/raid1/www/Hosts/bankrupt/TCR

/raid1/www/Hosts/bankrupt/TCR_Public/110213.mbx T R O U B L E D C O M P A N Y R E P O R T E R Sunday, February 13, 2011, Vol. 15, No. 43 Headlines 1888 FUND: S&P Raises Ratings on Various Classes of Notes AIRCRAFT CERTIFICATE: S&P Cuts Ratings on Two 2003-A Notes to 'BB' ALFA DIVERSIFIED: S&P Affirms 'BB+' Ratings on Five Series AMERICREDIT AUTOMOBILE: Moody's Assigns Final Ratings to Notes AMERICREDIT AUTOMOBILE: S&P Assigns Ratings to $780.056 Mil. Notes ANTHRACITE CDO: Fitch Downgrades Ratings on Seven Classes of Notes ARGENT MORTGAGE: Moody's Cuts Ratings on Two 2005-W1 Tranches ASSET SECURITIZATION: S&P Cuts Rating on 1997-D5 Certs. to 'D' ATRIUM CDO: S&P Raises Ratings on Various Classes of Notes ATRIUM III: S&P Raises Ratings on Various Classes of Notes AURORA BANK: Moody's Reviews Ratings on 48 Tranches AURUM CLO: S&P Raises Ratings on Various Classes of Notes AUSTIN HOUSING: S&P Gives Stable Outlook on 'CC' Bond Rating AVALON CAPITAL: S&P Raises Ratings on Various Classes of Notes AVENUE CLO: S&P Raises Ratings on Various Classes of Notes AVERY POINT: S&P Raises Ratings on Various Classes of Notes BABSON CLO: S&P Raises Ratings on Various Classes of Notes BAKER STREET: S&P Raises Ratings on Four Classes of Notes BANC OF AMERICA: Moody's Affirms Ratings on 20 2005-2 Certs. BEAR STEARNS: Moody's Upgrades Ratings on Series 1998-C1 Certs. BELHURST CLO: S&P Raises Ratings on Various Classes of Notes CARLYLE ARNAGE: S&P Takes Rating Actions on Various Classes CARLYLE AZURE: S&P Raises Ratings on Three Classes of Notes CD 2007-CD4: Moody's Reviews Ratings on 10 Classes of Certs. CENTURION CDO: S&P Raises Ratings on Various Classes of Notes CHASE MANHATTAN: S&P Raises Ratings on Three Classes of Certs. CITIMORTGAGE ALTERNATIVE: Moody's Cuts Ratings on 2005-A1 Tranches CLARET TRUST: Moody's Takes Rating Actions on Various 2006-1 Notes COLORADO HOUSING: S&P Junks Rating on Series 2007 Bonds From 'BB' COMM 2004-LNB4: Moody's Affirms Ratings on 18 Classes of Certs. COMM 2005-FL11: Moody's Affirms Ratings on Nine Pooled Classes COMM 2006-C7: Fitch Downgrades Ratings on 14 Classes of Certs. COMMONWEALTH PORTS: Fitch Affirms 'CCC' Rating on $14.6 Mil. Bonds COMMONWEALTH PORTS: Fitch Affirms 'BB-' Rating on Revenue Bonds CONSUMER PORTFOLIO: Moody's Reviews Ratings on 15 Tranches CORIOLANUS LTD: S&P Downgrades Rating on Series 39 to 'D' CORPORATE BACKED: Moody's Upgrades Ratings on Certs. to 'Ba2' CREDIT PROTECTION: Moody's Upgrades Ratings on Bonds From 'Ba1' CREDIT SUISSE: Moody's Affirms Ratings on Six 2002-CKP1 Certs. CREDIT SUISSE: Moody's Downgrades Ratings on Six 2001-CK6 Certs. CREDIT SUISSE: Moody's Reviews Ratings on 2004-C4 Certificates CREDIT SUISSE: S&P Downgrades Ratings on Seven 2005-C4 Notes CSAB MORTGAGE-BACKED: Moody's Downgrades Ratings on Three Tranches CSAM FUNDING: Moody's Upgrades Ratings on Various Classes of Notes CSAM FUNDING: S&P Raises Ratings on Various Classes of Notes CT CDO: Fitch Downgrades Ratings on Two Classes of Notes DBUBS 2011-LC1: Moody's Assigns Ratings on 11 CMBS Securities DELTA AIR: Moody's Assigns 'Ba3' Ratings on Class B Certificates DELTA AIR: S&P Assigns 'BB' Rating to 2010-2B Certificates DRYDEN VII-LEVERAGED: Moody's Upgrades Ratings on Four Notes FAIRWAY LOAN: S&P Raises Ratings on Various Classes of Notes FIRST UNION-LEHMAN: S&P Raises Ratings on 1997-C2 Securities FM LEVERAGED: S&P Raises Ratings on Various Classes of Notes FORD CREDIT: Fitch Takes Rating Actions on Various Classes FORD MOTOR: S&P Raises Ratings on Eight Transactions to 'B+' FOREST CREEK: S&P Raises Ratings on Various Classes of Notes FOUR CORNERS: S&P Raises Ratings on Various Classes of Notes G-FORCE 2005-RR2: Fitch Downgrades Ratings on 14 Classes of Notes GMAC 2004-C2: Moody's Reviews Ratings on Nine 2004-C2 Certs. GRANITE VENTURES: S&P Raises Ratings on Various Classes of Notes GREENWICH CAPITAL: Moody's Downgrades Ratings on 2003-C2 Certs. GREENPOINT MORTGAGE: Moody's Cuts Ratings on 16 2005-AR5 Tranches GSAA HOME: Moody's Downgrades Ratings on Eight Tranches ING INVESTMENT: S&P Raises Rating on Class D Notes to BB (sf) ING INVESTMENT: S&P Raises Ratings on Various Classes of Notes JP MORGAN: Moody's Affirms Ratings on 22 Series 2004-C3 Certs. JP MORGAN: Moody's Reviews 'B2' Ratings on Class A-2 Tranche JP MORGAN: Moody's Takes Rating Actions on Series 2003-ML1 Notes KATONAH III: Moody's Upgrades Ratings on Seven Classes of Notes KATONAH IX: Moody's Upgrades Ratings on Two Classes of Notes KATONAH V: S&P Raises Ratings on Various Classes of Notes KINGSLAND IV: Moody's Upgrades Ratings on Various Classes of Notes LEAF RECEIVABLES: DBRS Puts 'B (Low) ' Rating on Class E-2 Notes LEHMAN MORTGAGE: Moody's Downgrades Ratings on 50 Tranches LONGHORN CDO: S&P Raises Ratings on Various Classes of Notes MADISON SQUARE: Fitch Downgrades Ratings on Three Classes of Notes MERRILL LYNCH: Moody's Affirms Ratings on 16 Classes of Certs. MERRILL LYNCH: Moody's Downgrades Ratings on Three Certificates MERRILL LYNCH: Moody's Takes Rating Actions on Various Classes ML-CFC COMMERCIAL: Fitch Downgrades Ratings on 15 Certificates MONROE COUNTY: S&P Raises Ratings on Revenue Bonds From 'BB+' MORGAN STANLEY: Fitch Issues Presale Report on 2011-C1 Certs. MORGAN STANLEY: Fitch Downgrades Ratings on 13 2006-HQ9 Certs. MORGAN STANLEY: Moody's Takes Rating Actions on 1998-CF1 Notes MORGAN STANLEY: Moody's Downgrades Ratings on 2003-IQ6 Certs. MORGAN STANLEY: S&P Assigns Ratings to $1.55 Bil. 2011-C1 Certs. MORGAN STANLEY: S&P Downgrades Ratings on Three Classes of Notes NATIONAL CITY: Fitch Withdraws Ratings on Six Classes of Notes NEWCASTLE CDO: Moody's Downgrades Ratings on Class I-MM to 'B1' NORTHWOODS CAPITAL: S&P Raises Ratings on Various Classes of Notes OAK HILL: S&P Raises Ratings on Various Classes of Notes OHA INTREPID: S&P Assigns Ratings on $364 Mil. Floating Notes OSPREY CDO: Moody's Upgrades Ratings on Various Classes of Notes PACIFICA CDO: S&P Affirms Junk Ratings on 3 Classes of Notes PACIFICA CDO: S&P Raises Ratings on C-1 & C-2 Notes to B+ PEGASUS 2007-1: Moody's Cuts Rating on Class A1 Notes to 'Ba1' PHOENIX CDO: Moody's Upgrades Ratings on Two Classes of Notes PHOENIX CLO: Moody's Upgrades Ratings on Four Classes of Notes PONTIAC BUILDING: Moody's Downgrades GO Limited Tax Rating to 'B2' RESIX FINANCE: Fitch Withdraws Ratings on All Classes of Notes SARATOGA CLO: S&P Raises Ratings on Various Classes of Notes SATURN CLO: S&P Raises Ratings on Various Classes of Notes SCHOONER TRUST: Moody's Affirms Ratings on 17 Certificates SIERRA CLO: S&P Raises Ratings on Various Classes of Notes SOLAR TRUST: Moody's Upgrades Ratings on Six 2003-CC1 Certs. ST JOSEPH: S&P Withdraws 'CCC' Rating on Revenue Bonds SUFFIELD CLO: Fitch Upgrades Ratings on Three Classes of Notes SWISS CHEETAH: Moody's Upgrades Ratings on 8B Bonds to 'B1' TRIAD FINANCIAL: Moody's Takes Rating Actions on Two Classes VELOCITY CLO: S&P Raises Ratings on Four Classes of Notes VERICREST FINANCIAL: Moody's Downgrades Ratings on Four Tranches VERITAS CLO: Moody's Upgrades Ratings on Various Classes of Notes VERITAS CLO: Moody's Downgrades Ratings on Five Classes of Notes VERITAS CLO: S&P Raises Ratings on All Classes of Notes WEST PENN: Moody's Downgrades Rating on $748 Mil. Bonds to 'B2' WF-RBS COMMERCIAL: Fitch Issues Presale Report on 2011-C2 Certs. WHITEHORSE I: S&P Raises Ratings on Various Classes of Notes * Fitch Takes Rating Actions on New Orleans' Special Tax Bonds * S&P Downgrades Ratings on 43 Classes From Five CMBS Transactions * S&P Downgrades Ratings on 53 Certs. From Seven CMBS Transactions * S&P Downgrades Ratings on 182 Classes From 67 RMBS Transactions ********* 1888 FUND: 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, and C notes from 1888 Fund Ltd., a collateralized loan obligation transaction with APEX credit swap feature, managed by Guggenheim Investment Management LLC. At the same time, S&P removed the ratings on class A-1, A-2, and B from CreditWatch with positive implications. The upgrades reflect the effect of a reduction in the outstanding balance of the class A-1 and A-2 notes since S&P's last rating action in March 2010. The class A overcollateralization test improved to 144.9% in January 2011 from 131.6% as of February 2010, largely as a result of $77 million and $20 million in pay downs to the class A-1 and A-2 notes, respectively, since S&P's last rating action. According to the Jan. 6, 2011 trustee report, the transaction held $14 million in defaulted assets, down from $24 million noted in the Feb. 6, 2010, trustee report. In addition, assets from obligors rated in the 'CCC' category were 19% of the collateral pool in January 2011, compared with 14% in February 2010. 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 1888 Fund Ltd. Rating ------ Class To From ----- -- ---- A-1 AA+ (sf) AA (sf)/Watch Pos A-2 AA+ (sf) AA (sf)/Watch Pos B AA+ (sf) A+ (sf)/Watch Pos C BB+ (sf) B+ (sf) AIRCRAFT CERTIFICATE: S&P Cuts Ratings on Two 2003-A Notes to 'BB' ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings to 'BB (sf)' from 'BB+ (sf)' on the class D and E notes from Aircraft Certificate Owner Trust's series 2003-A. The rating actions follow lowering of the ratings on one of the transaction's underlying securities. The rating on the 2003-A transaction reflects the lowest of the ratings on the underlying securities, three US Airways class G pass-through certificates. The cash flow from the underlying aircraft securities is used to make interest and principal payments on the rated notes. Interest for the underlying aircraft certificates and the notes accrue on a fixed-rate basis and is payable semiannually. Principal collections are allocated to the rated notes and unrated certificates pro rata from series 2003-A, according to the transaction's documents. However, principal is allocated on a sequential basis between classes D and E--the only remaining two outstanding classes of notes from the 2003-A transaction. Even though the principal payment priority is sequential for the rated classes from series 2003-A (i.e., class E starts receiving principal payments and begins to amortize only after class D is retired) if there is no event of default, interest is distributed on a pro rata basis for these notes. Therefore, the ratings on classes D and E are linked to the lowest of the ratings on the three underlying US Airways class G securities. S&P will continue to monitor the transaction and take rating actions as appropriate. Underlying Aircraft Certificates US Airways class G pass-through certificates Series - 2000-2G 2000-3G 2001-1G CUSIP - 90332UAK9 90332UAL7 90332UAN3 Original bal. (mil. $) - 362.414 491.135 458.047 Original issue date - July 2000 Oct. 2000 Jan. 2001 Current rating - BBB- BBB BB/Negative Ratings Lowered Aircraft Certificate Owner Trust 2003-A Aircraft certificate-backed notes and owner trust certificates Rating ------ Class To From ----- -- ---- D BB (sf) BB+ (sf) E BB (sf) BB+ (sf) ALFA DIVERSIFIED: S&P Affirms 'BB+' Ratings on Five Series ---------------------------------------------------------- Standard & Poor's Ratings Services affirmed its 'BB+ (sf)' ratings on five series of notes issued by Alfa Diversified Payment Rights Finance Co. S.A. The note issuances are Russian financial future flow securitizations backed by all current and future diversified payment rights in the form of U.S. dollar- and euro-denominated SWIFT MT100 and 200 category payment order messages that OJSC Alfa Bank (B+/Positive) receives. Payment orders are created as a result of Alfa Bank's role as a financial intermediary between foreign payors that send funds to Russia and resident Russian entities that receive these funds. The rating actions follow S&P's completed review of Alfa Bank's ability to generate the necessary assets to service the transactions for timely principal and interest payments even under a state of selective default or other financial impairment. S&P's 'BB+ (sf)' ratings on the outstanding series are based on no adverse impact from the pending merger with Severnaya Kazna Bank OJSC and, among other things, the structural enhancements that are intended to mitigate sovereign risk and the overcollateralization levels that reflect the transactions' ability to withstand a decline in DPR receivables generation. Factors that support the transactions' credit quality include: Alfa Bank's size and systemic importance in Russia's banking system, which S&P believes would likely earn it the Russian government's support, if needed, when under financial stress. This support reduces the risk that Alfa Bank might have to cease operating if it were to default on one or more of its other financial obligations. The strategic importance of the payment order business to Alfa Bank. Alfa Bank is Russia's largest private bank, and its ability to provide corporate loan finance and payment order processing services is a major part of both its corporate and retail banking business lines. Standard & Poor's believes it is unlikely, therefore, that the bank will allow itself to become uncompetitive in or to abandon this business. The strong debt service coverage. Based only on non-Russian-generated receivables, S&P's cash flow analysis indicates the transactions' minimum DSC will be 33.8x the quarterly debt service at the point at which maximum debt service is due. Based on S&P's final stress scenarios its stress scenarios, which include interest rate and foreign exchange stress assumptions, this coverage declines to a minimum of 16.8x the quarterly debt service amount due. The structural features that mitigate sovereign and other potential credit risks. These features include, among others, DSC triggers, an offshore collection and debt service payment mechanism, and provisions for an early amortization of debt service if certain adverse events occur. In addition, Alfa Bank has obtained signed acknowledgements from several of its key correspondent banks (the designated depository banks) obligating these institutions to deposit relevant collections directly into the transactions' concentration accounts without setoff. Key risk factors that could affect the transactions' performance include: A potential decline in payment order generation. The dollar and euro value of generated payment orders depends on many factors, including the Russian economy's health, Alfa Bank's competitive position in the corporate loan market, the level of foreign direct and portfolio investment into Russia, the level of worker remittances sent to Russia by non-resident Russians, and the state of the world economy in general. The presence of Russian DPR flows in the transactions. Standard & Poor's believes the Russian payment orders securitized in these transactions that originate in Russia--largely as a result of the domestic currency regime and historical payment methods--are at particular risk of a sharp decline, or even a total cessation, if the Russian government were to impose currency transfer and convertibility controls as a result of severe financial stress. Even with these flows completely excluded, however, S&P believes the aforementioned stressed coverage ratios are sufficient to support the current ratings. Sovereign interference risk. Although S&P regard this risk as modest for properly structured financial future flow transactions issued by systemically important banks, the possibility remains that the government may be able to interfere in the transactions' payment mechanics, should it choose to do so. S&P will continue to surveil the ratings on these asset-backed transactions and revise the ratings as necessary to reflect any changes in the transactions' underlying credit quality. Ratings Affirmed Alfa Diversified Payment Rights Finance Co. S.A. Series Rating ------ ------ 2006-A BB+ (sf) 2006-B BB+ (sf) 2006-C BB+ (sf) 2007-A BB+ (sf) 2007-B BB+ (sf) AMERICREDIT AUTOMOBILE: Moody's Assigns Final Ratings to Notes -------------------------------------------------------------- Moody's Investors Service has assigned definitive ratings to the notes to be issued by AmeriCredit Automobile Receivables Trust 2011-1. This is the first senior/subordinated transaction of the year for AmeriCredit Financial Services, Inc. The complete rating actions are: Issuer: AmeriCredit Automobile Receivables Trust 2011-1 -- Class A-1 Notes, rated Prime-1 (sf); -- Class A-2 Notes, rated Aaa (sf); -- Class A-3 Notes, rated Aaa (sf); -- Class B Notes, rated Aa1 (sf); -- Class C Notes, rated Aa3 (sf); -- Class D Notes, rated Baa1 (sf); -- Class E Notes, rated Ba1 (sf); Ratings Rationale Moody's said the ratings are based on the quality of the underlying auto loans and their expected performance, the strength of the structure, the availability of excess spread over the life of the transaction, the experience and expertise of AmeriCredit Financial Services, Inc., as servicer, and the backup servicing arrangement with Aa2-rated Wells Fargo Bank, N.A. Moody's median cumulative net loss expectation for the AMCAR 2011- 1 pool is 11.0% and total credit enhancement required to achieve Aaa rating (i.e. Aaa proxy) is 40.0%. The loss expectation was based on an analysis of AmeriCredit's portfolio vintage performance as well as performance of past securitizations, and current expectations for future economic conditions. The Assumption Volatility Score for this transaction is Low/Medium versus a Medium for the sector. This is driven by a Low/Medium assessment for Governance due to the strong back-up servicing arrangement present in this transaction in addition to the size and strength of AmeriCredit's servicing platform. 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 the net loss used in determining the initial rating were changed to 20%, 25% or 35%, the initial model output for the Class A notes might change from Aaa to Aa1, Aa2, and A2, respectively; Class B notes might change from Aa1 to A3, Baa3, and below B3, respectively; Class C notes might change from Aa3 to Ba1, B3, and below B3, respectively; Class D notes might change from Baa1 to below B3 in all three scenarios; and Class D notes might change from Ba1 to below B3 in all three scenarios. 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 did not receive or take into account a third party due diligence report on the underlying assets or financial instruments in this transaction. AMERICREDIT AUTOMOBILE: S&P Assigns Ratings to $780.056 Mil. Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services assigned its ratings to AmeriCredit Automobile Receivables Trust 2011-1's $780.056 million auto receivables-backed notes. AmeriCredit Automobile Receivables Trust 2011-1's note issuance is a securitization of subprime auto loan receivables. The ratings reflect S&P's assessment of: * The availability of approximately 44.8%, 39.8%, 33.1%, 26.4%, and 23.0% credit support for the class A, B, C, D, and E notes, respectively (based on stressed cash flow scenarios, including excess spread), which provides coverage of more than 3.50x, 3.00x, 2.55x, 1.75x, and 1.50x S&P's 12.25%-12.75% expected cumulative net loss range for the class A, B, C, D, and E notes, respectively. These credit support levels are commensurate with the assigned 'AAA (sf)', 'AA (sf)', 'A+ (sf)', 'BBB (sf)', and 'BB (sf)' ratings on the class A, B, C, D, and E notes, respectively; * S&P's expectation that under a moderate, or 'BBB', stress scenario, its ratings on the class A, B, and C notes would not decline by more than one rating category (all else being equal). In the case of the 'AAA (sf)' and 'AA (sf)' rated securities, this is consistent with S&P's rating stability criteria. In the case of the 'A+ (sf)' rated notes, this is slightly better than S&P's minimum rating stability criteria, which permits a two- category downgrade; * The credit enhancement in the form of subordination, overcollateralization, a reserve account, and excess spread; * The timely interest and ultimate principal payments made under the stressed cash flow modeling scenarios, which are consistent with the assigned ratings; * The collateral characteristics of the securitized pool of subprime automobile loans; * General Motors Financial Co. Inc.'s (GM Financial; formerly known as AmeriCredit Financial Services Inc.; B/Watch Pos/--) extensive securitization performance history going back to 1994; and * The transaction's payment and legal structures. Ratings Assigned AmeriCredit Automobile Receivables Trust 2011-1 Class Rating Amount (mil. $)* ----- ------ ---------------- A-1 A-1+ (sf) 138.000 A-2 AAA (sf) 255.000 A-3 AAA (sf) 174.000 B AA (sf) 61.544 C A+ (sf) 76.393 D BBB (sf) 75.119 E* BB (sf) 19.944 * Class E will be privately placed and is not included in the public offering amount. ANTHRACITE CDO: Fitch Downgrades Ratings on Seven Classes of Notes ------------------------------------------------------------------ Fitch Ratings has downgraded seven and affirmed three classes issued by Anthracite CDO I Ltd./Corp. as a result of significant negative credit migration and increased interest shortfalls on the underlying collateral. 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 through F notes' breakeven rates are generally consistent with the ratings assigned below. Since Fitch's last rating action in March 2010, approximately 43.2% of the portfolio has been downgraded and 3.4% is currently on Rating Watch Negative. Approximately 36.9% has a Fitch derived rating below investment grade and 15.8% has a rating in the 'CCC' category or lower, compared to 26.4% and 1.8%, respectively, at last review. As of the Jan. 20, 2011 trustee report, 24.4% of the portfolio is experiencing interest shortfalls compared to 3.4% at last review. The class A notes have paid down by $1.4 million since the last review. The Negative Outlook on the class A through F notes reflects Fitch's expectation that underlying commercial mortgage backed security 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. Anthracite CDO I is a static cash flow commercial real estate collateralized debt obligation that closed on May 29, 2002. The collateral is composed of 94.8% of CMBS from the 1998 through 2003 vintages and 5.2% of real estate investment trusts. Fitch has taken these actions, including revising LS ratings,for these classes as indicated: -- $112,582,938 Class A-FL affirmed at 'AAAsf'; Outlook Negative; to 'LS3' from 'LS2'; -- $22,000,000 Class B affirmed at 'AAAsf'; Outlook Negative; to 'LS5' from 'LS3'; -- $24,433,000 Class B-FL affirmed at 'AAAsf'; Outlook Negative; to 'LS5' from 'LS3'; -- $29,331,000 Class C downgraded to 'Asf/LS4' from 'AA+sf/LS3'; Outlook Negative; -- $30,000,000 Class C-FL downgraded to 'Asf/LS4' from 'AA+sf/LS3'; Outlook Negative; -- $16,000,000 Class D downgraded to 'BBBsf/LS5' from 'AA- sf/LS3'; Outlook Negative; -- $14,955,000 Class D-FL downgraded to 'BBBsf/LS5' from 'AA-sf/ LS3'; Outlook Negative; -- $20,506,000 Class E downgraded to 'BBsf/LS5' from 'A+sf/LS4'; Outlook Negative; -- $4,000,000 Class E-FL downgraded to 'BBsf/LS5' from 'A+sf/LS4'; Outlook Negative; -- $43,853,000 Class F downgraded to 'Bsf/LS5' from 'BBB/LS3'; Outlook Negative. ARGENT MORTGAGE: Moody's Cuts Ratings on Two 2005-W1 Tranches ------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of two tranches issued by Argent Mortgage Loan Trust 2005-W1. The tranches were downgraded to B3 from Ba2, and remain on review for further downgrade given uncertainty regarding future benefit from a mortgage pool insurance policy issued by Radian Guaranty Inc (Insurer Financial Strength rated Ba3). The collateral backing these deals primarily consists of first-lien adjustable-rate subprime residential mortgages. Ratings Rationale The primary source of assumption uncertainty is the future benefit of a mortgage pool insurance policy issued by Radian Guaranty. The policy has a detachment point of 7.65% of original balance, and if all potential claims were accepted could provide a lifetime benefit of up to $191,250,016 (including all claims paid to date). Additionally, overcollateralization and excess spread serves as a deductible that must be exhausted in each period before claims can be considered. If the pool policy provider rejects claims, and overcollateralization and excess spread are depleted, the tranches will experience losses. Pool insurance policies are intended to offer protection to investors by reducing the amount of losses borne by a securitization trust. Typically these policies work by reimbursing losses from approved claims otherwise borne by the securitization between fixed attachment and detachment points. The attachment point (or deductible), is the amount of losses the securitization trust bears before the insurance policy kicks in. The insurer is expected to cover losses from approved claims up to the detachment point (a pre-specified cap) at which time the securitization, again, bears all losses. Claims may be contractually rejected by pool insurance providers in several ways. The most prevalent is rescission, typically occurring when the insurer deems that a loan does not comply with the originator's established underwriting guidelines. Denials (or "claims without payment"), represent a relatively small portion of overall rejected claims, and, according to insurers, typically result from incomplete/inadequate documentation provided by the servicer to the insurer. 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 tranches are wrapped by Financial Guaranty Insurance Company (Rating Withdrawn). RMBS securities wrapped by Financial Guaranty Insurance Company are rated at their underlying rating without consideration of the respective guaranties. 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: Argent Mortgage Loan Trust 2005-W1 -- Cl. A-1, Downgraded to B3 (sf) and Remains On Review for Possible Downgrade; previously on Jan. 13, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn March 25, 2009) -- Cl. A-2, Downgraded to B3 (sf) and Remains On Review for Possible Downgrade; previously on Jan. 13, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Financial Guaranty Insurance Company (Insured Rating Withdrawn March 25, 2009) ASSET SECURITIZATION: S&P Cuts Rating on 1997-D5 Certs. to 'D' -------------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating to 'D (sf)' on the class B-1 commercial mortgage pass-through certificate from Asset Securitization Corp.'s series 1997-D5, a U.S. commercial mortgage-backed securities transaction. Concurrently, S&P affirmed its ratings on seven other classes from the same transaction. S&P's rating actions follow its review of the transaction's remaining collateral, the transaction structure, and the liquidity available to the trust. Although the trust balance has deleveraged significantly, the uncertainty of timely interest payments that could impact the trust waterfall due to ongoing litigation tempered S&P's rating actions. The special servicer, ORIX Capital Markets LLC, in the name of the trustee, Bank of America Merrill Lynch, has filed various claims against the depositor and loan seller. The claims include, among other items, the breach of representation and warranties of several loans that were in the trust. Litigation expenses relating to this matter are being passed through to the trust, and it is S&P's understanding that the legal expenses are likely to increase significantly once a trial date is scheduled and takes place. S&P lowered its rating on the class B-1 certificate to 'D (sf)' due to accumulated interest shortfalls that have been outstanding for four months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. The affirmed ratings on the seven principal and interest certificates reflect subordination and liquidity support levels that are consistent with the outstanding ratings. 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 1.42x and a loan-to-value ratio of 55.7%. S&P further stressed the loans' cash flows under its 'AAA' scenario to yield a weighted average DSC of 1.09x and an LTV ratio of 78.2%. The implied defaults and loss severity under the 'AAA' scenario were 16.6% and 24.5%, respectively. The DSC and LTV calculations noted above exclude 13 fully defeased and one partially defeased loans ($125.4 million, 33.2%) and one specially serviced asset ($3.2 million, 0.8%). S&P separately estimated losses for the specially serviced asset and included it in S&P's 'AAA' scenario implied default and loss figures. Transaction Summary As of the Jan. 14, 2011 trustee remittance report, the collateral pool balance was $377.3 million, which is 21.5% of the balance at issuance. The pool includes 42 loans and one real estate asset, down from 155 loans at issuance. The master servicer, KeyBank Real Estate Capital, provided financial information for 98.8% of the nondefeased loans in the pool, 91.1% of which was full-year 2009 data. S&P calculated a weighted average DSC of 1.47x for the loans in the pool based on the servicer-reported figures. S&P's adjusted DSC and LTV ratio were 1.42x and 55.7%, respectively. S&P's adjusted DSC and LTV figures excluded 13 fully defeased and one partially defeased loans ($125.4 million, 33.2%) and one specially serviced asset ($3.2 million, 0.8%). The transaction has experienced $101.1 million in principal losses to date. Six loans ($61.4 million, 16.3%) in the pool are on the master servicer's watchlist. Eleven loans ($82.9 million, 22.0%) have reported DSCs below 1.10x, six of which ($72.5 million, 19.2%) have a reported DSC of less than 1.00x. Credit Considerations As of the Jan. 14, 2011 trustee remittance report, one asset ($3.2 million, 0.8%) in the pool was with the special servicer, ORIX. The Value City - Carol Stream asset, a 106,500-sq.-ft. retail strip center in Carol Stream, Ill., was transferred to ORIX on April 24, 2008, and became REO on March 12, 2009. ORIX stated that the property is currently under contract for sale. A December 2010 appraisal valued the retail property significantly below the total exposure of $4.9 million. S&P expects a significant loss upon the eventual resolution of this asset. Summary of Top 10 Real Estate Loans The top 10 loans secured by real estate have an aggregate outstanding balance of $223.2 million (59.1%). Using servicer- reported numbers, S&P calculated a weighted average DSC of 1.46x for the top 10 real estate loans. S&P's adjusted DSC and LTV ratio for the top 10 real estate loans are 1.40x and 56.7%, respectively. The second-largest nondefeased loan ($55.2 million, 14.6%) is on the master servicer's watchlist. Details on the three largest top 10 real estate loans are: The Saul Centers Retail Pool loan is the largest nondefeased loan in the pool. Excluding two retail properties totaling 427,300 sq. ft. that defeased in 2010 with an allocated trust balance of $19.2 million, the remaining collateral consists of seven retail centers totaling 1.9 million sq. ft. in various cities in Maryland and Virginia. The nondefeased whole-loan balance of $84.4 million is divided into an $83.9 million senior component that makes up 22.2% of the pooled trust balance and a $0.5 million junior component that provides 100% of the cash flow for the class B-3SC raked certificate (not rated by Standard & Poor's). KeyBank reported a combined DSC of 1.76x for year-end 2009, and the overall occupancy was 94.1% according to the June 30, 2010 rent rolls. The Westin Peachtree Hotel loan ($55.2 million, 14.6%), the second-largest nondefeased loan in the pool, is secured by a 1,068-room, full-service convention hotel in Atlanta. The loan is on the master servicer's watchlist due to a low DSC. KeyBank reported a 0.82x DSC and 53.1% occupancy for year-end 2009. The Dayton Mall loan ($51.7 million, 13.7%), the third-largest nondefeased loan in the pool, is secured by 663,400 sq. ft. of a 1.3 million-sq.-ft. enclosed mall in Dayton, Ohio. KeyBank reported a 1.87x DSC for year-end 2009, and occupancy was 91.9% according to the Sept. 30, 2010 rent roll. Standard & Poor's stressed the collateral in the pool according to its current criteria. The resultant credit enhancement levels are consistent with its affirmed and lowered ratings. Rating Lowered Asset Securitization Corp. Commercial mortgage pass-through certificates series 1997-D5 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- B-1 D (sf) B (sf) 2.51 Ratings Affirmed Asset Securitization Corp. Commercial mortgage pass-through certificates series 1997-D5 Class Rating Credit enhancement (%) ----- ------ ---------------------- A-1D AAA (sf) 98.97 A-1E AAA (sf) 85.02 A-2 AAA (sf) 61.78 A-3 AA+ (sf) 47.83 A-4 A+ (sf) 40.86 A-5 A- (sf) 30.40 A-6 BBB- (sf) 18.78 ATRIUM CDO: S&P Raises Ratings on Various Classes of Notes ---------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A, B-1, B-2, C-1, C-2, D-1, and D-2 notes from Atrium CDO, a collateralized loan obligation transaction managed by Credit Suisse Alternative Capital Inc. S&P removed its ratings on the class A, B-1, B-2, C-1, and C-2 notes from CreditWatch with positive implications. The upgrades reflect improved performance S&P has observed in the deal's underlying asset portfolio and significant paydown of the class A notes since its last rating action in October 2009. According to the Jan. 19, 2011 trustee report, the transaction currently holds $10.7 million in 'CCC' rated assets, down from $29.9 million noted in the Sept. 15, 2009, trustee report. In addition, the transaction holds $12.2 million in defaulted securities, down from $40.1 million in September 2009. The deal has paid down $26.1 million to the class A notes since the last review. Accordingly, the transaction's overcollateralization ratios have improved slightly. The class A O/C ratio is 129.53%, versus 127.75% in September 2009, and the class B O/C ratio is 115.49% versus 115.23%. 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 Atrium CDO Rating ------ Class To From ----- -- ---- A AAA (sf) AA (sf)/Watch Pos B-1 AA (sf) BBB+ (sf)/Watch Pos B-2 AA (sf) BBB+ (sf)/Watch Pos C-1 BBB+ (sf) B+ (sf)/Watch Pos C-2 BBB+ (sf) B+ (sf)/Watch Pos D-1 BB+ (sf) CCC (sf) D-2 BB+ (sf) CCC (sf) ATRIUM III: S&P Raises Ratings on Various Classes of Notes ---------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2a, A-2b, B, C, D-1, and D-2 notes from Atrium III, a collateralized loan obligation transaction managed by Credit Suisse Alternative Capital Inc. S&P removed four of those ratings from CreditWatch with positive implications. The upgrades reflect the improved performance S&P has observed in the transaction's underlying asset portfolio since November 2009. At that time, S&P lowered the ratings on all 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, the transaction held approximately $40.1 million in defaulted obligations and $76.1 million in underlying obligors with a rating in the 'CCC' range, according to the Sept. 25, 2009, trustee report. As of the Dec. 24, 2010 trustee report Atrium III held $17.1 million in defaulted obligations and $40.4 million in assets from underlying obligors with ratings in the 'CCC' range. Since the time of S&P's last rating action, a number of defaulted obligors held in the deal emerged from bankruptcy, with some receiving proceeds that were higher than their carrying value in the overcollateralization (O/C) ratio test calculation. This, in combination with a reduction in assets with ratings in the 'CCC' range and in discount assets, benefited the transaction's O/C ratios. The class A O/C ratio increased to 123.8% as of the Dec. 24, 2010 report from 119.3% as of Sept. 25, 2009 report. The transaction is passing its O/C and interest coverage tests. S&P will continue to review its ratings on the notes and assess whether, in its view, the ratings remain consistent with the credit enhancement available to support them and take rating actions as S&P deems necessary. Rating And Creditwatch Actions Atrium III Rating ------ Class To From ----- -- ---- A-1 AA+ (sf) AA (sf)/Watch Pos A-2a AA (sf) A (sf)/Watch Pos A-2b AA (sf) A (sf)/Watch Pos B BBB+ (sf) BBB- (sf)/Watch Pos C BB+ (sf) BB- (sf) D-1 B+ (sf) B- (sf) D-2 B+ (sf) B- (sf) AURORA BANK: Moody's Reviews Ratings on 48 Tranches --------------------------------------------------- Moody's Investors Service has placed on review for possible downgrade 48 tranches issued in six securitizations of small business loans and four tranches issued in three net interest margin securities transactions. The deals are serviced by Aurora Bank FSB, formerly known as Lehman Brothers Bank, FSB. The loans are secured primarily by commercial real estate. Ratings Rationale The rating actions are due to a significant rise in 60 days or more delinquencies, including amounts in foreclosure and REO, from a range of 10%-13% of the current pool balance in February 2009 to 20%-25% as of the January 2011 distribution date. The 2005-1 deal experienced an increase in 60 days or more delinquencies from 4% to 8% of the current pool balance. The methodology used in these rating actions included an analysis of the loan collateral to arrive at a range of estimated lifetime losses. This range of net losses was then evaluated against the available credit enhancement provided by the reserve account, overcollateralization, and excess spread. Sufficiency of coverage was considered in light of the credit quality of the collateral pool, industry, geographical and loan concentrations, historical variability of losses experienced by the issuer, and servicer quality. The methodology used for the net interest margin securities included evaluating the likelihood of paying interest and principal from excess cash and prepayment fees from the respective underlying small business loan transaction. The potential cash inflow was considered in relation to accumulated interest shortfalls and reserve account deficits. During the review period, Moody's will project expected defaults on the underlying pools of loans using delinquency roll rates and an estimate of market recoveries. The Aaa volatility proxies will also be determined. Driving factors of the Aaa volatility proxy for each deal are the credit quality of the collateral pool, the historical variability in losses experienced by the issuer, the servicer quality as well as the industrial, geographical and obligor concentrations. Based on Moody's revised expected losses and Aaa volatility proxies, Moody's will evaluate whether the available credit enhancement adequately protects investors against future collateral losses for given rating assignments. Primary sources of assumption uncertainty are the general economic environment, commercial property values, and the ability of small businesses to recover from the recession. The complete rating actions are: Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass- Through Certificates, Series 2005-1 -- Cl. A, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. A-IO, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. M1, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Baa2 (sf) -- Cl. M2, B1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to B1 (sf) -- Cl. B, B3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to B3 (sf) Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass- Through Certificates, Series 2006-2 -- Cl. 1A, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 2A2, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 2A3, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. M1, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Baa1 (sf) -- Cl. M2, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Baa3 (sf) -- Cl. M3, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Ba3 (sf) -- Cl. B, B2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to B2 (sf) Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass- Through Certficates, Series 2006-3 -- Cl. 1A, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 2A2, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 2A3, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. M1, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Baa1 (sf) -- Cl. M2, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Ba1 (sf) -- Cl. M3, B1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to B1 (sf) -- Cl. B, B2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to B2 (sf) Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass- Through Certificates, Series 2007-1 -- Cl. 1A, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 2A1, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 2A2, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 2A3, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. M1, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Baa1 (sf) -- Cl. M2, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Baa3 (sf) -- Cl. M3, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Ba3 (sf) -- Cl. M4, B1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to B1 (sf) -- Cl. B, B2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to B2 (sf) Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass- Through Certificates, Series 2007-2 -- Cl. 1A2, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 1A3, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 1A4, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 2A1, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 2A2, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. 2A3, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. M1, A3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to A3 (sf) -- Cl. M2, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Baa3 (sf) -- Cl. M3, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Ba1 (sf) -- Cl. M4, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Ba3 (sf) -- Cl. M5, B1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to B1 (sf) -- Cl. B, B2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to B2 (sf) Issuer: Lehman Brothers Small Balance Commercial Mortgage Pass- Through Certificates, Series 2007-3 -- Cl. AM, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. AJ, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Aa1 (sf) -- Cl. M1, A3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to A3 (sf) -- Cl. M2, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Baa3 (sf) -- Cl. M3, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Ba2 (sf) -- Cl. M4, Ba3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to Ba3 (sf) -- Cl. M5, B1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to B1 (sf) -- Cl. B, B2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 4, 2009 Downgraded to B2 (sf) Issuer: LBSBC Net Interest Margin Securities, Series 2005-2 -- Cl. N2, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on March 18, 2009 Downgraded to Caa3 (sf) Issuer: LBSBC Net Interest Margin Notes, Series 2006-1 -- Cl. N1, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on March 18, 2009 Downgraded to Ba1 (sf) -- Cl. N2, Ca (sf) Placed Under Review for Possible Downgrade; previously on March 18, 2009 Downgraded to Ca (sf) Issuer: LBSBC Net Interest Margin Securities, Series 2006-2 -- Cl. N1, Ca (sf) Placed Under Review for Possible Downgrade; previously on March 18, 2009 Downgraded to Ca (sf) AURUM 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, D-1, and D-2 notes from Aurum CLO 2002-1 Ltd., a collateralized loan obligation transaction managed by Deutsche Asset Management Inc. S&P removed its ratings on the class A-2, B, and C notes from CreditWatch with positive implications. At the same time, S&P affirmed its rating on the class A-1 notes. The upgrades reflect improved performance S&P has observed in the deal's underlying asset portfolio and the significant paydowns to the class A-1 notes since S&P's last rating action in November 2009. The affirmation reflects the availability of credit support at the current rating level. According to the Jan. 6, 2011 trustee report, the transaction currently holds $16.0 million in 'CCC' rated assets, down from $39.1 million noted in the Sept. 1, 2009, trustee report. In addition, the transaction holds $1.7 million in defaulted securities, down from $16.4 million in September 2009. The deal has paid down $108.3 million to the class A-1 notes since the last review. Accordingly, the transaction's overcollateralization ratios have improved since September 2009: * The class A O/C ratio is 164.23%, compared with 133.74%; * The class B O/C ratio is 126.86%, compared with 115.4%; * The class C O/C ratio is 114.68%, compared with 108.46%; and * The class D O/C ratio is 105.29%, compared with 102.72%. 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 may take rating actions as it deems necessary. Rating And Creditwatch Actions Aurum CLO 2002-1 Ltd. Rating ------ Class To From ----- -- ---- A-2 AAA (sf) AA+ (sf)/Watch Pos B AA+ (sf) A+ (sf)/Watch Pos C A (sf) BB+ (sf)/Watch Pos D-1 B (sf) CCC- (sf) D-2 B (sf) CCC- (sf) Rating Affirmed Aurum CLO 2002-1 Ltd. Class Rating ----- ------ A-1 AAA (sf) AUSTIN HOUSING: S&P Gives Stable Outlook on 'CC' Bond Rating ------------------------------------------------------------ Standard & Poor's Ratings Services revised the outlook on its 'CC' long-term rating on Austin Housing Finance Corp., Texas' single- family mortgage revenue refunding bonds series 1997A-1 to stable from negative. The bonds are secured by Ginnie Mae mortgage pass- through certificates. The rating reflects S&P's view of the insufficiency of revenues from mortgage debt service payments and investment earnings to pay full and timely debt service on the bonds until maturity, investments held in JPMorgan 100% U.S. Treasury Money Market Fund (AAAm), and an asset-to-liability ratio of 97.18% as of Jan. 5, 2011. "S&P expects that the parity position will continue to decline," said Standard & Poor's credit analyst Renee J. Berson. "The outlook is also reflective of the current rating on the bonds." AVALON CAPITAL: 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 Def, and D Def notes from Avalon Capital Ltd. 3, a collateralized loan obligation transaction managed by INVESCO Senior Secured Management Inc. At the same time, S&P removed its ratings on the class A-1, A-2, and B notes from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. The upgrades primarily reflect an improvement in the performance of the transaction's underlying portfolio since S&P's Nov. 17, 2009 rating action, when S&P downgraded the notes following the application of its September 2009 corporate CDO criteria. As of the Jan. 10, 2011 trustee report, the transaction had $2.71 million of defaulted assets. This was down from $45.33 million noted in the Oct. 7, 2009, trustee report, which S&P referenced for its November 2009 rating actions. The upgrade on the class D notes additionally reflects turbo payments to the tranche balance. Since the last action, the class D notes have been paid down by a total of $5.7 million, leaving them at 77% of their original note balance. Subsequently, the transaction has benefited from an increase in overcollateralization available to support the rated notes. The trustee reported these O/C ratios in the Jan. 10, 2011 monthly report: * The class A/B O/C ratio was 121.86%, compared with a reported ratio of 116.52% in October 2009; * The class C O/C ratio was 112.37%, compared with a reported ratio of 107.44% in October 2009; and * The class D O/C ratio was 105.69%, compared with a reported ratio of 99.98% 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 Avalon Capital Ltd. 3 Rating ------ Class To From ----- -- ---- A-1 AA+ (sf) AA (sf)/Watch Pos A-2 Var Fu AA+ (sf) AA (sf)/Watch Pos B AA (sf) A+ (sf)/Watch Pos C Def BBB+ (sf) BBB (sf) D Def BB+ (sf) CCC- (sf) Transaction Information ----------------------- Issuer: Avalon Capital Ltd. 3 Coissuer: Avalon Capital LLC 3 Collateral manager: INVESCO Senior Secured Management Inc. Underwriter: Lehman Bros. Inc. Trustee: Bank of New York Mellon (The) Transaction type: Cash flow CLO 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, A-3L, B-1L, and B-2L notes from Avenue CLO II Ltd., a collateralized loan obligation transaction managed by Avenue Capital Management II L.P. At the same time, S&P removed its ratings on the class A-1L, A-2L, A-3L, and B-1L notes from CreditWatch, where S&P had placed them with positive implications on Nov. 8, 2010. The upgrades reflect an improvement in the credit quality available to support the notes since S&P's Dec. 18, 2009, rating action, when S&P downgraded the rated notes, following the application of S&P's September 2009 corporate collateralized debt obligation criteria. As of the Dec. 21, 2010 trustee report, the transaction had $18.37 million in defaulted assets. This was down from $44.13 million noted in the Nov. 18, 2009 trustee report, which S&P referenced for its December 2009 rating actions. 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 Dec. 21, 2010 monthly report: * The senior class A O/C ratio (which includes the class A-1L and A-2L notes) was 121.71%, compared with a reported ratio of 117.58% in November 2009; * The class A O/C ratio was 114.03%, compared with a reported ratio of 110.30% in November 2009; * The class B-1L O/C ratio was 108.18%, compared with a reported ratio of 104.68% in November 2009; and * The class B-2L O/C ratio was 103.23%, compared with a reported ratio of 98.90% in November 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 II Ltd. Rating ------ Class To From ----- -- ---- A-1L AAA (sf) AA+ (sf)/Watch Pos A-2L AA (sf) A+ (sf)/Watch Pos A-3L A+ (sf) BBB+ (sf)/Watch Pos B-1L BBB (sf) B+ (sf)/Watch Pos B-2L CCC+ (sf) CCC- (sf) Transaction Information ----------------------- Issuer: Avenue CLO II Ltd. Co-issuer: Avenue CLO II (Delaware) Corp. Collateral manager: Avenue Capital Management II L.P. Underwriter: Bear Stearns Cos. LLC (The) Trustee: Bank of New York Mellon (The) Transaction type: Cash flow CLO AVERY POINT: S&P Raises Ratings on Various Classes of Notes ----------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-3, B, C-1, C-2, D-1, D-2, and E notes from Avery Point CLO Ltd., a collateralized loan obligation transaction managed by Sankaty Advisors LLC. S&P removed its ratings on the class A-3, B, C-1, and C-2 notes from CreditWatch with positive implications. At the same time, S&P affirmed its rating on the class A-2 notes. The upgrades reflect improved performance S&P has observed in the deal's underlying asset portfolio and significant paydowns to the class A-1 and A-2 notes since S&P's last rating action in December 2009. The affirmation reflects the availability of credit support at the current rating level. According to the Jan. 5, 2011, trustee report, the transaction currently holds $16.8 million in 'CCC' rated assets, down from $43.3 million noted in the Oct. 5, 2009, trustee report. In addition, the transaction holds $3.4 million in defaulted securities, down from $32.9 million in October 2009. The deal has paid down $49.7 million and $97.8 million to the class A-1 and A-2 notes, respectively, since S&P's December 2009 rating action. Accordingly, the transaction's overcollateralization ratios have improved. The class A/B O/C ratio is 144.0% versus 124.76% in October 2009, the class C O/C ratio is 127.4% versus 115.37%, the class D O/C ratio is 117.7% versus 109.45%, and the class E O/C ratio is 114.3% versus 107.3%. 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 Avery Point CLO Ltd. Rating ------ Class To From ----- -- ---- A-1 AAA (sf) AA+ (sf) A-3 AAA (sf) AA+ (sf)/Watch Pos B AAA (sf) AA- (sf)/Watch Pos C-1 AA- (sf) BBB+ (sf)/Watch Pos C-2 AA- (sf) BBB+ (sf)/Watch Pos D-1 BBB+ (sf) BB+ (sf) D-2 BBB+ (sf) BB+ (sf) E BB+ (sf) B+ (sf) Rating Affirmed Avery Point CLO Ltd. Class Rating ----- ------ A-2 AAA (sf) BABSON CLO: S&P Raises Ratings on Various Classes of Notes ---------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2B, B, C, and D notes from Babson CLO Ltd. 2003-I, a collateralized loan obligation transaction managed by Babson Capital Management LLC. At the same time, S&P removed those ratings from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. S&P also affirmed its 'AAA (sf)' rating on the class A-2A notes and its 'CCC- (sf)' rating on the class E notes and senior preferred shares. The upgrades reflect improved performance S&P has observed in the deal's underlying asset portfolio and paydowns on the class A-1 and class A-2A notes since S&P's Dec. 11, 2009 rating action, when S&P downgraded most of the rated notes following the application of its September 2009 corporate CDO criteria. As of the Dec. 31, 2010 trustee report, the transaction had $1.46 million of defaulted assets. This was down from $15.13 million noted in the Sept. 30, 2009 trustee report, which S&P referenced for its December 2009 rating actions. The affirmations of the class A-2A and E notes and the senior preferred shares reflect the availability of credit support at the current rating levels. The transaction has also benefited from an increase in overcollateralization (O/C) available to support the rated notes. The trustee reported these O/C ratios in the Dec. 31, 2010 monthly report: * The class A/B O/C ratio was 138.80%, compared with a reported ratio of 120.48% in September 2009; * The class C/D O/C ratio was 109.31%, compared with a reported ratio of 104.67% in September 2009; and * The class E/senior preferred shares O/C ratio was 104.50%, compared with a reported ratio of 100.46% in September 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 Babson CLO Ltd 2003-I Rating ------ Class To From ----- -- ---- A-1 AAA (sf) AA+ (sf)/Watch Pos A-2B AAA (sf) AA+ (sf)/Watch Pos B AAA (sf) A+ (sf)/Watch Pos C A+ (sf) BBB+ (sf)/Watch Pos D BB+ (sf) B+ (sf)/Watch Pos Ratings Affirmed Babson CLO Ltd. 2003-I Class Rating ----- ------ A-2A AAA (sf) E CCC- (sf) Senior preferred shares CCC- (sf) Transaction Information ----------------------- Issuer: Babson CLO Ltd. 2003-I Coissuer: Babson (Delaware) CLO Corp. 2003-I Collateral manager: Babson Capital Management LLC Underwriter: Wachovia Securities Inc. Trustee: U.S. Bank National Association Transaction type: Cash flow CLO BAKER STREET: S&P Raises Ratings on Four Classes of Notes --------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class B, C, D, and E notes from Baker Street Funding CLO 2005-1 Ltd., a collateralized loan obligation transaction managed by Seix Advisors. S&P also affirmed its 'AA+' (sf) ratings on the class A-1 and A-2 notes. At the same time, S&P removed its ratings on the class A-1, A-2, B, and C notes from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. The upgrades reflect an improvement in the credit quality available to support the notes since S&P's Feb. 8, 2010 rating actions, when S&P downgraded most of the rated notes, following the application of S&P's September 2009 corporate CDO criteria. As of the Dec. 8, 2010 trustee report, the transaction had $10.34 million in defaulted assets. This was down from $32.97 million noted in the Jan. 4, 2010, trustee report, which S&P referenced for its February 2010 rating actions. 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 Dec. 8, 2010 monthly report: * The class A/B O/C ratio was 119.31%, compared with a reported ratio of 115.73% in January 2010; * The class C O/C ratio was 112.13%, compared with a reported ratio of 108.76% in January 2010; * The class D O/C ratio was 106.86%, compared with a reported ratio of 103.66% in January 2010; and * The class E O/C ratio was 103.75%, compared with a reported ratio of 100.46% in January 2010. 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 Baker Street Funding CLO 2005-1 Ltd. Rating ------ Class To From ----- -- ---- A-1 AA+ (sf) AA+ (sf)/Watch Pos A-2 AA+ (sf) AA+ (sf)/Watch Pos B AA- (sf) A+ (sf)/Watch Pos C A (sf) BBB+ (sf)/Watch Pos D BB+ (sf) B+ (sf) E CCC+ (sf) CCC- (sf) Transaction Information ----------------------- Issuer: Baker Street Funding CLO 2005-1 Ltd. Coissuer: Baker Street Funding CLO 2005-1 Corp. Collateral manager: Seix Advisors Underwriter: SunTrust Capital Markets Trustee: The Bank of New York Mellon Transaction type: Cash flow CLO BANC OF AMERICA: Moody's Affirms Ratings on 20 2005-2 Certs. ------------------------------------------------------------ Moody's Investors Service affirmed the ratings of 20 classes of Banc of America, Commercial Mortgage Pass-Through Certificates, Series 2005-2: -- Cl. A-4, Affirmed at Aaa (sf); previously on July 5, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-AB, Affirmed at Aaa (sf); previously on July 5, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-5, Affirmed at Aaa (sf); previously on July 5, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. X-C, Affirmed at Aaa (sf); previously on July 5, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. X-P, Affirmed at Aaa (sf); previously on July 5, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-M, Affirmed at Aaa (sf); previously on July 5, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-J, Affirmed at Aaa (sf); previously on Aug. 27, 2009 Confirmed at Aaa (sf) -- Cl. B, Affirmed at Aa2 (sf); previously on Aug. 27, 2009 Confirmed at Aa2 (sf) -- Cl. C, Affirmed at Aa3 (sf); previously on Aug. 27, 2009 Confirmed at Aa3 (sf) -- Cl. D, Affirmed at A3 (sf); previously on Aug. 27, 2009 Downgraded to A3 (sf) -- Cl. E, Affirmed at Baa1 (sf); previously on Aug. 27, 2009 Downgraded to Baa1 (sf) -- Cl. F, Affirmed at Baa2 (sf); previously on Aug. 27, 2009 Downgraded to Baa2 (sf) -- Cl. G, Affirmed at Baa3 (sf); previously on Aug. 27, 2009 Downgraded to Baa3 (sf) -- Cl. H, Affirmed at Ba2 (sf); previously on Aug. 27, 2009 Downgraded to Ba2 (sf) -- Cl. J, Affirmed at Ba3 (sf); previously on Aug. 27, 2009 Downgraded to Ba3 (sf) -- Cl. K, Affirmed at B1 (sf); previously on Aug. 27, 2009 Downgraded to B1 (sf) -- Cl. L, Affirmed at B2 (sf); previously on Aug. 27, 2009 Downgraded to B2 (sf) -- Cl. M, Affirmed at Caa2 (sf); previously on Aug. 27, 2009 Downgraded to Caa2 (sf) -- Cl. N, Affirmed at Caa2 (sf); previously on Aug. 27, 2009 Downgraded to Caa2 (sf) -- Cl. O, Affirmed at Caa3 (sf); previously on Aug. 27, 2009 Downgraded to Caa3 (sf) Ratings Rationale 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 current ratings. Moody's rating action reflects a cumulative base expected loss of 3.2% of the current balance. At last review, Moody's cumulative base expected loss was 3.3%. Moody's stressed scenario loss is 13.5% 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 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. 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. 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 January 10, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 26% to $1.2 billion from $1.6 billion at securitization. The Certificates are collateralized by 77 mortgage loans ranging in size from less than 1% to 9% of the pool, with the top ten loans representing 51% of the pool. Two loans, representing 3% of the pool, have defeased and are collateralized with U.S. Government securities. Twenty-two loans, representing 26% 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 trust has experienced an aggregate $12,573 loss since securitization. Currently four loans, representing 2% of the pool, are in special servicing. The largest specially serviced loan is the Great Wall Mall Loan ($14.6 million -- 1.2% of the pool), which is secured by 73,866 square foot (SF) anchored retail center located in Kent, Washington. The loan was transferred to special servicing on December 31, 2010 and is currently in its grace period. The master servicer has recognized an aggregate $772,808 appraisal reduction on two of the specially serviced loans. Moody's has estimated an aggregate $9.1 million loss (37% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for seven poorly performing loans representing 13% of the pool. Moody's has estimated a $8.9 million loss (18% expected loss based on a 50% probability default) from the troubled loans. Moody's was provided with full year 2009 operating results for 99% of the pool. Excluding troubled loans, Moody's weighted average LTV 95% compared to 101% 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 9.3%. Excluding troubled loans, Moody's actual and stressed DSCRs are 1.60X and 1.11X, respectively, compared to 1.61X and 1.01X 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 24 compared to 30 at Moody's prior review. The top three performing conduit loans represent 24% of the pool. The largest loan is the New York University Housing Loan ($110.0 million -- 9.1% of the pool), which is secured by a 264- unit, 17-story student housing property located in the Tribeca sub-market of New York City. The property is 100% master leased to New York University. Performance has increased since securitization due to a higher base rent. Moody's LTV and stressed DSCR are 96% and 0.90X, respectively, compared to 114% and 0.76X, at last review. The second largest loan is the Canyon Ranch Loan ($95.0 million -- 7.8% of the pool), which is secured by two resort hotels containing a total of 315 rooms. The resorts are located in Arizona and Massachusetts. Performance has improved over the trailing 12 months due to increases in occupancy and revenues. Moody's LTV and stressed DSCR 80% and 1.42X, respectively, compared to 87% and 1.30X at last review. The third largest loan is the Regents Square I & II Loan ($88.6 million -- 7.3% of the pool), which is secured by a 307,450 SF office portfolio located in the La Jolla sub-market of San Diego, California. The property was 73% leased as of July 2010 compared to 75% at last review. Performance has declined due to an increase in vacancy and increases in operating expenses. The loan is currently on the master servicer's watchlist for low occupancy. Moody's has assumed a high default probability for this loan. Moody's LTV and stressed DSCR 171% and 0.59X, respectively, compared to 140% and 0.70X at last review. BEAR STEARNS: Moody's Upgrades Ratings on Series 1998-C1 Certs. --------------------------------------------------------------- Moody's Investors Service upgraded the rating of one class and placed the class on watch for possible downgrade and affirmed three classes of Bear Stearns Commercial Mortgage Securities Inc., Commercial Mortgage Pass-Through Certificates, Series 1998-C1: -- Cl. E, Upgraded to Aaa (sf) and Placed Under Review for Possible Downgrade; previously on April 1, 2009 Upgraded to Aa2 (sf) -- Cl. G, Affirmed at Ba2 (sf); previously on June 29, 1998 Assigned Ba2 (sf) -- Cl. H, Affirmed at B1 (sf); previously on May 25, 2006 Downgraded to B1 (sf) -- Cl. I, Affirmed at C (sf); previously on May 25, 2006 Downgraded to C (sf) Ratings Rationale Moody's rating action did not address the ratings of Classes B, C, D and X, which are all currently rated Aaa, on review for possible downgrade. These classes were placed on review on January 19, 2011. KeyCorp Real Estate Capital Markets, Inc. is the master servicer on this transaction and deposits collection, escrow and other accounts in KeyBank, National Association. Keybank no longer meets Moody's rating criteria for an eligible depository account institution for Aaa and Aa1 rated securities. Moody's is reviewing arrangements that KeyBank has proposed, and that it may propose, to mitigate the incremental risk indicated by the lower rating of the depository account institution, so as possibly to allow the classes on review to maintain their current ratings. The upgrade of Class E is due to overall improved pool performance and a significant increase in subordination levels due to loan paydowns and amortization. However, given that KeyBank does not meet Moody's rating criteria as an eligible despository account institution, this place is placed on review for possible downgrade along with the transaction's other Aaa rated classes. The affirmations of Classes G, H and I 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 2.0% of the current balance. At last review, Moody's cumulative base loss was 5.1%. Moody's stressed scenario loss is 4.3% 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 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 9 compared to 10 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. 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 April 1, 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 rating. Deal Performance As of the January 18, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 80% to $146.5 million from $714.7 million at securitization. The Certificates are collateralized by 28 mortgage loans ranging in size from less than 1% to 14% of the pool, with the top ten loans representing 63% of the pool. Nine loans, representing 29% of the pool, have defeased and are collateralized by U.S. Government securities. There are no loans in the pool with investment grade credit estimates. Two loans, representing 3% 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. Fourteen loans have been liquidated from the pool since securitization, resulting in a $21.2 million loss (50% loss severity). The pool had experienced an aggregate $20.2 million loss at last review. There are no loans currently in special servicing. Moody's has assumed a high default probability for the two poorly performing loans representing 3% of the pool and has estimated a $993,000 loss (27% expected loss based on a 61% probability default) from these troubled loans. Moody's was provided with full year 2009 and partial year 2010 operating results for 86% and 85%, respectively, of the pool's non-defeased loans. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 50% compared to 57% 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 9.6%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 2.57X and 2.27X, respectively, compared to 1.83X and 1.96X 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. The top three performing conduit loans represent 34% of the pool balance. The largest loan is the Mission Marketplace Loan ($19.8 million -- 13.5% of the pool), which is secured by a 344,100 square foot retail center located in Oceanside, California. Major tenants include Kmart, Mission Market Cinema and Henry Markets. Financial performance has been stable since last review. The property was 87% leased as of September 2010 versus 90% at last review. The loan has amortized 4% since last review. Moody's LTV and stressed DSCR are 71% and 1.37X, respectively, compared to 74% and 1.31X at last review. The second largest loan is the Lomas Santa Fe Plaza Loan ($17.5 million -- 12.0% of the pool), which is secured by a 214,000 SF retail center located north of San Diego in Solana Beach, California. Although financial performance at this property has declined since last review due to lower occupancy, the property is performing better than Moody's expectations. At last review Moody's analysis reflected a stressed cash flow due to concerns about potential income volatility caused by upcoming lease expirations. The center was 94% leased as September of 2010 versus 98% at last review. The loan has amortized 4% since last review. Moody's LTV and stressed DSCR are 37% and 2.66X, respectively, compared to 44% and 2.24X at last review. The third largest loan is the Torrey Reserve South Court Loan ($12.9 million -- 8.8% of the pool), which is secured by a 130,641 SF office building located in San Diego, California. Although financial performance at this property has declined since last review due to lower occupancy, the property is performing better than Moody's expectations. At last review Moody's analysis reflected a stressed cash flow due to concerns about potential income volatility caused by upcoming lease expirations. The property was 86% leased as of September 2010 versus 90% at last review. This loan has amortized 4% since last review. The loan is on the Master Servicer's watchlist due to lower occupancy. Moody's LTV and stressed DSCR are 48% and 2.33X, respectively, compared to 54% and 2.11X at last review. BELHURST CLO: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2, A-3, B, C, D, and E notes from Belhurst CLO Ltd., a collateralized loan obligation managed by INVESCO Senior Secured Management Inc. S&P removed the ratings on the class A-1, A-2, A- 3, B, C, and D notes from CreditWatch with positive implications. At the same time, S&P withdrew its rating on the transaction's principal protected notes. The upgrades reflect the improved performance S&P has observed in the transaction's underlying asset portfolio since its last rating action in October 2009. S&P withdrew its rating on the principal protected notes, which is dependent on the rating on the segregated collateral securities pledged for that class, in accordance with the rating of the segregated collateral securities. According to the Dec. 7, 2010 trustee report, the transaction held $4.21 million in defaulted assets, down from $32.2 million in defaulted assets as of the Sept. 8, 2009 trustee report. The transaction has also benefited from an increase in overcollateralization (O/C) available to support the rated notes. The trustee reported these O/C ratios in the Dec. 7, 2010 trustee report: * The class A/B O/C ratio was 120.5%, compared with a reported ratio of 115.5% in September 2009; * The class C O/C ratio was 110.7%, compared with a reported ratio of 106.0% in September 2009; and * The class D O/C ratio was 107.51%, compared with a reported ratio of 102.99% in September 2009. The transaction has paid down the deferred interest on the class D and E notes that had previously accumulated when it was failing the class C and class D principal coverage tests. 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 Belhurst CLO Ltd. Rating ------ Class To From ----- -- ---- A-1 AA+ (sf) AA- (sf)/Watch Pos A-2 AA+ (sf) AA- (sf)/Watch Pos A-3 AA+ (sf) AA- (sf)/Watch Pos B AA (sf) A+ (sf)/Watch Pos C (deferrable) BBB+ (sf) BBB- (sf)/Watch Pos D (deferrable) BBB (sf) B+ (sf)/Watch Pos E (deferrable) B+ (sf) CCC- (sf) Principal protected NR AAA (sf) NR -- not rated. CARLYLE ARNAGE: S&P Takes Rating Actions on Various Classes ----------------------------------------------------------- Standard & Poor's Ratings Services raised its rating on the class B-2L notes and affirmed its ratings on the class A-1L, A-1LA, A- 1LB, A-2L, A-3L, and B-1L notes from Carlyle Arnage CLO Ltd. (formerly known as Stanfield Arnage CLO Ltd.), a collateralized loan obligation managed by Carlyle Investment Management LLC. At the same time, S&P removed its ratings on classes A-1L, A-1LA, and A-1LB from CreditWatch with positive implications. The upgrade reflects the improved performance S&P has observed in the transaction since its last rating action in November 2009. According to the Jan. 27, 2011 trustee report, the transaction held $1 million in defaulted assets, down from $5 million noted in the Sept. 15, 2009 trustee report. The class A overcollateralization test improved to 112.93% in January 2011 from 111.69% as of September 2009. In addition, class B-2L's credit enhancement has improved. The rating was capped by the application of the largest obligor default supplemental test at the time of S&P's last rating action; however, as of January 2011, class B-2L had sufficient credit enhancement to withstand the combinations of underlying asset defaults specified by the largest obligor default supplemental test at the 'B+ (sf)' rating level. The affirmations and CreditWatch removals reflect S&P's view that sufficient credit support is available to the classes at their current rating levels. 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 will take rating actions as it deems necessary. Rating And Creditwatch Actions Carlyle Arnage CLO Ltd. Rating ------ Class To From ----- -- ---- B-2L B+ (sf) CCC+ (sf) A-1L AA+ (sf) AA+ (sf)/Watch Pos A-1LA AA+ (sf) AA+ (sf)/Watch Pos A-1LB AA+ (sf) AA+ (sf)/Watch Pos Ratings Affirmed Carlyle Arnage CLO Ltd. Class Rating ----- ------ A-2L A+ (sf) A-3L BB+ (sf) B-1L BB+ (sf) CARLYLE AZURE: S&P Raises Ratings on Three Classes of Notes ----------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on three classes of notes from Carlyle Azure CLO Ltd., a collateralized loan obligation transaction managed by The Carlyle Group. S&P also affirmed its ratings on an additional class of notes from the same transaction. At the same time, S&P affirmed its ratings on the class A-1L and A-1LV notes and removed them from CreditWatch with positive implications. The upgrades reflect improved performance S&P has observed in the deal's underlying asset portfolio since its last rating action in October 2009. According to the December 2010 trustee report, which S&P used in its current analysis, the balance of defaulted obligations in the transaction's asset portfolio was $5 million, compared with $10 million as of the September 2009 trustee report (which S&P used as a reference for its October 2009 analysis). Similarly, there were $14 million of 'CCC' rated obligations in the transaction's asset portfolio according to the December 2010 trustee report, down from $36 million as of the September 2009 trustee report. Standard & Poor's will continue to review whether, in its view, the ratings assigned to the notes remain consistent with the credit enhancement available to support them and take rating actions as S&P deems necessary. Ratings Raised Carlyle Azure CLO Ltd. Rating ------ Class To From ----- -- ---- A-2L AA- (sf) A+ (sf) A-3L A- (sf) BBB+ (sf) B-1L BBB- (sf) CCC+ (sf) Rating Affirmed Carlyle Azure CLO Ltd. Class Rating ----- ------ X AAA (sf) Ratings Affirmed And Removed From Creditwatch Carlyle Azure CLO Ltd. Class Rating ----- ------ A-1L AA+ (sf)/Watch Pos A-1LV AA+ (sf)/Watch Pos CD 2007-CD4: Moody's Reviews Ratings on 10 Classes of Certs. ------------------------------------------------------------ Moody's Investors Service placed 10 classes of CD 2007-CD4 Commercial Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2007-CD4 on review for possible downgrade: -- Cl. A-1A, Aaa (sf) Placed Under Review for Possible Downgrade; previously on April 10, 2007 Affirmed at Aaa (sf) -- Cl. A-4, Aaa (sf) Placed Under Review for Possible Downgrade; previously on April 10, 2007 Affirmed at Aaa (sf) -- Cl. A-MFX, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on March 4, 2010 Downgraded to Aa1 (sf) -- Cl. A-MFL, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on March 4, 2010 Downgraded to Aa1 (sf) -- Cl. A-J, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on March 4, 2010 Downgraded to Baa3 (sf) -- Cl. B, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on March 4, 2010 Downgraded to Ba2 (sf) -- Cl. C, B2 (sf) Placed Under Review for Possible Downgrade; previously on March 4, 2010 Downgraded to B2 (sf) -- Cl. D, Caa1 (sf) Placed Under Review for Possible Downgrade; previously on March 4, 2010 Downgraded to Caa1 (sf) -- Cl. E, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on March 4, 2010 Downgraded to Caa3 (sf) -- Cl. F, Ca (sf) Placed Under Review for Possible Downgrade; previously on March 4, 2010 Downgraded to Ca (sf) The classes were placed on review 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 March 24th, 2010. Deal And Performance Summary As of the January 5th, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 3% to $6.4 billion from $6.6 billion at securitization. The Certificates are collateralized by 375 mortgage loans ranging in size from less than 1% to 6% of the pool, with the top ten loans representing 34% of the pool. One hundred and two loans, representing 26% 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. One loan has been liquidated from the pool, resulting in an aggregate realized loss of $3.3 million (45% loss severity). Forty loans, representing 19% of the pool, are currently in special servicing. The specially serviced loans are secured by a mix of multifamily, retail, hotel and industrial property types. The master servicer has recognized appraisal reductions totaling $509.3 million for 24 of the specially serviced loans. At last review, there were 30 loans, representing 13% of the pool, in special servicing. Moody's review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. CENTURION CDO: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A, B-1, B-2, C, D-1, D-2, and D-3 notes from Centurion CDO VI Ltd. a collateralized loan obligation transaction managed by RiverSource Investments LLC. At the same time, S&P removed the ratings on the class A, B-1, B-2, and C notes from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. The upgrades reflect improved performance S&P has observed in the deal's underlying asset portfolio since its Nov. 17, 2009 rating action, when S&P downgraded all of the rated notes following the application of its September 2009 corporate CDO criteria. As of the Jan. 5, 2011 trustee report, the transaction had $4.7 million of defaulted assets. This was down from $21.42 million noted in the Oct. 5, 2009 trustee report, which S&P referenced for its November 2009 rating actions. 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 Jan. 5, 2011 monthly report: * The class A O/C ratio was 136.24%, compared with a reported ratio of 130.89% in October 2009; * The class B O/C ratio was 119.6%, compared with a reported ratio of 116.61% in October 2009; * The class C O/C ratio was 115.05%, compared with a reported ratio of 112.63% in October 2009; and * The class D O/C ratio was 110.49%, compared with a reported ratio of 108.61% 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 Centurion CDO VI Ltd. Rating ------ Class To From ----- -- ---- A AAA (sf) AA+ (sf)/Watch Pos B-1 AA- (sf) BBB- (sf)/Watch Pos B-2 AA- (sf) BBB- (sf)/Watch Pos C A- (sf) B+ (sf)/Watch Pos D-1 BBB- (sf) CCC- (sf) D-2 BBB- (sf) CCC- (sf) D-3 BBB- (sf) CCC- (sf) Transaction Information ----------------------- Issuer: Centurion CDO VI Ltd. Coissuer: Centurion CDO VI Corp. Collateral manager: RiverSource Investments LLC Underwriter: Credit Suisse AG Trustee: The Bank of New York Mellon Transaction type: Cash flow CLO CHASE MANHATTAN: S&P Raises Ratings on Three Classes of Certs. -------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on three classes of commercial mortgage pass-through certificates from Chase Manhattan Bank-First Union National Bank Commercial Mortgage Trust's series 1999-1, a U.S. commercial mortgage-backed securities transaction. In addition, S&P affirmed its ratings on seven other classes from the same transaction. The rating actions reflect S&P's analysis of the remaining collateral in the pool, the deal structure, and liquidity available to the trust. The raised ratings reflect increased credit enhancement levels resulting from principal paydowns to the trust. S&P's analysis included a review of the credit characteristics of all the assets in the pool. Using servicer-provided financial information, S&P calculated an adjusted debt service coverage of 1.27x and a loan-to-value ratio of 68.2%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 0.99x and an LTV ratio of 77.4%. The implied default and loss severity rates under S&P's 'AAA' scenario were 25.8% and 12.3%, respectively. All of the DSC and LTV calculations S&P noted above exclude the transaction's three ($12.5 million, 6.5%) specially serviced assets, three ($3.4 million, 1.7%) loans that S&P determined to be credit- impaired, and 20 ($55.2 million, 28.7%) defeased loans. S&P separately estimated losses for the six specially serviced and credit-impaired assets and included them in the 'AAA' scenario implied default and loss figures. The affirmations of S&P's ratings on the principal and interest certificates reflect liquidity support and subordination levels that are consistent with the outstanding ratings. S&P affirmed its rating on the class X interest-only certificate based on its current criteria. Transaction Summary As of the Jan. 18, 2011 trustee remittance report, the collateral pool balance was $192.8 million, which is 13.8% of the balance at issuance. The pool includes 56 loans and one real estate owned asset, down from 205 loans at issuance. Twenty ($55.2 million, 28.7%) loans are defeased and 18 ($35.1 million, 18.2%) loans are classified as credit-tenant-lease loans. The master servicer, Berkadia Commercial Mortgage LLC, provided financial information for 88.4% of the nondefeased and non-CTL loans in the pool. Of that information, 95.2% was full-year 2009, with the balance reflecting interim 2010 reporting. S&P calculated a weighted average DSC of 1.50x for the pool based on the servicer-reported figures. S&P's adjusted DSC and LTV ratio were 1.27x and 68.2%, respectively. S&P's adjusted figures exclude the transaction's three ($12.5 million, 6.5%) specially serviced assets, three ($3.4 million, 1.7%) loans that S&P determined to be credit- impaired, and the defeased loans. Four ($7.0 million, 3.7%) loans in the pool are on the master servicer's watchlist, including one of the top 10 real estate exposures, which S&P discuss below. Two ($2.8 million, 1.5%) loans have a reported DSC below 1.10x, one ($1.5 million, 0.8%) of which has a reported DSC of less than 1.00x. The transaction has experienced $18.9 million in principal losses to date. Credit Considerations As of the Jan. 18, 2011 trustee remittance report, three ($12.5 million, 6.5%) assets in the pool were with the special servicer, C-III Asset Management LLC. Two of these assets are top 10 real estate exposures. The reported payment status of the specially serviced assets is as follows: one ($5.9 million, 3.0%) is REO and two ($6.7 million, 3.5%) are 90-plus-days delinquent. The largest specially serviced asset has a $3.2 million appraisal reduction amount in effect. S&P estimated losses on all three of the specially serviced assets, arriving at a weighted-average loss severity of 27.5%. Details on the two specially serviced top 10 real estate exposures are: The Villa Park III asset ($5.9 million, 3.0%) is the seventh- largest exposure in the pool, and the largest asset with the special servicer. The REO asset is an 88,960-sq.-ft. industrial property in Richmond, Va. The loan was originally transferred to the special servicer on June 5, 2009. Recent DSC data was not available for this asset, and the property was 91.0% occupied as of April 2009. Standard & Poor's anticipates a moderate loss upon the eventual resolution of this asset. The Sierra Pacific Spectrum loan ($5.1 million, 2.7%) is the ninth-largest loan in the pool, and the second-largest asset with the special servicer. The loan is secured by a 70,511-sq.-ft. office property in Phoenix, Ariz. The loan was transferred to the special servicer on Aug. 12, 2010, and is classified as 90-plus- days delinquent. Reported DSC was 1.17x as of December 2009 and reported property occupancy was 94.1% as of June 2010. Standard & Poor's anticipates a moderate loss upon the eventual resolution of this asset. In addition to the specially serviced assets, S&P determined three ($3.4 million, 1.7%) loans to be credit-impaired. Each individual loan has a balance that represents less than 0.7% of the pool. The collateral properties are located in Rome, Ga.; San Benito, Texas; and Harlingen, Texas. The loans appear on the master servicer's watchlist, one for a low DSC and two for other factors cited as increasing the loans' default risk. Based on the reported loan statuses, financial information, and watchlist comments, S&P determined the loans to be at an increased risk of default and loss. Summary of Top 10 Real Estate Loans The top 10 real estate loans, excluding CTL loans, have an aggregate outstanding balance of $87.9 million (45.6%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.51x for the top 10 real estate loans. S&P's adjusted DSC and LTV ratio were 1.32x and 68.0%, respectively. S&P's adjusted figures exclude two specially serviced, top 10 loans. The Norwest Bank Office Building loan ($3.7 million, 1.9%), which is the 10th- largest loan in the pool, is the only top 10 loan that appears on the master servicer's watchlist. The loan is secured by a 68,536- sq.-ft. office property in Denver, Colo. Reported DSC was 1.67x as of December 2009, and the property was 88.9% occupied as of March 2010. The loan appears on the master servicer's watchlist for an impending maturity date, which, according to the master servicer, is now March 1, 2011. Standard & Poor's stressed the assets in the pool according to its criteria and the analysis is consistent with its raised and affirmed ratings. Ratings Raised Chase Manhattan Bank-First Union National Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 1999-1 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- F AAA (sf) AA+ (sf) 64.50 G A+ (sf) BBB+ (sf) 33.69 H A- (sf) BBB (sf) 28.26 Ratings Affirmed Chase Manhattan Bank-First Union National Bank Commercial Mortgage TrustCommercial mortgage pass-through certificates series 1999-1 Class Rating Credit enhancement (%) ----- ------ ---------------------- D AAA (sf) 98.93 E AAA (sf) 73.56 I BBB- (sf) 22.82 J BB- (sf) 11.95 K B+ (sf) 8.32 L B- (sf) 3.79 X AAA (sf) N/A N/A - Not applicable. CITIMORTGAGE ALTERNATIVE: Moody's Cuts Ratings on 2005-A1 Tranches ------------------------------------------------------------------ Moody's Investors Service has downgraded the ratings of 11 tranches from Citimortgage Alternative Loan Trust Series 2005-A1. 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. Moody's final rating actions are based on current ratings, level of credit enhancement, collateral performance and updated pool- level loss expectations relative to current level of credit enhancement. Moody's took into account credit enhancement provided by seniority, cross-collateralization, excess spread, time tranching, and other structural features within the senior note waterfalls. 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 Series 2005-A1 -- Cl. IA-1, Downgraded to B3 (sf); previously on Jan. 14, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Cl. IA-2, Downgraded to B3 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. IA-3, Downgraded to C (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. IA-4, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. IA-5, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Cl. IA-6, Downgraded to C (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. A-PO, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. IIA-1, Downgraded to B3 (sf); previously on Jan. 14, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade -- Cl. B-1, Downgraded to C (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. B-2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. B-3, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade CLARET TRUST: Moody's Takes Rating Actions on Various 2006-1 Notes ------------------------------------------------------------------ Moody's Investors Service upgraded the ratings of four classes and affirmed eight classes of Claret Trust Commercial Mortgage Pass- Through Certificates, Series 2006-1: -- Cl. A Certificate, Affirmed at Aaa (sf); previously on June 26, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. X Certificate, Affirmed at Aaa (sf); previously on June 26, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. B Certificate, Affirmed at Aaa (sf); previously on Feb. 25, 2010 Upgraded to Aaa (sf) -- Cl. C Certificate, Affirmed at Aaa (sf); previously on Feb. 25, 2010 Upgraded to Aaa (sf) -- Cl. D Certificate, Upgraded to Aa1 (sf); previously on Feb. 25, 2010 Upgraded to Aa2 (sf) -- Cl. E Certificate, Upgraded to A1 (sf); previously on Feb. 25, 2010 Upgraded to A2 (sf) -- Cl. F Certificate, Upgraded to A3 (sf); previously on Feb. 25, 2010 Upgraded to Baa1 (sf) -- Cl. G Certificate, Upgraded to Baa2 (sf); previously on Feb. 25, 2010 Upgraded to Baa3 (sf) -- Cl. H Certificate, Affirmed at Ba2 (sf); previously on Feb. 25, 2010 Upgraded to Ba2 (sf) -- Cl. J Certificate, Affirmed at B1 (sf); previously on June 26, 2006 Definitive Rating Assigned B1 (sf) -- Cl. K Certificate, Affirmed at B2 (sf); previously on June 26, 2006 Definitive Rating Assigned B2 (sf) -- Cl. L Certificate, Affirmed at B3 (sf); previously on June 26, 2006 Definitive Rating Assigned B3 (sf) Ratings Rationale The upgrades are due to the significant increase in subordination due to loan payoffs and amortization. The pool has paid down by 39% since Moody's last review. 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 2.4% of the current balance. At last review, Moody's cumulative base expected loss was 0.9%. 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 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 15 compared to 26 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 February, 25 2010. 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 January 17, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 76% to $92.3 million from $379.6 million at securitization. The Certificates are collateralized by 23 mortgage loans ranging in size from 1% to 13% of the pool, with the top ten loans representing 66% of the pool. No loans have defeased and there are no loans with credit estimates. Four 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. The pool has not realized any losses since securitization and currently there are no loans currently in special servicing. Moody's was provided with full year 2009 operating results for 100% of the pool. Moody's weighted average LTV is 61% compared to 54% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.1%. Moody's actual and stressed DSCRs are 1.44X and 1.74X, respectively, compared to 1.69X and 2.04X 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 30% of the pool balance. The largest loan is the Control Number 2 Loan ($11.4 million -- 12.3%), which is secured by a 305,267 square foot industrial building located in Calgary, Alberta. The property was 90% leased as of January 2010 compared to 100% at last review. Property performance has declined since last review. Moody's LTV and stressed DSCR are 74% and 1.27X, respectively, compared to 63% and 1.51X at last review. The second largest loan is the Control Number 17 and 40 Loan ($8.6 million -- 9.3%), which is secured by two adjacent retail properties totaling 108,091 square feet located in Orillia, Ontario. The properties were 100% leased as of January 2010, similar at last review. Moody's LTV and stressed DSCR are 56% and 1.70X, respectively, essentially the same as at last review. The third largest loan is the Control Number 5 Loan ($7.9 million -- 8.6%), which is secured by a 68,751 square foot office and retail building located in Calgary, Alberta. The property was 100% leased as of March 2010, similar at last review. Moody's is concerned about potential income volatility due to leases representing 31% of the portfolio expiring within the next 18 months. Moody's LTV and stressed DSCR are 64% and 1.65X, respectively, compared to 60% and 1.76X at last review. COLORADO HOUSING: S&P Junks Rating on Series 2007 Bonds From 'BB' ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its long-term rating to 'CCC' from 'BB' on Colorado Housing & Financing Authority's series 2007 bonds revenue bonds issued for Evergreen Country Day School. The rating reflects Standard & Poor's understanding that debt service on the school's series 2007 bonds is vulnerable to nonpayment and is dependent on favorable business, financial, and economic conditions. The school remains in default of its debt service coverage covenant and the bond trustee and issuing authority have the right to declare a default, which could include acceleration of the bonds, resulting in a working capital deficit. The rating reflects Standard & Poor's understanding that management continues to make debt service payments in a timely manner, have not accessed debt service reserves, and have unrestricted endowment funds that support debt payments through 2013. The rating also reflects Standard & Poor's assessment of a debt service covenant that is in default as of fiscal 2010 with a debt service ratio that is negative; limited financial resources to support debt service, which currently is interest-only until 2013; continued negotiations with bondholders, which management indicates may result in an agreement at below par workout of debt obligations; very weak operations on a full accrual basis; continued softening of financial resources levels; and an extremely high debt burden. Credit factors that Standard & Poor's believes support the rating include preliminary indications from management that it has made progress on reaching a resolution favorable to ECDS and that fall 2011 enrollment continues to grow and operations for fiscal 2011 should be self-sustaining on a cash basis not including debt service. Also supporting the rating is Standard & Poor's understanding that there has been growth in donor support in 2011 with fundraising surpassing goals and the previous year's funds. "The negative outlook reflects S&P's assessment of the school's ability to continue meeting its debt service payments and avoid an event of default over the next year," said Standard & Poor's credit analyst Blake Cullimore. A negative rating action would reflect the increased vulnerability of nonpayment or nonpayment resulting in a pending or actual default on a payment on the bonds. A positive rating action over the next year, while unlikely in Standard & Poor's opinion, would reflect the school's ability to continue to meet current obligations, have no covenant violations, and have the long-term financial strength to meet its debt service obligations. The school used the $12.95 million debt to build a new building for the school in 2008 and help the school expand enrollment. However, the slowing economy and the projections on which the school built the initial financial model have not materialized as planned. While management has reorganized and developed more reasonable enrollment, cost, and fundraising goals and achieved them, financially the school remains stressed due to their debt service obligations, on which they currently only pay interest. In addition, sinking fund payments will begin in June of 2013. COMM 2004-LNB4: Moody's Affirms Ratings on 18 Classes of Certs. --------------------------------------------------------------- Moody's Investors Service upgraded the rating of 1 and affirmed the ratings of 18 classes of COMM 2004-LNB4 Commercial Mortgage Pass-Through Certificates, Series 2004-LNB4: -- Cl. A-3, Affirmed at Aaa (sf); previously on March 25, 2010 Confirmed at Aaa (sf) -- Cl. A-4, Upgraded to Aaa (sf); previously on March 25, 2010 Downgraded to Aa3 (sf) -- Cl. A-5, Affirmed at Aa3 (sf); previously on March 25, 2010 Downgraded to Aa3 (sf) -- Cl. A-1A, Affirmed at Aa3 (sf); previously on March 25, 2010 Downgraded to Aa3 (sf) -- Cl. X-C, Affirmed at Aaa (sf); previously on Dec. 1, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. X-P, Affirmed at Aaa (sf); previously on Dec. 1, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. B, Affirmed at A2 (sf); previously on March 25, 2010 Downgraded to A2 (sf) -- Cl. C, Affirmed at Baa2 (sf); previously on March 25, 2010 Downgraded to Baa2 (sf) -- Cl. D, Affirmed at Ba2 (sf); previously on March 25, 2010 Downgraded to Ba2 (sf) -- Cl. E, Affirmed at B2 (sf); previously on March 25, 2010 Downgraded to B2 (sf) -- Cl. F, Affirmed at Caa2 (sf); previously on March 25, 2010 Downgraded to Caa2 (sf) -- Cl. G, Affirmed at Ca (sf); previously on March 25, 2010 Downgraded to Ca (sf) -- Cl. H, Affirmed at C (sf); previously on March 25, 2010 Downgraded to C (sf) -- Cl. J, Affirmed at C (sf); previously on March 25, 2010 Downgraded to C (sf) -- Cl. K, Affirmed at C (sf); previously on March 25, 2010 Downgraded to C (sf) -- Cl. L, Affirmed at C (sf); previously on March 25, 2010 Downgraded to C (sf) -- Cl. M, Affirmed at C (sf); previously on March 25, 2010 Downgraded to C (sf) -- Cl. N, Affirmed at C (sf); previously on March 25, 2010 Downgraded to C (sf) -- Cl. O, Affirmed at C (sf); previously on March 25, 2010 Downgraded to C (sf) Ratings Rationale The upgrade of Class A-4 is due to increased subordination due to paydowns and amortization and overall stable pool performance. In addition, anticipated recoveries from specially serviced and troubled loans along with near term maturities of defeased loans are expected to further deleverage Class A-4. 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 7.2% of the current balance. At last full review, Moody's cumulative base expected loss was 8.5%. Moody's stressed scenario loss is 19.6% 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 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 32 compared to 33 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 March 25, 2010. 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 January 18, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 25% to $917.26 million from $1.22 billion at securitization. The Certificates are collateralized by 100 mortgage loans ranging in size from less than 1% to 8% of the pool, with the top ten loans representing 41% of the pool. Seven loans, representing 13% of the pool, have defeased and are collateralized with U.S. Government securities, compared to 12% at last review. Two loans, representing 3% of the pool, have investment grade credit estimates. Twenty-one loans, representing 24% 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 since securitization, resulting in an aggregate $20.2 million loss (42% loss severity on average). The pool had experienced an aggregate loss of $10.8 million at last review. Currently seven loans, representing 9% of the pool, are in special servicing. The master servicer has recognized an aggregate $37.2 million appraisal reduction for six of the specially serviced loans. Moody's has estimated an aggregate loss of $48.4 million (56% 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 4% of the pool and has estimated a $4.9 million loss (15% 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 85% and 68% of the performing pool, respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 93% compared to 92% at last full 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 9.5%. Excluding specially serviced and troubled loans, Moody's actual DSCR is 1.55X compared to 1.43X 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 loan with a credit estimate is the 731 Lexington Avenue Loan ($62.4 million -- 6.8% of the pool), which is a 23.6% participation interest in a $314 million loan. The property is also encumbered by a $86 million junior loan which is held outside the trust. The loan is secured by a 694,634 square foot (SF) office building located in New York City. The property is 100% leased to Bloomberg, LP until 2028. The loan had a 24-month interest-only period and is now amortizing on a 237-month schedule maturing in March 2014. Moody's current credit estimate and stressed DSCR are A3 and 2.01X, respectively, compared to A3 and 1.99X at last full review. The top three performing conduit loans represent 16% of the pool balance. The largest loan is the Crossings at Corona-Phase I & II Loan ($76 million -- 8.3% of the pool), which is secured by a 503,037 SF retail power center located in Corona, California. The loan had a 35-month interest-only period and is now amortizing on a 395-month schedule maturing in October 2014. The loan has amortized 4% since last full review. Property performance has been stable. Moody's LTV and stressed DSCR are 101% and 0.91X, respectively, compared to 102% and 0.9X at last full review. The second largest loan is the Woodyard Crossing Shopping Center Loan ($38.7 million -- 4.2% of the pool), which is secured by a 483,724 SF retail power center located in Washington, DC. 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 amortized 3% since last full review. Moody's LTV and stressed DSCR are 78% and 1.25X, respectively, compared to 79% and 1.2X at last full review. The third largest loan is the 280 Trumbull Street Loan ($31.9 million -- 3.5% of the pool), which is secured by a 664,479 SF Class A office property located in Hartford, Connecticut. The loan had a 24-month interest-only period and is now amortizing on a 384-month schedule maturing in August 2014. Moody's LTV and stressed DSCR are 85% and 1.2X, respectively, compared to 95% and 1.02X at last review. COMM 2005-FL11: Moody's Affirms Ratings on Nine Pooled Classes -------------------------------------------------------------- Moody's Investors Service affirmed the ratings of nine pooled classes of COMM 2005-FL11 Commercial Mortgage Securities Corp. Series 2005-FL11. Moody's rating action is: -- Cl. B, Affirmed at Aaa (sf); previously on May 11, 2007 Upgraded to Aaa (sf) -- Cl. C, Affirmed at Aaa (sf); previously on May 11, 2007 Upgraded to Aaa (sf) -- Cl. D, Affirmed at Aaa (sf); previously on Feb. 25, 2010 Upgraded to Aaa (sf) -- Cl. E, Affirmed at Aa1 (sf); previously on Feb. 25, 2010 Upgraded to Aa1 (sf) -- Cl. F, Affirmed at Aa3 (sf); previously on Feb. 25, 2010 Upgraded to Aa3 (sf) -- Cl. H, Affirmed at Baa3 (sf); previously on March 3, 2009 Downgraded to Baa3 (sf) -- Cl. J, Affirmed at Ba1 (sf); previously on March 3, 2009 Downgraded to Ba1 (sf) -- Cl. X-2-DB, Affirmed at Aaa (sf); previously on Dec. 6, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. X-3-DB, Affirmed at Aaa (sf); previously on Dec. 16, 2005 Assigned Aaa (sf) 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 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 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. 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 25, 2010. Deal Performance As of the January 18, 2011 distribution date, the transaction's aggregate certificate balance has decreased by approximately 92% to $130.8 million from $1.69 billion at securitization. The Certificates are secured by three loans ranging in size from 9% to 72% of the pool balance. The pool has experienced losses of $22,905 since securitization. As of the January18, 2011 remittance statement, there are interest shortfalls totaling $5,101 to Class L. Generally, interest shortfalls are caused by special servicing fees, including workout and liquidation fees, appraisal subordinate entitlement reductions and extraordinary trust expenses. Currently one loan, the DDR/Macquarie Mervyn's Portfolio Loan ($11.4 million -- 9% of the pool balance), is in special servicing. This loan represents a pari-passu interest in a $153.4 million first mortgage loan. The loan has paid down 41% since securitization. The loan was originally secured by 35 single tenant buildings leased to Mervyn's. Mervyn's filed for Chapter 11 bankruptcy protection in July 2008, closed all its stores, and rejected the leases on all the properties in this portfolio. The loan was transferred to special servicing in October 2008 due to imminent default. The borrower is focused on selling or releasing the properties. Eleven properties have been sold and one sale is pending. Ten properties have been fully or partially leased. Thirteen properties are vacant. The loan matured in October of 2010 and is delinquent in paying debt service. Moody's loan to value ratio is over 100%, the same as last review. Moody's current credit estimate is C, the same as last review. The largest loan in the pool is the Whitehall/Starwood Golf Portfolio Loan ($93.8million - 72% of the pool balance) which was initially supported by fee and leasehold interests in a portfolio of 173 public and private golf courses containing 3,374 holes. Seventy three properties have been released since securitization and the loan is now secured by 100 courses containing 1,968 holes across the United States. The properties are managed by AGC Corp. The servicer recently executed a forebearance through July 2012 which requires two principal payments of $25 million due in August 2011 and June 2012. Moody's current pooled LTV is 64% and stressed DSCR is 1.77X. Moody's current credit estimate is Ba1 the same as last review. The second largest loan is the Crossgate Commons Loan ($25.5 million -- 19% of the pool balance), which is secured by a 690,000 square foot power center located in Albany, New York. The center is anchored by Wal-Mart and Sam's Club, although neither tenant is part of the collateral. Other anchor tenants include Home Depot, Sport's Authority and Jeepers. As of October 2010, the center was 77% leased. Both the cash flow and occupancy have deteriorated since securitization. This loan has been extended through September 2012. In addition, the borrower is providing an additional guarantee of up to $8 million and the cash flow is being swept into a reserve account and will be held as additional collateral. Moody's current pooled LTV is over 100% and stressed DSCR is 0.85X. Moody's current credit estimate is Caa2 the same as last review. COMM 2006-C7: Fitch Downgrades Ratings on 14 Classes of Certs. -------------------------------------------------------------- Fitch Ratings has downgraded and removed from Rating Watch Negative 14 classes of COMM 2006-C7's commercial mortgage pass- through certificates. The downgrades are 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 8.3% of the remaining pool; expected losses of the original pool are at 8.7%. Fitch has designated 49 loans (30.9%) as Fitch 'Loans of Concern', which includes nine specially serviced loans (10.2%). Fitch expects losses associated with the specially serviced loans to deplete classes J thru P and a portion of class H. The largest contributors to modeled losses are three (8.2%) of the top 15 loans in the transaction, two (6.7%) of which are currently specially serviced. Granite Run Mall is secured by a 1,046,667 square foot (sf) super regional mall located in Media, PA approximately 12 miles from the central business district of Philadelphia and is sponsored by Simon Property Group, L.P. and The Macerich Partnership, L.P. The mall is anchored by Sears, Boscov's, JC Penney, and Kohl's. Sears and JC Penney own their stores but are subject to ground leases with the sponsor. The loan was transferred to special servicing in October 2010 due to imminent default. The special servicer is in the process of determining the appropriate workout strategy. The most recent servicer reported debt-service coverage ratio as of Dec. 31, 2010 was 0.97X. The inline mall space is currently 68% occupied. The total mall including the non-owned anchors is currently 89% occupied. Lakeview Square Mall is secured by a 254,880 sf retail property located in Battle Creek, MI and is sponsored by General Growth Properties. The mall is anchored by Macy's, Sears and J.C. Penney's. The loan was transferred back to special servicing in August 2010 due to imminent default. GGP has submitted a workout proposal and have also proposed an issuance of a deed-in-lieu of foreclosure notice if the debt restructuring proposal is not achieved. The most recent reported DSCR as of September 2010 is 0.99X. The inline mall space is 72% occupied. The entire mall is 91.7% occupied. The Meadowood Resort is collateralized by a 98 room, full-service luxury resort located in St. Helena, CA in the heart of Napa Valley. Property continues to show declining performance since issuance due to increasing operating expenses, stagnant revenue, and current economic conditions. The net operating income of the property is no longer sufficient to meet debt service. The loan remains current due to the sponsor's funding the debt service shortfalls. The sponsor continues to make monthly required deposits of 4% of Effective Gross Income into a Furniture, Fixtures, and Equipment reserve. Per the latest remittance report, there is approximately $1.8 million on deposit in the reserve. The most recent servicer reported occupancy year-to-date as of June 30, 2010 was 45% with ADR of $545.50, and RevPAR of $243.13. The sponsor is Pacific Union Meadowood Partners, L.P. Fitch has downgraded, removed from Rating Watch Negative and assigned Recovery Ratings where noted to these classes: -- $189.7 million class A-J to 'A'/LS4' from 'AAA/LS3'; Outlook Stable; -- $52 million class B to 'BB/LS5' from 'AA/LS4'; Outlook Stable; -- $24.5 million class C to 'BB/LS5' from 'A/LS5'; Outlook Stable; -- $36.7 million class D to 'B-/LS5' from 'A/LS5'; Outlook Stable; -- $21.4 million class E to 'B-/LS5' from 'BBB/LS5'; Outlook Stable; -- $30.6 million class F to 'B-/LS5' from 'BBB-/LS5'; Outlook Negative; -- $24.5 million class G to 'CCC/RR1' from 'BB/LS5'; -- $30.6 million class H to 'CC/RR4' from 'B/LS5'; -- $12.2 million class J to 'C/RR6' from 'B-/LS5'; -- $6.1 million class K to 'C/RR6' from 'B-/LS5'; -- $9.2 million class L to 'C/RR6' from 'B-/LS5'; -- $3.1 million class M to 'C/RR6' from 'B-/LS5'; -- $6.1 million class N to 'C/RR6' from 'B-/LS5'; -- $9.2 million class O to C/RR6' from 'B-/LS5'. Additionally, Fitch has affirmed and revised Loss Severity ratings on these classes: -- $99.7 million class A-2 at 'AAA/LS2; Outlook Stable; -- $40.1 million class A-3 at 'AAA/LS2'; Outlook Stable; -- $98.8 million class A-AB at 'AAA/LS2'; Outlook Stable; -- $1.0527 billion class A-4 at 'AAA/LS2'; Outlook Stable; -- $316.4 million class A-1A at 'AAA/LS2'; Outlook Stable; -- $244.7 million class A-M at 'AAA/LS3'; Outlook Stable. Fitch has also withdrawn the rating on the interest-only class X. Fitch does not rate the $22.2 million class P. Class A-1 has paid in full. COMMONWEALTH PORTS: Fitch Affirms 'CCC' Rating on $14.6 Mil. Bonds ------------------------------------------------------------------ Fitch Ratings affirms the 'CCC' rating on approximately $14.6 million of outstanding Commonwealth Ports Authority, Commonwealth of the Northern Mariana Islands, senior series 1998A airport revenue bonds. The Rating Outlook for all airport bonds is Negative. Rating Rationale: The Negative Outlook reflects the potential for weakness in passenger traffic despite the up tick of 1.8% in fiscal 2010. Passenger traffic to the CNMI is tourist driven and heavily dependent on Asian markets, particularly Japan which has been quite dormant for the past few years. Year-to-date fiscal 2011 (as of November) enplanements are up 4.9% compared to a 22% decline in fiscal 2010 due to an increase in tourist inflow from the Japanese market. Chinese, Russian and South Korean markets remain quite consistent going into 2011. Weak traffic continues to pressure airport finances. Preliminary operating revenue and expense figures point to expectations of violating the rate covenant with 0.83 times coverage in fiscal 2010. The draws on cash balances will continue and the depletion of funds is a real possibility over the next several years absent a sustained traffic recovery or a revision of airline rates and charges. Fitch recognizes management's successful cost tightening strategies over the last several years and continued efforts in exploring additional non-airline revenue generating projects. However, should the overarching themes of a sluggish CNMI economy, weak passenger inflow, and lack of financial flexibility deteriorate further, the airports' current rating level could be pressured. The U.S planned relocation of approximately 8,000 military personnel and their dependents from Okinawa, Japan to neighboring Guam by 2014 could lead to inter-Island migration further dampening local demand. As part of the relocation, the U.S Department of Defense leased the northern two-thirds of Tinian Island from the CNMI for training groups of 200 Marines or larger due to land availability. Credit strengths include: -- Essentiality of the airports serving as the gateway to and within the Mariana Islands and CNMI's ability to continue to draw visitors from new markets; -- Management's focus on and effective containment of operating expenses for the past four fiscal years through various adjustments to personnel and operations; Credit concerns include: -- Potential for prolonged economic weakness of the air trade area due to CNMI's weak underlying economy with an elevated dependence on a diminished tourist base. The fragile tourism sector has led to a reduction in productivity on the islands. The CNMI also faces competition as a leisure destination from other islands in the Pacific; -- Sustained reduction in the airports' traffic base impacting airport revenues and debt service coverage levels. The CPA expects non-compliance with the rate covenant in fiscal 2010; -- Limited financial flexibility will continue to pressure liquidity due to management's reluctance to pass through charges to carriers during weak performing periods. Key Rating Drivers: -- Continued changes in the underlying service area economy and the airports' ability to maintain a stable traffic base; -- Substantial shift in the airports' short term liquidity and financial flexibility; Security: The series 1998A bonds are secured by a pledge of gross airport revenues generated by the operations of the airport, including Passenger Facility Charges eligible for payment of debt service. Credit Summary: Fiscal 2010 was the first year since 2004 that saw growth in passenger traffic adding 8,375 enplanements or 1.8% to its 475,769 enplanement base. Management is fairly optimistic about traffic performance in fiscal 2011 and believes that another year of positive growth is probable should the slight increase in travelers seen in the first quarter continue throughout the year. Overall airport traffic has been declining in recent years due to the loss of signatory carriers (Continental Airlines and Japan Airlines) being replaced with airlines operating charter flights on an as need basis. The slower demand from the Korean and Japanese markets prompted airlines to reduce seat capacity and suspend flights during slow periods. The airport system lost about one third of its traffic base since 2004. The airports' prolonged period of traffic recovery is consistent with weak traffic attributes and a lack of resiliency to downturns. Service at the airports is dominated by Delta Airlines and Asiana Airlines, combined, accounting for approximately 60% of total traffic served at Saipan airport -- CNMI's main gateway airport. Delta Airlines reduced passenger traffic by 17.5% in fiscal 2010; however volume was picked up by several other carriers. This reduction was expected at the time Fitch last reviewed the credit. The CPA expects a new carrier, Sichuan Airlines, to start service from various Asian cities to Saipan in 2011. The airline has received approval from the Department of Transportation and is now awaiting FAA approval. A full or partial loss of service from one of the airports' main signatory carriers would likely have credit implications. Fiscal 2010 operating revenue is expected to come in 3.4% lower than the previous year at $10.6 million. The CPA continues to expand non-aviation revenue sources and recently completed appraisals of airport properties which are expected to enhance future leases. Operating revenue in fiscal 2009 jumped 29% over 2008 due to a revision of airline rates and charges. Management has not passed any additional increases since, feeling that it could deter carriers from serving at the airport especially when the global economy has not fully recovered. Erosion of the airports' revenue generating base constrains revenue generating sources and limits the flexibility of producing sufficient revenues to meet debt service. Coverage for fiscal 2009 was 1.44x while 0.83x coverage is expected for fiscal 2010. A $1 million unbudgeted but necessary contractual expenditure to meet certain federal requirements is responsible for the deficiency in coverage. Operating costs are projected at $10.5 million, 1.7% higher than the previous year. CPA continues to make efforts to reduce operating expenses through the use of scheduled work reductions and the elimination of non-essential expenses. Operating costs are 7.9% lower than in fiscal 2006. Preliminary cash balances show a $1.4 million increase over fiscal 2009 attributed to better control of costs and aggressive collections of past due accounts, yet liquidity levels remain weak with 136 days cash on hand. Cost per enplanement (CPE) is expected to slightly decrease to the $15 range in fiscal 2010 as traffic improves. In fiscal 2009, CPE doubled to $16 over the previous year due to the substantial increase in airlines charges. Fitch forecast scenarios for small leisure airports contemplate a 10% loss in traffic and a seven-year recovery. While Fitch acknowledges the airport's austerity measures, under a stress scenario and absent revenue generating alternatives and a sustainable traffic recovery, the airports' unrestricted liquidity is expected to be depleted by 2019 at the expense of subsidizing debt service and maintaining a low cost structure to carriers. The airports exhibit a heighten vulnerability to macroeconomic stresses due to the Islands' natural dependence on external economic factors. The CPA owns and operates three airports in the CNMI, the largest of which is Saipan International Airport. The commonwealth consists of a chain of 14 islands of which four are inhabited. The islands are located in the North Pacific Ocean, approximately 1,458 miles southeast of Tokyo, Japan and 5,969 miles west of Los Angeles. As CNMI is a commonwealth of the United States, U.S. federal law and regulation, such as minimum wage law requirements, immigration restrictions, and environmental regulation all have an impact on the island's economy. The islands are also subject to weather related events such as typhoons due to their geographical location in the Pacific. COMMONWEALTH PORTS: Fitch Affirms 'BB-' Rating on Revenue Bonds --------------------------------------------------------------- Fitch Ratings affirms the 'BB-' rating on approximately $33.5 million of outstanding Commonwealth Ports Authority, Commonwealth of the Northern Mariana Islands, senior series 1998A and 2005A seaport revenue bonds. The Rating Outlook for all seaport bonds is Negative. Rating Rationale: The Negative Outlook reflects the possibility of a restrained capacity to meet financial commitments if CPA's business profile and CNMI's economic environment continue to be unfavorable. The overall economy of the CNMI is in decline and will likely take several years for seaport operations to be adequately sized for a more stabilized economy. While CPA has historically exhibited strong cash flows and a healthy balance sheet, the ports' ability to return to historical financial strength will require a sustained increase in wharfage rates which will undoubtedly have a dampening effect on demand and will increase the cost of goods across the islands. The U.S planned relocation of approximately 8,000 military personnel and their dependents from Okinawa, Japan to neighboring Guam by 2014 could lead to inter-island migration further dampening local demand. As part of the relocation, the U.S Department of Defense leased the northern two-thirds of Tinian Island from the CNMI for training groups of 200 Marines or larger due to land availability. Future inbound cargo operations will rely on CNMI's internal demand for raw material and goods. Credit strengths include: -- Essentiality of the seaports for the import of goods to an island economy; -- Management's focus on and effective containment of operating expenses through various adjustments to personnel and operations as well as the ability to adjust rates to mitigate lower revenue tonnage passing through the ports; -- Leverage of 6 times net debt to cash flow available for debt service and 48% cash to debt provides the CPA with some degree of flexibility to meet financial commitments in weak performing periods. However, should the drop in revenue tonnage continue or seaport tariffs and wharfage rates not continue to grow, liquidity draws would accelerate. Credit concerns include: -- Potential for prolonged economic weakness of the service area due to CNMI's weak underlying economy with an elevated dependence on a diminished tourist base. The fragile tourism sector has led to a reduced productivity on the islands. The CNMI also faces competition as a leisure destination from other islands in the Pacific; -- Sustained reduction in the ports' inbound revenue tonnage impacting seaport revenues and debt service coverage levels. Key Rating Drivers: -- Continued changes in the underlying service area economy and the seaport's ability to maintain base cargo levels; -- Shift in the seaport's short-term liquidity and financial flexibility resulting from changes in operating expense management or pricing power. Security: The seaport bonds are secured solely by gross seaport revenues and certain accounts established pursuant to the bond indenture. Credit Summary: Fiscal 2010 total revenue tonnage increased 2.7% to 375,442 metric tons over 2009, reversing five years of consecutive decreases in cargo activity. Inbound cargo is up 4.5% and outbound is down 20%. Management is fairly optimistic on cargo performance in fiscal 2011, however no projections were provided. Fiscal 2008 and 2009 cargo declined by 5% and 22% respectively due to the loss of what remained of the garment manufacturing business, global recessionary conditions, and fragile tourism sector. Having lost the garment industry, imports of raw materials dropped significantly and associated exports of the finished products fell accordingly. Since 2004, inbound cargo and outbound cargo lost 47.3% and 86.8% of its revenue base respectively. Fitch believes that the current level of cargo is now tied more closely to economic activity of the CNMI. Fiscal 2010 (preliminary) and 2009 seaport operating revenue increased by 4.6% and 21.2% to $6.5 and $6.2 million respectively due to an increase in seaport tariffs and concession franchise fees. The upward revision in tariffs in March of fiscal 2009 offset the loss from the 22.9% drop in cargo operations that year. The CPA has been under sustained austerity measures in order to meet the rate covenant. They have managed to reduce personnel and benefit expenses by imposing reduced working hours and by avoiding unnecessary expenses. Fiscal 2010 unaudited financials point to $2.1 million in operating expenses, a slight increase of 2.4% over 2009. Operating expenses decreased significantly in 2008 and 2009 by 4.7% and 19.2% respectively. CPA's revenue enhancing and cost cutting measures resulted in a 1.5x coverage in fiscal 2009 and projects a 1.41x coverage for fiscal 2010. Cash balances remain adequate in 2010 with days-cash-on-hand increasing to 305 days from 154 days in 2009. Fitch forecast scenarios contemplate a no growth stress case for the CPA which could lead to the depletion of cash balances in 2020 absent a recovery in CNMI's economy and sustainable growth in cargo operations. The CPA owns and operates three seaports in the CNMI, the largest of which is the Port of Saipan. The commonwealth consists of a chain of 14 islands of which four are inhabited. The islands are located in the North Pacific Ocean, approximately 1,458 miles southeast of Tokyo, Japan and 5,969 miles west of Los Angeles. As CNMI is a commonwealth of the United States, U.S. federal law and regulation, such as minimum wage law requirements, immigration restrictions, and environmental regulation all have an impact on the islands' economy. The Islands are also subject to weather related events such as typhoons due to their geographical location in the Pacific. CONSUMER PORTFOLIO: Moody's Reviews Ratings on 15 Tranches ---------------------------------------------------------- Moody's has placed on review for possible upgrade fifteen tranches from eleven transactions sponsored by Consumer Portfolio Services, Inc., from 2005 to 2008. Issuer: CPS Auto Receivables Trust 2005-C -- Cl. A-2, Aa3 (sf) Placed Under Review for Possible Upgrade; previously on Nov. 12, 2009 Confirmed at Aa3 (sf) -- Financial Guarantor: Assured Guaranty Municipal Corp. (Aa3; previously Confirmed on 11/12/2009) -- Underlying Rating: A3 (sf) Placed Under Review for Possible Upgrade; previously on Aug. 5, 2008 Upgraded to A3 (sf) Issuer: CPS Auto Receivables Trust 2005-D -- Cl. A-2, Aa3 (sf) Placed Under Review for Possible Upgrade; previously on Nov. 12, 2009 Confirmed at Aa3 (sf) -- Financial Guarantor: Assured Guaranty Municipal Corp. (Aa3; previously Confirmed on 11/12/2009) -- Underlying Rating: A3 (sf) Placed Under Review for Possible Upgrade; previously on Aug. 5, 2008 Upgraded to A3 (sf) Issuer: CPS Auto Receivables Trust 2006-A -- Cl. A-4, Aa3 (sf) Placed Under Review for Possible Upgrade; previously on Nov. 12, 2009 Confirmed at Aa3 (sf) -- Financial Guarantor: Assured Guaranty Municipal Corp. (Aa3; previously Confirmed on 11/12/2009) -- Underlying Rating: Baa3 (sf) Placed Under Review for Possible Upgrade; previously on March 31, 2006 Assigned Baa3 (sf) Issuer: CPS Auto Receivables Trust 2006-B -- Cl. A-4, Baa2 (sf) Placed Under Review for Possible Upgrade; previously on Feb. 18, 2009 Downgraded to Baa2 (sf) -- Financial Guarantor: MBIA Insurance Corporation (B3; previously on 2/18/2009 Downgraded to B3 from Baa1) -- Underlying Rating: Baa2 (sf) Placed Under Review for Possible Upgrade; previously on July 3, 2006 Assigned Baa2 (sf) Issuer: CPS Auto Receivables Trust 2006-C/CPS Cayman Residual Trust 2006-C -- Cl. A-4, Baa2 (sf) Placed Under Review for Possible Upgrade; previously on Aug. 5, 2008 Downgraded to Baa2 (sf) -- Financial Guarantor: Syncora Guarantee Inc., (Ca; previously on 3/9/2009 Downgraded to Ca from Caa1) -- Underlying Rating: Baa2 (sf) Placed Under Review for Possible Upgrade; previously on Oct. 3, 2006 Assigned Baa2 (sf) -- Cl. B, Ba3 (sf) Placed Under Review for Possible Upgrade; previously on Oct. 3, 2006 Assigned Ba3 (sf) Issuer: CPS Auto Receivables Trust 2006-D/CPS Cayman Residual Trust 2006-D -- Cl. A-4, Aa3 (sf) Placed Under Review for Possible Upgrade; previously on Nov. 12, 2009 Confirmed at Aa3 (sf) -- Financial Guarantor: Assured Guaranty Municipal Corp. (Aa3; previously Confirmed on 11/12/2009) -- Underlying Rating: Baa3 (sf) Placed Under Review for Possible Upgrade; previously on April 7, 2009 Downgraded to Baa3 (sf) -- Cl. B, B1 (sf) Placed Under Review for Possible Upgrade; previously on April 7, 2009 Downgraded to B1 (sf) Issuer: CPS Auto Receivables Trust 2007-A/CPS Cayman Residual Trust 2007-A -- Cl. A-4, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on April 7, 2009 Downgraded to Baa3 (sf) -- Financial Guarantor: MBIA Insurance Corporation (B3; previously on 2/18/2009 Downgraded to B3 from Baa1) -- Underlying Rating: Baa3 (sf) Placed Under Review for Possible Upgrade; previously on April 7, 2009 Downgraded to Baa3 (sf) -- Cl. B, B1 (sf) Placed Under Review for Possible Upgrade; previously on April 7, 2009 Downgraded to B1 (sf) Issuer: CPS Auto Receivables Trust 2007-B -- Cl. A-4, Aa3 (sf) Placed Under Review for Possible Upgrade; previously on Nov. 12, 2009 Confirmed at Aa3 (sf) -- Financial Guarantor: Assured Guaranty Municipal Corp. (Aa3; previously Confirmed on 11/12/2009) -- Underlying Rating: Baa3 (sf) Placed Under Review for Possible Upgrade; previously on April 7, 2009 Downgraded to Baa3 (sf) Issuer: CPS Auto Receivables Trust 2007-C -- Cl. A-4, Aa3 (sf) Placed Under Review for Possible Upgrade; previously on Nov. 12, 2009 Confirmed at Aa3 (sf) -- Financial Guarantor: Assured Guaranty Municipal Corp. (Aa3; previously Confirmed on 11/12/2009) -- Underlying Rating: Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Dec. 31, 2008 Downgraded to Baa3 (sf) Issuer: CPS Auto Receivables Trust 2007-TFC -- Cl. A-2, Baa3 (sf) Placed Under Review for Possible Upgrade; previously on Aug. 5, 2008 Downgraded to Baa3 (sf) -- Financial Guarantor: Syncora Guarantee Inc., (Ca; previously on 3/9/2009 Downgraded to Ca from Caa1) -- Underlying Rating: Baa3 (sf) Placed Under Review for Possible Upgrade; previously on May 14, 2007 Assigned Baa3 (sf) Issuer: CPS Auto Receivables Trust 2008-A -- Cl. A-3, Aa3 (sf) Placed Under Review for Possible Upgrade; previously on Nov. 12, 2009 Confirmed at Aa3 (sf) -- Financial Guarantor: Assured Guaranty Municipal Corp. (Aa3; previously Confirmed on 11/12/2009) -- Underlying Rating: Baa1 (sf) Placed Under Review for Possible Upgrade; previously on April 7, 2009 Downgraded to Baa1 (sf) -- Cl. A-4, Aa3 (sf) Placed Under Review for Possible Upgrade; previously on Nov. 12, 2009 Confirmed at Aa3 (sf) -- Financial Guarantor: Assured Guaranty Municipal Corp. (Aa3; previously Confirmed on 11/12/2009) -- Underlying Rating: Baa1 (sf) Placed Under Review for Possible Upgrade; previously on April 7, 2009 Downgraded to Baa1 (sf) Ratings Rationale The review was prompted by updated lower loss expectations relative to current levels of credit enhancement. Moody's expects CPS Auto Receivables Trust 2005-C to incur lifetime cumulative net losses in the range of 14.50% to 14.75% of the original pool balance, compared to previous expectation of 17%. Total hard credit enhancement (excluding excess spread of approximately 8.0% per annum) for class A-2 notes is approximately 100.00% of the outstanding collateral pool balance. This transaction has paid down significantly with a pool factor of 3.1 % of original pool balance. Moody's expects CPS Auto Receivables Trust 2005-D to incur lifetime CNL in the range of 15.50% to 16.00% of the original pool balance, compared to previous expectation of 17%. Total hard credit enhancement (excluding excess spread of approximately 8.1% per annum) for class A-2 notes is approximately 80% of the outstanding collateral pool balance. This transaction has paid down significantly with a pool factor of 4.8% of original pool balance. Moody's expects CPS Auto Receivables Trust 2006-A to incur lifetime CNL in the range of 16.50% to 17.00% of the original pool balance, compared to previous expectation of 17%. Total hard credit enhancement (excluding excess spread of approximately 7.7% per annum) for class A-4 notes is approximately 45% of the outstanding collateral pool balance. This transaction has paid down significantly with a pool factor of 7.2% of original pool balance. Moody's expects CPS Auto Receivables Trust 2006-B to incur lifetime CNL in the range of 18.00% to 19.00% of the original pool balance, compared to previous expectation of 19%. Total hard credit enhancement (excluding excess spread of approximately 7.6% per annum) for class A-4 notes is approximately 55% of the outstanding collateral pool balance. This transaction has paid down significantly with a pool factor of 10.0% of original pool balance. Moody's expects CPS Auto Receivables Trust 2006-C, 2006-D, 2007-A, 2007-B, 2007-C and 2008-A to incur lifetime CNL in the range of 19.50% to 21.00% of the original pool balance, compared to previous expectations of 21%, 22%, 21%, 22%, 22%, 23% respectively. For 2006-C transaction, total hard credit enhancement (excluding excess spread of approximately 8.0% per annum) for class A-4 and class B notes is approximately 41% and 31% of the outstanding collateral pool balance. For 2006-D transaction, total hard credit enhancement (excluding excess spread of approximately 8.5% per annum) for class A-4 and class B is approximately 31% and 25% respectively of the outstanding collateral pool balance. For 2007-A transaction, total hard credit enhancement (excluding excess spread of approximately 8.4% per annum) for class A-4 and class B is approximately 33% and 26% respectively of the outstanding collateral pool balance. For 2007-B transaction, total hard credit enhancement (excluding excess spread of approximately 8% per annum) for class A-4 is approximately 30% of the outstanding collateral pool balance. For 2007-C transaction, total hard credit enhancement (excluding excess spread of approximately 7.7% per annum) for class A-3 and A-4 is approximately 26% of outstanding collateral pool balance. For 2008-A transaction, total hard credit enhancement (excluding excess spread of approximately 5.9% per annum) for class A-3 and A-4 is approximately 38% of outstanding collateral pool balance. Pool factors for 2006-C, 2006-D, 2007-A, 2007-B, 2007-C and 2008-A are 12.6%, 17.0%, 21.0%, 25.4%, 29.3% and 36.3% respectively of original pool balance. Moody's expects CPS Auto Receivables Trust 2007-TFC to incur lifetime CNL in the range of 16% to 17% of the original pool balance. Total hard credit enhancement for class A-2 is 45% of outstanding collateral pool balance. Pool factor for the transaction is 12.9% of original pool balance. 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, and weakness in the RV and marine market. 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 largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. CORIOLANUS LTD: S&P Downgrades Rating on Series 39 to 'D' --------------------------------------------------------- Standard & Poor's Ratings Services lowered its rating on the tranche from Coriolanus Ltd.'s series 39 to 'D (sf)'. The lowered rating follows a number of recent write-downs of underlying reference entities, which have caused the notes to incur partial principal losses. Rating Lowered Coriolanus Ltd. Series 39 Rating ------ Class To From ----- -- ---- Tranche D (sf) CC (sf) CORPORATE BACKED: Moody's Upgrades Ratings on Certs. to 'Ba2' ------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the rating of these certificates issued by Corporate Backed Trust Certificates, Series 2001-27 (Royal Caribbean): * 1,521,126 Corporate Backed Trust Certificates, Series 2001-27, Class A-1; Upgraded to Ba2; previously on July 2, 2009 Downgraded to Ba3 Ratings Rationale 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 the result of the change of the rating of the underlying securities which are the 7.50% Senior Debentures issued by Royal Caribbean Cruises, Ltd., which were upgraded to Ba2 by Moody's on January 28, 2011. CREDIT PROTECTION: Moody's Upgrades Ratings on Bonds From 'Ba1' --------------------------------------------------------------- Moody's Investors Service announced this rating action on Credit Protection Trust 259, a collateralized debt obligation transaction. The CSO, issued in 2007, references a portfolio of corporate synthetic senior unsecured bonds. Issuer: Credit Protection Trust 259 -- US$1,000,000,000 Super Senior, Upgraded to A2 (sf); previously on Sept. 4, 2009 Downgraded to Ba1 (sf) Rating Rationale Moody's rating action is the result of the credit improvement of the underlying portfolio, the level of credit enhancement remaining in the transaction and the shortened time to maturity of the CSO. Since the last rating action in September 2009, the 10-year weighted average rating factor of the portfolio improved from 4412 to 3790, equivalent to Caa1, including settled credit events. The portfolio continues to improve with 29 percent of the portfolio rated Caa1 or below, compared to 43 percent since the last rating action took place. There are six reference entities with a negative outlook and one entity on watch for downgrade compared to 25 entities on negative outlook and two on watch for downgrade as of the previous rating action date. As of February 4, eleven reference entities are on positive outlook and two are on review for possible upgrade versus four on positive outlook and zero on review for possible upgrade as of the previous rating action date. There is approximately 36% subordination remaining in the deal. There have been no credit events since the last rating action. The portfolio has experienced eight credit events since inception, equivalent to a ten percent loss of the portfolio based on the portfolio notional value at closing. Although Clear Channel Communications, Dynegy Inc., Harrah's Operating Company and Residential Capital, LLC, have not experienced a credit event so far, Moody's assumptions for modeling purposes treat them as defaulted given their low rating combined with a negative outlook or a review for possible downgrade, if any. The CSO has a remaining life of 3.38 years. Moody's rating action factors in a number of sensitivity analyses and stress scenarios, discussed below. Results are given in terms of the number of notches' difference versus the base case, where higher notches correspond to lower expected losses, and vice- versa: * Moody's reviews a scenario consisting of reducing the maturity of the CSO by 6 months, keeping all other parameters constant. The result of this run is comparable to the base case. * Market Implied Ratings are modeled in place of the corporate fundamental ratings to derive the default probability of the reference entities in the portfolio. The gap between an MIR and a Moody's corporate fundamental rating is an indicator of the extent of the divergence in credit view between Moody's and the market. The result of this run is two notches higher than that of the base case. * Moody's performs a stress analysis consisting of defaulting all entities rated Caa1 and below. The result of this run is three notches lower than in the base case. * Moody's conducts a sensitivity analysis consisting of notching down by one the ratings of the most referenced industry ( High Tech Industries, 13.75% of the portfolio). The result of this run is comparable to the base case. * Removing the notch-down adjustment on ratings of all reference entities on negative outlook and/or on watch for downgrade generates a result that is comparable to the base case. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, and specific documentation features. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. 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 does not run a separate loss and cash flow analysis other than the one already done by the CDOROM model. For a description of the analysis, refer to the methodology and the CDOROM user's guide on Moody's website. Moody's analysis of CSOs is subject to uncertainties, the primary sources of which include complexity, governance and leverage. Although the CDOROM model captures many of the dynamics of the Corporate CSO structure, it remains a simplification of the complex reality. Of greatest concern are (a) variations over time in default rates for instruments with a given rating, (b) variations in recovery rates for instruments with particular seniority/security characteristics and (c) uncertainty about the default and recovery correlations characteristics of the reference pool. Similarly on the legal/structural side, the legal analysis although typically based in part on opinions (and sometimes interpretations) of legal experts at the time of issuance, is still subject to potential changes in law, case law and the interpretations of courts and (in some cases) regulatory authorities. The performance of this CSO is also dependent on on- going decisions made by one or several parties, including the Manager and the Trustee. Although the impact of these decisions is mitigated by structural constraints, anticipating the quality of these decisions necessarily introduces some level of uncertainty in Moody's assumptions. Given the tranched nature of CSO liabilities, rating transitions in the reference pool may have leveraged rating implications for the ratings of the CSO liabilities, thus leading to a high degree of volatility. All else being equal, the volatility is likely to be higher for more junior or thinner liabilities. The base case scenario modeled fits into the central macroeconomic scenario predicted by Moody's of a sluggish recovery scenario in the corporate universe. Should macroeconomics conditions evolve towards a more severe scenario, such as a double dip recession, the CSO rating will likely be downgraded to an extent that depends on the expected severity of the worsening conditions. CREDIT SUISSE: Moody's Affirms Ratings on Six 2002-CKP1 Certs. -------------------------------------------------------------- Moody's Investors Service affirmed the ratings of six classes and downgraded two classes of Credit Suisse First Boston Commercial Mortgage Corp., Commercial Mortgage Pass-Through Certificates, Series 2002-CKP1: -- Cl. E Certificate, Affirmed at Aa3 (sf); previously on March 18, 2010 Downgraded to Aa3 (sf). -- Cl. F Certificate, Affirmed at A3 (sf); previously on March 18, 2010 Downgraded to A3 (sf) -- Cl. G Certificate, Affirmed at Baa2 (sf); previously on March 18, 2010 Downgraded to Baa2 (sf) -- Cl. H Certificate, Affirmed at Ba2 (sf); previously on March 18, 2010 Downgraded to Ba2 (sf) -- Cl. K-Z Certificate, Downgraded to Caa2 (sf); previously on March 18, 2010 Downgraded to B3 (sf) -- Cl. L Certificate, Downgraded to Ca (sf); previously on March 18, 2010 Downgraded to Caa3 (sf) -- Cl. M Certificate, Affirmed at C (sf); previously on March 18, 2010 Downgraded to C (sf) -- Cl. N Certificate, Affirmed at C (sf); previously on March 18, 2010 Downgraded to C (sf) Ratings Rationale Moody's rating action did not address the ratings of Classes A3, B, C, D, and AX, which are all currently rated Aaa or Aa1, on review for possible downgrade. These classes were placed on review on January 19, 2011. KeyCorp Real Estate Capital Markets, Inc. is a primary servicer on this transaction and deposits collection, escrow and other accounts in KeyBank, National Association. Keybank no longer meets Moody's rating criteria for an eligible depository account institution for Aaa and Aa1 rated securities. Moody's is reviewing arrangements that KeyBank has proposed, and that it may propose, to mitigate the incremental risk indicated by the lower rating of the depository account institution, so as possibly to allow the classes on review to maintain their current ratings. 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 4.5% of the current balance. At last review, Moody's cumulative base expected loss was 5.5%. Moody's stressed scenario loss is 7.7% 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 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 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. 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 22, 2010. 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 December 17, 2010 distribution date, the transaction's aggregate certificate balance has decreased by 23% to $768 million from $992.9 million at securitization. The Certificates are collateralized by 134 mortgage loans ranging in size from less than 1% to 8% of the pool, with the top ten non-defeased loans representing 40% of the pool. Twenty-six loans, representing 23% of the pool, have defeased and are secured by U.S. Government securities. Defeasance at last review represented 22% of the pool. Thirty-six loans, representing 30% 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-one loans have been liquidated from the pool, resulting in an aggregate realized loss of $38.7 million (49% loss severity on average). The pool had experienced an aggregate loss of $23.5 million at last review. Four loans, representing 4% of the pool, are currently in special servicing. The largest specially serviced loan is the Chaparral Apartments Loan ($15.5 million -- 2.0% of the pool), which is secured by a 444-unit apartment complex located in Largo, Florida. The loan was transferred to special servicing in October 2010 for payment default and is now 90+ days delinquent. The remaining three specially serviced loans are secured by a mix of multifamily and retail properties. Moody's has estimated a $16.1 million aggregate loss for the four specially serviced loans (47% loss severity on average). Moody's has assumed a high default probability on nine troubled loans, representing 3% of the pool. These loans mature within the next 36 months and have a Moody's stressed DSCR less than 1.0X. Moody's has estimated a $3.8 million aggregate loss on these loans (15% loss severity on average). Moody's was provided with year-end 2009 for 97% of the pool. Moody's weighted average LTV for the conduit pool, excluding specially serviced and troubled loans, is 73% compared to 79% at the prior full 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 9.6%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 1.45X and 1.51X, respectively, compared to 1.30X and 1.33X 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 loans represent 20% of the pool. The largest loan is the Metroplex West Loan ($58.5 million -- 7.6% of the pool), which is secured by the borrower's interest in a 477,000 square foot retail center located in Plymouth Meeting, Pennsylvania. The center is anchored by Target and Lowe's, both of which own their respective buildings and are not part of the collateral. As of October 2010, the property was 100% leased, the same last review and securitization. Property performance has increased since the last review due to rent steps on existing long term tenants. Moody's LTV and stressed DSCR are 69% and 1.48X, respectively, compared to 77% and 1.33X at last review. The second largest loan is the 300 M Street Office Building Loan ($47.3 million -- 6.2% of the pool), which is secured by a 280,000 square foot Class A office building located in Washington, D.C. As of June 2010 the property was 100% leased, the same as last review. The largest tenants are Northrop Grumman, URS Federal Technical Services, and Allon Science and Technology (total of 68% of the NRA). All of these tenants leases are scheduled to expire in 2011 but early indications are that the tenants will renew. Moody's analysis reflects a stressed cash flow due to Moody's concerns about the property's significant lease rollover in 2011. Moody's LTV and stressed DSCR are 75% and 1.40X, respectively, compared to 77% and 1.37X at last review. The third largest loan is The Shops at Deerfield Square Loan ($44.8 million -- 5.8% of the pool), which is secured by a mixed- use property that includes 170,000 square feet of retail and 67,000 square feet of office space located in Deerfield, Illinois. The property was 100% leased as of October 2010, the same as last review. Moody's LTV and stressed DSCR are 85% and 1.15X, respectively, compared to 90% and 1.08X at last review. CREDIT SUISSE: Moody's Downgrades Ratings on Six 2001-CK6 Certs. ---------------------------------------------------------------- Moody's Investors Service downgraded the ratings of six classes and affirmed five classes of Credit Suisse First Boston Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates, Series 2001-CK6: -- Cl. E, Affirmed at Aa3 (sf); previously on Sept. 12, 2007 Upgraded to Aa3 (sf) -- Cl. F, Affirmed at A1 (sf); previously on Sept. 12, 2007 Upgraded to A1 (sf) -- Cl. G, Affirmed at A3 (sf); previously on Sept. 12, 2007 Upgraded to A3 (sf) -- Cl. H, Affirmed at Baa2 (sf); previously on Sept. 12, 2007 Upgraded to Baa2 (sf) -- Cl. J, Affirmed at Baa3 (sf); previously on Sept. 12, 2007 Upgraded to Baa3 (sf) -- Cl. K, Downgraded to Ba3 (sf); previously on Dec. 21, 2001 Definitive Rating Assigned Ba2 (sf) -- Cl. L, Downgraded to Caa1 (sf); previously on Dec. 21, 2001 Definitive Rating Assigned Ba3 (sf) -- Cl. M, Downgraded to Ca (sf); previously on March 11, 2009 Downgraded to B2 (sf) -- Cl. N, Downgraded to C (sf); previously on March 11, 2009 Downgraded to B3 (sf) -- Cl. O, Downgraded to C (sf); previously on March 11, 2009 Downgraded to Caa1 (sf) -- Cl. P, Downgraded to C (sf); previously on March 11, 2009 Downgraded to Ca (sf) Ratings Rationale Moody's rating action did not address the ratings of Classes A3, B, C, D, and A-X, which are all currently rated Aaa, on review for possible downgrade. These classes were placed on review on January 19, 2011. KeyCorp Real Estate Capital Markets, Inc. (KRECM) is a primary servicer on this transaction and deposits collection, escrow and other accounts in KeyBank, National Association (Keybank). Keybank no longer meets Moody's rating criteria for an eligible depository account institution for Aaa and Aa1 rated securities. Moody's is reviewing arrangements that KeyBank has proposed, and that it may propose, to mitigate the incremental risk indicated by the lower rating of the depository account institution, so as possibly to allow the classes on review to maintain their current ratings. 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 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 5.5% of the current balance. At last full review, Moody's cumulative base expected loss was 2.8%. Moody's stressed scenario loss is 9.5% 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 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 26 compared to 50 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 September 12, 2007. 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 January 18, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 32% to $670 million from $986 million at securitization. The Certificates are collateralized by 106 mortgage loans ranging in size from less than 1% to 9.6% of the pool, with the top ten loans representing 38% of the pool. Twenty-two loans, representing 24% of the pool, have defeased and are collateralized with U.S. Government securities, compared to 26% at last review. Twenty-one 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 loans have been liquidated from the pool since securitization, resulting in an aggregate $9 million loss (41% loss severity on average). At last review the pool had realized an aggregate $7.7 million loss. Currently eight loans, representing 6% of the pool, are in special servicing. The master servicer has recognized an aggregate $20 million appraisal reduction for the specially serviced loans. Moody's has estimated an aggregate loss of $22.4 million (59% expected loss on average) for all of the specially serviced loans. Moody's has assumed a high default probability for nine poorly performing loans representing 5% of the pool and has estimated a $6.9 million loss (21% expected loss based on a 61% probability default) from these troubled loans. Moody's was provided with full year 2009 and partial year 2010 operating results for 99% and 37% of the performing pool, respectively. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 83% compared to 89% 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 9.8%. Excluding specially serviced and troubled loans, Moody's actual DSCRs is 1.31X compared to 1.20X 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 top three performing conduit loans represent 19.7% of the pool balance. The largest loan is the Avalon Pavilions Loan ($64.1 million -- 9.6% of the pool), which is secured by a 932- unit multifamily property located in Manchester, Connecticut. The loan is amortizing on a 360-month schedule maturing in August 2011. The loan has amortized 3% since last full review. Property performance has been stable but the loan is currently on the master servicer's watchlist due to low DSCR. Moody's LTV and stressed DSCR are 96% and 1.04X, respectively, compared to 96% and 1.05X at last full review. The second largest loan is the Washington Design Center Loan ($43.4 million -- 6.5% of the pool), which is secured by a 357,518 SF mixed use building located in Washington, DC. The loan is amortizing on a 360-month schedule maturing in November 2011. The loan has amortized 3% since last full review. The property was 87% leased as of October 2010 compared to 96% at last review. Moody's LTV and stressed DSCR are 75% and 1.52X, respectively, compared to 77% and 1.44X at last full review. The third largest loan is the Rockland Center Loan ($24.6 million -- 3.7% of the pool), which is secured by a 259,244 SF retail community center located in Nanuet, New York. Although property performance has been relatively stable, the loan is on the master servicer's watchlist due to the uncertainty around the status of Pathmark, the property's largest tenant. Pathmark is a subsidiary of A&P which filed for bankruptcy on December 13, 2010. A&P has announced plans to close 25 stores. The loan is amortizing on a 360-month schedule maturing in November 2011. The loan has amortized 3% since last full review. Moody's LTV and stressed DSCR are 100% and 1.03X, respectively, compared to 103% and 1X at last review. CREDIT SUISSE: Moody's Reviews Ratings on 2004-C4 Certificates -------------------------------------------------------------- Moody's Investors Service placed these seven additional classes of Credit Suisse First Boston Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2004-C4 on review for possible downgrade, adding it to the ten classes previously placed on review for possible downgrade on January 19, 2011: -- Cl. B, A1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 3, 2010 Downgraded to A1 (sf) -- Cl. C, Baa1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 3, 2010 Downgraded to Baa1 (sf) -- Cl. D, Baa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 3, 2010 Downgraded to Baa3 (sf) -- Cl. E, Ba2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 3, 2010 Downgraded to Ba2 (sf) -- Cl. F, B2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 3, 2010 Downgraded to B2 (sf) -- Cl. G, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 3, 2010 Downgraded to Caa2 (sf) -- Cl. H, Ca (sf) Placed Under Review for Possible Downgrade; previously on Feb. 3, 2010 Downgraded to Ca (sf) The classes were placed on review for possible downgrade due to higher expected losses for the pool resulting from anticipated losses from specially serviced and troubled loans as well as interest shortfalls. On January 19, 2011, Moody's placed ten classes on review for possible downgrade because KeyBank National Association, the bank in which the related transactions' collection, escrow and other accounts are held, no longer meets Moody's rating criteria for an eligible depository account institution for Aaa- and Aa1-rated securities. 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 3, 2010. Deal And Performance Summary As of the January 18, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 27% to $832.9 million from $1.14 billion at securitization. The Certificates are collateralized by 158 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 32% of the pool. Thirteen loans, representing 8% of the pool, have defeased and are collateralized with U.S. Government securities. Defeasance at last review represented 23% of the pool. Eighteen 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. Twelve loans have been liquidated from the pool since securitization, resulting in an aggregate $6.5 million loss (12% loss severity on average). The pool had experienced a $660,340 loss at Moody's prior review. Currently 4 loans, representing 11% of the pool, are in special servicing. The largest specially serviced loan is the Village on the Parkway Loan ($45.0 million -- 5.0%) which is secured by a 381,000 square feet retail center located in Addison, Texas. The loan was transferred to special servicing in October 2009. The property was foreclosed in September 2010 and is REO. The remaining three specially serviced loans are secured by a mix of property types. The master servicer has recognized an aggregate $21.6 million appraisal reduction for the specially serviced loans. Based on the most recent remittance statement, Classes J through O have experienced cumulative interest shortfalls totaling $1.3 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 review will focus on potential losses from specially serviced and troubled loans and the performance of the overall pool. CREDIT SUISSE: S&P Downgrades Ratings on Seven 2005-C4 Notes ------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on seven classes of commercial mortgage-backed securities from Credit Suisse First Boston Mortgage Securities Corp.'s series 2005-C4. The downgrades of the class L and M certificates to 'D (sf)' follow a principal loss to the class, which was detailed in the Jan. 18, 2011 remittance report. The class L certificate experienced a loss totaling 51.42% of its $6.64 million beginning certificate balance, and the class M certificate experienced a loss totaling 100% of its $1.66 million beginning balance. The class N certificates, which Standard & Poor's previously lowered to 'D (sf)', lost 100% of its $3.28 million opening balance. According to the January 2011 remittance report, the $10.67 million total principal loss to the trust resulted from the liquidation of The Pavilion Center loan, which was with the special servicer, C-III Asset Management LLC. The Pavilion Center asset is a 136,774-sq.-ft. retail property in Vista, Calif., which was transferred to the special servicer on Feb. 19, 2009, due to payment default. The asset had an outstanding balance of $20.6 million at the time of liquidation. Based on the January 2011 remittance report data, the loss severity was 51.8%. The downgrades of classes F through K reflect recurring interest shortfalls and reduced liquidity available to absorb future interest shortfalls. S&P expects the class J and K certificates to experience ongoing interest shortfalls for the foreseeable future resulting from ASERs related to two of the seven loans that are currently with the special servicer, as well as interest not advanced and special servicing fees. Consequently, S&P lowered these classes to 'D (sf)'. According to the January 2011 remittance report, the trust experienced a net repayment of accumulated interest shortfalls totaling $509,163. The net recovery is primarily due to a one- time ASER recovery associated with the liquidation of the Pavilion Center loan. Prior to the liquidation, as of the Dec. 17, 2010, trustee remittance report, accumulated interest shortfalls were $620,318, and had affected all classes subordinate to and including class J. Classes J and K had accumulated interest shortfalls outstanding for five months or more. The total reported ASER amount for loans currently in special servicing was $23,249, and the reported cumulative ASER amount was $170,607. ARAs totaling $5.9 million were in effect for three loans. Standard & Poor's considered the two ASER amounts, both of which were based on MAI appraisals, as well as interest not advanced ($7,315) on the remaining loan, and current special servicing fees in determining its rating actions. Credit Suisse First Boston Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2005-C4 Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- F B+ (sf) BB (sf) 4.11 0 0 G CCC+ (sf) BB- (sf) 2.87 0 0 H CCC- (sf) B (sf) 1.32 0 0 J D (sf) B- (sf) 0.86 (36,306) 0 K D (sf) CCC+ (sf) 0.09 (168,502) 0 L D (sf) CCC- (sf) 0.00 (151,811) 0 M D (sf) CCC- (sf) 0.00 (40,445) 0 CSAB MORTGAGE-BACKED: Moody's Downgrades Ratings on Three Tranches ------------------------------------------------------------------ Moody's Investors Service has downgraded the ratings of three tranches and confirmed the rating on one tranche from CSAB Mortgage-Backed Trust 2006-2. 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. Complete rating actions are: Issuer: CSAB Mortgage-Backed Trust 2006-2 -- Cl. A-2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-5-A, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-6-A, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. A-3-B, Confirmed at Caa3 (sf); previously on Jan. 14, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Cl. A-3-A, Current Rating at Aa3 (sf); previously on Nov. 12, 2009 Confirmed at Aa3 (sf) -- Underlying Rating: Confirmed at Caa3 (sf); previously on Jan. 21, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Assured Guaranty Municipal Corp (Confirmed at Aa3, Outlook Negative on Nov. 12, 2009) -- Cl. A-4, Current Rating at Aa3 (sf); previously on Nov. 12, 2009 Confirmed at Aa3 (sf) -- Underlying Rating: Confirmed at Caa3 (sf); previously on Jan. 21, 2010 Caa3 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: Assured Guaranty Municipal Corp (Confirmed at Aa3, Outlook Negative on Nov. 12, 2009) CSAM FUNDING: 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 CSAM Funding I: -- US$10,500,000 Class A-1 Notes (current outstanding balance of $7,320,514), Upgraded to Aa1 (sf); previously on November 23, 2010 Aa3 (sf) Placed Under Review for Possible Upgrade; -- US$563,500,000 Class A-2 Notes (current outstanding balance of $392,867,614), Upgraded to Aa1 (sf); previously on November 23, 2010 Aa3 (sf) Placed Under Review for Possible Upgrade; -- US$22,500,000 Class B-1 Notes, Upgraded to Baa1 (sf); previously on November 23, 2010 Ba1 (sf) Placed Under Review for Possible Upgrade; -- US$40,000,000 Class B-2 Notes, Upgraded to Baa1 (sf); previously on November 23, 2010 Ba1 (sf) Placed Under Review for Possible Upgrade; -- US$18,000,000 Class C-1 Notes, Upgraded to Ba2 (sf); previously on November 23, 2010 B3 (sf) Placed Under Review for Possible Upgrade; -- US$11,700,000 Class C-2 Notes, Upgraded to Ba2 (sf); previously on November 23, 2010 B3 (sf) Placed Under Review for Possible Upgrade; -- US$11,800,000 Class D-1 Notes, Upgraded to Caa3 (sf); previously on November 23, 2010 Ca (sf) Placed Under Review for Possible Upgrade; -- US$12,000,000 Class D-2 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 an increase in the transaction's overcollateralization ratios and improvement in the credit quality of the underlying portfolio since the rating action in July 2009. The overcollateralization ratios of the rated notes have improved due to the delevering of the Class A-1 and Class A-2 Notes, which have been paid down by approximately 19.7% or $98 million since the rating action in July 2009. Based on the January 2011 trustee report, the Class A, Class B, Class C, and Class D overcollateralization ratios are reported at 136.42%, 118.49%, 111.53% and 106.51%, respectively, versus June 2009 levels of 127.3%, 113.10%, 107.40% and 103.30%, respectively, and all related overcollateralization tests are currently in compliance. Moody's also notes that the deal has benefited from improvement in the credit quality of the underlying portfolio since the last rating action. The weighted average rating factor in the January 2011 report was 2716 compared to 2944 in June 2009, and securities rated Caa1 and below make up approximately 9.6% of the underlying portfolio versus 17.7% in June 2009. The deal also experienced a decrease in defaulted securities. In particular, the dollar amount of defaulted securities has decreased to about $25 million from approximately $75 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 balance of $563 million, defaulted par of $31 million, a weighted average default probability of 23.65% (implying a WARF of 3796), a weighted average recovery rate upon default of 38.89%, and a diversity score of 65. 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. CSAM Funding I, issued on March 29, 2001, 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 sensitivity analyses to test the impact on all rated notes of various default probabilities. 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% (3037) -- Class A-1: +1 -- Class A-2: +1 -- Class B-1: +2 -- Class B-2: +2 -- Class C-1: +2 -- Class C-2: +2 -- Class D-1: +3 -- Class D-2: +3 Moody's Adjusted WARF + 20% (4555) -- Class A-1: -1 -- Class A-2: -1 -- Class B-1: -2 -- Class B-2: -2 -- Class C-1: -2 -- Class C-2: -2 -- Class D-1: -1 -- Class D-2: -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 manager's investment strategy 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 at what pace delevering will continue. 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 sell 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. 4) 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. 5) Other collateral quality metrics: The deal is allowed to reinvest from unscheduled proceeds 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. CSAM FUNDING: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class A, B-1, B-2, C-1, C-2, and D notes from CSAM Funding II, a collateralized loan obligation transaction managed by CSFB Alternative Capital Inc. At the same time, S&P removed the ratings on the class A, B-1, B-2, C-1, C-2, and D notes 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 November 2009. According to the Jan. 10, 2011 trustee report the transaction held $19 million in defaulted assets, down from $45 million noted in the Oct. 7, 2009 trustee report. In addition, assets from obligors rated in the 'CCC' category were approximately 6% of the collateral pool in January 2011 as compared with approximately 9% in October 2009. The class A par value test improved to 135.53% in January 2011 from 129.54% as of October 2009. The class A notes were paid down by $53 million since S&P's last rating action. Standard & Poor's will continue to review the ratings assigned to the notes to asses whether they remain consistent with the credit enhancement available to support them and take rating actions as S&P deems necessary. Rating And Creditwatch Actions CSAM Funding II Rating ------ Class To From ----- -- ---- A AA+ (sf) AA- (sf)/Watch Pos B-1 A+ (sf) BBB- (sf)/Watch Pos B-2 A+ (sf) BBB- (sf)/Watch Pos C-1 BB+ (sf) B+ (sf)/Watch Pos C-2 BB+ (sf) B+ (sf)/Watch Pos D B+ (sf) CCC- (sf)/Watch Pos CT CDO: Fitch Downgrades Ratings on Two Classes of Notes -------------------------------------------------------- Fitch Ratings has downgraded two and affirmed 12 classes issued by CT CDO III Ltd./Corp. This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs'. The ratings are not based on the Portfolio Credit Model given the high obligor concentration and seasoning of the portfolio. Instead, the projected recovery estimate on the distressed collateral was applied in accordance with the principal waterfall. Additionally, an asset by asset analysis was performed for the remaining assets to determine the collateral coverage for the remaining liabilities. Since Fitch's last rating action in February 2010, the weighted average rating of the portfolio has remained the same at 'BB/BB-'. Currently, 29.1% has a Fitch derived rating below investment grade and 15.8% has a rating in the 'CCC' rating category or lower, compared to 28.7% and 15.9%, respectively, at last review. The class A-1 notes have paid down by $14.5 million since the last review. The portfolio has become increasingly concentrated with 13 obligors remaining. The class A-1 notes have been affirmed and are assigned a Stable Outlook, since they are adequately supported by 'AAA' rated collateral. Classes A-2 through H have been affirmed at their current ratings given that their balances are covered by collateral with equal or better rated collateral. These classes have been assigned a Negative Outlook reflecting Fitch's expectation that underlying commercial mortgage backed security 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. Fitch affirmed classes J through L at their current ratings given the limited amount of credit enhancement that would remain after liquidation of the distressed collateral. The total loss estimate for the distressed assets is expected to erode the class O notes and part of class N, and significantly reduce the credit enhancement for class M. As a result, the class M and N notes have been downgraded to 'Csf, indicating default is inevitable. CT CDO III is a commercial real estate collateralized debt obligation that closed Aug. 4, 2005. The transaction is collateralized by 21 CMBS assets from 13 obligors from the 1996- 1999 vintages. Fitch has taken these actions, including revising LS ratings and revising Outlooks for these classes as indicated: -- $44,387,524 Class A-1 Notes affirmed at 'AAAsf/LS4'; Outlook to Stable from Negative; -- $147,169,000 Class A-2 Notes affirmed at 'Asf/LS3'; Outlook Negative; -- $29,007,000 Class B Notes affirmed at 'BBB+sf/LS4'; Outlook Negative; -- $13,650,000 Class C Notes affirmed at 'BBBsf'; Outlook Negative; to 'LS5' from 'LS4'; -- $5,118,000 Class D Notes affirmed at 'BBB-sf/LS5'; Outlook Negative; -- $6,825,000 Class E Notes affirmed at 'BB+sf/LS5'; Outlook Negative; -- $6,825,000 Class F Notes affirmed at 'BB+sf/LS5'; Outlook Negative; -- $9,811,000 Class G Notes affirmed at 'BBsf/LS5'; Outlook Negative; -- $11,517,000 Class H Notes affirmed at 'Bsf/LS5' Outlook Negative; -- $6,825,000 Class J Notes affirmed at 'CCCsf'; -- $3,839,000 Class K Notes affirmed at 'CCCsf'; -- $5,118,000 Class L Notes affirmed at 'CCsf'; -- $5,545,000 Class M Notes downgraded to 'Csf' from 'CCsf'; -- $4,265,000 Class N Notes downgraded to 'Csf' from 'CCsf'. DBUBS 2011-LC1: Moody's Assigns Ratings on 11 CMBS Securities ------------------------------------------------------------- Moody's Investors Service has assigned provisional ratings to 11 classes of CMBS securities, issued by DBUBS 2011-LC1, Commercial Mortgage Pass-Through Certificates Series 2011-LC1. -- Cl. A-1 Certificate, Assigned (P)Aaa (sf) -- Cl. A-2 Certificate, Assigned (P)Aaa (sf) -- Cl. A-3 Certificate, Assigned (P)Aaa (sf) -- Cl. X-A Certificate, Assigned (P)Aaa (sf) -- Cl. X-B Certificate, Assigned (P)Aaa (sf) -- Cl. B Certificate, Assigned (P)Aa2 (sf) -- Cl. C Certificate, Assigned (P)A2 (sf) -- Cl. D Certificate, Assigned (P)Baa1 (sf) -- Cl. E Certificate, Assigned (P)Baa3 (sf) -- Cl. F Certificate, Assigned (P)Ba2 (sf) -- Cl. G Certificate, Assigned (P)B2 (sf) Ratings Rationale The Certificates are collateralized by 47 fixed rate loans secured by 83 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 1.43X is higher than the 2007 conduit/fusion transaction average of 1.31X. The Moody's Stressed DSCR of 1.07X is higher than the 2007 conduit/fusion transaction average of 0.92X. Moody's Trust LTV ratio of 94.0% is lower than the 2007 conduit/fusion transaction average of 110.6%. Moody's Total LTV ratio (inclusive of subordinated debt) of 97.7% is also considered when analyzing various stress scenarios for the rated debt. Moody's also considers both loan level diversity and property level diversity when selecting a ratings approach. With respect to loan level diversity, the pool's loan level Herfindahl score is 18. With respect to property level diversity, the pool's property level Herfindahl score is 19. The transaction is concentrated relative to previously rated conduit and fusion transactions but more diverse than previously rated large loan transactions. As a result, Moody's approach to rating the deal incorporated a blend of both Moody's conduit and large loan rating methodologies. Properties located in major markets represent approximately 91.2% of the pool balance. Additionally, Moody's Red-Yellow-GreenTM analysis covers properties representing 83.3% of the pool balance. The tertiary market share of 8.8% is amongst the lowest exposures Moody's has observed in its rated conduit and fusion universe. Properties situated in major markets tend to exhibit more cash flow and cap rate stability over time compared to assets located in tertiary markets. Moody's also grades properties on a scale of 1 to 5 (best to worst) and considers those grades when assessing the likelihood of debt payment. The factors considered include property age, quality of construction, location, market, and tenancy. The pool's weighted average property quality grade is 1.8, which is lower than the average of recently rated conduit deals. The low weighted average grade is indicative of the strong market composition of the pool and the stability of the cash flows underlying the assets. The transaction benefits from two loans, representing approximately 11.3% 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. 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 Low/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, Aa3, 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. DELTA AIR: Moody's Assigns 'Ba3' Ratings on Class B Certificates ---------------------------------------------------------------- Moody's Investors Service assigned Ba3 ratings to the respective Class B Pass Through Certificates, Series 2010-1B of the 2010-1B Pass Through Trust and the Series 2010-2B of the 2010-2B Pass Through Trust to be issued by Delta Air Lines, Inc. At the same time, the Baa2 ratings previously assigned by Moody's to the respective Class A Pass Through Certificates , Series 2010-1A which Delta issued on July 2, 2010, and Series 2010-2A, which Delta issued on November 22, 2010, and all of Delta's other EETC and debt ratings, are affirmed by Moody's and remain in force. Ratings Rationale A portion of the 2010-2B Certificates' proceeds will immediately fund the purchase of 12 Class B equipment notes that Delta will issue. The remaining proceeds will be held in escrow, and will fund the purchase of the remaining 16 Class B equipment notes of that Series to be issued by Delta for refinancings concluding with Delta's 2001-1 EETC that has a scheduled maturity in September 2011. The proceeds of the 2010-1B Series will fund the immediate purchase of the Class B equipment notes of that Series to be issued by Delta. The company will use the Notes proceeds for general corporate purposes. Please refer to Moody's press releases dated June 28, 2010 and November 15, 2010 on www.moodys.com for descriptions of the aircraft that comprise the respective collateral for each of these EETCs. The Class B Certificates of each Series will generally be subordinated to the Class A Certificates of that Series for the distribution of scheduled principal and interest payments on the Notes, as well as for non-scheduled distributions, if any. Scheduled interest payments on the Class B Certificates are supported by separate Class B Liquidity Facilities, each sized to pay up to three respective consecutive semi-annual interest payments in the event Delta defaults on its obligations under the Notes. Assignments: Issuer: Delta Air Lines, Inc. -- Series 2010-1B Senior Secured Enhanced Equipment Trust, Class B, Assigned Ba3 -- Series 2010-2B Senior Secured Enhanced Equipment Trust, Class B, Assigned Ba3 The ratings of the Certificates consider the credit quality of Delta (Corporate Family Rating of B2, 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 applicability of Section 1110 of Title 11 of the United States Code. The assigned ratings 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 the final legal distribution dates of July 2, 2017 for 2010-1B and May 23, 2017 for 2010-2B. Series 2010-1B Moody's believes that affirmation of the 2010-1 Series under a bankruptcy scenario would be likely because the aircraft collateral represent some of the youngest vintages for the respective models in Delta's fleet. Additionally, the B777- 200LR's are among the newest aircraft in the fleet and fill a key role in Delta's strategy to increase capacity on its longest-haul routes between the U.S. and Asia. The structure's cross-default feature further supports the anticipation of affirmation given the relatively younger age and relevance of the collateral to Delta's route network, even under a reorganization scenario. Moody's estimates the peak loan-to-value inclusive of benefit for the cross-collateralization feature at above 70%. The resultant over-collateralization through the Class B Certificates obligation provides an adequate cushion to support recovery on the B tranche in the event of a bankruptcy filing by Delta during the upcoming five years, the tenor of the Class B obligations. The cross- collateralization of the aircraft securing each equipment note underlying the transaction could enhance the recovery for investors in the event Delta was to dis-affirm its obligations under the equipment notes under a bankruptcy filing by it and pursuant to the provisions of the Code. Series 2010-2B Moody's believes that affirmation of the 2010-2 Series under a bankruptcy scenario is also likely but possibly somewhat less so than that of the other three of Delta's EETC's including 2010-1 that provide cross-default and cross-collateralization of the respective underlying equipment notes. This is because of the few number of many models of aircraft in this financing transaction. Moody's estimates the peak loan-to-value inclusive of the benefit for the cross-collateralization feature at above 75% initially. The resultant over-collateralization through the Class B Certificates obligation should provide an adequate cushion to support a good recovery on the B tranche in the event of a bankruptcy filing by Delta during the upcoming five years, the tenor of the Class B obligations. The cross-collateralization of the aircraft securing each equipment note underlying this Series could enhance the recovery for investors in the event Delta was to disaffirm its obligations under the equipment notes under a bankruptcy filing by it and pursuant to the provisions of the Code. Any combination of future changes in the underlying credit quality or ratings of Delta, unexpected material changes in the value of the aircraft pledged as collateral, and/or changes in the status or terms of the liquidity facilities could cause Moody's' to change its ratings of the Certificates. The last rating action was on November 15, 2010 when Moody's assigned a Baa2 rating to the $474 million of Class A Pass Through Certificates, Series 2010-2A of the 2010-2 Pass Through Trust issued by Delta. Delta Air Lines, Inc., headquartered in Atlanta, Georgia, is the world's largest airline, providing scheduled air transportation for passengers and cargo throughout the U.S. and around the world. DELTA AIR: S&P Assigns 'BB' Rating to 2010-2B Certificates ---------------------------------------------------------- Standard & Poor's Ratings Services said that it has assigned its preliminary 'BB' (sf) rating to Delta Air Lines Inc.'s pass- through certificates series 2010-2B, a rule 415 shelf registration drawdown, with an expected maturity of Nov. 23, 2015. The final legal maturity will be 18 months after the expected maturity. The issue is a junior tranche secured by the same collateral as the $474.1 million series 2010-1A certificates issued Nov. 15, 2010. The issuance of this series has no effect on S&P's 'A-' (sf) rating on the 2010-A series. The preliminary 'BB' (sf) rating on the 2010-1 class B certificates reflects Delta's credit quality, substantial collateral coverage by a combination of very desirable and somewhat-less-liquid aircraft, and legal and structural protections available to the certificates. The 2010-2A and 2010- 2B certificates are secured by aircraft notes which, in turn, are secured -- one per aircraft -- by aircraft Delta already owns: six B737-800, one B757-200ER, and three B767-300ER aircraft (previously collateral for earlier pass-through certificates); two B737-700, six B757-200ER, one B777-200LR, and one A330-200 aircraft (previously collateral for third-party financings); and three B757-300, one A320-200, one A330-300, and three MD90-30 aircraft (previously unencumbered). Each aircraft's secured notes are cross-collateralized and cross-defaulted, a provision that S&P believes increases the likelihood that Delta would affirm the notes (and, therefore, 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 Natixis S.A. This 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 Delta in a bankruptcy with regard to certificates. The preliminary rating applies 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, the Bank of New York Mellon, pending delivery of the aircraft that Delta will refinance with proceeds from the certificates (10 of which currently secure Delta's 2001-1 EETCs). Amounts deposited under the escrow agreements are not the property of Delta 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 Delta 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 Delta rejected any of the aircraft notes. This should prevent Delta from selectively affirming some aircraft notes and rejecting others ("cherry- picking"), which often harms the interests of certificateholders n a bankruptcy. S&P considers the collateral pool overall to be of mixed quality, with some aircraft models more attractive than others. The largest proportion of value, about 60%, is comprised of good collateral: B737-800s and B737-700s (26%), A330-200s and A330-300s (16%), B777-200LRs (15%), and one A320 (3%). The B737-800 and closely related B737-700 are Boeing's most popular aircraft, a midsize narrowbody plane that more than 100 airlines worldwide operate. Given the modern technology incorporated in the plane, its wide user base, and expected demand in excess of supply over the intermediate term, S&P considers it to be the best aircraft collateral available. Boeing currently says that it could possibly introduce a successor to the various current B737 models toward the end of this decade. The A330-200 and A330-300 are popular Airbus widebodies operated globally. However, they will compete in the global aircraft market with the B787, which incorporates newer technology, with the first aircraft expected to be delivered in 2011. The Airbus A350, scheduled to enter service in 2013, is a somewhat larger and longer-range plane than the A330 models, but will also represent a successor. The B777-200LR is a long-range version introduced in 2005 of Boeing's successful B777 model. It's more specialized than the predecessor B777-200ER from which it was derived and has attracted fewer airline operators so far; S&P accordingly judges its liquidity to be somewhat less than the B777-200ER's. The A320-200 is the core of Airbus' very successful narrowbody product line and widely used by airlines worldwide. Although this plane was introduced in 1995, S&P does not expect Airbus to introduce a successor model until at least late this decade, now that Airbus has announced a re-engined version available mid-decade. The balance of value, about 40%, is comprised of B757-200ERs (14%), B767-300ERs (13%), B757-300s (10%), and MD9-30s (3%). The B757-200ER is a large narrowbody aircraft introduced in the 1980s and widely used, especially by U.S. airlines. Boeing's current generation of narrowbodies includes a successor aircraft, the B737-900 and B737-900ER, although even the long-range "-ER" version does not have trans-Atlantic capability. S&P considers these planes of average desirability as collateral. The B757-300, introduced in 1999 as a derivative of the B757-200, does not incorporate the most current technology and has a much narrower user base than the A330s. The B757-300 had the misfortune of being introduced two years before the global aviation downturn that started in 2001, and production was ended in 2004. Accordingly, S&P considers resale prospects for this plane to be more limited than for the A330. The B767-300ER is a small widebody introduced in the 1980s. This plane has a fairly wide user base and is well suited to flying routes that cannot support larger models. It will eventually be superseded by the new B787. The MD90-30 is the least attractive of the aircraft types due to its age (1990s production), small user base, and fuel efficiency that is somewhat less than that in the current generation of B737s and A320 family. Since all of the models of aircraft represented in the collateral form significant parts of Delta's current fleet, S&P believes that most are likely to remain part of Delta's fleet if the airline enters bankruptcy a second time and reorganizes. Since Delta has no new aircraft on order, S&P would expect most of the other model types to remain in the fleet. Indeed, Delta is actively looking for more MD90s to replace its aging DC9s. S&P's analysis of the aircraft collateral, which focuses mainly on resale liquidity and technological risk, also considers the age of the aircraft, as well as the characteristics of the models. S&P judged that the 10-year-old B737-800 aircraft would exhibit somewhat greater potential volatility of values than the new delivery B737-800s in an airline industry downturn, and factored that into S&P's conclusions. The initial loan-to-value of the class B certificates is 70.3%% using the appraised base values and depreciation assumptions in the offering memorandum. However, S&P focused on more- conservative maintenance-adjusted current market values (not disclosed in the offering memorandum) for the B767-300ER, B757- 200ER, B757-300, and MD90-30 aircraft, and more-conservative maintenance-adjusted base values for the B737-800 and B737-700, B777-200LR, A330-200 and A330-300, and A320-200 aircraft. 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, the values of the B737-800s and B737-700s would decline by 5% of the preceding year's value per year; the A320s, 6%; the A330-200s and A330-300s, 6.5%; the B757-200ERs, B767-300ERs, and B777-200LRs, 7%; the B757-300s, 8%; and the MD90- 30s, 10%. Using these values and assumptions, the class B initial LTV is higher, 70.3%--its peak, before declining gradually. 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. However this amount is, because of current low interest rates, somewhat below levels (as a percent of asset value) of EETCs of the past several years. Initially, a full draw, with interest, is equivalent to about 6.6% of asset value using S&P's assumptions. S&P's ratings on Atlanta, Ga.-based Delta Air Lines Inc. reflect a highly leveraged financial profile, with significant intermediate- term debt maturities, and risks associated with participation in the price-competitive, cyclical, and capital-intensive airline industry. Ratings also incorporate the reduced debt load and operating costs Delta achieved while in Chapter 11 in 2005-2007, and an enhanced competitive position and synergy opportunities associated with its 2008 merger with Northwest Airlines Corp. (parent of Northwest Airlines Inc.), with the two airlines fully integrated in December 2009. S&P characterizes Delta's business risk profile as weak and its financial risk profile as highly leveraged. S&P's outlook on Delta is stable. S&P doesn't expect to make any rating revisions over the next year. However, if continued strong earnings, coupled with debt reduction, generate adjusted funds flow to debt in the high-teen percent area, S&P could raise its ratings. On the other hand, if adverse industry conditions (for example, a serious fuel price spike) cause financial results to deteriorate so that funds flow to debt falls into the mid-single- digit percent area, or unrestricted liquidity falls below $3.5 billion on a sustained basis, S&P could lower ratings. Ratings List Delta Air Lines Inc. Corporate credit rating B/Stable/-- New Rating Delta Air Lines Inc. Pass-thru cert series 2010-2B BB (sf) DRYDEN VII-LEVERAGED: Moody's Upgrades Ratings on Four Notes ------------------------------------------------------------ Moody's Investors Service announced that it has upgraded the ratings of these notes issued by Dryden VII-Leveraged Loan CDO 2004: -- US$26,000,000 Class A-2L Floating Rate Notes, Upgraded to Aa1 (sf); previously on August 26, 2010 Upgraded to Aa3 (sf) -- US$22,000,000 Class A-3F Fixed Rate Notes, Upgraded to A3 (sf); previously on August 26, 2010 Upgraded to Baa3 (sf) -- US$22,000,000 Class B-1L Floating Rate Notes, Upgraded to Ba2 (sf); previously on August 26, 2010 Upgraded to B3 (sf) -- US$7,500,000 Class B-2L Floating Rate Notes, Upgraded to B3 (sf); previously on August 26, 2010 Upgraded to Caa3 (sf) Ratings Rationale According to Moody's, the rating actions taken on the notes result primarily from the delevering of the Senior Class A notes (Class A1L, Class A1LA, and Class A1LB notes), which have been paid down by approximately 24% or $49.7 million since the last rating action in August 2010. As a result of the delevering, the overcollateralization ratios have increased since August 2010. As of the latest trustee report dated January 7, 2011, the Senior Class A, Class A, Class B-1L, and Class B-2L overcollateralization ratios are reported at 143.6%, 128.4%, 116.1%, and 112.4%, respectively, versus August 2010 levels of 134.1%, 122.6%, 113.0%, and 110.0%, respectively. Moody's notes that the credit profile of the underlying portfolio has been relatively stable since the last rating action. 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 balance of $266.6 million, defaulted par of $4.3 million, a weighted average default probability of 23.95% (implying a WARF of 3779), a weighted average recovery rate upon default of 41.0%, and a diversity score of 49. 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. Dryden VII-Leveraged Loan CDO 2004, issued in July 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. In addition to the base case analysis, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is 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% (3023) -- Class A1L: 0 -- Class A1LA: 0 -- Class A1LB: 0 -- Class A2L: +1 -- Class A3F: +2 -- Class B1L: +2 -- Class B2L: +3 Moody's Adjusted WARF +20% (4535) -- Class A1L: 0 -- Class A1LA: 0 -- Class A1LB: 0 -- Class A2L: -2 -- Class A3F: -2 -- Class B1L: -1 -- Class B2L: -3 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 manager's investment strategy 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. 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 sell 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. FAIRWAY LOAN: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class A-1L, A-1LV, A-2L, and B-1L notes from Fairway Loan Funding Co., a collateralized loan obligation transaction managed by Pacific Investment Management Co. LLC. At the same time, S&P removed its ratings on the class A-2L and A-3L notes from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. S&P also affirmed its ratings on the class X, A-3L, B-2L, and C-6 notes, and withdrew its ratings on the class C-2 and C-5 notes. The upgrades of the class A-1L, A-1LV, A-2L, and B-1L notes reflect improved performance S&P has observed in the deal's underlying asset portfolio since S&P's Dec. 8, 2009, rating action, when S&P downgraded the A-1L, A-1LV, A-2L, A-3L, B-1L, and B-2L notes following the application of its September 2009 corporate CDO criteria. As of the January 2011 trustee report, the transaction had $3.7 million of defaulted assets. This was down from $53.8 million as reflected in the October 2009 trustee report, which S&P referenced for its December 2009 rating actions. The affirmations of the class X, A-3L, and B-2L notes reflects the availability of credit support at the current rating level. The affirmation of its 'AAA (sf)' rating on the class C-6 notes reflects the principal protection on the notes by U.S. Treasury collateral. Additionally, S&P withdrew its ratings on the class C-2 and C-5 note balances as they had paid down to zero. The transaction has also benefited from an increase in overcollateralization available to support the rated notes. The trustee reported these O/C ratio in the January 2011 monthly report * The senior class A O/C ratio was 122.42%, compared with a reported ratio of 120.31% in October 2009; * The class A O/C ratio was 113.50%, compared with a reported ratio of 111.60% in October 2009; * The class B-1L O/C ratio was 108.35%, compared with a reported ratio of 106.57% in October 2009; and * The class B-2L O/C ratio was 103.61%, compared with a reported ratio of 100.28% 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 Fairway Loan Funding Co. Rating ------ Class To From ----- -- ---- X AAA (sf) AAA (sf) A-1L AAA (sf) AA+ (sf) A-1LV AAA (sf) AA+ (sf) A-2L AA+ (sf) A+ (sf)/Watch Pos A-3L BBB+ (sf) BBB+ (sf)/Watch Pos B-1L B+ (sf) CCC+ (sf) B-2L CCC- (sf) CCC- (sf) C-2 NR AAA (sf) C-5 NR AAA (sf) C-6 AAA (sf) AAA (sf) NR - Not rated. Transaction Information ----------------------- Issuer: Fairway Loan Funding Co. Coissuer: Fairway Loan Funding (Delaware) Corp. Collateral manager: Pacific Investment Management Co. LLC Underwriter: Bear Stearns Cos. LLC (The) Trustee: Bank of New York Mellon (The) Transaction type: Cash flow CLO FIRST UNION-LEHMAN: S&P Raises Ratings on 1997-C2 Securities ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class F and G certificates of commercial mortgage-backed securities from First Union-Lehman Bros. Trust's series 1997-C2. Concurrently, S&P lowered its rating to 'CCC+ (sf)' on the class J certificates and affirmed its ratings on three other classes from the same transaction. The upgrades reflect increased credit enhancement levels resulting from principal paydowns to the trust, as well as S&P's analysis of the remaining collateral in the pool and the transaction structure. The downgrade to 'CCC+ (sf)' on the class J reflects the reduced liquidity support available to this class, and the potential for future shortfalls. Finally, the affirmations follow S&P's analysis of the remaining collateral in the pool 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 1.16x and an adjusted loan-to-value ratio of 70.2%. S&P further stressed the loans' cash flows under S&P's 'AAA' scenario to yield a weighted average DSC of 0.85x and an LTV ratio of 77.8%. The implied defaults and loss severity under the 'AAA' scenario were 42.4% and 18.6%, respectively. The DSC and LTV calculations S&P noted above exclude four defeased loans ($52.9 million, 17.5%), and one ($3.0 million, 1.0%) specially serviced loan. S&P separately estimated a loss for the specially serviced loan and including it in its 'AAA' scenario implied default and loss figures. S&P's analysis also considered the volume of near-term maturing loans with final maturities in 2012 ($141.6 million, 46.9%). Transaction Summary As of the January 2011 remittance report, the aggregate pooled trust balance was $302.2 million, which represents 13.7% of the aggregate pooled trust balance at issuance. There are 80 loans remaining in the pool, down from 422 at issuance. Four ($52.9 million, 17.5%) loans are defeased and 42 ($63.5 million, 21.0%) loans are classified as credit tenant lease loans. The master servicer, Wells Fargo Commercial Mortgage Servicing, provided financial information for 87.1% of the nondefeased and nonCTL loans in the pool, 53.2% of which was full-year 2009, with the balance reflecting interim 2010 reporting. 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 ratio were 1.16x and 70.2%, respectively. S&P's adjusted figures exclude the four defeased loans, as well as the one ($3.0 million, 1.0%) specially serviced loan. Eighteen loans ($68.9 million, 22.8%) are on the master servicer's watchlist. Ten loans ($41.0 million, 13.6%) have a reported DSC of less than 1.10x, and eight of these loans ($38.4 million, 12.7%) have a reported DSC of less than 1.00x. To date, the transaction has realized 28 principal losses totaling $62.4 million. The transaction benefits from seasoning and also has a significant amount of fully amortizing loans (27.0% by balance). Specially Serviced Loan As of the January 2011 remittance report, the Texas Melody loan ($3.0 million, 1.0%) was the sole loan with the special servicer, CWCapital Asset Management LLC. The loan is secured by a 262-unit multifamily property in Dallas, Texas. The loan was reported as 90-plus-days delinquent. The reported DSC was 0.78x as of December 2009. The loan was originally transferred to the special servicer on Oct. 21, 2010, due to imminent payment default. Standard & Poor's anticipates a moderate loss upon the eventual resolution of this asset. Summary of Top 10 Real Estate Exposures The top 10 exposures secured by real estate have an aggregate outstanding pooled balance of $152.2 million (50.4%). Using servicer-reported numbers, S&P calculated a weighted average DSC of 1.23x for the top 10 exposures. S&P's adjusted DSC and LTV ratio for the top 10 exposures were 1.16x and 75.1%, respectively. Three of the top 10 exposures appear on the master servicer's watchlist. Details regarding these loans are: The Drury Portfolio #1 loan ($21.2 million, 7.0%) is the third- largest real estate exposure in the pool and the largest loan on the master servicer's watchlist. The loan is secured by five lodging properties totaling 676 rooms in Missouri and Indianapolis. The loan appears on the master servicer's watchlist due to low DSC. As of June 2010, the consolidated reported DSC and occupancy were 0.77X and 67.2%, respectively. Two of the five properties are performing poorly. The poor performance at one of these two properties is due to a reduction of flights at the St. Louis airport, while the other property is performing poorly because of renovations that took several rooms offline. The Yaohan Plaza Costa Mesa loan ($7.1 million, 2.4%) is the eighth-largest real estate exposure in the pool and the second- largest loan on the master servicer's watchlist. The loan is secured by a 44,419-sq.-ft. retail property in Costa Mesa, Calif. The loan appears on the master servicer's watchlist due to past delinquency issues, however, it is now reported as current. The property is 100% occupied by Yaohan USA, with a lease through Aug. 22, 2017. The Nob Hill Apartments - Madison loan ($5.3 million, 1.7%) is the 10th-largest real estate exposure in the pool and the third- largest loan on the master servicer's watchlist. The loan is secured by a 272-unit multifamily property in Madison, Wis. The loan appears on the master servicer's watchlist due deferred maintenance. As of September 2010, reported DSC and property occupancy were 1.58x and 83.5%, respectively. Standard & Poor's stressed the assets in the pool according to its criteria and the analysis is consistent with its rating actions Ratings Raised First Union-Lehman Brothers Trust Commercial mortgage pass-through certificates series 1997-C2 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- F AA(sf) A (sf) 37.69 G A (sf) BBB+ (sf) 21.28 Rating Lowered First Union-Lehman Brothers Trust Commercial mortgage pass-through certificates series 1997-C2 Rating ------ Class To From Credit enhancement (%) ----- -- ---- ---------------------- J CCC+ (sf) B- (sf) 1.23 Ratings Affirmed First Union-Lehman Brothers Trust Commercial mortgage pass-through certificates series 1997-C2 Class Rating Credit enhancement (%) ----- ------ ---------------------- D AAA (sf) 70.50 E AAA (sf) 59.56 H BB+ (sf) 15.81 FM LEVERAGED: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class A-2, B, C, D, and E notes from FM Leveraged Capital Fund II, a collateralized loan obligation transaction managed by GSO Capital Partners L.P. At the same time, S&P removed its ratings on the class B, C, and D notes from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. S&P also affirmed its 'AAA' (sf) rating on the class A-1 notes. The upgrades mainly reflect an improvement in the credit quality available to support the notes since S&P downgraded most of the rated notes on Dec. 29, 2009, following the initial application of its updated corporate collateralized debt obligation criteria, as well as deterioration in the credit quality of certain CLO tranches due to increased exposure to obligors that have either defaulted or experienced downgrades into the 'CCC' range. As of the Dec. 20, 2010 trustee report, the transaction had $19.96 million in defaulted assets. This was down from $47.75 million noted in the Nov. 6, 2009 trustee report, which S&P referenced for S&P's December 2009 rating actions. 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 Dec. 20, 2010 monthly report: * The class A/B O/C ratio was 146.19%, compared with a reported ratio of 130.47% in November 2009; * The class C O/C ratio was 124.81%, compared with a reported ratio of 115.73% in November 2009; * The class D O/C ratio was 114.02%, compared with a reported ratio of 107.84% in November 2009; and * The class E O/C ratio was 105.71%, compared with a reported ratio of 1.55% in November 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 FM Leveraged Capital Fund II Rating ------ Class To From ----- -- ---- A-2 AAA (sf) AA+ (sf) B AA+ (sf) AA (sf)/Watch Pos C A+ (sf) BBB+ (sf)/Watch Pos D BBB (sf) BB+ (sf) /Watch Pos E B+ (sf) CCC+ (sf) Rating Affirmed FM Leveraged Capital Fund II Class Rating ----- ------ A-1 AAA (sf) Transaction Information ----------------------- Issuer: FM Leveraged Capital Fund II Coissuer: FM Leveraged Capital Fund II LLC Collateral manager: GSO Capital Partners L.P. Underwriter: Wachovia Capital Markets LLC Trustee: U.S. Bank N.A. Transaction type: Cash flow CLO FORD CREDIT: Fitch Takes Rating Actions on Various Classes ---------------------------------------------------------- Fitch Ratings affirms 17 and upgrades 10 classes of five Ford Credit Auto Owner Trust transactions, as part of its on going surveillance process. The affirmations and upgrades are a result of continued available credit enhancement in excess of stressed remaining losses. Further, the upgraded subordinate notes reflect Fitch's view on the transaction's improving loss performance. The collateral in each transaction continues to perform within Fitch's base case expectations. Currently, the securities can withstand stress scenarios consistent with the current rating categories and still make full payments of interest and principal in accordance with the terms of the documents. As before, the ratings reflect the quality of Ford Motor Credit Co.'s retail auto loan originations, the sound financial and legal structure of the transactions, and servicing provided by FMCC. The rating actions are: 2007-A -- Class A-4a notes affirmed at 'AAAsf'; Outlook Stable; -- Class A-4b notes affirmed at 'AAAsf'; Outlook Stable; -- Class B notes affirmed at 'AAAsf'; Outlook Stable; -- Class C notes upgraded to 'AAAsf' from 'AAsf'; Outlook Stable from Positive; -- Class D notes upgraded to 'Asf' from 'BBBsf'; Outlook Stable from Positive. 2007-B -- Class A-3a notes affirmed at 'AAAsf'; Outlook Stable; -- Class A-3b notes affirmed at 'AAAsf'; Outlook Stable; -- Class A-4a notes affirmed at 'AAAsf'; Outlook Stable; -- Class A-4b notes affirmed at 'AAAsf'; Outlook Stable; -- Class B notes affirmed at 'AAAsf'; Outlook Stable; -- Class C notes upgraded to 'AAA' from 'AA'; Outlook Stable from Positive; -- Class D notes upgraded to 'AAsf' from 'Asf'; Outlook Stable from Positive. 2008-B -- Class A-3a notes affirmed at 'AAAsf'; Outlook Stable; -- Class A-3b notes affirmed at 'AAAsf'; Outlook Stable; -- Class A-4a notes affirmed at 'AAAsf'; Outlook Stable; -- Class A-4b notes affirmed at 'AAAsf'; Outlook Stable; -- Class B notes upgraded to 'AAAsf' from 'AAsf'; Outlook Stable from Positive; -- Class C notes upgraded to 'AAsf' from 'Asf'; Outlook Positive; -- Class D notes upgraded to 'Asf' from 'BBsf'; Outlook Stable from Positive. 2008-C -- Class A-3 notes affirmed at 'AAAsf'; Outlook Stable; -- Class A-4a notes affirmed at 'AAAsf'; Outlook Stable; -- Class A-4b notes affirmed at 'AAAsf'; Outlook Stable; -- Class B notes upgraded to 'AAAsf' from 'AAsf'; Outlook revised to Stable from Positive; -- Class C notes upgraded to 'AAsf' from 'Asf'; Outlook Positive; -- Class D notes upgraded to 'Asf' from 'BBsf'; Outlook Stable from Positive. 2009-B -- Class A-3 notes affirmed at 'AAAsf'; Outlook Stable; -- Class A-4 notes affirmed at 'AAAsf'; Outlook Stable. FORD MOTOR: S&P Raises Ratings on Eight Transactions to 'B+' ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on eight Ford Motor Co.-related transactions to 'B+' from 'B'. All of the transactions are pass-through structures. The ratings on each of them are dependent on the ratings on one of these underlying securities (see the ratings list for more detailed information): Ford Motor Co.'s 7.45% debentures due July 16, 2031 ('B+'); Ford Motor Co.'s 7.7% debentures due May 15, 2097 ('B+'); and Ford Motor Co.'s 7.4% debentures due Nov. 1, 2046 ('B+'). The upgrades follow S&P's Feb. 1, 2011, raising of its ratings on the three underlying securities to 'B+' from 'B'. S&P may take subsequent rating actions on these transactions due to changes in its ratings assigned to the underlying securities. Ratings Raised Corporate Backed Trust Certificates Ford Motor Co Debenture-Backed Series 2001-36 Trust US$58.501 million pass-through series 2001-36 due May 15, 2097 (underlying security: Ford Motor Co.'s 7.7% debentures due May 15, 2097) Rating ------ Class To From ----- -- ---- A1 B+ B CorTS Trust For Ford Debentures US$300 million 7.4% pass-through due Nov. 1, 2046 (underlying security: Ford Motor Co.'s 7.4% debentures due Nov. 1, 2046) Rating ------ Class To From ----- -- ---- Certs B+ B CorTS Trust II For Ford Notes US$219.584 million 8% pass-through series 2003-3 due July 16, 2031 (underlying security: Ford Motor Co.'s 7.45% debentures due July 16, 2031) Rating ------ Class To From ----- -- ---- Certs B+ B PPLUS Trust Series FMC-1 US$40 million 8.25% pass-through series FMC-1 due July 16, 2031 (underlying security: Ford Motor Co.'s 7.45% debentures due July 16, 2031) Rating ------ Class To From ----- -- ---- Certs B+ B PreferredPlus Trust Series FRD-1 US$50 million trust certificates series FRD-1 (underlying security: Ford Motor Co.'s 7.4% debentures due Nov. 1, 2046) Rating ------ Class To From ----- -- ---- Certs B+ B Public STEERS Series 1998 F-Z4 Trust US$231.903 million pass-through series 1998 F-Z4 due Nov. 15, 2018 (underlying security: Ford Motor Co.'s 7.7% debentures due May 15, 2097) Rating ------ Class To From ----- -- ---- A B+ (sf) B (sf) B B+ (sf) B (sf) SATURNS Trust No. 2003-5 US$75.027 million 8.125% pass-through series 2003-5 due July 16, 2031 (underlying security: Ford Motor Co.'s 7.45% debentures due July 16, 2031) Rating ------ Class To From ----- -- ---- Units B+ B Trust Certificates (TRUCs) Series 2002-1 Trust US$32 million 7.7% pass-through series 2002-1 due May 15, 2097 (underlying security: Ford Motor Co.'s 7.7% debentures due May 15, 2097) Rating ------ Class To From ----- -- ---- A-1 B+ B FOREST CREEK: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class A-1LB, A-2L, A-3L, A-4L, and B-1L notes from Forest Creek CLO Ltd, a collateralized loan obligation transaction managed by Deerfield Capital Management LLC. At the same time, S&P removed its ratings on the class A-1LB, A-2L, A-3L, and A-4L notes from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. S&P also affirmed its ratings on the class A-1LA and B-2L notes. The upgrades reflect improved performance S&P has observed in the deal's underlying asset portfolio since its March 4, 2010 rating action, when S&P downgraded most of the rated notes following the application of its September 2009 corporate CDO criteria. As of the Jan. 3, 2011 trustee report, the transaction had $9.44 million of defaulted assets, and $15.00 million in assets from obligors with ratings in the 'CCC' range. This was down from $18.58 million in defaults and $21.83 million in assets from obligors with ratings in the 'CCC' range noted in the Nov. 30, 2009 trustee report, which S&P referenced for its March 2010 rating actions. In addition, the principal was paid down on the class A-1LA notes from $110.48 million in November 2009 to $43.07 million in January 2011, while the class A-1LB notes principal was paid down from $69.79 million to $32.65 million during the same period. The affirmations of the class A-1LA and B-2L notes reflect its opinion of the availability of sufficient credit support at the current rating levels. The transaction has benefited from an increase in overcollateralization available to support the rated notes. The trustee reported these O/C ratios in the Jan. 3, 2011 monthly report: * The senior class A O/C ratio was 135.82%, compared with a reported ratio of 114.98% in November 2009; * The class A O/C ratio was 116.87%, compared with a reported ratio of 104.83% in November 2009; * The class B-1L O/C ratio was 103.27%, compared with a reported ratio of 96.76% in November 2009; and * The class B-2L O/C ratio was 98.18%, compared with a reported ratio of 93.81% in November 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 Forest Creek CLO Ltd. Rating ------ Class To From ----- -- ---- A-1LB AAA (sf) AA+ (sf)/Watch Pos A-2L AAA (sf) AA+ (sf)/Watch Pos A-3L AAA (sf) AA (sf)/Watch Pos A-4L AA- (sf) BBB+ (sf)/Watch Pos B-1L CCC+ (sf) CCC- (sf) Ratings Affirmed Forest Creek CLO Ltd. Class Rating ----- ------ A-1LA AAA (sf) B-2L CCC- (sf) FOUR CORNERS: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class B, C, and D from Four Corners CLO III Ltd., a cash flow collateralized loan obligation transaction managed by Four Corners Capital Management LLC, and removed its rating on the class B note from CreditWatch with positive implications. S&P also affirmed its ratings on the class A and E notes. In its most recent monthly report as of January 2011, the trustee calculated the class A/B, C, D, and E overcollateralization ratios to be 121.92%, 111.71%, 107.24%, and 102.83%, respectively. The corresponding O/C ratios were 116.09%, 107.67%, 103.9%, and 100.16%, respectively, as per the November 2009 trustee report, which S&P used for its analysis when S&P downgraded the classes in December 2009. The improved O/C ratios reflect a decline in both the class A note balance and the level of defaults in the transaction's underlying asset portfolio. As of January 2011, the class A note balance was $188.198 million (81.68% of its original balance), down from $221.137 million in November 2009 (95.98% of its original balance). In addition, the trustee reports in the January 2011 report $1 million in par defaults, which is down from $13.8 million reported in November 2009. The transaction has also benefited from an improvement in the credit quality of the underlying collateral. The trustee calculated $7.05 million of assets in the pool to be rated 'CCC+' or below (excluding defaulted obligations), down from $21.71 million in November 2009. The transaction is currently passing its class E O/C ratio and interest diversion test, which were both failing in November 2009. The interest diversion test is measured in the interest proceeds section of the payment priorities waterfall; if the test is breached during the reinvestment period (ending October 2012), the cure amount (restricted to 50% of available interest proceeds) is diverted toward reinvestment. If the test fails after the reinvestment period, the cure amount is diverted to pay down the class E notes. As a result of the factors listed above, S&P raised its ratings on the class B, C, and D notes. S&P affirmed its ratings on the class A and E notes to reflect the classes' adequate credit support at their current rating levels. Standard & Poor's will continue to monitor the CDO transactions it rates and take rating actions, including CreditWatch placements, when appropriate. Rating And Creditwatch Actions Four Corners CLO III Ltd. Rating ------ Class To From ----- -- ---- B AA+ (sf) A+ (sf)/Watch Pos C A (sf) BBB+ (sf) D BB+ (sf) B+ (sf) Ratings Affirmed Four Corners CLO III Ltd. Class Rating ----- ------ A AA+ E CCC- G-FORCE 2005-RR2: Fitch Downgrades Ratings on 14 Classes of Notes ----------------------------------------------------------------- Fitch Ratings has downgraded 14 and affirmed two classes issued by G-Force 2005-RR2, LLC as a result of negative credit migration of the commercial mortgage back securities collateral. 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 Rating Loss Rates were then compared to the credit enhancement of the classes. Based on this analysis, the credit enhancement for classes A-2 and A-3FL are inconsistent with the current ratings and are downgraded as indicated below. In addition to the stated criteria, Fitch analyzed the structure's sensitivity to refinance risk on the underlying CMBS loans. Since Fitch's last rating action in February 2010, approximately 59.9% of the portfolio has been downgraded. Currently, 87.7% has a Fitch derived rating below investment grade and 51.7% has a rating in the 'CCC' rating category or lower, compared to 81.4% and 25.1%, respectively, at last review. The class A-2 notes have paid down by $21.7 million since the last review. The Negative Outlook on the class A-2 and A-3FL 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. Fitch has downgraded classes A-4 through D and affirmed classes E and F, given that these classes are reliant on distressed assets ('CC' and below) for repayment. Since the last review, classes H through N have realized a complete loss and class G has experienced a partial loss, due to principal losses on the underlying collateral. As a result, Fitch has downgraded these classes to 'Dsf'. Additionally, Fitch has withdrawn the rating of the interest-only class X. G-Force 2005-RR2 is a CMBS Resecuritization issued in August 2005. The transaction is currently collateralized by 105 CMBS assets from 23 obligors from the 1998-2002 vintages. The collateral is primarily composed of CMBS B-Piece resecuritizations which are CRE CDOs and ReRemic transactions that include the most junior bonds of CMBS transactions. Fitch has taken these actions as indicated: -- $100,035,535 class A-2 downgraded to 'AAsf/LS5' from 'AAAsf/LS5'; Outlook Negative -- $250,000,000 class A-3FL downgraded to 'Bsf/LS4' from 'BBB-sf /LS4'; Outlook Negative; -- $50,000,000 class A-4A downgraded to 'CCsf' from 'B/LS5'; -- $58,446,000 class A-4B downgraded to 'CCsf' from 'B/LS5'; -- $64,860,000 class B downgraded to 'Csf' from 'B/LS5'; -- $47,397,000 class C downgraded to 'Csf' from 'CCCsf'; -- $17,462,000 class D downgraded to 'Csf' from 'CCsf'; -- $21,204,000 class E affirmed at 'Csf'; -- $23,698,000 class F affirmed at 'Csf'; -- $31,182,000 class G downgraded to 'Dsf' from 'Csf'; -- $19,957,000 class H downgraded to 'Dsf' from 'Csf'; -- $12,473,000 class J downgraded to 'Dsf' from 'Csf'; -- $11,226,000 class K downgraded to 'Dsf' from 'Csf'; -- $12,472,000 class L downgraded to 'Dsf' from 'Csf'; -- $11,226,000 class M downgraded to 'Dsf' from 'Csf'; -- $9,978,000 class N downgraded to 'Dsf' from 'Csf'; -- Interest-only, class X withdrawn. GMAC 2004-C2: Moody's Reviews Ratings on Nine 2004-C2 Certs. ------------------------------------------------------------ Moody's Investors Service placed nine classes of GMAC 2004-C2, Commercial Mortgage Securities, Inc., Commercial Mortgage Pass- Through Certificates, Series 2004-C2 on review for possible downgrade: -- Cl. B Certificate, Aa1 (sf) Placed Under Review for Possible Downgrade; previously on March 27, 2007 Upgraded to Aa1 (sf) -- Cl C Certificate, Aa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2010 Downgraded to Aa3 (sf) -- Cl. D Certificate, A3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2010 Downgraded to A3 (sf) -- Cl. E Certificate, Baa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2010 Downgraded to Baa2 (sf) -- Cl. F Certificate, Ba1 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2010 Downgraded to Ba1 (sf) -- Cl. G Certificate, B2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2010 Downgraded to B2 (sf) -- Cl. H Certificate, Caa2 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2010 Downgraded to Caa2 (sf) -- Cl. J Certificate, Caa3 (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 2010 Downgraded to Caa3 (sf) -- Cl. K Certificate, Ca (sf) Placed Under Review for Possible Downgrade; previously on Feb. 11, 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. 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, 2010. Deal And Performance Summary As of the January 10, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 17% to $773.4 million from $933.7 million at securitization. The Certificates are collateralized by 64 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 52% of the pool. Six loans, representing 26% of the pool, have defeased and are collateralized by U.S. Government securities. Defeasance at last review represented 16% of the pool. The pool also contains three loans, representing 25% of the pool, with investment grade credit estimates. Ten loans, representing 9% 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. Four loans have been liquidated from the pool since securitization, resulting in an aggregate $4.6 million loss (19% loss severity on average). Currently seven loans, representing 18% of the pool, are in special servicing. The seven specially serviced loans are secured by a mix of property types. The master servicer has recognized an aggregate $33 million appraisal reduction for the specially serviced loans. At last review the pool contained 5 specially serviced loans, representing 8% of the pool. Based on the most recent remittance statement, Classes L through P have experienced interest shortfalls totaling $1.6 million. Moody's anticipates that the pool will continue to experience future 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. GRANITE VENTURES: 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, and C notes from Granite Ventures II Ltd., a collateralized loan obligation transaction managed by Stone Tower Debt Advisors LLC. At the same time, S&P removed the ratings from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. S&P also affirmed its 'CCC+ (sf)' rating on the class D notes. The upgrades reflect improved performance S&P has observed in the deal's underlying asset portfolio and a paydown to the balance of the class A-1 notes. As of the Dec. 6, 2010, trustee report, the transaction had $2.62 million in defaulted assets. This was down from $3.55 million noted in the Oct. 5, 2009, trustee report, which S&P referenced for its November 2009 rating actions. Additionally, the class A-1 note balance has been paid down to $203.175 million from $273.00 million over the same period of time. 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 Dec. 6, 2010, monthly report: * The class A O/C ratio was 122.12%, compared with a reported ratio of 116.28% in October 2009; * The class B O/C ratio was 112.89%, compared with a reported ratio of 109.49% in October 2009; * The class C O/C ratio was 106.20%, compared with a reported ratio of 104.40% in October 2009; and * The class D O/C ratio was 103.74%, compared with a reported ratio of 102.50% 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 Granite Ventures II Ltd. Rating ------ Class To From ----- -- ---- A-1 AAA (sf) AA+ (sf)/Watch Pos A-2 AA (sf) AA- (sf)/Watch Pos B A (sf) BBB+ (sf)/Watch Pos C BB (sf) B+ (sf)/Watch Pos Rating Affirmed Granite Ventures II Ltd. Class Rating ----- ------ D CCC+ (sf) Transaction Information ----------------------- Issuer: Granite Ventures II Ltd. Collateral manager: Stone Tower Debt Advisors LLC Underwriter: Citigroup Global Markets Inc. Trustee: U.S. Bank N.A. Transaction type: Cash flow CLO GREENWICH CAPITAL: Moody's Downgrades Ratings on 2003-C2 Certs. --------------------------------------------------------------- Moody's Investors Service downgraded the ratings of five classes and affirmed 11 classes of Greenwich Capital Commercial Funding Corp., Commercial Mortgage Pass-Through Certificates, Series 2003- C2: -- Cl. A-3 Certificate, Affirmed at Aaa (sf); previously on Jan. 14, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. A-4 Certificate, Affirmed at Aaa (sf); previously on Jan. 14, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. XC Certificate, Affirmed at Aaa (sf); previously on Jan. 14, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. B Certificate, Affirmed at Aaa (sf); previously on Aug. 17, 2006 Upgraded to Aaa (sf) -- Cl. C Certificate, Affirmed at Aaa (sf); previously on July 23, 2007 Upgraded to Aaa (sf) -- Cl. D Certificate, Affirmed at Aa1 (sf); previously on Sept. 25, 2008 Upgraded to Aa1 (sf) -- Cl. E Certificate, Affirmed at Aa3 (sf); previously on July 23, 2007 Upgraded to Aa3 (sf) -- Cl. F Certificate, Affirmed at A2 (sf); previously on July 23, 2007 Upgraded to A2 (sf) -- Cl. G Certificate, Affirmed at Baa1 (sf); previously on July 23, 2007 Upgraded to Baa1 (sf) -- Cl. H Certificate, Affirmed at Baa3 (sf); previously on Dec. 3, 2009 Confirmed at Baa3 (sf) -- Cl. J Certificate, Affirmed at Ba1 (sf); previously on Dec. 3, 2009 Confirmed at Ba1 (sf) -- Cl. K Certificate, Downgraded to B1 (sf); previously on Dec. 3, 2009 Downgraded to Ba3 (sf) -- Cl. L Certificate, Downgraded to B3 (sf); previously on Dec. 3, 2009 Downgraded to B2 (sf) -- Cl. M Certificate, Downgraded to Caa2 (sf); previously on Dec. 3, 2009 Downgraded to Caa1 (sf) -- Cl. N Certificate, Downgraded to Ca (sf); previously on Dec. 3, 2009 Downgraded to Caa3 (sf) -- Cl. O Certificate, Downgraded to C (sf); previously on Dec. 3, 2009 Downgraded to Ca (sf) Ratings Rationale The downgrades are due to higher expected losses for the pool 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 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. Moody's rating action reflects a cumulative base expected loss of 4.2% of the current balance. At last review, Moody's cumulative base expected loss was 3.5%. 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 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 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 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 19 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 December 3, 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 January 7, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 38% to $1.072 billion from $1.735 billion at securitization. The Certificates are collateralized by 63 mortgage loans ranging in size from less than 1% to 11% of the pool, with the top ten loans representing 50% of the pool. There are no loans with investment grade credit estimates. Twenty loans representing 23% of the pool have defeased and are collateralized with U.S. Government securities. Defeasance at last review represented 36% of the pool. Thirteen loans, representing 24% 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. Four loans have been liquidated from the pool since securitization, resulting in an aggregate $18.8 million loss (48% loss severity on average). The pool had experienced an aggregate $4.0 million loss at last review. Three loans, representing 7% of the pool, are currently in special servicing. The largest specially serviced loan is The Windsor Capital Portfolio Loan ($47.6 million -- 4.4% of the pool), which represents a pari passu interest in a $95.2 million first mortgage loan. The loan is secured by six full service hotel properties located in California (5) and Michigan (1). The hotels operate under the Embassy Suites, Marriot and Radisson. The loan was transferred to special servicing in May 2010 due to imminent maturity default. The borrower has been granted a loan modification and extension and the loan is current. Moody's is not currently estimating a loss on this loan at this time. The remaining two specially serviced loans are secured by office properties. Moody's has estimated an aggregate $16.5 million loss (51% expected loss on average) for these two specially serviced loans. Moody's was provided with full year 2009 operating results for 99% of the pool and partial year 2010 for 87% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 99% compared to 87% at last review. Moody's net cash flow reflects a weighted average haircut of 18.8% 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 1.11X, respectively, compared to 1.64X and 1.26X 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 27% of the pool balance. The largest loan is the U.S. Bank Tower Loan ($120.2 million -- 11.1% of the pool), which represents a pari passu interest in a $250 million first mortgage loan. The loan is secured by a 1.4 million square foot office tower and accompanying parking garage in downtown Los Angeles, California. The loan sponsor is Maguire Properties (Maguire). The property was 57% leased as of September 2010 compared to 88% at last review. The largest tenant at securitization, Latham & Watkins (20% of the net rentable area) vacated the premises at its December 2009 lease expiration. Furthermore, the lease for the second largest tenant, Sempra Energy (16% of the NRA) expired in June 2010. Even with the substantial decline in cash flow from the dramatic rise in vacancy, Moody's projects that the property will still generate cash flow in excess of debt service. However, given the softness in the Los Angeles office market, it is anticipated that new tenants will be paying lower rents than those currently in place. In addition, due to Maguire's current financial issues, Moody's is concerned about the availability of funds for leasing costs. The loan is interest-only for the entire term. The loan is currently on the master servicer's watch list for high vacancy. Moody's LTV and stressed DSCR are 130% and 0.77X, respectively, compared to 103% and 1.01X, at last review. The second largest loan is the Broadway Mall Loan ($88.0 million - - 8.1% of the pool), which is secured by the borrower's interest in a 1.1 million SF regional mall located 27 miles east of New York City in Hicksville (Nassau County), New York. The property was 79% leased as of October 2010, the same as last review. The center is anchored by Macy's, IKEA and Target. Performance has been stable. Moody's LTV and stressed DSCR are 91% and 1.10X, respectively, compared 103% and 0.97X at last review. The third largest loan is the Pinnacle Building Loan ($86.1 million -- 8.0% of the pool), which is secured by a 393,000 SF Class A office building located in Burbank, California. The property was 98% leased as of September 2010, the same as last review. The largest tenant is Warner Music Group, which leases 50% of the premises through December 2019. The loan is interest- only for the entire term. Moody's LTV and stressed DSCR are 80% and 1.25X respectively, compared to 75% and 1.33X at last review. GREENPOINT MORTGAGE: Moody's Cuts Ratings on 16 2005-AR5 Tranches ----------------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 16 tranches from Greenpoint Mortgage Funding Trust 2005-AR5. Ratings Rationale The collateral backing the transaction 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-AR5 -- Cl. I-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010 Aa2 (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-1, Downgraded to C (sf); previously on Jan. 27, 2010 Aa2 (sf) Placed Under Review for Possible Downgrade -- Cl. I-X-2, Downgraded to C (sf); previously on Jan. 27, 2010 B3 (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 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-1, Downgraded to C (sf); previously on Jan. 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. II-X-2, Downgraded to C (sf); previously on Jan. 27, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. II-X-3, Downgraded to C (sf); previously on Jan. 27, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. III-A-1, Downgraded to Ca (sf); previously on Jan. 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. III-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-X-1, Downgraded to C (sf); previously on Jan. 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. IV-A-1, Downgraded to Ca (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-X-1, Downgraded to C (sf); previously on Jan. 27, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. IV-X-2, Downgraded to C (sf); previously on Jan. 27, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade GSAA HOME: Moody's Downgrades Ratings on Eight Tranches ------------------------------------------------------- Moody's Investors Service has downgraded the ratings of eight tranches from one RMBS transaction, backed by Alt-A loans, issued by GSAA Home Equity Trust 2005-11. Issuer: GSAA Home Equity Trust 2005-11 -- Cl. 1A1, Downgraded to B3 (sf); previously on Jan. 14, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 1A2, Downgraded to C (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 2A1, Downgraded to B3 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 2A2, Downgraded to C (sf); previously on Jan. 14, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade -- Cl. 3A1, Downgraded to B1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 3A2, Downgraded to C (sf); previously on Jan. 14, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade -- Cl. 3A5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade -- Cl. M-1, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade In the rating action, Class 3-A-4, currently Ba2, remains on review for downgrade. There is a conflicting language in the transaction's documents: According to the Pooling and Servicing Agreement, after the Subordinate Certificates have been reduced to zero, principal will be allocated to Classes 3A4 and 3A5 sequentially so long as a Group III Sequential Trigger Event is in effect. However, according to the Prospectus Supplement, after the Subordinate Certificates have been reduced to zero, principal will be paid pro-rata to Classes 3A4 and 3A5 even if a Group III Sequential Trigger Event is in effect. According to the trustee, Goldman Sachs is in the process of amending one of these documents. Moody's will take final action in accordance with the amended documentation. Ratings Rationale The collateral backing this transaction consists primarily of first-lien, adjustable-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 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. ING INVESTMENT: S&P Raises Rating on Class D Notes to BB (sf) ------------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2, B, C, and D notes from ING Investment Management CLO IV Ltd., a collateralized loan obligation transaction managed by ING Alternative Asset Management. At the same time, S&P removed its ratings on the class A-1 and A-2 notes from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. The upgrades mainly reflect an improvement in the credit quality available to support the notes since S&P downgraded the rated notes on Oct. 23, 2009, following the initial application of S&P's updated corporate collateralized debt obligation criteria. As of the Jan. 12, 2011 trustee report, the transaction had $4.54 million in defaulted assets. This was down from $21.32 million noted in the Sept. 14, 2009, trustee report, which S&P referenced for S&P's October 2009 rating actions. 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 Jan. 12, 2011, monthly report: * The class A O/C ratio was 120.9%, compared with a reported ratio of 119.20% in October 2009; * The class B O/C ratio was 113.5%, compared with a reported ratio of 111.9% in October 2009; * The class C O/C ratio was 108.00%, compared with a reported ratio of 106.40% in October 2009; and * The class D O/C ratio was 105.20%, compared with a reported ratio of 103.7% 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 ING Investment Management CLO IV Ltd. Rating ------ Class To From ----- -- ---- A-1 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) B+ (sf) Transaction Information ----------------------- Issuer: ING Investment Management CLO IV Ltd. Collateral manager: ING Alternative Asset Management Underwriter: Credit Suisse AG Trustee: U.S. Bank N.A. Transaction type: Cash flow CLO ING INVESTMENT: 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, and D notes from ING Investment Management CLO I Ltd., a collateralized loan obligation transaction managed by ING Alternative Asset Management LLC. S&P removed four of those ratings from CreditWatch with positive implications. The upgrades reflect the improved performance S&P has observed in the transaction's underlying asset portfolio since December 2009. At that time, S&P lowered the ratings on all of the notes in the transaction following a review using S&P's updated criteria for rating corporate collateralized debt obligations. At the time of S&P's last rating action, ING Investment Management CLO I Ltd. held approximately $23.8 million in defaulted obligations and $69.2 million in underlying assets from obligors with ratings in the 'CCC' range, according to the Oct. 5, 2009 trustee report. As of the Jan. 3, 2011, trustee report, the transaction held $2.4 million in defaulted obligations and $32.0 million in assets from underlying obligors with ratings in the 'CCC' range. Since the time of S&P's last rating action, a number of defaulted obligors held in the deal emerged from bankruptcy, with some receiving proceeds that were higher than their carrying value in the transaction's overcollateralization ratio test calculation. This, in combination with a reduction in assets with ratings in the 'CCC' range, benefited the transaction's O/C ratio. As of the Jan. 3, 2011, the transaction was passing its senior O/C test and senior interest coverage test with ratios of 119.6% and 901.7% respectively. Also, at the time of S&P's last rating action, the class D notes failed to withstand the specified combination of underlying asset defaults at the 'B' rating levels of the largest obligor default test. The largest obligor default test is no longer a constraining factor for the rating on the class D notes. S&P will continue to review its ratings on the notes and assess whether, in its view, the ratings remain consistent with the credit enhancement available to support them and take rating actions as S&P deems necessary. Rating And Creditwatch Actions ING Investment Management CLO I Ltd. Rating ------ Class To From ----- -- ---- A-1 AAA (sf) AA (sf)/Watch Pos A-2 AAA (sf) AA (sf)/Watch Pos B AA+ (sf) A- (sf)/Watch Pos C A+ (sf) BBB- (sf)/Watch Pos D BBB+ (sf) CCC+ (sf) JP MORGAN: Moody's Affirms Ratings on 22 Series 2004-C3 Certs. -------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 22 classes of JP Morgan Chase Commercial Mortgage Securities Corp. Commercial Mortgage Pass-Through Certificates, Series 2004-C3: -- Cl. A-2, Affirmed at Aaa (sf); previously on Dec. 29, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. A-3, Affirmed at Aaa (sf); previously on Dec. 29, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. A-4, Affirmed at Aaa (sf); previously on Dec. 29, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. A-5, Affirmed at Aaa (sf); previously on Dec. 29, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. A-1A, Affirmed at Aaa (sf); previously on Dec. 29, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. X-1, Affirmed at Aaa (sf); previously on Dec. 29, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. X-2, Affirmed at Aaa (sf); previously on Dec. 29, 2004 Definitive Rating Assigned Aaa (sf) -- Cl. A-J, Affirmed at Aa3 (sf); previously on March 18, 2010 Downgraded to Aa3 (sf) -- Cl. B, Affirmed at Baa1 (sf); previously on March 18, 2010 Downgraded to Baa1 (sf) -- Cl. C, Affirmed at Baa2 (sf); previously on March 18, 2010 Downgraded to Baa2 (sf) -- Cl. D, Affirmed at Ba1 (sf); previously on March 18, 2010 Downgraded to Ba1 (sf) -- Cl. E, Affirmed at Ba3 (sf); previously on March 18, 2010 Downgraded to Ba3 (sf) -- Cl. F, Affirmed at B3 (sf); previously on March 18, 2010 Downgraded to B3 (sf) -- Cl. G, Affirmed at Caa2 (sf); previously on March 18, 2010 Downgraded to Caa2 (sf) -- Cl. H, Affirmed at Caa3 (sf); previously on March 18, 2010 Downgraded to Caa3 (sf) -- Cl. J, Affirmed at Ca (sf); previously on March 18, 2010 Downgraded to Ca (sf) -- Cl. K, Affirmed at C (sf); previously on March 18, 2010 Downgraded to C (sf) -- Cl. L, Affirmed at C (sf); previously on March 18, 2010 Downgraded to C (sf) -- Cl. M, Affirmed at C (sf); previously on March 18, 2010 Downgraded to C (sf) -- Cl. N, Affirmed at C (sf); previously on March 18, 2010 Downgraded to C (sf) -- Cl. P, Affirmed at C (sf); previously on March 18, 2010 Downgraded to C (sf) -- Cl. Q, Affirmed at C (sf); previously on March 18, 2010 Downgraded to C (sf) 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 7.1% of the current balance. At last review, Moody's cumulative base expected loss was 7.9%. Moody's stressed scenario loss is 16.6% 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 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. 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 17th, 2010. Deal Performance As of the January 18, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 12% to $1.3 billion from $1.5 billion at securitization. The Certificates are collateralized by 131 mortgage loans ranging in size from less than 1% to 5% of the pool, with the top ten loans representing 25% of the pool. Ten loans, representing 13% of the pool, have defeased and are collateralized with U.S. Government securities. Thirty-seven loans, representing 28% 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, resulting in an aggregate $8.2 million loss (30% loss severity overall). At last review, the pool had experienced an aggregate $4.3 million realized loss. Sixteen loans, representing 11% of the pool, are currently in special servicing. Moody's has estimated an aggregate $58.7 million loss (41.6% expected loss on average) for the specially serviced loans. Moody's has assumed a high default probability for ten poorly performing loans representing 4% of the pool and has estimated a $10.7 million aggregate loss (20% expected loss based on a 50% probability default) from these troubled loans. Moody's was provided with full year 2009 operating results for 74% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 100% compared to 99% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 11.6% 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 1.37X and 1.03X, respectively, compared to 1.41X and 1.03X 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 53 compared to 31 at Moody's prior review. The top three performing conduit loans represent 13% of the pool balance. The largest loan is the 345 Park Avenue South Loan ($71.8 million -- 5.4%), which is secured by a 272,000 square foot Class A office building located in Midtown Manhattan, New York. The property was 97% leased as of September 2010 which is in line with last review. Performance has improved due to increased rental revenues. Moody's LTV and stressed DSCR are 103% and 0.92X, respectively, compared to 126% and 0.80X at last review. The second largest loan is the Crossroads Shopping Center Loan ($61.3 million -- 4.6%), which is secured by a 311,000 square foot retail center located in White Plains, New York. The property was 94% leased as of September 2010, similar to last review. The largest tenant is A&P Supermarket. A&P declared bankruptcy in December 2010 and has announced that there will be store closings. Moody's valuation reflects a stressed cash flow due to Moody's concerns about the continued occupancy of A&P. Moody's LTV and stressed DSCR are 121% and 0.71X, respectively, compared to 114% and 0.75X at last review. The third largest loan is the Broadway Marketplace Loan ($41 million -- 3.1%), which is secured by a 387,000 square foot retail center located in Denver, Colorado. The property was 98% leased as of September 2010, similar to last review Moody's LTV and stressed DSCR are 102% and 0.91X, respectively, compared to 103% and 0.89X at last review. JP MORGAN: Moody's Reviews 'B2' Ratings on Class A-2 Tranche ------------------------------------------------------------ Moody's has placed on review for possible downgrade class A-2 tranche from JP Morgan RV Marine Trust 2004-A. The transaction is serviced by Vericrest Financial, Inc. Vericrest Financial, Inc., formerly known as CIT Group/Sales Financing, Inc., was acquired by Lone Star Funds in 2009. Issuer: JPMorgan RV Marine Trust 2004-A -- Cl. A-2, B2 (sf) Placed Under Review for Possible Downgrade; previously on June 3, 2009 Downgraded to B2 (sf) -- Financial Guarantor: Financial Guaranty Insurance Company (WR; previously on 3/24/2009 Downgraded to Caa3 from Caa1) -- Underlying Rating: B2 (sf) Placed Under Review for Possible Downgrade; previously on June 3, 2009 Downgraded to B2 (sf) Ratings Rationale The review was prompted by updated higher loss expectations relative to current levels of credit enhancement. Unlike other vehicle-backed ABS, the impact here has been more severe and long lasting due to the non-essential nature of the underlying collateral, and the longer financing terms, which on average range between 170 and 185 months. As a result, these transactions have experienced more than one economic downturn during their lives. Moody's expects JP Morgan RV Marine Trust 2004-Ato incur lifetime cumulative net losses in the range of 13.50% to 14.50% of the original pool balance, compared to expectations of 5.00% at closing. Total hard credit enhancement (excluding excess spread of approximately 3.2% per annum) for class A-2 notes is approximately 0.32% of the outstanding collateral pool balance. Pool factor is 9.95% of original pool balance. 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, and weakness in the RV and marine market. 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 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 6 months. JP MORGAN: Moody's Takes Rating Actions on Series 2003-ML1 Notes ---------------------------------------------------------------- Moody's Investors Service upgraded three and affirmed 12 classes of J.P. Morgan Chase Commercial Mortgage Securities Corp., Commercial Mortgage Pass-Through Certificates, Series 2003-ML1: -- Cl. A-1, Affirmed at Aaa (sf); previously on July 24, 2003 Definitive Rating Assigned Aaa (sf) -- Cl. A-2, Affirmed at Aaa (sf); previously on July 24, 2003 Definitive Rating Assigned Aaa (sf) -- Cl. X-1, Affirmed at Aaa (sf); previously on July 24, 2003 Definitive Rating Assigned Aaa (sf) -- Cl. B, Affirmed at Aaa (sf); previously on Jun 29, 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 July 10, 2007 Upgraded to Aaa (sf) -- Cl. E, Affirmed at Aaa (sf); previously on Sept. 25, 2008 Upgraded to Aaa (sf) -- Cl. F, Upgraded to Aa1 (sf); previously on Sept. 25, 2008 Upgraded to A1 (sf) -- Cl. G, Upgraded to A1 (sf); previously on Sept. 25, 2008 Upgraded to A3 (sf) -- Cl. H, Upgraded to Baa2 (sf); previously on July 24, 2003 Definitive Rating Assigned Ba1 (sf) -- Cl. J, Affirmed at Ba2 (sf); previously on July 24, 2003 Definitive Rating Assigned Ba2 (sf) -- Cl. K, Affirmed at Ba3 (sf); previously on July 24, 2003 Definitive Rating Assigned Ba3 (sf) -- Cl. L, Affirmed at B1 (sf); previously on July 24, 2003 Definitive Rating Assigned B1 (sf) -- Cl. M, Affirmed at B2 (sf); previously on July 24, 2003 Definitive Rating Assigned B2 (sf) -- Cl. N, Affirmed at B3 (sf); previously on July 24, 2003 Definitive Rating Assigned B3 (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 25% since Moody's last review. 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 1.6% of the current balance. At last review, Moody's cumulative base expected loss was 1.3%. Moody's stressed scenario loss is 8.2% 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 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 48 compared to 45 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 July 10, 2007. 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 6 months. Deal Performance As of the January 12, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 31% to $640.3 million from $929.8 million at securitization. The Certificates are collateralized by 107 mortgage loans ranging in size from less than 1% to 7% of the pool, with the top ten loans representing 28% of the pool. Seventeen loans, representing 25.0% of the pool, have defeased and are collateralized with U.S. Government securities. One loan, representing 7% of the pool, has an investment grade credit estimate. Twenty-five 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 an aggregate $4.8 million loss (23% loss severity on average). Currently three loans, representing 3% of the pool, are in special servicing. The master servicer has recognized a $864,905 appraisal reduction for one specially serviced loan. Moody's has estimated an aggregate loss of $2.5 million (15% expected loss on average) for all of the specially serviced loans. Moody's has assumed a high default probability for one poorly performing loan representing 0.5% of the pool and has estimated a $407,042 loss (13% 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 96% and 79%, respectively, of the non- defeased performing pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 77% compared to 80% at last full review. Moody's net cash flow reflects a weighted average haircut of 13% 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 1.79X and 1.65X, respectively, compared to 1.52X and 1.33X 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 loan with a credit estimate is the Hyatt Regency Hotel Loan Loan ($45.1 million -- 7.0%), which is secured by a 686-room full service hotel with a 53,000 square feet (SF) of flexible function space located in Arlington, Virginia. Despite the overall downturn in the tourism industry, the hotel's performance only slightly declined and is performing better than at last full review. The loan is amortizing on a 360-month schedule maturing in January 2013 and has paid down 6% since last full review. Moody's current credit estimate and stressed DSCR are Aa3 and 2.95X, respectively, compared to A3 and 2.15X at last full review. The top three performing conduit loans represent 10% of the pool balance. The largest conduit loan is the JANAF Shopping Center Loan ($30.7 million -- 4.8% of the pool), which is secured by a 583,000 SF retail center located in Norfolk, Virginia. The collateral comprises a retail center, two office buildings, an out parcel strip retail building and pad sites. The largest retail tenants include Sports Authority (7% of the net rentable area (NRA); lease expiration August 2016), TJ Maxx (6% of the NRA; lease expiration January 2014), and Conway (6% of the NRA; lease expiration May 2012). The largest non-retail tenant is JANAF, which leases 6% of the subject's total NRA through April 2020. Norfolk demographic trends remain weak and thousands of jobs are at risk due to the pending closure of the U.S. Joint Forces Command (JFCOM) which may inhibit growth in consumer spending. Due to slower anticipated recovery in this market, Moody's has stressed this loan. The loan is amortizing on a 300-month schedule maturing in May 2012 and has paid down 8% since last full review. Moody's LTV and stressed DSCR are 77% and 1.36X, respectively, compared to 71% and 1.44X at last review. The second largest conduit loan is the 4820 Overland Avenue Loan ($17.7 million -- 2.8% of the pool), which is secured by a two- story office building and a single-story R&D building totaling 158,585 SF located in Kearny Mesa, California. The property was 100% leased to Overland Data, Inc. through February 2014. However, the tenant has amended the lease to remove the entire office building and 6,950 of the NRA of the R&D building from its leasehold interest leaving 91,300 of the NRA in the R&D building. Northrop-Grumman Systems Corporation (Moody's senior unsecured rating of Baa1 - stable outlook) now occupies this space in a lease through June and November 2015. Property performance is inline with Moody's original expectations. The loan is amortizing on a 360-month schedule maturing in August 2014 and has paid down 6% since last full review. Moody's LTV and stressed DSCR are 74% and 1.43X, respectively, compared to 73% and 1.40X at last full review. The third conduit largest loan is the Hershey Heritage Village Loan ($14.4 million -- 2.2% of the pool), which is secured by a 517-unit multifamily property located in Lancaster, Pennsylvania. The property was 95% leased as of August 2010 compared to 98% at last review. Property performance is stable. The loan had a 59- month interest-only period and is amortizing on a 353-month schedule maturing in January 2013. The loan has paid down 4% since last full review. Moody's LTV and stressed DSCR are 65% and 1.58X, respectively, compared to 59% and 1.64X at last full review. KATONAH III: Moody's Upgrades Ratings on Seven Classes of Notes --------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of these notes issued by Katonah III, Ltd.: -- US$321,000,000 Class A Floating Rate Notes Due 2015 (current outstanding balance of $226,010,812.7), Upgraded to Aaa (sf); previously on November 23, 2010 Aa3 (sf) Placed Under Review for Possible Upgrade; -- US$17,000,000 Class B-1 Floating Rate Notes Due 2015, Upgraded to Baa1 (sf); previously on November 23, 2010 Ba1 (sf) Placed Under Review for Possible Upgrade; -- US$23,000,000 Class B-2 Fixed Rate Notes Due 2015, Upgraded to Baa1 (sf); previously on November 23, 2010 Ba1 (sf) Placed Under Review for Possible Upgrade; -- US$13,000,000 Class C-1 Floating Rate Notes Due 2015, Upgraded to Ba2 (sf); previously on November 23, 2010 Caa2 (sf) Placed Under Review for Possible Upgrade; -- US$4,000,000 Class C-2 Fixed Rate Notes Due 2015, Upgraded to Ba2 (sf); previously on November 23, 2010 Caa2 (sf) Placed Under Review for Possible Upgrade; -- US$12,000,000 Class D-1 Floating Rate Notes Due 2015, Upgraded to Caa2 (sf); previously on November 23, 2010 Ca (sf) Placed Under Review for Possible Upgrade; -- US$2,500,000 Class D-2 Fixed Rate Notes Due 2015, Upgraded to Caa2 (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 due to an increase in the transaction's overcollateralization ratios, and improvement in the credit quality of the underlying portfolio since the rating action in August 2009. The overcollateralization ratios of the rated notes have improved in part as a result of amortization of the Class A Notes, which have been paid down by approximately $36.0 million or 14% since the rating action in August 2009. As of the latest trustee report dated January 18, 2011, the Class A, Class B, Class C, and Class D overcollateralization ratios are reported at 143.9%, 122.2%, 114.9%, and 109.3%, respectively, versus July 2009 levels of 130.9%, 113.6%, 107.5%, and 102.8%, respectively. 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 January 2011 trustee report, the weighted average rating factor is 2658 compared to 3022 in July 2009, and securities rated Caa1 and below make up approximately 6% of the underlying portfolio versus 13% in July 2009. The deal also experienced a decrease in defaults. In particular, the dollar amount of defaulted securities has decreased to approximately $1.9 million from $43.0 million in July 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 balance of $322 million, defaulted par of $4.3 million, weighted average default probability of 22.5% (implying a WARF of 3414), a weighted average recovery rate upon default of 42.4%, and a diversity score of 49. 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. Katonah III, Ltd., issued on April 18, 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. 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: In addition to the base case analysis described above, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is 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, whereby a positive difference corresponds to lower expected losses), assuming that all other factors are held equal: Moody's Adjusted WARF - 20% (2731) -- Class A: +1 -- Class B-1: +1 -- Class B-2: +1 -- Class C-1: +1 -- Class C-2: +2 -- Class D-1: +3 -- Class D-2: +3 Moody's Adjusted WARF + 20% (4097) -- Class A: -1 -- Class B-1: -2 -- Class B-2: -2 -- Class C-1: -2 -- Class C-2: -2 -- Class D-1: -2 -- Class D-2: -2 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 strategy 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. 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 sell 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. 4) 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 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. KATONAH IX: Moody's Upgrades Ratings on Two Classes of Notes ------------------------------------------------------------ Moody's Investors Service announced that it has upgraded the ratings of these notes issued by Katonah IX CLO Ltd.: -- US$15,000,000 Class B-1L Floating Rate Notes, Due 2019, Upgraded to Caa2 (sf); previously on November 23, 2010 Caa3 (sf) Placed Under Review for Possible Upgrade; -- US$15,000,000 Class B-2L Floating Rate Notes, Due 2019, 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 transaction's overcollateralization ratios since the rating action in June 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 January 12, 2011, the weighted average rating factor is currently 2513 compared to 2888 in the May 2009 report, and securities rated Caa1 or lower make up approximately 3.4% of the underlying portfolio versus 7.9% in May 2009. Additionally, defaulted securities total about $10.6 million of the underlying portfolio compared to $35 million in May 2009. The overcollateralization ratios of the rated notes have also improved since the rating action in June 2009. The Senior Class A, Class A-3L, Class B-1L, and Class B-2L overcollateralization ratios are reported at 119.62%, 111.04%, 106.63%, and 102.55%, respectively, versus May 2009 levels of 117.04%, 108.78%, 104.53%, and 96.76%, respectively, and all related overcollateralization tests are currently in compliance. Moody's also notes that the Class B-2L Notes are no longer deferring interest and that all previously deferred interest has been paid in full. While the transaction has benefited from improvement in the credit quality of the underlying portfolio, Moody's noted that the portfolio includes a number of investments in CLO tranches that mature after the maturity date of the notes. Based on the latest trustee report in January 2011, securities that mature after the maturity date of the notes make up approximately 4.2% of the underlying portfolio. These investments potentially expose the 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 balance of $400.7 million, defaulted par of $13.6 million, a weighted average default probability of 23.47% (implying a WARF of 3464), a weighted average recovery rate upon default of 41.89%, and a diversity score of 65. 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. Katonah IX CLO Ltd., issued in November 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. 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 sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is 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% (2772) -- Class X: 0 -- Class A-1LV: +2 -- Class A-1L: +2 -- Class A-2L: +3 -- Class A-3L: +2 -- Class B-1L: +4 -- Class B-2L: +1 Moody's Adjusted WARF + 20% (4157) -- Class X: 0 -- Class A-1LV: -2 -- Class A-1L: -2 -- Class A-2L: -1 -- 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 manager's investment strategy 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: * 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 sell 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. * 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 and the asset's current market value. * 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. * 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. KATONAH V: 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, and B-2 notes from Katonah V Ltd., a collateralized loan obligation transaction managed by INVESCO Senior Secured Management Inc. At the same time, S&P removed those ratings from CreditWatch with positive implications, where S&P placed them on Nov. 8, 2010. S&P also affirmed its 'CCC- (sf)' rating on the class C notes and its 'CC (sf)' rating on the class D notes. The transaction is in its amortization phase and principal proceeds are used to pay down the notes in a sequential manner. The current balance of the class A-1 notes is $59.015 million (32% of its original balance), down from $107.812 million at the time of the last rating action in May 2010. According to the January 2011 monthly report, the overcollateralization ratios of all tranches have improved from their levels noted in the March 2010 monthly report (prior to the March 2010 note payment report) that S&P used in its previous analysis: * The class A O/C ratio was 148.5%, compared with 121.3% in March 2010; * The class B O/C ratio was 117.75%, compared with 107.12% in March 2010; * The class C O/C ratio was 106.16%, compared with 100.89% in March 2010; and * The class D O/C ratio was 95.69%, compared with 95.01% in March 2010 In addition, the January 2011 report discloses $4.7 million of defaulted assets, down from $11.9 million in March 2010. As a result of improved credit support due to the paydown and lower defaults, S&P raised its ratings on the class A-1, A-2, B-1, and B-2 notes. S&P affirmed its ratings on the class C and D notes to reflect the classes' adequate credit support at their current rating levels. Standard & Poor's will continue to monitor the CDO transactions it rates and take rating actions, including CreditWatch placements, when appropriate. Rating And Creditwatch Actions Katonah V Ltd. Rating ------ Class To From ----- -- ---- A-1 AAA (sf) AA+ (sf)/Watch Pos A-2 AAA (sf) A+ (sf)/Watch Pos B-1 BBB- (sf) B+ (sf)/Watch Pos B-2 BBB- (sf) B+ (sf)/Watch Pos Ratings Affirmed Katonah V Ltd. Class Rating ----- ------ C CCC- (sf) D CC (sf) Transaction Information ----------------------- Issuer: Katonah V Ltd. Coissuer: Katonah V Inc. Collateral manager: INVESCO Senior Secured Management Inc. Underwriter: Credit Suisse AG Trustee: Bank of New York Mellon (The) Transaction type: Cash flow CLO KINGSLAND IV: 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 Kingsland IV Ltd.: -- US$308,100,000 Class A-1 Senior Secured Floating Rate Notes Due 2021 (current balance of $304,300,554), Upgraded to Aa3 (sf); previously on May 20, 2010 Upgraded to A1 (sf); -- US$60,000,000 Class A-1R Senior Secured Revolving Floating Rate Notes Due 2021 (current balance of $59,260,088), Upgraded to Aa3 (sf); previously on May 20, 2010 Upgraded to A1 (sf); -- US$22,900,000 Class B Senior Secured Floating Rate Notes Due 2021, Upgraded to Baa1 (sf); previously on May 20, 2010 Upgraded to Baa2 (sf); -- US$25,000,000 Class C Senior Secured Deferrable Floating Rate Notes Due 2021, Upgraded to Ba1 (sf); previously on May 20, 2010 Upgraded to Ba2 (sf); -- US$18,000,000 Class D Senior Secured Deferrable Floating Rate Notes Due 2021, Upgraded to B2 (sf); previously on Nov. 23, 2010 Caa1 (sf) Placed Under Review for Possible Upgrade; -- US$14,900,000 Class E Secured Deferrable Floating Rate Notes Due 2021, Upgraded to Caa3 (sf); previously on Nov. 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 an improvement in Moody's calculated overcollateralization ratios since the rating action in July 2010. The reported overcollateralization ratios of the rated notes have improved slightly since the rating action in July 2010. The Class A/B, Class C, Class D, and Class E overcollateralization ratios are reported at 119.44%, 112.19%, 107.48%, and 103.88%, respectively, versus June 2010 levels of 119.03%, 111.80%, 107.11% and 103.52%, respectively, and all related overcollateralization tests are currently in compliance. Notably, however, Moody's analysis of collateral coverage is based on adjusted overcollateralization ratios that have improved by more than the trustee-reported improvement due to a decrease in the percentage of securities with Ca or C ratings. Consistent with its rating surveillance assumptions, Moody's treated Ca or C-rated securities as defaulted securities in its analysis leading to the rating action in July 2010. In its current analysis, Moody's is treating such securities which have benefited from having their ratings upgraded above previous Ca or C rating levels as performing assets. In particular, the current Moody's calculated overcollateralization ratios for the Class A/B, Class C, Class D and Class E are 119.42%, 112.17%, 107.47% and 103.86%, respectively, versus July 2010 levels of 116.72%, 109.63%, 105.03% and 101.51%, respectively. 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 balance, including principal proceeds balance, of $461 million, defaulted par of $4 million, a weighted average default probability of 25.28% (implying a WARF of 3164), a weighted average recovery rate upon default of 40.33%, and a diversity score of 50. 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. Kingsland IV, Ltd., issued in February 2007, 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 sensitivity analysis to test the impact on all rated notes of various default probabilities. Below is 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% (2531) -- Class A1: +2 -- Class A1R: +2 -- Class B: +3 -- Class C: +2 -- Class D: +2 -- Class E : +2 Moody's Adjusted WARF + 20% (3797) -- Class A1: -2 -- Class A1R: -2 -- Class B: -2 -- Class C: -2 -- Class D: -3 -- Class E: -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 strategy and behavior, 2) divergence in legal interpretation of CDO documentation by different transactional parties due to embedded ambiguities, and 3) potential additional expected loss associated with swap agreements in CDOs as a result of the recent U.S. bankruptcy court ruling on Lehman swap termination in the Dante case. Sources of additional performance uncertainties are: 1) 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. 2) 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 and the asset's current market value. 3) 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 sell 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. 4) 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 worse of reported and covenanted values for weighted average rating factor, weighted average spread, weighted average coupon, and diversity score. Additionally, in light of the large positive difference between the reported and covenant levels for the weighted average spread, Moody's considered the impact of assuming the midpoint of the Moody's calculated weighted average spread and the covenant in its analysis. LEAF RECEIVABLES: DBRS Puts 'B (Low) ' Rating on Class E-2 Notes ---------------------------------------------------------------- DBRS has assigned final ratings to the following classes issued by LEAF Receivables Funding 6, LLC - Equipment Contract Backed Notes, Series 2011-1: -- Series 2011-1, Class A Notes rated AAA (sf) -- Series 2011-1, Class B Notes rated AA (sf) -- Series 2011-1, Class C Notes rated 'A' (sf) -- Series 2011-1, Class D Notes rated BBB (sf) -- Series 2011-1, Class E-1 Notes rated BB (sf) -- Series 2011-1, Class E-2 Notes rated B (low) (sf) LEHMAN MORTGAGE: Moody's Downgrades Ratings on 50 Tranches ---------------------------------------------------------- Moody's Investors Service has downgraded the ratings of 50 tranches and confirmed the ratings on three tranches from two RMBS transactions, backed by Alt-A loans, issued by Lehman Mortgage Trust in 2005. 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: Lehman Mortgage Trust 2005-1 -- Cl. 1-A1, Downgraded to B1 (sf); previously on Jan. 14, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A2, Downgraded to B1 (sf); previously on Jan. 14, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A3, Downgraded to Ca (sf); previously on Jan. 14, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A1, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A2, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A3, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A4, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A5, Downgraded to C (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A1, Downgraded to B3 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A2, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A3, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A4, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A5, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A6, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A7, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A8, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A9, Downgraded to Caa1 (sf); previously on Jan. 14, 2010 Ba3 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A10, Downgraded to C (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. 5-A1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Ba1 (sf) Placed Under Review for Possible Downgrade -- Cl. 5-A2, Downgraded to C (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. 6-A1, Downgraded to B3 (sf); previously on Jan. 14, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade -- Cl. 7-A1, Downgraded to B3 (sf); previously on Jan. 14, 2010 Ba2 (sf) Placed Under Review for Possible Downgrade -- Cl. AX, Downgraded to B1 (sf); previously on Jan. 14, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade -- Cl. AP, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B1 (sf) Placed Under Review for Possible Downgrade -- Cl. PAX, Downgraded to B1 (sf); previously on Jan. 14, 2010 Aa3 (sf) Placed Under Review for Possible Downgrade -- Cl. B1, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade Issuer: Lehman Mortgage Trust 2005-3 -- Cl. 1-A1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A2, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A3, Confirmed at Caa1 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A4, Downgraded to Ca (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A5, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A6, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A7, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A8, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A9, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A10, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A11, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 1-A12, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A1, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B2 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A2, Downgraded to C (sf); previously on Jan. 14, 2010 Ca (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A3, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A4, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A5, Current Rating at B3 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Underlying Rating: Downgraded to Caa2 (sf); previously on Feb 20, 2009 Downgraded to B3 (sf) -- Financial Guarantor: MBIA Insurance Corporation (Downgraded to B3, Outlook Negative on Jun 25, 2009) -- Cl. 2-A6, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A7, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A8, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 2-A9, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 B3 (sf) Placed Under Review for Possible Downgrade -- Cl. 3-A1, Downgraded to Caa3 (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A1, Downgraded to B3 (sf); previously on Jan. 14, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade -- Cl. 4-A2, Downgraded to C (sf); previously on Jan. 14, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade -- Cl. AX, Confirmed at Caa1 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. AP, Downgraded to Caa2 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade -- Cl. PAX, Confirmed at Caa1 (sf); previously on Jan. 14, 2010 Caa1 (sf) Placed Under Review for Possible Downgrade LONGHORN CDO: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class B, C, D-1, and D-2 notes from Longhorn CDO III Ltd., a collateralized loan obligation transaction managed by BlackRock Financial Management Inc. S&P removed its rating on the class B notes from CreditWatch with positive implications. At the same time, S&P affirmed its ratings on the class A-1, A-2, and E notes. The upgrades reflect improved performance S&P has observed in the deal's underlying asset portfolio and significant paydown of the class A-1 notes since its last rating action in November 2009. The affirmations reflect the availability of credit support at the class' current rating levels. According to the Dec. 29, 2010 trustee report, the transaction currently holds $3.7 million in 'CCC' rated assets, down from $14.0 million noted in the Oct. 1, 2009, trustee report. In addition, the transaction holds $1.3 million in defaulted securities, down from $6.5 million in October 2009. The deal has paid down $53.9 million to the class A-1 notes since the last review. Accordingly, the transaction's overcollateralization ratios have improved. The class A O/C ratio is 180.79% versus 139.32% in October 2009, the class B O/C ratio is 140.73% versus 120.12%, the class C O/C ratio is 115.21% versus 105.56%, the class D O/C ratio is 104.28% versus 98.66%, and the class E O/C ratio is 99.06% versus 95.20%. 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 Longhorn CDO III Ltd. Rating ------ Class To From ----- -- ---- B AAA (sf) AA (sf)/Watch Pos C BBB+ (sf) BB+ (sf) D-1 CCC+ (sf) CCC- (sf) D-2 CCC+ (sf) CCC- (sf) Ratings Affirmed Longhorn CDO III Ltd. Class Rating ----- ------ A-1 AAA (sf) A-2 AAA (sf) E CCC- (sf) MADISON SQUARE: Fitch Downgrades Ratings on Three Classes of Notes ------------------------------------------------------------------ Fitch Ratings has downgraded three and affirmed four classes issued by Madison Square 2004-1 as a result of negative credit migration of the commercial mortgage back securities collateral. This transaction was analyzed under the framework described in the report 'Global Rating Criteria for Structured Finance CDOs'. The ratings are not based on the Portfolio Credit Model given the high obligor concentration and seasoning of the portfolio. Instead, the projected recovery estimate on the distressed collateral was applied in accordance with the principal waterfall. Additionally, an asset by asset analysis was performed for the remaining assets to determine the collateral coverage for the remaining liabilities. Since Fitch's last rating action in March 2010, approximately 75.5% of the portfolio has been downgraded. Currently, 92.5% has a Fitch derived rating below investment grade and 69.4% has a rating in the 'CCC' rating category or lower, compared to 80.6% and 51.1%, respectively, at last review. The class L notes are the most senior class and have paid down by $46.6 million since the last review. The portfolio has become increasingly concentrated with eight obligors remaining. Class L and M are assigned a Stable Outlook since they have significant credit enhancement to withstand potential credit migration. The Negative Outlook on the class N through Q 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. Madison Square 2004-1 is a commercial real estate collateralized debt obligation that closed March 31, 2004. The transaction is collateralized by 21 assets from eight obligors from the 1996 through 1999 vintages. Fitch has affirmed these classes and revised the Rating Outlooks where indicated: -- $32,337,012 class L Notes at 'AAAsf/LS5'; Outlook to Stable from Negative; -- $18,473,000 class M notes at 'AA-sf/LS5'; Outlook to Stable from Negative; -- $29,029,000 class N notes at 'A+sf/LS5'; Outlook Negative; -- $18,501,489 class Q notes at 'Bsf/LS5'; Outlook Negative. Fitch has downgraded these classes: -- $29,028,000 class O notes to 'BBsf/LS5' from 'BBBsf/LS5'; Outlook Negative; -- $34,950,409 class P notes to 'Bsf/LS5' from 'BB-sf/LS5'; Outlook Negative; -- $14,391,389 class S notes to 'CCCsf' from 'Bsf/LS5'. Classes A through K have paid in full. MERRILL LYNCH: Moody's Affirms Ratings on 16 Classes of Certs. -------------------------------------------------------------- Moody's Investors Service affirmed the ratings of 16 classes of Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass- Through Certificates, Series 2006-Canada 20: -- Cl. A-1 Certificate, Affirmed at Aaa (sf); previously on Oct. 27, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-2 Certificate, Affirmed at Aaa (sf); previously on Oct. 27, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. A-3 Certificate, Affirmed at Aaa (sf); previously on Oct. 27, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. XP-1 Certificate, Affirmed at Aaa (sf); previously on Oct. 27, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. XP-2 Certificate, Affirmed at Aaa (sf); previously on Oct. 27, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. XC Certificate, Affirmed at Aaa (sf); previously on Oct. 27, 2006 Definitive Rating Assigned Aaa (sf) -- Cl. B Certificate, Affirmed at Aa2 (sf); previously on Oct. 27, 2006 Definitive Rating Assigned Aa2 (sf) -- Cl. C Certificate, Affirmed at A2 (sf); previously on Oct. 1, 2009 Confirmed at A2 (sf) -- Cl. D Certificate, Affirmed at Baa3 (sf); previously on Oct. 1, 2009 Downgraded to Baa3 (sf) -- Cl. E Certificate, Affirmed at Ba2 (sf); previously on Oct. 1, 2009 Downgraded to Ba2 (sf) -- Cl. F Certificate, Affirmed at B1 (sf); previously on Oct. 1, 2009 Downgraded to B1 (sf) -- Cl. G Certificate, Affirmed at B3 (sf); previously on Oct. 1, 2009 Downgraded to B3 (sf) -- Cl. H Certificate, Affirmed at Caa1 (sf); previously on Oct. 1, 2009 Downgraded to Caa1 (sf) -- Cl. J Certificate, Affirmed at Caa2 (sf); previously on Oct. 1, 2009 Downgraded to Caa2 (sf) -- Cl. K Certificate, Affirmed at Caa3 (sf); previously on Oct. 1, 2009 Downgraded to Caa3 (sf) -- Cl. L Certificate, Affirmed at Ca (sf); previously on Oct. 1, 2009 Downgraded to Ca (sf) 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 2.1% of the current pooled balance. Moody's cumulative base expected loss was 3.3% at last review. Moody's stressed scenario loss is 10.4% of the current pooled 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 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 25 compared to 26 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 October 1, 2009. Deal Performance As of the January 12, 2011 distribution date, the transaction's aggregate certificate balance decreased by 10% to $533.2 million from $595.3 million at securitization. The Certificates are collateralized by 64 mortgage loans ranging in size from less than 1% to 7.4% of the pool, with the top ten loans representing 53% of the pool. One loan, representing 5% of the pool has an investment grade credit estimate. Two loans, representing less than 2% of the pool, have defeased and are collateralized by Canadian Government securities. Nine 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. The pool has not experienced any losses since securitization. There are currently two loans in special servicing. The specially serviced loans represent 6% of the pool. One of the specially serviced loans, Summit Properties ($7.9 million - 1% of pool), paid off in full subsequent to the January 12, 2011 distribution date. The remaining specially serviced loan, Marriott Pooled Senior Loan ($25.4 million - 5% of pool), is secured by five Marriott flagged hotels in the Greater Toronto area. The subject loan represents a 50% pari passu interest in a $15.8 million first mortgage loan. The loan was transferred to the special servicer in August 2009 for payment delinquency and is currently less than 30 days past due. The loan's sponsor, Concord Hospitality, is overseeing a Project Improvement Plan at three of the collateral properties. Moody's is not estimating a loss 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 $2.4 million loss (based on a 50% probability of default and 36% loss given default on average) from these troubled loans. Moody's was provided with full year 2009 operating results for 86% of the pool. Excluding troubled loans, Moody's weighted average LTV is 88% compared to 93% 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 9.2%. Excluding troubled loans, Moody's actual and stressed DSCRs are 1.48X and 1.20X, respectively, as compared to 1.37X 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. The loan with a credit estimate is the Westview Village Manufactured Home Loan ($27.6 million - 5.2%), which is secured by a 1,060 pad manufactured housing community located in Edmonton, Alberta. The property was virtually 100% leased as of September 2010 and has maintained a near 100% occupancy since securitization. Property performance has improved due to increased rental revenues and amortization. Moody's current credit estimate and stressed DSCR are A1 and 1.65X, respectively, compared to A3 and 1.48X at last review. The top three performing conduit loans represent 21% of the pool balance. The largest conduit loan is the Station Tower Loan ($39.2 million - 7.4%), which is secured by a 218,000 square foot (SF) Class A office building. The property is located in Surrey, which is a suburb of Vancouver, British Colombia. The property was 96% leased as of August 2010 compared to 99% at last review. Moody's LTV and stressed DSCR are 76% and 1.21X, respectively, compared to 84% and 1.09X at last review. The second largest conduit loan is the Heritage Square Loan ($37.0 million - 6.9%), which is secured by a 316,000 SF Class A office building located in the Acadia suburb of Calgary, Alberta. The property was 98% leased as of October 2010, compared to 100% at last review. The largest tenant is AMEC, which is a leading global engineering, project management and consultancy company. AMEC's lease expires in August 2013. Property performance has improved due to increased base revenues and amortization. Moody's LTV and stressed DSCR are 55% and 1.93X, respectively, compared to 77% and 1.37X at last review. The third largest conduit loan is the Carrefour Trois Rivieres/de Recollets Loan ($35.5 million -- 6.7%), which is secured by two anchored retail centers, totaling 475,000 SF, located in Trois Rivieres, Quebec. The weighted average occupancy was 95% on December 31, 2009, compared to 90% at last review. The loan matures in July 2011. Moody's LTV and stressed DSCR are 96% and 0.99X, respectively, compared to 97% and .97X at last review. MERRILL LYNCH: Moody's Downgrades Ratings on Three Certificates --------------------------------------------------------------- Moody's Investors Service downgraded the ratings of three classes and affirmed 12 classes of Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass-Through Certificates, Series 2005-Canada 17: -- Cl. A-1 Certificate, Affirmed at Aaa (sf); previously on Dec. 7, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-2 Certificate, Affirmed at Aaa (sf); previously on Dec. 7, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. XP-1 Certificate, Affirmed at Aaa (sf); previously on Dec. 7, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. XP-2 Certificate, Affirmed at Aaa (sf); previously on Dec. 7, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. XC Certificate, Affirmed at Aaa (sf); previously on Dec. 7, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. B Certificate, Affirmed at Aa2 (sf); previously on Dec. 7, 2005 Definitive Rating Assigned Aa2 (sf) -- Cl. C Certificate, Affirmed at A2 (sf); previously on Dec. 7, 2005 Definitive Rating Assigned A2 (sf) -- Cl. D Certificate, Affirmed at Baa2 (sf); previously on Dec. 7, 2005 Definitive Rating Assigned Baa2 (sf) -- Cl. E Certificate, Affirmed at Baa3 (sf); previously on Dec. 7, 2005 Definitive Rating Assigned Baa3 (sf) -- Cl. F Certificate, Affirmed at Ba1 (sf); previously on Dec. 7, 2005 Definitive Rating Assigned Ba1 (sf) -- Cl. G Certificate, Affirmed at Ba2 (sf); previously on Dec. 7, 2005 Definitive Rating Assigned Ba2 (sf) -- Cl. H Certificate, Affirmed at Ba3 (sf); previously on Dec. 7, 2005 Definitive Rating Assigned Ba3 (sf) -- Cl. J Certificate, Downgraded to B2 (sf); previously on Dec. 7, 2005 Definitive Rating Assigned B1 (sf) -- Cl. K Certificate, Downgraded to B3 (sf); previously on Dec. 7, 2005 Definitive Rating Assigned B2 (sf) -- Cl. L Certificate, Downgraded to Caa1 (sf); previously on Dec. 7, 2005 Definitive Rating Assigned B3 (sf) Ratings Rationale The downgrades are due to higher expected losses resulting from anticipated losses from troubled loans and higher credit quality dispersion. Four loans, representing 23% of the pool, have a Moody's loan to value ratio higher than 100% compared to 5% at last review and 1% at securitization. The affirmations are due to key parameters, including Moody's LTV 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 2.1% of the current balance. At last review, Moody's cumulative base expected loss was 1.5%. Moody's stressed scenario loss is 9.7% 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 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 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 14 compared to 15 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 December 3, 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 January 12, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 20% to $402.0 million from $502.8 million at securitization. The Certificates are collateralized by 36 mortgage loans ranging in size from less than 1% to 15% of the pool, with the top ten loans representing 71% of the pool. The pool includes two loans with investment-grade credit estimates, representing 12% of the pool. Six 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. One loan has been liquidated from the pool, resulting in a realized loss of $189,431 (11% loss severity). There are currently no loans in special servicing. Moody's has assumed a high default probability for three poorly performing loans representing 5% of the pool and has estimated an aggregate $3.4 million loss (17% expected loss based on a 55% probability default) from these troubled loans. Moody's was provided with full year 2009 operating results for 91% of the pool. Excluding troubled loans, Moody's weighted average LTV is 88% compared to 87% at Moody's prior 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 troubled loans, Moody's actual and stressed DSCRs are 1.44X and 1.19X, respectively, compared to 1.47X 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. The largest loan with a credit estimate is the College Square Loan ($24.0 million -- 6.0% of the pool), which is secured by a 386,210 square foot anchored retail centre located in Ottawa, Ontario. The center has maintained 100% occupancy since securitization. The center is anchored by Home Depot and Loblaws. Performance has been stable. Moody's current credit estimate and stressed DSCR are Aaa and 1.86X, respectively, compared to Aaa and 1.77X at last review. The second loan with a credit estimate is the InnVest CMBS Portfolio II Loan ($22.1 million -- 5.5% of the pool), which is secured by ten limited service hotels with 781 rooms. The hotels are located in Quebec, Ontario, New Brunswick, and Nova Scotia. Although NOI has declined since last review, performance is in line with the Moody's expectations. At last review, Moody's analysis incorporated a stressed cash flow due to concerns about weakness in the lodging industry. Moody's current credit estimate and stressed DSCR are A3 and 2.08X, respectively, compared to A3 and 1.98X at last review. The top three performing conduit loans represent 37% of the pool balance. The largest loan is the TransGlobe Pooled Senior Loan ($59.8 million -- 14.9% of the pool) which is secured by 25 multifamily properties containing a total of 2,302 units located across Ontario and Nova Scotia. The loan represents a 55% interest in a first mortgage loan of $107.7 million. There is also $11.1 million B note held outside the trust. The loan previously was in special servicing because the borrower obtained subordinate financing without the lender's approval. The loan has been modified, three properties were released and subordinated debt was paid in full. The loan is currently on the servicer's watchlist due to low DSCR. Based on the year-end 2009 data, 17 out of 25 properties were performing below the DSCR threshold with an overall DSCR of 1.02x. Moody's LTV and stressed DSCR are 110% and 0.84X, respectively, compared to 99% and 0.93X at last review. The second largest loan is the Redbourne Office Portfolio Loan ($51.4 million -- 12.8% of the pool), which is secured by ten office buildings with 710,498 square feet located in Quebec, Canada. The portfolio was 99% leased as of April 2010 compared to 94% at last review. Performance has declined since last review due to lower revenues and higher expenses. Moody's LTV and stressed DSCR are 83% and 1.3X, respectively, compared to 75% and 1.45X at last review. The third largest loan is the Technoparc Portfolio Loan ($39.4 million -- 9.8% of the pool), which is secured by 13 office buildings with 323,373 square feet located in the Technoparc submarket of Saint-Laurent, Quebec. The portfolio was 70% leased as of October 2010 compared to 90% at last review. Six of the properties had occupancy less than 50%. Moody's has incorporated the recent increased vacancy in its analysis. Moody's LTV and stressed DSCR are 94% and 1.09X, respectively, compared to 86% and 1.19X at last review. MERRILL LYNCH: Moody's Takes Rating Actions on Various Classes -------------------------------------------------------------- Moody's Investors Service upgraded four and affirmed eleven classes of Merrill Lynch Financial Assets Inc., Commercial Mortgage Pass-Through Certificates, Series 2003-Canada 10: -- Cl. A-1 Certificate, Affirmed at Aaa (sf); previously on July 16, 2003 Definitive Rating Assigned Aaa (sf) -- Cl. A-2 Certificate, Affirmed at Aaa (sf); previously on July 16, 2003 Definitive Rating Assigned Aaa (sf) -- Cl. XC-2 Certificate, Affirmed at Aaa (sf); previously on July 16, 2003 Definitive Rating Assigned Aaa (sf) -- Cl. XC-1 Certificate, Affirmed at Aaa (sf); previously on July 16, 2003 Definitive Rating Assigned Aaa (sf) -- Cl. B Certificate, Affirmed at Aaa (sf); previously on Dec. 13, 2006 Upgraded to Aaa (sf) -- Cl. C Certificate, Affirmed at Aaa (sf); previously on Oct. 16, 2008 Upgraded to Aaa (sf) -- Cl. D-1 Certificate, Upgraded to Aa3 (sf); previously on Oct. 16, 2008 Upgraded to A2 (sf) -- Cl. D-2 Certificate, Upgraded to Aa3 (sf); previously on Oct. 16, 2008 Upgraded to A2 (sf) -- Cl. E-1 Certificate, Upgraded to Baa1 (sf); previously on Oct. 16, 2008 Upgraded to Baa2 (sf) -- Cl. E-2 Certificate, Upgraded to Baa1 (sf); previously on Oct. 16, 2008 Upgraded to Baa2 (sf) -- Cl. F Certificate, Affirmed at Ba1 (sf); previously on July 16, 2003 Definitive Rating Assigned Ba1 (sf) -- Cl. G Certificate, Affirmed at Ba2 (sf); previously on July 16, 2003 Definitive Rating Assigned Ba2 (sf) -- Cl. H Certificate, Affirmed at Ba3 (sf); previously on July 16, 2003 Definitive Rating Assigned Ba3 (sf) -- Cl. J Certificate, Affirmed at B3 (sf); previously on Oct. 1, 2009 Downgraded to B3 (sf) -- Cl. K Certificate, Affirmed at Caa1 (sf); previously on Oct. 1, 2009 Downgraded to Caa1 (sf) Ratings Rationale The upgrades are due to increased subordination from loan payoffs and amortization and the pool's overall improved performance. The pool has paid down 26% since securitization and 9% since last review. 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 cumulative base expected 0f 2.3% of the current balance compared to 1.8% at last review. The current stressed scenario loss is 3.4% of the current pooled 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 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 20 compared to 25 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 October 1, 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 January 12, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 26% to $341.5 million from $460.4 million at securitization. The Certificates are collateralized by 51 mortgage loans ranging in size from less than 1% to 8.5% of the pool, with the top ten loans representing 45% of the pool. Seven loans, representing 24% of the pool, have defeased and are collateralized by Canadian Government securities. Two loans, representing 14% of the pool, have investment grade credit estimates. Seven loans, representing 10% of the pool, are on the master servicer's watchlist. The watchlist includes loans which meet certain portfolio review guidelines established as part of the 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 not experienced any losses since securitization and currently there are no loans in special servicing. Moody's has assumed a high default probability for five of the loans on the watchlist. These five troubled loans represent 9% of the pool. Moody's has estimated a $4.5 million loss (based on a 50% probability of default and 29% loss given default on average) from the troubled loans. Moody's was provided with full year 2009 operating results for 85% of the pool. Excluding troubled loans, Moody's weighted average LTV is 57% compared to 67% at last full review. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 9.8%. Excluding troubled loans, Moody's stressed DSCR is 2.04X as compared to 1.79X at last full review. 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 Sheridan Centre Loan ($29 million - 8.5%), which is secured by a 549,000 square foot retail and office complex located approximately 13 miles west of Toronto in Mississauga, Ontario. The retail portion accounts for 55% of the property's net rentable area (NRA) and consists of a community center anchored by Zellers and Dominion Food Store. The largest tenant in the office portion is Royal & Sun Alliance, which leases 38% of the collateral through 2018. The center was 98% leased as of December 2009, the same as at last review. Moody's current credit estimate and stressed DSCR are A1 and 1.88X, respectively, compared to A1 and 1.84X at last review. The second loan with an underlying rating is the Richmond Centre North Loan ($18.3 million -- 5.4%), which is secured by the borrower's interest in a 716,000 square foot regional mall (308,000 square feet of collateral) located immediately south of Vancouver in Richmond, British Columbia. The center is anchored by The Bay, which leases 53% of the collateral's NRA though September 2017. The center was 98% leased as of March 2010 as compared to 100% at last review. Moody's current credit estimate and stressed DSCR are Aaa and 3.08X, respectively, compared to Aaa and 2.78X at last review. The top three conduit loans represent 17% of the pool. The largest conduit loan is the RioCan Fairgrounds Loan ($22.8 million -- 6.7%), which is secured by a 250,000 square foot power center located approximately 50 miles northwest of Toronto in Orangeville, Ontario. Major tenants include Wal-Mart (leases 42% of NRA through 2017), Price Chopper (17% of NRA though 2018) and Galaxy Theatres (10% of NRA though 2021). The center was 100% leased as of January 2010, the same as at last review. The loan sponsor, RioCan Real Investment Trust (RioCan), is a large Canadian REIT which owns properties representing 38 million square feet. Moody's LTV and stressed DSCR are 66% and 1.56X, respectively, as compared to 71% and 1.44X at last review. The second largest conduit loan is The Junction (Phase I) Loan ($17.9 million -- 5.3%), which is secured by the borrower's interest in a 370,000 square foot power center (194,000 square feet of collateral) located in Mission, British Columbia. The collateral is anchored by Sav on Foods, which leases 30% of the NRA through 2018. The property was 99% leased as of December 2009, the same as at last review. The loan sponsor is a joint venture between two large North American based REITs, RioCan and Kimco Realty. Moody's LTV and stressed DSCR are 58% and 1.73X, respectively, as compared to 68% and 1.48X at last review. The third largest conduit loan is the Lawrence Terrace Loan ($17.4 million -- 5.1%), which is secured by a 410-unit mid-rise apartment complex located in Toronto, Ontario. The property was constructed in 1964. Property performance has declined since securitization due to increased operating expenses and a decline in occupancy. The most recent property inspection report available (September 2008) indicates several areas of deferred maintenance, including the underground parking structure. Current financial information for this loan is not available. The loan is on the master servicer's watchlist due to low debt service coverage. Given the property's age, poor physical condition, lack of current financials and decline in performance since securitization, Moody's included this loan as one of the five troubled loans in this deal. Moody's LTV and stressed DSCR are 149% and 0.69X, respectively, compared to 145% and 0.71X at last review. ML-CFC COMMERCIAL: Fitch Downgrades Ratings on 15 Certificates -------------------------------------------------------------- Fitch Ratings downgrades and revises Rating Outlooks and Loss Severity Ratings on 15 classes of ML-CFC Commercial Mortgage Trust's commercial mortgage pass-through certificates, series 2007-5. 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 12.59% (12.97% cumulative transaction losses which includes losses realized to date). Fitch expects classes E through Q to be fully depleted by losses on specially serviced loans and class D to be affected. As of January 2011, there are cumulative interest shortfalls in the amount of $9.9 million currently affecting classes C through Q. As of the January 2011 distribution date, the pool's aggregate principal balance was $4.28 billion, down from $4.42 billion at issuance. There are no defeased loans. Fitch has identified 91 loans (43.2%) as Fitch Loans of Concern, which includes 28 specially serviced loans (27.2%). The largest contributor to losses was Peter Cooper Village/Stuyvesant Town, which is in special servicing. PCV/ST comprises 56 multi-story buildings, situated on 80 acres, and includes a total of 11,227 apartments. The special servicer has gained control of the property by acquiring the mezzanine debt of the borrower. The special servicer is working to stabilize the asset and has engaged Rose Associates as property manager. The special servicer intends to renovate 570 vacant units in 2011. Property performance continues to be below what is needed to service the debt; however the securitized loan balance per unit ($267,213) is low relative to other NYC multi family properties. The most recent servicer-reported debt service coverage ratio is 0.6 and occupancy is 95%. The second largest contributor to losses was HAS Memphis Industrial Portfolio, which transferred to special servicing in September 2010 for imminent monetary default. The loan is secured by 15 office/flex/industrial properties with over 1.5 million square feet disbursed across three industrial parks in Memphis, TN. Portfolio occupancy has been gradually declining due to a high level of rollover and is currently 74%, down from 89% at issuance. As a result, the servicer-reported debt service coverage ratio (based on net cash flow) had fallen to 0.86 times at YE2009 and 0.83x in 1Q'10. The special servicer plans to foreclose on this asset. The third largest contributor to losses was the Renaissance Dallas, which is a 518 room full service hotel located in the Dallas market center, which is 3.5 miles from the Dallas CBD. Hotel amenities include two restaurants, 13 meeting rooms, a lounge, an outdoor rooftop pool and whirlpool, a fitness center and sauna, a gift shop and business center. Property performance has been significantly impacted by the downturn. The servicer- reported YTD June 2010 debt service coverage ratio, occupancy, average daily rate, and revenue per available room were 0.51x, 62%, $103, and $64, respectively. Fitch has downgraded these classes and revised Rating Outlooks where indicated: -- $341.7 million class AM to 'AA/LS4' from 'AAA/LS3'; Outlook to Stable from Negative; -- $100 million class AM-FL to 'AA/LS4' from 'AAA/LS3'; Outlook to Stable from Negative; -- $211.5 million class AJ to 'B-/LS5' from 'BB/LS3'; Outlook Negative; -- $175 million class AJ-FL to 'B-/LS5' from 'BB/LS3'; Outlook Negative; -- $77.3 million class B to 'CCC/RR1' from 'BB/LS5'; -- $33.1 million class C to 'CCC/RR1' from 'BB/LS5' -- $77.3 million class D to 'CCC/RR2' from 'B-/LS5'; -- $38.6 million class E to 'CCC/RR6' from 'B-/LS5'; -- $55.2 million class F to 'CC/RR6' from 'B-/LS5'; -- $49.7 million class G to 'CC/RR6' from 'B-/LS5'; -- $49.7 million class H to 'CC/RR6' from 'B-/LS5'; -- $16.6 million class J to 'C/RR6' from 'B-/LS5'; -- $11 million class K to 'C/RR6' from 'B-/LS5'; -- $11 million class L to 'C/RR6' from 'B-/LS5'; -- $5.5 million class N to 'C/RR6' from 'B-/LS5'. Additionally, Fitch affirms these classes: -- $553,403 class A-1 at 'AAA/LS2'; Outlook Stable; -- $63.3 million class A-2 at 'AAA/LS2'; Outlook Stable; -- $35 million class A-2FL at 'AAA/LS2'; Outlook Stable; -- $25 million class A-2FX at 'AAA/LS2'; Outlook Stable; -- $153.4 million class A-3 at 'AAA/LS2'; Outlook Stable; -- $187.1 million class A-SB at 'AAA/LS2'; Outlook Stable; -- $1,200.2 million class A-1A at 'AAA/LS2'; Outlook Stable; -- $1,090.2 million class A-4 at 'AAA/LS2'; Outlook Stable; -- $245 million class A-4FL at 'AAA/LS2'; Outlook Stable. Fitch does not rate the class M, class P or class Q certificates. Fitch withdraws the ratings of the interest only class X. MONROE COUNTY: S&P Raises Ratings on Revenue Bonds From 'BB+' ------------------------------------------------------------- Standard & Poor's Ratings Services raised its long-term rating to 'BBB-' from 'BB+' on Monroe County Hospital Finance Authority, Mich.'s series 2006 revenue bonds issued for Mercy Memorial Hospital System Corp. Obligated Group. The rating revision reflects Standard & Poor's assessment of Mercy's improved operating performance in the past fiscal year and the first six months of fiscal 2011, generating strong debt service coverage, coupled with an improved balance sheet. The balance sheet was boosted by the unexpected receipt of $18.1 million from the sale of private shares in January 2010 and benefits from operational improvements. In addition, the 'BBB-' rating reflects Standard & Poor's view of Mercy's dominant business position in Monroe County despite its location in the competitive markets of Detroit and Ann Arbor, Mich., and Toledo, Ohio. Offsetting credit factors include high unemployment in Monroe County, as well as competition and outmigration to larger facilities in nearby Toledo, Detroit, and Ann Arbor. "The positive outlook reflects S&P's expectation that Mercy will likely sustain its operating improvements and at least maintain its balance sheet strength over the next one- to two-years," said Standard & Poor's credit analyst Jessica Goldman. Standard & Poor's believes a higher rating is possible if management is able to continue to demonstrate sustained operating improvement and coverage while at least maintaining the balance sheet as well as market share stability over the next few years as health care reform unfolds. While not expected, should Mercy experience operating losses or the balance sheet deteriorates, Standard & Poor's could consider a return to a stable outlook. Mercy consists of Mercy Memorial Hospital Corp. and Monroe Community Health Services. Mercy operates a 238-licensed-bed facility (179 staffed) in Monroe, Mich., about 40 miles south of Detroit as well as a 70-bed skilled-nursing center. MORGAN STANLEY: Fitch Issues Presale Report on 2011-C1 Certs. ------------------------------------------------------------- Fitch Ratings has issued a presale report on Morgan Stanley Capital I Trust 2011-C1 commercial mortgage pass-through certificates. Fitch expects to rate the transaction and assign Loss Severity ratings, with a Stable Outlook: -- $87,863,000 class A-1 'AAAsf/LS1'; -- $597,153,000 class A-2 'AAAsf/LS1'; -- $105,120,000 class A-3 'AAAsf/LS1'; -- $404,067,000 class A-4 'AAAsf/LS1'; -- $1,194,203,000* class X-A 'AAAsf'; -- $60,001,000 class B 'AAsf/LS3'; -- $89,033,000 class C 'Asf/LS3'; -- $85,162,000 class D 'BBBsf/LS3'; -- $19,355,000 class E 'BBB-sf/LS5'; -- $13,548,000 class F 'BB+sf/LS5'; -- $15,484,000 class G 'BBsf/LS5'. * Notional amount and interest only. The expected ratings are based on information provided by the issuer as of Jan. 31, 2011. Fitch does not expect to rate the $13.5 million class H, the $15.5 million class J, the $13.5 million class K, the $9.7 million class L, the $19.4 million class M, or the interest-only class X-B. The certificates represent the beneficial ownership in the trust, primary assets of which are 37 loans secured by 79 commercial properties having an aggregate principal balance of approximately $1.55 billion as of the cutoff date. The loans were originated by Morgan Stanley Mortgage Capital Holdings and Banc of America Mortgage Capital Corporation. Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 80.2% of the properties by balance, cash flow analysis of 89.6% of the pool and asset summary reviews on 89.6% of the pool. The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.20 times, a Fitch stressed loan-to value of 93.6%, and a Fitch debt yield of 10.4%. Fitch's aggregate net cash flow represents a variance of 8.1% to issuer cash flows. The transaction is concentrated by loan and sponsor. The largest 10 loans account for 71.8% of the pool, and the largest 15 account for 82%. There is no material sponsor concentration across multiple loans. The Master Servicer and Special Servicer will be Bank of America, N.A. and Midland Loan Services, Inc., rated 'CMS2+' and 'CSS1', respectively, by Fitch. MORGAN STANLEY: Fitch Downgrades Ratings on 13 2006-HQ9 Certs. -------------------------------------------------------------- Fitch Ratings downgrades and removes from Rating Watch Negative 13 classes of Morgan Stanley Capital I Trust 2006-HQ9 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 4.4% (4.9% cumulative transaction losses which includes losses realized to date). Fitch expects losses on specially serviced loans to delete classes L through Q and a portion of class K. As of January 2010, there are cumulative interest shortfalls in the amount of $4.95 million currently affecting classes K through Q. As of the January 2010 distribution date, the pool's aggregate principal balance has been paid down by 2.77% to $2.49 billion from $2.57 billion at issuance. There are no defeased loans. Fitch has identified 64 loans (26.2%) as Fitch Loans of Concern, which includes 21 specially serviced loans (10.1%). The largest contributor to modeled losses is the Center Point Complex Portfolio loan (1.23%) which is collateralized by four specialty trade-mart properties located in High Point, NC. The aggregate square footage for the portfolio is 460,681 square feet (sf). All of the tenants are in the furniture and home improvement sectors. The loan transferred to the special servicer due to a decline in occupancy and a drop in market rents. The special servicer is negotiating a resolution with the borrower. The city of High Point, NC is highly dependent on the furniture industry and also contains the International Home Furnishings Center which is the largest showroom center with approximately 2.7 million sf of showroom space. The second largest contributor to modeled losses is the Gateway Shopping Center loan (2.41%) which is collateralized by a 257,844 sf retail power center located in West Bloomfield, MI within the Detroit MSA. The property is anchored by Kohl's, Walgreens, Staples, Petsmart and Whole Foods. The loan transferred to the special servicer due to performance issues related to the vacancy of Linens N' Things. The vacant space has since been leased to Dunham's Sporting Goods in February 2009. Occupancy is currently at 97% as of December 2010 with debt service coverage ratio (DSCR) of 1.18 times. Year end 2010 net operating income (NOI) has increased 3% from YE2009. The third largest contributor to modeled losses is the 80 Broad Street loan (5.0%) which is collateralized by a 397,485 sf office building in the Financial District of Manhattan. The loan transferred to the special servicer due to an event of default concerning the borrower's failure to fund its tenant improvement and leasing cost reserves to a predetermined amount of $3.5 million as required by the loan documents. As of November 2010 occupancy has declined to 83% from 95% at YE 2009. DSCR has also declined to 1.16x from 1.51x at YE2009. The special servicer has retained a broker to market the note for sale. In total, there are currently 21 loans (10.1%) in special servicing, which consists of four loans (0.96%) in foreclosure, 10 loans (3.08%) that are 90 days delinquent and seven loans (6.05%) that are current. At Fitch's last review there were 13 loans (3.9%) in special servicing consisting of 11 loans (3.56%) that were 30 to 90 days delinquent and two loans (0.31%) in foreclosure. Fitch downgrades, removes from Rating Watch Negative and assigns Recovery Ratings, Loss Severity ratings and Outlooks to these classes as indicated: -- $35.3 million class C to 'Asf/LS5' from 'AAsf/LS5'; Outlook Stable; -- $22.4 million class E to 'BBBsf/LS5' from 'Asf/LS5'; Outlook Stable; -- $25.7 million class F to 'BBB-sf/LS5' from 'BBBsf/LS5'; Outlook Stable; -- $25.7 million class G to 'BBsf/LS5' from 'BBB-sf/LS5'; Outlook Stable; -- $28.9 million class H to 'Bsf/LS5' from 'BBsf/LS5'; Outlook Stable; -- $32.1 million class J to 'CCCsf/RR1' from 'Bsf/LS5'; -- $25.7 million class K to 'CCCsf/RR2' from 'B-sf/LS5'; -- $9.6 million class L to 'CCCsf/RR6' from 'B-sf/LS5'; -- $3.2 million class M to 'CCCsf/RR6' from 'B-sf/LS5'; -- $9.6 million class N to 'CCCsf/RR6' from 'B-sf/LS5'; -- $6.4 million class O to 'CCsf/RR6' from 'B-sf/LS5' -- $3.2 million class P to 'CCsf/RR6' from 'B-sf/LS5'; -- $9.6 million class Q to 'CCsf/RR6' from 'B-sf/LS5'. Fitch affirms, removes from Rating Watch Negative and assigns Loss Severity ratings and Outlooks to these classes as indicated: -- $256.5 million class A-M at 'AAAsf/LS3'; Outlook Stable; -- $202 million class A-J at 'AAsf/LS3'; Outlook Stable; -- $19.2 million class B at 'AAsf/LS5'; Outlook Stable -- $28.9 million class D at 'Asf/LS5'; Outlook Stable. Additionally, Fitch affirms these classes, with a Stable Outlook: -- $23.4 million class A-1 at 'AAAsf/LS1'; Outlook Stable; -- $154.7 million class A-1A at 'AAAsf/LS1'; Outlook Stable; -- $92.9 million class A-2 at 'AAAsf/LS1'; Outlook Stable; -- $215 million class A-3 at 'AAAsf/LS1'; Outlook Stable; -- $84.6 million class A-AB at 'AAAsf/LS1'; Outlook Stable; -- $784.2 million class A-4 at 'AAAsf/LS1'; Outlook Stable; -- $350 million class A-4FL at 'AAAsf/LS1'; Outlook Stable; -- $214 thousand class ST-A at 'BBB-sf'; Outlook Stable; -- $2.9 million class ST-B at 'BBsf'; Outlook Stable; -- $1.1 million class ST-C at 'BB-sf'; Outlook Stable; -- $2.3 million class ST-D at 'Bsf'; Outlook Stable; -- $1.3 million class ST-E at 'B-sf'; Outlook Stable. The ST classes are related to a non-pooled B-Note secured by 633 Indiana Ave NW. Fitch affirms these classes as the underlying collateral is a single-tenant building, 100% occupied by the General Service Administration, on a long-term lease through September 2020. Fitch withdraws the ratings of the interest only classes X and X- MP. The interest only X-RC class has been paid in full. MORGAN STANLEY: Moody's Takes Rating Actions on 1998-CF1 Notes -------------------------------------------------------------- Moody's Investors Service upgraded the rating of one class and affirmed five classes of Morgan Stanley Capital I Inc., Commercial Mortgage Pass-Through Certificates, Series 1998-CF1: -- Cl. X Certificate, Affirmed at Aaa (sf); previously on Aug. 25, 1998 Assigned Aaa (sf) -- Cl. D Certificate, Affirmed at Aaa (sf); previously on April 15, 2009 Upgraded to Aaa (sf) -- Cl. E Certificate, Upgraded to Aa3 (sf); previously on April 15, 2009 Upgraded to A2 (sf) -- Cl. F Certificate, Affirmed at B2 (sf); previously on April 15, 2009 Upgraded to B2 (sf) -- Cl. G Certificate, Affirmed at C (sf); previously on Dec. 23, 2003 Downgraded to C (sf) -- CL H Certificate, Affirmed at C (sf); previously on Dec. 23, 2003 Downgraded to C (sf) Ratings Rationale The upgrade is due to overall improved pool performance and a significant increase in subordination levels since Moody's last review. 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 8.0% of the current balance, the same as at last review. Moody's stressed scenario loss is 10.1% 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 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 22 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. 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 April 15, 2009. Moody's Investors Service received and took into account one or more third party due diligence report(s) on the underlying assets or financial instruments in this transaction and the due diligence report(s) had a neutral impact on the ratings. Deal Performance As of the January 18, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 92% to $92.5 million from $1.1 billion at securitization. The Certificates are collateralized by 44 mortgage loans ranging in size from less than 1% to 10% of the pool, with the top ten loans representing 57% of the pool. Five loans, representing 10% of the pool, have defeased and are collateralized by U.S. Government securities. There are no loans in the pool with investment grade credit estimates. Nine 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. Twenty-four loans have been liquidated from the pool since securitization, resulting in a $77.8 million loss. At last review the pool had experienced an aggregate $76.5 million loss. Two loans, representing 7% of the pool, are currently in special servicing. Moody's has estimated an aggregate $5.5 million loss (90% expected loss on average) for the two specially serviced loans. Moody's has assumed a high default probability for three poorly performing loans representing 5% of the pool and has estimated a $534,000 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 84% of the pool's non-defeased loans and partial year 2010 results for 61% of the pool's non-defeased loans. Excluding specially serviced and troubled loans, Moody's weighted average LTV is 56% compared to 74% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 10.2% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 10.1%. Excluding specially serviced and troubled loans, Moody's actual and stressed DSCRs are 2.27X and 2.18X, respectively, compared to 1.42X and 1.81X 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 26% of the pool balance. The largest loan is the Bristol Market Place Loan ($9.4 million -- 10.2% of the pool), which is secured by a 99,256 square foot (SF) retail center located in Santa Ana, California. Financial performance has declined due to lower occupancy at 90% as of September 2010 versus 92% at last review. Recent financial performance suggests improved financial performance coupled with 5% amortization since last review. Moody's LTV and stressed DSCR are 72% and 1.44X, respectively, compared to 71% and 1.44X at last review. The second largest loan is the Preston Place Apartments Loan ($7.8 million -- 8.5% of the pool), which is secured by a 239-unit apartment complex located in Plano, Texas. Financial performance has improved since last review due to higher occupancy. The property was 93% leased as of September 2010 compared to 88% at last review. The loan has amortized 15% since last review. Moody's LTV and stressed DSCR are 36% and 3.0X, respectively, compared to 50% and 2.18X at last review. The third largest loan is the Van Dorn Station Loan ($7.1 million -- 7.7% of the pool), which is secured by a 74,500 SF retail center located in Alexandria, Virginia adjacent to a Metro stop. The property's financial performance improved slightly since last review despite a 2% drop in occupancy to 93% as of December 2009 from 95% as of December 2008. There are presently re-leasing efforts underway to fill the former Comcast space which expired December 2010. This loan has amortized 5% since last review. Moody's LTV and stressed DSCR are 42% and 2.6X, respectively, compared to 50% and 2.4X at last review. MORGAN STANLEY: Moody's Downgrades Ratings on 2003-IQ6 Certs. ------------------------------------------------------------- Moody's Investors Service downgraded the ratings of five classes and affirmed 13 classes of Morgan Stanley Capital I Trust, Commercial Mortgage Pass-Through Certificates, Series 2003-IQ6: -- Cl. A-3 Certificate, Affirmed at Aaa (sf); previously on Jan. 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-4 Certificate, Affirmed at Aaa (sf); previously on Jan. 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. A-1A Certificate, Affirmed at Aaa (sf); previously on Jan. 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. X-1 Certificate, Affirmed at Aaa (sf); previously on Jan. 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. X-2 Certificate, Affirmed at Aaa (sf); previously on Jan. 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. X-Y Certificate, Affirmed at Aaa (sf); previously on Jan. 19, 2011 Aaa (sf) Placed Under Review for Possible Downgrade -- Cl. B Certificate, Affirmed at Aa1 (sf); previously on Jan. 19, 2011 Aa1 (sf) Placed Under Review for Possible Downgrade -- Cl. C Certificate, Affirmed at A1 (sf); previously on Jan. 5, 2007 Upgraded to A1 (sf) -- Cl. D Certificate, Affirmed at A3 (sf); previously on Dec. 19, 2003 Definitive Rating Assigned A3 (sf) -- Cl. E Certificate, Affirmed at Baa1 (sf); previously on Dec. 19, 2003 Definitive Rating Assigned Baa1 (sf) -- Cl. F Certificate, Affirmed at Baa2 (sf); previously on Dec. 19, 2003 Definitive Rating Assigned Baa2 (sf) -- Cl. G Certificate, Affirmed at Baa3 (sf); previously on Dec. 19, 2003 Definitive Rating Assigned Baa3 (sf) -- Cl. H Certificate, Affirmed at Ba1 (sf); previously on Dec. 19, 2003 Definitive Rating Assigned Ba1 (sf) -- Cl. J Certificate, Downgraded to Ba3 (sf); previously on Dec. 19, 2003 Definitive Rating Assigned Ba2 (sf) -- Cl. K Certificate, Downgraded to B2 (sf); previously on Dec. 19, 2003 Definitive Rating Assigned Ba3 (sf) -- Cl. L Certificate, Downgraded to B3 (sf); previously on Dec. 19, 2003 Definitive Rating Assigned B1 (sf) -- Cl. M Certificate, Downgraded to Caa2 (sf); previously on Sept. 18, 2008 Downgraded to B3 (sf) -- Cl. N Certificate, Downgraded to Caa3 (sf); previously on Sept. 18, 2008 Downgraded to Caa1 (sf) Ratings Rationale The downgrades are due to higher expected losses for the pool resulting from 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 current ratings. Moody's rating action reflects a cumulative base expected loss of 2.2% of the current balance. At last review, Moody's cumulative base expected loss was 1.9%. Moody's stressed scenario loss is 5.4% 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 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. 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 September 18, 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 January 18, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 16% to $837.6 million from $997.7 million at securitization. The Certificates are collateralized by 166 mortgage loans ranging in size from less than 1% to 13% of the pool, with the top ten loans representing 46% of the pool. The pool includes 77 loans with investment grade credit estimates, representing 38% of the pool. Loans secured by residential cooperative properties account for 72 of those loans and 13% of the pool. Nine loans, representing 6% of the pool, have defeased and are collateralized with U.S. Government securities. Twenty-one loans, representing 5% 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. No loans have been liquidated from the trust since securitization. Currently two loans, the Charleston Tower Office Building Loan ($11.5 million -- 1.4% of the pool) and Corn Exchange National Bank Loan ($4.9 million -- 0.6% of the pool) are in special servicing. The Charleston Tower Office Building Loan transferred to special servicing in January 2010 and the property became REO in August 2010. The Corn Exchange National Bank Loan was transferred to special servicing in June 2010 due to payment default. Moody's has estimated an aggregate $7.1 million loss (43% expected loss overall) for the specially serviced loans. Moody's has assumed a high default probability for two poorly performing loans representing 1.1% of the pool. Moody's has estimated a $2.2 million loss (25% expected loss based on a 50% probability default) from the troubled loans. Moody's was provided with full year 2009 operating results for 89% of the pool. Excluding specially serviced and troubled loans, Moody's weighted average LTV for the conduit component is 77% compared to 80% at Moody's prior 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 8.8%. Excluding specially serviced and troubled loans, Moody's actual DSCR for the conduit component is 1.49X, compared to 1.52X at last review. Moody's stressed DSCR for the conduit component is 1.38. 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 25 compared to 31 at Moody's prior review. The largest loan with a credit estimate is the Mall at Tuttle Crossing Loan ($112.5 million -- 13.4% of the pool), which is secured by a 380,953 square foot mall located in Columbus, Ohio. Anchor tenants include JC Penny, Sears and Macy's. The loan is sponsored by Simon Property Group. As of September 2010, the property was 90% leased compared to 83% at last review. Due to an increase in occupancy, performance has improved since last review. Moody's credit estimate and stressed DSCR are A2 and 1.52X, respectively, compared to A3 and 1.43X at last review. The second loan with a credit estimate is the WestShore Plaza Loan ($30.0 million -- 3.6% of the pool), which represents a 34% pari passu interest in a $88.1 million loan. The loan is secured by a 1.1 million SF regional mall located in Tampa, Florida. As of September 2010, the property was 98% leased, which is the same as at last review. The loan is sponsored by Glimcher Properties. Performance has been stable. Moody's credit estimate and stressed DSCR are A2 and 1.60X, respectively, compared to A2 and 1.55X at last review. The third loan with a credit estimate is the 3 Times Square Loan ($25.9 million -- 3.1% of the pool), which represents a 20.6% pari passu interest in $145.5 million A-note. The loan is collateralized by a 883,405 SF class A office property located in the Time Square District of New York City. Major tenants include Reuters (79% of the net rentable area; lease expiration November 2021) and Bank of Montreal (12% of the NRA; lease expiration November 2021). The property has been 100% leased since securitization. The loan is sponsored by the Rudin Management Company and Reuters. The loan was structured with a 218 month amortization schedule and has amortized 11% since last review. Moody's credit estimate and stressed DSCR are Aaa and 3.25X, respectively, compared to Aaa and 2.74X at last review. The fourth loan with a credit estimate is the 250 W 19th Street Loan ($18.7 million -- 2.2% of the pool), which is secured by a 200 unit apartment building located in New York City's Chelsea neighborhood. As of October 2010, the property was 95% leased, a slight decline from 98% at last review. Performance has been stable. Moody's credit estimate and stressed DSCR are Aaa and 1.95X, respectively, compared to Aaa and 1.91X at last review. The fifth loan with a credit estimate is the Country Club Mall Loan ($17.7 million -- 2.1% of the pool), which is secured by a 392,139 SF mall located in Cumberland, Maryland. The mall is anchored by Sears (23% of the NRA; lease expiration October 2012), Bon-Ton (19% of the NRA; lease expiration January 2012) and JC Penny (18% of NRA; lease expiration March 2011). The absence of competing retail centers in the region offsets concerns about upcoming lease expirations. Moody's credit estimate and stressed DSCR are Baa2 and 1.74X, respectively, compared to Baa2 and 1.65X at last review. The top three performing conduit loans represent 15.3% of the pool. The largest loan is the 840 North Michigan Loan ($55.5 million -- 6.6% of the pool), which is secured by an 87,136 SF retail center located on Chicago's Magnificent Mile, a shopping and entertainment district. Major tenants include H&M (53% of the NRA; lease expiration August 2013), Escada (28% of the NRA; lease expiration January 2013) and Casual Male (15% of the NRA; lease expiration January 2013). Occupancy at the property has remained at 100% since securitization. Performance has improved since last review due to amortization and rent increases. Moody's LTV and stressed DSCR are 71% and 1.43X, respectively, compared to 79% and 1.13 at last review. The second largest loan is the 88 Sidney Street Loan ($36.4 million -- 4.3% of the pool), which is collateralized by a 145,275 SF class A medical office building located in Cambridge, Massachusetts. The property is 100% leased to a single tenant, Alkermes Inc., whose lease expires in June 2012. Moody's utilized a Lit/Dark analysis to reflect potential cash flow volatility due to the single tenant's near term lease expiration. The loan was structured with a 300 month amortization schedule and has amortized 6% since last review. Moody's LTV and stressed DSCR are 78% and 1.31X, respectively, compared to 81% and 1.27X at last review. The third largest loan is the 609 Fifth Avenue Loan ($35.9 million -- 4.3% of the pool), which represents a 37.3% pari passu interest in a $96.4 million loan. The loan is secured by a 147,958 SF office and street retail property located in the Rockefeller Center submarket of New York City. Major tenants include American Girl Place (34% of the NRA; lease expiration March 2018; retail tenant), DZ Bank (29% of the NRA; lease expiration March 2017; office tenant) and Reebok (10% of the NRA; lease expiration November 2013; office tenant). Performance has been stable. Moody's LTV and stressed DSCR are 91% and 1.07X, respectively, compared to 94% and 1.04X at last review. MORGAN STANLEY: S&P Assigns Ratings to $1.55 Bil. 2011-C1 Certs. ---------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to Morgan Stanley Capital I Trust 2011-C1's $1.55 billion commercial mortgage pass-through certificates. The preliminary ratings are based on information as of Feb. 4, 2011. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect the credit support provided by the subordinate classes of certificates, the liquidity provided by the trustee, and the underlying loans' economics, geographic diversity, and property type diversity. In its analysis, S&P determined that, on a weighted average basis, the pool has a debt service coverage of 1.20x based on a weighted average Standard & Poor's Ratings Services loan constant of 8.46%, a beginning loan- to-value ratio of 88.9%, and an ending LTV ratio of 78.5%. To calculate the number of loans, S&P considered each group of cross- collateralized and cross-defaulted loans as one loan. Preliminary Ratings Assigned Morgan Stanley Capital I Trust 2011-C1 Class Rating Amount ($) ----- ------ ---------- A-1 AAA (sf) 87,863,000 A-2 AAA (sf) 597,153,000 A-3 AAA (sf) 105,120,000 A-4 AAA (sf) 404,067,000 X-A* AAA (sf) 1,194,203,000** X-B* NR 354,197,430** B AA (sf) 60,001,000 C A (sf) 89,033,000 D BBB (sf) 85,162,000 E BBB- (sf) 19,355,000 F BB+ (sf) 13,548,000 G BB (sf) 15,484,000 H BB- (sf) 13,549,000 J B+ (sf) 15,484,000 K B (sf) 13,548,000 L B- (sf) 9,678,000 M NR 19,355,430 R NR N/A * Interest-only class. ** Notional amount. NR -- Not rated. N/A -- Not applicable. MORGAN STANLEY: S&P Downgrades Ratings on Three Classes of Notes ---------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on the class IA, IB, and IIA notes from Morgan Stanley Managed ACES' series SPC 2007-11 to 'D (sf)'. The lowered ratings follow a number of recent write-downs of underlying reference entities, which have caused the notes to incur partial principal losses. Ratings Lowered Morgan Stanley Managed ACES SPC Series 2007-11 Rating ------ Class To From ----- -- ---- IA D (sf) CCC- (sf) IB D (sf) CCC- (sf) IIA D (sf) CC (sf) NATIONAL CITY: Fitch Withdraws Ratings on Six Classes of Notes -------------------------------------------------------------- Fitch Ratings has withdrawn the ratings on six classes of National City Mortgage Loan Trust 2005-1. On Oct. 28, 2010, PNC Bank, N.A., exercised its option as the sole holder of the outstanding certificates to terminate the transaction and directed Wells Fargo Bank, N.A. the trustee, to cancel all of the outstanding certificates. Fitch has withdrawn the ratings on these classes: -- Class A (CUSIP: 635420AF9) 'CCsf/RR2'; -- Class M1 (CUSIP: 635420AA0) 'Csf/RR6'; -- Class M2 (CUSIP: 635420AB8) 'Csf/RR6'; -- Class M3 (CUSIP: 635420AC6) 'Dsf/RR6'; -- Class M4 (CUSIP: 635420AD4) 'Dsf/RR6'; -- Class M5 (CUSIP: 635420AE2) 'Dsf/RR6'. NEWCASTLE CDO: Moody's Downgrades Ratings on Class I-MM to 'B1' --------------------------------------------------------------- Moody's has downgraded one class of Notes issued by Newcastle 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 and increase in Defaulted Securities. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation transactions. -- Class I-MM Floating Rate Notes, Downgraded to B1 (sf); previously on Feb. 24, 2010 Downgraded to Ba2 (sf) Ratings Rationale Newcastle CDO VI, Ltd., is a CRE CDO transaction backed by a portfolio of conduit, large loan and rake classes of commercial mortgage backed securities (60.5%), subprime residential mortgage backed securities (20.6%), REIT debt (16.0%), term loans (2.5%), and small business loans (0.4%). As of the January 18, 2011 Trustee report, the aggregate Note balance of the transaction has decreased to $419.2 million from $500.0 million at issuance, with the principal paydown directed to the Class I-MM Notes. The paydowns are a result of the failure of the Class I, Class II, Class II, and Class IV Par Value Tests. Per the Indenture dated April 5, 2005, upon the failure of any Par Value Test, all scheduled interest and principal payments are directed to pay down the notes in a senior sequential manner, until the failed Par Value Test is satisfied. Additionally, there is currently approximately $5.4 million in accrued interest proceeds to Class II, Class III, Class IV, and Class V notes. There are twenty assets with par balance of $96.3 million (26.0% of the current pool balance) that are considered Defaulted Securities as of the January 18, 2010 Trustee report. Thirteen of these assets (37.0% of the defaulted balance) are RMBS, five assets are CMBS (50.5%), one asset is REIT (12.5%), and one asset is a small business loan (1.7%). 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 reference obligations. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 2,362 (excluding defaulted securities) compared to 1,603 at last review. The distribution of current ratings and credit estimates (excluding defaulted securities) is: Aaa-Aa3 (14.1% compared to 5.5% at last review), A1-A3 (12.0% compared to 9.2% at last review) Baa1-Baa3 (16.3%compared to 22.3% at last review), Ba1-Ba3 (19.6% compared to 20.7% at last review), B1-B3 (19.3% compared to 18.2% at last review), and Caa1-C (18.7% compared to 24.4% 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, excluding defaulted securities, of 3.7 years compared to 4.5 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, excluding defaulted securities, of 22.0% compared to 22.7% 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 12.7% compared to 25.6% 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) v2.8, one of Moody's CDO rating models, which was released on January 24, 2011. The cash flow model, CDOEdge(R) v3.2.1.0, 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 22% to 12% or up to 32% would result in average rating movement on the rated tranches of 1 notch downward and 1 notch 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 sluggish macroeconomic environment and varying performance in the commercial real estate property markets. However, Moody's expects to see increasing or stabilizing property values, higher transaction volumes, a slowing in the pace of loan delinquencies and greater liquidity for commercial real estate in 2011 The hotel and multifamily sectors are continuing to show signs of recovery, while recovery in the office and retail sectors will be tied to recovery of the broader economy. The availability of debt capital continues to improve with terms returning toward market norms. Moody's central global macroeconomic scenario reflects an overall sluggish recovery through 2012, amidst ongoing individual, corporate and governmental deleveraging, persistent unemployment, and government budget considerations. 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. NORTHWOODS CAPITAL: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2, A-3, A-4, B, C, D, and E notes from Northwoods Capital VII Ltd., a collateralized loan obligation transaction managed by Angelo, Gordon & Co. L.P. At the same time, S&P removed its ratings on the class A-1, A-2, A-3, A-4, and B notes from CreditWatch with positive implications. The upgrades reflect the improved performance S&P has observed in the deal since December 2009, when S&P downgraded each of the classes following a review of the transaction under its 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 was holding $104.43 million in assets rated 'CCC+' or below, either by Standard & Poor's or another rating agency. This is compared with $73.62 million as of the Dec. 12, 2010 monthly report. In combination with a reduction amount of assets rated 'CCC+' and below, the deal has also had an increase it its overcollateralization (O/C) ratio. As of December 2010, the class A/B O/C ratio had improved to 137.69% from 127.10% 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 deems necessary. Rating And Creditwatch Actions Northwoods Capital VII Ltd. Rating ------ Class To From ----- -- ---- A-1 AA+ (sf) A+ (sf)/Watch Pos A-2 AA+ (sf) A+ (sf)/Watch Pos A-3 AAA (sf) AA+ (sf)/Watch Pos A-4 AA+ (sf) A+ (sf)/Watch Pos B AA- (sf) BBB+ (sf)/Watch Pos C A (sf) BB+ (sf) D BBB (sf) CCC+ (sf) E BB (sf) CCC- (sf) NR - Not rated. OAK HILL: S&P Raises Ratings on Various Classes of Notes -------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-2a, A-2b, B, C-1, C-2, D-1, D-2, and D-3 notes from Oak Hill Credit Partners II Ltd., a collateralized loan obligation transaction managed by Oak Hill Advisors L.P. At the same time, S&P removed its ratings on the class C-1, C-2, D-1, D-2, and D-3 notes from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. S&P also affirmed its 'AAA (sf)' ratings on the class A-1a and A-1b notes. The upgrades reflect an improvement in the performance of the transaction's underlying asset portfolio, as well as paydowns to the pari passu class A-1a and A-1b notes since its Dec. 11, 2009, rating action, when S&P downgraded some of the rated notes following the application of its September 2009 corporate CDO criteria. As of the January 2011 trustee report, the transaction had $0.61 million of defaulted assets. This was down from $35.3 million noted in the November 2009 trustee report, which S&P referenced for its December 2009 rating actions. The affirmations of S&P's ratings on the class A-1a and A-1b notes reflect the availability of credit support at the current rating levels. Through the same time period, the pari passu class A-1a and A-1b notes had been paid down by a total of $149 million, leaving them at their current amount of 35% of their original balance. Subsequently, the transaction has benefited from an increase in the overcollateralization available to support the rated notes. The trustee reported these O/C ratios in the Jan. 1, 2011 monthly report: * The class A O/C ratio was 168.40%, compared with a reported ratio of 126.06% in November 2009; * The class B O/C ratio was 140.29%, compared with a reported ratio of 115% in November 2009; * The class C O/C ratio was 120.77%, compared with a reported ratio of 105.99% in November 2009; and * The class D O/C ratio was 114.35%, compared with a reported ratio of 102.74% in November 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 Oak Hill Credit Partners II Ltd. Rating ------ Class To From ----- -- ---- A-2a AAA (sf) AA (sf) A-2b AAA (sf) AA (sf) B AAA (sf) A (sf) C1 A (sf) BB+ (sf)/Watch Pos C2 A (sf) BB+ (sf)/Watch Pos D1 BB+ (sf) CCC+ (sf)/Watch Pos D2 BB+ (sf) CCC+ (sf)/Watch Pos D3 BB+ (sf) CCC+ (sf)/Watch Pos Ratings Affirmed Oak Hill Credit Partners II Ltd. Class Rating ----- ------ A-1a AAA (sf) A-1b AAA (sf) Transaction Information ----------------------- Issuer: Oak Hill Credit Partners II Ltd. Coissuer: Oak Hill Credit Partners II Inc. Collateral manager: Oak Hill Advisors L.P. Underwriter: Deutsche Bank Alex Brown Trustee: The Bank of New York Mellon Transaction type: Cash flow CLO OHA INTREPID: S&P Assigns Ratings on $364 Mil. Floating Notes ------------------------------------------------------------- Standard & Poor's Ratings Services assigned its preliminary ratings to OHA Intrepid Leveraged Loan Fund Ltd./OHA Intrepid Leveraged Loan Fund Inc.'s $364.0 million floating-rate notes. The preliminary ratings are based on information as of Feb. 7, 2011. Subsequent information may result in the assignment of final ratings that differ from the preliminary ratings. The preliminary ratings reflect S&P's assessment of: * The credit enhancement provided to the preliminary rated notes through the subordination of cash flows that are payable to the subordinated notes; * The transaction's cash flow structure, which Standard & Poor's assessed using the assumptions and methods outlined in its corporate collateralized debt obligation criteria, which can withstand the default rate projected by Standard & Poor's CDO Evaluator model; * The transaction's legal structure, which is expected to be bankruptcy remote; * The diversified collateral portfolio, which consists primarily of speculative-grade senior secured term loans; * The collateral manager's experienced management team; S&P's expectation of timely interest and ultimate principal payments on the rated notes, which S&P assessed using its cash flow analysis and assumptions that are commensurate with the assigned preliminary ratings under various interest rate scenarios, including LIBOR rates ranging from 0.344%-12.256%; and The transaction's overcollateralization and interest coverage tests, a failure of which will lead to the diversion of interest and principal proceeds to reduce the outstanding balance of the rated notes. Preliminary Ratings Assigned OHA Intrepid Leveraged Loan Fund Ltd./ OHA Intrepid Leveraged Loan Fund Inc. Class Rating Amount (mil. $) ----- ------ --------------- A AAA (sf) 265.0 B AA (sf) 26.0 C (deferrable) A (sf) 35.0 D (deferrable) BBB (sf) 18.0 E (deferrable) BB (sf) 20.0 Subordinated NR 49.0 NR - Not rated. OSPREY CDO: 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 Osprey CDO 2006-1 Ltd.: -- US$7,500,000 Class X Notes Due January 2014 (current balance of $4,062,500), Upgraded to Aaa (sf); previously on October 16, 2009 Downgraded to A1 (sf); -- US$184,000,000 Class A-1LA Floating Rate Notes Due 2022 (current balance of $162,955,732), Upgraded to Baa1 (sf); previously on October 16, 2009 Downgraded to Ba1 (sf); -- US$28,000,000 Class A-1LB Floating Rate Notes Due 2022 (current balance of $25,352,706), Upgraded to Ba1 (sf); previously on October 16, 2009 Downgraded to B1 (sf); -- US$34,000,000 Class A-2L Floating Rate Notes Due 2022, Upgraded to B1 (sf); previously on November 23, 2010 Caa2 (sf) Placed Under Review for Possible Upgrade; -- US$15,000,000 Class A-3L Floating Rate Notes Due 2022, Upgraded to Caa1 (sf); previously on November 23, 2010 Caa3 (sf) Placed Under Review for Possible Upgrade; -- US$10,000,000 Class B-1L Floating Rate Notes Due 2022 (current balance of $9,373,000), 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 increase in the overcollateralization ratios of the rated notes since the rating action in October 2009. The deal has benefited from improvement in the credit quality of the underlying portfolio since the rating action in October 2009. Based on the December 2010 trustee report, the weighted average rating factor is 2584 compared to 2771 in August 2009, and securities rated Caa1 and below make up approximately 13% of the underlying portfolio versus 16.3% in August 2009. The deal also experienced a decrease in defaults. In particular, the dollar amount of defaulted securities has decreased to $6.7 million from approximately $19 million in August 2009. The transaction is exposed to a significant concentration in mezzanine and junior CLO tranches in the underlying portfolio. Based on the latest trustee report, CLO Securities currently held in the portfolio total about $105.9 million, accounting for approximately 39.4% of the collateral balance. Moody's observes that recent credit qualities in mezzanine and junior CLO tranches in the underlying portfolio have stabilized or improved. Moody's notes that the overcollateralization ratios of the rated notes have improved in part due to delevering of the Class A-1LA and A-1LB Notes, which have been paid down by approximately 8.5% or $17.6 million since the rating action in October 2009. Available principal proceeds and excess spread are being diverted to pay down the Class A-1LA and A-1LB Notes as a result of continued failure of the Class B-2L overcollateralization ratio test. Furthermore, the overcollateralization ratios have also improved due to a decrease in the number of defaulted CLO tranches. A number of CLO tranches were defaulted and carried at depressed market values in the rating action in October 2009 but are currently treated as performing securities due to improved credit qualities. As of the latest trustee report dated December 20, 2010, the Class A, Class B-1L, and Class B-2L overcollateralization ratios are reported at 117.36%, 112.9%, and 99.62%, respectively, versus August 2009 levels of 108.69%, 104.83%, and 92.67%, respectively. The rating actions on the Class X Notes and Class A-1LA Notes in October 2009 took into consideration the increased risk of an event of default, which has been mitigated since the last rating action. This is reflected in part in the upgrade rating actions on the Class X and A-1LA Notes. 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 balance of $278.3 million, defaulted par of $7.7 million, a weighted average default probability of 35.89% (implying a WARF of 4375), a weighted average recovery rate upon default of 29.8%, and a diversity score of 47. These default and recovery properties of the collateral pool are incorporated in Moody's 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. Osprey CDO 2006-1 Ltd. issued on December 13, 2006, is a collateralized loan obligation backed primarily by a portfolio of senior secured loans and CLO securities. 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 sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is 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, whereby a positive difference corresponds to lower expected losses), assuming that all other factors are held equal: Moody's Adjusted WARF - 20% (3500) -- Class X: 0 -- Class A-1LA: +2 -- Class A-1LB: +2 -- Class A-2L: +3 -- Class A-3L: +3 -- Class B-1L: +3 Moody's Adjusted WARF + 20% (5250) -- Class X: 0 -- Class A-1LA: -3 -- Class A-1LB: -2 -- Class A-2L: -2 -- Class A-3L: -2 -- Class B-1L: 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 manager's investment strategy 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 sell 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) 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. In addition, as part of the base case, Moody's considered a lower diversity score due to the large concentration of CLO tranches. PACIFICA CDO: S&P Affirms Junk Ratings on 3 Classes of Notes ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the class A-1, A-2, B-1, and B-2 notes from Pacifica CDO II Ltd., a collateralized loan obligation transaction managed by Alcentra Ltd. At the same time, S&P removed its ratings on the class A-1 and A-2 notes from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. S&P also affirmed its 'CCC+' (sf) ratings on the class C-1 and C-2 notes and its 'CCC-' (sf) rating on the class D notes. The upgrades reflect an improvement in the credit quality available to support the notes since S&P's Oct. 23, 2009 rating actions, when S&P downgraded most of the rated notes, following the application of its September corporate CDO criteria and the paydowns to the class A-1 notes. Since October 2009, the transaction has paid down approximately $99.46 million to the class A-1 notes, including a $13 million payment on the Dec. 31, 2010 distribution date. As of the Dec. 31, 2010 trustee report, the transaction had $6.67 million in defaulted assets. This was down from $17.26 million noted in the Sept. 1, 2009 trustee report. Since the time of S&P's last rating action, a number of defaulted obligors whose assets are held in the deal emerged from bankruptcy, and some received proceeds that were higher than their carrying value in the transaction's overcollateralization ratio test calculation. This, in combination with a $99.5 million paydown to the class A-1 notes, has benefited the transaction's O/C ratios. 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 Pacifica CDO II Ltd. Rating ------ Class To From ----- -- ---- A-1 AAA (sf) AA+ (sf)/Watch Pos A-2 AA+ (sf) A+ (sf)/Watch Pos B-1 BBB-(sf) BB+ (sf) B-2 BBB-(sf) BB+ (sf) Ratings Affirmed Class Rating ----- ------ C-1 CCC+ (sf) C-2 CCC+ (sf) D CCC- (sf) Transaction Information ----------------------- Issuer: Pacifica CDO II Ltd. Coissuer: Pacifica CDO II Inc. Collateral manager: Alcentra Ltd. Underwriter: Credit Suisse AG Trustee: The Bank of New York Mellon Transaction type: Cash flow CLO PACIFICA CDO: S&P Raises Ratings on C-1 & C-2 Notes to B+ --------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-2a, A-2b, B-1, B-2, C-1, and C-2 notes from Pacifica CDO III Ltd., a collateralized loan obligation transaction managed by Alcentra Ltd. At the same time, S&P removed its ratings on the class A-2a and A-2b notes from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. S&P also affirmed its 'AA+ (sf)' rating on the class A-1 notes. The upgrades reflect an improvement in the credit quality available to support the notes since S&P's Nov. 25, 2009, rating action, when S&P downgraded most of the rated notes, following the application of S&P's revised corporate CDO criteria and the paydowns to the class A-1 notes. Since November 2009, the transaction has paid down approximately $49.27 million to the class A-1 notes, including a $26 million payment on the Jan. 3, 2011, distribution date. As of the Jan. 3, 2011, trustee report, the transaction had $8.57 million in defaulted assets. This was down from $26.37 million noted in the Sept. 3, 2009, trustee report. Since the time of S&P's last rating action, a number of defaulted obligors held in the deal emerged from bankruptcy, with some receiving proceeds that were higher than their carrying value in the overcollateralization ratio test calculation. This, in combination with a reduction in assets with ratings in the 'CCC' range, benefited the transaction's O/C ratios. The trustee reported these O/C ratios in the Jan. 3, 2011, monthly report: * The class A O/C ratio was 117.99%, compared with a reported ratio of 110.38% in Sept. 3 2009; * The class B O/C ratio was 113.04%, compared with a reported ratio of 106.47% in Sept. 3 2009; and * The class C O/C ratio was 104.66%, compared with a reported ratio of 99.71% in Sept. 3 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 Pacifica CDO III Ltd. Rating ------ Class To From ----- -- ---- A-2a AA- (sf) BBB+ (sf) /Watch Pos A-2b AA- (sf) BBB+ (sf) /Watch Pos B-1 A- (sf) BBB (sf) B-2 A- (sf) BBB (sf) C-1 B+ (sf) CCC- (sf) C-2 B+ (sf) CCC- (sf) Rating Affirmed Pacifica CDO III Ltd. Class Rating ----- ------ A-1 AA+ (sf) Transaction Information ----------------------- Issuer: Pacifica CDO III Ltd. Coissuer: Pacifica CDO III Inc. Collateral manager: Alcentra Ltd. Underwriter: Credit Suisse AG Trustee: Bank of New York Mellon (The) Transaction type: Cash flow CLO PEGASUS 2007-1: Moody's Cuts Rating on Class A1 Notes to 'Ba1' -------------------------------------------------------------- Moody's has downgraded one class of Notes issued by Pegasus 2007- 1, Ltd., due to the deterioration in the credit quality of the underlying reference obligations as evidenced by an increase in the weighted average rating factor. The rating action is the result of Moody's on-going surveillance of commercial real estate collateralized debt obligation transactions. -- US$112M Cl. A1 Notes Notes, Downgraded to Ba1 (sf); previously on Feb. 19, 2010 Downgraded to Baa1 (sf) Ratings Rationale Pegasus 2007-1 Ltd. is a synthetic CRE CDO transaction backed by commercial mortgage backed securities (100.0%) reference obligations. As of the January 18, 2011 Trustee report, the aggregate Note balance of the transaction has remained $112.0 million, the same as at issuance. 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 reference obligations. The bottom-dollar WARF is a measure of the default probability within a collateral pool. Moody's modeled a bottom-dollar WARF of 25 compared to 6 at last review. The distribution of current ratings and credit estimates is: Aaa-Aa3 (89.3% compared to 96.4% at last review) and A1-A3 (10.7% compared to 3.6% 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 5.1 years compared to 6.0 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 69.6% compared to 73.8% 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). Moody's modeled a MAC of 63.7% compared to 69.1% at last review. Moody's review incorporated CDOROM(R) v2.8, one of Moody's CDO rating models, which was released on January 24, 2011. 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 70% to 60% or up to 80% 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 sluggish macroeconomic environment and varying performance in the commercial real estate property markets. However, Moody's expects to see increasing or stabilizing property values, higher transaction volumes, a slowing in the pace of loan delinquencies and greater liquidity for commercial real estate in 2011. The hotel and multifamily sectors are continuing to show signs of recovery, while recovery in the office and retail sectors will be tied to recovery of the broader economy. The availability of debt capital continues to improve with terms returning toward market norms. Moody's central global macroeconomic scenario reflects an overall sluggish recovery through 2012, amidst ongoing individual, corporate and governmental deleveraging, persistent unemployment, and government budget considerations. 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. PHOENIX CDO: Moody's Upgrades Ratings on Two Classes of Notes ------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of two classes of notes issued by Phoenix CDO II, Ltd. The classes of notes affected by the rating action are: -- Class A First Priority Senior Secured Floating Rate Notes Due 2035 (current balance of $22,711,703), Upgraded to A1 (sf); previously on August 21, 2009 Downgraded to Ba1 (sf) -- Class B Secondary Priority Senior Secured Floating Rate Notes Due 2035, Upgraded to Baa3 (sf); previously on August 21, 2009 Downgraded to B1 (sf) Ratings Rationale According to Moody's, the rating actions taken on the notes result primarily from the continuing amortization of the Class A Notes, which have been paid off by 51.4 million since August 2009. The deal also benefits from the diversion of excess interest to amortize the Class A Notes. This benefit is magnified due to high interest bearing fixed rate assets in the portfolio which are used to pay floating rate liabilities. The portfolio is primarily backed by pre-2000 vintage ABS assets, which are expected to have stable performance. The deal experienced an Event of Default in 2003 and subsequently declared acceleration. Given the strict voting requirement for liquidation (super majority of each class voting as a separate class), the risk of a liquidation being declared is considered low. Phoenix CDO II, Ltd., is a collateralized debt obligation backed primarily by a portfolio of CMBS, RMBS and ABS originated from 1997 to 2002. Moody's performed a number of sensitivity analyses in addition to the standard notching assumption applied to assets under review for possible downgrade. Moody's considered negative sensitivity runs including downgrading all non-investment grade assets to Ca. The model results for the notes worsened within three notches compared to the standard assumption but were nevertheless still better than the current rating. Moody's applied the Monte Carlo simulation framework within CDOROMv2.6 to model the loss distribution for SF CDOs. Within this framework, defaults are generated so that they occur with the frequency indicated by the adjusted default probability pool (the default probability associated with the current rating multiplied by the Resecuritization Stress) for each credit in the reference. Specifically, correlated defaults are simulated using a normal (or "Gaussian") copula model that applies the asset correlation framework. Recovery rates for defaulted credits are generated by applying within the simulation the distributional assumptions, including correlation between recovery values. Together, the simulated defaults and recoveries across each of the Monte Carlo scenarios define the loss distribution for the reference pool. Once the loss distribution for the collateral has been calculated, each collateral loss scenario derived through the CDOROM loss distribution is associated with the interest and principal received by the rated liability classes via the CDOEdge cash-flow model. The cash flow model takes into account these: collateral cash flows, the transaction covenants, the priority of payments (waterfall) for interest and principal proceeds received from portfolio assets, reinvestment assumptions, the timing of defaults, interest-rate scenarios and foreign exchange risk (if present). The Expected Loss for each tranche is the weighted average of losses to each tranche across all the scenarios, where the weight is the likelihood of the scenario occurring. Moody's defines the loss as the shortfall in the present value of cash flows to the tranche relative to the present value of the promised cash flows. The present values are calculated using the promised tranche coupon rate as the discount rate. For floating rate tranches, the discount rate is based on the promised spread over Libor and the assumed Libor scenario. 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. PHOENIX CLO: Moody's Upgrades Ratings on Four Classes of Notes -------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of these notes issued by Phoenix CLO I, Ltd.: -- US$302,000,000 Class A Senior Secured Floating Rate Notes Due 2018 (current outstanding balance of $287,346,915), Upgraded to Aa2 (sf); previously on June 17, 2009 Downgraded to A3 (sf); -- US$39,500,000 Class B Second Priority Deferrable Floating Rate Notes Due 2018, Upgraded to Ba1 (sf); previously on June 17, 2009 Downgraded to B3 (sf); -- US$13,000,000 Class C Third Priority Deferrable Floating Rate Notes Due 2018, Upgraded to B1 (sf); previously on November 23, 2010 Ca (sf) Placed Under Review for Possible Upgrade; -- US$15,500,000 Class D Fourth Priority Deferrable Floating Rate Notes Due 2018 (current outstanding balance of $13,810,776), Upgraded to Caa2 (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 improvement in the credit quality of the underlying portfolio and an increase in the transaction's overcollateralization ratios since the rating action in June 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 December 24, 2010, the weighted average rating factor is currently 2514 compared to 2829 in the April 2009 report, and securities rated Caa1/CCC+ or lower make up approximately 7.4% of the underlying portfolio versus 15.4% in June 2009. Additionally, defaulted securities total about $12.5 million of the underlying portfolio compared to $28.9 million in April 2009. The overcollateralization ratios of the rated notes have also improved since the rating action in June 2009. The Class A, Class B, Class C and Class D overcollateralization ratios are reported at 125.85%, 110.64%, 106.40% and 102.25%, respectively, versus April 2009 levels of 114.66%, 101.36%, 97.63% and 93.84%, respectively, and all related overcollateralization tests are currently in compliance. Moody's also notes that the Class B, Class C and Class D 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 balance of $354.5 million, defaulted par of $16.6 million, a weighted average default probability of 26.02% (implying a WARF of 3311), a weighted average recovery rate upon default of 43.88%, 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. Phoenix CLO I, Ltd., issued in October 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. 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, Moody's also performed sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is 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, whereby a positive difference corresponds to lower expected losses), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (2649) -- Class X: 0 -- Class A: +2 -- Class B: +3 -- Class C: +2 -- Class D: +2 Moody's Adjusted WARF + 20% (3973) -- Class X: 0 -- Class A: -2 -- Class B: -1 -- Class C: -1 -- Class D: -2 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 manager's investment strategy 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 sell 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. PONTIAC BUILDING: Moody's Downgrades GO Limited Tax Rating to 'B2' ------------------------------------------------------------------ Moody's Investors Service has downgraded the general obligation limited tax rating for Pontiac Building Authority (MI) to B2 from B1 with negative outlook and placed the rating on review for possible further downgrade. The B2 rating applies to $615,000 of outstanding lease rental bonds that are secured by the City of Pontiac's general obligation limited tax pledge. Ratings Rationale Further Narrowing Of Liquidity And Deterioration In Local Economy Drives Downgrade The downgrade of the city's GOLT rating reflects the city's extremely narrowed liquidity and unmanageable operating deficit, exacerbated by General Fund support for special obligation tax increment debt (not rated by Moody's), increasingly pressured local employment and tax base profile, and uncertainty of management plans to take swift and material action to stabilize the city's financial position. The city's General Fund performance has deteriorated in recent years, including declining State Revenue Sharing funds, lagging municipal income tax revenues, and increasing property delinquencies and appeals. As revenues have fallen, many operating expenditures, such as health care and energy costs, have increased significantly over the same period, exacerbating operating deficits and increasing the city's structural budget gaps. In response to the city's financial distress, in early 2009, the Governor appointed an Emergency Financial Manager to oversee all of the city's financial operations for a one year period beginning March 1, 2009. A replacement EFM was appointed in June 2010 and a deficit reduction plan was released on September 1, 2010. Among several options to address the General Fund's deficit position, per statute, the EFM may recommend applying for federal bankruptcy protection under Chapter 9 of the US Bankruptcy Code, although this has not been considered to date. Exacerbating the fiscal pressures have been numerous instances of accounting and financial reporting shortcomings, including a restatement of $8 million in fiscal year 2004 for prior period adjustments. Also, the EFM's September 1, 2010 report noted additional liabilities not accounted for in the audit, including uncollectible taxes and a pending tax appeal by General Motors. Although the audit reports a modest $700,000 General Fund surplus, this surplus is supported by several one-time revenues, and does not include the tax liabilities noted by the EFM. Although the city initially passed a balanced budget for fiscal 2011, the EFM currently projects an $8.8 million operating deficit in the General Fund and has proposed several measures to narrow this gap. These proposals include a request for GERS/VEBA contributions, layoffs, privatization of various administrative processes, and contracting for police services with Oakland County while eliminating the city's police department. The last item, the transfer of the city's police force to the county, would have saved the city $2 million on an annual basis; but this option was dropped by the EFM after a lawsuit by the city's police officers union. Without implementation of any of the proposed reductions, the EFM's report dated September 1, 2010, projects a $9.7 million operating deficit in fiscal 2012 and a $13.2 million operating deficit in fiscal 2013. This would reduce the city's General Fund in fiscal 2013 to a substantial negative $36 million, equivalent to 107% of projected fiscal 2013 General Fund revenues. The city's pressured financial operations is in part due to the significantly adverse economic conditions. Pontiac serves as the county seat of Oakland County (GO rated Aaa), and has historically been the major industrial center of the area. Over the past five decades, Pontiac's population has fallen by nearly 25% and its demographic profile remains one of the weakest in the nation. Despite a labor force which has declined, unemployment levels have remained persistently high. The city's October 2010 unemployment rate was 28.9%, more than twice the states 12% rate for the same period. Review For Further Downgrade Pending Review Of Updated Deficit Elimination Plan For Fiscal 2011, 2012, And 2013 The review for possible downgrade reflects Moody's ongoing assessment of the financial workout plan proposed by the state- appointed Emergency Fiscal Manager. In Moody's review of the workout plan, Moody's will consider: -- The city's plans to continue to support non-general obligation tax increment debt, which continues to underperform and drain scarce resources from city coffers. Moody's will also consider the expected time frame and likelihood of default of tax increment debt payments in the context of the city's overall plan. -- Assumptions related to key revenue items including property and income tax collections and state aid distributions for the remainder of fiscal 2011 and 2012. Local tax revenues and intergovernmental aid comprised 56% and 26%, respectively, of fiscal 2010 General Fund revenues. -- Feasibility of the EFM's gap closing measures for the projected $13 million General Fund gap for fiscal 2011. -- Availability of internal liquidity and/or options for external liquidity to support overall operations and repayment of debt. -- Implications of settlement with GM over property tax appeals What Could Change The Rating Up? -- Disciplined expenditure reductions coupled with strengthened on-going revenue streams to eliminate deficit position -- Dramatic improvement in employment levels -- Significant increases in property tax collection levels -- Successful negotiation results with unions What Could Change The Rating Down? -- Escalation of deficit position -- Further tax base deterioration -- Increased property tax appeals -- Inability to make expenditure cuts -- Difficulty making timely debt service payments on general obligation bonds RESIX FINANCE: Fitch Withdraws Ratings on All Classes of Notes -------------------------------------------------------------- Fitch Ratings has withdrawn the ratings on all classes in RESIX Finance 2006-B and RESIX Finance 2007-A. The affected classes have been written-off due to losses and have no outstanding balances remaining. The trustee has terminated the deal based on all class balances being zero. Fitch has withdrawn these ratings: RESIX Finance Limited Partnership, Series 2006-B -- Class B7 'Dsf/RR6'; -- Class B8 'Dsf/RR6'; -- Class B9 'Dsf/RR6'; -- Class B10 'Dsf/RR6'; -- Class B11 'Dsf/RR6'. EASIX Finance Limited Partnership, Series 2007-A -- Class B7 'Dsf/RR6'; -- Class B8 'Dsf/RR6'; -- Class B9 'Dsf/RR6'; -- Class B10 'Dsf/RR6'; -- Class B11 'Dsf/RR6'; -- Class B12 'Dsf/RR6'. SARATOGA 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 Saratoga CLO I Ltd., a collateralized loan obligation transaction managed by INVESCO Senior Secured Management Inc. S&P removed its ratings on the class A-2 and B notes from CreditWatch with positive implications. At the same time, S&P affirmed its ratings on the class A-2 notes. The upgrades reflect improved performance S&P has observed in the deal's underlying asset portfolio since its last rating action in November 2009. The affirmation reflects the availability of credit support at the class' current rating levels. According to the Jan. 10, 2011, trustee report, the transaction currently holds $21.9 million in 'CCC' rated assets, down from $33.8 million noted in the Sept. 2, 2009, trustee report. In addition, the transaction holds $3.2 million in defaulted securities, down from $32.6 million in September 2009. Accordingly, the transaction's overcollateralization ratios have improved: * The class A O/C ratio is 125.22% versus 122.47% in September 2009; * The class B O/C ratio is 113.3% versus 110.81% in September 2009; * The class C O/C ratio is 108.45% versus 106.07% in September 2009; and * The class D O/C ratio is 106.32% versus 103.99% in September 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 Saratoga CLO I Ltd. Rating ------ Class To From ----- -- ---- A-2 AA+ (sf) A+ (sf)/Watch Pos B BBB+ (sf) BBB- (sf)/Watch Pos C BB+ (sf) B+ (sf) D B+ (sf) CCC+ (sf) Rating Affirmed Saratoga CLO I Ltd. Class Rating ----- ------ A-1 AAA (sf) SATURN CLO: S&P Raises Ratings on Various Classes of Notes ---------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1, A-1S, A-1J, A-2, B, C, and D notes from Saturn CLO Ltd., a collateralized loan obligation transaction managed by PineBridge Investments LLC. At the same time, S&P removed its ratings on the class A-1, A-1S, A-1J, and A-2 from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. The upgrades reflect an improvement in the credit quality available to support the notes since S&P's Oct. 23, 2009 rating action, when S&P downgraded the rated notes following the application of its September 2009 corporate CDO criteria. As of the Jan. 3, 2011 trustee report, there were no defaulted assets in the portfolio. This was down from $17.42 million noted in the Sep. 1, 2009 trustee report, which S&P referenced for S&P's October 2009 rating actions. 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 Jan. 3, 2011 monthly report: * The class A O/C ratio was 121.53%, compared with a reported ratio of 118.45% in August 2009; * The class B O/C ratio was 114.19%, compared with a reported ratio of 111.30% in August 2009; * The class C O/C ratio was 108.93%, compared with a reported ratio of 106.17% in August 2009; and * The class D O/C ratio was 104.13%, compared with a reported ratio of 101.49% 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 deems necessary. Rating And Creditwatch Actions Saturn CLO Ltd. Rating ------ Class To From ----- -- ---- A-1 AA+ (sf) AA (sf) /Watch Pos A-1S AAA (sf) AA+ (sf) /Watch Pos A-1J AA+ (sf) AA (sf) /Watch Pos A-2 AA (sf) A+ (sf) /Watch Pos B A (sf) BBB+ (sf) C BBB (sf) BB+ (sf) D B+ (sf) CCC- (sf) Transaction Information ----------------------- Issuer: Saturn CLO Ltd. Coissuer: Saturn CLO Inc. Collateral manager: PineBridge Investments LLC Underwriter: JPMorgan Securities Inc. Trustee: Bank of New York Mellon (The) Transaction type: Cash flow CLO SCHOONER TRUST: Moody's Affirms Ratings on 17 Certificates ---------------------------------------------------------- Moody's Investors Service affirmed the ratings of 17 classes of Schooner Trust Commercial Mortgage Pass-Through Certificates, Series 2005-3: -- Cl. A-1 Certificate, Affirmed at Aaa (sf); previously on July 19, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. A-2 Certificate, Affirmed at Aaa (sf); previously on July 19, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. XP-1 Certificate, Affirmed at Aaa (sf); previously on July 19, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. XP-2 Certificate, Affirmed at Aaa (sf); previously on July 19, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. XC-1 Certificate, Affirmed at Aaa (sf); previously on July 19, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. XC-2 Certificate, Affirmed at Aaa (sf); previously on July 19, 2005 Definitive Rating Assigned Aaa (sf) -- Cl. B Certificate, Affirmed at Aa2 (sf); previously on July 19, 2005 Definitive Rating Assigned Aa2 (sf) -- Cl. C Certificate, Affirmed at A2 (sf); previously on July 19, 2005 Definitive Rating Assigned A2 (sf) -- Cl. D-1 Certificate, Affirmed at Baa2 (sf); previously on July 19, 2005 Definitive Rating Assigned Baa2 (sf) -- Cl. D-2 Certificate, Affirmed at Baa2 (sf); previously on July 19, 2005 Definitive Rating Assigned Baa2 (sf) -- Cl. E Certificate, Affirmed at Baa3 (sf); previously on July 19, 2005 Definitive Rating Assigned Baa3 (sf) -- Cl. F Certificate, Affirmed at Ba1 (sf); previously on July 19, 2005 Definitive Rating Assigned Ba1 (sf) -- Cl. G Certificate, Affirmed at Ba2 (sf); previously on July 19, 2005 Definitive Rating Assigned Ba2 (sf) -- Cl. H Certificate, Affirmed at Ba3 (sf); previously on July 19, 2005 Definitive Rating Assigned Ba3 (sf) -- Cl. J Certificate, Affirmed at B1 (sf); previously on July 19, 2005 Definitive Rating Assigned B1 (sf) -- Cl. K Certificate, Affirmed at B2 (sf); previously on July 19, 2005 Definitive Rating Assigned B2 (sf) -- Cl. L Certificate, Affirmed at B3 (sf); previously on July 19, 2005 Definitive Rating Assigned B3 (sf) Ratings Rationale 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 1.3% of the current balance. At last review, Moody's cumulative base expected loss was 1.1%. Moody's stressed scenario loss is 5.0% 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 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. 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 31, 2010. 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 January 17, 2011 distribution date, the transaction's aggregate certificate balance has decreased by 18% to $324.7 million from $396 million at securitization. The Certificates are collateralized by 83 mortgage loans ranging in size from less than 1% to 8% of the pool, with the top ten loans representing 42% of the pool. The pool contains two loans with investment grade credit estimates that represent 6% of the pool. Eight loans, representing 6% of the pool, have defeased and are collateralized with Canadian Government securities. Seven loans, representing 3% 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 not realized any losses since securitization. There are no loans currently in special servicing. Moody's was provided with full year 2009 operating results for 73% of the pool. Moody's conduit weighted average LTV is 69% compared to 75% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 8.8%. Moody's conduit actual and stressed DSCRs are 1.55X and 1.50X, respectively, compared to 1.46X and 1.38X 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 30 compared to 29 at Moody's prior review. The largest loan with a credit estimate is the 71 Rexdale Boulevard Loan ($10.8 million -- 3.3%), which is secured by a 167,000 square foot single-tenant industrial building located in Toronto, Ontario. The property is 100% leased to Cargill Limited through September 2012. Moody's current credit estimate and stressed DSCR are Baa3 and 1.27X, respectively, the same as at last review. The second loan with a credit estimate is the Vaughan Industrial Portfolio ($8.1 million -- 2.5%), which is secured by 13 industrial buildings located in Vaughan, Ontario. The portfolio was 83% leased as of March 2010 compared to 76% at last review. At securitization the portfolio included 17 properties, but four have been released through defeasance. Moody's current credit estimate and stressed DSCR are A2 and 1.96X, respectively, compared to Baa1 and 1.51X at last review. The top three performing conduit loans represent 18% of the pool balance. The largest loan is the Portsmouth Place Loan ($21.8 million -- 6.7%), which is secured by a 400-unit multifamily building located in Kingston, Ontario. The property was 99% leased as of February 2010 compared to 100% at last review. Moody's LTV and stressed DSCR are 76% and 1.10X, respectively, compared to 80% and 1.05X at last review. The second largest loan is the Corner Brook Plaza Loan ($19.2 million -- 5.9%), which is secured by a 233,347 square foot shopping center located in Corner Brook, Newfoundland. The property was 96% leased as of February 2010, similar to last review. At last review Moody's was concerned about the approaching lease expirations of two tenants representing 51% of the center and stressed the cash flow to reflect potential decline in income. The tenants have renewed and performance has exceeded Moody's previous expectations. Moody's LTV and stressed DSCR are 75% and 1.36X, respectively, compared to 93% and 1.11X at last review. The third largest loan is the Metro Self Storage Portfolio ($17.3 million -- 5.3%), which is secured by seven self-storage properties located in Halifax and Turo, Nova Scotia. The portfolio was 99% leased as of December 2009 compared to 93% at last review. Performance has improved due to increased rental revenue. Moody's LTV and stressed DSCR are 60% and 1.66X, respectively, compared to 76% and 1.32X at last review. SIERRA CLO: S&P Raises Ratings on Various Classes of Notes ---------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A-1L, A-1LV, A-2L, A-3L, B-1L, and B-2L notes from Sierra CLO II Ltd., a collateralized loan obligation transaction managed by Churchill Pacific Asset Management LLC. At the same time, S&P removed its ratings on the class A-1L, A-1LV, A-2L, and A-3L notes from CreditWatch, where S&P placed them with positive implications on Nov. 8, 2010. S&P also affirmed its 'AAA (sf)' rating on the class X notes. The upgrades reflect an improvement in the credit quality available to support the notes since S&P's Jan. 29, 2010 rating action, when S&P downgraded all of its rated notes, except the class X notes, following the application of its revised corporate CDO criteria. As of the Dec. 13, 2010 trustee report, the transaction had $9.46 million in defaulted assets. This was down from $25.44 million noted in the Dec. 11, 2009, trustee report, which S&P referenced for its January 2010 rating actions. Furthermore, assets from obligors rated in the 'CCC' category were reported at $12.3 million in December 2010, compared with $25.97 million in December 2009. The transaction has also benefited from an increase in overcollateralization (O/C) available to support the rated notes. The trustee reported the following O/C ratios in the Dec. 13, 2010 monthly report: * The senior class A O/C ratio was 122.69%, compared with a reported ratio of 118.71% in December 2009; * The class A O/C ratio was 114.58%, compared with a reported ratio of 110.91% in December 2009; * The class B-1L O/C ratio was 109.69%, compared with a reported ratio of 106.20% in December 2009; and * The class B-2L O/C ratio was 105.06%, compared with a reported ratio of 101.66% 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 deems necessary. Rating And Creditwatch Actions Sierra CLO II Ltd. Rating ------ Class To From ----- -- ---- A-1L AA+ (sf) AA (sf)/Watch Pos A-1LV AA+ (sf) AA (sf)/Watch Pos A-2L AA- (sf) A (sf)/Watch Pos A-3L A (sf) BBB- (sf)/Watch Pos B-1L BBB (sf) B+ (sf) B-2L BB (sf) CCC- (sf) Rating Affirmed Sierra CLO II Ltd. Class Rating ----- ------ X AAA (sf) Transaction Information ----------------------- Issuer: Sierra CLO II Ltd. Coissuer: Sierra CLO II (Delaware) Corp. Collateral manager: Churchill Pacific Asset Management LLC Underwriter: Bear Stearns Cos. LLC (The) Trustee: Bank of New York Mellon (The) Transaction type: Cash flow CLO SOLAR TRUST: Moody's Upgrades Ratings on Six 2003-CC1 Certs. ------------------------------------------------------------ Moody's Investors Service upgraded the ratings of six classes and affirmed eight classes of Solar Trust, Commercial Mortgage Pass- Through Certificates, Series 2003-CC1: -- Cl. A-1 Certificate, Affirmed at Aaa (sf); previously on May 27, 2003 Definitive Rating Assigned Aaa (sf) -- Cl. A-2 Certificate, Affirmed at Aaa (sf); previously on May 27, 2003 Definitive Rating Assigned Aaa (sf) -- Cl. IO-1 Certificate, Affirmed at Aaa (sf); previously on May 27, 2003 Definitive Rating Assigned Aaa (sf) -- Cl. IO-2 Certificate, Affirmed at Aaa (sf); previously on May 27, 2003 Definitive Rating Assigned Aaa (sf) -- Cl. B Certificate, Affirmed at Aaa (sf); previously on July 27, 2006 Upgraded to Aaa (sf) -- Cl. C Certificate, Upgraded to Aaa (sf); previously on Sept. 25, 2008 Upgraded to Aa1 (sf) -- Cl. D-1 Certificate, Upgraded to A1 (sf); previously on Sept. 25, 2008 Upgraded to Baa1 (sf) -- Cl. D-2 Certificate, Upgraded to A1 (sf); previously on Sept. 25, 2008 Upgraded to Baa1 (sf) -- Cl. E Certificate, Upgraded to Baa1 (sf); previously on May 27, 2003 Definitive Rating Assigned Baa3 (sf) -- Cl. F Certificate, Upgraded to Baa2 (sf); previously on May 27, 2003 Definitive Rating Assigned Ba1 (sf) -- Cl. G Certificate, Upgraded to Ba1 (sf); previously on May 27, 2003 Definitive Rating Assigned Ba2 (sf) -- Cl. H Certificate, Affirmed at Ba3 (sf); previously on May 27, 2003 Definitive Rating Assigned Ba3 (sf) -- Cl. J Certificate, Affirmed at B3 (sf); previously on April 9, 2009 Downgraded to B3 (sf) -- Cl. K Certificate, Affirmed at Caa1 (sf); previously on April 9, 2009 Downgraded to Caa1 (sf) Ratings Rationale The upgrades are due to increased credit subordination due to amortization and loans payoffs and overall improved pool performance. 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 1.7% of the current balance. At last review, Moody's cumulative base expected loss was 5.1%. Moody's stressed scenario loss is 3.8% 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 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 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 28 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. 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 April 9, 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 December 13, 2010 distribution date, the transaction's aggregate certificate balance has decreased by approximately 35% to $305.3 million from $468.2 million at securitization. The Certificates are collateralized by 58 loans ranging in size from less than 1% to 7% of the pool, with the top 10 loans representing 49% of the pool. Six loans, representing 6% of the pool, have defeased and are collateralized with Canadian Government securities. One loan, representing 1% of the pool, is on the master servicer's watchlist. There have been no realized losses since securitization and there are currently no delinquent or specially serviced loans. Moody's was provided with full year 2009 operating statements for 64% of the pool. Moody's LTV ratio is 63% compared to 78% at Moody's prior review. Moody's net cash flow reflects a weighted average haircut of 13% to the most recently available net operating income. Moody's value reflects a weighted average capitalization rate of 10.0%. Moody's actual and stressed DSCRs are 2.17X and 2.32X, respectively, compared to 1.45X and 1.54X 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 three largest loans represent 19% of the pool. The largest loan is the Eglinton Square Loan ($21.9 million -- 7.2%), which is secured by a 275,000 square foot retail center located in the Greater Toronto area. The property was 95% leased as of March 2010 compared to 91% at last review. Moody's LTV and stressed DSCR are 63% and 1.68X, respectively, compared to 80% and 1.33X at the last review. The second largest loan is the Kirkland Centre Loan ($21.6 million -- 7.1%), which is secured by a 225,000 square foot retail center located in suburban Montreal. The property was 98% leased as of February 2010 compared to 92% at last review and 100% at securitization. Anchor tenants include Winners and Business Depot, both of which are on long-term leases. The loan is full recourse to the sponsor, RioCan Real Investment Trust, Canada's largest real estate investment trust. Moody's LTV and stressed DSCR are 66% and 1.47X, respectively, compared to 67% and 1.45X at Moody's last review. The third largest loan is the Matheson Boulevard Loan ($15.7 million -- 5.1%), which is secured by a 187,000 square foot Class A suburban office building located in Mississauga, Ontario. Performance has improved since last review due to increased revenues and stable expenses. The property has been 100% leased since securitization, however, the lease for a tenant which occupied 24% of the premises expired in December 2010. Moody's have not yet received confirmation of whether the tenant is still in occupancy but Moody's analysis reflects a stressed cash flow to reflect the potential loss of income from this tenant. Moody's LTV and stressed DSCR are 68% and 1.47X, respectively, compared to 84% and 1.45X at last review. ST JOSEPH: S&P Withdraws 'CCC' Rating on Revenue Bonds ------------------------------------------------------ Standard & Poor's Ratings Services withdrew its 'CCC' long-term rating on the St. Joseph County Hospital Authority, Indiana's series 2005 and 1999 revenue bonds and series 1997 general obligation economic development refunding bonds, issued for Madison Center Inc., due to a lack of pertinent information from Madison Center required to update the rating. S&P had lowered the rating to 'CCC' from 'BB+' and placed it on CreditWatch with negative implications on Sept. 10, 2010. Madison Center provides mental health and clinical dependency services for adults and children living primarily in St. Joseph County in northern Indiana. SUFFIELD CLO: Fitch Upgrades Ratings on Three Classes of Notes -------------------------------------------------------------- Fitch Ratings has upgraded three and affirmed four classes of notes issued by Suffield CLO Ltd./Corp. Fitch has also marked one combination note as paid-in-full. Rating Outlooks, Loss Severity Ratings, and Recovery Ratings have been revised or maintained: -- $12,027,669 class II notes affirmed at 'AA+sf/LS3'; Outlook Stable; -- $42,000,000 class III-A notes upgraded to 'AAsf/LS2' from 'Asf/LS3'; Outlook revised to Stable from Negative; -- $15,000,000 class III-B notes upgraded to 'AAsf/LS2 from 'Asf/LS3'; Outlook revised to Stable from Negative; -- $35,000,000 class IV notes upgraded to 'Bsf/LS3' from 'CCCsf/RR2'; Outlook Stable; -- $5,607,983 class V-A notes affirmed at 'Csf/RR6'; -- $14,019,957 class V-B notes affirmed at 'Csf/RR5'. Fitch has taken these actions on the combination notes of Suffield CLO: -- $19,019,957 class K combination securities rated 'Bsf' are PIF; -- $14,700,000 class L combination securities affirmed at 'Csf'. The upgrades of the class III-A and III-B notes and the class IV notes are the result of the strong performance of the underlying portfolio and the significant amortization of the capital structure since Fitch's last rating action in January 2010. The underlying loan portfolio has significantly improved in credit quality since Fitch's last rating action. Fitch currently considers just 8.1% of the underlying portfolio to be rated 'CCC+' or below, an improvement from 28.7% at the last review. Defaults have been minimal since the last action, and defaulted assets now represent just 2.5% of the total portfolio, compared to 10.9% at the last action. Finally, Fitch estimates that over 35% of the portfolio has been upgraded since the last rating action, while just 6.4% has been downgraded. The class I notes, which had approximately $36.7 million of principal outstanding at the last rating action, have since been paid in full while the class II notes have received almost $41 million in principal payments, representing approximately 77.3% of their initial principal balance. Currently, just over $12 million of class II notes remain outstanding, while the principal collection account has over $12.3 million in proceeds as of the Dec. 20, 2010 trustee report. The class II notes will likely be paid in full at the March 2011 payment date, at which time the class III notes would become the senior-most outstanding class. The class III notes now benefit from a higher degree of credit enhancement and in Fitch's opinion are of very high credit quality. The strong performance and continued amortization of the underlying portfolio has increased the relative likelihood of ultimate repayment for the class III and IV notes. The class IV notes, however, remain sensitive to potential future negative credit migration and therefore maintain a highly speculative rating. The class V-A and V-B (collectively, class V) notes are undercollateralized, as displayed by a reported class V overcollateralization ratio of 95.4%. Although the failure of this test is currently leading to the use of excess interest proceeds to pay class V principal, Fitch expects these notes to experience a principal loss at maturity. The class K combination securities were rated to the ultimate receipt of their $20 million initial principal balance. The class K combination securities receive 100% of the distributions to the class V-B notes, and about 13.6% of any distributions to the preferred shares. Fitch calculates that the combined interest and principal payments to these notes have totaled over $21.2 million to date, indicating that the receipt of the initial principal balance has been achieved. Consequently, Fitch considers the class K notes to be paid in full, as they have satisfied their rating requirement. The rating of the class L combination securities addresses the likelihood that investors will receive the stated balance of principal by the final maturity date, as well as a yield of 8.4% on the original investment. The class L combination notes receive approximately 4.8% of distributions to the class III-A notes, 28.6% of distributions to the class IV notes, and 7.4% of distributions to the preferred shares. The floating-rate class III-A and class IV notes have historically received coupons significantly lower than the required 8.4% yield on the class L combination securities, which has been exacerbated by the low interest rate environment. As a result, the class L combination securities are not expected to be able to achieve this yield, and are affirmed at 'C'. The LS ratings for the class II, III, and IV notes 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. Recovery Ratings for the class V-A and class V-B notes are based on the total discounted future cash flows projected to be available to these bonds in a base-case default scenario. These projections indicate cash flows representative of an 'RR6' (0% to 10% recoveries) and 'RR5' (11% to 30% recoveries) for the class V- A and V-B notes, respectively, 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 'CCCsf' or below. For further details on Recovery Ratings, please see Fitch's reports 'Global Surveillance Criteria for Corporate CDOs' and 'Criteria for Structured Finance Recovery Ratings'. Suffield CLO is a cash flow collateralized loan obligation (CLO) that closed on Sept. 13, 2000 and is managed by Babson Capital Management LLC. Suffield CLO exited its reinvestment period in September 2005 and currently has a portfolio consisting of about 92.5% senior secured loans, with the balance consisting of second lien and senior unsecured corporate debt assets, as well as structured finance securities. The CLO is scheduled to mature in September 2014. SWISS CHEETAH: Moody's Upgrades Ratings on 8B Bonds to 'B1' ----------------------------------------------------------- Moody's Investors Service announced this rating action on Swiss Cheetah LLC Asset Protection Transaction 8, a collateralized debt obligation transaction. The CSO, issued in 2003, references a portfolio of corporate synthetic senior unsecured bonds. Issuer: Swiss Cheetah LLC Asset Protection Transaction 8 -- $37,500,000 Swiss Cheetah 8B Bond, Upgraded to B1 (sf); previously on Sept. 18, 2009 Downgraded to Caa2 (sf) Rating Rationale Moody's rating action is the result of the improving credit profile of the transaction, the shortened time to maturity of the CSO and the level of credit enhancement remaining in the transaction. Since the last rating review in September 2009, the 10-year weighted average rating factor (WARF) of the portfolio improved from 1277 to 1124, equivalent to Ba2. There are 21 reference entities with a negative outlook compared to three that are positive, and one entity on watch for downgrade compared to none on watch for upgrade. At the time of the last action 35 entities had a negative outlook compared to zero with a positive outlook and five entities on watch for downgrade compared to three on watch for upgrade. The portfolio has experienced four credit events, equivalent to approximately 1.3% percent of the portfolio based on the portfolio notional value at closing. After removing settled credit events the transaction has approximately 5.2% credit enhancement remaining. There have been no additional credit events since the previous rating action. The CSO has a remaining life of 2.1 years. Moody's rating action factors in a number of sensitivity analyses and stress scenarios, discussed below. Results are given in terms of the number of notches' difference versus the base case, where higher notches correspond to lower expected losses, and vice- versa: * Moody's reviews a scenario consisting of reducing the maturity of the CSO by 6 months, keeping all other parameters equal. The result of this run is comparable to that of the base case. * Market Implied Ratings are modeled in place of the corporate fundamental ratings to derive the default probability of the reference entities in the portfolio. The gap between an MIR and a Moody's corporate fundamental rating is an indicator of the extent of the divergence in credit view between Moody's and the market. The result of this run is 1.5 notches below that of the base case. * Moody's performs a stress analysis consisting of defaulting all entities rated Caa1 and below. The result of this run is approximately 5 notches lower than in the base case. * Moody's conducts a sensitivity analysis consisting of notching down by one the ratings of reference entities in the Banking, Finance, Insurance and Real Estate sectors. The result from this run is one notch below the one modeled under the base case. * Removing the notch-down adjustment on ratings of all reference entities on negative outlook and/or on watch for downgrade generates a result that is comparable to the base case. In addition to the quantitative factors that are explicitly modeled, qualitative factors are part of rating committee considerations. These qualitative factors include the structural protections in each transaction, the recent deal performance in the current market environment, the legal environment, and specific documentation features. All information available to rating committees, including macroeconomic forecasts, input from other Moody's analytical groups, market factors, and judgments regarding the nature and severity of credit stress on the transactions, may influence the final rating decision. 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 analysis of CSOs is subject to uncertainties, the primary sources of which include complexity, governance and leverage. Although the CDOROM model captures many of the dynamics of the Corporate CSO structure, it remains a simplification of the complex reality. Of greatest concern are (a) variations over time in default rates for instruments with a given rating, (b) variations in recovery rates for instruments with particular seniority/security characteristics and (c) uncertainty about the default and recovery correlations characteristics of the reference pool. Similarly on the legal/structural side, the legal analysis although typically based in part on opinions (and sometimes interpretations) of legal experts at the time of issuance, is still subject to potential changes in law, case law and the interpretations of courts and (in some cases) regulatory authorities. The performance of this CSO is also dependent on on- going decisions made by one or several parties, including the Manager and the Trustee. Although the impact of these decisions is mitigated by structural constraints, anticipating the quality of these decisions necessarily introduces some level of uncertainty in Moody's assumptions. Given the tranched nature of CSO liabilities, rating transitions in the reference pool may have leveraged rating implications for the ratings of the CSO liabilities, thus leading to a high degree of volatility. All else being equal, the volatility is likely to be higher for more junior or thinner liabilities. The base case scenario modeled fits into the central macroeconomic scenario predicted by Moody's of a sluggish recovery scenario in the corporate universe. Should macroeconomics conditions evolve towards a more severe scenario, such as a double dip recession, the CSO rating will likely be downgraded to an extent that depends on the expected severity of the worsening conditions. TRIAD FINANCIAL: Moody's Takes Rating Actions on Two Classes ------------------------------------------------------------ Moody's has upgraded one tranche and confirmed another from two auto loan securitizations sponsored by Triad Financial Corporation. Triad was acquired by Santander Consumer USA Inc. in October 2009, and the transactions are currently serviced by Santander. Issuer: Triad Automobile Receivables Trust 2006-C -- Cl. A-4, Upgraded to Aaa (sf); previously on Dec. 6, 2010 Baa3 (sf) Placed Under Review for Possible upgrade -- Financial Guarantor: Ambac Assurance Corporation Caa2; previously Confirmed on 11/23/2010 Issuer: Triad Automobile Receivables Trust 2007-A -- Cl. A-4, Confirmed at Aa3 (sf); previously on Dec. 6, 2009 Aa3 (sf) Placed Under Review for Possible Upgrade -- Financial Guarantor: Assured Guaranty Municipal Corp. (Aa3; previously Confirmed on 11/12/2009) Ratings Rationale The actions are a result of lower lifetime cumulative net loss expectations and build-up in credit enhancement relative to remaining losses due to the non-declining nature of reserve accounts in the transactions. All of the affected transactions also benefit from monoline financial support. In addition to collateral performance and available credit enhancement, Moody's views the acquisition and assumption of servicing by Santander as positive for the outstanding transactions, providing financial strength and stability to the servicing operations. Moody's current lifetime CNL expectations (expressed as a percentage of the original pool balances) for the Triad 2006-C transaction is 18.75%. The pool factor for this transaction is approximately 12% of the original pool balance. Hard credit enhancement that does not include excess spread of approximately 9% per annum, for the Cl. A notes as a percentage of the remaining collateral balance, is approximately 36%. For the 2007-A transaction, Moody's current lifetime CNL expectation is 16.25%. The pool factor for this transaction is approximately 20% of the original pool balance. Hard credit enhancement, that does not include excess spread of approximately 8% per annum , for the Cl. A notes as a percentage of the remaining collateral balance, is approximately 23%. Ratings on the affected notes could be upgraded (where applicable) if the lifetime CNLs are lower by 10%, or downgraded if the lifetime CNLs are higher by 10%. 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 expects a sluggish recovery in the U.S. economy, with elevated fiscal deficits and persistent, high unemployment levels. The underlying ratings reflect the intrinsic credit quality of the securities in the absence of the transactions' guarantees from monoline bond insurers. The current ratings on the securities are consistent with Moody's practice of rating insured securities at the higher of the guarantor's insurance financial strength rating and any underlying rating. 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 6 months. VELOCITY CLO: S&P Raises Ratings on Four Classes of Notes --------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on the class A, B, C, and D notes from Velocity CLO Ltd., a collateralized loan obligation transaction managed by TCW Asset Management Co. S&P removed two of those ratings from CreditWatch with positive implications. The upgrades reflect the improved performance S&P has observed in the transaction's underlying asset portfolio since November 2009. At that time, S&P lowered the ratings on all notes in the transaction following a review using S&P's updated criteria for rating corporate collateralized debt obligations. At the time of S&P's last rating action, the transaction held approximately $12.9 million in defaulted obligations and $55.2 million in underlying obligors with a rating in the 'CCC' range, according to the Sept. 15, 2009 trustee report. As of the Dec. 15, 2010 trustee report. Velocity CLO Ltd. held $0.1 million in defaulted obligations and $24.6 million in assets from underlying obligors with ratings in the 'CCC' range. Since the time of S&P's last rating action, a number of defaulted obligors held in the deal emerged from bankruptcy, with some receiving proceeds that were higher than their carrying value in the overcollateralization (O/C) ratio test calculation. This, in combination with a reduction in assets with ratings in the 'CCC' range assets and a $35.2 million dollar principal paydown to the class A notes, benefited the transaction's O/C ratios. The class A O/C ratio increased to 133.0% as of the Dec. 15, 2010 report from 123.3% as of Sept. 15, 2009, report. At the time of S&P's last rating action, the class B, C, and D notes failed to withstand the specified combination of underlying asset defaults at the 'A', 'B', and 'CCC' rating levels of the largest obligor default test respectively. The largest obligor default test is no longer a constraining factor for the ratings on the class B, C, and D notes. S&P will continue to review its ratings on the notes and assess whether, in S&P's view, the ratings remain consistent with the credit enhancement available to support them and take rating actions as S&P deems necessary. Rating And Creditwatch Actions Velocity CLO Ltd. Rating ------ Class To From ----- -- ---- A AAA (sf) AA+ (sf)/Watch Pos B AA- (sf) BBB+ (sf)/Watch Pos C BBB- (sf) CCC+ (sf) D BB+ (sf) CCC- (sf) VERICREST FINANCIAL: Moody's Downgrades Ratings on Four Tranches ---------------------------------------------------------------- Moody's has downgraded four tranches from three transactions backed by recreational vehicle and marine installment sales contracts serviced by Vericrest Financial, Inc. Vericrest Financial, Inc., formerly known as CIT Group/Sales Financing, Inc., was acquired by Lone Star Funds in 2009. Issuer: CIT RV Trust 1998-A -- Class B, Downgraded to B3 (sf); previously on Nov. 2, 2010 Baa3 (sf) Placed Under Review for Possible Downgrade -- Certificates, Downgraded to C (sf); previously on Nov. 2, 2010, Ca (sf) Placed Under Review for Possible Downgrade Issuer: CIT RV Trust 1999-A -- Class B, Downgraded to Ca; previously on Nov. 2, 2010 Caa2 (sf) Placed Under Review for Possible Downgrade Issuer: CIT Marine Trust 1999-A -- Certificates, Downgraded to Ba2 (sf); previously on Nov. 2, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Certificates, Underlying Downgraded to Ba2 (sf); previously on Nov. 2, 2010 Baa2 (sf) Placed Under Review for Possible Downgrade -- Financial Guarantor: MBIA Insurance Corporation (B3; previously on Feb. 18, 2009 Downgraded to B3 from Baa1) Ratings Rationale The actions were prompted by higher pool lifetime cumulative net losses attributable mainly to continued U.S. economic weakness. Unlike other vehicle-backed ABS, the negative effect on losses has been more severe and long lasting due to the non-essential nature of the underlying collateral. As a result of longer financing terms of between 170 and 180 days, these transactions have experienced more than one economic downturn during their lives. Moody's expects CIT RV Trust 1998-A to incur lifetime cumulative net losses of 8.75% of the original pool balance. The initial expectation for this transaction at closing was 2.50%. Total hard credit enhancement (excluding excess spread of approximately 2.00% per annum) for class B notes is approximately 4% of the outstanding collateral pool balance. The transaction is under- collateralized by $ 5,756,729 which is equal to almost the entire amount of the outstanding certificates. The pool balance for these transactions is approximately 2% of the original pool balance. For the CIT RV Trust 1999-A Moody's expects the lifetime CNL 9.80% of the original pool balance, compared to expectations of 2.50% at closing. The transaction is under-collateralized by $18,980,814 and both the certificates and the class B notes are accruing losses. The pool balance for these transactions is approximately 3% of the original pool balance. Moody's expects the CIT Marine Trust 1999-A to incur lifetime CNL of 6.70% of the original pool balance, compared to expectations of 4.75% at closing. Total hard credit enhancement (excluding excess spread of approximately 1.5% per annum) for the certificates is approximately 11% of the remaining collateral balance. The pool balance for these transactions is approximately 2% of the original pool balance. Ratings on the affected notes could be upgraded if the lifetime CNLs are lower by 5%, or downgraded if the lifetime CNLs are higher by 5%. 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, and weakness in the RV and marine market. 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 largest economies, returning to trend growth rate with elevated fiscal deficits and persistent unemployment levels. The underlying ratings reflect the intrinsic credit quality of the securities in the absence of the transactions' guarantees from monoline bond insurers. The current ratings on the securities are consistent with Moody's practice of rating insured securities at the higher of the guarantor's insurance financial strength rating and any underlying rating. 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. VERITAS 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 Veritas CLO II, Ltd.: -- US$25,200,000 Class A-2 Second Priority Senior Secured Floating Rate Notes Due July 11, 2021, Upgraded to A1 (sf); previously on June 15, 2009 Downgraded to A2 (sf); -- US$15,200,000 Class B Third Priority Senior Secured Floating Rate Notes Due July 11, 2021, Upgraded to A3 (sf); previously on June 15, 2009 Downgraded to Baa1 (sf); -- US$20,600,000 Class C Fourth Priority Mezzanine Secured Floating Rate Deferrable Interest Notes Due July 11, 2021, Upgraded to Ba1 (sf); previously on June 15, 2009 Downgraded to Ba2 (sf); -- US$10,500,000 Class D Fifth Priority Mezzanine Secured Floating Rate Deferrable Interest Notes Due July 11, 2021, Upgraded to Ba3 (sf); previously on June 15, 2009 Downgraded to B3 (sf); -- US$9,500,000 Class E Sixth Priority Mezzanine Secured Floating Rate Deferrable Interest Notes Due July 11, 2021, 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 transaction's overcollateralization ratios since the rating action in June 2009. In Moody's view, these positive developments coincide with reinvestment of sale proceeds (including higher than previously anticipated recoveries realized on defaulted securities) into substitute assets with higher par amounts and/or higher ratings. 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 January 4, 2011, the weighted average rating factor is currently 2525 compared to 2722 in the April 2009 report, and securities rated Caa1/CCC+ or lower make up approximately 11.6% of the underlying portfolio versus 20.3% in April 2009. Additionally, defaulted securities total about $5.9 million of the underlying portfolio compared to $22.3 million in April 2009. The overcollateralization ratios of the rated notes have also improved since the rating action June 2009. The Class A/B, Class C, Class D, and Class E overcollateralization ratios are reported at 120.71%, 111.74%, 107.66%, and 104.22%, respectively, versus April 2009 levels of 114.50%, 106.17%, 102.37%, and 99.16%, respectively, and all related overcollateralization tests are currently in compliance. Moody's also notes that the Class D and 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 balance of $309 million, defaulted par of $6 million, a weighted average default probability of 27.51% (implying a WARF of 3571), a weighted average recovery rate upon default of 43.24%, and a diversity score of 60. 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. Veritas CLO II, Ltd., issued in June 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. 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 sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is 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, whereby a positive difference corresponds to lower expected losses), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (2857) -- Class A-1R: +1 -- Class A-1T: +1 -- Class A-2: +3 -- Class B: +3 -- Class C: +2 -- Class D: +2 -- Class E: +4 Moody's Adjusted WARF + 20% (4285) -- Class A-1R: -1 -- Class A-1T: -1 -- Class A-2: -1 -- Class B: -2 -- Class C: -2 -- Class D: -3 -- Class E: -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 manager's investment strategy 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 sell 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. VERITAS CLO: Moody's Downgrades Ratings on Five Classes of Notes ---------------------------------------------------------------- Moody's Investors Service announced that it has upgraded the ratings of these notes issued by Veritas CLO I, Ltd.: -- US$229,000,000 Class A First Priority Senior Secured Floating Rate Notes due September 5, 2016 (current outstanding balance of $127,652,696), Upgraded to Aaa (sf); previously on November 23, 2010 A2 (sf) Placed Under Review for Possible Upgrade; -- US$19,000,000 Class B Second Priority Senior Secured Floating Rate Notes due September 5, 2016, Upgraded to A1 (sf); previously on November 23, 2010 Ba1 (sf) Placed Under Review for Possible Upgrade; -- US$16,000,000 Class C Third Priority Mezzanine Secured Floating Rate Deferrable Interest Notes due September 5, 2016, Upgraded to Baa3 (sf); previously on November 23, 2010 B3 (sf) Placed Under Review for Possible Upgrade; -- US$10,500,000 Class D Fourth Priority Mezzanine Secured Floating Rate Deferrable Interest due September 5, 2016, Upgraded to B3 (sf); previously on November 23, 2010 Ca (sf) Placed Under Review for Possible Upgrade; -- US$8,000,000 Class E Fifth Priority Mezzanine Secured Floating Rate Deferrable Interest Notes due September 5, 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 the delevering of the Class A Notes, which have been paid down by approximately 44% or $99.8 million since the rating action in June 2009. As a result of the delevering, the overcollateralization ratios have increased since the rating action in June 2009. As of the latest trustee report dated December 31, 2010, the Class A/B, Class C, Class D, and Class E overcollateralization ratios are reported at 126.97%, 114.48%, 107.54%, and 102.79%, respectively, versus April 2009 levels of 113.24%, 106.34%, 102.25%, and 99.34%, respectively, and all related 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. 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. Moody's adjusted WARF has declined since the rating action in June 2009 due to a decrease in the percentage of securities with ratings on "Review for Possible Downgrade" or with a "Negative Outlook." In addition, securities rated Caa1/CCC+ or lower make up approximately 12.3% of the underlying portfolio in December 2010 versus 17.8% in April 2009. The deal also experienced a decrease in defaults. In particular, defaulted securities total about $4.4 million of the underlying portfolio compared to $9.9 million in April 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 balance of $173 million, defaulted par of $8 million, a weighted average default probability of 23.72% (implying a WARF of 3646), a weighted average recovery rate upon default of 41.42%, and a diversity score of 54. 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. Veritas CLO I, Ltd., issued in August 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 sensitivity analyses to test the impact on all rated notes of various default probabilities. Below is 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, whereby a positive difference corresponds to lower expected losses), assuming that all other factors are held equal: Moody's Adjusted WARF -- 20% (2917) -- Class A: 0 -- Class B: +2 -- Class C: +2 -- Class D: +3 -- Class E: +1 Moody's Adjusted WARF + 20% (4375) -- Class A: -1 -- Class B: -2 -- Class C: -2 -- Class D: -3 -- 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 manager's investment strategy 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. 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 sell 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. VERITAS CLO: S&P Raises Ratings on All Classes of Notes ------------------------------------------------------- Standard & Poor's Ratings Services raised its ratings on all notes from Veritas CLO I Ltd., a cash flow collateralized loan obligation transaction, and removed the ratings on the class A, B, and C notes from CreditWatch with positive implications. The transaction is in its amortization phase and continues to use its principal proceeds to paydown the notes in a sequential manner. The class A note balance is currently at $127.65 million, about 56% of its original balance. This is down from $214.7 million in February 2010, the time of the last rating action. The reduced class A balance improved the overcollateralization (O/C) ratios -- which includes a "haircut" if collateral exposure to specific ratings exceed a threshold -- for all tranches. The trustee calculated the O/C ratios as of December 2010 to be 124.67% for the class A/B, 113.50% for the class C, 107.20% for the class D, and 102.54% for the class E. The corresponding O/C ratios were 14.23%, 106.91%, 102.59%, and 99.37% in January 2010. The class C and D OC ratios, which were failing in January 2010, are currently passing. In addition to the paydown to the class A note, the transaction also benefited from a decrease in the level of defaults. The trustee currently reports $4.44 million par as defaults in the December 2010 monthly report, compared with $15.75 million par reported as of January 2010. Standard & Poor's notes that the class E note had a paid-in-kind balance that was paid off in the December 2010 payment period. The paydowns and the decrease in defaults improved the credit support to the rated tranches leading to the upgrades. Standard & Poor's will continue to monitor the CDO transactions it rates and take rating actions, including CreditWatch placements, when appropriate. Rating Actions Veritas CLO I Ltd. Rating ------ Class To From ----- -- ---- A AAA (sf) AA+ (sf)/Watch Pos B AA+ (sf) A+ (sf)/Watch Pos C A- (sf) BBB+ (sf)/Watch Pos D BB+ (sf) B+ (sf) E CCC+ (sf) CCC- (sf) WEST PENN: Moody's Downgrades Rating on $748 Mil. Bonds to 'B2' --------------------------------------------------------------- Moody's Investors Service has downgraded the bond rating for West Penn Allegheny Health System (PA) to B2 from B1, affecting $748 million of Series 2007 fixed rate bonds issued through the Allegheny County Hospital Development Authority. The outlook remains negative. Rating Rationale: The B2 rating and downgrade reflects (1) significant and accelerating volume declines throughout fiscal year 2010 and in the first quarter of fiscal year 2011, reportedly due to the early effects of the system's restructuring initiatives, the economy and growth in observation cases; (2) operating performance, excluding non-recurring items, that was significantly below expectations in fiscal year 2010 and a large operating loss in the first quarter of fiscal year 2011; and (3) significant execution risks and capital and operating costs related to the system's strategy to downsize and restructure its operations, especially in a difficult economic environment, that raises the overall risk profile of the system until successfully implemented. Maintenance of the negative outlook reflects Moody's belief that there are substantial execution and financial risks as the system implements a large restructuring and the system's weak operating performance and cash position leave it little flexibility to absorb any unexpected challenges, such as continued volume declines and/or further pension funding requirements. While Moody's believe the system's outline of a comprehensive strategy has credibility and is necessary for the system's long-term viability, implementation risks are high, particularly retaining volumes as the organization restructures physician groups and consolidates clinical services at its facilities. Legal Security: Joint and several obligation of the Obligated Group with mortgage lien on certain real property, including the primary hospital facilities, and gross revenue pledge; debt service reserve fund present; limitations on additional indebtedness and withdrawal from obligated group permitted if a combination of certain coverage and financial ratio tests are met. Days cash on hand covenant liberal with definition including project funds. Interest Rate Derivatives: None Challenges * Execution risks associated with implementing a strategy to consolidate physician organizations and clinical services, while maintaining profitable volumes and focusing on financial turnaround during this transition phase; additionally, operating and capital costs related to the restructuring are anticipated to be very high * Excluding a large FICA refund, operating performance in fiscal year 2010 was significantly less than expectations even before unanticipated restructuring costs in part due to volume losses. Excluding a gain on the sale of assets, the system reported a large $13.1 million operating loss in the first quarter of fiscal year 2011. * Acute discharges declined significantly in fiscal year 2010 by 7.4% compared with the prior year and the first quarter of fiscal year 2011 was down 9.9% from the prior year * Weak unrestricted cash position of 42 days of cash on hand as of September 30, 2010 (excluding trustee-held project funds), which declined by $60 million (24%) since fiscal yearend 2010 in part due to pension funding and partially offset by $9.5 million received from asset sales * As of fiscal yearend 2010, unfunded status of pension plan was large at almost $300 million, increasing from $222 million at fiscal yearend 2009; the system made a large required pension payment in the first quarter; future funding levels are uncertain until a new actuarial study is completed * Heavy competition from UPMC Health System, which is the largest health system in the region and owns a large managed care plan, enabling UPMC to influence health plan membership and volumes * Dependency on Highmark, the largest insurer in the region, for approximately 38% of system revenues including Highmark and Highmark Medicare Security Blue products * High leverage relative to operating performance with weak maximum debt service coverage of 1.9 times and high 13.5 times debt-to-cashflow based on fiscal year 2010 * Challenging demographic service area with declining population trends in the primary service area and an aging patient base Strengths * Favorable debt structure with all fixed rate debt and no interest rate derivatives * Notwithstanding enormous challenges, the system's strategic direction is more focused and, if implemented successfully, should better position it competitively and financially * Availability of project funds to fund capital related to restructuring initiatives * System's prominence as the second largest healthcare system in Pittsburgh with almost 71,000 acute discharges Recent Developments/Results While the system improved its operating performance in fiscal year 2010 compared with the prior year period, excluding a non- recurring item, operating performance was significantly below expectations even before restructuring costs. As discussed in Moody's last report in June 2010, volumes continue to be Moody's major concern, as evidenced by an acceleration of admissions declines in 2010 and the first quarter and strategic plans carry significant execution risk. Excluding a one-time FICA refund, West Penn had an operating loss of $29.9 million (-1.8% margin) in fiscal year 2010, compared with an operating loss of $38.5 million (-2.4% margin) in the prior year. Operating cashflow was $85.2 million (5.2%) in fiscal year 2010, compared with $76.1 million (4.7%) in the prior year period. The year-over-year operating improvement reflects improvement initiatives begun in 2009; however, given a $20 million reduction in restructuring costs year-over-year, operating improvement was expected to be greater. The system is below expectations primarily because of significant volume shortfalls and unanticipated restructuring costs of $12 million. The first quarter of fiscal year 2011 includes a $9.5 million gain from the sale of a dialysis business. Excluding this gain, the system had a material $13.1 million operating loss (-3.2%), compared with a $4.1 million operating loss (-1.0%) in the prior year period. Net patient revenue was down 3%. Acute discharges declined 7.4% in fiscal year 2010, with the third quarter experiencing a large decline of 8.5%. Discharges were down 9.9% in the first quarter of fiscal year 2011. The decline is reportedly due to volume losses from the consolidation and closure of beds as part of the restructuring, the impact of the economy, and a shift to observation cases. The system's plan to downsize and restructure the operations is necessary for the system's long-term viability. However, there is significant execution risk that raises the overall risk profile in the short-term, restructuring costs are high, and the system has little financial flexibility to absorb unexpected challenges. The system has been reconfiguring its clinical services, concentrating tertiary services at AGH and moving obstetrics to West Penn and psychiatry to Forbes. With this consolidation, it will be a challenge to manage the migration of volumes. Finally, the capital and operating costs to implement the restructuring are likely to be large; the system anticipates using the project funds ($60 million as of September 30, 2010) as the primary source of funding for capital costs. The organization will be pursuing a restructuring and consolidation of physician practices to better align physicians and improve efficiencies, which involves risk in being able to retain and recruit productive physicians during this process. West Penn's unrestricted cash (excluding project funds) grew to $246 million (57 days cash on hand) as of fiscal yearend 2010 from $195 million (45 days) as of fiscal yearend 2009 as a result of limited pension funding and lower capital spending. As of September 30, 2010, unrestricted cash declined by $60 million to $186 million (42 days cash on hand). Cash would have declined further without $9.5 million in proceeds from an asset sale. Although West Penn's unrestricted asset allocation is fairly conservative, investment returns could affect the ability to maintain cash. As of June 30, 2010, approximately 11% of unrestricted investments are invested in equities or alternative investments. As a result of weaker cash levels, the system is reportedly managing its capital spending in an effort to preserve cash. Capital requirements to implement the restructuring are planned to be covered with project funds. The system's pension obligation increased as of fiscal yearend 2010 with an almost $300 million (56%) unfunded status, compared with $222 million as of fiscal yearend 2009, due to a decline in the discount rate and assumed returns. The system funded $51 million in the first quarter of 2011 as required. A new actuarial study is underway to determine future funding requirements, based on a January 1, 2011 measurement date. West Penn's pension fund currently has a relatively high allocation to equities, exposing future funding levels to market volatility. However, in conjunction with the hiring of an outsourced Chief Investment Officer, West Penn is in the process of implementing a liability driven investment strategy (i.e. a long duration fixed income allocation). Outlook Maintenance of the negative outlook reflects Moody's belief that there are substantial execution and financial risks as the system implements a large restructuring and the system's weak operating performance and cash position leave it little flexibility to absorb any unexpected challenges, such as continued volume declines. While Moody's believe the system's outline of a comprehensive strategy has credibility and is necessary for the system's long-term viability, implementation risks are high, particularly retaining volumes as the organization restructures physician groups and consolidates clinical services at its facilities. What could change the rating -- Up With a negative outlook, a rating upgrade in the near-term is not likely. Long-term, an upgrade would be considered with significant and sustained improvement in operating cashflow for several years, at least stability in volumes, significant growth in unrestricted cash, stability or growth in medical staff and successful completion of physician and facilities restructuring strategies. What could change the rating -- Down Decline in unrestricted cash (excluding project funds), continued large operating losses and volume declines Key Indicators Assumptions & Adjustments: -- Based on financial statements for West Penn Allegheny Health System -- First number reflects audit year ended June 30, 2009 -- Second number reflects audit year ended June 30, 2010 -- Investment returns smoothed at 6% unless otherwise noted -- Non-recurring items: $10.7 million related to a FICA refund in 2010, added back to expenses * Inpatient acute discharges: 76,464; 70,790 * Total operating revenues: $1.61 billion; $1.63 billion * Moody's-adjusted net revenue available for debt service: $88.9 million; $101.1 million * Total debt outstanding: $827 million; $813 million * Maximum annual debt service (MADS): $53.9 million; $53.9 million (excluding balloon payments in 2015 and 2016 related to a financing for helicopters, which would increase MADS by approximately $5 million and $3 million, respectively, in these years) * MADS coverage based on reported investment income: 1.8 times; 1.9 times * Moody's-adjusted MADS coverage with normalized investment income: 1.7 times; 1.9 times * Debt-to-cash flow: 17.0 times; 13.5 times * Days cash on hand (excluding project funds): 45 days; 57 days * Cash-to-debt: 24%; 30% * Operating margin: -2.4%; -1.8% * Operating cash flow margin: 4.7%; 5.2% Rated Debt - Series 2007 fixed rate bonds ($748 million): B2 The last rating action was on June 1, 2010, when the Ba3 rating was downgraded to B1 and the negative outlook maintained. WF-RBS COMMERCIAL: Fitch Issues Presale Report on 2011-C2 Certs. ---------------------------------------------------------------- Fitch Ratings has issued a presale report on WF-RBS Commercial Mortgage Trust 2011-C2 commercial mortgage pass-through certificates. Fitch expects to rate the transaction and assign Loss Severity ratings, with a Stable Outlook: -- $583,545,000 class A-1 'AAAsf/LS1'; -- $493,220,000 class A-2 'AAAsf/LS1'; -- $1,076,765,000* class X-A 'AAAsf'; -- $38,978,000 class B 'AAsf/LS4'; -- $43,850,000 class C 'Asf/LS5'; -- $68,212,000 class D 'BBB-sf/LS5'; -- $21,113,000 class E 'BBsf/LS5'; -- $14,616,000 class F 'Bsf/LS5'. * Notional amount and interest only. The expected ratings are based on information provided by the issuer as of Feb. 1, 2011. Fitch does not expect to rate the $35.7 million class G, or the interest-only class X-B. The certificates represent the beneficial ownership in the trust, primary assets of which are 50 loans secured by 96 commercial properties having an aggregate principal balance of approximately $1.30 billion as of the cutoff date. The loans were originated by Wells Fargo Bank National Association, The Royal Bank of Scotland plc, RBS Financial Products Inc., Natixis Real Estate Capital LLC, and Basis Real Estate Capital II, LLC. Fitch reviewed a comprehensive sample of the transaction's collateral, including site inspections on 85.9% of the properties by balance, cash flow analysis of 83.9% of the pool and asset summary reviews of 86.4% of the pool. The transaction has a Fitch stressed debt service coverage ratio (DSCR) of 1.26 times, a Fitch stressed loan-to value of 89%, and a Fitch debt yield of 10.3%. Fitch's aggregate net cash flow represents a variance of 6.8% to issuer cash flows. The transaction is concentrated as the largest 10 loans account for 56.6% of the pool, and the largest 15 account for 69.3%. There is no material sponsor concentration across multiple loans. WHITEHORSE I: S&P Raises Ratings on Various Classes of Notes ------------------------------------------------------------ Standard & Poor's Ratings Services raised its ratings on the A- 1LB, A-2L, A-3L, and B-1L notes from WhiteHorse I Ltd., a cash flow collateralized loan obligation transaction. At the same time, S&P removed its rating on the class A-1LB notes from CreditWatch with positive implications. S&P also affirmed the rating on the class A-1LA notes. The transaction's reinvestment period ended in September 2009 and is now in its amortization phase. The collateral pool is static and the transaction uses the principal proceeds to pay down the notes in a sequential manner. The current balance of the class A- 1LA notes is $44.27 million (36.89% of its original balance), down from $111.95 million at the time of the last rating action in February 2010. As a result of the lower class A-1LA note balance, the overcollateralization of all tranches has improved. According to the Jan. 6, 2011, trustee report, the senior class A, class A, and class B-1L O/C ratios were 126.39%, 113.52%, and 108.03% respectively, compared with 115.95%, 108.97%, and 105.78% as of the February 2010 monthly report. The upgrades reflect increases in the O/C levels, which improved the credit support available to the rated tranches at their prior rating levels. Standard & Poor's will continue to monitor the CDO transactions it rates and take rating actions, including CreditWatch placements, when appropriate. Rating And Creditwatch Actions WhiteHorse I Ltd. Rating ------ Class To From ----- -- ---- A-1LB AAA (sf) AA+ (sf)/Watch Pos A-2L AA (sf) A (sf) A-3L BBB+ (sf) BBB- (sf) B-1L BB-(sf) B+ (sf) Rating Affirmed WhiteHorse I Ltd. Class Rating ----- ------ A-1LA AAA (sf) * Fitch Takes Rating Actions on New Orleans' Special Tax Bonds -------------------------------------------------------------- Fitch Ratings takes this rating action on the New Orleans, LA utility system revenue bonds and drainage special tax bonds (issued on behalf of the New Orleans Sewerage and Water Board [the board]) as part of its continuous surveillance effort: -- Approximately $172.8 million sewer system revenue bonds downgraded to 'BBB-' from 'BBB+'; -- Approximately $34.6 million water system revenue bonds upgraded to 'BBB-' from 'B'; -- Approximately $21.5 million drainage special tax bonds upgraded to 'A-' from 'BBB+'. The Rating Outlook for all three securities is Stable. Rating Rationale: -- The upgrade of the water revenue bond rating to 'BBB-' from 'B' reflects the improved financial profile of the water system, due to a series of rate increases, a recent FEMA reimbursement for prior years' expenditures, and re- allocation of administrative costs between the board's three systems. -- Conversely, the sewer system has weakened financially over the past two fiscal years due in part to various accounting and reporting changes that have contributed to sizable increases in operating costs; the downgrade to 'BBB-' from 'BBB+' is based on this weakened position, which has resulted in the sewer system violating its rate covenant. -- The upgrade of the drainage special tax bond rating to 'A-' from 'BBB+' reflects continued stable property tax collections, and moderate, steady growth in the tax base. -- A portion of the board's community disaster loan principal was forgiven by the federal government in November 2010, and board officials are hopeful the remainder will be cancelled. -- The recent addition of two new senior staff members with extensive utility experience in other cities strengthens the caliber of board staff. -- Recessionary pressures continue to hinder the post-Katrina economic recovery in New Orleans; while employment totals have been increasing modestly in recent months as residents and businesses return to the city, the city's unemployment rate has climbed to levels higher than the state and U.S. averages. -- Significant amounts of money are still coming into New Orleans for various infrastructure projects; many are still in design stage, and the transition to construction should provide some positive economic momentum. Key Rating Drivers: -- Anticipated additional water and sewer rate increases are critical to finance operations, comply with rate covenants, and begin to address massive capital needs; however, affordability likely will become a credit concern if rates climb substantially. -- As the area continues to recover -- albeit at an uneven pace -- Fitch anticipates that further population gains will help restore customer counts and needed cash flow to the board's operations. -- Capital needs for all three systems are extremely large, and the task of funding needed improvements will remain daunting for an extended period. Security: The sewer revenue bonds are secured by a net pledge of revenues of the board's sewer utility system; the water revenue bonds are secured by a net pledge of revenues of the board's water utility system; the drainage special tax bonds are payable from and secured by the proceeds of a limited ad valorem tax. Credit Summary: The financial positions of the water fund and sewer fund have shifted over the past 24 months, due to a number of factors. First, water system revenues continue to increase as a steady return of customers is augmented by a series of annual rate increases that has increased the average residential bill by nearly 50% since 2007. On the expenditure side, ongoing cost control measures have been accompanied by a recent FEMA reimbursement of nearly $17 million. These factors, along with a shift in administrative costs between the water, sewer and drainage funds that has reduced water system outlays, have improved both liquidity and debt service coverage for the water system; preliminary results for 2010 suggest coverage of roughly 1.50 times, a marked improvement from recent years. (This coverage calculation, along with sewer system coverage calculations, excludes the forgiveness of a portion of the board's CDL that is being booked in 2010 as an operating grant.) Projected cash and investments at 2010 year-end total $12.9 million, or roughly 90 days of expenditures. This improved financial performance has occurred despite an increase in the provision for doubtful accounts for 2010 to nearly $4 million. Fiscal 2010 coverage excluding the one-time spike in the provision for doubtful accounts and an additional non-cash item for OPEB accrual would be in excess of 3.0x. Conversely, the financial profile of the sewer system has weakened markedly as a result of the additional expenses for OPEB accrual, the increased provision for doubtful accounts, and the shift in administrative costs that have combined to apply upward pressure on expenses. The non-cash OPEB accrual and provision for doubtful accounts expenses combined total roughly $10 million for 2010, which significantly affects projected debt service coverage. Coverage (again excluding the CDL loan forgiveness revenue entry) is projected to be slightly below 1.0x for 2010, well below the system's 1.30x rate covenant minimum. According to staff, the spike in provision for doubtful accounts is a one-time write-off of receivables from accounts closed in 2007 (accounts that had been kept open in late 2005 and 2006 following Katrina). They anticipate this expense will return to a more typical amount -- the sewer loss provision had averaged less than $1 million annually prior to 2005 -- which should improve operating results and coverage levels. Coverage for 2010 excluding this increased loss provision and the OPEB accrual would be roughly 1.35x. Sewer system liquidity also has weakened, which Fitch notes is a factor in this rating action. Projected cash and investments at 2010 year-end total only $2.3 million, or 16 days of spending. The financial profile of the drainage system is satisfactory, and has benefited from steady increases in taxable value and a return of property tax collections to pre-2005 levels. Taxable assessed value (TAV) for 2010 was $2.76 billion, up 3% from the prior year; this increase was consistent with gains in 2008 and 2009. Likewise, property tax collections have climbed steadily since 2005 and at more than 85% current collections are consistent with historical levels. Outstanding drainage tax bonds are secured by one of three taxes levied by the board for drainage purposes, and 2010 revenues from this millage levy totaled $16.6 million, well in excess of annual debt service of $2.2 million. Going forward, management recognizes the need to align recurring sewer and water utility revenues with expenses, build up liquidity, and generate funds for capital projects. Toward that end, the board selected an outside consultant to conduct a comprehensive financial plan and rate study for the water, sewer and drainage systems; initial results from the project are expected in spring 2011. Although Fitch believes that a combination of rate hikes and a steady increase in customer count will eventually further stabilize operations for both the water and sewer systems, utility charge affordability likely will be a concern given the relatively low wealth levels in the city. All three systems have large future capital needs, which result from a combination of storm damage and aging infrastructure. Estimated capital costs for the water system through 2015 total roughly $300 million, while costs for the sewer and drainage systems total $445 million and $2.18 billion, respectively. Funding for drainage projects will be financed in part with federal monies -- currently projected at more than $1.2 billion for this period. Fitch notes that none of the systems are generating surplus revenues sufficient to make a significant contribution towards the sizable capital needs of each system. As capital needs are deferred, the potential for service interruptions and increased costs in the future climbs. The sewer system's debt level is relatively high at roughly $1,975 per customer, while the water and drainage systems debt loads are fairly modest. The debt total for all systems includes $77.5 million in debt service assistance that was provided by the state as authorized by the Gulf Opportunity Zone Act of 2005. The New Orleans Board of Liquidation serves as debt service custodian for all board debt, as well as the authorizing agency on all bond issuances, while contributing an advisory and oversight role on rate matters. Recessionary forces have affected News Orleans' tourism business and retail activity, dampening the positive effect of ongoing reconstruction activity in the city. Also, the 2010 gulf oil spill has affected offshore drilling activity and commercial fishing and seafood processing. Despite the weakened economic climate, the city is registering employment gains and numerous large-scale infrastructure projects are either in design or under construction. Fitch believes that the large amount of recovery and rebuilding money flowing into the city and surrounding area over the near term will provide a certain level of support to economic activity and will establish a solid foundation for future economic growth. Notable projects include the new LSU-VA medical complex under construction, a recently announced steel and iron plant in nearby St. James Parish, and the scheduled re-opening of the Hyatt Regency downtown hotel in fall 2011. Meanwhile, state and local officials are working to locate a new buyer/user for the Avondale Shipyard; the area's largest employer with more than 4,000 workers, this facility is scheduled for closure by Northrop Grumman in 2013. While progress on various fronts continues, Fitch notes that much work remains to be done in the critical areas of housing, healthcare, education and public infrastructure; the city still faces years of recovery ahead. The most recent estimates put the city's population at roughly 355,000, or roughly 75% of the pre-storm total. Employment registered some moderate improvement in recent months, and October 2010 totals indicate a 2.5% increase in employment over the same period in 2009. Despite the recent gains, employment in the metro area remains about 15% below pre-Katrina levels. The latest city unemployment rate of 9.8% (October 2010) was up from last year and higher than the national (9.0%) average for the month. The current utility customer base of more than 120,000 has shown steady growth since June 2008 when a program to aggressively pursue and close inactive accounts peaked, and the customer count now is approximately 87% of the pre-Katrina total of more than 140,000. * S&P Downgrades Ratings on 43 Classes From Five CMBS Transactions ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 43 classes of commercial mortgage pass-through certificates from five U.S. commercial mortgage-backed securities transactions due to interest shortfalls. The downgrades reflect current and potential interest shortfalls. S&P lowered its ratings on 32 of these classes to 'D (sf)' because S&P expects these interest shortfalls to continue. Of the 32 classes that S&P downgraded to 'D (sf)', 31 have had accumulated interest shortfalls outstanding for three or more months. The remaining class has had accumulated interest shortfalls outstanding for two 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; * The 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 special servicing fees that are likely, in its view, to cause recurring interest shortfalls. The servicer implements ARAs and resulting ASER amounts 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 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 details the 43 downgraded classes from the five CMBS transactions below. Banc of America Commercial Mortgage Inc. Series 2005-6 S&P lowered its ratings on the class L, M, N, O, and P certificates from Banc of America Commercial Mortgage Inc.'s series 2005-6 due to interest shortfalls resulting from ASER amounts related to 10 ($76.8 million, 3.2% of the pooled trust balance) of the 21 loans ($322.7 million, 13.4%) that are currently with the special servicer, LNR Partners LLC, as well as special servicing fees. S&P also lowered its ratings on classes J and K because S&P believes these two classes are susceptible to future interest shortfalls. As of the Jan. 10, 2011, trustee remittance report, ARAs totaling $35.6 million were in effect for 10 loans. The total reported ASER amount was $162,894, and the reported cumulative ASER amount was $1.39 million. Standard & Poor's considered the 10 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 $258,923 and have affected all of the classes subordinate to and including class L. Classes L, M, N, O, and P have had accumulated interest shortfalls outstanding between three and five months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P lowered the ratings on these classes to 'D (sf)'. Morgan Stanley Capital I Trust 2005-HQ6 S&P lowered its ratings on the class K, L, M, N, O, P, and Q certificates from Morgan Stanley Capital I Trust 2005-HQ6 due to interest shortfalls resulting from ASER amounts related to 12 ($157.0 million, 6.4% of the pooled trust balance) of the 20 loans ($218.0 million, 8.9%) that are currently with the special servicer, CWCapital Asset Management LLC, as well as special servicing fees. S&P also lowered its rating on class J because S&P believes this class is susceptible to future interest shortfalls. As of the Jan. 13, 2011 trustee remittance report, ARAs totaling $71.7 million were in effect for 14 loans. The total reported ASER amount was $349,196, and the reported cumulative ASER amount was $1.96 million. Standard & Poor's considered 11 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 $398,024 and have affected all of the classes subordinate to and including class K. Classes K, L, M, N, O, P, and Q have had accumulated interest shortfalls outstanding between four and seven months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P lowered the ratings on these classes to 'D (sf)'. Merrill Lynch Mortgage Trust 2006-C2 S&P lowered its ratings on the class G, H, J, K, L, and M certificates from Merrill Lynch Mortgage Trust 2006-C2 due to interest shortfalls resulting from ASER amounts related to 11 ($80.2 million, 6.2% of the pooled trust balance) of the 15 loans ($171.4 million, 13.2%) that are currently with the special servicer, J.E. Robert Co. Inc., as well as special servicing fees and interest rate modification on the Casa Carranza Mesa loan. S&P also downgraded the class C, D, E, and F certificates because S&P believes the recurring interest shortfalls have reduced liquidity support available to these classes. As of the Jan. 12, 2011, trustee remittance report, ARAs totaling $94.8 million were in effect for 15 loans. The total reported ASER amount was $196,002, and the reported cumulative ASER amount was $1.86 million. Standard & Poor's considered 10 ASER amounts, all of which were based on MAI appraisals, as well as current special servicing fees and the interest rate reduction ($30,070) from the modification of the Casa Carranza Mesa loan, in determining its rating actions. Additionally, S&P's rating actions also considered that the master servicer, Wells Fargo Bank N.A., expects an additional ASER amount to be in effect by the February 2011 trustee remittance report for the largest asset with the special servicer, the Mall at Whitney Field asset. The reported monthly interest shortfalls totaled $259,536 and affected all of the classes subordinate to and including class G. Classes H, J, K, L, and M have had accumulated interest shortfalls outstanding between six and 11 months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded these classes to 'D (sf)'. JPMorgan Chase Commercial Mortgage Securities Trust 2006-CIBC16 S&P lowered its ratings on the class G, H, J, K, L, M, N, and P certificates from JPMorgan Chase Commercial Mortgage Securities Trust 2006-CIBC16 due to interest shortfalls resulting from ASER amounts related to six ($124.8 million, 6.0% of the pooled trust balance) of the 15 loans ($360.8 million, 17.5%) that are currently with the special servicer, C-III Asset Management LLC, as well as special servicing fees and interest rate modifications on the Lakeshore Plaza and 3000 Lincoln loans. S&P also downgraded the class E and F certificates because S&P believes these two classes are susceptible to future interest shortfalls. As of the Jan. 12, 2011, trustee remittance report, ARAs totaling $49.4 million were in effect for seven loans. The total reported ASER amount was $256,701, and the reported cumulative ASER amount was $1.78 million. Standard & Poor's considered five ASER amounts, all of which were based on MAI appraisals, as well as current special servicing fees and the interest rate reduction ($27,650) from the modifications of the two aforementioned loans, in determining its rating actions. The reported monthly interest shortfalls, excluding the repayment of other expenses related to the Sportsman's Warehouse loan, totaled $377,925. Accumulated interest shortfalls are outstanding on all classes subordinate to and including class G. Classes G, H, J, K, L, M, N, and P have had accumulated interest shortfalls outstanding between two and 12 months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P downgraded these classes to 'D (sf)'. Morgan Stanley Capital I Trust 2007-TOP27 S&P lowered its ratings on the class H, J, K, L, M, N, and O certificates from Morgan Stanley Capital I Trust 2007-TOP27 due to interest shortfalls resulting from ASER amounts related to eight ($77.3 million, 2.9% of the pooled trust balance) of the 12 loans ($109.9 million, 4.1%) that are currently with the special servicer, C-III, as well as special servicing fees and interest not advanced. S&P also downgraded the class G certificate because S&P believes this class is susceptible to future interest shortfalls. As of the Jan. 13, 2011, trustee remittance report, ARAs totaling $55.9 million were in effect for 10 loans. The total reported ASER amount was $203,590, and the reported cumulative ASER amount was $1.81 million. Standard & Poor's considered seven ASER amounts, all of which were based on MAI appraisals, as well as current special servicing fees and interest not advanced ($98,395), in determining its rating actions. The reported monthly interest shortfalls totaled $324,435 and affected all of the classes subordinate to and including class H. Classes H, J, K, L, M, N, and O have had accumulated interest shortfalls outstanding between four and eight months, and S&P expects these shortfalls to remain outstanding for the foreseeable future. Consequently, S&P lowered its ratings on these classes to 'D (sf)'. Ratings Lowered Banc of America Commercial Mortgage Inc. Commercial mortgage pass-through certificates series 2005-6 Reported Rating Interest Shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- J B- (sf) BB- (sf) 3.89 0 0 K CCC- (sf) B+ (sf) 2.76 0 0 L D (sf) B (sf) 2.19 40,130 95,087 M D (sf) B- (sf) 1.48 70,366 295,148 N D (sf) CCC+ (sf) 1.34 14,075 70,374 O D (sf) CCC (sf) 1.05 28,145 140,727 P D (sf) CCC- (sf) 0.91 14,075 70,374 Morgan Stanley Capital I Trust 2005-HQ6 Commercial mortgage pass-through certificates series 2005-HQ6 Reported Rating Interest Shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- J CCC+ (sf) B+ (sf) 5.03 0 0 K D (sf) B (sf) 3.34 74,617 192,489 L D (sf) B (sf) 2.92 40,929 163,717 M D (sf) B- (sf) 2.50 40,933 163,733 N D (sf) CCC+ (sf) 1.79 68,221 284,521 O D (sf) CCC+ (sf) 1.65 13,642 68,209 P D (sf) CCC (sf) 1.23 40,933 204,667 Q D (sf) CCC- (sf) 0.80 40,933 269,761 Merrill Lynch Mortgage Trust 2006-C2 Commercial mortgage pass-through certificates series 2006-C2 Reported Rating Interest Shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- C BB- (sf) BBB- (sf) 10.68 0 0 D CCC (sf) BB (sf) 8.60 0 0 E CCC- (sf) BB- (sf) 7.27 0 0 F CCC- (sf) B+ (sf) 5.35 0 0 G CCC- (sf) B (sf) 4.16 5,117 5,117 H D (sf) B- (sf) 2.98 78,874 328,710 J D (sf) B- (sf) 2.24 43,574 264,946 K D (sf) CCC+ (sf) 1.95 17,430 122,013 L D (sf) CCC+ (sf) 1.50 26,143 233,051 M D (sf) CCC (sf) 1.21 17,426 191,685 JPMorgan Chase Commercial Mortgage Securities Trust Commercial mortgage pass-through certificates series 2006-CIBC16 Reported Rating Interest Shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- E CCC+ (sf) B+ (sf) 5.83 (56,506) 0 F CCC- (sf) B+ (sf) 4.40 (144,854) 0 G D (sf) B (sf) 3.10 66,249 200,128 H D (sf) B- (sf) 1.93 123,020 331,519 J D (sf) CCC+ (sf) 1.67 23,534 164,739 K D (sf) CCC (sf) 1.15 47,073 460,594 L D (sf) CCC- (sf) 0.76 35,306 389,895 M D (sf) CCC- (sf) 0.63 11,767 141,205 N D (sf) CCC- (sf) 0.37 23,539 282,463 P D (sf) CCC- (sf) 0.11 23,539 282,463 Morgan Stanley Capital I Trust 2007-TOP27 Commercial mortgage pass-through certificates series 2007-TOP27 Reported Rating Interest Shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- G CCC- (sf) B (sf) 2.77 0 0 H D (sf) B- (sf) 1.89 86,261 247,827 J D (sf) B- (sf) 1.76 16,026 64,530 K D (sf) CCC+ (sf) 1.63 16,022 70,784 L D (sf) CCC (sf) 1.38 32,053 161,975 M D (sf) CCC (sf) 1.12 32,048 161,951 N D (sf) CCC- (sf) 0.87 32,048 163,433 O D (sf) CCC- (sf) 0.74 16,022 123,078 * S&P Downgrades Ratings on 53 Certs. From Seven CMBS Transactions ------------------------------------------------------------------ Standard & Poor's Ratings Services lowered its ratings on 53 classes of commercial mortgage pass-through certificates from seven U.S. commercial mortgage-backed securities transactions. The downgrades reflect current and potential interest shortfalls. S&P lowered its ratings on 39 of these classes to 'D (sf)' because S&P expects the recurring interest shortfalls to continue. Thirty-seven of the 39 classes that S&P downgraded to 'D (sf)' have had accumulated interest shortfalls outstanding for four or more months. The remaining two classes have had accumulated interest shortfalls outstanding for three 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 special servicing fees that are likely, in S&P's view, to cause recurring interest shortfalls. ARAs and 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 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 details the 53 downgraded classes from the seven CMBS transactions below. CD 2006-CD3 Mortgage Trust S&P lowered its ratings on the class J, K, L, M, N, O, P, and Q certificates from CD 2006-CD3 Mortgage Trust. The lowered ratings reflect accumulated interest shortfalls resulting from ASER amounts related to 15 ($204.3 million, 6.0%) of the 28 loans ($575 million, 16.8%) that are currently with the special servicer, J.E. Robert Co., as well as special servicing fees. An interest rate reduction on three loans (the Tennyson Office Center loan, the Moody Texas Hotel Portfolio loan, and the Macdade Terrace Apartments loan) also contributed to the interest shortfalls. As of the Jan. 18, 2011, trustee remittance report, ARAs totaling $108.9 million were in effect for 24 loans. The total reported ASER amount on 15 loans was $402,013, and the reported cumulative ASER amount was $3.5 million. Standard & Poor's considered 14 ASER amounts (totaling $293,683), all of which were based on MAI appraisals, as well as current special servicing fees and interest rate reduction of $133,551 resulting from the modification of three loans (the Tennyson Office Center loan, the Moody Texas Hotel Portfolio loan, and the Macdade Terrace Apartments loan), in determining its rating actions. The reported monthly interest shortfalls totaled $595,500, and accumulated interest shortfalls have affected class J and all of the classes subordinate to it. Classes K, L, M, N, O, P, and Q have had accumulated interest shortfalls outstanding between eight and 11 months, which S&P expects to remain outstanding for the foreseeable future. Consequently, S&P lowered its ratings on these classes to 'D (sf)'. JPMorgan Chase Commercial Mortgage Securities Corp.'s series 2005-LDP1 S&P lowered its ratings on the class K, L, M, N, and P certificates from JPMorgan Chase Commercial Mortgage Securities Corp.'s series 2005-LDP1. The lowered ratings reflect accumulated interest shortfalls resulting from ASER amounts related to 12 ($36.9 million, 1.8%) of the 19 ($149.4 million, 7.13%) loans that are currently with the special servicer, Midland Loan Services Inc., as well as special servicing fees. An interest rate reduction on three loans (the Redwood Tower loan, the Indian River Office Building loan, and the Shops on Howard loan) also contributed to the interest shortfalls. As of the Jan. 18, 2011, trustee remittance report, ARAs totaling $36.9 million were in effect for 12 loans. The total reported ASER amount on 11 loans was $170,335, and the reported cumulative ASER amount was $1.2 million. Standard & Poor's considered five ASER amounts (totaling $29,359), all of which were based on MAI appraisals, as well as current special servicing fees and interest rate reduction of $51,133 resulting from the modification of three loans (the Redwood Tower loan, the Indian River Office Building loan, and the Shops on Howard loan), in determining its rating actions. The reported monthly interest shortfalls totaled $197,607, and accumulated interest shortfalls have affected class K and all of the classes subordinate to it. Classes L, M, N, and P have had accumulated interest shortfalls outstanding between five and 11 months, which S&P expects to remain outstanding for the foreseeable future. Consequently, S&P lowered its ratings on these classes to 'D (sf)'. LB-UBS Commercial Mortgage Trust 2007-C6 S&P lowered its ratings on the class H, J, K, L, M, N, P, Q, and S certificates from LB-UBS Commercial Mortgage Trust 2007-C6. The lowered ratings reflect accumulated interest shortfalls resulting from ASER amounts related to 12 ($523.1 million, 17.7%)) of the 17 ($659.5 million, 22.8%) loans that are currently with the special servicer, Midland, including the largest loan in the pool, the Innkeepers Portfolio loan ($412.7 million, 14.0%), as well as interest not advanced and special servicing fees. As of the Jan. 18, 2011, trustee remittance report, ARAs totaling $152.4 million were in effect for 15 loans. The total reported ASER amount on 12 loans was $830,415, and the reported cumulative ASER amount was $4.3 million. Standard & Poor's considered nine ASER amounts (totaling $172,242), all of which were based on MAI appraisals, as well as current special servicing fees and interest not advanced ($11,083), in determining its rating actions. The reported monthly interest shortfalls totaled $925,147 and accumulated interest shortfalls have affected class H and all of the classes subordinate to it. Classes L, M, N, P, Q, and S have had accumulated interest shortfalls outstanding between four and eight months, which S&P expects to remain outstanding for the foreseeable future. Consequently, S&P lowered its ratings on these classes to 'D (sf)'. LB-UBS Commercial Mortgage Trust 2007-C7 S&P lowered its ratings on the class G, H, J, K, L, M, N, P, Q, and S certificates from LB-UBS Commercial Mortgage Trust 2007-C7. The lowered ratings reflect accumulated interest shortfalls resulting from ASER amounts related to seven ($472.9 million, 15.0%) of the 10 loans ($657.7 million, 20.9%) that are currently with the special servicer, LNR Partners LLC, including the largest loan in the pool, the Innkeepers Portfolio loan, as well as special servicing fees. As of the Jan. 18, 2011, trustee remittance report ARAs totaling $133.3 million were in effect for seven loans. The total reported ASER amount on seven loans was $748,809, and the reported cumulative ASER amount was $3.6 million. Standard & Poor's considered four ASER amounts (totaling $88,420), 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 $492,535, and accumulated interest shortfalls have affected class H and all of the classes subordinate to it. Classes K, L, M, N, P, Q, and S have had accumulated interest shortfalls outstanding between four and eight months, which S&P expects to remain outstanding for the foreseeable future. Consequently, S&P lowered its ratings on these classes to 'D (sf)'. Morgan Stanley Capital I Trust 2007-IQ13 S&P lowered its ratings on the class F, G, H, J, K, and L certificates from Morgan Stanley Capital I Trust 2007-IQ13. The lowered ratings reflect accumulated interest shortfalls resulting from ASER amounts related to seven ($89.0 million, 5.6%) of the 15 ($377.7 million, 23.6%) loans that are currently with the special servicer, LNR, as well as special servicing fees. As of the Jan. 18, 2011, trustee remittance report ARAs totaling $52.6 million were in effect for eight loans. The total reported ASER amount on seven loans was $262,442, and the reported cumulative ASER amount was $1.7 million. Standard & Poor's considered seven ASER amounts (totaling $262,442), 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 $379,663 and accumulated interest shortfalls have affected class F and all of the classes subordinate to it. Classes G, H, J, K, and L have had accumulated interest shortfalls outstanding between four and seven months, which S&P expects to remain outstanding for the foreseeable future. Consequently, S&P lowered its ratings on these classes to 'D (sf)'. Wachovia Bank Commercial Mortgage Trust's series 2005-C17 S&P lowered its ratings on the class L, M, N, and O certificates from Wachovia Bank Commercial Mortgage Trust's series 2005-C17. The lowered ratings reflect accumulated interest shortfalls resulting from ASER amounts related to six ($67.8 million, 2.9%) of the 14 ($207.0 million, 8.9%) loans that are currently with the special servicer, CWCapital Asset Management LLC, as well as special servicing fees. S&P lowered its ratings on the class H, J, and K certificates because S&P believes these classes are susceptible to future interest shortfalls. As of the Jan. 18, 2011, trustee remittance report ARAs totaling $38.6 million were in effect for seven loans. The total reported ASER amount, excluding an ASER recovery of $143,752 on the Deer Valley Office Park loan, was $91,731, and the reported cumulative ASER amount was $1.3 million. Standard & Poor's considered five ASER amounts (totaling $90,994), 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 $13,562, and accumulated interest shortfalls have affected class L and all of the classes subordinate to it. Classes L, M, N, and O have had accumulated interest shortfalls outstanding for eight months, which S&P expects to remain outstanding for the foreseeable future. Consequently, S&P lowered its ratings on these classes to 'D (sf)'. Wachovia Bank Commercial Mortgage Trust's series 2005-C19 S&P lowered its ratings on the class H, J, K, L, M, N, and O certificates from Wachovia Bank Commercial Mortgage Trust's series 2005-C19. The lowered ratings reflect accumulated interest shortfalls resulting from ASER amounts related to three ($17.7 million, 1.4%) of the five ($126.3 million, 9.7%) loans that are currently with the special servicer, Torchlight Investors LLC, as well as special servicing fees. An interest rate reduction on the Centennial Tower loan also contributed to the interest shortfalls. S&P lowered its rating on the class G certificate because S&P believes this class is susceptible to future interest shortfalls. As of the Jan. 18, 2011, trustee remittance report ARAs totaling $17.7 million were in effect for three loans. The total reported ASER amount on three loans was $73,787, and the reported cumulative ASER amount was $664,929. Standard & Poor's considered three ASER amounts (totaling $73,787), all of which were based on MAI appraisals, as well as current special servicing fees and an interest rate reduction of $111,765 resulting from the modification of the Centennial Tower loan, in determining its rating actions. The reported monthly interest shortfalls totaled $226,366, and accumulated interest shortfalls have affected class H and all of the classes subordinate to it. Classes J, K, L, M, N, and O have had accumulated interest shortfalls outstanding between three and four months, which S&P expects to remain outstanding for the foreseeable future. Consequently, S&P lowered its ratings on these classes to 'D (sf)'. Rating Actions CD 2006-CD3 Mortgage Trust Commercial mortgage pass-through certificates Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- J CCC- (sf) B (sf) 3.25 74,922 74,922 K D (sf) B- (sf) 2.08 204,554 1,050,017 L D (sf) B- (sf) 1.69 59,487 588,336 M D (sf) CCC+ (sf) 1.43 39,655 396,552 N D (sf) CCC+ (sf) 1.03 59,487 608,464 O D (sf) CCC+ (sf) 0.90 19,828 218,104 P D (sf) CCC (sf) 0.51 59,483 654,311 Q D (sf) CCC (sf) 0.38 19,832 218,152 JPMorgan Chase Commercial Mortgage Securities Corp. Commercial mortgage pass-through certificates series 2005-LDP1 Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- K CCC- (sf) B- (sf) 2.24 659 71,150 L D (sf) CCC+ (sf) 1.73 43,909 208,300 M D (sf) CCC (sf) 1.39 29,270 146,349 N D (sf) CCC- (sf) 1.04 29,274 213,094 P D (sf) CCC-(sf) 0.53 43,905 482,553 LB-UBS Commercial Mortgage Trust 2007-C6 Commercial mortgage pass-through certificates Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- H CCC- (sf) B (sf) 6.80 4,084 4,084 J CCC- (sf) B (sf) 5.41 213,067 657,483 K CCC- (sf) B- (sf) 4.40 154,953 624,984 L D (sf) B- (sf) 2.88 190,428 761,713 M D (sf) B- (sf) 2.38 63,478 255,431 N D (sf) CCC+ (sf) 2.00 47,607 250,111 P D (sf) CCC (sf) 1.87 15,866 95,197 Q D (sf) CCC (sf) 1.62 31,741 227,968 S D (sf) CCC- (sf) 1.37 31,737 253,893 LB-UBS Commercial Mortgage Trust 2007-C7 Commercial mortgage pass-through certificates Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- G CCC+ (sf) B (sf) 5.43 (91,194) 0 H CCC- (sf) B- (sf) 4.55 (60,680) 377,702 J CCC- (sf) B- (sf) 3.80 123,885 499,639 K D (sf) B- (sf) 2.92 144,529 582,895 L D (sf) CCC+ (sf) 2.29 75,013 300,050 M D (sf) CCC (sf) 1.91 45,010 180,039 N D (sf) CCC-(sf) 1.53 45,006 244,448 P D (sf) CCC- (sf) 1.40 15,003 90,020 Q D (sf) CCC- (sf) 1.28 15,003 119,676 S D (sf) CCC-(sf) 1.15 15,003 120,026 Morgan Stanley Capital I Trust 2007-IQ13 Commercial mortgage pass-through certificates series Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- F CCC- (sf) B- (sf) 4.79 36,781 36,781 G D (sf) B- (sf) 3.89 69,211 142,149 H D (sf) CCC+ (sf) 2.74 88,988 456,590 J D (sf) CCC(sf) 2.22 34,561 209,566 K D (sf) CCC- (sf) 2.10 8,638 52,379 L D (sf) CCC- (sf) 1.84 17,281 120,779 Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2005-C17 Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- H B+ (sf) BB- (sf) 3.59 0 0 J CCC+ (sf) B+ (sf) 3.30 (65,644) 0 K CCC- (sf) B (sf) 2.87 (127,356) 0 L D (sf) B- (sf) 2.28 (15,212) 351,340 M D (sf) CCC+ (sf) 1.99 28,299 226,389 N D (sf) CCC (sf) 1.70 28,299 226,389 O D (sf) CCC- (sf) 1.41 28,299 226,389 Wachovia Bank Commercial Mortgage Trust Commercial mortgage pass-through certificates series 2005-C19 Reported Rating interest shortfalls ($) ------ ----------------------- Class To From Credit enhancement Current Accumulated ----- -- ---- ------------------ ------- ----------- G B+ (sf) BB+ (sf) 5.87 (5,331) 0 H CCC- (sf) BB (sf) 4.33 (3,297) 87,666 J D (sf) BB- (sf) 3.71 33,570 95,697 K D (sf) B+ (sf) 3.09 33,570 100,711 L D (sf) B (sf) 2.63 25,175 83,917 M D (sf) B (sf) 2.32 16,783 67,132 N D (sf) B- (sf) 2.16 8,392 33,566 O D (sf) CCC+ (sf) 1.85 16,783 67,132 * S&P Downgrades Ratings on 182 Classes From 67 RMBS Transactions ----------------------------------------------------------------- Standard & Poor's Ratings Services lowered its ratings on 182 classes from 67 U.S. residential mortgage-backed securities transactions backed primarily by scratch-and-dent mortgage loan collateral issued between 2001 and 2006. S&P removed two of the lowered ratings from CreditWatch with negative implications. In addition, S&P affirmed its ratings on 212 classes from 58 of the downgraded transactions, as well as seven other transactions, and removed 15 of the affirmed ratings from CreditWatch negative. S&P also withdrew its ratings on two other classes. The "scratch-and-dent" collateral backing these transactions originally consisted predominantly of reperforming first-lien, fixed- and adjustable-rate, residential mortgage loans secured by one- to four-family properties. The downgrades and affirmations incorporate S&P's current and projected losses, which S&P based on the dollar amounts of loans currently in the transactions' delinquency, foreclosure, and real estate owned pipelines, as well as S&P's projection of future defaults. S&P also incorporated cumulative losses to date in its analysis when assessing rating outcomes. S&P derived its loss assumptions using its criteria listed in the "Related Criteria And Research". As part of its analysis, S&P considered the characteristics of the underlying mortgage collateral, as well as macroeconomic influences. For example, S&P's view of the risk profile of the underlying mortgage pools influences its default projections, while its outlook for housing- price declines and the health of the housing market influence S&P's loss severity assumptions. Furthermore, S&P adjusted its loss expectations for each deal based on upward trends in delinquencies. To assess the creditworthiness of each class, S&P reviewed the individual delinquency and loss trends of each transaction for changes, if any, in S&P's assessment of the risk characteristics, servicing, and the ability to withstand additional credit deterioration. In order to maintain a 'B' rating on a class, S&P assessed whether, in S&P's view, a class could absorb the base- case loss assumptions S&P used in its analysis. In order to maintain a rating higher than 'B', S&P assessed whether the class could withstand losses exceeding the base-case loss assumptions at a percentage specific to each rating category, up to 150% for an 'AAA' rating. For example, in general, S&P would assess whether one class could withstand approximately 110% of its base-case loss assumptions to maintain a 'BB' rating, while S&P would assess whether a different class could withstand approximately 120% of its base-case loss assumptions to maintain a 'BBB' rating. Each class with an affirmed 'AAA' rating can, in S&P's view, withstand approximately 150% of its base-case loss assumptions under its analysis. The lowered ratings reflect S&P's belief that the amount of credit enhancement available for the downgraded classes is not sufficient to cover losses at the previous rating levels, given its current projected losses, due to increased delinquencies. The affirmations reflect S&P's belief that there is sufficient credit enhancement to support the ratings at their current levels. S&P monitors these transactions to incorporate updated losses and delinquency pipeline performance to assess whether, in its view, the applicable credit enhancement features are sufficient to support the current ratings. S&P will continue to monitor these transactions and take additional rating actions in accordance with its criteria. Rating Actions C-BASS Mortgage Loan Asset-Backed Certificates Series 2002-CB2 Rating ------ Class CUSIP To From ----- ----- -- ---- A-2 12489WER1 BBB- (sf) AAA (sf) M-1 12489WET7 B- (sf) AAA (sf) M-2 12489WEU4 CC (sf) BBB (sf) B-1 12489WEV2 CC (sf) CCC (sf) B-2 12489WEW0 CC (sf) CCC (sf) 2002-CB4 Trust Series 2002-CB4 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 12489WFD1 AA+ (sf) AAA (sf) M-2 12489WFE9 B (sf) AA (sf) B-1 12489WFF6 CC (sf) CCC (sf) B-2 12489WFG4 CC (sf) CCC (sf) C-BASS Mortgage Loan Asset Backed Certificates Series 2002-CB5 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 12489WFS8 AA- (sf) AAA (sf) M-2 12489WFT6 B- (sf) BB (sf) 2003-CB2 Trust Series 2003-CB2 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 04542BCW0 BB (sf) A (sf) M-2 04542BCX8 CCC (sf) BB (sf) B-1 04542BCY6 CC (sf) B (sf) B-2 04542BCZ3 CC (sf) CCC (sf) 2003-CB3 Trust Series 2003-CB3 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 12489WGM0 BB+ (sf) AAA (sf) M-2 12489WGN8 CC (sf) BBB (sf) B-1 12489WGP3 CC (sf) B (sf) B-2 12489WGQ1 CC (sf) CCC (sf) ACE Securities Corp Home Equity Loan Trust Series 2004-SD1 Series 2004-SD1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 004421HF3 B (sf) A (sf) M-3 004421HG1 CC (sf) B- (sf) M-4 004421HH9 CC (sf) CCC (sf) ACE Securities Corp. Home Equity Loan Trust, Series 2005-SD3 Series 2005-SD3 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 004421TQ6 BB+ (sf) AA (sf) M-2 004421TR4 CCC (sf) BBB (sf) M-3 004421TS2 CC (sf) CCC (sf) ACE Securities Corp. Home Equity Loan Trust, Series 2005-SD1 Series 2005-SD1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 004421KL6 B- (sf) A+ (sf) M-3 004421KM4 CC (sf) BBB+ (sf) M-4 004421KN2 CC (sf) B (sf) Bayview Financial Mortgage Pass Through Trust 2005-C Series 2005-C Rating ------ Class CUSIP To From ----- ----- -- ---- M-3 07325NBR2 A- (sf) A (sf) M-4 07325NBS0 BB (sf) A- (sf) B-1 07325NBT8 B- (sf) BBB+ (sf) B-2 07325NBU5 CCC (sf) BB (sf) B-3 07325NBV3 CC (sf) CCC (sf) Bayview Financial Mortgage Pass Through Trust Series 2006-B Series 2006-B Rating ------ Class CUSIP To From ----- ----- -- ---- A-IO 07325NDJ8 AAA (sf) AAA (sf)/Watch Neg 1-A2 07325NDL3 AAA (sf) AAA (sf)/Watch Neg 1-A3 07325NDM1 AAA (sf) AAA (sf)/Watch Neg 1-A4 07325NDN9 AAA (sf) AAA (sf)/Watch Neg 1-A5 07325NDP4 AAA (sf) AAA (sf)/Watch Neg 2-A3 07325NDS8 AAA (sf) AAA (sf)/Watch Neg 2-A4 07325NDT6 AAA (sf) AAA (sf)/Watch Neg M-1 07325NDU3 BB- (sf) AA (sf)/Watch Neg M-2 07325NDV1 B- (sf) BBB (sf) M-4 07325NDX7 CC (sf) CCC (sf) B-1 07325NDY5 CC (sf) CCC (sf) B-2 07325NDZ2 CC (sf) CCC (sf) Bayview Financial Mortgage Pass-Through Trust 2006-A Series 2006-A Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 07325NCY6 AA- (sf) AA (sf) M-2 07325NCZ3 BBB (sf) AA- (sf) M-3 07325NDA7 B- (sf) A (sf) M-4 07325NDB5 CCC (sf) A- (sf) B-1 07325NDC3 CCC (sf) BBB+ (sf) B-2 07325NDD1 CC (sf) BB (sf) B-3 07325NDE9 CC (sf) B (sf) Bayview Financial Mortgage Pass-Through Trust 2006-C Series 2006-C Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A1 07325DAB0 AAA (sf) AAA (sf)/Watch Neg 1-A2 07325DAC8 AAA (sf) AAA (sf)/Watch Neg 1-A3 07325DAD6 BB (sf) AA (sf) 1-A4 07325DAE4 CCC (sf) B (sf) 1-A5 07325DAF1 B- (sf) B (sf) 2-A2 07325DAH7 AAA (sf) AAA (sf)/Watch Neg 2-A3 07325DAJ3 CCC (sf) BB (sf) 2-A4 07325DAK0 CCC (sf) BB (sf) M-1 07325DAL8 CC (sf) CCC (sf) Bayview Financial Mortgage Pass-Through Trust, Series 2005-B Series 2005-B Rating ------ Class CUSIP To From ----- ----- -- ---- B-2 07325NBD3 B- (sf) BB (sf) Bayview Financial Mortgage Pass-Through Trust, Series 2005-D Series 2005-D Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 07325NCD2 B+ (sf) AA+ (sf) M-2 07325NCE0 CCC (sf) AA (sf) M-3 07325NCF7 CCC (sf) AA- (sf) M-4 07325NCG5 CC (sf) A+ (sf) M-5 07325NCH3 CC (sf) BBB (sf) M-6 07325NCJ9 CC (sf) BB (sf) B-1 07325NCK6 CC (sf) B (sf) A-F4 07325NCB6 AA (sf) AAA (sf) Bear Stearns Asset Backed Securities Trust 2002-1 Series 2002-1 Rating ------ Class CUSIP To From ----- ----- -- ---- B 07384YCZ7 CC (sf) CCC (sf) Bear Stearns Asset Backed Securities Trust 2002-2 Series 2002-2 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 07384YER3 A- (sf) AA- (sf) Bear Stearns Asset Backed Securities Trust 2003-2 Series 2003-2 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 07384YJV9 B+ (sf) BBB (sf) B 07384YJW7 CC (sf) CCC (sf) Bear Stearns Asset Backed Securities Trust 2003-3 Series 2003-3 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 07384YLU8 BBB+ (sf) AA (sf) M-2 07384YLV6 CCC (sf) A (sf) B 07384YLW4 CC (sf) B (sf) Bear Stearns Asset Backed Securities Trust 2003-SD1 Series 2003-SD1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 07384YKN5 BBB+ (sf) A (sf) B 07384YKP0 CCC (sf) B (sf) Bear Stearns Asset Backed Securities Trust 2003-SD2 Series 2003-SD2 Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 07384YLL8 A (sf) AA+ (sf) B-2 07384YLM6 B- (sf) BB (sf) Bear Stearns Asset Backed Securities Trust 2003-SD3 Series 2003-SD3 Rating ------ Class CUSIP To From ----- ----- -- ---- B 07384YNE2 B- (sf) B (sf) Bear Stearns Asset Backed Securities Trust 2004-1 Series 2004-1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 07384YSZ0 B- (sf) BB (sf) M-3 07384YTF3 CCC (sf) B (sf) B-2 07384YTB2 CC (sf) CCC (sf) Bear Stearns Asset Backed Securities Trust 2004-2 Series 2004-2 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 073879GZ5 AA (sf) AA+ (sf) M-2 073879HA9 CCC (sf) BB (sf) M-3 073879HB7 CC (sf) B (sf) B 073879HC5 CC (sf) CCC (sf) Bear Stearns Asset Backed Securities Trust 2004-SD1 Series 2004-SD1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 07384YSG2 BBB- (sf) A (sf) M-3 07384YSH0 CC (sf) B (sf) B 07384YSJ6 CC (sf) CCC (sf) Bear Stearns Asset Backed Securities Trust 2004-SD2 Series 2004-SD2 Rating ------ Class CUSIP To From ----- ----- -- ---- B-2 07384YTN6 BBB+ (sf) A (sf) B-3 07384YTP1 CCC (sf) B (sf) Bear Stearns Asset Backed Securities Trust 2004-SD3 Series 2004-SD3 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 073879GB8 A (sf) AA (sf) M-2 073879GC6 B- (sf) BBB (sf) M-3 073879GD4 CC (sf) B (sf) B 073879GE2 CC (sf) CCC (sf) Bear Stearns Asset Backed Securities Trust 2004-SD4 Series 2004-SD4 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 073879ME5 BBB- (sf) A (sf) B 073879MG0 CCC (sf) B (sf) Bear Stearns Asset Backed Securities Trust 2006-2 Series 2006-2 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 07388FAD5 A- (sf) AA (sf) M-2 07388FAE3 BBB- (sf) AA- (sf) M-3 07388FAF0 B- (sf) BBB (sf) M-4 07388FAG8 CCC (sf) BB (sf) M-5 07388FAH6 CCC (sf) B (sf) M-6 07388FAJ2 CCC (sf) B- (sf) C-BASS 2003-RP1 Trust Series 2003-RP1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 124860DT1 CCC (sf) AA (sf) M-2 124860DU8 CC (sf) CCC (sf) C-Bass Trust 2001-CB3 Series 2001-CB3 Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 12489WDV3 CC (sf) CCC (sf) Citigroup Mortgage Loan Trust Inc. Series 2005-HE2 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 17307GSU3 A+ (sf) AA (sf) M-2 17307GSV1 B- (sf) A (sf) Citigroup Mortgage Loan Trust Inc. Series 2005-SHL1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 17307GR67 BBB- (sf) AA (sf) M-2 17307GR75 B- (sf) A (sf) Citigroup Mortgage Loan Trust Inc. Series 2006-SHL1 Rating ------ Class CUSIP To From ----- ----- -- ---- A 17309UAA3 A (sf) AAA (sf) M-1 17309UAB1 B- (sf) A (sf) M-3 17309UAD7 CC (sf) CCC (sf) M-4 17309UAE5 CC (sf) CCC (sf) M-5 17309UAF2 CC (sf) CCC (sf) Countrywide Home Loan Trust 2003-SD2 Series 2003-SD2 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 126671ZF6 BB+ (sf) AA (sf) M-2 126671ZG4 CCC (sf) BBB (sf) B-1 126671ZH2 CC (sf) CCC (sf) Countrywide Home Loan Trust 2004-SD2 Series 2004-SD2 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 1266716Z4 B- (sf) AA (sf) B-1 1266717A8 CC (sf) BB (sf) B-2 1266717B6 CC (sf) B (sf) Countrywide Home Loan Trust 2004-SD1 Series 2004-SD1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 1266712J4 A (sf) AA+ (sf) M-2 1266712K1 CCC (sf) BBB (sf) B-1 1266712L9 CC (sf) BB (sf) B-2 1266712M7 CC (sf) CCC (sf) CSFB Trust 2004-CF1 Series 2004-CF1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 22541SBY3 B- (sf) BBB (sf) B 22541SBZ0 CC (sf) B (sf) CSFB Trust 2005-CF1 Series 2005-CF1 Rating ------ Class CUSIP To From ----- ----- -- ---- B 225458M70 B+ (sf) BBB (sf) CSMC Trust 2006-CF1 Series 2006-CF1 Rating ------ Class CUSIP To From ----- ----- -- ---- B-1 225470UB7 BBB (sf) BBB+ (sf) B-2 225470UC5 BB (sf) BBB (sf) B-3 225470UD3 B- (sf) BBB- (sf) CSMC Trust 2006-CF2 Series 2006-CF2 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 12638EAA2 AAA (sf) AAA (sf)/Watch Neg M-1 12638EAE4 AA (sf) AA (sf)/Watch Neg M-3 12638EAG9 B+ (sf) A (sf) CSMC Trust 2006-CF3 Series 2006-CF3 Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 12638GAA7 AAA (sf) AAA (sf)/Watch Neg M-3 12638GAD1 CC (sf) CCC (sf) CWABS Asset-Backed Notes Trust 2004-SD4 Series 2004-SD4 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 126673SE3 AA (sf) AA+ (sf) M-2 126673SF0 B- (sf) BB (sf) M-3 126673SG8 CC (sf) B (sf) B-1 126673SH6 CC (sf) CCC (sf) CWABS Asset-Backed Notes Trust 2005-SD1 Series 2005-SD1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-1 126673G30 AA- (sf) AA+ (sf) M-2 126673G48 CCC (sf) BB (sf) M-3 126673G55 CC (sf) B (sf) B-1 126673G63 CC (sf) CCC (sf) CWABS Asset-Backed Notes Trust 2005-SD2 Series 2005-SD2 Rating ------ Class CUSIP To From ----- ----- -- ---- M-3 1266734Y5 B (sf) A+ (sf) M-4 1266734Z2 CCC (sf) B (sf) M-5 1266735A6 CC (sf) CCC (sf) EMC Mortgage Loan Trust 2004-B Series 2004-B Rating ------ Class CUSIP To From ----- ----- -- ---- A-1 268668DW7 NR AAA (sf) A-2 268668DX5 A- (sf) A (sf) EMC Mortgage Loan Trust 2005-A Series 2005-A Rating ------ Class CUSIP To From ----- ----- -- ---- A 268668EK2 B+ (sf) AAA (sf) M-1 268668EM8 CCC (sf) B (sf) M-2 268668EP1 CC (sf) CCC (sf) EMC Mortgage Loan Trust 2005-B Series 2005-B Rating ------ Class CUSIP To From ----- ----- -- ---- A 268668EW6 B- (sf) AAA (sf) M-1 268668EX4 CCC (sf) B- (sf) M-2 268668EY2 CC (sf) CCC (sf) EMC Mortgage Loan Trust 2006-A Series 2006-A Rating ------ Class CUSIP To From ----- ----- -- ---- A 268668FD7 B (sf) AAA (sf) M-1 268668FE5 CCC (sf) B (sf) B 268668FG0 CC (sf) CCC (sf) Fannie Mae REMIC Trust 2002-W1 Series 2002-W1 Rating ------ Class CUSIP To From ----- ----- -- ---- B-2 31392CMN1 BBB (sf) BBB (sf)/Watch Neg Financial Asset Securities Corp. Series 2004-RP1 Rating ------ Class CUSIP To From ----- ----- -- ---- I-B-3 92922FYQ5 CCC (sf) BBB (sf) Security National Mortgage Loan Trust 2004-1 Series 2004-1 Rating ------ Class CUSIP To From ----- ----- -- ---- AF-3 81441PBR1 A+ (sf) AAA (sf) M-1 81441PBT7 CCC (sf) BBB (sf) M-2 81441PBU4 CC (sf) B (sf) Security National Mortgage Loan Trust 2004-2 Series 2004-2 Rating ------ Class CUSIP To From ----- ----- -- ---- AF-3 81441PBZ3 A- (sf) AAA (sf) AV 81441PCA7 AA- (sf) AAA (sf) M-1 81441PCB5 B- (sf) A (sf) Security National Mortgage Loan Trust 2005-1 Series 2005-1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 81441PCJ8 BBB- (sf) A (sf) B-1 81441PCK5 B- (sf) BBB (sf) B-2 81441PCL3 CCC (sf) BB (sf) Security National Mortgage Loan Trust 2006-1 Series 2006-1 Rating ------ Class CUSIP To From ----- ----- -- ---- 1-A-2 81441LAB6 AA- (sf) AAA (sf) 1-A-3 81441LAC4 BB- (sf) AAA (sf) 2-A 81441LAD2 BB- (sf) AAA (sf) M-1 81441LAE0 CCC (sf) BB (sf) M-2 81441LAF7 CC (sf) CCC (sf) Security National Mortgage Loan Trust 2006-2 Series 2006-2 Rating ------ Class CUSIP To From ----- ----- -- ---- A-3 81441NAC0 B+ (sf) AAA (sf) M-1 81441NAD8 CCC (sf) BB (sf) M-2 81441NAE6 CC (sf) B (sf) B 81441NAF3 CC (sf) CCC (sf) Security National Mortgage Loan Trust 2006-3 Series 2006-3 Rating ------ Class CUSIP To From ----- ----- -- ---- A-2 81441WAB2 B (sf) AAA (sf)/Watch Neg A-3 81441WAC0 CCC (sf) B (sf) M-1 81441WAD8 CC (sf) CCC (sf) Structured Asset Securities Corp. Series 2005-RF4 Rating ------ Class CUSIP To From ----- ----- -- ---- A 86359DQB6 A- (sf) AAA (sf) AIO 86359DQC4 NR AAA (sf) B1 86359DQD2 CCC (sf) BBB (sf) Truman Capital Mortgage Loan Trust 2004-2 Series 2004-2 Rating ------ Class CUSIP To From ----- ----- -- ---- M-3 897896BB1 B+ (sf) BB (sf) Truman Capital Mortgage Loan Trust 2005-1 Series 2005-1 Rating ------ Class CUSIP To From ----- ----- -- ---- A 897896BD7 AAA (sf) AAA (sf)/Watch Neg M-1 897896BE5 BBB (sf) AA- (sf) M-2 897896BF2 CCC (sf) B (sf) M-3 897896BG0 CC (sf) CCC (sf) Wachovia Loan Trust 2005-SD1 Series 2005-SD1 Rating ------ Class CUSIP To From ----- ----- -- ---- M-2 92977XAE3 BBB+ (sf) AA (sf) M-3 92977XAF0 B- (sf) A (sf) B-1 92977XAB9 B- (sf) BBB+ (sf) B-2 92977XAC7 CCC (sf) BB (sf) Ratings Affirmed C-BASS Mortgage Loan Asset-Backed Certificates Series 2002-CB1 Class CUSIP Rating ----- ----- ------ M-2 12489WEK6 AAA (sf) B-1 12489WEL4 BBB (sf) C-BASS Mortgage Loan Asset-Backed Certificates Series 2002-CB2 Class CUSIP Rating ----- ----- ------ A-1 12489WEQ3 AAA (sf) 2002-CB5 Trust Series 2002-CB5 Class CUSIP Rating ----- ----- ------ AF-3 12489WFP4 AAA (sf) AV-2 12489WFW9 AAA (sf) B-1 12489WFU3 CC (sf) 2002-CB4 Trust Series 2002-CB4 Class CUSIP Rating ----- ----- ------ A-IO 12489WEY6 AAA (sf) C-BASS Mortgage Loan Asset Backed Certificates Series 2002-CB5 Class CUSIP Rating ----- ----- ------ AF-3 12489WFP4 AAA (sf) AV-2 12489WFW9 AAA (sf) B-1 12489WFU3 CC (sf) 2003-CB2 Trust Series 2003-CB2 Class CUSIP Rating ----- ----- ------ AF-3 04542BCS9 AAA (sf) 2003-CB3 Trust Series 2003-CB3 Class CUSIP Rating ----- ----- ------ AF-1 12489WGJ7 AAA (sf) ACE Securities Corp Home Equity Loan Trust Series 2004-SD1 Series 2004-SD1 Class CUSIP Rating ----- ----- ------ A-1 004421HD8 AAA (sf) M-1 004421HE6 AA (sf) ACE Securities Corp. Home Equity Loan Trust, Series 2005-SD3 Series 2005-SD3 Class CUSIP Rating ----- ----- ------ A-1 004421TP8 AAA (sf) M-4 004421TT0 CC (sf) ACE Securities Corp. Home Equity Loan Trust, Series 2005-SD1 Series 2005-SD1 Class CUSIP Rating ----- ----- ------ A-1 004421KJ1 AAA (sf) M-1 004421KK8 AA+ (sf) ACE Securities Corp. Home Equity Loan Trust, Series 2006-SD2 Series 2006-SD2 Class CUSIP Rating ----- ----- ------ A 00442MAA5 AAA (sf) M-1 00442MAB3 CCC (sf) M-2 00442MAC1 CC (sf) Bayview Financial Mortgage Pass Through Trust 2005-C Series 2005-C Class CUSIP Rating ----- ----- ------ A-1C 07325NBM3 AAA (sf) A-2 07325NBN1 AAA (sf) M-1 07325NBP6 AA (sf) M-2 07325NBQ4 AA- (sf) Bayview Financial Mortgage Pass Through Trust Series 2006-B Series 2006-B Class CUSIP Rating ----- ----- ------ M-3 07325NDW9 CCC (sf) Bayview Financial Mortgage Pass-Through Trust 2006-A Series 2006-A Class CUSIP Rating ----- ----- ------ A-IO 07325NCN0 AAA (sf) 1-A2 07325NCQ3 AAA (sf) 1-A3 07325NCR1 AAA (sf) 1-A4 07325NCS9 AAA (sf) 1-A5 07325NCT7 AAA (sf) 2-A3 07325NCW0 AAA (sf) 2-A4 07325NCX8 AAA (sf) Bayview Financial Mortgage Pass-Through Trust, Series 2005-B Series 2005-B Class CUSIP Rating ----- ----- ------ 1-A3 07325NAQ5 AAA (sf) 1-A4 07325NAR3 AAA (sf) 1-A5 07325NAS1 AAA (sf) 1-A6 07325NAT9 AAA (sf) 2-A3 07325NAW2 AAA (sf) A-IO 07325NAX0 AAA (sf) M-1 07325NAY8 AA (sf) M-2 07325NAZ5 AA- (sf) M-3 07325NBA9 A (sf) M-4 07325NBB7 A- (sf) B-1 07325NBC5 BBB (sf) Bayview Financial Mortgage Pass-Through Trust, Series 2005-D Series 2005-D Class CUSIP Rating ----- ----- ------ A-F2 07325NBZ4 AAA (sf) A-F3 07325NCA8 AAA (sf) A-IO 07325NBW1 AAA (sf) Bear Stearns Asset Backed Securities Trust 2001-3 Series 2001-3 Class CUSIP Rating ----- ----- ------ A-1 07384YBL9 AAA (sf) A-2 07384YBM7 AAA (sf) A-3 07384YBN5 AAA (sf) M-1 07384YBQ8 B (sf) M-2 07384YBR6 CCC (sf) B 07384YBS4 CC (sf) Bear Stearns Asset Backed Securities Trust 2002-1 Series 2002-1 Class CUSIP Rating ----- ----- ------ 1-A5 07384YCU8 AAA (sf) 2-A 07384YCV6 AAA (sf) M-1 07384YCX2 AA (sf) M-2 07384YCY0 B (sf) Bear Stearns Asset Backed Securities Trust 2002-2 Series 2002-2 Class CUSIP Rating ----- ----- ------ A-1 07384YEM4 AAA (sf) A-2 07384YEN2 AAA (sf) M-1 07384YEQ5 AA+ (sf) B 07384YES1 CCC (sf) Bear Stearns Asset Backed Securities Trust 2002-2 Series 2002-2 Class CUSIP Rating ----- ----- ------ A-1 07384YEM4 AAA (sf) A-2 07384YEN2 AAA (sf) M-1 07384YEQ5 AA+ (sf) B 07384YES1 CCC (sf) Bear Stearns Asset Backed Securities Trust 2003-2 Series 2003-2 Class CUSIP Rating ----- ----- ------ A-1 07384YJN7 AAA (sf) A-3 07384YJQ0 AAA (sf) M-1 07384YJU1 AA (sf) Bear Stearns Asset Backed Securities Trust 2003-3 Series 2003-3 Class CUSIP Rating ----- ----- ------ A-2 07384YLS3 AAA (sf) A-IO 07384YLT1 AAA (sf) Bear Stearns Asset Backed Securities Trust 2003-SD1 Series 2003-SD1 Class CUSIP Rating ----- ----- ------ A 07384YKL9 AAA (sf) M-1 07384YKM7 AA (sf) Bear Stearns Asset Backed Securities Trust 2003-SD2 Series 2003-SD2 Class CUSIP Rating ----- ----- ------ I-A 07384YLH7 AAA (sf) II-A 07384YLJ3 AAA (sf) III-A 07384YLK0 AAA (sf) B-3 07384YLN4 CC (sf) B-4 07384YMH6 CC (sf) B-5 07384YMJ2 CC (sf) Bear Stearns Asset Backed Securities Trust 2003-SD3 Series 2003-SD3 Class CUSIP Rating ----- ----- ------ A 07384YNB8 AAA (sf) M-1 07384YNC6 AA (sf) M-2 07384YND4 A (sf) Bear Stearns Asset Backed Securities Trust 2004-1 Series 2004-1 Class CUSIP Rating ----- ----- ------ A-2 07384YSW7 AAA (sf) A-IO 07384YSX5 AAA (sf) M-1 07384YSY3 AA (sf) Bear Stearns Asset Backed Securities Trust 2004-2 Series 2004-2 Class CUSIP Rating ----- ----- ------ A-1 073879GX0 AAA (sf) A-3 073879HY7 AAA (sf) A-5 073879JA7 AAA (sf) Bear Stearns Asset Backed Securities Trust 2004-SD1 Series 2004-SD1 Class CUSIP Rating ----- ----- ------ A-2 07384YSE7 AAA (sf) M-1 07384YSF4 AA (sf) Bear Stearns Asset Backed Securities Trust 2004-SD2 Series 2004-SD2 Class CUSIP Rating ----- ----- ------ I-A 07384YTH9 AAA (sf) II-A 07384YTJ5 AAA (sf) III-A 07384YTK2 AAA (sf) IV-A 07384YTL0 AAA (sf) B-1 07384YTM8 AA (sf) B-4 07384YTS5 CC (sf) B-5 07384YTT3 CC (sf) Bear Stearns Asset Backed Securities Trust 2004-SD3 Series 2004-SD3 Class CUSIP Rating ----- ----- ------ A-2 073879GJ1 AAA (sf) A-3 073879GK8 AAA (sf) A-4 073879GL6 AAA (sf) Bear Stearns Asset Backed Securities Trust 2004-SD4 Series 2004-SD4 Class CUSIP Rating ----- ----- ------ A-1 073879MC9 AAA (sf) A-2 073879MF2 AAA (sf) M-1 073879MD7 AA (sf) Bear Stearns Asset Backed Securities Trust 2006-2 Series 2006-2 Class CUSIP Rating ----- ----- ------ A-2 07388FAB9 AAA (sf) A-3 07388FAC7 AAA (sf) M-7 07388FAK9 CCC (sf) C-BASS 2003-RP1 Trust Series 2003-RP1 Class CUSIP Rating ----- ----- ------ A 124860DR5 AAA (sf) B-1 124860DV6 CC (sf) C-Bass Trust 2001-CB3 Series 2001-CB3 Class CUSIP Rating ----- ----- ------ M-2 12489WDU5 AAA (sf) Citigroup Mortgage Loan Trust Inc. Series 2005-HE2 Class CUSIP Rating ----- ----- ------ A 17307GST6 AAA (sf) M-3 17307GSW9 CCC (sf) M-4 17307GSX7 CCC (sf) Citigroup Mortgage Loan Trust Inc. Series 2005-SHL1 Class CUSIP Rating ----- ----- ------ A 17307GR42 AAA (sf) M-3 17307GR83 CCC (sf) M-4 17307GR91 CCC (sf) Citigroup Mortgage Loan Trust Inc. Series 2006-SHL1 Class CUSIP Rating ----- ----- ------ M-2 17309UAC9 CCC (sf) Countrywide Home Loan Trust 2003-SD2 Series 2003-SD2 Class CUSIP Rating ----- ----- ------ A-1 126671ZD1 AAA (sf) A-2 126671ZE9 AAA (sf) Countrywide Home Loan Trust 2004-SD2 Series 2004-SD2 Class CUSIP Rating ----- ----- ------ A-1 1266716W1 AAA (sf) A-2 1266716X9 AAA (sf) M-1 1266716Y7 AA+ (sf) Countrywide Home Loan Trust 2004-SD1 Series 2004-SD1 Class CUSIP Rating ----- ----- ------ A-1 1266712G0 AAA (sf) A-2 1266712H8 AAA (sf) CSFB Trust 2004-CF1 Series 2004-CF1 Class CUSIP Rating ----- ----- ------ A-2 22541SBW7 AAA (sf) M-1 22541SBX5 AA (sf) CSFB Trust 2005-CF1 Series 2005-CF1 Class CUSIP Rating ----- ----- ------ A-3 225458M21 AAA (sf) M-1 225458M54 AA (sf) M-2 225458M62 A (sf) CSMC Trust 2006-CF1 Series 2006-CF1 Class CUSIP Rating ----- ----- ------ A-1 225470TY9 AAA (sf) M-1 225470TZ6 AA (sf) M-2 225470UA9 A (sf) CSMC Trust 2006-CF2 Series 2006-CF2 Class CUSIP Rating ----- ----- ------ M-2 12638EAF1 AA- (sf) B-1 12638EAB0 CCC (sf) B-2 12638EAC8 CC (sf) CSMC Trust 2006-CF3 Series 2006-CF3 Class CUSIP Rating ----- ----- ------ M-1 12638GAB5 CCC (sf) M-2 12638GAC3 CCC (sf) CWABS Asset-Backed Notes Trust 2004-SD4 Series 2004-SD4 Class CUSIP Rating ----- ----- ------ A-1 126673SC7 AAA (sf) A-2 126673SD5 AAA (sf) CWABS Asset-Backed Notes Trust 2005-SD1 Series 2005-SD1 Class CUSIP Rating ----- ----- ------ A-1-C 126673K35 AAA (sf) A-2 126673G22 AAA (sf) CWABS Asset-Backed Notes Trust 2005-SD2 Series 2005-SD2 Class CUSIP Rating ----- ----- ------ A-1-C 1266734U3 AAA (sf) A-2 1266734V1 AAA (sf) M-1 1266734W9 AA+ (sf) M-2 1266734X7 AA (sf) B-1 1266735B4 CC (sf) EMC Mortgage Loan Trust 2004-B Series 2004-B Class CUSIP Rating ----- ----- ------ M-1 268668DY3 CCC (sf) M-2 268668DZ0 CC (sf) EMC Mortgage Loan Trust 2005-B Series 2005-B Class CUSIP Rating ----- ----- ------ B 268668EZ9 CC (sf) EMC Mortgage Loan Trust 2006-A Series 2006-A Class CUSIP Rating ----- ----- ------ M-2 268668FF2 CCC (sf) Fannie Mae REMIC Trust 2002-W1 Series 2002-W1 Class CUSIP Rating ----- ----- ------ 1A-4 31392CMJ0 AAA (sf) 1A-IO 31392CMK7 AAA (sf) 2A 31392CMS0 AAA (sf) 2A-IO 31392CMU5 AAA (sf) 3A 31392CMV3 AAA (sf) M 31392CML5 AA (sf) B-1 31392CMM3 A (sf) 3M 31392CMW1 AA (sf) 3B-1 31392CMX9 A (sf) 3B-2 31392CMY7 BBB (sf) B-3 31392CMP6 CC (sf) 3B-3 31392CMZ4 BB (sf) 3B-4 31392CNA8 B (sf) Financial Asset Securities Corp. Series 2004-RP1 Class CUSIP Rating ----- ----- ------ I-F 92922FYJ1 AAA (sf) I-HJ 92922FYK8 AAA (sf) I-S 92922FYL6 AAA (sf) II-A 92922FZD3 AAA (sf) I-B-1 92922FYN2 AA (sf) II-B-1 92922FYV4 AA (sf) I-B-2 92922FYP7 A (sf) II-B-2 92922FYW2 A (sf) II-B-3 92922FYX0 CCC (sf) I-B-4 92922FYR3 CC (sf) II-B-4 92922FYY8 CCC (sf) II-B-5 92922FYZ5 CC (sf) Salomon Brothers Mortgage Securities VII Inc. Series 2001-2 Class CUSIP Rating ----- ----- ------ M-1 79548K6E3 AAA (sf) M-2 79548K6F0 AA (sf) M-3 79548K6G8 BBB (sf) Salomon Mortgage Loan Trust, Series 2003-CB1 Series 2003-CB1 Class CUSIP Rating ----- ----- ------ AF 79549ARU5 AAA (sf) M-1 79549ARX9 AAA (sf) M-2 79549ARY7 B (sf) B-1 79549ARZ4 CCC (sf) Security National Mortgage Loan Trust 2004-1 Series 2004-1 Class CUSIP Rating ----- ----- ------ AV 81441PBS9 AAA (sf) Security National Mortgage Loan Trust 2005-1 Series 2005-1 Class CUSIP Rating ----- ----- ------ AF-1 81441PCE9 AAA (sf) AF-2 81441PCF6 AAA (sf) AV 81441PCG4 AAA (sf) M-1 81441PCH2 AA (sf) Security National Mortgage Loan Trust 2006-1 Series 2006-1 Class CUSIP Rating ----- ----- ------ 1-A-1 81441LAA8 AAA (sf) Security National Mortgage Loan Trust 2006-2 Series 2006-2 Class CUSIP Rating ----- ----- ------ A-1 81441NAA4 AAA (sf) A-2 81441NAB2 AAA (sf) Security National Mortgage Loan Trust 2006-3 Series 2006-3 Class CUSIP Rating ----- ----- ------ A-1 81441WAA4 AAA (sf) Structured Asset Securities Corp. Series 2005-RF4 Class CUSIP Rating ----- ----- ------ B2 86359DQE0 CCC (sf) B3 86359DQF7 CC (sf) Truman Capital Mortgage Loan Trust 2004-1 Series 2004-1 Class CUSIP Rating ----- ----- ------ A-1 897896AN6 AAA (sf) A-2 897896AP1 AAA (sf) M-1 897896AR7 AA (sf) M-2 897896AS5 B (sf) Truman Capital Mortgage Loan Trust 2004-2 Series 2004-2 Class CUSIP Rating ----- ----- ------ A-1 897896AW6 AAA (sf) A-2 897896AX4 AAA (sf) M-1 897896AZ9 AA (sf) M-2 897896BA3 A (sf) M-4 897896BC9 CCC (sf) Truman Capital Mortgage Loan Trust 2005-1 Series 2005-1 Class CUSIP Rating ----- ----- ------ M-3 897896BG0 CCC (sf) Wachovia Loan Trust 2005-SD1 Series 2005-SD1 Class CUSIP Rating ----- ----- ------ A-1 92977XAA1 AAA (sf) M-1 92977XAD5 AA+ (sf) ********* Monday's edition of the TCR delivers a list of indicative prices for bond issues that reportedly trade well below par. Prices are obtained by TCR editors from a variety of outside sources during the prior week we think are reliable. Those sources may not, however, be complete or accurate. The Monday Bond Pricing table is compiled on the Friday prior to publication. Prices reported are not intended to reflect actual trades. Prices for actual trades are probably different. Our objective is to share information, not make markets in publicly traded securities. Nothing in the TCR constitutes an offer or solicitation to buy or sell any security of any kind. It is likely that some entity affiliated with a TCR editor holds some position in the issuers" public debt and equity securities about which we report. Each Tuesday edition of the TCR contains a list of companies with insolvent balance sheets whose shares trade higher than $3 per share in public markets. At first glance, this list may look like the definitive compilation of stocks that are ideal to sell short. Don't be fooled. Assets, for example, reported at historical cost net of depreciation may understate the true value of a firm's assets. A company may establish reserves on its balance sheet for liabilities that may never materialize. The prices at which equity securities trade in public market are determined by more than a balance sheet solvency test. A list of Meetings, Conferences and Seminars appears in each Wednesday's edition of the TCR. Submissions about insolvency- related conferences are encouraged. Send announcements to conferences@bankrupt.com by e-mail. On Thursdays, the TCR delivers a list of recently filed Chapter 11 cases by individuals and business entities estimating assets and debts or disclosing assets and liabilities at less than $1,000,000. The list includes links to freely downloadable images of the small-dollar business-related petitions in Acrobat PDF format. Each Friday's edition of the TCR includes a review about a book of interest to troubled company professionals. All titles are available at your local bookstore or through Amazon.com. Go to http://www.bankrupt.com/books/to order any title today. Monthly Operating Reports are summarized in every Saturday edition of the TCR. The Sunday TCR delivers securitization rating news from the week then-ending. For copies of court documents filed in the District of Delaware, please contact Vito at Parcels, Inc., at 302-658-9911. For bankruptcy documents filed in cases pending outside the District of Delaware, contact Ken Troubh at Nationwide Research & Consulting at 207/791-2852. ********* S U B S C R I P T I O N I N F O R M A T I O N Troubled Company Reporter is a daily newsletter co-published by Bankruptcy Creditors" Service, Inc., Fairless Hills, Pennsylvania, USA, and Beard Group, Inc., Frederick, Maryland, USA. Jhonas Dampog, Marites Claro, Joy Agravante, Rousel Elaine Tumanda, Howard C. Tolentino, Joseph Medel C. Martirez, Denise Marie Varquez, Philline Reluya, Ronald C. Sy, Joel Anthony G. Lopez, Cecil R. Villacampa, Sheryl Joy P. Olano, Carlo Fernandez, Christopher G. Patalinghug, and Peter A. Chapman, Editors. Copyright 2011. All rights reserved. ISSN: 1520-9474. This material is copyrighted and any commercial use, resale or publication in any form (including e-mail forwarding, electronic re-mailing and photocopying) is strictly prohibited without prior written permission of the publishers. Information contained herein is obtained from sources believed to be reliable, but is not guaranteed. The TCR subscription rate is $775 for 6 months delivered via e- mail. Additional e-mail subscriptions for members of the same firm for the term of the initial subscription or balance thereof are $25 each. For subscription information, contact Christopher Beard at 240/629-3300. *** End of Transmission ***