 million principal loss to date. Fifteen loans are on
the master servicer's watchlist ($107.8 million; 14.2%). Two
loans ($16.6 million, 2.2%) have a reported DSC between 1.0x and
1.1x, and 10 loans ($115.8 million, 15.3%) have a reported DSC
of less than 1.0x. S&P separately estimated losses for two
($50.3 million; 6.6%) of the three specially serviced loans.
Summary of Top 10 Real Estate Exposures
The top 10 real estate exposures have an aggregate outstanding
trust balance of $292.3 million (38.6%). Using servicer-reported
information, S&P calculated a weighted average DSC of 1.33x.
S&P's adjusted DSC and LTV figures for the top 10 loans were 1.34x
and 86.2%, respectively. These figures exclude the second-largest
loan in the pool, the Brandywine Office Building & Garage loan
($45.6 million; 6.0%), for which S&P separately estimated a loss.
If S&P include this loan, the weighted average DSC is 1.18x.
Three other top 10 loans, which S&P discuss below, are on the
master servicer's watchlist.
The Renaissance Pere Marquette Hotel loan ($21.2 million; 2.8%),
the fifth-largest loan in the pool, is secured by a 280-room hotel
in downtown New Orleans that was built in 1926 and renovated in
2001. The loan appears on the master servicer's watchlist due to
a low DSC. For year-end 2007, 2008, and 2009, the property's
revenues did not cover operating expenses and capital
expenditures. The sponsors have been supporting the loan with
out-of-pocket contributions over the past three years. For year-
end 2009, the reported occupancy and revenue per available room
were 63.7% and $106.73, respectively.
The 10th & Broadway loan ($18.4 million; 2.4%), the sixth-largest
loan in the pool, is secured by a building complex consisting of
10 adjacent office buildings totaling 204,058 sq. ft. in Oakland,
Calif., that were built between 1868 and 1881 and renovated
between 1986 and 1988. The loan appears on the master servicer's
watchlist due to low DSC and low occupancy. For year-end 2009,
the reported occupancy and DSC were 77% and 0.94x, respectively.
Based on the June 2010 rent roll, S&P estimates a current DSC of
0.50x.
The Promenade at Bonita Bay loan ($16.0 million; 2.1%), the
eighth-largest loan in the pool, is secured by a 105,895-sq.-ft.
retail property in Bonita Springs, Fla., that was built between
1999 and 2001. The loan appears on the master servicer's
watchlist due to low DSC and low occupancy. For year-end 2009,
the reported occupancy and DSC were 57% and 0.73x, respectively.
Based on the August 2010 rent roll, S&P currently estimate a
similar DSC.
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
Prudential Commercial Mortgage Trust 2003-PWR1
Commercial mortgage pass-through certificates series 2003-PWR1
Rating
------
Class To From Credit enhancement (%)
----- -- ---- ----------------------
C A+ (sf) AA (sf) 13.19
D BBB (sf) A+ (sf) 11.29
E BBB- (sf) A- (sf) 10.02
F BB (sf) BBB+ (sf) 8.60
G B+ (sf) BBB (sf) 7.01
H B- (sf) BB+ (sf) 4.80
J CCC (sf) BB (sf) 3.85
K CCC- (sf) BB- (sf) 3.21
L CCC- (sf) B+ (sf) 2.26
M CCC- (sf) B (sf) 1.79
N CCC- (sf) B- (sf) 1.31
Ratings Affirmed
Prudential Commercial Mortgage Trust 2003-PWR1
Commercial mortgage pass-through certificates series 2003-PWR1
Class Rating Credit enhancement (%)
----- ------ ----------------------
A-1 AAA (sf) 22.22
A-2 AAA (sf) 22.22
B AA+ (sf) 17.95
X-1 AAA (sf) N/A
X-2 AAA (sf) N/A
N/A - Not applicable.
RACE POINT: Fitch Upgrades Ratings on Four Classes of Notes
-----------------------------------------------------------
Fitch Ratings has upgraded four classes of notes and affirmed five
classes of notes issued by Race Point II CLO, Ltd./Inc., and
revised or assigned Rating Outlooks, Loss Severity ratings, and
Recovery Ratings:
-- $210,522,859 class A-1 notes affirmed at 'AAAsf/LS2'; Outlook
to Stable from Negative;
-- $15,000,000 class A-2 notes affirmed at 'AAsf/LS5'; Outlook
to Stable from Negative;
-- $15,000,000 class B-1 notes upgraded to 'BBsf/LS3' from
'Bsf/LS4'; Outlook to Stable from Negative;
-- $38,000,000 class B-2 notes upgraded to 'BBsf/LS3' from
'Bsf/LS4'; Outlook to Stable from Negative;
-- $12,000,000 class C-1 notes upgraded to 'Bsf/LS4' from
'CCCsf'; Outlook Stable;
-- $5,000,000 class C-2 notes upgraded to 'Bsf/LS4' from
'CCCsf'; Outlook Stable;
-- $3,500,000 class D-1 notes affirmed at 'CCCsf/RR1';
-- $3,000,000 class D-2 notes affirmed at 'CCCsf/RR1';
-- $4,000,000 class D-3 notes affirmed at 'CCCsf/RR1'.
The affirmations of class A-1, A-2, D-1, D-2 and D-3 notes, in
addition to the upgrades to the class B-1, B-2, C-1, and C-2
notes, reflect the significant amortization and overall credit
quality improvements of the underlying loan portfolio. The
portfolio has experienced an improved average rating quality, net
positive credit migration, and reduced exposure to assets rated
'CCC+' or below since Fitch's last review in November 2009.
During that same period, the class A-1 notes have received
approximately $157.1 million of principal payments, representing
39.1% of their initial balance. This amortization has led to
increased credit enhancement levels across the capital structure.
Additionally, the amount of performing assets Fitch considers
rated 'CCC+' or below has decreased to 17.9% from 33.6% at last
review, while the latest trustee report dated Nov. 16, 2010
indicates that defaulted assets now represent approximately
$5.5 million in par, compared to $33.4 million at the Sept. 30,
2009 trustee report. Finally, Fitch currently considers the
weighted average rating of the performing portfolio to be 'B/B-',
improved from 'B-/CCC+' at Fitch's last review.
The class A-1 and A-2 notes have been affirmed and their Outlooks
have been revised to Stable because they should continue to
perform in line with their current ratings.
The class B-1, B-2, C-1, and C-2 notes have also benefited from
the amortization of the class A-1 notes. Furthermore, the
performance of the underlying loan portfolio since Fitch's last
review has led to improved credit quality for these notes. At the
time of Fitch's last review, the U.S. economy was in the midst of
a severe economic downturn, experiencing near-record highs in
corporate default rates and record lows in recovery rates. Race
Point II CLO's underlying portfolio has since reflected the
improved U.S. corporate performance, and Fitch believes the credit
quality of these classes has likewise improved. Fitch has
upgraded these notes to reflect their improved credit quality and
has revised their Outlooks to Stable.
The class D-1, D-2, and D-3 (collectively, class D) notes have
similarly benefited from the improved credit quality and rapid
amortization in the underlying portfolio, but remain highly
subordinated. While the amortization has benefited all rated
notes, approximately 76.6% of the underlying portfolio is
scheduled to mature in 2013 or 2014. Fitch is aware that a
significant volume of leveraged loans in the high-yield market
also have maturities during this time window.
Fitch has assigned a Recovery Rating to the class D notes based on
the total discounted future cash flows projected to be available
to these bonds in a base-case default scenario. Recovery Ratings
are designed to provide a forward-looking estimate of recoveries
on currently distressed or defaulted structured finance securities
rated 'CCC' or below.
Aside from class D, each class of notes has been assigned a Loss
Severity rating. 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'. The LS rating should always be considered in
conjunction with the notes' long-term credit rating.
Race Point II CLO is a collateralized debt obligation that
closed on April 16, 2003, and is managed by Sankaty Advisors, LLC.
The transaction's reinvestment period ended in May 2009. The
portfolio primarily consists of senior secured loans (88.4%), with
the remaining portfolio comprised of second lien loans (4.8%) and
bonds (6.8%).
RACE POINT: S&P Raises Ratings on Various Classes of Notes
----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A-1, A-2, B-1, B-2, C-1, C-2, D-1, D-2, and D-3 notes from Race
Point II CLO Ltd., a collateralized loan obligation transaction
managed by Sankaty Advisors LLC. At the same time, S&P removed
its rating on the class A-1 notes from CreditWatch with positive
implications.
The upgrades reflect factors that have positively affected the
credit enhancement available to support the notes since S&P
downgraded the notes in November 2009. The primary factor has
been the delevering of the transaction.
Since November 2009, the transaction has paid down approximately
$157 million to the class A-1 notes, including a $31 million
payment on the Nov. 1, 2010 distribution date. At the time of its
last rating action, based on the Oct. 30, 2009 trustee report, the
transaction was holding approximately $33 million in defaulted
obligations. Since that time, a number of defaulted obligors held
in the deal emerged from the bankruptcy process, with some
receiving proceeds that were higher than their carrying value in
the overcollateralization ratio test calculations. As of the
Nov. 1, 2010 trustee report, the transaction held approximately
$5 million in defaulted assets. The combination of a reduction in
the defaulted assets and a $157 million paydown on the class A-1
notes has benefited the O/C ratio tests, thereby increasing the
O/C available to support the rated notes.
Coverage Ratio Comparison
Test Name Nov. 1, 2010 Oct. 30, 2009
--------- ------------ -------------
Class A OC (%) 148.5 130.3
Class B OC (%) 123.1 114.4
Class C OC (%) 116.7 110.1
Class D OC (%) 113.0 107.6
OC - Overcollateralization.
Standard & Poor's will continue to review whether, in its view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as S&P deems necessary.
Rating Actions
Race Point II CLO Ltd.
Class To From
----- -- ----
A-1 AAA (sf) AA+ (sf)/Watch Pos
A-2 AAA (sf) AA+
B-1 A+ (sf) BBB- (sf)
B-2 A+ (sf) BBB- (sf)
C-1 BBB+ (sf) BB- (sf)
C-2 BBB+ (sf) BB- (sf)
D-1 BB+ (sf) B (sf)
D-2 BB+ (sf) B (sf)
D-3 BB+ (sf) B (sf)
RAIT CRE: Moody's Downgrades Ratings on Nine Classes of Notes
-------------------------------------------------------------
Moody's has confirmed two and downgraded nine classes of Notes
issued by RAIT CRE CDO I, Ltd., due to the deterioration in the
credit quality of the underlying portfolio as evidenced by an
increase in the weighted average rating factor, the sensitivity of
the transaction to recovery rates, and the cancellation of
portions of the junior Notes. Additionally, the downgrades are
partly the result of a correction in inputs that Moody's used in
its prior analysis with respect to the in-place interest rate
hedge. Moody's previously incorrectly prioritized the interest
rate hedges within the cash flow waterfall. The interest rate
hedge acts as a fixed to floating hedge where fixed rate
collateral is swapped to a floating basis in order to pay the
floating rate Notes. Moody's has corrected the input error and
the rating action reflects the corrected hedge priority. The
rating action is the result of Moody's on-going surveillance of
commercial real estate collateralized debt obligation
transactions.
-- Cl. A-1A, Confirmed at Aaa; previously on Sept. 1, 2010 Aaa
Placed Under Review Direction Uncertain
-- Cl. A-1B, Confirmed at Aaa; previously on Sept. 1, 2010 Aaa
Placed Under Review Direction Uncertain
-- Cl. A-2, Downgraded to A1; previously on Sept. 1, 2010 Aaa
Placed Under Review Direction Uncertain
-- Cl. B, Downgraded to Baa3; previously on Sept. 1, 2010 Aa2
Placed Under Review Direction Uncertain
-- Cl. C, Downgraded to B1; previously on Sept. 1, 2010 A1
Placed Under Review Direction Uncertain
-- Cl. D, Downgraded to B2; previously on Sept. 1, 2010 A2
Placed Under Review Direction Uncertain
-- Cl. E, Downgraded to B3; previously on Sept. 1, 2010 Baa1
Placed Under Review Direction Uncertain
-- Cl. F, Downgraded to Caa1; previously on Sept. 1, 2010 Baa2
Placed Under Review Direction Uncertain
-- Cl. G, Downgraded to Caa1; previously on Sept. 1, 2010 Baa3
Placed Under Review Direction Uncertain
-- Cl. H, Downgraded to Caa2; previously on Sept. 1, 2010 Ba2
Placed Under Review Direction Uncertain
-- Cl. J, Downgraded to Caa3; previously on Sept. 1, 2010 B1
Placed Under Review Direction Uncertain
Ratings Rationale
RAIT CRE CDO I, Ltd., is a revolving CRE CDO transaction backed
by a portfolio A-Notes and whole loans (67.0% of the pool
balance), B-Notes (1.5%), and mezzanine loans (31.5%). As of the
November 22, 2010 Trustee report, the aggregate Note balance of
the transaction has decreased to $985.5 million from $1.02 billion
at issuance, due to the cancellation of portions of the Class D,
Class F, Class G, and Class H Notes. The revolving period ends in
November 2011 at which point paydowns are directed to the Class
A1A and Class A1B notes.
On August 26, 2010, Moody's received "Notice of Abandonment of
Notes" from the Trustee, indicating the cancellation of portions
of the junior Notes in RAIT CRE CDO I, Ltd. Per Moody's special
comment, "Junior CDO Note Cancellations Should Concern Senior
Noteholders in Structured Transactions", dated June 14, 2010,
there is concern that the cancellation of junior notes can divert
cash flow away from the senior notes in the event of a Par Value
Test Failure. Holding all key parameters static, the partial
cancellations of the junior Notes results in average rating
movement on Classes B through J of 1 to 2 notches downward.
There are eighteen assets with par balance of $74.7 million (7.5%
of the current pool balance) that are considered Defaulted
Securities as of the November 22, 2010 Trustee report. Three of
these assets (46.2% of the defaulted balance) are A-Notes or whole
loans, one is a B-Note (7.4%), and fourteen are mezzanine loans
(46.5%). Defaulted Securities are defined as assets which are 60
or more days delinquent in their debt service payment. While
there have been no realized losses to date, Moody's does expect
significant losses to occur once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral assets. For non-CUSIP collateral,
Moody's is eliminating the additional default probability stress
applied to corporate debt in CDOROM(R) v2.6 as Moody's expects the
underlying non-CUSIP collateral to experience lower default rates
and higher recovery compared to corporate debt due to the nature
of the secured real estate collateral. The bottom-dollar WARF is
a measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF (excluding Defaulted
Securities) of 5,881 compared to 3,314 at last review. The
distribution of current ratings and credit estimates is: Baa1-Baa3
(0.0% compared to 13.2% at last review), Ba1-Ba3 (0.2% compared to
37.2% at last review), B1-B3 (21.7% compared to 34.0% at last
review), and Caa1-C (78.1% compared to 15.6% at last review).
WAL acts to adjust the probability of default of the collateral
assets in the pool for time. Moody's modeled to a WAL of 7.0
years compared to 7.5 years at last review. The modeled WAL
includes the remaining revolving period.
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 38.0% compared to 39.7% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
20.8% compared to 15.0% at last review.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 38% to 28% or up to 48% would result in average rating
movement on the rated tranches of 1 to 4 notches downward and 1 to
4 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in a majority of property sectors.
The availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
RAIT PREFERRED: Moody's Confirms Ratings on Two Classes of Notes
----------------------------------------------------------------
Moody's has confirmed two and downgraded nine classes of Notes
issued by RAIT Preferred Funding II. Ltd. due to the deterioration
in the credit quality of the underlying portfolio as evidenced by
an increase in the weighted average rating factor, an increase in
Defaulted Securities, the sensitivity of the transaction to
recovery rates, and the cancellation of portions of the junior
Notes. The rating action is the result of Moody's on-going
surveillance of commercial real estate collateralized debt
obligation transactions.
-- Cl. A-1T, Confirmed at Aaa (sf); previously on Sept. 1, 2010
Aaa (sf) Placed Under Review Direction Uncertain
-- Cl. A-1R, Confirmed at Aaa (sf); previously on Sept. 1, 2010
Aaa (sf) Placed Under Review Direction Uncertain
-- Cl. A-2, Downgraded to A2 (sf); previously on Sept. 1, 2010
Aa1 (sf) Placed Under Review Direction Uncertain
-- Cl. B, Downgraded to Ba1 (sf); previously on Sept. 1, 2010 A3
(sf) Placed Under Review Direction Uncertain
-- Cl. C, Downgraded to B2 (sf); previously on Sept. 1, 2010
Baa3 (sf) Placed Under Review Direction Uncertain
-- Cl. D, Downgraded to Caa1 (sf); previously on Sept. 1, 2010
Ba1 (sf) Placed Under Review Direction Uncertain
-- Cl. E, Downgraded to Caa1 (sf); previously on Sept. 1, 2010
Ba2 (sf) Placed Under Review Direction Uncertain
-- Cl. F, Downgraded to Caa2 (sf); previously on Sept. 1, 2010
B1 (sf) Placed Under Review Direction Uncertain
-- Cl. G, Downgraded to Caa3 (sf); previously on Sept. 1, 2010
B2 (sf) Placed Under Review Direction Uncertain
-- Cl. H, Downgraded to Caa3 (sf); previously on Sept. 1, 2010
B3 (sf) Placed Under Review Direction Uncertain
-- Cl. J, Downgraded to Caa3 (sf); previously on Sept. 1, 2010
Caa2 (sf) Placed Under Review Direction Uncertain
Ratings Rationale
RAIT Preferred Funding II. Ltd. is a revolving CRE CDO transaction
backed by a portfolio A-Notes and whole loans (84.0% of the pool
balance), B-Notes (5.9%), and mezzanine loans and preferred equity
positions (10.1%). As of the November 26, 2010 Trustee report,
the aggregate Note balance of the transaction has decreased to
$827.9 million from $832.9 million at issuance, due to the
cancellation of portions of the Class D, Class E, Class F, and
Class G Notes. The revolving period ends in June 2012 at which
point paydowns are directed to the Notes in senior sequential
order.
On August 26, 2010, Moody's received "Notice of Abandonment of
Notes" from the Trustee, indicating the cancellation of portions
of the junior Notes in RAIT Preferred Funding II. Ltd. Per
Moody's special comment, "Junior CDO Note Cancellations Should
Concern Senior Noteholders in Structured Transactions", dated
June 14, 2010, there is concern that the cancellation of junior
notes can divert cash flow from away from the senior notes in the
event of a Par Value Test Failure. Holding all key parameters
static, the partial cancellations of the junior Notes results in
average rating movement on Class C, Class D, and Class E of 1
notch downward.
There are four assets with par balance of $34.6 million (4.4% of
the current pool balance) that are considered Defaulted Securities
as of the November 26, 2010 Trustee report. One of these assets
(57.7% of the defaulted balance) is a B-Note, and three assets are
mezzanine loans (42.3%). Defaulted Securities are defined as
assets which are 60 or more days delinquent in their debt service
payment. While there have been no realized losses to date,
Moody's does expect significant losses to occur once they are
realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 5,441 compared to 3,392 at
last review. The distribution of current ratings and credit
estimates is: Aaa-Aa3 (0.1% compared to 0.0% at last review),
Baa1-Baa3 (0.7% compared to 0.5% at last review), Ba1-Ba3 (2.0%
compared to 2.7% at last review), B1-B3 (25.5% compared to 96.8%
at last review), and Caa1-C (71.7% compared to 0.0% at last
review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 5.5 years compared
to 5.5 years at last review. The modeled WAL includes the
remaining revolving period.
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 collateral) of 52.0% compared to 48.8% at
last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
17.0% compared to 25.7% at last review. The lower MAC is a result
of a larger number of high risk collateral assets in the pool.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 52% to 42% or up to 62% would result in average rating
movement on the rated tranches of 1 to 5 notches downward and 1 to
4 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
RALI-QA SERIES: Moody's Downgrades Ratings on 48 Tranches
---------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 48
tranches and confirmed the ratings of 15 tranches from 16 RMBS
transactions in the RALI-QA series. The collateral backing these
transactions consists primarily of first-lien, adjustable-rate,
Alt-A residential mortgage loans.
Ratings Rationale
The actions are a result of the rapidly deteriorating performance
of Alt-A pools in conjunction with macroeconomic conditions that
remain under duress. The actions reflect Moody's updated loss
expectations on Alt-A pools issued in 2005 to 2007.
To assess the rating implications of the updated loss levels on
Alt-A RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: RALI Series 2006-QA1 Trust
-- Cl. A-I-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-I-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-II-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-II-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-III-1, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-III-2, Downgraded to C (sf); previously on Jan. 14,
2010 Ca (sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2006-QA10 Trust
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2006-QA11 Trust
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2006-QA2 Trust
-- Cl. I-A-1, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-IO, Confirmed at Caa3 (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-IO, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-1, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-2, Downgraded to C (sf); previously on Jan. 14,
2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-IO, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2006-QA3 Trust
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2006-QA4 Trust
-- Cl. A, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2006-QA5 Trust
-- Cl. I-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Caa3 (sf); previously on Jan. 14,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2006-QA6 Trust
-- Cl. A-1, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2006-QA7 Trust
-- Cl. I-A-1, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Confirmed at Ca (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2006-QA8 Trust
-- Cl. A-1, Confirmed at Ca (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2006-QA9 Trust
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2007-QA1 Trust
-- Cl. A-1, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2007-QA2 Trust
-- Cl. A-1, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2007-QA3 Trust
-- Cl. A-1, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Confirmed at Caa3 (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2007-QA4 Trust
-- Cl. A-1-A, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1-B, Downgraded to Ca (sf); previously on Jan. 14, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2007-QA5 Trust
-- Cl. I-A-1, Downgraded to Ca (sf); previously on Jan. 14, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 14, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-1, Downgraded to Ca (sf); previously on Jan. 14,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-2, Downgraded to C (sf); previously on Jan. 14,
2010 Ca (sf) Placed Under Review for Possible Downgrade
RESI FINANCE: Moody's Reviews Ratings on 51 Tranches
----------------------------------------------------
Moody's Investors Service has placed the ratings of 51 tranches
from five deals issued by RESI Finance Limited Partnership on
review for possible downgrade and has placed the ratings of 8
tranches of 2 deals that are issued by RESIX Finance Limited
Credit-Linked Notes on review for possible downgrade due to
deteriorated credit performance of underlying securities and
loans. RESI deals are synthetic deals whose reference portfolios
consist of prime jumbo loans. The RESIX credit-linked notes
replicate the cash flow of select synthetic RMBS securities issued
by RESI deals.
Issuer: RESI Finance Limited Partnership 2003-C/RESI Finance DE
Corporation 2003-C, Series 2003-C
-- Class A1 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A2 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A3 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A4 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A5 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Cl. B1, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on April 11, 2006 Assigned Aa2 (sf)
-- Cl. B2, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on April 11, 2006 Assigned Aa3 (sf)
-- Cl. B3, A2 (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 5, 2003 Assigned A2 (sf)
-- Cl. B4, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 5, 2003 Assigned A3 (sf)
-- Cl. B5, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 5, 2003 Assigned Baa2 (sf)
-- Cl. B6, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 5, 2003 Assigned Baa3 (sf)
-- Cl. B7, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 5, 2003 Assigned Ba2 (sf)
-- Cl. B8, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 5, 2003 Assigned Ba3 (sf)
-- Cl. B9, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 5, 2003 Assigned B2 (sf)
-- Cl. B10, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 5, 2003 Assigned B3 (sf)
Issuer: RESI Finance Limited Partnership 2003-D RESI Finance
Limited Partnership 2003-D/RESI Finance DE Corporation 2003-D
-- Class A1 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A2 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A3 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A4 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A5 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Cl. B1, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on April 11, 2006 Assigned Aa2 (sf)
-- Cl. B2, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on April 11, 2006 Assigned Aa3 (sf)
-- Cl. B3, A2 (sf) Placed Under Review for Possible Downgrade;
previously on April 29, 2004 Assigned A2 (sf)
-- Cl. B4, A3 (sf) Placed Under Review for Possible Downgrade;
previously on April 29, 2004 Assigned A3 (sf)
-- Cl. B5, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on April 29, 2004 Assigned Baa2 (sf)
-- Cl. B6, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on April 29, 2004 Assigned Baa3 (sf)
-- Cl. B7, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on April 29, 2004 Assigned Ba2 (sf)
-- Cl. B8, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on April 29, 2004 Assigned Ba3 (sf)
-- Cl. B9, B2 (sf) Placed Under Review for Possible Downgrade;
previously on April 29, 2004 Assigned B2 (sf)
-- Cl. B10, B3 (sf) Placed Under Review for Possible Downgrade;
previously on April 29, 2004 Assigned B3 (sf)
Issuer: RESI Finance Limited Partnership 2004-A RESI Finance
Limited Partnership 2004-A/RESI Finance DE Corporation 2004-A
-- Class A1 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A2 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A3 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A4 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A5 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Cl. B1, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to Aaa (sf)
-- Cl. B2, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to Aaa (sf)
-- Cl. B3, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to Aa2 (sf)
-- Cl. B4, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to Aa3 (sf)
-- Cl. B5, A2 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to A2 (sf)
-- Cl. B6, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to A3 (sf)
-- Cl. B7, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to Baa2 (sf)
-- Cl. B8, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to Baa3 (sf)
-- Cl. B9, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to Ba2 (sf)
-- Cl. B10, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 12, 2008 Downgraded to B2 (sf)
Issuer: RESI Finance Limited Partnership 2004-B RESI Finance
Limited Partnership 2004-B/RESI Finance DE Corporation 2004-B
-- Class A1 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A2 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A3 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A4 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A5 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Cl. B1, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on April 11, 2006 Assigned Aa2 (sf)
-- Cl. B2, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on April 11, 2006 Assigned Aa3 (sf)
-- Cl. B3, A2 (sf) Placed Under Review for Possible Downgrade;
previously on July 5, 2004 Assigned A2 (sf)
-- Cl. B4, A3 (sf) Placed Under Review for Possible Downgrade;
previously on July 5, 2004 Assigned A3 (sf)
-- Cl. B5, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on July 5, 2004 Assigned Baa2 (sf)
-- Cl. B6, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on July 5, 2004 Assigned Baa3 (sf)
-- Cl. B7, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on July 5, 2004 Assigned Ba2 (sf)
-- Cl. B8, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on July 5, 2004 Assigned Ba3 (sf)
-- Cl. B9, B2 (sf) Placed Under Review for Possible Downgrade;
previously on July 5, 2004 Assigned B2 (sf)
-- Cl. B10, B3 (sf) Placed Under Review for Possible Downgrade;
previously on July 5, 2004 Assigned B3 (sf)
Issuer: RESI Finance Limited Partnership 2004-C RESI Finance
Limited Partnership 2004-C/RESI Finance DE Corporation 2004-C
-- Class A1 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A2 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A3 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A4 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Class A5 Notes, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on Jan. 30, 2009 Assigned Aaa (sf)
-- Cl. B1, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to Aaa (sf)
-- Cl. B2, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to Aaa (sf)
-- Cl. B3, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to Aa2 (sf)
-- Cl. B4, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to Aa3 (sf)
-- Cl. B5, A2 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to A2 (sf)
-- Cl. B6, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 14, 2007 Upgraded to A3 (sf)
Issuer: RESIX Finance Limited Credit-Linked Notes, Series 2003-D
-- Cl. B7, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on July 1, 2005 Assigned Ba2 (sf)
-- Cl. B8, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on July 1, 2005 Assigned Ba3 (sf)
-- Cl. B9, B2 (sf) Placed Under Review for Possible Downgrade;
previously on July 1, 2005 Assigned B2 (sf)
-- Cl. B10, B3 (sf) Placed Under Review for Possible Downgrade;
previously on July 1, 2005 Assigned B3 (sf)
Issuer: Resix Finance Limited Credit-Linked Notes, Series 2004-A
-- Cl. B7, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 20, 2008 Upgraded to Baa2 (sf)
-- Cl. B8, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 20, 2008 Upgraded to Baa3 (sf)
-- Cl. B9, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Nov. 20, 2008 Upgraded to Ba2 (sf)
-- Cl. B10, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Dec. 12, 2008 Downgraded to B2 (sf)
Ratings Rationale
The review actions were prompted by continued performance
deterioration of these deals backed by prime jumbo loans
originated before 2005 (seasoned loans). Serious delinquencies
(loans greater than 60 or more days delinquent, including loans in
foreclosure and REO) as a percentage of current balance on the
pool of loans have increased from 1.25% as of November 2009 to
3.65% as of November 2010.
Over the coming months, Moody's expect continued negative
performance on seasoned prime jumbo pools, as the overhang of
impending foreclosures will impact home prices negatively. The
most important predictor of mortgage default in the past several
years has been the degree to which borrowers have negative equity
in their homes. Moody's Economy.com expects home prices to fall
by about an additional 8%, reaching bottom in the coming year.
Prime jumbo borrowers, who typically had loan-to-value ratios
around 65% at closing, are therefore increasingly subject to
protracted periods of little, and in some cases negative, equity
in their homes. Although the pools backing RESI/RESIX deals have
paid off substantially, with pool factors averaging at 21%, the
remaining loans in the pools are under pressure as a result of the
sharp decline in home values.
To determine which tranches to place on review, Moody's compared
the tranches' credit enhancement from subordination to a loss
proxy that was based on a multiple of two times the lifetime
pipeline losses expected from the related pools. The lifetime
pipeline loss was derived based on lifetime roll rates to default
of 75% for 60-day delinquencies, 85% for 90+ day delinquencies,
97.5% for loans in foreclosure, and 100% for loans where the homes
are held-for-sale, each applied with a severity assumption of
37.5%. Tranches without enough credit enhancement to maintain
current ratings based on this calculation have been placed on
review for possible downgrade. Tranches expected to pay off in
full in the coming months were not placed on review.
Senior tranches were placed on review according to the
subordination offered by subordinate/mezzanine tranches. Certain
tranches that may benefit from super-seniority or first-pay status
in the waterfall may be confirmed as additional transaction-
specific analysis is concluded over the coming months.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
RESIDENTIAL FUNDING: Moody's Downgrades Ratings on 16 Tranches
--------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 16
tranches from 4 RMBS transactions, backed by option arm loans,
issued by Residential Funding Corporation.
Ratings Rationale
The collateral backing these transactions consists primarily of
first-lien, adjustable-rate, negative amortization, Alt-A
residential mortgage loans. The actions are a result of the
rapidly deteriorating performance of option arm pools in
conjunction with macroeconomic conditions that remain under
duress. The actions reflect Moody's updated loss expectations on
option arm pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on
option arm RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
For securities insured by a financial guarantor, the rating on the
securities is the higher of (i) the guarantor's financial strength
rating and (ii) the current underlying rating (i.e., absent
consideration of the guaranty) on the security. The principal
methodology used in determining the underlying rating is the same
methodology for rating securities that do not have a financial
guaranty and is as described earlier.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: RALI Series 2006-QO4 Trust
-- Cl. I-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Current rating at Ca (sf); previously on March 9,
2009 Downgraded to Ca (sf)
-- Financial Guarantor: Syncora Guarantee Inc. (Downgraded to
Ca, Outlook Developing on March 9, 2009)
-- Underlying Rating: Confirmed at Ca (sf); previously on
March 30, 2010 Ca (sf) Placed Under Review for Possible
Downgrade
-- Cl. II-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-3, Current rating at Ca (sf); previously on March 9,
2009 Downgraded to Ca (sf)
-- Financial Guarantor: Syncora Guarantee Inc. (Downgraded to
Ca, Outlook Developing on March 9, 2009)
-- Underlying Rating: Confirmed at Ca (sf); previously on
March 30, 2010 Ca (sf) Placed Under Review for Possible
Downgrade
Issuer: RALI Series 2006-QO8 Trust
-- Cl. I-A1A, Confirmed at B3 (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A1AU, Confirmed at B3 (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A1B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A2A, Confirmed at Caa3 (sf); previously on Jan. 27,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A2AU, Confirmed at Caa3 (sf); previously on Jan. 27,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A3A, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A3B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A4A, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A4B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A5A, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A5AU, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-AX, Confirmed at B3 (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-AX, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2007-QH8 Trust
-- Cl. A, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
Issuer: RALI Series 2007-QH9 Trust
-- Cl. A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X, Confirmed at Ca (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
RESIX FINANCE: Fitch Withdraws Ratings on All Classes of Notes
--------------------------------------------------------------
Fitch Ratings has withdrawn ratings on all classes in RESIX
Finance 2006-C and EASIX Finance 2007-1.
The affected classes no longer have outstanding balances and have
since been written-off due to losses.
Therefore, since all class balances are zero the trustee has
terminated the deal.
Fitch has withdrawn these ratings:
RESIX Finance Limited Partnership, Series 2006-C
-- Class B7 'Dsf/RR6';
-- Class B8 'Dsf/RR6';
-- Class B9 'Dsf/RR6';
-- Class B10 'Dsf/RR6';
-- Class B11 'Dsf/RR6';
-- Class B12 'Dsf/RR6'.
EASIX Finance Limited Partnership, Series 2007-1
-- Class B7 'Dsf/RR6';
-- Class B8 'Dsf/RR6';
-- Class B9 'Dsf/RR6';
-- Class B10 'Dsf/RR6';
-- Class B11 'Dsf/RR6';
-- Class B12 'Dsf/RR6'.
RESOURCE REAL: Moody's Downgrades Ratings on 12 Classes of Notes
----------------------------------------------------------------
Moody's has affirmed two classes and downgraded twelve classes of
Notes issued by Resource Real Estate Funding CDO 2007-1, Ltd., due
to the deterioration in the credit quality of the underlying
portfolio as evidenced by an increase in the weighted average
rating factor, and the sensitivity of the transaction to recovery
rates. The rating action is the result of Moody's on-going
surveillance of commercial real estate collateralized debt
obligation transactions.
-- CL. A-1, Affirmed at Aaa (sf); previously on April 20, 2009
Confirmed at Aaa (sf)
-- CL. A-1R, Affirmed at Aaa (sf); previously on April 20, 2009
Confirmed at Aaa (sf)
-- CL. A-2, Downgraded to Aa3 (sf); previously on April 20, 2009
Confirmed at Aaa (sf)
-- CL. B, Downgraded to Baa3 (sf); previously on April 20, 2009
Confirmed at Aa1 (sf)
-- CL. C, Downgraded to Ba2 (sf); previously on April 20, 2009
Downgraded to Aa3 (sf)
-- CL. D, Downgraded to B2 (sf); previously on April 20, 2009
Downgraded to A3 (sf)
-- CL. E, Downgraded to Caa1 (sf); previously on April 20, 2009
Downgraded to Baa2 (sf)
-- CL. F, Downgraded to Caa1 (sf); previously on April 20, 2009
Downgraded to Baa3 (sf)
-- CL. G, Downgraded to Caa2 (sf); previously on April 20, 2009
Downgraded to Ba1 (sf)
-- CL. H, Downgraded to Caa2 (sf); previously on April 20, 2009
Downgraded to Ba2 (sf)
-- CL. J, Downgraded to Caa3 (sf); previously on April 20, 2009
Downgraded to Ba3 (sf)
-- CL. K, Downgraded to Caa3 (sf); previously on April 20, 2009
Downgraded to B2 (sf)
-- CL. L, Downgraded to Caa3 (sf); previously on April 20, 2009
Downgraded to Caa1 (sf)
-- CL. M, Downgraded to Caa3 (sf); previously on April 20, 2009
Downgraded to Caa2 (sf)
Ratings Rationale
Resource Real Estate Funding CDO 2007-1, Ltd., is a revolving cash
CRE CDO transaction backed by a portfolio of whole loans (62.5% of
the pool balance), commercial mortgage backed securities (16.8%),
mezzanine debt (12.4%), and B-Note debt (8.3%). As of the
November 19, 2010 Trustee report, the aggregate Note balance of
the transaction, including Preferred Shares, is $500 million, the
same as at issuance. The revolving period is set to end June
2012.
There are three assets with par balance of $12.0 million (2.6% of
the current collateral pool balance excluding cash reserves) that
are classified as Impaired Securities as of the November 19, 2010
Trustee report.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 6,891 compared to 2,335 at
last review. The distribution of current ratings and credit
estimates is: Aaa-Aa3 (2.2% compared to 0.0% at last review), A1-
A3 (3.3% compared to 0.0% at last review), Baa1-Baa3 (8.0%
compared to 0.0% at last review ), Ba1-Ba3 (2.6% compared to 52.6%
at last review ), B1-B3 (7.7% compared to 42.6% at last review),
and Caa1-C (76.3% compared to 4.8% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 5.5, reflecting
the remaining revolving period, compared to 8.2 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 36.7% compared to 35.0% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
99.9% compared to 20.2% at last review. The high MAC is due to a
small number of collateral names concentrated in higher risk
collateral.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 36.7% to 26.7% or up to 46.7% would result in average
rating movement on the rated tranches of 0 to 7 notches downward
or 0 to 7 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
RESOURCE REAL: Moody's Downgrades Ratings on Eight Classes
----------------------------------------------------------
Moody's has downgraded eight classes and affirmed one class of
Notes issued by Resource Real Estate Funding CDO 2006-1, Ltd., due
to the deterioration in the credit quality of the underlying
portfolio as evidenced by an increase in the weighted average
rating factor, and the sensitivity of the transaction to recovery
rates. The rating action is the result of Moody's on-going
surveillance of commercial real estate collateralized debt
obligation transactions.
-- CL. A-1, Downgraded to Aa1 (sf); previously on April 20, 2009
Confirmed at Aaa (sf)
-- CL. B, Downgraded to Ba2 (sf); previously on April 20, 2009
Downgraded to A3 (sf)
-- CL. C, Downgraded to B3 (sf); previously on April 20, 2009
Downgraded to Baa2 (sf)
-- CL. D, Downgraded to Caa1 (sf); previously on April 20, 2009
Downgraded to Baa3 (sf)
-- CL. E, Downgraded to Caa2 (sf); previously on April 20, 2009
Downgraded to Ba1 (sf)
-- CL. F, Downgraded to Caa2 (sf); previously on April 20, 2009
Downgraded to Ba2 (sf)
-- CL. G, Downgraded to Caa3 (sf); previously on April 20, 2009
Downgraded to B1 (sf)
-- CL. J, Downgraded to Caa3 (sf); previously on April 20, 2009
Downgraded to Caa1 (sf)
-- CL. K, Affirmed at Caa3 (sf); previously on April 20, 2009
Downgraded to Caa3 (sf)
Ratings Rationale
Resource Real Estate Funding CDO 2006-1, Ltd., is a revolving cash
CRE CDO transaction backed by a portfolio of whole loans (41.9% of
the pool balance), mezzanine debt (40.4%), B-Note debt (7.1%), CRE
CDOs (6.4%), and commercial mortgage backed securities (4.3%). As
of the November 19, 2010 Trustee report, the aggregate Note
balance of the transaction, including Preferred Shares, is $345
million, the same as at issuance. The revolving period is set to
end September 2011.
There are two assets with par balance of $15.5 million (5.7% of
the current collateral pool balance excluding cash reserves) that
are classified as a Impaired Securities as of the November 19,
2010 Trustee report.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 7,034 compared to 3,318 at
last review. The distribution of current ratings and credit
estimates is: Baa1-Baa3 (7.1% compared to 0.0% at last review),
Ba1-Ba3 (1.5% compared to 21.8% at last review), B1-B3 (6.1%
compared to 56.9% at last review), and Caa1-C (85.3% compared to
21.3% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 4.8, reflecting
the remaining revolving period, compared to 4.1 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 24.6% compared to 24.4% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
99.9% compared to 26.0% at last review. The high MAC is due to a
small number of collateral names concentrated in higher risk
collateral.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 24.6% to 14.6% or up to 34.6% would result in average
rating movement on the rated tranches of 0 to 7 notches downward
or 0 to 6 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
RFMSI SERIES: Moody's Downgrades Ratings on 18 Tranches
-------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 18
tranches and has placed the ratings of 12 tranches on review for
possible downgrade from two deals that are issued by RFMSI Series
Trust. The collateral backing these deals consists primarily of
first-lien, prime residential mortgages.
Issuer: RFMSI Series 2005-S5 Trust
-- Cl. A-1, Downgraded to B3 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Baa3 (sf)
Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to B1 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Baa3 (sf)
Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to B1 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Baa3 (sf)
Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to A3 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Aa3 (sf)
Placed Under Review for Possible Downgrade
-- Cl. A-6, Downgraded to B2 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Baa3 (sf)
Placed Under Review for Possible Downgrade
-- Cl. A-7, Downgraded to Caa2 (sf); previously on Dec. 17, 2009
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-8, Downgraded to B3 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Baa3 (sf)
Placed Under Review for Possible Downgrade
-- Cl. A-P, Downgraded to B2 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Baa3 (sf)
Placed Under Review for Possible Downgrade
-- Cl. A-V, Downgraded to A3 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Aa3 (sf)
Placed Under Review for Possible Downgrade
Issuer: RFMSI Series 2005-SA2 Trust
-- Cl. I-A, Downgraded to Caa2 (sf); previously on Dec. 17, 2009
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to B2 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Baa3 (sf)
Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to Caa2 (sf); previously on Dec. 17,
2009 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-2, Downgraded to B3 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Baa3 (sf)
Placed Under Review for Possible Downgrade
-- Cl. III-A-3, Downgraded to B3 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Baa3 (sf)
Placed Under Review for Possible Downgrade
-- Cl. IV-A, Downgraded to B3 (sf) and Remains On Review for
Possible Downgrade; previously on Dec. 17, 2009 Baa3 (sf)
Placed Under Review for Possible Downgrade
-- Cl. V-A, Downgraded to Caa1 (sf); previously on Dec. 17, 2009
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. VI-A-1, Downgraded to Caa1 (sf); previously on Dec. 17,
2009 Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. M-1, Downgraded to C (sf); previously on May 13, 2009
Downgraded to Ca (sf)
Ratings Rationale
The ratings were downgraded because these tranches did not have
sufficient credit enhancement to maintain the current ratings
compared to the revised loss expectations on the deals. The
ratings on eight tranches of RFMSI Series 2005-S5 Trust and on
four tranches of RFMSI Series 2005-SA2 Trust continue to be under
review for possible downgrade due to the irregularities in GMAC
Mortgage, LLC's foreclosure process that have recently come to
light.
To assess the rating implications of the updated loss levels on
prime RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the deal including
priorities of payment distribution among the different tranches,
average life of the tranches, current balances of the tranches and
future cash flows under expected and stressed scenarios. The
scenarios include ninety-six different combinations comprising of
six loss levels, four loss timing curves and four prepayment
curves. The volatility in losses experienced by a tranche due to
small increments in losses on the underlying mortgage pool is
taken into consideration when assigning ratings.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
ROCK 1: Moody's Affirms Ratings on 14 Classes of Notes
------------------------------------------------------
Moody's has downgraded one and affirmed fourteen classes of Notes
issued by ROCK 1 - CRE CDO 2006, Ltd., due to the deterioration in
the credit quality of the underlying portfolio as evidenced by an
increase in the weighted average rating factor, the current level
of Defaulted Securities, and the sensitivity of the transaction to
recovery rates. The rating action is the result of Moody's on-
going surveillance of commercial real estate collateralized debt
obligation transactions.
-- Cl. A-1, Downgraded to Aa1; previously on April 7, 2009
Confirmed at Aaa
-- Cl. A-2, Affirmed at Baa1; previously on April 7, 2009
Downgraded to Baa1
-- Cl. B, Affirmed at Ba1; previously on April 7, 2009
Downgraded to Ba1
-- Cl. C, Affirmed at B2; previously on April 7, 2009 Downgraded
to B2
-- Cl. D, Affirmed at B3; previously on April 7, 2009 Downgraded
to B3
-- Cl. E, Affirmed at Caa1; previously on April 7, 2009
Downgraded to Caa1
-- Cl. F, Affirmed at Caa2; previously on April 7, 2009
Downgraded to Caa2
-- Cl. G, Affirmed at Caa2; previously on April 7, 2009
Downgraded to Caa2
-- Cl. H, Affirmed at Caa3; previously on April 7, 2009
Downgraded to Caa3
-- Cl. J, Affirmed at Caa3; previously on April 7, 2009
Downgraded to Caa3
-- Cl. K, Affirmed at Caa3; previously on April 7, 2009
Downgraded to Caa3
-- Cl. L, Affirmed at Caa3; previously on April 7, 2009
Downgraded to Caa3
-- Cl. M, Affirmed at Caa3; previously on April 7, 2009
Downgraded to Caa3
-- Cl. N, Affirmed at Caa3; previously on April 7, 2009
Downgraded to Caa3
-- Cl. O, Affirmed at Caa3; previously on April 7, 2009
Downgraded to Caa3
Ratings Rationale
ROCK 1 - CRE CDO 2006, Ltd., is a revolving cash CRE CDO
transaction backed by a portfolio of whole loans (87.4% of the
pool balance), CRE CDO debt (10.0%), and commercial mortgage
backed securities (2.6%). As of the November 10, 2010 Trustee
report, the aggregate Note balance of the transaction, including
Preferred Shares, is $500 million, the same as at issuance. The
revolving period is set to end in December 2012.
There are four assets with par balance of $34.3 million (8.2% of
the current collateral pool balance) that are classified as
Defaulted Securities as of the November 10, 2010 Trustee report.
Moody's expects moderate losses from those Defaulted Securities to
occur once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 4,940 (including Defaulted
Securities) compared to 4,199 at last review. The distribution of
current ratings and credit estimates is: Aaa-Aa3 (5.8% compared to
3.2% at last review), A1-A3 (0.0% compared to 1.2 % at last
review), Baa1-Baa3 (0.0% compared to 4.9% at last review), Ba1-Ba3
(3.8% compared to 5.5% at last review), B1-B3 (3.6% compared to
2.7% at last review), and Caa1-C (87.8% compared to 82.5% at last
review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 10, reflecting the
remaining revolving period, compared to 8.3 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 53.4% compared to 54.6% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
9.1% compared to 15.0% at last review.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 53.4% to 43.4% or up to 63.4% would result in average
rating movement on the rated tranches of 0 to 3 notches downward
or 0 to 3 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
ROCK 2001-C1: Moody's Reviews Ratings on Eight Classes of Notes
---------------------------------------------------------------
Moody's Investors Service placed eight classes of ROCK 2001-C1
Series 2001-C1 on review for possible downgrade:
-- Cl. F, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on July 24, 2008 Upgraded to Aaa (sf)
-- Cl. G, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on July 24, 2008 Upgraded to Aa3 (sf)
-- Cl. H, A3 (sf) Placed Under Review for Possible Downgrade;
previously on July 24, 2008 Upgraded to A3 (sf)
-- Cl. J, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on May 30, 2001 Assigned Ba2 (sf)
-- Cl. K, Ba3 (sf) Placed Under Review for Possible Downgrade;
previously on May 30, 2001 Assigned Ba3 (sf)
-- Cl. L, B1 (sf) Placed Under Review for Possible Downgrade;
previously on May 30, 2001 Assigned B1 (sf)
-- Cl. M, B3 (sf) Placed Under Review for Possible Downgrade;
previously on May 26, 2005 Downgraded to B3 (sf)
-- Cl. N, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on May 26, 2005 Downgraded to Caa2 (sf)
The classes were placed on review due to interest shortfalls and
higher expected losses for the pool resulting from actual and
anticipated losses from specially serviced and troubled loans.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated July 24, 2008.
Deal And Performance Summary
As of the November 10, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 53% to
$427.6 million from $908.2 million at securitization. The
Certificates are collateralized by 91 mortgage loans ranging in
size from less than 1% to 21% of the pool, with the top ten loans
representing 47% of the pool. Twenty loans, representing 29% of
the pool, have defeased and are collateralized with U.S.
Government securities, compared to 46% at last review.
Twenty loans, representing 46% 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 CRE
Finance Council (formerly the Commercial Mortgage Securities
Association) 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.
Three loans have been liquidated from the pool, resulting in an
aggregate realized loss of $3.8 million (21% loss severity).
Three loans, representing 3% of the pool, are currently in special
servicing. The specially serviced loans are secured by a mix of
multifamily, retail, office and industrial property types. The
master servicer has recognized an aggregate $5.5 million in
appraisal reductions for the specially serviced loans.
Moody's review will focus on potential losses from specially
serviced and troubled loans, losses from interest shortfalls, and
the performance of the overall pool.
ROSEMONT CLO: Fitch Takes Rating Actions on Various Classes
-----------------------------------------------------------
Fitch Ratings has upgraded one class of notes and affirmed four
classes of notes issued by Rosemont CLO, Ltd./Corp. Rating
Outlooks, Loss Severity Ratings, and Recovery Ratings have also
been revised or assigned:
-- $21,011,960 class A notes affirmed at 'AAAsf/LS3'; Outlook
Stable;
-- $18,000,000 class B-1 notes affirmed at 'Asf/LS3'; Outlook to
Stable from Negative;
-- $7,000,000 class B-2 notes affirmed at 'Asf/LS3'; Outlook to
Stable from Negative;
-- $13,200,000 class C notes upgraded to 'BB/LS3' from 'B/LS4';
Outlook to Stable from Negative;
-- $12,000,000 class D notes affirmed at 'CCsf', assigned 'RR2'.
The affirmations for class the A and class B-1 and B-2 notes, in
addition to the upgrade to the class C notes, reflect the
relatively strong performance of the underlying loan portfolio,
while accounting for the increased concentration risk in the
portfolio and the generally uncertain U.S. economic recovery.
Since Fitch's last review in November 2009, the class A notes have
received approximately $48 million of principal payments,
representing 19% of their initial balance. This amortization has
led to increasing credit enhancement levels across the capital
structure. Additionally, Fitch recognizes the improving
collateral quality of the underlying loan portfolio. The amount
of performing assets Fitch considers rated 'CCC+' or below has
decreased to 16.8% from 27.1% over this same time period, while
the latest trustee report dated Oct. 29, 2010 indicates that
defaulted assets now represent 10.3% of the entire portfolio,
compared to 13.5% at the last review.
While the amortization has benefited all notes, increasing obligor
concentration has become a factor as the top obligor now accounts
for 6.8% of the portfolio, and the top five obligors account for
23.6% of the total portfolio.
The class A notes have been affirmed, as they should continue to
perform in line with their current ratings. The class B notes
have benefited from the amortization of the class A notes and will
be next-in-line to receive principal payments. Fitch has affirmed
the class B notes to reflect their high credit quality and has
revised their Outlook to Stable.
The performance of the underlying loan portfolio since Fitch's
last review has led to improved credit quality for the class C
notes. At the time of Fitch's last review, the U.S. economy was
in the midst of a severe economic downturn, experiencing near-
record highs in corporate default rates and record lows in
recovery rates. Rosemont CLO's underlying portfolio has since
reflected the improved U.S. corporate performance, and Fitch
believes the credit quality of the class C notes has likewise
improved. Fitch recognizes that the class C notes remain exposed
to potential concentration risk and a generally uncertain economic
recovery, and has thus maintained a speculative rating for the
notes, while the Outlook has been revised to Stable.
The class D notes maintain only minimal overcollateralization, and
are highly vulnerable to the potential default of any of the
underlying obligors. An ultimate principal impairment to these
notes remains a possibility. Fitch has affirmed the notes and
assigned a Recovery Rating based on the total discounted future
cash flows projected to be available to these bonds in a base-case
default scenario. These discounted cash flows of approximately
$9.5 million yielded an ultimate recovery projection in a range
between 71% and 90%, which is representative of an 'RR2' on
Fitch's Recovery Rating scale. Recovery Ratings are designed to
provide a forward-looking estimate of recoveries on currently
distressed or defaulted structured finance securities rated 'CCC'
or below. For further detail on Recovery Ratings, please see
Fitch's report 'Criteria for Structured Finance Recovery Ratings'.
Each class of notes has been assigned a Loss Severity rating. 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'. The LS
rating should always be considered in conjunction with the notes'
long-term credit rating.
Rosemont CLO is a collateralized debt obligation that closed on
Jan. 8, 2002, and is managed by Deerfield Capital Management LLC.
The transaction's reinvestment period ended in January 2007. The
portfolio is comprised of approximately 97.6% senior secured loans
and 2.4% second lien loans.
The majority of the underlying loans are publicly rated. Fitch
used model-based shadow ratings in its default probability
analysis of the CDO portfolio for approximately 14.5% of the
portfolio where a public rating was unavailable. Information for
the model-based shadow ratings was gathered from financial
statements provided to Fitch by Deerfield.
SAN JOAQUIN: Moody's Affirms 'Ba2' Rating on Revenue Bonds
----------------------------------------------------------
Moody's has affirmed the Ba2 rating and revised the outlook to
stable from negative for the revenue bonds of the San Joaquin
Hills Transportation Corridor Agency. The rating applies to
$2.1 billion of outstanding Series 1993 and Series 1997 revenue
bonds issued by the agency to finance the construction of a 15-
mile limited access toll road (State Route 73) in Orange County
(rated Aa1).
The Ba2 rating is based on the sound economic profile of the
service area and Moody's expectation of continued traffic and toll
revenue growth; the availability of reserves and additional
liquidity support provided by payments from its sister agency, the
Foothill/Eastern TCA (F/ETCA rated Baa3 stable outlook), pursuant
to a November 2005 mitigation and loan agreement. On June 30,
2009, the agency received its last $30 million installment of a
total of $120 million in mitigation payments. The agreement
provides an additional $1.04 billion in loans from F/ETC if needed
to meet SJHTCA's rate covenant. The Ba2 rating is dependent on
the operating support from F/ETCA, accordingly SJHTCA's rating is
closely tied to the credit quality of F/ETCA (rated Baa3).
Legal Security: Net toll road and other available revenues (mainly
account maintenance fees, violation fees and fines, investment
income and development impact fees) and mitigation payments and
loans from F/ETCA. Bondholders also benefit from a cash-funded
debt service reserve fund currently at $226.5 million.
Interest Rate Derivatives: None.
Strengths
* The agency has independent toll raising ability, and service
area socio-economic indicators are above average
* Mitigation payments set aside in a toll stabilization account
combined with a cash funded debt service reserve of
$226.5 million provide significant financial cushion. Up to
$1.04 billion in loans from F/ETCA could be available to help
meet rate covenant
* Traffic and revenues appear to be stabilizing with slight year-
to-date growth in toll revenues and flat traffic
Challenges
* Toll transactions and revenues continue to severely lag the
forecast (FY 2010 revenues are 69.9% of forecast; transactions
44.1%)
* Debt service costs ramp up steadily and payment depends on
continued revenue growth, regular toll rate increases and
support from F/ETCA mitigation payments and loans
* Construction of the Foothill/South project could pressure F/ETCA
finances, depending on its cost, finance plan, and financial
feasibility, thus constraining amount of funds available to make
loans to SJHTCA
* Toll rates are currently among the highest for U.S. toll roads
Recent Developments
Traffic and revenues appear to be moderating in FY 2011 with
monthly revenues through November up 1.3% and toll traffic
essentially flat at 0.5%. Fiscal year 2010 traffic decreased 6.7%
but toll revenues increased 6.4% due to a toll rate increase in
July 2009. Tolls, fees and fines revenues increased 3.1% over
2009, but expenses were down 3.2%. The agency achieved a 1.34
times debt service coverage ratio in FY 2010 with the transfer of
$28.7 million from the stabilization account funded from
mitigation payments from F/ETCA. Debt service coverage was 0.94
times without the transfer. At June 30, 2010 the toll
stabilization account held $34.3 million.
The FY 2011 budget is based on a 36.9% operating expense reduction
from FY 2010; flat toll traffic and revenues and no toll increase.
FY 2011 will be the first year with no toll increases since 2002;
however, future toll increases will be needed to grow revenues
to meet escalating debt service costs. The agency's credit rating
is vulnerable to escalating debt service, which rises from
$99 million in FY 2010 to $115 million in FY 2012 and peaks at
$225 million in FY 2033. The FY 2011 DSCR is budgeted at 1.32
times in compliance with the 1.3 rate covenant, including rate
stabilization transfers, and 0.89 times without the transfers.
At year-end FY 2010 the agency had $16.4 million unrestricted
funds and $344 million in restricted funds (including a
$34 million in the stabilization account and $226 million in
the DSRF).
Due to San Joaquin's underperformance of traffic and revenue
F/ETCA entered into mitigation and loan agreement to offset toll
revenue the forecasted diversion impact of the Foothill South
extension to complete the 241 toll road and connect to I-5.
F/ETCA has paid $120 million since 2007 to help SJHTCA meet its
rate covenant. The last $30 million installment payment was made
on June 30 2009. Payments become loans if construction of the F/S
extension does not commence by December 2015.
In February 2009 the California Coastal Commission denied, and the
U.S. Department sustained on appeal, the required certification
for permitting of the extension project. The F/ETCA board and
management are currently evaluating alternative development
options. The most recent estimate of the project cost is
$1.218 billion in 2010 dollars; however, this could increase with
additional implementation delays and/or significant design
changes.
The mitigation agreement could provide up to $1.04 billion of
additional loans to help SJHTCA meet its rate covenant, but unlike
the $120 million mitigation payment the loan would have to be
repaid on January 1, 2037, to the extent the agency has any
surplus revenues available. At June 30, 2010, no amounts had been
borrowed under the agreement.
Background/Governance: SJTCA opened to traffic in 1996 as the
first publicly owned toll road in California. The toll road is
15-mile limited access four to six lane facility that connects to
I-405 at the north and I-5 at the south alignment. The agency is
a joint powers agency under state law and governed by independent
board comprised of 14 local government officials from 14 city and
county entities. SJHTCA entities represented on the board are
Aliso Viejo, Costa Mesa, Dana Point, Irvine, Laguna Hills, Laguna
Niguel, Laguna Woods, Mission Viejo, Newport Beach, San Clemente,
San Juan Capistrano, Santa Ana, and the Orange CountY's 3rd and
5th Districts. Eight of the SJHTCA member agencies also sit on
the F/ETCA board. In 1997 the agency restructured its debt and
extended payment of principal maturities by five years to relieve
some operating pressures and improve its debt service coverage
ratio due to slower than projected traffic and revenue ramp-up.
In November 2005 the agency entered into mitigation and loan
agreement to offset toll revenue diversion impact of the planned
Foothill South extension to complete the 241 toll road and connect
to I-5. F/ETCA has paid $120 million in mitigation payments since
then to help SJHTCA meet its 1.3x rate covenant. These funds were
deposited into the toll stabilization account and applied to
SJHTCA debt service as necessary. The mitigation agreement with
SJHTCA also allows F/ETCA to make up to $1.04 billion in loans to
help San Joaquin meet its rate covenant. Such loans to SJHTCA
could affect future liquidity at F/ETCA. The last required
mitigation payment was made June 30 2009. The payments become
loans if the F/S extension is not built which would add to
SJHTCA's overall debt burden. In February 2009 the California
Coastal Commission denied and the U.S. Department sustained on
appeal the required certification for permitting of the extension
project. The F/ETCA board and management of the are currently
evaluating all of their options including whether to litigate the
Coastal Commission decision. The most recent estimate of the
extension project cost is $1.218 billion in 2010 dollars; however,
this could increase with additional implementation delays and/or
significant design changes.
Outlook
The rating outlook is revised to stable from negative based on the
expectation of continued financial support from F/ETCA to meet the
1.3 times rate covenant. Absent either continued financial
support from F/ETCA, debt restructuring or dramatic increases in
traffic and toll revenues the agency likely will not be able to
meet escalating debt service requirements. Also reflected in
Moody's outlook is Moody's expectation that the F/S project costs
will be manageable so that F/ETCA will have sufficient liquidity
to be able to advance loans to help meet SJHTCA's rate covenant.
What Could Change the Rating -- Up
Upside potential for the rating would be closely correlated with
accelerated growth in traffic and revenues, improvement in
financial operations and debt service coverage, independent of
loans from F/ETCA and more certainty about the development plans
for Foothill South, and it's potential impact on traffic and
revenue.
What Could Change the Rating -- Down
The agency's credit rating would be negatively impacted by
continued slower than forecasted traffic and revenue growth as
debt service escalates. The rating is closely tied to the rating
of F/ETCA; any downward pressures on F/ETCA's rating would impact
the rating of SJHTCA.
Key Indicators:
Type of System: 15-mile limited access toll road in Orange County,
from I-45 in Santa Ana to I -5. Road is owned by CALTRANS
-- FY 2010 Transactions: 25,308,372
-- FY 2010 Toll Revenues: $87,095,815
-- FY 2010 Transactions to Forecast: 44.1%
-- FY 2010 Revenues to Forecast: 62.9%
-- FY 2009 Transactions: 26,810,468
-- FY 2009 Toll Revenues: $86,419,923
-- FY 2009 Transactions to Forecast: 49.2%
-- FY 2009 Toll Revenues to Forecast: 65.8% [1]
-- % Change Transactions/Revenues, 2009-2010: -5.6/0.8%
-- FY 2010 DSCR : 0.94x/1.34x[2]
-- FY 2009 DSCR: 0.94x/1.35x[2]
-- 5 Year CAGR, Toll Transactions: -1.8%
-- 5 Year CAGR Toll Revenue: 5.6%
-- Total Outstanding Debt: $2.065 billion
[1] Wilbur Smith 1999 T&R report.
[2] Excluding/including Stabilization account transfers
The last rating action on the SJHTCA was on November 3, 2009, when
the Ba2 rating and negative outlook were affirmed.
SARGAS CLO: Fitch Affirms Ratings on Five Classes of Notes
----------------------------------------------------------
Fitch Ratings has affirmed five classes of notes issued by Sargas
CLO II, Ltd./LLC. In addition, Rating Outlooks and Loss Severity
Ratings have also been revised or maintained:
-- $60,300,184 class A-2 notes affirmed at 'AAAsf/LS3'; Outlook
Stable;
-- $9,256,707 class B notes affirmed at 'AAsf', LS rating
revised to 'LS4' from 'LS5'; Outlook Stable;
-- $29,141,486 class C notes affirmed at 'Asf', LS rating
revised to 'LS3' from 'LS4'; Outlook to Stable from Negative;
-- $16,113,528 class D notes affirmed at 'BBsf', LS rating
revised to 'LS4' from 'LS5'; Outlook to Stable from Negative;
-- $19,199,097 class E notes affirmed at 'Bsf', LS rating
revised to 'LS3' from 'LS5'; Outlook Negative.
The affirmations reflect the relatively stable performance of the
underlying loan portfolio and the significant amortization that
has occurred since Fitch's last review, while accounting for the
increased concentration risk in the portfolio and the generally
uncertain U.S. economic recovery.
Since Fitch's last review in September 2009, the full
$116.2 million balance of the class A-1 notes has been paid
in full and the class A-2 notes have received approximately
$10.6 million of principal payments. The total principal
redemption of these notes since Fitch's last review represents
approximately 31% of the entire capital structure. This
amortization has led to increasing credit enhancement levels
across the capital structure.
While the amortization has benefited the credit enhancement levels
of all notes, the underlying portfolio is becoming increasingly
concentrated. The largest obligor now accounts for 6.4% of the
portfolio, and the five largest obligors account for 28.3% of the
total portfolio. In total, Fitch considers there to be 30
remaining performing obligors in the portfolio and three defaulted
obligors, compared to 56 total obligors at the time of Fitch's
last review.
Exposure to loans considered to be rated 'CCC+' or below by Fitch
has significantly increased since the last review, to 53.6% of the
performing portfolio from approximately 28%. This is partially a
by-product of the amortization in the portfolio, as most of the
loan repayments since the last review came from obligors rated at
least 'B-', leaving the portfolio increasingly dependent on the
lower-rated remaining collateral. Additionally, several obligors
have been downgraded to the 'CCC' category over the last year.
In Fitch's view the current rating on each class of notes remains
indicative of the credit risk, as the significant amortization of
the underlying loan portfolio has helped mitigate the increasing
obligor concentration and exposure to lower-rated collateral. In
addition, Fitch now maintains Stable Rating Outlooks on each of
the class A-2, B, C, and D notes to reflect the relative
stabilization of the U.S. corporate sector since the time of
Fitch's last review. The class E notes maintain a Negative
Outlook due to their subordinated nature and the high degree of
concentration risk in the portfolio.
Each class of notes has been assigned a Loss Severity (LS) rating.
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'.
The LS rating should always be considered in conjunction with the
notes' long-term credit rating.
Sargas CLO II is a collateralized debt obligation that closed on
Aug. 16, 2006, and was originally named De Meer Middle Market CLO
2006-1 Ltd./LLC. In June 2009, collateral management duties were
transferred to Pangaea Asset Management from Bank of America,
N.A., which had in turn assumed management responsibilities from
De Meer Asset Management in October 2007. The transaction's
substitution period ended in March 2009. The portfolio is
comprised of 99.6% senior secured loans and 0.4% second lien
loans. Of the underlying loans, 46.8% are traditional middle
market loans, 41.9% are broadly syndicated loans, and 11.3% are
large middle market loans.
A significant portion of the portfolio, over 40%, is not publicly
rated. Instead, Fitch provides model-based shadow ratings for the
performing unrated loans. Information for the model-based shadow
ratings was gathered from financial statements provided to Fitch
by Pangaea Asset Management.
SILVER CREEK: S&P Raises Ratings on Two Classes of Notes
--------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the
class A-1 and A-2 notes from Silver Creek Funding Ltd., a hybrid
collateralized loan obligation transaction managed by Pacific
Investment Management Co. LLC. At the same time, S&P affirmed
its ratings on the class B-1, B-2, and C notes. Hybrid CLOs are
collateralized debt obligation transactions that combine elements
of both cash flow and synthetic CDOs.
The upgrades reflect improvements in the performance of the
transaction since S&P's last rating action in April 2010. The
affirmations reflect the availability of sufficient credit support
at their current rating levels.
According to the Nov. 12, 2010 trustee report, the transaction
held $1.0 million in defaulted assets, down from $20.2 million
noted in the Feb. 28, 2010, trustee report. Additionally, since
October 2009, the class A-1 notes have experienced $4.8 million,
and the class A-2 notes have experienced $1.9 million in pro rata
paydowns, which have reduced the current amount outstanding to
51.3% of both notes' original balance. In the November 2010
payment period, the transaction also paid down the class C
deferred interest that the transaction had previously accumulated
when it was failing the class B overcollateralization test.
Standard & Poor's will continue to review whether, in its view,
the ratings currently assigned to the notes remain consistent with
the credit enhancement available to support them and take rating
actions as S&P deems necessary.
Rating Actions
Silver Creek Funding Ltd.
Rating
------
To From
-- ----
Class A-1 A+ (sf) BBB+ (sf)
Class A-2 A+ (sf) BBB+ (sf)
Ratings Affirmed
Silver Creek Funding Ltd.
Rating
------
Class B-1 CCC- (sf)
Class B-2 CCC- (sf)
Class C CCC- (sf)
SORIN REAL: Moody's Downgrades Ratings on Nine Classes of Notes
---------------------------------------------------------------
Moody's has downgraded nine classes of Notes issued by Sorin Real
Estate CDO IV, Ltd., due to the deterioration in the credit
quality of the underlying portfolio as evidenced by an increase in
the weighted average rating factor, the increase of Defaulted
Securities, and the sensitivity of the transaction to recovery
rates. The rating action is the result of Moody's on-going
surveillance of commercial real estate collateralized debt
obligation transactions.
-- CL. A-1, Downgraded to Baa2 (sf); previously on Feb. 19, 2010
Downgraded to A2 (sf)
-- CL. A-2, Downgraded to Caa1 (sf); previously on Feb. 19, 2010
Downgraded to Baa3 (sf)
-- CL. A-3, Downgraded to Caa2 (sf); previously on Feb. 19, 2010
Downgraded to Ba1 (sf)
-- CL. B, Downgraded to Caa3 (sf); previously on Feb. 19, 2010
Downgraded to Ba1 (sf)
-- CL. C, Downgraded to Ca (sf); previously on Feb. 19, 2010
Downgraded to B1 (sf)
-- CL. D, Downgraded to C (sf); previously on Feb. 19, 2010
Downgraded to B3 (sf)
-- CL. E, Downgraded to C (sf); previously on Feb. 19, 2010
Downgraded to B3 (sf)
-- CL. F, Downgraded to C (sf); previously on Feb. 19, 2010
Downgraded to Caa2 (sf)
-- CL. G, Downgraded to C (sf); previously on Feb. 19, 2010
Downgraded to Ca (sf)
Ratings Rationale
Sorin Real Estate CDO IV, Ltd., is a revolving cash CRE CDO
transaction backed by a portfolio of whole loans (12.5% of the
pool balance), commercial mortgage backed securities (29.3%), CRE
CDO debt (5.7%), B-note debt (17.9%), mezzanine debt (19.0%), REIT
debt (6.5%), and Rake bonds (9.1%). As of the October 21,
2010 Trustee report, the aggregate Note balance of the
transaction, including Income Notes, is $1 billion, has
decreased to $368.0 million from $400 million at issuance, due
to approximately $35.8 million in pay-downs to the Class A1
Notes. The pay-down was triggered as a result of the failure
of the Class A/B, Class C/D, and Class E/F Principal Coverage
Tests. Per the transaction governing documents, 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. The
revolving period is set to end in October 2011.
There are thirteen assets with par balance of $103.7 million (29%
of the current pool balance) that are classified as Defaulted
Securities as of the October 21, 2010 Trustee report, compared to
19% of Defaulted Securities at last review. Moody's expects
significant losses from those Defaulted Securities to occur once
they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 5,149 (including Defaulted
Securities) compared to 4,470 at last review. The distribution of
current ratings and credit estimates is: Aaa-Aa3 (14.1% compared
to 17.9% at last review), A1-A3 (3.2% compared to 5.7% at last
review), Baa1-Baa3 (15.9% compared to 4.0% at last review), Ba1-
Ba3 (0.0% compared to 3.9% at last review), B1-B3 (10.2% compared
to 4.3% at last review), and Caa1-C (56.6% compared to 64.2% at
last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 4.0 years compared
to 6.0 years at last review. Moody's are modeling the WAL,
including remaining revolving period, in the current 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 30.0% (excluding Defaulted Securities) compared to 24.0% at
last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in the pooled transactions. Moody's modeled a MAC of
9.0% compared to 1.9% at last review.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 30.0% to 19.9% or up to 40.2% would result in average
rating movement on the rated tranches of 0 to 2 notches downward
or 0 to 2 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
SPIRIT MASTER: S&P Downgrades Ratings on Four Classes of Notes
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on four
classes of notes from Spirit Master Funding LLC's series 2005-1,
Spirit Master Funding II LLC's series 2006-1, and Spirit Master
Funding III LLC's series 2007-1. At the same time, S&P removed
them from CreditWatch with negative implications.
All three transactions are part of a master trust that is
primarily collateralized by single-tenant, freestanding commercial
real estate properties and related rental payments according to
triple-net leases.
S&P's rating actions reflect its view of the ability of the cash
flow, generated both by the lease payments and property
liquidations, if any, to pay timely interest and full principal on
the rated notes by the rated final payment date of each series of
notes.
S&P expects the originator to refinance each series of notes on
its legal final payment date, which occurs three years before its
rated final payment date. If the originator does not refinance
any series of the notes on its legal final payment date, a rapid
amortization trigger would occur, and the principal of all series
of notes would be paid down using all available funds. The notes
also benefit from a Ambac Assurance Corp.-provided bond insurance
policy, which requires the insurer to pay noteholders any
remaining note principal balance outstanding on the rated final
payment date.
Given the recent Chapter 11 bankruptcy of Ambac Financial Group
Inc., parent of Ambac, Standard & Poor's believes it is highly
unlikely that Ambac will be able to pay the noteholders any
remaining note principal balance outstanding on the rated final
payment date. S&P views a liquidation of real estate properties
under a stressed environment to be a more likely scenario. S&P's
ratings therefore reflect its opinion of the available credit
enhancement in the form of overcollateralization and excess
spread, under the stressed liquidation scenario.
Rating And Creditwatch Actions
Spirit Master Funding LLC
Series 2005-1
Rating
------
Class To From
----- -- ----
A-1 B (sf) A- (sf)/Watch Neg
A-2 B (sf) A- (sf)/Watch Neg
Spirit Master Funding II LLC
Series 2006-1
Rating
------
Class To From
----- -- ----
A B (sf) A- (sf)/Watch Neg
Spirit Master Funding III LLC
Series 2007-1
Rating
------
Class To From
----- -- ----
A B (sf) A- (sf)/Watch Neg
STRUCTURED ADJUSTABLE: Moody's Cuts Ratings on Three Tranches
-------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of three
tranches from one RMBS transaction issued by Structured Adjustable
Rate Mortgage Loan Trust. The collateral backing this transaction
consists primarily of first-lien, adjustable-rate, negative
amortization residential mortgage loans.
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2005-7
-- Cl. 7-A, Downgraded to Caa3 (sf); previously on Jan. 14, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 7-AX, Downgraded to Ca (sf); previously on Jan. 14, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B1-II, Downgraded to C (sf); previously on Jan. 14, 2010
B2 (sf) Placed Under Review for Possible Downgrade
Ratings Rationale
The actions are a result of the rapidly deteriorating performance
of Option Arm pools in conjunction with macroeconomic conditions
that remain under duress. The actions reflect Moody's updated
loss expectations on option arm pools issued in 2005-2007.
To assess the rating implications of the updated loss levels on
option arm RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approach "Option ARM RMBS Loss Projection
Update: April 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
STRUCTURED ADJUSTABLE: Moody's Downgrades Ratings on 15 Tranches
----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 15
tranches from two RMBS transactions issued by Structured
Adjustable Rate Mortgage Loan Trust. The collateral backing
these transactions consists primarily of first-lien, adjustable-
rate, option arm residential mortgage loans.
Ratings Rationale
The actions are a result of the rapidly deteriorating performance
of Option Arm pools in conjunction with macroeconomic conditions
that remain under duress. The actions reflect Moody's updated
loss expectations on option arm pools issued in 2005.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2005-16XS
-- Cl. A-1, Downgraded to Ba2 (sf); previously on Aug. 22, 2005
Assigned Aaa (sf)
-- Cl. A-2A, Downgraded to Caa1 (sf); previously on Feb. 19,
2009 Downgraded to Aa3 (sf)
-- Cl. A-2B, Downgraded to Caa1 (sf); previously on Feb. 19,
2009 Downgraded to Aa3 (sf)
-- Cl. A-3, Downgraded to Caa3 (sf); previously on Feb. 19, 2009
Downgraded to A1 (sf)
-- Cl. M1, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. M2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Structured Adjustable Rate Mortgage Loan Trust 2005-19XS
-- Cl. 1-A1, Downgraded to B3 (sf); previously on Jan. 27, 2010
Aa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2A, Downgraded to C (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A2B, Downgraded to C (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A3, Downgraded to C (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A1, Downgraded to B1 (sf); previously on Jan. 27, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A2, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Aa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A3, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. M1-I, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. M1-II, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
STRUCTURED ASSET: Moody's Downgrades Ratings on 430 Tranches
------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 430
tranches, and confirmed the ratings of 13 tranches from 20 RMBS
transactions issued by Structured Asset Mortgage Investments II
Trust. The collateral backing these transactions primarily
consists of first-lien, adjustable-rate, negative amortization
residential mortgages.
Ratings Rationale
The actions are a result of the rapidly deteriorating performance
of option arm pools in conjunction with macroeconomic conditions
that remain under duress. The actions reflect Moody's updated
loss expectations on option arm pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on
option arm RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
Certain securities, as noted below, are insured by financial
guarantors. The Cl. A-13B tranche issued by Structured Asset
Mortgage Investments II Trust 2006-AR7, and the Cl. A-6B tranche
issued by Structured Asset Mortgage Investments II Trust 2006-AR8,
are wrapped by Ambac Assurance Corporation (Segregated Account --
Unrated). For securities insured by a financial guarantor, the
rating on the securities is the higher of (i) the guarantor's
financial strength rating and (ii) the current underlying rating
(i.e., absent consideration of the guaranty) on the security. The
principal methodology used in determining the underlying rating is
the same methodology for rating securities that do not have a
financial guaranty and is as described earlier. RMBS securities
wrapped by Ambac Assurance Corporation are rated at their
underlying rating without consideration of Ambac's guaranty.
The above mentioned approach "Option ARM RMBS Loss Projection
Update: April 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 1.8 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: Structured Asset Mortgage Investments II Trust 2005-AR2
-- Cl. I-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. M-X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. M-1, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. M-2, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to Ca (sf); previously on Jan. 27,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-2, Downgraded to C (sf); previously on Jan. 27,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2005-AR3
-- Cl. 1-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. M-X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. M-1, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Ba2 (sf); previously on Jan. 27,
2010 Aa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2005-AR4
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. X-2, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. M-X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. M-1, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2005-AR5
-- Cl. A-1, Downgraded to Baa2 (sf); previously on Jan. 27, 2010
Aa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to A1 (sf); previously on Jan. 27, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Aa1 (sf); previously on Jan. 27, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Downgraded to Baa2 (sf); previously on Jan. 27, 2010
Aa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. X-2, Downgraded to A1 (sf); previously on Jan. 27, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. X-3, Downgraded to Aa1 (sf); previously on Jan. 27, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. X-B, Downgraded to B2 (sf); previously on Jan. 27, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B-1, Downgraded to B2 (sf); previously on Jan. 27, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B-2, Downgraded to Ca (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. B-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ba2 (sf) Placed Under Review for Possible Downgrade
-- Cl. B-4, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2005-AR6
-- Cl. I-A-1, Downgraded to Caa1 (sf); previously on Jan. 27,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to Ca (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. X-2, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. M-X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. M-1, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Caa1 (sf); previously on Jan. 27,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2005-AR7
-- Cl. 1-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-X-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-X-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-X-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-X-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 5-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 5-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 5-X-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 5-X-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 6-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 6-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 6-X-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 6-X-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2005-AR8
-- Cl. A-1A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
-- Grantor Trust Class A-1B, Downgraded to Caa3 (sf); previously
on Jan. 27, 2010 Ba3 (sf) Placed Under Review for Possible
Downgrade
-- Cl. A-2, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2006-AR1
-- Cl. 1A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1A-2, Downgraded to C (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 3A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3A-2A, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3A-2B, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 3X, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2006-AR2
-- Cl. A-1, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2006-AR3
-- Cl. I-1A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-1A-2, Downgraded to Ca (sf); previously on Jan. 27,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-1A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-1A-4, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2A-2, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2A-4, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-2X, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-1A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-2A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-2X, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-3A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Aa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-3X, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Aa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-4A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-4X, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-X, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Aa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-2, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-3, Downgraded to C (sf); previously on Jan. 27,
2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. III-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2006-AR4
-- Cl. I-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-2, Downgraded to C (sf); previously on Jan. 27,
2010 Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. III-A-3, Downgraded to C (sf); previously on Jan. 27,
2010 Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. III-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. IV-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. V-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. V-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. V-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. V-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2006-AR5
-- Cl. 1-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. 1-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Downgraded to Caa1 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 2-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 3-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. 4-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2006-AR6
-- Cl. I-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-4, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-5, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2006-AR7
-- Cl. A-1A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-1B, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2A, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2B, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4, Downgraded to Caa1 (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-5, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-9, Confirmed at B3 (sf); previously on Jan. 27, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-10, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-11, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-12, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-13A, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-13B, Downgraded to C (sf); previously on April 16, 2010
Downgraded to Ca (sf) and Placed Under Review for Possible
Downgrade
-- Underlying Rating: Downgraded to C (sf); previously on
March 30, 2010 Ca (sf) Placed Under Review for Possible
Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Cl. X, Downgraded to Ca (sf); previously on Jan. 27, 2010 Aaa
(sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2006-AR8
-- Cl. A-1A, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 B2 (sf) Placed Under Review for Possible Downgrade
-- Grantor Trust A-1B, Downgraded to Caa2 (sf); previously on
Jan. 27, 2010 B2 (sf) Placed Under Review for Possible
Downgrade
-- Cl. A-2, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4A, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Grantor Trust A-4B, Downgraded to C (sf); previously on
Jan. 27, 2010 Caa3 (sf) Placed Under Review for Possible
Downgrade
-- Grantor Trust A-4C, Downgraded to C (sf); previously on
Jan. 27, 2010 Caa3 (sf) Placed Under Review for Possible
Downgrade
-- Cl. A-5, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-6A, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. A-6B, Downgraded to C (sf); previously on April 16, 2010
Downgraded to Ca (sf) and Placed Under Review for Possible
Downgrade
-- Underlying Rating: Downgraded to C (sf); previously on
March 30, 2010 Ca (sf) Placed Under Review for Possible
Downgrade
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Cl. X, Downgraded to Ca (sf); previously on Jan. 27, 2010 B2
(sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2007-AR1
-- Cl. I-A-1, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2007-AR2
-- Cl. I-A-1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Downgraded to Caa1 (sf); previously on Jan. 27,
2010 A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-X, Downgraded to Ca (sf); previously on Jan. 27, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. II-MX, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2007-AR3
-- Cl. I-A-1, Upgraded to Aaa (sf); previously on Jan. 27, 2010
Aa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-2, Confirmed at B2 (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-3, Downgraded to Ca (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. I-A-4A, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. Grantor Trust I-A-4B, Downgraded to C (sf); previously on
Jan. 27, 2010 Ca (sf) Placed Under Review for Possible
Downgrade
-- Cl. I-A-5, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. Underlying I-A-4B, Downgraded to C (sf); previously on
Jan. 27, 2010 Ca (sf) Placed Under Review for Possible
Downgrade
-- Cl. I-X-1, Confirmed at Ca (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. I-X-2, Confirmed at Ca (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- Cl. II-A-1, Confirmed at Caa2 (sf); previously on Jan. 27,
2010 Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2007-AR4
-- Cl. A-1, Confirmed at Aa3 (sf); previously on Jan. 27, 2010
Aa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to Caa1 (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-3, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-4A, Confirmed at B2 (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. Grantor Trust A-4B, Confirmed at B2 (sf); previously on
Jan. 27, 2010 B2 (sf) Placed Under Review for Possible
Downgrade
-- Cl. Underlying A-4B, Confirmed at B2 (sf); previously on
Jan. 27, 2010 B2 (sf) Placed Under Review for Possible
Downgrade
-- Cl. A-5, Confirmed at Caa2 (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-6, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. A-7, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Confirmed at Aa3 (sf); previously on Jan. 27, 2010
Aa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. X-2, Confirmed at Aa3 (sf); previously on Jan. 27, 2010
Aa3 (sf) Placed Under Review for Possible Downgrade
Issuer: Structured Asset Mortgage Investments II Trust 2007-AR6
-- Cl. A-1, Downgraded to Caa2 (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. A-2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. X-1, Downgraded to Ca (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. X-2, Downgraded to Ca (sf); previously on Jan. 27, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. B-1, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
STRUCTURED ASSET: Moody's Reviews Ratings on 39 Tranches
--------------------------------------------------------
Moody's Investors Service has placed the ratings of 39 tranches
from 4 deals issued by Structured Asset Securities Corporation on
review for possible downgrade due to deteriorated collateral
credit performance. The collateral backing each transaction
consists of loans originated by the Small Business Administration
to borrowers who have experienced property losses in disasters
recognized by the United States federal government.
Issuer: Structured Asset Securities Corp. Pass-Through
Certificates, Series 2002-AL1
-- Cl. APO(3), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
-- Cl. B1, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on April 30, 2002 Assigned Aa2 (sf)
-- Cl. B2, A2 (sf) Placed Under Review for Possible Downgrade;
previously on April 30, 2002 Assigned A2 (sf)
-- Cl. B3, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on April 30, 2002 Assigned Baa2 (sf)
-- Cl. A1(B), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
-- Cl. A2(1), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
-- Cl. A3(1), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
-- Cl. AIO(1), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
-- Cl. APO(1), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
-- Cl. A2(2), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
-- Cl. A3(2), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
-- Cl. AIO(2), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
-- Cl. APO(2), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
-- Cl. A3(3), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
-- Cl. AIO(3), Aaa (sf) Placed Under Review for Possible
Downgrade; previously on April 30, 2002 Assigned Aaa (sf)
Issuer: Structured Asset Securities Corporation Assistance Loan
Trust 2003-AL1
-- Cl. A, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on March 31, 2003 Assigned Aaa (sf)
-- Cl. B1, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on March 31, 2003 Assigned Aa2 (sf)
-- Cl. B3, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on March 31, 2003 Assigned Baa2 (sf)
-- Cl. B4, B1 (sf) Placed Under Review for Possible Downgrade;
previously on May 6, 2009 Downgraded to B1 (sf)
-- Cl. APO, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on March 31, 2003 Assigned Aaa (sf)
-- Cl. B2, A2 (sf) Placed Under Review for Possible Downgrade;
previously on March 31, 2003 Assigned A2 (sf)
-- Cl. AIO, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on March 31, 2003 Assigned Aaa (sf)
Issuer: Structured Asset Securities Corporation Assistance Loan
Trust 2003-AL2
-- Cl. A, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on May 6, 2009 Downgraded to Aa2 (sf)
-- Cl. B1, A1 (sf) Placed Under Review for Possible Downgrade;
previously on May 6, 2009 Downgraded to A1 (sf)
-- Cl. B2, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on May 6, 2009 Downgraded to Baa2 (sf)
-- Cl. B3, B3 (sf) Placed Under Review for Possible Downgrade;
previously on May 6, 2009 Downgraded to B3 (sf)
-- Cl. AIO, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on May 6, 2009 Downgraded to Aa2 (sf)
-- Cl. APO, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on May 6, 2009 Downgraded to Aa2 (sf)
Issuer: Structured Asset Securities Corporation Mortgage Pass-
Through Certificates, Series 2001-SB1
-- Cl. B2, A2 (sf) Placed Under Review for Possible Downgrade;
previously on June 29, 2001 Assigned A2 (sf)
-- Cl. B3, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on June 29, 2001 Assigned Baa2 (sf)
-- Cl. B4, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on June 29, 2001 Assigned Ba2 (sf)
-- Cl. B5, B2 (sf) Placed Under Review for Possible Downgrade;
previously on June 29, 2001 Assigned B2 (sf)
-- Cl. A4, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on June 29, 2001 Assigned Aaa (sf)
-- Cl. A5, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on June 29, 2001 Assigned Aaa (sf)
-- Cl. APO, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on June 29, 2001 Assigned Aaa (sf)
-- Cl. A2 Component 2, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on June 29, 2001 Assigned Aaa (sf)
-- Cl. B1, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on June 29, 2001 Assigned Aa2 (sf)
-- Cl. AIO, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on June 29, 2001 Assigned Aaa (sf)
-- Cl. A2 Component 1, Aaa (sf) Placed Under Review for Possible
Downgrade; previously on June 29, 2001 Assigned Aaa (sf)
Ratings Rationale
The review actions were prompted by the increase in loss
expectations on these deals backed by disaster assistance loans
that were originated before 2004 (seasoned loans).
To determine which tranches to place on review, Moody's compared
the tranches' credit enhancement from subordination to a loss
proxy that was based on a multiple of two times the lifetime
pipeline losses expected from the related pools. The lifetime
pipeline loss was derived based on lifetime roll rates to default
of 85% for 60-day delinquencies, 95% for 90+ day delinquencies,
100% for loans in foreclosure, and 100% for loans where the homes
are held-for-sale, each applied with a severity assumption of 70%.
Tranches without enough credit enhancement to maintain current
ratings based on this calculation have been placed on review for
possible downgrade. Tranches expected to pay off in full in the
coming months were not placed on review.
Senior tranches were placed on review according to the
subordination offered by subordinate/mezzanine tranches. Certain
tranches that may benefit from super-seniority or first-pay status
in the waterfall may be confirmed as additional transaction-
specific analysis is concluded over the coming months.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
STRUCTURED ENHANCED: Fitch Affirms Ratings on Six Classes
---------------------------------------------------------
Fitch Ratings has affirmed ratings of these six classes of notes
from Structured Enhanced Return Vehicle Trust, series 2006-1,
along with the corresponding Rating Outlooks:
-- $157,500,000 class A-1 revolving notes at 'Bsf'; Outlook
Stable;
-- $312,500,000 class A-2 notes at 'Bsf'; Outlook Stable;
-- $29,167,000 class B notes at 'CCsf';
-- $50,000,000 class C notes at 'Csf';
-- $2,080,000 class D-1 notes at 'Csf';
-- $2,087,000 class D-2 notes at 'Csf'.
The rating actions reflect Fitch's analysis of both the market
value and the credit risk of the portfolio. Given the exposure to
both risks, the tranches are rated to the lower of the two
indicative levels.
The market value risk was analyzed by comparing the distance-to-
trigger metric and distance-from-trigger metric to advance rate
ranges (ARs are based on Fitch's analysis of the market
dislocation experienced in 2007-2008, which represent a peak to
trough decline). The DTT metric indicates the price decline
stress that would occur before triggering a liquidation event.
The DFT metric shows the additional price decline that would
result in a loss for both the class A-1 and A-2 notes.
In addition, Fitch's analysis includes a categorization of
portfolio loan assets generally based on the seniority level of
the loan, which is then used to determine the AR thresholds under
various rating stresses. For example, a senior secured first lien
loan would be classified as Category 2, and the range of ARs
applied to a Category 2 asset under a 'B' stress would be 92-96%.
This analysis is further supplemented in Fitch's May 2008
commentary, 'Fitch Update: Application of Revised Market Value
Structure Criteria to TRR CLOs'.
Based on Fitch's classification of the portfolio assets, the
SERVES 2006-1 portfolio is composed of:
-- 78.7% Category 2 assets;
-- 17.5% Category 3 assets (second-lien loans, covenant-light
loans, revolvers, delayed draw term loans); and
-- 3.8% Category 4 assets (defaulted assets).
The average advance rate of the current portfolio (as of the Oct.
10, 2010 trustee report) is approximately 90% under a 'B' stress.
This would correspond to a market value decline of approximately
10% under a 'B' stress. The market value trigger for the class A
notes is in line with Fitch's 'B' advance rates for this
structure, with a combined DFT and DTT metric of approximately
29%, up from 19% in the last review. Although the cushion to the
liquidation trigger has increased from increasing market prices,
there still remains uncertainty of market value risk exposure upon
liquidation or termination of the transaction. Therefore, the
ratings for the class A notes have been affirmed at 'B' and
continue to maintain a Stable Outlook. The class A-1 notes remain
undrawn.
As the reference portfolio is comprised of a diverse pool of
senior secured loans, the credit risk of the portfolio was also
analyzed using the Portfolio Credit Model, as described in Fitch's
Corporate CDO criteria. The par coverage of the class A notes is
approximately 30%, which corresponds with a 'AAA' rating loss rate
for the portfolio, based on Fitch's PCM analysis. However, this
approach was not used to determine the class A notes' ratings as
the market value trigger for the class A notes exposes them to
additional risk beyond pure credit risk.
Based on the classification of the assets, the market value
coverage for the class B notes is below Fitch's 'CCC' advance rate
threshold, and the par subordination of the class B notes
(approximately 4%), is also below the 'CCC' rating loss rate in
Fitch's PCM analysis. Therefore, the rating has been affirmed at
'CC', as default of some kind appears probable.
The class C and D notes have negative market value and par
coverage, and are therefore unlikely to see any principal proceeds
at maturity. Therefore, they remain at 'C', with default
appearing to be inevitable.
SERVES 2006-1 is a total rate of return collateralized loan
obligation with a market value termination trigger. The
transaction closed on Feb. 24, 2006, and is managed by PPM America
Inc.
TCW GLOBAL: S&P Downgrades Ratings on Five Classes of Notes
-----------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on five
classes of notes issued by TCW Global Project Fund III Ltd., a
cash flow collateralized debt obligation managed by TCW Asset
Management Co. and collateralized by project finance securities,
and removed them from CreditWatch with negative implications. At
the same time, S&P affirmed its 'AAA (sf)' rating on the revolving
notes and removed it from CreditWatch with negative implications.
The downgrades reflect the application of S&P's updated corporate
CDO criteria. More specifically, the downgrades reflect the fact
that the affected tranches did not pass the largest-obligor
default test, one of the two supplemental tests that S&P
introduced as part of its revised corporate CDO criteria.
The application of the supplemental tests is intended to address
event risk and model risk that may be present in rated
transactions. The largest-obligor default test assesses whether a
CDO tranche has sufficient credit enhancement (not counting excess
spread) to withstand specified combinations of underlying asset
defaults based on the ratings on the underlying assets, with a
flat recovery.
The reinvestment period for the transaction ended on Aug. 31,
2010. Since that time the transaction has started to pay down the
revolving notes. Standard & Poor's will continue to review
whether, in S&P's view, the ratings currently assigned to the
notes remain consistent with the credit enhancement available to
support them and take rating actions as S&P deem necessary.
Rating And Creditwatch Actions
TCW Global Project Fund III Ltd.
Rating
------
Class To From
----- -- ----
Revolving Notes AAA (sf) AAA (sf)/Watch Neg
A-1 AA+ (sf) AAA (sf)/Watch Neg
A-2 A+ (sf) AA (sf)/Watch Neg
B-1 BB+ (sf) A (sf)/Watch Neg
B-2 BB+ (sf) A(sf)/Watch Neg
C B+ (sf) BBB (sf)/Watch Neg
Transaction Information
-----------------------
Issuer: TCW Global Project Fund III Ltd.
C0-Issuer: TCW Global Project Fund III Inc.
Collateral manager: TCW Asset Management Co.
Underwriter: Citigroup Inc.
Trustee: Bank of New York Mellon (The)
Transaction type: Cash flow CLO
TIAA REAL: Fitch Affirms Ratings on Five Classes of Notes
---------------------------------------------------------
Fitch Ratings has affirmed five and downgraded two classes issued
by TIAA Real Estate CDO 2003-1 as a result of continued negative
credit migration.
Since Fitch's last rating action in June 2010, approximately 27.9%
of the portfolio has been downgraded and currently 5.7% is on
Rating Watch Negative. Approximately 29.1% has a Fitch derived
rating below investment grade and 10.5% has a rating in the 'CCC'
rating category or lower. As of the Oct. 29, 2010 trustee report,
7.9% of the portfolio is experiencing interest shortfalls. The
class A-1MM notes have paid down by $84.2 million since issuance.
This transaction was analyzed 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. 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 Corporate CDOs'. Based on this
analysis, the class A-1MM through D notes' breakeven rates are
generally consistent with the ratings assigned below.
For the class E notes, Fitch analyzed the class' sensitivity to
the default of the distressed assets ('CCC' and below). Given the
high probability of default of the underlying assets and the
expected limited recovery prospects upon default, the class E
notes have been downgraded to 'Csf'. As of the Sept. 28, 2010
payment date, classes A-1MM through C notes received their full
interest distributions, class D received a partial interest
payment, and the class E notes are deferring their interest
payments.
The Negative Rating Outlook on the class A-1MM through C notes
reflects Fitch's expectation that underlying CMBS loans will
continue to face refinance risk. The Loss Severity 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'. The LS rating should
always be considered in conjunction with the probability of
default for tranches. Fitch does not assign LS ratings or
Outlooks to classes rated 'CCC' and below.
TIAA 2003-1 is a static collateralized debt obligation that closed
on Nov. 6, 2003. The current portfolio consists of 66 bonds from
58 obligors, of which 67.3% are commercial mortgage backed
securities from the 1998 through 2003 vintages, 31.5% are real
estate investment trust debt securities, and 1.2% are structured
finance CDOs.
Fitch has affirmed these classes:
-- $137,817,252 class A-1MM notes at 'AAsf'/LS2; Outlook
Negative;
-- $10,000,000 class B-1 notes at 'Asf/LS5'; Outlook Negative;
-- $2,000,000 class B-2 notes at 'Asf/LS5'; Outlook Negative;
-- $16,000,000 class C-1 notes at 'BBsf'; Outlook Negative and
revise to LS-4 from LS-3;
-- $14,000,000 class C-2 notes at 'BBsf'; Outlook Negative and
revise to LS-4 from LS-3.
In addition, Fitch has downgraded these classes:
-- $13,539,574 class D notes to 'CCCsf' from 'Bsf/LS4';
-- $12,240,000 class E notes to 'Csf' from 'CCsf'.
US AIRWAYS: Moody's Assigns Low-B Ratings on Two 2010-1 Certs.
--------------------------------------------------------------
Moody's Investors Service assigned Ba2 and B2 ratings to the
Class A and Class B Pass Through Certificates, Series 2010-1,
respectively, of the 2010-1 Pass Through Trusts to be issued by
US Airways, Inc. The transaction documentation provides for the
possible issuance of one additional subordinated tranche of
certificates at a future date. The subordination provisions of
the inter-creditor agreement provide for the payment of interest
on the Preferred Pool Balance of 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 and Class B Equipment Notes issued by US Airways and
acquired with the proceeds of the Certificates will be the primary
assets of the Pass Through Trust. The Certificates' proceeds will
refinance eight currently owned Airbus aircraft; each delivered
new in 2009 with any excess proceeds held for general corporate
purposes. The payment obligations of US Airways under the
equipment notes will be fully and unconditionally guaranteed by US
Airways Group, Inc.
Assignments:
Issuer: US Airways, Inc.
-- Senior Secured Enhanced Equipment Trust, Class A, Assigned
Ba2
-- Senior Secured Enhanced Equipment Trust, Class B, Assigned B2
Rating Rationale
The ratings of the Certificates consider the credit quality of
US Airways (Corporate Family Rating of Caa1, stable outlook) as
obligor under the Notes, Moody's opinion of the collateral
protection of the Notes, the credit support provided by the
Liquidity Facilities, the cross-subordination provisions of the
inter-creditor agreement 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 Ba2 and B2 on the
Class A and Class B Certificates, 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 October 22, 2024, for the Class A Certificates
and October 22, 2018, for the Class B Certificates, each the final
maturity dates.
The aircraft collateral of this financing will be the youngest
vintages in any of US Airways' (including those of the former
America West Airlines) other Enhanced Equipment Trust Certificate
financings. Additionally, the underlying obligations of a
majority of the aircraft in the other EETCs of US Airways are
operating leases, whereby an unrelated third-party holds the
equity and ultimate potential loss position in the event of a
restructuring by US Airways. The ratings assigned to each of the
tranches of the Series 2010-1 certificates reflects Moody's belief
of a high probability of affirmation by US Airways of the
underlying equipment notes in the event of a reorganization by US
Airways under a default scenario because of the young age of the
aircraft and the cross-default and cross-collateralization
feature. The ratings also consider the more modest over-
collateralization that this financing contemplates relative to
those of other recent EETCs issued by other U.S. carriers.
At Ba2, the rating on the A-tranche of 2010-1 is one notch
above the current Ba3 ratings on the G-tranches of US Airways'
2000-2, 2000-3 and 2001-1 EETCs, financings with modestly higher
loans-to-value based on Moody's current estimates of aircraft
values. Moody's believes that the probability of affirmation of
US Airways' obligations under the underlying financing agreements
is greater for the 2010-1 Series because of the operating benefits
of nearly new aircraft versus those of 10 or 11-year old Airbus
aircraft in these other EETCs. The inclusion of A330-200s in the
2010-1 EETC also makes the collateral of 2010-1 more attractive
under a reorganization scenario as there are relatively few wide-
bodies in this carrier's fleet and the lift provided by these
aircraft would be needed to support its long-haul network
relative to those of its U.S. legacy carrier peers. The over-
collateralization that this financing contemplates (above 60% on
the A-tranche and above 75% on the B-tranche, based on Moody's
estimates of value) provides a smaller equity cushion relative to
those of other EETCs recently issued by other U.S. carriers.
Nevertheless, the cross-collateralization of the equipment notes
should enhance the recovery for investors in the event of the
rejection of the aircraft by US Airways in the event of a
bankruptcy filing by it and pursuant to the provisions of the Code
or in the event of a default on the Certificates.
Any combination of future changes in the underlying credit
quality or ratings of US Airways or US Airways Group, Inc.,
unexpected material 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 2010-1 EETC
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
eight Notes. The interest on these funds will be sufficient to
pay accrued interest on the outstanding Certificates during the
Delivery Period which expires on or before January 21, 2011.
The collateral pool consists of these eight aircraft:
(i) one 2009 vintage Airbus A320-200;
(ii) five 2009 vintage Airbus A321-200s; and
(iii) two 2009 vintage Airbus A330-200s
The transaction documentation provides for US Airways to upsize
the amount of the financing by including four additional aircraft:
i) one 2009 vintage Airbus A320-200, ii) two 2009 vintage Airbus
A321-200s and iii) one 2010 vintage Airbus A330-200. Should US
Airways choose to upsize the principal amount of the 2010-1 EETC
to include the refinancing of the additional four aircraft as
outlined in this transaction's Prospectus Supplement dated
December 15, 2010, Moody's would affirm the Ba2 rating on the A-
tranche and the B2 rating on the B-tranche because the loan-to-
value ratios will be similar to those of the announced eight
aircraft financing.
The Certificates issued to finance the aircraft are not
obligations of, nor are they guaranteed by US Airways. However,
the amounts payable by US Airways under the Notes will be
sufficient to pay in full all interest and principal 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
US Airways that the Notes will be entitled to the benefits of
Section 1110 of the U.S. Bankruptcy Code. Scheduled interest
payments on the Certificates will be supported by the Liquidity
Facilities sized to pay up to three respective consecutive semi-
annual interest payments in the event US Airways defaults on its
obligations under the Notes. The liquidity facilities do not
provide for payments of principal due, nor on interest on the
Certificate proceeds held in escrow during the Delivery Period.
Morgan Stanley Bank, N.A. (Moody's short-term rating of P-1) will
provide the Liquidity Facilities. The liquidity provider has a
priority claim on proceeds from liquidation of any of the aircraft
or of the Notes and other Trust collateral ahead of any of the
holders of the Certificates and is also the controlling party
following a default under the Notes indentures.
Cross-Collateralization
The ratings of the 2010-1 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 for each aircraft sold following a default, the
excess of sale proceeds above the payoff of the related equipment
note is made available to cover potential shortfalls that might
arise under any other equipment note upon the sale of the aircraft
pledged to any such note. Importantly, following a default, all
excess proceeds are retained until the settlement at maturity of
the last of the eight equipment notes 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 benefit of a cross-collateralized EETC. At eight
aircraft covering three different types, the collateral pool is
modest, providing only limited benefit for this feature. The
included aircraft types do not constitute a significant
concentration in any particular aircraft type within its combined
mainline fleet. Being the youngest vintages in the company's
fleet and that each of the models would be integral to the
company's network support the likelihood of affirmation by US
Airways of its obligations under the Notes under a reorganization
scenario, 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 July 21, 2010, when Moody's upgraded
the Speculative Grade Liquidity rating to SGL-3 and changed the
rating outlook to stable.
US Airways Group, Inc., based in Tempe, Arizona, through its
subsidiaries operates one of the largest airlines in the U.S. with
service throughout the U.S. as well as Canada, Mexico, Europe, the
Middle East, the Caribbean, Central and South America.
US AIRWAYS: S&P Assigns 'B+' Rating to Class B Certificates
-----------------------------------------------------------
Standard & Poor's Ratings Services said that it assigned its
preliminary 'BBB' rating to US Airways Inc.'s series 2010-1 Class
A pass-through certificates, with an expected maturity of
April 22, 2023. At the same time it assigned its preliminary 'B+'
rating to the Class B pass-through certificates, with an expected
maturity of April 22, 2017. The final legal maturities will be 18
months after the expected maturity. The issues are drawdowns
under a Rule 415 shelf registration. Standard & Poor's will
decide on ratings to assign on conclusion of a legal review of the
documentation.
"The preliminary 'BBB' and 'B+' ratings are based on US Airways'
credit quality, substantial collateral coverage by good quality
aircraft, and on legal and structural protections available to the
pass-through certificates," said Standard & Poor's credit analyst
Philip Baggaley. The company will use the proceeds of the
offering to refinance 5 A321-200, 2 A330-200 and 1 A320-200
aircraft that were delivered in 2009. Each aircraft's secured
notes are cross-collateralized and cross-defaulted, a provision
that S&P believes increases the likelihood that US Airways would
affirm the notes (and thus continue to pay on the certificates) in
bankruptcy.
The pass-through certificates are a form of enhanced equipment
trust certificates, and benefit from legal protections afforded
under Section 1110 of the federal bankruptcy code and by a
liquidity facility provided by Morgan Stanley Bank N.A.
(A+/Negative/A-1). The liquidity facility is intended to cover up
to three semiannual interest payments, a period during which
collateral could be repossessed and remarketed by
certificateholders following any default by the airline, or to
maintain continuity of interest payments as certificateholders
negotiate with US Airways in a bankruptcy with regard to
certificates.
The preliminary ratings apply to a unit consisting of certificates
representing the trust property and escrow receipts, initially
representing interests in deposits (the proceeds of the
offerings). The escrow deposits are held by a depositary bank,
Bank of New York Mellon (AA-/Stable/A-1+), pending paying off
existing debt on the planes (which should be accomplished in a
short time). Amounts deposited under the escrow agreements are
not property of US Airways and are not entitled to the benefits of
Section 1110 of the U.S. Bankruptcy Code, and any default arising
under an indenture solely by reason of the cross-default in such
indenture may not be of a type required to be cured under Section
1110. Any cash collateral held as a result of the cross-
collateralization of the equipment notes also would not be
entitled to the benefits of Section 1110. Neither the
certificates nor the escrow receipts may be separately assigned or
transferred.
S&P believes that US Airways views these planes as important and
would, given the cross-collateralization and cross-default
provisions, likely affirm the aircraft notes in a bankruptcy
scenario. In contrast to most EETCs issued before 2009, the
cross-default would take effect immediately in a bankruptcy if US
Airways rejected any of the aircraft notes. This should prevent
US Airways from selectively affirming some aircraft notes and
rejecting others (cherry-picking), which often harms the interests
of certificateholders in a bankruptcy.
S&P considers the collateral pool overall to be of good quality.
The largest proportion of value, about 51%, consists of A321-
200's. The A321-200 is the largest version of Airbus' popular
A320 narrowbody family of planes. The A321-200 has not been as
successful as the A320 or smaller A319, but nonetheless is
operated by 61 airlines worldwide, more than Boeing's competing
B737-900ER (although the latter is a newer model and thus has had
less time to attract orders). Airbus very recently announced that
it would offer a more fuel-efficient new-engine-option on its
narrowbody planes starting in 2016. It is too early to tell how
popular this option will be, and S&P believes a lot will depend on
how much more expensive the NEO is. If widely adopted, sale of
NEO planes could depress somewhat residual values of existing-
technology Airbus narrowbody planes. However, this effect is most
likely for older planes in the A320 family (e.g. those delivered
in the 1990's), rather than the recently delivered A321-200's and
A320's in the 2010-1 collateral pool.
The second-largest proportion of aircraft securing the
certificates is A330-200's, a small, long-range widebody plane.
This model, which incorporates newer technology than Boeing's
competing B767-300ER, has been successful, and is operated by
about 67 airlines worldwide. It will face more serious
competition when large numbers of Boeing's long-delayed B787 are
delivered. Still, it will take awhile for this to occur, even if
Boeing is able to make its first delivery in 2011. The final, and
smallest, proportion of value, about 9%, is represented by A320-
200's. This model is Airbus' most successful plane, with a very
wide user base around the world. As discussed above, Airbus will
offer a new engine option on this plane in the middle of this
decade.
The initial loan-to-value of the Class A certificates is 54% and
of the Class B certificates 69.9%, using the appraised base values
and depreciation assumptions in the offering memorandum. However,
S&P focused on more conservative maintenance-adjusted appraised
values (not disclosed in the offering memorandum). S&P also use
more conservative depreciation assumptions for all of the planes
than those in the prospectus. S&P assumed that absent cyclical
fluctuations, values of the A321-200s and A320-200's would decline
by 6.5% of the preceding year's value per year, and the A320-200's
6%. Using these values and assumptions, the Class A initial loan-
to-value is higher, 57.7%, and rises slightly to more than 59% at
its highest point, before declining gradually. The Class B
initial loan-to-value, using S&P's assumptions, is about 74.7%,
and peaks at more than 77% before declining. S&P's analysis also
considered that a full draw of the liquidity facility, plus
interest on those draws represents a claim senior to the
certificates. This amount is somewhat higher (as a percent of
asset value) than for EETCs issued recently by other U.S.
airlines, but is similar to that of many other, earlier EETCs.
Initially, a full draw, with interest, is equivalent to about 7%
of asset value, using S&P's assumptions.
S&P's ratings on US Airways reflect its view of the consolidated
credit quality of parent US Airways Group Inc., which also owns
America West Airlines Inc. On Dec. 8, 2010, S&P affirmed its 'B-'
corporate credit rating and revised its outlook to stable from
negative, based on improving operating performance and liquidity.
S&P base the ratings on US Airways Group's substantial debt and
lease burden, limited (though improving) liquidity, and
participation in the high-risk U.S. airline industry. The ratings
also incorporate the company's better-than-average operating
costs. Tempe, Ariz.-based US Airways Group is the sixth-largest
U.S. airline, carrying about 8% of industry traffic. S&P
characterizes the company's business profile as vulnerable and its
financial profile as highly leveraged.
S&P expects US Airways' financial profile to remain fairly stable
over the next two years, with EBITDA interest coverage 1.6x?2.0x
and funds from operations/debt in the low-teen percent area. S&P
believes that an upgrade is not likely over the near-term, but
could occur if FFO/debt moves consistently into the high teens
percent area and unrestricted cash and short-term investments
increase to more than $2.5 billion. With US Airways' improved
operating performance and liquidity, S&P also believe a downgrade
is unlikely over the near term. However, if a stalled U.S.
economic recovery or serious oil price spike caused losses,
eroding liquidity to fall to below $1 billion, S&P could lower
ratings.
VEGA CAPITAL: Moody's Assigns 'Ba3' Rating to Class C Notes
-----------------------------------------------------------
Moody's Investors Service announced that it has assigned a rating
to notes issued by Vega Capital Ltd., an exempted company
incorporated under the laws of the Cayman Islands.
This rating was assigned:
-- US$63,900,000 Series 2010-I Class C Principal At-Risk
Variable Rate Notes due December 20, 2013, Assigned Ba3 (sf)
Ratings Rationale
This transaction is the second issuance of the Vega Capital Ltd.
catastrophe bond program. The issuance is sponsored by Swiss
Reinsurance Company Ltd ("Counterparty") and is linked to the
occurrence of certain earthquakes in California, certain
hurricanes in the North Atlantic, certain windstorms in Europe,
certain earthquakes in Japan, and certain typhoons in Japan during
a risk period of three years. The transaction contains index
loss-triggered and parametric-triggered losses tied to information
reported by several event reporting agencies. Potential losses to
noteholders are incurred based on cumulative losses from any of
the five catastrophic events. Each event has a maximum annual
loss amount.
Moody's rating addresses the ultimate cash receipt of all required
interest and principal payments as provided by the governing
documents and is based on the expected loss posed to the
noteholders relative to the promise of receiving the present value
of such payments. The rating is based on Moody's analysis of the
probability of occurrence of qualifying events, their timing and
the severity of losses experienced by investors should these
events occur during the risk period. The rating also addresses
the effectiveness of the documentation in conveying the risks
inherent in the structure as well as the credit strength of the
Counterparty and the collateral.
Moody's rating analysis considers future reserve payments that
will be made by the Counterparty, which add subordination over the
life of the transaction. Amounts due to the Counterparty
following any triggered loss events will be paid first from
amounts in the reserve account, then by a principal loss on the
Class D notes, and finally by a principal loss on the Class C
notes. In cases where there have been partial principal losses on
the Notes, future reserve account payments will increase the
principal amount of the Notes by order of seniority up to the
original principal amount of each Class.
Moody's evaluation included extensive review of the technical
basis, methodology and historical data used to develop the
probabilistic risk models used by the modeling agent, EQECAT,
Inc., to analyze potential losses and for the sensitivity analysis
of critical parameters of the model. The risk analysis developed
by EQECAT is expressed as an annualized exceedance curve for each
event built from the maximum event in each simulated year, which
is then used by Moody's to calculate potential losses resulting
from events. Additionally, Moody's uses the complete event set to
determine the probability of multiple events in one year. In its
rating analysis, Moody's used the risk analysis results developed
by EQECAT then stresses the results to capture uncertainties in
the modeling and examine the robustness of the ratings. The
frequency of occurrence of the events were increased in
incremental amounts to determine the sensitivity to the exceedence
curves. By creating a simplified model of the transaction and
using the modified results provided by the modeling agent as an
input, Moody's can simulate the occurrence of multiple scenarios
throughout the life of the transaction.
Both qualitative and quantitative considerations were incorporated
when analyzing the counterparty and collateral default risks.
With regard to collateral risk, the idealized expected loss of the
three year Aaa collateral exposure was added to the modeled
expected losses. Noteholders will receive interest on the notes
for the first year regardless of principal losses. Because the
counterparty makes such payments, Moody's incorporated a one year
default probability of A1 (current Swiss Re Insurance Financial
Strength Rating) multiplied by the fraction of interest divided by
the total rated promise.
Proceeds from the sale of the Notes were used to purchase
$63,900,000 of puttable notes issued by the International Bank of
Reconstruction and Development. The IBRD Notes are currently
rated Aaa and are puttable as of the first anniversary of the
transaction closing, in whole or in part at par. Any future
reserve payments, or reinvestments of collateral due to an IBRD
downgrade will be invested into money market funds ("Directed
Investments"). These Directed Investments must meet specific
criteria, including but not limited to investing solely in direct
government obligations and holding principal stability ratings of
Aaa or Aaa/MR1+, as applicable.
Issuer and Counterparty entered into a Counterparty Contract,
which will provide for the payment by the Issuer to Counterparty
of cash settlement or payment "in kind" amounts following certain
conditions to settlement being satisfied with regard to one or
more events. The Counterparty payments made by Swiss Reinsurance
Company Ltd along with the proceeds from the Directed Investments
are designed to meet the anticipated cash flows under the Notes.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments in this transaction.
VELOCITY CLO: Moody'S Upgrades Ratings on Five Classes of Notes
---------------------------------------------------------------
Moody's Investors Service announced that it has upgraded the
ratings of these notes issued by Velocity CLO, Ltd.:
-- US$229,000,000 Class A Senior Secured Notes Due 2016
(current balance of $176,267,002), Upgraded to Aaa (sf); \
previously on July 29, 2009 Downgraded to Aa3 (sf);
-- US$22,000,000 Class B Senior Secured Interest Deferrable
Notes Due 2016, Upgraded to Baa1 (sf); previously on July 29,
2009 Confirmed at Ba1 (sf);
-- US$14,000,000 Class C Senior Secured Interest Deferrable
Notes Due 2016, Upgraded to Ba3 (sf); previously on July 29,
2009 Downgraded to B2 (sf);
-- US$8,000,000 Class D Senior Secured Interest Deferrable
Notes Due 2016 (current balance of $5,076,339), Upgraded to
B2 (sf); previously on July 29, 2009 Downgraded to Ca (sf);
-- US$5,300,000 Class 1 Composite Securities Due 2016 (current
rated balance of $3,198,769), Upgraded to Baa1 (sf);
previously on July 29, 2009 Downgraded to Ba1 (sf).
Ratings Rationale
According to Moody's, the rating action taken on the notes results
primarily from the delevering of the Class A Notes and improvement
in the credit quality of the underlying portfolio since the last
rating action in July 2009.
The overcollateralization ratios of the rated notes have improved
as a result of delevering of the Class A Notes, which have been
paid down by approximately 21% or $47 million since the last
rating action in July 2009. A substantial proportion of this
paydown is attributable to principal prepayments on the underlying
loans. As of the latest trustee report dated November 10, 2010,
the Class A, Class B, Class C, and Class D overcollateralization
ratios are reported at 127.23%, 115.24%, 108.72%, and 106.41%,
respectively, which does not reflect the $47 million in paydown of
the Class A notes in November 2010, versus June 2009 levels of
119.36%, 108.66%, 102.8%, and 100.5%, respectively. The Class D
overcollateralization ratio has increased due a turbo feature in
the deal whereby 20% of excess interest is diverted to delever the
Class D Notes before payment to incentive management fees and
Subordinated Notes. Moody's expects delevering to continue as a
result of the end of the deal's reinvestment period in February
2010.
Moody's also notes that the deal has benefited from improvement in
the credit quality of the underlying portfolio since the last
rating action. Based on the November 2010 trustee report, the
weighted average rating factor is 2658 compared to 2841 in June
2009, and securities rated Caa1 and below or CCC+ and below make
up approximately 10.5% of the underlying portfolio versus 17.9% in
June 2009. The deal also experienced a decrease in defaults. In
particular, the dollar amount of defaulted securities has
decreased to $0.1 million from approximately $15.7 million in June
2009.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" and "Annual Sector Review (2009): Global CLOs," key
model inputs used by Moody's in its analysis, such as par,
weighted average rating factor, diversity score, and weighted
average recovery rate, may be different from the trustee's
reported numbers. In its base case, Moody's analyzed the
underlying collateral pool to have a performing par and principal
proceeds of $235 million, defaulted par of $0.2 million, weighted
average default probability of 21.1% (implying a WARF of 3300), a
weighted average recovery rate upon default of 44.9%, and a
diversity score of 57. These default and recovery properties of
the collateral pool are incorporated in cash flow model analysis
where they are subject to stresses as a function of the target
rating of each CLO liability being reviewed. The default
probability is derived from the credit quality of the collateral
pool and Moody's expectation of the remaining life of the
collateral pool. The average recovery rate to be realized on
future defaults is based primarily on the seniority of the assets
in the collateral pool. In each case, historical and market
performance trends, and collateral manager latitude for trading
the collateral are also factors.
Velocity CLO, Ltd. issued on August 31, 2004, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The principal methodologies used in these ratings were "Moody's
Approach to Rating Collateralized Loan Obligations" published in
August 2009 and "Using the Structured Note Methodology to Rate CDO
Combo-Notes" published in February 2004.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Moody's modeled the transaction using the Binomial Expansion
Technique, as described in Section 2.3.2.1 of the "Moody's
Approach to Rating Collateralized Loan Obligations" rating
methodology published in August 2009.
In addition to the base case analysis described above, Moody's
also performed a number of sensitivity analyses to test the impact
on all rated notes, including these:
1. Various default probabilities to capture potential defaults in
the underlying portfolio.
2. A range of recovery rate assumptions for all assets to capture
variability in recovery rates.
A summary of the impact of different default probabilities
(expressed in terms of WARF levels) on all rated notes (shown in
terms of the number of notches' difference versus the current
model output, where a positive difference corresponds to lower
expected loss), assuming that all other factors are held equal:
Moody's Adjusted WARF - 20% (2640)
-- Class A: 0
-- Class B: +3
-- Class C: +2
-- Class D: +2
-- Class 1 Composite Securities: +3
Moody's Adjusted WARF + 20% (3960)
-- Class A: -1
-- Class B: -1
-- Class C: -2
-- Class D: -2
-- Class 1 Composite Securities: -1
A summary of the impact of different recovery rate levels on all
rated notes (shown in terms of the number of notches' difference
versus the current model output, where a positive difference
corresponds to lower expected loss), assuming that all other
factors are held equal:
Moody's Adjusted WARR + 2% (46.9%)
-- Class A: 0
-- Class B: +1
-- Class C: 0
-- Class D: 0
-- Class 1 Composite Securities: +1
Moody's Adjusted WARR - 2% (42.9%)
-- Class A: -1
-- Class B: 0
-- Class C: 0
-- Class D: 0
-- Class 1 Composite Securities: 0
Moody's notes that this transaction is subject to a high level of
macroeconomic uncertainty, as evidenced by 1) uncertainties of
credit conditions in the general economy and 2) the large
concentration of speculative-grade debt maturing between 2012 and
2014 which may create challenges for issuers to refinance. CDO
notes' performance may also be impacted by 1) the managers'
investment strategies and behavior and 2) divergence in legal
interpretation of CDO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Delevering: The main source of uncertainty in this transaction
is whether delevering from unscheduled principal proceeds will
continue and at what pace. Delevering may accelerate due to
high prepayment levels in the loan market and/or collateral
sales by the manager, which may have significant impact on the
notes' ratings.
VILLAGE OF RIVERDALE: Moody's Cuts Ratings on Bonds to 'Ba2'
------------------------------------------------------------
Moody's Investors Service has downgraded the Village of
Riverdale's (IL) outstanding general obligation unlimited tax
backed-debt to Ba2 from Ba1 and has affirmed the negative
outlook. Concurrently, Moody's has assigned a Ba2 rating and
negative outlook to the village's $9.8 million Taxable General
Obligation Bonds, Series 2010A (Build America Bonds - Direct
Payment), $2.1 million Taxable General Obligation Bonds, Series
2010B, and $5.9 million General Obligation Bonds, Series 2010C.
The rating action affects $19.4 million of outstanding rated debt,
including the current offerings.
Rating Rationale
The current offerings are secured by the village's general
obligation unlimited tax pledge. The Series 2010A bonds will
finance various capital improvement projects throughout the
village and the Series 2010B bonds will provide funds to support
the general operations of the village. The Series 2010C bonds
will refund and restructure the village's outstanding Series
2003A, Series 2003B, Series 2003C and Series 2004A bonds to
provide relief to the village's fiscal operations. The downgrade
reflects the village's deteriorating financial position, ongoing
annual operating deficits, and the various challenges the village
will face to address its financial issues. The Ba2 rating also
reflects the village's limited tax base, relatively high industry
concentration and a high overall debt burden with slow principal
amortization. The negative outlook reflects Moody's assessment of
the viability of the village's deficit elimination plan in a weak
economic environment.
Financial Operations Remain Stressed
With Growing Deficit Fund Balance;
Deficit Elimination Plan To Be Carried Out
Over Next Four Years
At the close of fiscal 2008, the village's General Fund balance
stood at a negative $2.4 million, or a negative 28.2% of revenues,
with an unreserved balance of negative $2.6 million. This was the
result of several years of annual operating deficits of up to
$500,000 per year, primarily due to the partial abatement of the
village's bond levy. The village has been able to cash flow its
operations by borrowing funds from the water and sewer enterprise
funds. At the time of the last credit review, management, which
has since changed, had indicated that fiscal 2008 year-end results
would reflect a turnaround from this trend given the village's
recently authorized status as home rule. However, fiscal 2008
closed with a $505,000 General Fund operating deficit, including
a $305,000 transfer to the Debt Service Fund to meet debt service
requirements. The current administration took office in April
2009. At the close of fiscal 2009, the village realized a
$455,000 operating shortfall bringing General Fund reserves to
negative $2.9 million (-34.1% of revenues). In fiscal 2010,
management has implemented expenditure reductions such as
layoffs, furlough days and restructured work hours to cut down on
overtime. Despite these efforts, unaudited 2010 results reflect a
$1.1 million operating shortfall, bringing reserves to the
village's largest deficit balance to date of approximately
negative $3.9 million (-51.7% of revenues).
As part of the fiscal 2011 budget process officials noted a
$2.5 million budget gap, which takes into account the gaps that
have rolled forward in prior budgets. To address this gap,
management implemented various expenditure reductions including
layoffs, furlough days, the sale of land, and charging salaries to
other available funds where available, such as the Motor Fuel Tax
Fund. The prior outlined deficit elimination plan included
increasing the village's property tax levy up to 15% each year for
these three years to improve the operations of the village's
General Fund has been revised. Historical property tax
collections have been weak, with less than 92% collected annually
over the past five years. As a result, management has revised the
plan to avoid severely impacting a property tax base with already
challenged property tax collections. The current plan, which
extends the General Fund deficit elimination to approximately four
years, implements various revenue enhancements including a home-
rule sales tax, zero tolerance fees for legal violations, and
newly authorized grant revenues and casino tax revenue sharing
receipts in association with the development of a new area casino.
The fiscal 2011 balance is expected to improve by approximately
$1.5 million due to the current borrowing which will add
$2 million to the village's General Fund. The projected
operations still include a structural imbalance of approximately
$552,000. The village's success in implementing the four year
deficit elimination plan is contingent on some economically
sensitive revenue streams and revenues susceptible to state
interception (gaming tax receipts). Moody's notes the volatility
of these revenues may prolong the village's ability to regain
structural balance.
Limited Tax Base Dependent On Redevelopment For Future Growth
The Village of Riverdale is located in Cook County (general
obligation rated Aa3/stable), 20 miles south of downtown Chicago
(rated Aa2/stable) and has significant industrial and commercial
sectors. The village's full valuation is a modest $413 million
and growth over the past five years has been slow, averaging only
1.7% annually. In 2008 the village realized a modest decline in
valuation and officials expect 2009 figures to show slight
improvement. As of 2008, the city's10 largest taxpayers comprised
25.8% of assessed valuation, reflecting an above average
concentration. Mittal Steel, a manufacturer, is the largest
taxpayer and accounts for 8.6% of assessed valuation. The city
currently owns a significant amount of land which it hopes to sell
to developers for redevelopment. Management reports that there
has already been some success in this plan as a 100,000 square
foot warehouse was recently sold. Due to the mature nature of the
community, future growth will depend on successful redevelopment
and revitalization efforts. Officials have undertaken significant
outreach efforts to improve economic development within the
village yet substantial progress towards management's goals is yet
to be realized. Cook County's unemployment rate as of August 2010
was 10.2%, which slightly higher than the state and national
levels of 9.9% and 9.5%, respectively. Resident income indices
for the Village of Riverdale are below average with median family
income and per capita income levels at 84% and 67%, respectively,
of national medians.
Heavily Leveraged Tax Base Direct Debt Expected
to Remain Manageable
At 5.7% of full valuation, the village's direct debt is above
average and overlapping debt brings this burden up to a high
12.3%. Amortization of the village's is significantly weakened
with the current restricting which extend various maturities of
the village's refunded bonds. Payout declines to a slow 17.3%
over ten years. The village has no near-term borrowing plans and
all of the village's debt is in fixed rate mode. Riverdale is not
party to any swap agreements.
Outlook
The outlook encompasses Moody's concern that the village's deficit
elimination plan as currently stated is not achievable in the weak
economic environment, which has already dampened the village's
major operating revenue streams. Further credit reviews will
focus on managements willingness and ability to adjust budgets and
operations appropriately while restoring financial stability to
the organization.
What could lead to a rating upgrade (or revise the outlook to
stable):
-- Structurally balanced budgets achieved through financial
solutions that can carry forward to future fiscal years
-- Material operating surpluses that will eliminate the deficit
General Fund balance position
-- Continuing commitment among management to make mid-year
budget adjustments as necessary to achieve structurally
balance operations
What could lead to a rating downgrade:
-- Continued structural imbalance resulting from negative budget
variances yielding larger deficits in the General Fund
-- Inability or unwillingness to implement deficit elimination
plan as outlined
Key Statistics:
-- 2000 Population: 15,055
-- 2009 Full valuation: $413 million
-- Full value per capita (estimate): $28,788
-- 1999 Per capita income (as % of US): $14,461 (67%)
-- 1999 Median family income (as % of US): $41,892 (84%)
-- 2009 undesignated General Fund balance: Negative $2.9 million
(-35% of General Fund revenue)
-- Overall debt burden: 12.3% (direct 5.7%)
-- Payout of principal (10 years): 17.3%
-- Long-term rated GO rated debt outstanding: $19.4 million
-- Total GO debt outstanding: $23.1 million
WACHOVIA BANK: Moody's Upgrades Ratings on Three 2002-C2 Certs.
---------------------------------------------------------------
Moody's Investors Service upgraded the ratings of three classes,
affirmed 14 classes of Wachovia Bank Commercial Mortgage Trust
Commercial Mortgage Pass-Through Certificates, Series 2002-C2:
-- Cl. A-2, Affirmed at Aaa (sf); previously on Nov. 12, 2002
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Dec. 3, 2002
Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Dec. 3, 2002
Assigned Aaa (sf)
-- Cl. B, Affirmed at Aaa (sf); previously on Dec. 20, 2005
Upgraded to Aaa (sf)
-- Cl. C, Affirmed at Aaa (sf); previously on Dec. 20, 2005
Upgraded to Aaa (sf)
-- Cl. D, Affirmed at Aaa (sf); previously on Feb. 8, 2007
Upgraded to Aaa (sf)
-- Cl. E, Affirmed at Aaa (sf); previously on Dec. 20, 2007
Upgraded to Aaa (sf)
-- Cl. F, Upgraded to Aaa (sf); previously on Feb. 7, 2008
Upgraded to Aa1 (sf)
-- Cl. G, Upgraded to Aa2 (sf); previously on Feb. 7, 2008
Upgraded to Aa3 (sf)
-- Cl. H, Upgraded to A1 (sf); previously on Feb. 7, 2008
Upgraded to A2 (sf)
-- Cl. J, Affirmed at Baa2 (sf); previously on Feb. 7, 2008
Upgraded to Baa2 (sf)
-- Cl. K, Affirmed at Ba1 (sf); previously on Feb. 8, 2007
Upgraded to Ba1 (sf)
-- Cl. L, Affirmed at Ba2 (sf); previously on Feb. 8, 2007
Upgraded to Ba2 (sf)
-- Cl. M, Affirmed at B1 (sf); previously on Nov. 12, 2002
Definitive Rating Assigned B1 (sf)
-- Cl. N, Affirmed at B2 (sf); previously on Nov. 12, 2002
Definitive Rating Assigned B2 (sf)
-- Cl. O, Affirmed at B3 (sf); previously on Nov. 12, 2002
Assigned B3 (sf)
-- Cl. IO-I, Affirmed at Aaa (sf); previously on Nov. 12, 2002
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The upgrades are due to the significant increase in subordination
due to loan payoffs and amortization and overall stable pool
performance. The pool has paid down by 14% since Moody's last
review. In addition, the pool benefits from 29% defeasance.
The affirmations are due to key parameters, including Moody's loan
to value ratio, Moody's stressed debt service coverage ratio and
the Herfindahl Index, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
Moody's rating action reflects a cumulative base expected loss of
2.6% of the current balance. At last review, Moody's cumulative
base expected loss was 1.6%. Moody's stressed scenario loss is
5.2% of the current balance
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
(Herf), a measure of loan level diversity, is a primary
determinant of pool level diversity and has a greater impact on
senior certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated February 7, 2008.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 20% to
$702.9 million from $875.1 million at securitization. The
Certificates are collateralized by 101 mortgage loans ranging in
size from less than 1% to 6% of the pool, with the top ten loans
representing 35% of the pool. The pool contains one loan with
investment grade credit estimates that represent 3% of the pool.
Thirty-one loans, representing 29% of the pool, have defeased and
are collateralized with U.S. Government securities, compared to
13% at last review.
Twenty-one loans, representing 19% 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 CRE
Finance Council 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.
There have been no losses since securitization. Three loans,
representing 2% of the pool, are currently in special servicing.
The master servicer has recognized an aggregate $6 million
appraisal reduction for the specially serviced loans. Moody's has
estimated an aggregate $6.2 million loss (38.2% expected loss on
average) for the specially serviced loans.
Moody's has assumed a high default probability for four poorly
performing loans representing 3% of the pool and has estimated a
$4.2 million aggregate loss (50% expected loss based on a 40%
probability default) from these troubled loans.
Moody's was provided with full year 2009 operating results for 98%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 76% compared to 83% at Moody's
prior review. Moody's net cash flow reflects a weighted average
haircut of 11% to the most recently available net operating income
(NOI). Moody's value reflects a weighted average capitalization
rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.52X and 1.41X, respectively, compared to
1.26X and 1.19X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 31 compared to 52 at Moody's prior review.
The loan with a credit estimate is the Home Depot Expo Design
Center Loan ($19.8 million - 2.8% of the pool), which is secured
by a 105,000 square foot retail building located in Encinitas,
California. The property is 100% vacant as of April 2009, however
Home Depot continues to pay rent (Moody's senior unsecured rating
Baa1) through January 2028. The collateral is part of a larger
530,000 SF power center. Moody's current credit estimate and
stressed DSCR are Baa1 and 1.16X, respectively, compared to Aa3
and 1.11X at last review.
The top three performing conduit loans represent 16% of the pool
balance. The largest loan is The Crossing at Smithfield Loan
($45.0 million -- 6.4% of the pool), which is secured by a 588,000
SF anchored retail center in Smithfield, Rhode Island. The
property was 100% leased as of December 31, 2009 compared to 98%
at last review. The three largest tenants are Target (Moody's
senior unsecured rating A2, 21% of the NRA, lease expiration in
2027), Kohls (Moody's senior unsecured rating Baa1, 15% of the
NRA, lease expiration in 2023), and Staples (Moody's senior
unsecured rating Baa2, 4% of the NRA, lease expiration in 2017).
Moody's LTV and stressed DSCR are 88% and 1.17X, respectively,
essentially the same as at last review.
The second largest loan is The Promenade at Town Center Loan
($33.9 million -- 4.8%), which is secured by a 181,723 SF grocery
anchored community center in Valencia, California. The property
was 97% leased as of December 2009, compared to 100% at last
review. The three largest tenants are The Vons Companies (30% of
the NRA, lease expiration in 2017), Homegoods Store (14% of the
NRA, lease expiration in 2012), and World of Jeans and Tops (6% of
the NRA, lease expiration in 2012). Moody's LTV and stressed DSCR
are 82% and 1.22X, respectively, compared to 93% and 1.08X at last
review.
The third largest loan is the Kentlands Marketplace Loan
($31.4 million -- 4.5%), which is secured by a 252,000 SF anchored
shopping center in Gaithersburg, Maryland. The property was 92%
leased as of December 2009, compared to 98% at last review. The
top three largest tenants are Whole Foods (14% of the NRA, lease
expiration in 2021); Michael's (9% of the NRA, lease expiration in
2014) and Bally Total Fitness (9% of the net rentable area, lease
expiration in 2014). Moody's LTV and stressed DSCR are 62% and
1.62X, respectively, compared to 74% and 1.37X at last review.
WACHOVIA BANK: Moody's Downgrades Ratings on 17 2004-C34 Certs.
---------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 17 classes and
affirmed six classes of Wachovia Bank Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2004-C34:
-- Cl. A-1, Affirmed at Aaa (sf); previously on Nov. 27, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on Nov. 27, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-PB, Affirmed at Aaa (sf); previously on Nov. 27, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Nov. 27, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on Nov. 27, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-M, Downgraded to Aa2 (sf); previously on Nov. 18, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to Baa1 (sf); previously on Nov. 18, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Baa2 (sf); previously on Nov. 18, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Baa3 (sf); previously on Nov. 18, 2010
A3 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to B1 (sf); previously on Nov. 18, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to B2 (sf); previously on Nov. 18, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to B3 (sf); previously on Nov. 18, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Caa1 (sf); previously on Nov. 18, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Caa2 (sf); previously on Nov. 18, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to Ca (sf); previously on Nov. 18, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Nov. 18, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Nov. 18, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Nov. 18, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Nov. 18, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. O, Downgraded to C (sf); previously on Nov. 18, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Nov. 18, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. Q, Downgraded to C (sf); previously on Nov. 18, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. IO, Affirmed at Aaa (sf); previously on Nov. 27, 2007
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from anticipated losses from specially serviced and
troubled loans and concerns about loans approaching maturity in an
adverse environment. Thirteen loans, representing 13% of the
pool, have either matured or mature within the next 24 months and
have a Moody's stressed debt coverage ratio less than 1.0X.
The affirmations are due to key parameters, including Moody's loan
to value ratio, the Herfindahl Index and Moody's stressed DSCR,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
On November 18, 2010, Moody's placed 17 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
8.7% of the current balance. At last review, Moody's cumulative
base expected loss was 3.8%. Moody's stressed scenario loss is
30.4% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
(Herf), a measure of loan level diversity, is a primary
determinant of pool level diversity and has a greater impact on
senior certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated February 11, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 1.0% to
$1.46 billion from $1.48 billion at securitization. The
Certificates are collateralized by 113 mortgage loans ranging in
size from less than 1% to 11% of the pool, with the top ten loans
representing 43% of the pool. The pool includes one loan with an
investment grade credit estimate, representing 1% off the pool.
Twenty-three loans, representing 36% 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 CRE Finance Council monthly reporting package. Moody's has
assumed a high default probability for seven of the watchlisted
loans as well as two additional loans that mature within the next
24 months and have a Moody's stressed DSCR less than 1.0X.
Moody's has estimated a $33.5 million loss (20% expected loss
based on an 50% default probability) from these troubled loans.
The pool has not experienced any realized losses. Nine loans,
representing 10% of the pool, are currently in special servicing.
The largest specially serviced loan is the Sheraton Park Hotel --
Anaheim, CA Loan ($65 million -- 4.4% of the pool), which is
secured by a 490-room full-service hotel located in Anaheim,
California. This loan was transferred to special servicing in
July 2010 due to imminent monetary default. Property performance
has declined since securitization due to a 29% decline in room
revenue. The remaining eight specially serviced loans are a mix
of multifamily, office, retail, industrial and hotel properties
and each represent less than 2% of the pool. The master servicer
has recognized an aggregate $22.4 million appraisal reduction for
seven of the specially serviced loans. Moody's estimates an
aggregate loss of approximately $51.3 million (35% expected loss
on average) for all of the specially serviced loans.
Moody's was provided with full year 2009 operating results for 92%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 117% compared to 107% at
securitization. Moody's net cash flow reflects a weighted average
haircut of 12% to the most recently available net operating
income. Moody's value reflects a weighted average capitalization
rate of 9.7%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.29X and 0.93X, respectively, compared to
1.30X and 0.95X at securitization. Moody's actual DSCR is based
on Moody's net cash flow and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 26 compared to 30 at securitization.
The loan with a credit estimate is the Greentree Shopping Center
Loan ($10.6 million -- 0.7% of the pool), which is secured by a
172,807 square foot retail center located in Naples, Florida. The
property was 95% leased as of June 2010 compared to 98% at
securitization. Property performance has been stable since
securitization. Moody's current credit estimate and stressed DSCR
are Aa3 and 1.75X, respectively, compared to Aa3 and 1.77X at
securitization.
The top three performing conduit loans represent 22% of the pool
balance. The largest loan is the Ashford Hospitality Pool 5 Loan
($158.1 million -- 10.8% of the pool), which is secured by five
cross-collateralized and cross-defaulted full-service hotels
located in Arizona, New Jersey, North Carolina, Pennsylvania and
Texas. Three of the properties are flagged by Marriott, one is
flagged by Sheraton and one is flagged by Embassy Suites. The
portfolio contains a total of 1,141 rooms. Performance has
declined since securitization due to a decline in room revenue.
However, the combined portfolio continues to show improvement
versus the competitive set and has shown an improvement in revenue
per available room in the third quarter of 2010. Moody's LTV and
stressed DSCR are 143% and 0.84X, respectively, compared to 121%
and 1.01X at securitization.
The second largest loan is the Nestle 94 Pool Loan ($106 million -
- 7.2%), which is secured by three cross-collateralized and cross-
defaulted industrial properties located in California, Indiana and
Pennsylvania. The properties are all 100% leased to Nestle
through December 2012. Property performance has improved since
securitization due to an increase in base rent. The loan is also
encumbered by a $40.5 million B Note which is held outside of the
trust. Moody's LTV and stressed DSCR are 95% and 1.02X,
respectively, compared to 98% and 0.96X at securitization.
The third largest loan is the 2100 Ross Loan ($61 million --
4.2%), which is secured by a 843,728 SF office building in Dallas,
Texas. The property was 66% leased as of June 2010 compared to
84% at securitization. The loan is currently on the watchlist due
to occupancy concerns, however, there are lease renewals and
negotiations in process. Moody's LTV and stressed DSCR are 115%
and 0.92X, respectively, compared to 103% and 1.03X at
securitization.
WACHOVIA BANK: Moody's Downgrades Ratings on Nine 2005-C18 Certs.
-----------------------------------------------------------------
Moody's Investors Service downgraded the ratings of nine classes,
confirmed one class and affirmed 12 classes of Wachovia Bank
Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2005-C18:
-- Cl. A-2, Affirmed at Aaa (sf); previously on June 6, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on June 6, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-PB, Affirmed at Aaa (sf); previously on June 6, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on June 6, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on June 6, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. A-J-1, Confirmed at Aaa (sf); previously on Oct. 28, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J-2, Downgraded to A3 (sf); previously on Oct. 28, 2010
Aa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Baa3 (sf); previously on Oct. 28, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Ba2 (sf); previously on Oct. 28, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to B3 (sf); previously on Oct. 28, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Caa2 (sf); previously on Oct. 28, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Caa3 (sf); previously on Oct. 28, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to Ca (sf); previously on Oct. 28, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to C (sf); previously on Oct. 28, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Oct. 28, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Affirmed at C (sf); previously on Oct. 15, 2009
Downgraded to C (sf)
-- Cl. L, Affirmed at C (sf); previously on Oct. 15, 2009
Downgraded to C (sf)
-- Cl. M, Affirmed at C (sf); previously on Oct. 15, 2009
Downgraded to C (sf)
-- Cl. N, Affirmed at C (sf); previously on Oct. 15, 2009
Downgraded to C (sf)
-- Cl. O, Affirmed at C (sf); previously on Oct. 15, 2009
Downgraded to C (sf)
-- Cl. X-P, Affirmed at Aaa (sf); previously on June 6, 2005
Definitive Rating Assigned Aaa (sf)
-- Cl. X-C, Affirmed at Aaa (sf); previously on June 6, 2005
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans, interest shortfalls and concerns
about loans approaching maturity in an adverse environment. Six
loans, representing 10% of the pool, have either matured or mature
within the next 36 months and have a Moody's stressed debt service
coverage ratio less than 1.0X.
The confirmation and affirmations are due to key parameters,
including Moody's loan to value ratio, the Herfindahl Index and
Moody's stressed DSCR, remaining within acceptable ranges. Based
on Moody's current base expected loss, the credit enhancement
levels for the affirmed classes are sufficient to maintain their
current ratings.
On October 28, 2010, Moody's placed ten classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
7.6% of the current balance. Moody's stressed scenario loss is
14.7% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions as well as the excel-based CMBS Large Loan Model v.
8.0 which is used for Large Loan transactions. Conduit model
results at the Aa2 level are driven by property type, Moody's
actual and stressed DSCR, and Moody's property quality grade
(which reflects the capitalization rate used by Moody's to
estimate Moody's value). Conduit model results at the B2 level
are driven by a paydown analysis based on the individual loan
level Moody's LTV ratio. Moody's Herfindahl score, a measure of
loan level diversity, is a primary determinant of pool level
diversity and has a greater impact on senior certificates. Other
concentrations and correlations may be considered in Moody's
analysis. Based on the model pooled credit enhancement levels at
Aa2 and B2, the remaining conduit classes are either interpolated
between these two data points or determined based on a multiple or
ratio of either of these two data points. For fusion deals, the
credit enhancement for loans with investment-grade credit
estimates is melded with the conduit model credit enhancement into
an overall model result. Fusion loan credit enhancement is based
on the underlying rating of the loan which corresponds to a range
of credit enhancement levels. Actual fusion credit enhancement
levels are selected based on loan level diversity, pool leverage
and other concentrations and correlations within the pool.
Negative pooling, or adding credit enhancement at the underlying
rating level, is incorporated for loans with similar credit
estimates in the same transaction.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 12 compared to 21 at Moody's prior review.
In cases where the Herf falls below 20, Moody's also employs the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.0 and then reconciles and weights
the results from the two models in formulating a rating
recommendation. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated October 15, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months
Deal Performance
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 13% to
$1.23 billion from $1.41 billion at securitization. The
Certificates are collateralized by 58 mortgage loans ranging in
size from less than 1% to 17% of the pool, with the top ten loans
representing 53% of the pool. There is one loan, representing
2.2% of the pool, with an investment grade credit estimate. Four
loans, representing 13.6% of the pool, have defeased and are
collateralized with U.S. Government securities, the same as at
last review.
Eight loans, representing 13% 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 CRE
Finance Council monthly reporting package. Moody's has assumed a
high default probability for five of the watchlisted loans as well
as two additional loans that mature within the next 24 months and
have a Moody's stressed DSCR less than 1.0X. Moody's has
estimated a $24.9 million loss (20% expected loss based on a 50%
default probability) from these troubled loans.
The pool has incurred a $5.4 million realized loss due to a loan
modification of the Fall Creek Harbour Shopping Center Loan. The
loan was originally $7.5 million and was modified with a principal
write-off, assumed for $2.6 million and is currently still in the
pool. Nine loans, representing 18% of the pool, are currently in
special servicing. The largest specially serviced loan is the
Park Place II Loan ($92.2 million -- 5.8% of the pool), which is
secured by a 275,000 square foot mixed-use office and retail
complex located in Irvine, California. This loan was transferred
to special servicing in August 2009 after the loan's sponsor,
Maguire, announced that they would no longer fund cash shortfalls
associated with this loan. The property was 83% leased as of
October 2010. The loan was assumed and restructured in July 2010
with the new borrower making a $4 million principal pay down and
assuming an $84 million A-note and a $10.2 million B-note.
The second largest specially serviced loan is the Happy Valley
Towne Center Loan ($54.3 million -- 4.4% of the pool), which is
secured by a 680,000 SF shopping center located in Phoenix,
Arizona. The shopping center is anchored by Wal-Mart, Lowe's and
Sports Chalet. As of October 2010, the property was 93% leased
compared to 91% at last review. The loan was transferred to
special servicing in September 2010 due to imminent default.
Performance has weakened due to increased vacancy and increased
operating expenses.
The third largest specially serviced loan is the Cypress Lake at
Stonebriar Loan ($29.7 million -- 2.4% of the pool), which is
secured by a 472-unit multifamily complex located in Frisco,
Texas. The loan was transferred to special servicing April 2010
due to imminent maturity default. The loan has been extended
through May 2013 and is pending return to the master servicer.
The remaining six specially serviced loans are secured by a mix of
property types. The master servicer has recognized an aggregate
$14.9 million appraisal reduction for four of the remaining
specially serviced loans. Moody's estimates an aggregate loss of
approximately $51.2 million (28% expected loss on average) for
eight of the specially serviced loans.
Based on the most recent remittance statement, Classes H through
P have experienced cumulative interest shortfalls totaling
$2.4 million. Moody's anticipates that the pool will continue to
experience interest shortfalls because of the high exposure to
specially serviced loans. Interest shortfalls are caused by
special servicing fees, including workout and liquidation fees,
appraisal subordinate entitlement reductions and extraordinary
trust expenses.
Moody's was provided with full year 2009 operating results for 83%
of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 99% compared to 118% at last
review. Moody's net cash flow reflects a weighted average haircut
of 10% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.3%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.41X and 1.06X, respectively, compared to
1.34X and 0.93X at last review. Moody's actual DSCR is based on
Moody's net cash flow and the loan's actual debt service. Moody's
stressed DSCR is based on Moody's NCF and a 9.25% stressed rate
applied to the loan balance.
The loan with a credit estimate is the 2700 Broadway Loan
($27.5 million -- 2.2% of the pool), which is secured by a 25,000
SF condominium interest in the retail portion of a mixed-use
building located in New York City. The condo unit is 100% leased
to the Trustees of Columbia University through October 2054.
Moody's current credit estimate is A2, the same as at last review.
The top three performing conduit loans represent 29% of the pool
balance. The largest loan is the One & Two International Place
Loan ($203.9 million -- 16.6% of the pool), which represents a 50%
pari passu interest in a first mortgage loan. The loan is secured
by two Class A office towers, totaling 1.9 million SF located in
Boston, Massachusetts. The property was 92% leased as of December
2009 compared to 94% at last review. The lease for the property's
largest tenant, Ropes & Gray, which occupies 19% of the net
rentable area, expires in December 2010. Performance has declined
since last review due to a decline in occupancy and an increase in
operating expenses. Moody's LTV and stressed DSCR are 83% and
1.11X, respectively, compared to 81% and 1.13X at last review.
The second largest loan is the Kadima Medical Office Pool Loan
($109.8 million -- 9% of the pool), which is secured by 16 medical
office buildings totaling 779,000 SF. The properties are located
in eight states with the largest concentration in Florida (8
properties). The portfolio was 91% leased as of January 2010
compared to 89% at last review. Property performance has been
stable and the loan has amortized 10% since last review. Moody's
LTV and stressed DSCR are 111% and 1.00X, respectively, compared
to 129% and 0.86X at last review.
The third largest loan is the 590 Fifth Avenue Loan ($39.1 million
-- 3.2% of the pool), which is secured by a 98,000 SF office
building in New York City. The property was 79% leased as of June
2010 compared to 81% at last review. At last review, Moody's
valuation reflected concerns about potential increased vacancy due
to the lease expiration of Strategic Insight Consulting (15% of
the NRA) at the end of 2009. However, a 15-year lease with Health
Insurance Plan of New York (19% of the NRA) was executed in
November 2009. The tenant was receiving free rent through
November 2010, so this additional income was not reflected in the
2009 net operating income. Moody's current valuation includes
this additional future income. Moody's LTV and stressed DSCR are
124% and 0.87X, respectively, compared to 151% and 0.72X at last
review.
WACHOVIA BANK: Moody's Downgrades Ratings on 16 2006-C25 Certs.
---------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 16, confirmed
one class and affirmed eight classes of Wachovia Bank Commercial
Mortgage Trust, Commercial Mortgage Pass-Through Certificates,
Series 2006-C25:
-- Cl. A-2, Affirmed at Aaa (sf); previously on July 26, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on July 26, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-PB1, Affirmed at Aaa (sf); previously on July 26, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-PB2, Affirmed at Aaa (sf); previously on July 26, 2006
Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on July 26, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-5, Affirmed at Aaa (sf); previously on July 26, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on July 26, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-M, Confirmed at Aaa (sf); previously on Oct. 20, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to A3 (sf); previously on Oct. 20, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Baa1 (sf); previously on Oct. 20, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to Baa2 (sf); previously on Oct. 20, 2010
A3 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Baa3 (sf); previously on Oct. 20, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Ba1 (sf); previously on Oct. 20, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Ba3 (sf); previously on Oct. 20, 2010
Baa3 (sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to B3 (sf); previously on Oct. 20, 2010 Ba1
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to Caa1 (sf); previously on Oct. 20, 2010
Ba3 (sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to Caa2 (sf); previously on Oct. 20, 2010
B2 (sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to Caa3 (sf); previously on Oct. 20, 2010
B3 (sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to Ca (sf); previously on Oct. 20, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Oct. 20, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Oct. 20, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. O, Downgraded to C (sf); previously on Oct. 20, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Oct. 20, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. Q, Downgraded to C (sf); previously on Oct. 20, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. IO, Affirmed at Aaa (sf); previously on July 26, 2006
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from realized and anticipated losses from specially
serviced and troubled loans. The affirmations and confirmation
are due to key parameters, including Moody's loan to value ratio,
Moody's stressed DSCR and the Herfindahl Index, remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
On October 20, 2010, Moody's placed 17 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
6.3% of the current balance. At last full review, Moody's
cumulative base expected loss was 4.6%. Moody's stressed scenario
loss is 20.8% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the Excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
(Herf), a measure of loan level diversity, is a primary
determinant of pool level diversity and has a greater impact on
senior certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 26 compared to 51 at Moody's prior full review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated January 16, 2008.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 8% to $2.63 billion
from $2.86 billion at securitization. The Certificates are
collateralized by 142 mortgage loans ranging in size from less
than 1% to 12% of the pool, with the top ten loans representing
44% of the pool. Three loans, representing 0.5% of the pool, have
defeased and are collateralized with U.S. Government securities,
compared to 1.4% at last review. Two loans, representing 3% of
the pool, have investment grade credit estimates. At last full
review, the Westfield Gateway Loan ($83.0 million -- 3.2% of the
pool) had an investment grade credit estimate. Due to declined
performance and increased leverage the loan no longer has a credit
estimate and is analyzed as part of the conduit pool.
Forty-one loans, representing 37% 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 CRE
Finance Council 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.
Three loans have been liquidated from the pool since
securitization, resulting in an aggregate $1.6 million loss (6%
loss severity on average). Currently seven loans, representing 4%
of the pool, are in special servicing. The master servicer has
recognized an aggregate $46.8 million appraisal reduction for the
specially serviced loans. Moody's has estimated an aggregate loss
of $45.5 million (48% expected loss on average) for all of the
specially serviced loans.
Moody's has assumed a high default probability for 10 poorly
performing loans representing 7% of the pool and has estimated a
$46.8 million loss (25% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2009 and partial year 2010
operating results for 99% and 80% of the performing pool,
respectively. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 106% compared to 102% at last full
review. Moody's net cash flow reflects a weighted average haircut
of 12% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.1%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.27X and 0.97X, respectively, compared to
1.35X and 0.99X at last full review. Moody's actual DSCR is based
on Moody's net cash flow and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
The largest loan with a credit estimate is the Paramount Building
Loan ($39.5 million -- 1.5% of the pool), which is secured by a
639,000 square foot (SF) office building located in New York City.
The property was 95% leased as of June 2010. The loan is
interest-only during its entire 10-year period maturing in April
2016. Moody's current credit estimate and stressed DSCR are Aaa
and 3.17X, respectively, compared to Aaa and 2.98X at last full
review.
The second loan with a credit estimate is the Wyndham Hotel
Greenspoint Loan ($33.3 million -- 1.3% of the pool), which is
secured by a 472-room hotel located in Houston, Texas. The loan
had a 36-month interest-only period and is now amortizing on a
360-month schedule maturing in March 2016. The loan has paid down
2% since last full review. Moody's current credit estimate and
stressed DSCR are Baa1 and 1.87X, respectively, compared to Baa1
and 1.94X at last full review.
The top three performing conduit loans represent 25% of the
pool balance. The largest loan is the Prime Outlets Pool Loan
($303.5 million -- 11.5% of the pool), which is a 50.0%
participation interest in a $606.7 million loan secured by 10
retail centers located in eight states, including Texas,
Pennsylvania, Florida, and Ohio. The total gross leasable area
is 3.5 million SF. The loan had a 24-month interest-only period
and is now amortizing on a 360-month schedule maturing in January
2016. The loan has paid down 4% since last full review. Property
performance remains stable. Moody's LTV and stressed DSCR are 99%
and 0.99X, respectively, compared to 110% and 0.89X at last full
review.
The second largest loan is the Marriott-Chicago Loan
($192.5 million -- 7.3% of the pool), which is secured by a 1,192-
room full service hotel located in Chicago, Illinois. The loan
has a non-pooled junior component of $24.8 million. The loan had
a 42-month interest-only period and is now amortizing on a 360-
month schedule maturing in April 2016. The loan has paid down 1%
since last full review. Property performance has declined since
last review as the hotel has been impacted by the downturn in the
tourism industry. Further, the loan is currently on the master
servicer's watchlist due to low DSCR. RevPAR for 2009 was $129.95
compared to $140.25 at last full review. Moody's LTV and stressed
DSCR are 115% and 0.99X, respectively, compared to 89% and 1.28X
at last full review.
The third largest loan is the 530 Fifth Avenue Loan
($174.0 million -- 6.6% of the pool), which is secured by a
500,000 SF office property located in New York City. The
property is also encumbered by a $24.9 million non-trust junior
component and $25 million of mezzanine financing. Property
performance has declined due to a decrease in occupancy and
expense reimbursements. As of June 2010, the property was 89%
leased, compared to 100% at last full review. The loan had a 48-
month interest-only period and is now amortizing on a 360-month
schedule maturing in May 2016. The loan has paid down 1% since
last full review. Moody's LTV and stressed DSCR are 103% and
0.89X, respectively, compared to 90% and 1.00X at last review.
WACHOVIA BANK: Moody's Downgrades Ratings on 16 2006-C29 Certs.
---------------------------------------------------------------
Moody's Investors Service downgraded the ratings of 16 classes and
affirmed seven classes of Wachovia Bank Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2006-C29:
-- Cl. A-1, Affirmed at Aaa (sf); previously on Dec. 21, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Affirmed at Aaa (sf); previously on Dec. 21, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-3, Affirmed at Aaa (sf); previously on Dec. 21, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-PB, Affirmed at Aaa (sf); previously on Dec. 21, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-4, Affirmed at Aaa (sf); previously on Dec. 21, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-1A, Affirmed at Aaa (sf); previously on Dec. 21, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-M, Downgraded to Aa2 (sf); previously on Nov. 11, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- Cl. A-J, Downgraded to Baa3 (sf); previously on Nov. 11, 2010
A2 (sf) Placed Under Review for Possible Downgrade
-- Cl. B, Downgraded to Ba3 (sf); previously on Nov. 11, 2010 A3
(sf) Placed Under Review for Possible Downgrade
-- Cl. C, Downgraded to B3 (sf); previously on Nov. 11, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- Cl. D, Downgraded to Caa1 (sf); previously on Nov. 11, 2010
Baa2 (sf) Placed Under Review for Possible Downgrade
-- Cl. E, Downgraded to Caa2 (sf); previously on Nov. 11, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- Cl. F, Downgraded to Ca (sf); previously on Nov. 11, 2010 Ba2
(sf) Placed Under Review for Possible Downgrade
-- Cl. G, Downgraded to C (sf); previously on Nov. 11, 2010 Ba3
(sf) Placed Under Review for Possible Downgrade
-- Cl. H, Downgraded to C (sf); previously on Nov. 11, 2010 B2
(sf) Placed Under Review for Possible Downgrade
-- Cl. J, Downgraded to C (sf); previously on Nov. 11, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- Cl. K, Downgraded to C (sf); previously on Nov. 11, 2010 Caa1
(sf) Placed Under Review for Possible Downgrade
-- Cl. L, Downgraded to C (sf); previously on Nov. 11, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. M, Downgraded to C (sf); previously on Nov. 11, 2010 Caa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. N, Downgraded to C (sf); previously on Nov. 11, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. O, Downgraded to C (sf); previously on Nov. 11, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. P, Downgraded to C (sf); previously on Nov. 11, 2010 Caa3
(sf) Placed Under Review for Possible Downgrade
-- Cl. IO, Affirmed at Aaa (sf); previously on Dec. 21, 2006
Definitive Rating Assigned Aaa (sf)
Ratings Rationale
The downgrades are due to higher expected losses for the pool
resulting from anticipated losses from specially serviced and
troubled loans and interest shortfalls.
The affirmations are due to key parameters, including Moody's loan
to value ratio, the Herfindahl Index and Moody's stressed DSCR,
remaining within acceptable ranges. Based on Moody's current base
expected loss, the credit enhancement levels for the affirmed
classes are sufficient to maintain their current ratings.
On November 11, 2010, Moody's placed 16 classes on review for
possible downgrade. This action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
8.8% of the current balance. At last review, Moody's cumulative
base expected loss was 3.6%. Moody's stressed scenario loss is
23.3% of the current balance.
Depending on the timing of loan payoffs and the severity and
timing of losses from specially serviced loans, the credit
enhancement level for investment grade classes could decline below
the current levels. If future performance materially declines,
the expected level of credit enhancement and the priority in the
cash flow waterfall may be insufficient for the current ratings of
these classes.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted, change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the current
review. Even so, deviation from the expected range will not
necessarily result in a rating action. There may be mitigating or
offsetting factors to an improvement or decline in collateral
performance, such as increased subordination levels due to
amortization and loan payoffs or a decline in subordination due to
realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "hook-shaped" for
2010 and 2011; Moody's expect overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.50 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 level are driven
by property type, Moody's actual and stressed DSCR, and Moody's
property quality grade (which reflects the capitalization rate
used by Moody's to estimate Moody's value). Conduit model results
at the B2 level are driven by a paydown analysis based on the
individual loan level Moody's LTV ratio. Moody's Herfindahl score
(Herf), a measure of loan level diversity, is a primary
determinant of pool level diversity and has a greater impact on
senior certificates. Other concentrations and correlations may be
considered in Moody's analysis. Based on the model pooled credit
enhancement levels at Aa2 and B2, the remaining conduit classes
are either interpolated between these two data points or
determined based on a multiple or ratio of either of these two
data points. For fusion deals, the credit enhancement for loans
with investment-grade credit estimates is melded with the conduit
model credit enhancement into an overall model result. Fusion
loan credit enhancement is based on the underlying rating of the
loan which corresponds to a range of credit enhancement levels.
Actual fusion credit enhancement levels are selected based on loan
level diversity, pool leverage and other concentrations and
correlations within the pool. Negative pooling, or adding credit
enhancement at the underlying rating level, is incorporated for
loans with similar credit estimates in the same transaction.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated February 10, 2009.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by less than 1% to
$3.36 billion from $3.37 billion at securitization. The
Certificates are collateralized by 142 mortgage loans ranging in
size from less than 1% to 10% of the pool, with the top ten loans
representing 46% of the pool. There are three loans, representing
12.7% of the pool, with investment grade credit estimates. At
securitization, the Centro Syndicate 2 Pool Loan and Westfield Fox
Valley Loan also had credit estimates. However, due to a decline
in property performance and increased leverage, these loans are
now analyzed as part of the conduit pool.
Thirty-nine loans, representing 25% 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 CRE
Finance Council monthly reporting package. Moody's has assumed a
high default probability for 18 of the watchlisted loans as well
as one additional loan that matures within the next 24 months and
has a Moody's stressed DSCR less than 1.0X. Moody's has estimated
a $80.3 million loss (19% expected loss based on an 50% default
probability) from these troubled loans.
The pool has not experienced any realized losses. Sixteen loans,
representing 8% of the pool, are currently in special servicing.
The largest specially serviced loan is the Hilton -- Providence,
RI Loan ($48.5 million -- 1.4% of the pool), which is secured by
a 274-room full-service hotel located in Providence, Rhode
Island. This loan was transferred to special servicing in
September 2009 due to imminent default. The remaining 15
specially serviced loans are a mix of self storage, multifamily,
office, industrial and hotel properties and each represent less
than 2% of the pool. Moody's estimates an aggregate loss of
approximately $140.1 million (55% expected loss on average) for
the specially serviced loans.
Based on the most recent remittance statement, Classes J through
Q have experienced cumulative interest shortfalls totaling
$4.9 million. The servicer has recognized appraisal reductions
totaling $103 million on 11 specially serviced loans. Moody's
anticipates that the pool will continue to experience interest
shortfalls because of the high exposure to specially serviced
loans. Interest shortfalls are caused by special servicing fees,
including workout and liquidation fees, appraisal subordinate
entitlement reductions and extraordinary trust expenses.
Moody's was provided with full year 2009 operating results for
94% of the pool. Excluding specially serviced and troubled
loans, Moody's weighted average LTV is 111% compared to 108% at
securitization. Moody's net cash flow reflects a weighted average
haircut of 9% to the most recently available net operating income.
Moody's value reflects a weighted average capitalization rate of
9.1%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.45X and 0.94X, respectively, compared to
1.34X and 0.89X at securitization. Moody's actual DSCR is based
on Moody's net cash flow and the loan's actual debt service.
Moody's stressed DSCR is based on Moody's NCF and a 9.25% stressed
rate applied to the loan balance.
Moody's uses a variation of 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 risk of multiple notch downgrades under
adverse circumstances. The credit neutral Herf score is 40. The
pool has a Herf of 26 compared to 69 at securitization.
The largest loan with a credit estimate is the Galleria at Tyler
Loan ($205 million -- 6.1% of the pool), which is secured by a
1.2 million square foot (SF) regional mall located in Riverside,
California. The mall is anchored by JC Penney, Macy's and
Nordstrom, which are not part of the collateral. The property
was 98% leased as of June 2010 compared to 91% at securitization.
The loan was proforma at securitization and has performed in-line
with the projections at securitization. This loan is also
encumbered by a $45 million B-note held outside of the trust.
Moody's current credit estimate and stressed DSCR are Baa3 and
1.15X, respectively, compared to Baa3 and 0.96X at securitization.
The second loan with a credit estimate is the Centro International
Wholesale Pool Loan ($161 million -- 4.8% of the pool), which is
secured by 13 cross-collateralized and cross-defaulted retail
properties located in Connecticut, Florida, Massachusettes,
Mississippi, New Jersey, New York and North Carolina. The
properties were 97% leased as of December 2009 compared to 99% at
securitization. Property performance has been stable since
securitization. Moody's current credit estimate and stressed DSCR
are Baa2 and 1.28X, respectively, compared to Baa2 and 1.31X at
securitization.
The third loan with a credit estimate is the Deer Park Town Center
Loan ($60 million -- 1.8% of the pool), which is secured by a
340,369 SF retail center in Deer Park, Illinois. Property
performance has improved since securitization. Moody's current
credit estimate and stressed DSCR are A3 and 1.32X, respectively,
compared to A3 and 1.28X at securitization.
The top three performing conduit loans represent 21% of the pool
balance. The largest loan is the Duke Realty Industrial Pool Loan
($318.9 million -- 9.5% of the pool), which is secured by 27
cross-collateralized and cross-defaulted industrial properties
located in five submarkets in Indiana and Georgia. Property
performance has improved since securitization. However, Moody's
valuation reflects concerns about potential increased vacancy due
to near-term rollover risk. Moody's LTV and stressed DSCR are
109% and 0.89X, respectively, compared to 106% and 0.91X at
securitization.
The second largest loan is the Centro Syndicate Pool 2 Loan
($234 million -- 7% of the pool), which is secured by 16 cross-
collateralized and cross-defaulted retail properties located in 12
different states. The portfolio was 91% leased as of March 2010
compared to 97% at securitization. The portfolio performance has
declined since securitization due to the drop in occupancy.
Moody's LTV and stressed DSCR are 76% and 1.28X, respectively,
compared to 67% and 1.37X at securitization.
The third largest loan is the Westfield Fox Valley Loan
($150 million -- 4.5% of the pool), which is secured by a
1.4 million SF regional mall located in Aurora, Illinois. The
mall is anchored by Sears, Macy's and JC Penney, which are not
part of the collateral. The property was 81% leased as of June
2010 compared to 86% at securitization. Moody's value reflects
concerns over the decline in occupancy. Moody's LTV and stressed
DSCR are 93% and 1.05X, respectively, compared to 89% and 1.28X at
securitization.
WACHOVIA BANK: Moody's Reviews Ratings on 15 2006-C26 Certs.
------------------------------------------------------------
Moody's Investors Service placed 15 classes of Wachovia Bank
Commercial Mortgage Trust, Commercial Mortgage Pass-Through
Certificates, Series 2006-C26, on review for possible downgrade:
-- Cl. A-M, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on July 12, 2006 Definitive Rating Assigned Aaa
(sf)
-- Cl. A-J, A1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to A1 (sf)
-- Cl. B, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to A3 (sf)
-- Cl. C, Baa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Baa1 (sf)
-- Cl. D, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Baa3 (sf)
-- Cl. E, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Ba2 (sf)
-- Cl. F, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to B1 (sf)
-- Cl. G, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to B3 (sf)
-- Cl. H, Caa1 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa1 (sf)
-- Cl. J, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa2 (sf)
-- Cl. K, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa2 (sf)
-- Cl. L, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa2 (sf)
-- Cl. M, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa3 (sf)
-- Cl. N, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa3 (sf)
-- Cl. O, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on Feb. 10, 2009 Downgraded to Caa3 (sf)
The classes were placed on review for possible downgrade due to
higher expected losses for the pool resulting from realized and
anticipated losses from specially serviced and troubled loans.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review
is summarized in a press release dated February 10, 2009.
Deal And Performance Summary
As of the November 18, 2010 distribution date, the transaction's
aggregate certificate balance has decreased by 3.8% to
$1.68 billion from $1.74 billion at securitization. The
Certificates are collateralized by 113 mortgage loans ranging in
size from less than 1% to 10.2% of the pool.
Twenty-six loans, representing 19% 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 CRE
Finance Council 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.
Two loans have been liquidated from the trust since
securitization, resulting in a $483,776 loss (19.4% loss severity)
for one of the loans. Currently eight loans, representing 9% of
the pool, are in special servicing. The largest specially
serviced loan is the Eastern Shore Center loan ($68.9 million --
4.1% of the pool), which was transferred to special servicing in
July 2009. The master servicer has recognized an appraisal
reduction of $37.7 million for this loan. The remaining seven
specially serviced loans are secured by a mix of property types.
The master servicer has recognized an aggregate $38.2 million
appraisal reduction for six of the remaining specially serviced
loans.
Moody's review will focus on potential losses from specially
serviced and troubled loans and the performance of the overall
pool.
WACHOVIA BANK: Moody's Downgrades Ratings on 12 2006-WHALE 7 Notes
------------------------------------------------------------------
Moody's Investors Service downgraded 12 and affirmed the ratings
of three classes of Wachovia Bank Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2006-WHALE
7.
-- Cl. A-1, Affirmed at Aaa (sf); previously on Oct. 3, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. X-1B, Affirmed at Aaa (sf); previously on Oct. 3, 2006
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Downgraded to Baa2 (sf); previously on March 19,
2009 Downgraded to A1 (sf)
-- Cl. B, Downgraded to Baa3 (sf); previously on March 19, 2009
Downgraded to A2 (sf)
-- Cl. C, Downgraded to Ba2 (sf); previously on March 19, 2009
Downgraded to Baa1 (sf)
-- Cl. KH-1, Downgraded to B3 (sf); previously on March 19, 2009
Downgraded to Ba3 (sf)
-- Cl. KH-2, Downgraded to Caa1 (sf); previously on March 19,
2009 Downgraded to B1 (sf)
-- Cl. WA, Affirmed at C (sf); previously on March 19, 2009
Downgraded to C (sf)
-- Cl. BP-1, Downgraded to Caa1 (sf); previously on March 19,
2009 Downgraded to B1 (sf)
-- Cl. BP-2, Downgraded to Caa2 (sf); previously on March 19,
2009 Downgraded to B2 (sf)
-- Cl. MB-1, Downgraded to Ba2 (sf); previously on March 19,
2009 Downgraded to Baa3 (sf)
-- Cl. MB-2, Downgraded to Ba3 (sf); previously on March 19,
2009 Downgraded to Ba1 (sf)
-- Cl. MB-3, Downgraded to B1 (sf); previously on March 19, 2009
Downgraded to Ba2 (sf)
-- Cl. MB-4, Downgraded to B2 (sf); previously on March 19, 2009
Downgraded to Ba3 (sf)
-- Cl. CM, Downgraded to C (sf); previously on March 19, 2009
Downgraded to B2 (sf)
Ratings Rationale
The downgrade is due to higher expected losses for the trust
resulting from anticipated losses from appraisal reductions,
specially serviced and watchlisted loans, and pending maturity in
2011.
The affirmations are due to key parameters, including Moody's loan
to value ratio and Moody's stressed debt service coverage ratio
remaining within acceptable ranges. The pool has paid down by 3%
since Moody's last review, benefiting the most senior Class A-1
and notional balance only Class X-1B. Moody's does not rate
pooled classes D, E, F, G, H, J, K, and L which provide additional
credit support for the pool.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the
previous review. Even so, deviation from the expected range will
not necessarily result in a rating action. There may be
mitigating or offsetting factors to an improvement or decline in
collateral performance, such as increased subordination levels due
to amortization and loan payoffs or a decline in subordination due
to realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "Hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.0. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased to $2.38 billion from
$2.46 billion at last review. The Certificates are collateralized
by nine floating rate whole loans and senior interests in whole
loans. The loans range in size from 1% to 45% of the pooled
balance, with the top three loans representing 84% of the pool.
All of the loans have additional debt in the form of a non-pooled
or rake bond within the trust, B note or mezzanine debt outside of
the trust. The current low interest rate environment coupled with
low loan spreads have helped the loans stay current through the
last two years, but high leverage continues to be a cause for
concern. All of the loans mature over the next 12 month period.
The largest loan in the pool is secured by fee and leasehold
interests in Kyo-Ya Hotel Pool Loan ($932 million, or 45% of the
pooled balance plUS$123 million of rake bonds within the trust).
The hotel portfolio includes five properties located in Hawaii
(Honolulu and Maui) and the Palace Hotel in San Francisco. Two
hotel properties located in Orlando were released from the
portfolio in 2007. The sponsor is Cerberus Capital Management.
There is additional debt in the form of non-trust junior component
and mezzanine debt outside the trust.
US Hotels suffered significant declines in operating performance
during the last two years. However they reached a turning point
in late 2009/early 2010, and are showing signs of growth.
Particularly, properties located in gateway cities with high
barriers to entry such as New York City, Boston and Miami have
achieved double digit Revenue per Available Room growth in the
first 10 months of 2010 over the same period in 2009. According
to Smith Travel Research, Hawaii's RevPAR in the year-to-date
through October 2010 period was up 6.3% from the same period in
2009, closely tracking that of the Top 25 Markets (average of
6.5%). Luxury and urban properties are showing particularly
strong improvement compared to other segments.
For the trailing twelve month period ending September 2010, the
Kyo-Ya Hotel Pool Loan achieved an EBITDA of $96 million, up 44%
from $66 million achieved in 2009. The overall lodging demand has
increased but the bulk of the performance improvement can be
attributed to the completion of the various renovation projects
that were taking place at Sheraton Waikiki (1,636 guestrooms),
Westin Moana Surfrider (794 guestrooms) and The Royal Hawaiian
(529 guestrooms). The renovation projects will help to reposition
the properties and provide a competitive edge over the competition
as the market fundamentals continue to improve over the next few
years. However, the pending maturity date in July 2011 combined
with high leverage is a cause for concern. Moody's weighted
average LTV for the pooled portion is 84%, including rakes is 95%
and for the first mortgage is 100%. Moody's current credit
estimate for the pooled portion is B2.
The Boca Resort Hotel Pool Loan ($652 million, or 31% of pooled
balance plUS$148 million of rake bonds within the trust) is five
hotel properties and one golf course located in Boca Raton, Ft.
Lauderdale and Naples, FL. The sponsor is The Blackstone Group.
According to Smith Travel Research, Miami-Hialeah area's RevPAR in
the year-to-date through October 2010 period was up 11.2% from the
same period in 2009. This submarket is one of the four markets in
the Top 25 Markets as defined by Smith Travel Research that is
showing double digit recovery in RevPAR during this period. The
portfolio's Net Operating Income increased by 34% during the year-
to-date through September 2010 period ($39 million) over the same
time in 2009 ($29 million).
Moody's does not rate the four rake bonds associated with this
loan (Classes BH-1, BH-2, BH-3 and BH-4). There is additional
debt in the form of non-trust junior component and mezzanine debt
outside the trust. The pending maturity date in August 2011
combined with high leverage is a cause for concern. Moody's
weighted average LTV for the pooled portion is 122%, including
rakes is 150% and for the first mortgage is 169%. Moody's current
credit estimate for the pooled portion is Caa1.
There are currently two loans totaling 5% of pooled balance (The
Westin Aruba Resort & Spa Loan and Leestown Square Loan) in
special servicing. There has not been any interest shortfalls or
losses incurred to the trust as of November 2010 distribution
date.
Moody's weighted average pooled LTV ratio is 96% and Moody's
weighted average stressed debt service coverage ratio for pooled
trust debt is 1.14X. Moody's weighted average first mortgage LTV
is 129% and Moody's weighted average stressed debt service
coverage ratio for first mortgage debt is 0.91X.
WACHOVIA BANK: Moodys' Downgrades Ratings on 11 2007-WHALE 8 Notes
------------------------------------------------------------------
Moody's Investors Service downgraded 11 and affirmed the ratings
of four classes of Wachovia Bank Commercial Mortgage Trust,
Commercial Mortgage Pass-Through Certificates, Series 2007-WHALE
8. Moody's rating action is:
-- Cl. A-1, Affirmed at Aaa (sf); previously on July 6, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. A-2, Downgraded to A2 (sf); previously on July 6, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. X-1B, Affirmed at Aaa (sf); previously on July 6, 2007
Definitive Rating Assigned Aaa (sf)
-- Cl. B, Downgraded to Baa1 (sf); previously on March 4, 2009
Downgraded to Aa2 (sf)
-- Cl. LXR-1, Downgraded to B2 (sf); previously on March 4, 2009
Downgraded to Ba2 (sf)
-- Cl. LXR-2, Downgraded to Caa1 (sf); previously on March 4,
2009 Downgraded to Ba3 (sf)
-- Cl. AP-1, Downgraded to B2 (sf); previously on March 4, 2009
Downgraded to Ba2 (sf)
-- Cl. AP-2, Downgraded to B3 (sf); previously on March 4, 2009
Downgraded to Ba3 (sf)
-- Cl. AP-3, Downgraded to Caa1 (sf); previously on March 4,
2009 Downgraded to B1 (sf)
-- Cl. AP-4, Downgraded to Caa2 (sf); previously on March 4,
2009 Downgraded to B2 (sf)
-- Cl. LP-3, Downgraded to Caa3 (sf); previously on March 4,
2009 Downgraded to B1 (sf)
-- Cl. HH-1, Affirmed at B1 (sf); previously on Oct. 21, 2010
Downgraded to B1 (sf)
-- Cl. FSN-1, Downgraded to Caa3 (sf); previously on March 4,
2009 Downgraded to Caa2 (sf)
-- Cl. FSN-2, Downgraded to Ca (sf); previously on March 4, 2009
Downgraded to Caa3 (sf)
-- Cl. MH-1, Affirmed at B1 (sf); previously on Oct. 21, 2010
Downgraded to B1 (sf)
Ratings Rationale
The downgrade is due to higher expected losses for the trust
resulting from anticipated losses from appraisal reductions,
specially serviced and watchlisted loans, and interest shortfalls.
The affirmations are due to key parameters, including Moody's loan
to value ratio and Moody's stressed debt service coverage ratio
remaining within acceptable ranges. Moody's does not rate pooled
classes C, D, E, F, G, H, J, K, and L which provide additional
credit support for the pool.
Moody's analysis reflects a forward-looking view of the likely
range of collateral performance over the medium term. From time
to time, Moody's may, if warranted change these expectations.
Performance that falls outside an acceptable range of the key
parameters may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated during the
previous review. Even so, deviation from the expected range will
not necessarily result in a rating action. There may be
mitigating or offsetting factors to an improvement or decline in
collateral performance, such as increased subordination levels due
to amortization and loan payoffs or a decline in subordination due
to realized losses.
Primary sources of assumption uncertainty are the current stressed
macroeconomic environment and continuing weakness in the
commercial real estate and lending markets. Moody's currently
views the commercial real estate market as stressed with further
performance declines expected in the industrial, office, and
retail sectors. Hotel performance has begun to rebound, albeit
off a very weak base. Multifamily has also begun to rebound
reflecting an improved supply / demand relationship. The
availability of debt capital is improving with terms returning
towards market norms. Job growth and housing price stability will
be necessary precursors to commercial real estate recovery.
Overall, Moody's central global scenario remains "Hook-shaped" for
2010 and 2011; Moody's expects overall a sluggish recovery in most
of the world's largest economies, returning to trend growth rate
with elevated fiscal deficits and persistent unemployment levels.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.0. The large loan model derives credit enhancement
levels based on an aggregation of adjusted loan level proceeds
derived from Moody's loan level LTV ratios. Major adjustments to
determining proceeds include leverage, loan structure, property
type, and sponsorship. These aggregated proceeds are then further
adjusted for any pooling benefits associated with loan level
diversity, other concentrations and correlations.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
Moody's Investors Service did not receive or take into account a
third-party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
Deal Performance
As of the November 15, 2010 distribution date, the transaction's
aggregate certificate balance has decreased to $1.66 billion from
$1.68 billion at last review. The Certificates are collateralized
by nine floating rate whole loans and senior interests in whole
loans. Two loans (Hudson Hotel Loan and Mondrian Hotel Loan) have
pari-passu portions in Citibank Commercial Mortgage Trust
Commercial Mortgage Pass-Through Certificates, Series 2007-FL3
transaction. The loans range in size from 2% to 64% of the pooled
balance, with the top three loans representing 80% of the pool.
All of the loans have additional debt in the form of a non-pooled
or rake bond within the trust, B note or mezzanine debt outside of
the trust. The current low interest rate environment coupled with
low loan spreads have helped the loans' performance through the
last two years, but high leverage continues to be a cause for
concern.
The largest loan in the pool is secured by fee interests in LXR
Hospitality Pool Loan ($948 million, or 64% of the pooled balance
plus $124 million of rake bonds within the trust). The hotel
portfolio includes 12 properties located in Puerto Rico, FL, CA,
AZ, Jamaica and NY. The Park Shore Waikiki asset located in
Hawaii was released. The sponsor is The Blackstone Group. There
is additional debt in the form of non-trust junior component and
mezzanine debt outside the trust.
US Hotels suffered significant declines in operating performance
during the last two years. However they reached a turning point
in late 2009/early 2010, and are showing signs of growth. Luxury
and urban properties are showing particularly strong improvement
compared to other segments.
For the year-to-date period ending September 2010, the LXR
Hospitality Pool Loan achieved an EBITDA of $47 million, down 16%
from $53 million achieved in the same time period in 2009. The
decline was largely due to lower performance in the three Puerto
Rico assets and the Rose Hall Resort & Country Club located in
Jamaica. Typically, Caribbean assets will cater to leisure
travelers from the US, and discretionary income spending has been
cut back significantly in the last two years. The weighted
average LTV for the pooled portion is 89%, including rakes is 101%
and for the first mortgage is 119%. Moody's current credit
estimate for the pooled portion is B1.
The Longhouse Hospitality Pool Loan ($150 million, or 10% of
pooled balance plUS$15 million of rake bonds within the trust) is
secured by cross-collateralized and cross-defaulted 42 extended-
stay hotel properties totaling 5,600 guestrooms. The sponsor is
JER Partners and Longhouse Hospitality Trust. The loan was
transferred to special servicing on October 26, 2010 due to
imminent default, and the special servicer is in their initial
stages of due diligence.
The portfolio's Net Cash Flow during the trailing twelve month
period ending September 2010 was $11 million. There is additional
debt in the form mezzanine outside the trust. Moody's weighted
average LTV for the pooled portion is 107%, including rakes is
118%. Moody's current credit estimate for the pooled portion is
Caa2.
There are currently six loans totaling 27% of pooled balance in
special servicing. However, two loans (Hudson Hotel Loan and
Mondrian Hotel Loan) totaling 8% of the pooled balance have been
modified and extended through October 12, 2011. The rake bonds
associated with these two loans (Classes HH-1 and MH-1) were
downgraded on October 21, 2010. Moody's does not rate Classes HH-
2 and MH-2.
Four Seasons Nevis Loan (3% of the pooled balance) has been in
special servicing since October 2008 when it was damaged by
Hurricane Omar. The property is currently in renovation, and is
expected to reopen on December 15, 2010. Moody's current credit
estimate for the pooled portion is Caa3. Classes H, J, K, L, FSN-
1 and FSN-2 have incurred interest shortfalls as of November 2010
distribution date. Classes HH-2 and MH-2 have suffered losses
totaling $41,993 as of the same distribution date.
Moody's weighted average pooled LTV ratio is 92% and Moody's
weighted average stressed debt service coverage ratio for pooled
trust debt is 0.82X. Moody's weighted average LTV for the trust
including the rake bonds is 103% and Moody's weighted average
stressed debt service coverage ratio for the trust including the
rake bonds is 0.73X.
WASHINGTON MUTUAL: Moody's Downgrades Ratings on 26 Tranches
------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 26
tranches from 3 RMBS transactions, backed by option arm loans,
issued by Washington Mutual.
Ratings Rationale
The collateral backing these transactions consists primarily of
first-lien, adjustable-rate, negative amortization, Alt-A
residential mortgage loans. The actions are a result of the
rapidly deteriorating performance of option arm pools in
conjunction with macroeconomic conditions that remain under
duress. The actions reflect Moody's updated loss expectations on
option arm pools issued from 2005 to 2007.
To assess the rating implications of the updated loss levels on
option arm RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R), the cash flow
model developed by Moody's Wall Street Analytics. This individual
pool level analysis incorporates performance variances across the
different pools and the structural features of the transaction
including priorities of payment distribution among the different
tranches, average life of the tranches, current balances of the
tranches and future cash flows under expected and stressed
scenarios. The scenarios include ninety-six different
combinations comprising of six loss levels, four loss timing
curves and four prepayment curves. The volatility in losses
experienced by a tranche due to small increments in losses on the
underlying mortgage pool is taken into consideration when
assigning ratings.
The above mentioned approach "Alt-A RMBS Loss Projection Update:
February 2010" is adjusted slightly when estimating losses on
pools left with a small number of loans. To project losses on
pools with fewer than 100 loans, Moody's first estimates a
"baseline" average rate of new delinquencies for the pool that is
dependent on the vintage of loan origination (10%, 19% and 21% for
the 2005, 2006 and 2007 vintage respectively). This baseline rate
is higher than the average rate of new delinquencies for the
vintage to account for the volatile nature of small pools. Even
if a few loans in a small pool become delinquent, there could be a
large increase in the overall pool delinquency level due to the
concentration risk. Once the baseline rate is set, further
adjustments are made based on 1) the number of loans remaining in
the pool and 2) the level of current delinquencies in the pool.
The fewer the number of loans remaining in the pool, the higher
the volatility and hence the stress applied. Once the loan count
in a pool falls below 75, the rate of delinquency is increased by
1% for every loan less than 75. For example, for a pool with 74
loans from the 2005 vintage, the adjusted rate of new delinquency
would be 10.10%. If current delinquency levels in a small pool is
low, future delinquencies are expected to reflect this trend. To
account for that, the rate calculated above is multiplied by a
factor ranging from 0.2 to 2.0 for current delinquencies ranging
from less than 2.5% to greater than 50% respectively.
Delinquencies for subsequent years and ultimate expected losses
are projected using the approach described in the methodology
publication.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment remains at high
levels, and weakness persists in the housing market. Moody's
notes an increasing potential for a double-dip recession, which
could cause a further 20% decline in home prices (versus its
baseline assumption of roughly 5% further decline). Overall,
Moody's assumes a further 5% decline in home prices with
stabilization in early 2011, accompanied by continued stress in
national employment levels through that timeframe.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: WaMu Mortgage Pass-Through Certificates, Series 2005-AR1
-- CL. A-1A, Downgraded to B1 (sf); previously on Jan. 27, 2010
Aaa (sf) Placed Under Review for Possible Downgrade
-- CL. A-1B, Downgraded to Ca (sf); previously on Jan. 27, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- CL. A-2A1, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Aa2 (sf) Placed Under Review for Possible Downgrade
-- CL. A-2A3, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Aa2 (sf) Placed Under Review for Possible Downgrade
-- CL. A-2B, Downgraded to C (sf); previously on Jan. 27, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- CL. A-3, Downgraded to Caa3 (sf); previously on Jan. 27, 2010
A1 (sf) Placed Under Review for Possible Downgrade
-- CL. X, Downgraded to C (sf); previously on Jan. 27, 2010 A1
(sf) Placed Under Review for Possible Downgrade
-- CL. B-1, Downgraded to C (sf); previously on Jan. 27, 2010
Ba1 (sf) Placed Under Review for Possible Downgrade
-- CL. B-2, Downgraded to C (sf); previously on Jan. 27, 2010 B3
(sf) Placed Under Review for Possible Downgrade
-- CL. B-3, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
Issuer: WaMu Mortgage Pass-Through Certificates, Series 2006-AR4
-- CL. 1A-1A, Downgraded to B1 (sf); previously on Jan. 27, 2010
Aa1 (sf) Placed Under Review for Possible Downgrade
-- CL. 1A-1B, Downgraded to Ca (sf); previously on Jan. 27, 2010
Baa1 (sf) Placed Under Review for Possible Downgrade
-- CL. 1A-C2, Downgraded to Baa1 (sf); previously on Jan. 27,
2010 A3 (sf) Placed Under Review for Possible Downgrade
-- CL. 1A-C3, Downgraded to C (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- CL. 1X-1A, Downgraded to C (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- CL. 1X-1B, Downgraded to C (sf); previously on Jan. 27, 2010
B1 (sf) Placed Under Review for Possible Downgrade
-- CL. 2A-1A, Downgraded to Caa3 (sf); previously on Jan. 27,
2010 Baa2 (sf) Placed Under Review for Possible Downgrade
-- CL. 2X, Downgraded to C (sf); previously on Jan. 27, 2010 B1
(sf) Placed Under Review for Possible Downgrade
-- CL. B-1, Downgraded to C (sf); previously on Jan. 27, 2010
Caa2 (sf) Placed Under Review for Possible Downgrade
Issuer: WaMu Mortgage Pass-Through Certificates, Series 2006-AR5
-- CL. A-1A, Downgraded to Caa2 (sf); previously on Jan. 27,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
-- CL. A-1A2A, Downgraded to Caa1 (sf); previously on Jan. 27,
2010 Ba1 (sf) Placed Under Review for Possible Downgrade
-- CL. A-1A2B, Downgraded to Ca (sf); previously on Jan. 27,
2010 Ba2 (sf) Placed Under Review for Possible Downgrade
-- CL. A-1B2, Downgraded to C (sf); previously on Jan. 27, 2010
Caa1 (sf) Placed Under Review for Possible Downgrade
-- CL. A-1B3, Downgraded to C (sf); previously on Jan. 27, 2010
Ca (sf) Placed Under Review for Possible Downgrade
-- CL. X, Downgraded to C (sf); previously on Jan. 27, 2010 Ca
(sf) Placed Under Review for Possible Downgrade
WELLS FARGO: Moody's Reviews Ratings on 13 Tranches
---------------------------------------------------
Moody's Investors Service has placed on review for possible
upgrade thirteen tranches from six auto loan securitizations from
2006 to 2008 that are serviced by Wells Fargo Bank, N.A. (as
successor by merger to Wachovia Bank, N.A.), a direct wholly-owned
subsidiary of Wells Fargo & Company.
Ratings:
Issuer: Wachovia Auto Loan Owner Trust 2006-1
-- Cl. C, Aa3 (sf) Placed Under Review for Possible Upgrade;
previously on Dec. 22, 2009 Upgraded to Aa3 (sf)
-- Cl. D, B1 (sf) Placed Under Review for Possible Upgrade;
previously on Dec. 22, 2009 Upgraded to B1 (sf)
Issuer: Wachovia Auto Loan Owner Trust 2006-2
-- Cl. C, Aa1 (sf) Placed Under Review for Possible Upgrade;
previously on Dec. 22, 2009 Upgraded to Aa1 (sf)
-- Cl. D, Baa2 (sf) Placed Under Review for Possible Upgrade;
previously on Dec. 22, 2009 Upgraded to Baa2 (sf)
-- Cl. E, B3 (sf) Placed Under Review for Possible Upgrade;
previously on Feb. 20, 2009 Downgraded to B3 (sf)
Issuer: Wachovia Auto Loan Owner Trust 2007-1
-- Cl. C, Aa1 (sf) Placed Under Review for Possible Upgrade;
previously on April 7, 2010 Upgraded to Aa1 (sf)
-- Cl. D, Baa3 (sf) Placed Under Review for Possible Upgrade;
previously on April 7, 2010 Upgraded to Baa3 (sf)
-- Cl. E, B3 (sf) Placed Under Review for Possible Upgrade;
previously on Feb. 20, 2009 Downgraded to B3 (sf)
Issuer: Wachovia Auto Loan Owner Trust 2008-1
-- Cl. C, Aa2 (sf) Placed Under Review for Possible Upgrade;
previously on April 7, 2010 Upgraded to Aa2 (sf)
-- Cl. D, Ba2 (sf) Placed Under Review for Possible Upgrade;
previously on April 7, 2010 Upgraded to Ba2 (sf)
-- Cl. E, B3 (sf) Placed Under Review for Possible Upgrade;
previously on Feb. 20, 2009 Downgraded to B3 (sf)
Issuer: Wachovia Auto Owner Trust 2007-A
-- Cl. B, Baa2 (sf) Placed Under Review for Possible Upgrade;
previously on June 28, 2007 Definitive Rating Assigned Baa2
(sf)
Issuer: Wachovia Auto Owner Trust 2008-A
-- Cl. B, Baa2 (sf) Placed Under Review for Possible Upgrade;
previously on June 24, 2008 Definitive Rating Assigned Baa2
(sf)
Ratings Rationale
The review actions are the result of the build-up in credit
enhancement relative to remaining losses and updated lower loss
expectations.
Moody's current lifetime cumulative net loss projections for 2006
near prime transactions range between 6.00% to 6.50% of the
original pool balance, compared to 7.50% from Moody's previous
rating actions in December 2009. For 2006-1 transaction, total
hard credit enhancement (excluding excess spread of approximately
5.4% per annum) is currently approximately 47% and 17% of
outstanding pool balance for Classes C and D respectively. For
2007-1 transaction, total hard credit enhancement (excluding
excess spread of approximately 4.8% per annum) is currently
approximately 61%, 31%, 9% of outstanding pool balance for Classes
C, D and E respectively. Principal payments are allocated
sequentially between Classes A, B, C, D and E.
Moody's currently projects 2007-1 and 2008-1 near prime
transactions to incur a cumulative lifetime loss between 6.75% to
7.25% and between 6.25% to 7.25% of the original pool balance
respectively. CNL projections have decreased from a range of
8.75% to 9.00% from Moody's previous rating actions in April 2010.
For 2007-1 transaction, total hard credit enhancement (excluding
excess spread of approximately 5.0% per annum) is approximately
44%, 21% and 6% of outstanding pool balance for Classes C, D and E
respectively. For 2008-1 transaction, total hard credit
enhancement (excluding excess spread of approximately 4.3% per
annum) is 33%, 13% and 4% of outstanding pool balance for Classes
C, D and E respectively.
Moody's expects Wachovia Auto Owner Trust 2007-A and 2008-A prime
transactions to incur lifetime CNL between 0.65% to 0.75% and
0.80% to 0.95% of the original pool balance respectively. For
2007-A transaction, hard credit enhancement (excluding excess
spread of approximately 1.5% per annum) is approximately 3% of
outstanding pool balance for Class B. For 2008-A transaction,
hard credit enhancement (excluding excess spread of approximately
1.1% per annum) is 2% of outstanding pool balance for Class B.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations.
Performance that falls outside the given range may indicate that
the collateral's credit quality is stronger or weaker than Moody's
had anticipated when the related securities ratings were issued.
Even so, a deviation from the expected range will not necessarily
result in a rating action nor does performance within expectations
preclude such actions. The decision to take (or not take) a
rating action is dependent on an assessment of a range of factors
including, but not exclusively, the performance metrics. Primary
sources of assumption uncertainty are the current macroeconomic
environment, in which unemployment continues to rise moderately,
and strength in the used vehicle market. Moody's currently views
the used vehicle market as much stronger now than it was at the
end of 2008 when the uncertainty relating to the economy as well
as the future of the U.S auto manufacturers was significantly
greater. Overall, Moody's expect a sluggish recovery in the U.S.
economy, with elevated fiscal deficits and persistent, high
unemployment levels.
WRIGHTWOOD CAPITAL: Moody's Downgrades Ratings on Three Classes
---------------------------------------------------------------
Moody's has downgraded three classes of Notes issued by Wrightwood
Capital Real Estate CDO 2005-1, Ltd. due to the deterioration in
the credit quality of the underlying portfolio as evidenced by an
increase in the weighted average rating factor, and sensitivity to
recovery rates. The rating action is the result of Moody's on-
going surveillance of commercial real estate collateralized debt
obligation transactions.
-- Cl. A-1, Affirmed at Aa3 (sf); previously on April 15, 2009
Downgraded to Aa3 (sf)
-- Cl. A-R, Affirmed at Aa3 (sf); previously on April 15, 2009
Downgraded to Aa3 (sf)
-- Cl. B, Downgraded to Ba3 (sf); previously on April 15, 2009
Downgraded to Ba1 (sf)
-- Cl. C, Downgraded to B2 (sf); previously on April 15, 2009
Downgraded to B1 (sf)
-- Cl. D, Downgraded to B3 (sf); previously on April 15, 2009
Downgraded to B2 (sf)
-- Cl. E, Affirmed at Caa1 (sf); previously on April 15, 2009
Downgraded to Caa1 (sf)
-- Cl. F, Affirmed at Caa2 (sf); previously on April 15, 2009
Downgraded to Caa2 (sf)
-- Cl. G, Affirmed at Caa3 (sf); previously on April 15, 2009
Downgraded to Caa3 (sf)
-- Cl. H, Affirmed at Caa3 (sf); previously on April 15, 2009
Downgraded to Caa3 (sf)
Ratings Rationale
Wrightwood Capital Real Estate CDO 2005-1, Ltd. is a currently
static CRE CDO transaction backed by a portfolio A-Notes and whole
loans (100% of the pool balance). As of the November 15, 2010
Trustee report, the aggregate issued Note balance of the
transaction has decreased to $630.5 million from $650 million at
issuance, due to an undrawn balance of Class A-R. The
transaction's reinvestment period ended in August 2010.
There are three assets with par balance of $22.4 million (3.6% of
the current pool balance) that are considered Defaulted Securities
as of the November 15, 2010 Trustee report. While there have been
no realized losses to date, Moody's does expects losses to occur
once they are realized.
Moody's has identified these parameters as key indicators of the
expected loss within CRE CDO transactions: WARF, weighted average
life, weighted average recovery rate, and Moody's asset
correlation. These parameters are typically 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 non-
Moody's rated collateral. For non-CUSIP collateral, Moody's is
eliminating the additional default probability stress applied to
corporate debt in CDOROM(R) v2.6 as Moody's expects the underlying
non-CUSIP collateral to experience lower default rates and higher
recovery compared to corporate debt due to the nature of the
secured real estate collateral. The bottom-dollar WARF is a
measure of the default probability within a collateral pool.
Moody's modeled a bottom-dollar WARF of 7,049 compared to 3,540 at
last review. The distribution of current ratings and credit
estimates is: Baa1-Baa3 (0.5% compared to 0.0% at last review),
Ba1-Ba3 (2.1% compared to 19.6% at last review), B1-B3 (1.4%
compared to 67.0% at last review), and Caa1-C (96.0% compared to
13.4% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 3.4 years compared
to 6.5 years at last review. The modeled WAL reflects the current
WAL including extensions on the loan collateral.
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 56.3%, the same as that at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity). For
non-CUSIP collateral, Moody's is reducing the maximum over
concentration stress applied to correlation factors due to the
diversity of tenants, property types, and geographic locations
inherent in pooled transactions. Moody's modeled a MAC of 20.5%
compared to 22.6% at last review.
Moody's review incorporated CDOROM(R) v2.6, one of Moody's CDO
rating models, which was released on May 27, 2010.
The cash flow model, CDOEdge(R) v3.2, was used to analyze the cash
flow waterfall and its effect on the capital structure of the
deal.
Changes in any one or combination of the key parameters may have
rating implications on certain classes of rated notes. However,
in many instances, a change in key parameter assumptions in
certain stress scenarios may be offset by a change in one or more
of the other key parameters. Rated notes are particularly
sensitive to changes in recovery rate assumptions. Holding all
other key parameters static, changing the recovery rate assumption
down from 56.3% to 46.3% or up to 66.3% would result in average
rating movement on the rated tranches of 0 to 4 notches downward
and 1 to 4 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given
range may indicate that the collateral's credit quality is
stronger or weaker than Moody's had anticipated when the related
securities ratings were issued. Even so, a deviation from the
expected range will not necessarily result in a rating action nor
does performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics. Primary sources of assumption
uncertainty are the current stressed macroeconomic environment and
continuing weakness in the commercial real estate and lending
markets. Moody's currently views the commercial real estate
market as stressed with further performance declines expected in a
majority of property sectors. The availability of debt capital is
improving with terms returning towards market norms. Job growth
and housing price stability will be necessary precursors to
commercial real estate recovery. Overall, Moody's central global
scenario remains "hook-shaped" for 2010 and 2011; Moody's expects
overall a sluggish recovery in most of the world's largest
economies, returning to trend growth rate with elevated fiscal
deficits and persistent unemployment levels.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
* Moody's Downgrades Ratings on 35 Tranches from 17 Housing Loans
-----------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of 35
tranches from 17 transactions, backed manufactured housing loans.
Ratings Rationale
The ratings on the securities were monitored by evaluating factors
Moody's determined to be essential in the analysis of securities
backed by such loans. The salient factors include: i) the nature,
sufficiency, and quality of historical loan performance
information, ii) the collateral composition and pool credit
performance including loan delinquency and loss data, iii) the
transaction's capital structure and related allocations of
collateral cash flows and losses, and iv) a comparison of current
credit enhancement levels to updated Moody's pool loss projections
based on present collateral credit performance.
When analyzing underlying ratings for MH transactions, Moody's
projects cumulative losses for each deal based on a collateral
analysis of the deal's Constant Prepayment Rate and Constant
Default Rate.
* CPR is based on the average of the last six months 1-month CPR.
There are two approaches for determining pool CDR. The first
approach calculates CDR based on pool loan losses from the
previous twelve months, i.e. recent losses. A second approach is
based on pipeline defaults -- derived from days-aged delinquencies
and Moody's assumptions for default based on days delinquent or
REO. Moody's assumes 85% severity for manufactured homes at an
expected case. After CDR is calculated using the two methods, the
effective CDR for loss projection purposes is determined by using
a maximum of the CDRs. Moody's will project future CDR rates
based on delinquency and loss trends. For the actions noted
below, in most cases, Moody's has assumed that CDR will remain
constant over the life of each deal. A sudden reversal in the
existing trend of projected defaults and losses is not anticipated
for these deals as they are well seasoned.
Based on calculated CPR and CDR, Moody's calculates projected
deal-specific cumulative losses and the weighted average life of
the deal. The credit enhancement calculation may also include
credit for excess spread, i.e. the aggregate, positive difference
in the weighted average loan coupon and the all-inclusive
securities' interest and deal fees, including servicing. Excess
spread benefit is calculated by multiplying the stressed
annualized excess spread by the weighted average life of the deal.
Aggregate credit enhancement which combines subordination benefit
(including overcollateralization and/or reserve accounts) and
support from letters of credit or guarantees and excess spread
benefit, is compared with projected cumulative losses for the deal
to derive coverage multiples and associated ratings by tranche.
Moody's will analyze tranche coverage multiples after
consideration of tranche-specific loss allocation and timing of
principal repayment.
Classes A-3 and A-4 from CountryPlace Manufactured Housing
Contract Trust 2007-1, Classes A-1 and Callable A-2 from Origen
Manufactured Housing Contract Trust 2006-A, Classes A-1 and
Callable A-2 from Origen Manufactured Housing Contract Trust
Collateralized Notes, Series 2007-A, and Class A from Manufactured
Housing Contract Trust Collateralized Notes, Series 2007-B are
wrapped by Ambac Assurance Corporation (Segregated Account -
Unrated). Class IIA from GreenPoint Manufactured Housing Contract
Trust 1998-1, Class A-2 from GreenPoint Manufactured Housing
Contract Trust 1999-6, and Class A-2 from GreenPoint Manufactured
Housing Contract Trust 2000-7 are wrapped by MBIA Insurance
Corporation (Downgraded to B3, Outlook Negative on June 25, 2009).
For securities insured by a financial guarantor, the rating on the
securities is the higher of (i) the guarantor's financial strength
rating and (ii) the current underlying rating (i.e., absent
consideration of the guaranty) on the security. The principal
methodology used in determining the underlying rating is the same
methodology for rating securities that do not have a financial
guaranty and is as described earlier. RMBS securities wrapped by
Ambac Assurance Corporation are rated at their underlying rating
without consideration of Ambac's guaranty.
If expected losses on the each of the collateral pools were to
increase by 10%, model implied results indicate that most of the
deals' ratings would remain stable, with the exception of the
tranches listed in the sensitivity analysis.
Moody's Investors Service received and took into account one or
more third party due diligence reports on the underlying assets or
financial instruments in this transaction and the due diligence
reports had a neutral impact on the rating.
Complete rating actions are:
Issuer: C-BASS Mortgage Loan Asset-Backed Certificates, Series
2006-MH1
-- Cl. AF-3, Downgraded to A3 (sf); previously on Sept. 23, 2009
Confirmed at Aaa (sf)
-- Cl. AF-4, Downgraded to Baa2 (sf); previously on Sept. 23,
2009 Confirmed at Aaa (sf)
-- Cl. M-1, Downgraded to B1 (sf); previously on March 30, 2009
Downgraded to A1 (sf)
-- Cl. M-2, Downgraded to C (sf); previously on March 30, 2009
Downgraded to Ba2 (sf)
-- Cl. B-1, Downgraded to C (sf); previously on March 30, 2009
Downgraded to Ca (sf)
Issuer: Conseco Finance Securitization Corp. Series 2002-2
-- Class M-1, Downgraded to B3 (sf); previously on Aug. 2, 2006
Downgraded to B1 (sf)
-- Class M-2, Downgraded to C (sf); previously on March 30, 2009
Downgraded to Ca (sf)
Issuer: Conseco Finance Securitizations Corp. Manufacturing
Housing Contract Senior/Subordinate Pass-Through Certificates
-- Cl. A-5, Downgraded to Caa3 (sf); previously on Aug. 2, 2006
Downgraded to B3 (sf)
Issuer: Conseco Finance Securitizations Corp. Series 2001-3
-- Class A-4, Downgraded to Caa2 (sf); previously on Sept. 23,
2009 Downgraded to B2 (sf)
-- Class M-1, Downgraded to C (sf); previously on Aug. 2, 2006
Downgraded to Ca (sf)
Issuer: CountryPlace Manufactured Housing Contract Trust 2007-1
-- Cl. A-3, Downgraded to B3 (sf); previously on April 10, 2009
Confirmed at Baa1 (sf)
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Cl. A-4, Downgraded to Caa2 (sf); previously on April 13,
2009 Downgraded to Baa2 (sf)
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Issuer: CSFB ABS Trust Manufactured Housing Pass-Through
Certificates 2001-MH29
-- Cl. M-1, Downgraded to Ba3 (sf); previously on Sept. 23, 2009
Confirmed at Aa2 (sf)
-- Cl. M-2, Downgraded to Ca (sf); previously on March 30, 2009
Downgraded to Baa3 (sf)
-- Cl. B-1, Downgraded to C (sf); previously on March 30, 2009
Downgraded to Ca (sf)
Issuer: CSFB Manufactured Housing Pass-Through Certificates,
Series 2002-MH3
-- Cl. A, Downgraded to A3 (sf); previously on Sept. 23, 2009
Downgraded to Aa1 (sf)
-- Cl. M-1, Downgraded to Caa2 (sf); previously on March 30,
2009 Downgraded to A3 (sf)
-- Cl. M-2, Downgraded to C (sf); previously on March 30, 2009
Downgraded to B2 (sf)
Issuer: GreenPoint Manufactured Housing Contract Trust 1998-1
-- II A, Downgraded to B1 (sf); previously on April 10, 2009
Upgraded to Baa3 (sf)
-- Financial Guarantor: MBIA Insurance Corporation (Downgraded
to B3, Outlook Negative on June 25, 2009)
Issuer: GreenPoint Manufactured Housing Contract Trust 1999-6
-- Cl. A-2, Downgraded to B3 (sf); previously on April 10, 2009
Upgraded to Baa2 (sf)
-- Financial Guarantor: MBIA Insurance Corporation (Downgraded
to B3, Outlook Negative on June 25, 2009)
Issuer: GreenPoint Manufactured Housing Contract Trust 2000-7
-- Cl. A-2, Downgraded to B3 (sf); previously on April 10, 2009
Upgraded to Ba1 (sf)
-- Financial Guarantor: MBIA Insurance Corporation (Downgraded
to B3, Outlook Negative on June 25, 2009)
Issuer: Oakwood Mortgage Investors Trust 1999-D
-- A-1, Downgraded to Caa3 (sf); previously on March 30, 2009
Downgraded to Caa2 (sf)
Issuer: Origen Manufactured Housing Conract Trust 2005-A
-- Cl. B, Downgraded to Baa3 (sf); previously on June 16, 2005
Assigned Baa1 (sf)
Issuer: Origen Manufactured Housing Conract Trust Collateralized
Notes, Series 2005-B
-- Cl. M-1, Downgraded to A1 (sf); previously on Dec. 21, 2005
Assigned Aa2 (sf)
-- Cl. M-2, Downgraded to Ba2 (sf); previously on Dec. 21, 2005
Assigned A2 (sf)
-- Cl. B-1, Downgraded to Ca (sf); previously on March 30, 2009
Downgraded to Baa3 (sf)
-- Cl. B-2, Downgraded to C (sf); previously on March 30, 2009
Downgraded to Ba2 (sf)
Issuer: Origen Manufactured Housing Contract Senior/Subordinate
Asset-Backed Certificates, Series 2002-A
-- Cl. M-1, Downgraded to Baa2 (sf); previously on Sept. 7, 2004
Downgraded to A3 (sf)
-- Cl. M-2, Downgraded to Ca (sf); previously on Sept. 7, 2004
Downgraded to Ba3 (sf)
-- Cl. B-1, Downgraded to C (sf); previously on March 30, 2009
Downgraded to Ca (sf)
Issuer: Origen Manufactured Housing Contract Trust 2006-A
-- Cl. A-1, Downgraded to B2 (sf); previously on April 13, 2009
Downgraded to Ba2 (sf)
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Callable Class A-2, Downgraded to Ca (sf); previously on
April 13, 2009 Downgraded to Ba2 (sf)
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Issuer: Origen Manufactured Housing Contract Trust Collateralized
Notes, Series 2007-A
-- Cl. A-1, Downgraded to Caa2 (sf); previously on April 13,
2009 Downgraded to Baa2 (sf)
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
-- Cl. Callable A-2, Downgraded to Caa3 (sf); previously on
April 13, 2009 Downgraded to Baa2 (sf)
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
Issuer: Origen Manufactured Housing Contract Trust Collateralized
Notes, Series 2007-B
-- Cl. A, Downgraded to Ca (sf); previously on April 13, 2009
Downgraded to Baa2 (sf)
-- Financial Guarantor: Ambac Assurance Corporation (Segregated
Account - Unrated)
* Moody's Upgrades Ratings on Nine Rental Car Asset Backed Notes
----------------------------------------------------------------
Moody's has upgraded nine series of rental car asset backed notes
issued by the sponsors: Avis Budget Car Rental LLC and The Hertz
Corporation.
ISSUER: Avis Budget Rental Car Funding (AESOP) LLC
-- Series Description: Series 2006-1 Rental Car Asset-Backed
Notes
-- Current Rating: A3(sf); previously Baa2(sf), placed under
review for possible upgrade on November 22, 2010
-- Financial Guarantor: MBIA Insurance Corporation (B3;
previously on 2/18/2009 Downgraded to B3 from Baa1)
-- Series Description: Series 2007-2 Rental Car Asset-Backed
Notes
-- Current Rating: A3(sf); previously Baa2(sf), placed under
review for possible upgrade on November 22,2010
-- Financial Guarantor: Ambac Assurance Corporation (Caa2
confirmed on November 23, 2010; previously on 3/26/2010 Caa2
placed under review for possible upgrade)
-- Series Description: Series 2009-1 Rental Car Asset-Backed
Notes
-- Current Rating: Aa1(sf); previously on July 24, 2009 assigned
A2(sf) , placed under review for possible upgrade on
November 22, 2010
-- Series Description: Series 2009-3 Variable Funding Asset
Backed Notes
-- Current Rating: Aaa(sf); previously on December 3, 2009
assigned Aa2(sf), placed under review for possible upgrade on
November 22, 2010
-- Series Description: Series 2010-2 Rental Car Asset-Backed
Notes
-- Class Description: Class B
-- Current Rating: A1(sf); previously on March 24, 2010 assigned
Baa2(sf), placed under review for possible upgrade on
November 22, 2010
-- Series Description: Series 2010-3 Rental Car Asset-Backed
Notes
-- Class Description: Class B
-- Current Rating: A2(sf); previously on March 24, 2010 assigned
Baa2(sf), placed under review for possible upgrade on
November 22, 2010
ISSUER: Hertz Vehicle Financing LLC
-- Series Description: Series 2009-1 Variable Funding Floating
Rate Asset Backed Notes
-- Current Rating: Aaa(sf); previously on September 22, 2009
assigned Aa1(sf), placed under review for possible Upgrade on
November 22, 2010
-- Series Description: Series 2009-2 Rental Car Asset-Backed
Notes
-- Class Description: Class B
-- Current Rating: A1(sf); previously on June 22, 2009 assigned
Baa2(sf), placed under review for possible upgrade on
November 22, 2010
-- Series Description: Series 2010-1 Rental Car Asset-Backed
Notes
-- Class Description: Class B
-- Current Rating: A1(sf); previously on July 28, 2010 assigned
Baa2(sf), placed under review for possible upgrade
Ratings Rationale
The actions are motivated, to varying degrees depending on the
sponsor, primarily by the strengthening credit profiles of both
Ford Motor Company and General Motors Limited, and secondarily by
recent upgrades to Hyundai Motor Company and Kia Motors Corp. and
improved rental car fleet diversification.
Separately, Moody's notes that Avis Budget submitted an
acquisition bid to purchase Dollar Thrifty Automotive Group.
Moody's views the potential acquisition as credit positive to
DTAG-sponsored ABS, and views it as credit neutral to Avis-
sponsored ABS. Given the uncertainties concerning the completion
of the acquisition, such as the need for FTC approval, Moody's
will take ratings actions if the transaction comes to fruition,
depending on its ultimate impact on the DTAG-sponsored ABS.
Key Factors In Rating Analysis
The key factors in Moody's rating analysis include (1) the
probability of default by the sponsor, as lessee, (2) the
likelihood of a bankruptcy or default by the auto manufacturers
providing vehicles to the rental car fleet owned by the issuer or
other lessors, and (3) the recovery rate on the rental car fleet
in the event that the sponsor defaults. Monte Carlo simulation
modeling was used to assess the impact on bondholders of these
variables.
Moody's ratings analysis makes assumptions about key factors,
such as (1) the likelihood of default of the sponsor (and the
vehicle manufacturers who provide program agreements), (2) the
composition of the pool's vehicle mix over time and (3) the
realizable value of the portion of the fleet backing the ABS
should fleet liquidation be necessary. Data is unavailable on
vehicle values in a large scale stressed liquidation. To address
this variability, Moody's make assumptions Moody's believes to be
conservative about appropriate recovery value haircuts.
Consequently, the rating action was based on limited historical
data.
Principal Rating Methodology
The primary asset backing the notes is the monthly lease payments
owed by the related sponsoring rental car company under an
operating lease, as well as a pool of vehicles comprising the bulk
of the sponsor's daily rental car fleet, including both program
vehicles (acquired vehicles subject to repurchase, or guaranteed a
minimum depreciation or resale value, by the related auto
manufacturer at pre-set prices) and non-program vehicles (acquired
vehicles that do not benefit from such repurchase or guaranteed
depreciation agreements). The vehicles are owned by a bankruptcy-
remote entity, referred to as the lessor, which may also be the
issuer or be an affiliate of the issuer. The sponsor and/or
operating affiliates act as lessees. For quantitative analysis
Moody's uses a monte carlo simulation model which simulates the
potential cash flows from the vehicle assets and any additional
credit enhancements and the rated obligation repayment
requirements.
The key factors in Moody's rating analysis include the probability
of default of the sponsor, the likelihood of a bankruptcy or
default by the auto manufacturers providing vehicles to the rental
car fleet owned by the lessor, and the recovery rate on the rental
car fleet in case the rental car sponsor defaults. Monte Carlo
simulation modeling was used to assess the impact on bondholders
of these variables. The default probability of the sponsor is
simulated based on its current corporate probability of default
rating and Moody's idealized default rates. For surveillance
purposes, in the event that an upgrade above the initial rating is
being considered, Moody's stress the rating of the sponsor as
lessee to provide a limited degree of de-linkage of the rated ABS
from the corporate rating of the sponsor, otherwise, the current
rating of the sponsor is used.
All of the sponsoring rental car companies fleets include both
program vehicles and non-program vehicles (also known as 'risk'
vehicles). Under the terms of the simulation, in cases where the
related sponsor does not default it is assumed that bondholders
are repaid in full and no liquidation of the lessor's rental car
fleet is necessary. In cases where the sponsor does default, the
lessor's fleet must be liquidated in order to repay their secured
loans to the Issuer, and ultimately the bondholders. In those
cases, the default probability of the related manufacturers must
also be simulated. Due to Chrysler's, Ford's and GM's high
concentrations in the pool and non-investment grade ratings or
non-ratings, as applicable, their defaults were simulated based on
estimates for probability of default provided by Moody's corporate
analysts. These default estimates differentiate between default
with continued operation and default with cessation of operations.
The default probability of the other manufacturers is derived from
their respective ratings. For each manufacturer simulated to be
in Chapter 11, Moody's further simulate whether each such
manufacturer will honor its obligation with respect to program
vehicles or default on that obligation.
In simulating liquidation of the rental car fleet following a
sponsor default, it is assumed that the portion of the program
vehicle fleet associated with non-defaulting manufacturers (both
non-bankrupt manufacturers and bankrupt Chapter 11 manufacturers
honoring their program obligations) is returned to the related
manufacturer at full book value. For the non-program (risk)
fleet, as well as the portion of the program fleet associated with
defaulting manufacturers not honoring obligations on their program
vehicles, it is assumed the vehicles will be sold in the open
market. For vehicles sold in the open market, the market value of
a vehicle at time of liquidation before any haircuts are applied
is estimated using market depreciation data from the National
Automobile Dealers Association for each manufacturer with vehicles
in the collateral pool. In making this calculation Moody's
generally assume a purchase price for program and non-program
(risk) vehicles which is 10% below MSRP, to give credit to the
volume discounts typically achieved by rental car companies.
However, in the case of Avis Budget, Moody's assumes the discount
for non-program (risk) vehicles is 15% to reflect both the terms
required under the transaction documentation and historic
performance. In addition, Moody's assumes a delay in sale of six
months and therefore net an additional six months of depreciation.
This six month delay in fleet liquidation following the sponsor's
default contemplates potential legal challenges to obtaining
control of the fleet and the potential difficulties of marshaling
and selling such a large quantity of vehicles. The base
liquidation value of sold vehicles is determined by applying a
base haircut to this estimated depreciated market value. The base
haircut is simulated using a triangular distribution (i.e.,
minimum, mode, maximum) with values of (5%, 15%, 30%). The
resulting calculation provides the base liquidation value.
Additional haircuts may be applied to the base liquidation value
depending on the manufacturer's simulated status: non-bankrupt,
bankrupt Chapter 11 or bankrupt Chapter 7. No further haircuts
are applied to either (i) non-program (risk) and program vehicles
from non-bankrupt manufacturers or (ii) program vehicles from
bankrupt Chapter 11 manufacturers who are assumed to honor their
program obligations. However, in all other cases, the base
liquidation value is further reduced. For bankrupt Chapter 11
manufacturers, Moody's reduces the base liquidation of their non-
program (risk) vehicles and their program vehicles whose
obligations are assumed not to be honored by multiplying the base
liquidation value by a haircut, which is simulated using a
triangular distribution with input parameters (14%, 18%, 19%).
For manufacturers assumed to be in Chapter 7, Moody's reduces base
liquidation value of their vehicles by multiplying the base
liquidation value by a haircut, which is simulated using a
triangular distribution with input parameters (25%, 35%, 50%).
With respect to transaction maturity, for analytical purposes
Moody's is assigning each transaction to one of three assumed
maturity buckets based on its actual remaining expected maturity.
If the remaining expected maturity is less than 18 months, a
remaining maturity of 12 months will be assumed. If the remaining
expected maturity is 18 months or more but less than 37 months, 24
months will the input to the model. If the remaining expected
maturity is 37 months or more, 60 months will be assumed. This is
a method of quantifying Moody's view that there is greater
uncertainty regarding fleet mix by manufacturer for transactions
with longer terms than for those with shorter terms.
Moody's Investors Service did not receive or take into account a
third party due diligence report on the underlying assets or
financial instruments related to the monitoring of this
transaction in the past six months.
* Moody's Withdraws Ratings on 29 Tranches From 11 RMBS Deals
-------------------------------------------------------------
Moody's Investors Service has withdrawn the ratings of 29 tranches
from 11 seasoned RMBS transactions issued between 1984 and 2003.
Moody's Investors Service has withdrawn the credit rating pursuant
to published credit rating methodologies that allow for the
withdrawal of the credit rating if the size of the pool
outstanding at the time of the withdrawal has fallen below a
specified level.
Moody's current RMBS surveillance methodologies apply to pools
with at least 40 loans and a pool factor of greater than 5%. As a
result, Moody's may withdraw its rating when the pool factor drops
below 5% and the number of loans in the pool declines to 40 loans
or lower unless specific structural features allow for a
monitoring of the transaction (such as a credit enhancement
floor).
Complete Rating actions follow:
Issuer: Banc of America Mortgage 2003-B Trust
-- Cl. 1-A-1, Withdrawn (sf); previously on April 15, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-1, Withdrawn (sf); previously on April 15, 2010 A1
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-2, Withdrawn (sf); previously on April 15, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-7, Withdrawn (sf); previously on April 15, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-8, Withdrawn (sf); previously on April 15, 2010 A2
(sf) Placed Under Review for Possible Downgrade
-- Cl. 2-A-P, Withdrawn (sf); previously on April 15, 2010 A2
(sf) Placed Under Review for Possible Downgrade
Issuer: CSFB Mortgage-Backed Pass-Through Certificates, Series
2003-AR20
-- Cl. IV-A-1, Withdrawn (sf); previously on Oct. 27, 2003
Assigned Aaa (sf)
-- Cl. IV-M-1, Withdrawn (sf); previously on April 15, 2010 Aa2
(sf) Placed Under Review for Possible Downgrade
-- Cl. IV-M-2, Withdrawn (sf); previously on April 15, 2010 A1
(sf) Placed Under Review for Possible Downgrade
-- Cl. IV-M-3, Withdrawn (sf); previously on April 15, 2010 Baa3
(sf) Placed Under Review for Possible Downgrade
Issuer: CTS Home Equity Loan Trust 1995-1
-- A, Withdrawn (sf); previously on May 14, 2009 Downgraded to
Ba1 (sf)
-- Financial Guarantor: MBIA Insurance Corporation (Downgraded
to B3, Outlook Negative on June 25, 2009)
Issuer: Green Tree Home Improvement Loans 1994-D
-- B-2, Withdrawn (sf); previously on March 18, 2010 Ca (sf)
Placed Under Review for Possible Downgrade
Issuer: Option One/CTS ARM Trust 1996-1
-- A-1, Withdrawn (sf); previously on June 26, 2009 Confirmed at
A2 (sf)
-- Financial Guarantor: MBIA Insurance Corporation (Downgraded
to B3, Outlook Negative on June 25, 2009)
Issuer: Sears Mtg Sec Corp 1984-01
-- D, Withdrawn (sf); previously on Feb. 15, 1984 Assigned Aaa
(sf)
Issuer: First Boston 1987-01 (Glenfed Mtg)
-- A, Withdrawn (sf); previously on Aug. 19, 1994 Upgraded to
Aa1 (sf)
Issuer: ComFed Savings Bank 1988-07
-- A-1, Withdrawn (sf); previously on July 1, 1997 Modified
Rating Notation to Caa2 (sf)
-- A-2, Withdrawn (sf); previously on July 1, 1997 Modified
Rating Notation to Caa2 (sf)
Issuer: Housing Securities Inc 1992-8
-- A, Withdrawn (sf); previously on June 30, 1992, Assigned Aa2
(sf)
-- B, Withdrawn (sf); previously on June 30, 1992, Assigned Aa2
(sf)
-- C, Withdrawn (sf); previously on June 30, 1992, Assigned Aa2
(sf)
-- D, Withdrawn (sf); previously on June 30, 1992, Assigned Aa2
(sf)
-- E, Withdrawn (sf); previously on June 30, 1992, Assigned Aa2
(sf)
Issuer: Citicorp Mtg Sec Inc 1993-14
-- A-3, Withdrawn (sf); previously on Nov. 29, 1993 Assigned Aaa
(sf)
-- A-4, Withdrawn (sf); previously on Nov. 29, 1993 Assigned Aaa
(sf)
-- A-5, Withdrawn (sf); previously on Nov. 29, 1993 Assigned Aaa
(sf)
-- B-1, Withdrawn (sf); previously on March 18, 2003 Downgraded
to Caa1 (sf)
Issuer: Citicorp Mtg Sec Inc 1994-03
-- A-05, Withdrawn (sf); previously on Feb. 23, 1994 Assigned
Aaa (sf)
-- A-13, Withdrawn (sf); previously on Feb. 23, 1994 Assigned
Aaa (sf)
-- B-01, Withdrawn (sf); previously on May 8, 2009 Downgraded
to B1 (sf)
* S&P Downgrades Ratings on 42 Certs. From Six CMBS Transactions
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 42
classes of commercial mortgage pass-through certificates from six
U.S. commercial mortgage-backed securities transactions.
The downgrades reflect current and potential interest shortfalls.
S&P lowered its ratings on 33 of these classes to 'D (sf)' because
of interest shortfalls that S&P expects to continue.
Thirty-two of the 33 classes that S&P downgraded to 'D (sf)' have
had accumulated interest shortfalls outstanding for four or more
months. The recurring interest shortfalls for the respective
certificates are primarily due to one or more of these factors:
* Appraisal subordinate entitlement reduction amounts in effect
for specially serviced loans;
* A lack of servicer advancing for loans where the servicer has
made nonrecoverable advance declarations;
* Special servicing fees; and
* Interest rate reductions or deferrals resulting from loan
modifications.
Standard & Poor's analysis primarily considered the ASER amounts
based on appraisal reduction amounts calculated using recent
Member of the Appraisal Institute appraisals. S&P also considered
servicer nonrecoverable advance declarations and specially
servicing fees that are likely, in S&P's view, to cause recurring
interest shortfalls.
ARAs and the resulting ASER amounts are implemented in accordance
with each respective transaction's terms. Typically, these terms
call for the automatic implementation of an ARA equal to 25% of
the stated principal balance of a loan when a loan is 60 days past
due and an appraisal or other valuation is not available within a
specified timeframe. S&P primarily considered ASER amounts based
on ARAs calculated from MAI appraisals when deciding which classes
from the affected transactions to downgrade to 'D (sf)' because
ARAs based on a principal balance haircut are highly subject to
change, or even reversal, once the special servicer obtains the
MAI appraisals.
Servicer nonrecoverable advance declarations can prompt interest
shortfalls due to a lack of debt service advancing, the recovery
of previously made advances deemed nonrecoverable, or the failure
to advance trust expenses when nonrecoverable declarations have
been determined. Trust expenses may include, but are not limited
to, property operating expenses, property taxes, insurance
payments, and legal expenses.
S&P detail the 42 downgraded classes from the six CMBS
transactions below.
LB-UBS Commercial Mortgage Trust 2003-C8
S&P lowered its rating on the class S certificate to 'CCC- (sf)'
from LB-UBS Commercial Mortgage Trust 2003-C8 because S&P believes
this class is susceptible to future interest shortfalls. While
the trust recovered an ASER amount totaling $685,281 related to
one liquidated loan, S&P believes the class S certificate has the
potential to experience future interest shortfalls. According to
the Nov. 18, 2010, trustee remittance report, ARAs totaling
$11.0 million were in effect for six loans that are currently with
the special servicer, LNR Partners Inc. The total reported ASER
amount was $68,285, and the reported cumulative ASER amount was
$580,924. Standard & Poor's considered three of the ARAs that
were based on MAI appraisals, as well as current special servicing
fees, in determining its rating action.
The collateral pool for the LB-UBS 2003-C8 transaction consists
of 79 loans with an aggregate trust balance of $890.6 million.
As of the Nov. 18, 2010 trustee remittance report, 10 loans
($69.5 million, 7.8%) in the pool were with the special servicer.
The payment status of these loans is: one ($4.8 million, 0.6%) is
real estate owned; one ($8.3 million, 0.9%) is in foreclosure;
three ($19.3 million, 2.2%) are 90-plus days delinquent; three
($33.2 million, 3.7%) are nonperforming matured balloons; one
($2.1 million, 0.2%) is 30-plus days delinquent; and one
($1.8 million, 0.2%) is in its grace period.
Morgan Stanley Capital I Trust 2004-HQ4
S&P lowered its ratings on the class J, K, L, M, N, O, and P
certificates from Morgan Stanley Capital I Trust 2004-HQ4 due to
interest shortfalls resulting from ASER amounts related to three
of the five loans that are currently with the special servicer,
CWCapital Asset Management LLC, as well as special servicing fees
and interest not advanced. S&P lowered its rating on class H
because S&P believes this class is susceptible to future interest
shortfalls. As of the Nov. 15, 2010 trustee remittance report,
ARAs totaling $21.6 million were in effect for three loans.
The total reported ASER amount was $101,566, and the reported
cumulative ASER amount was $836,151. Standard & Poor's considered
three ASER amounts, all of which were based on MAI appraisals, as
well as current special servicing fees and interest not advanced
($7,131), in determining its rating actions. The reported monthly
interest shortfalls totaled $123,332 and have affected all of the
classes subordinate to and including class J. Classes J, K, L, M,
N, O, and P have had accumulated interest shortfalls outstanding
between four and nine months, and S&P expects these shortfalls to
remain outstanding for the foreseeable future. Consequently, S&P
lowered its ratings on these classes to 'D (sf)'.
The collateral pool for the MSC 2004-HQ4 transaction consists of
99 loans with an aggregate trust balance of $1.20 billion. As
of the Nov. 15, 2010, trustee remittance report, five loans
($54.9 million, 4.6%) in the pool were with the special servicer.
The payment status of these loans is: three ($33.4 million, 2.8%)
are REO; one ($18.8 million, 1.6%) is in foreclosure; and one
($2.7 million, 0.2%) is current.
Citigroup Commercial Mortgage Trust 2005-C3
S&P lowered its ratings on the class H, J, K, L, and M
certificates from Citigroup Commercial Mortgage Trust 2005-C3 due
to interest shortfalls resulting from ASER amounts related to four
of the eight loans that are currently with the special servicer,
CWCapital, as well as special servicing fees. S&P downgraded the
class G certificate because S&P believes this class is susceptible
to future interest shortfalls. As of the Nov. 18, 2010, trustee
remittance report, ARAs totaling $54.5 million were in effect for
five loans. The total reported ASER amount was $153,631, and the
reported cumulative ASER amount was $2.0 million. Standard &
Poor's considered four ASER amounts, all of which were based on
MAI appraisals, as well as current special servicing fees, in
determining its rating actions. The reported monthly interest
shortfalls totaled $196,139 and affected all of the classes
subordinate to and including class H. Classes H, J, K, L, and M
have had accumulated interest shortfalls outstanding between four
and seven months. S&P expects the shortfalls on classes J, K, L,
and M to remain outstanding for the foreseeable future.
Consequently, S&P downgraded these classes to 'D (sf)'.
The collateral pool for the CGCMT 2005-C3 transaction consists of
113 loans with an aggregate pooled trust balance of $1.21 billion.
As of the Nov. 18, 2010, trustee remittance report, eight loans
($169.1 million, 13.9%) in the pool were with the special
servicer. The payment status of these loans is: four
($87.3 million, 7.2%) are in foreclosure; one ($6.9 million,
0.5%) is 90-plus days delinquent; one ($9.1 million, 0.7%) is
30-plus days delinquent; one ($12.8 million, 1.1%) is in its
grace period; and one ($53.0 million; 4.4%) is a performing
matured balloon.
Wachovia Bank Commercial Mortgage Trust Series 2006-C26
S&P lowered its ratings on the class F, G, H, J, K, L, and M
certificates from Wachovia Bank Commercial Mortgage Trust's series
2006-C26 due to interest shortfalls resulting from ASER amounts
related to four of the eight loans that are currently with the
special servicer, CWCapital, as well as special servicing fees and
the interest rate modification on the Eastern Shore Centre loan,
which is in special servicing. As of the Nov. 18, 2010 trustee
remittance report, ARAs totaling $75.9 million were in effect for
seven loans. The total reported ASER amount was $219,599, and the
reported cumulative ASER amount was $3.4 million. Standard &
Poor's considered four ASER amounts, all of which were based on
MAI appraisals, as well as current special servicing fees and the
interest rate reduction ($135,654) from the modification of the
Eastern Shore Centre loan, in determining its rating actions. The
reported monthly interest shortfalls totaled $514,414 and affected
all of the classes subordinate to and including class F. Classes
G, H, J, K, L, and M have had accumulated interest shortfalls
outstanding between seven and 10 months, and S&P expects these
shortfalls to remain outstanding for the foreseeable future.
Consequently, S&P downgraded these classes to 'D (sf)'.
The collateral pool for the WBCMT 2006-C26 transaction consists of
112 loans with an aggregate pooled trust balance of $1.67 billion.
As of the Nov. 18, 2010, trustee remittance report, eight loans
($147.5 million, 8.8%) in the pool were with the special servicer.
The payment status of these loans is: three ($38.0 million, 2.3%)
are REO; two ($21.8 million, 1.3%) are in foreclosure; two
($73.9 million, 4.4%) are 90-plus days delinquent; and one
($13.8 million, 0.8%) is in its grace period.
Morgan Stanley Capital I Trust 2006-IQ12
S&P lowered its ratings on the class D, E, F, G, H, and J
certificates from Morgan Stanley Capital I Trust 2006-IQ12 due to
interest shortfalls resulting from ASER amounts related to 11 of
the 33 loans that are currently with the special servicer,
CWCapital, as well as special servicing fees and interest not
advanced. As of the Nov. 15, 2010, trustee remittance report,
ARAs totaling $93.2 million were in effect for 17 loans. The
total reported ASER amount was $279,177, and the reported
cumulative ASER amount was $3.7 million. Standard & Poor's
considered 11 ASER amounts, all of which were based on MAI
appraisals, as well as current special servicing fees and interest
not advanced ($68,041), in determining its rating actions. The
reported monthly interest shortfalls totaled $415,383 and affected
all of the classes subordinate to and including class E. Classes
D, E, F, G, H, and J have had accumulated interest shortfalls
outstanding between five and nine months. S&P expects the
interest shortfalls on classes E, F, G, H, and J to remain
outstanding for the foreseeable future. Consequently, S&P lowered
its ratings on these classes to 'D (sf)'.
The collateral pool for the MSC 2006-IQ12 transaction consists of
257 loans with an aggregate pooled trust balance of $2.58 billion.
As of the Nov. 15, 2010, trustee remittance report, 33 loans
($329.2 million, 12.7%) in the pool were with the special
servicer. The payment status of these loans is: four
($127.1 million, 4.9%) are REO; 10 ($75.4 million, 2.9%) are
in foreclosure; nine ($79.0 million, 3.1%) are 90-plus days
delinquent; one ($8.5 million, 0.3%) is 60-plus days delinquent;
two ($2.5 million, 0.1%) are 30-plus days delinquent; one
($2.2 million, 0.1%) is less than 30 days delinquent; and six
($34.5 million, 1.3%) are in their grace periods.
Morgan Stanley Capital I Trust 2007-HQ12
S&P lowered its ratings on the class D, E, F, G, H, J, K, L, M,
N, O, P, and Q certificates from Morgan Stanley Capital I Trust
2007-HQ12 due to interest shortfalls resulting from ASER amounts
related to three loans that are currently with the special
servicer, LNR, as well as special servicing fees and deferred
interest resulting from the Columbia Center loan modification.
S&P downgraded the class C certificate because S&P believes
this class is susceptible to future interest shortfalls. As
of the Nov. 15, 2010 trustee remittance report, ARAs totaling
$101.6 million were in effect for five loans. The total reported
ASER amount was $46,847, and the reported cumulative ASER amount
was $239,506. Standard & Poor's considered two ASER amounts,
which were both based on MAI appraisals, as well as current
special servicing fees ($264,126) and deferred interest
($387,156), in determining its rating actions. The reported
monthly interest shortfalls totaled $698,128 and affected all of
the classes subordinate to and including class D. Classes G, H,
J, K, L, M, N, O, P, and Q have had accumulated interest
shortfalls outstanding between five and nine months. Class F has
shorted interest for one month. S&P expects the interest
shortfalls on these 11 classes to continue. Consequently, S&P
lowered its ratings on these classes to 'D (sf)'.
S&P recently learned of a loan modification on the Beacon Seattle
& DC Portfolio Roll-up loan in the MSC 2007-HQ12 transaction,
which has a trust balance of $161.0 million (8.7% of the pooled
trust balance). S&P's analysis excludes the Beacon Seattle & DC
Portfolio Roll-up loan. S&P is currently evaluating the loan
modification, which occurred on Dec. 3, 2010, to determine the
impact on this transaction. This may prompt further rating
actions. (See "S&P Reviewing Rating Impact Of Beacon Seattle &
D.C. Portfolio Loan Modification On Five Related CMBS
Transactions," published Dec. 9, 2010, for more information.)
The collateral pool for the MSC 2007-HQ12 transaction consists of
96 loans with an aggregate pooled trust balance of $1.84 billion.
As of the Nov. 15, 2010, trustee remittance report, 13 loans
($895.7 million, 48.7%) in the pool were with the special
servicer. The payment status of these loans is: two
($16.8 million, 0.9%) are in foreclosure; four ($391.9 million,
21.3%) are 90-plus days delinquent; one ($8.5 million, 0.5%) is
60-plus days delinquent; one ($56.0 million, 3.0%) is 30-plus
days delinquent; two ($123.5 million, 6.7%) are less than 30
days delinquent; and three ($299.0 million, 16.3%) are current.
Ratings Lowered
LB-UBS Commercial Mortgage Trust 2003-C8
Commercial mortgage pass-through certificates
Reported
Rating Interest Shortfalls ($)
------ -----------------------
Class To From Credit enhancement (%) Current Accumulated
----- -- ---- ---------------------- ------- -----------
S CCC- (sf) B- (sf) 1.72 (128,024) 0
Morgan Stanley Capital I Trust 2004-HQ4
Commercial mortgage pass-through certificates
Reported
Rating Interest Shortfalls ($)
------ -----------------------
Class To From Credit enhancement (%) Current Accumulated
----- -- ---- ---------------------- ------- -----------
H CCC+ (sf) B (sf) 3.45 0 0
J D (sf) B- (sf) 2.17 21,047 41,883
K D (sf) CCC+ (sf) 1.75 20,081 100,555
L D (sf) CCC (sf) 1.32 20,081 108,372
M D (sf) CCC- (sf) 0.89 20,085 131,727
N D (sf) CCC- (sf) 0.75 6,691 54,267
O D (sf) CCC- (sf) 0.47 13,390 108,596
P D (sf) CCC- (sf) 0.18 13,386 119,216
Citigroup Commercial Mortgage Trust 2005-C3
Commercial mortgage pass-through certificates
Reported
Rating Interest Shortfalls ($)
------ -----------------------
Class To From Credit enhancement (%) Current Accumulated
----- -- ---- ---------------------- ------- -----------
G B- (sf) BB- (sf) 4.67 0 0
H CCC- (sf) B+ (sf) 3.63 11,577 71,330
J D (sf) B (sf) 3.19 20,734 101,077
K D (sf) B- (sf) 2.60 27,646 138,228
L D (sf) CCC (sf) 2.15 20,734 116,679
M D (sf) CCC- (sf) 1.71 20,734 145,139
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2006-C26
Reported
Rating Interest Shortfalls ($)
------ -----------------------
Class To From Credit enhancement (%) Current Accumulated
----- -- ---- ---------------------- ------- -----------
F CCC- (sf) B (sf) 5.69 48,112 48,112
G D (sf) B- (sf) 4.39 112,436 469,469
H D (sf) CCC+ (sf) 3.22 101,191 904,785
J D (sf) CCC- (sf) 2.96 20,398 203,979
K D (sf) CCC- (sf) 2.57 30,592 305,922
L D (sf) CCC- (sf) 2.31 20,398 203,979
M D (sf) CCC- (sf) 2.05 20,393 203,932
Morgan Stanley Capital I Trust 2006-IQ12
Commercial mortgage pass-through certificates
Reported
Rating Interest Shortfalls ($)
------ -----------------------
Class To From Credit enhancement (%) Current Accumulated
----- -- ---- ---------------------- ------- -----------
D CCC (sf) B (sf) 5.82 (238,261) 399,362
E D (sf) B- (sf) 5.29 63,004 382,412
F D (sf) B- (sf) 4.37 110,631 811,735
G D (sf) CCC (sf) 3.44 111,427 989,826
H D (sf) CCC- (sf) 2.38 131,168 1,203,455
J D (sf) CCC- (sf) 1.33 135,657 1,228,261
Morgan Stanley Capital I Trust 2007-HQ12
Commercial mortgage pass-through certificates
Reported
Rating Interest Shortfalls ($)
------ -----------------------
Class To From Credit enhancement (%) Current Accumulated
----- -- ---- ---------------------- ------- -----------
C CCC+ (sf) B (sf) 9.14 0 0
D CCC- (sf) B (sf) 7.80 31,474 31,474
E CCC- (sf) B (sf) 7.01 70,762 70,762
F D (sf) B- (sf) 5.68 117,930 117,930
G D (sf) B- (sf) 4.48 106,138 195,366
H D (sf) B- (sf) 3.28 106,133 526,484
J D (sf) B- (sf) 2.48 64,648 345,115
K D (sf) CCC+ (sf) 2.22 21,546 148,360
L D (sf) CCC+ (sf) 1.82 32,324 240,797
M D (sf) CCC+ (sf) 1.55 21,546 172,372
N D (sf) CCC (sf) 1.29 21,551 172,407
O D (sf) CCC (sf) 1.02 21,546 192,522
P D (sf) CCC (sf) 0.75 21,546 193,918
Q D (sf) CCC (sf) 0.49 21,546 193,918
*********
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
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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
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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
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