/raid1/www/Hosts/bankrupt/TCR_Public/111218.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, December 18, 2011, Vol. 15, No. 350
Headlines
1ST FINANCIAL: DBRS Confirms Sr. Cash Collateral Account at 'BB'
ABACUS 2005-1: S&P Lowers Rating on Class A-1 From 'CC' to 'D'
ACACIA CRE CDO 1: Moody's Lowers Rating of Cl. A Notes to 'C'
AEGIS ASSET: S&P Lowers Rating NIMs Class N2 From 'CCC' to 'D'
ALTIUS I: S&P Lowers Ratings on 2 Classes From 'CCC-' to 'CC'
ARES X CLO: Moody's Raises Rating of Class D-1 Notes to 'Ba1'
ARMSTRONG LOAN: Moody's Raises Cl. F Notes Rating to Baa2 From Ba1
ASHFORD CDO: Moody's Raises Rating of Class A-1LB Notes to 'Ba2'
ASSET REPACKAGING 2009-2: S&P Says Class B 'BB' Rating Off Watch
AURUM CLO: S&P Affirms Ratings on 2 Classes of Notes at 'B'
AXIS EQUIPMENT: DBRS Puts 'BB' on Class D Rating
BACM 2002-PB2: Moody's Reviews 'B1' Rating of Cl. G Notes
BALBOA CDO: Moody's Raises Cl. B Notes Rating to 'B2' From 'Caa2'
BANC OF AMERICA: Moody's Raises Rating of Cl. K-CP Notes to 'Ba1'
BEAR STEARNS: DBRS CONFIRMS CLASS J AT 'BB'
BEAR STEARNS: S&P Lowers Class J Cert. Rating to 'D'
BELIZE MORTGAGE: Moody's Raises Cl. A Notes Rating to Aaa From Ba1
BLACKROCK SENIOR: S&P Raises Ratings on 2 Classes of Notes to 'B+'
BRASCAN STRUCTURED: Fitch Affirms Junk Rating on $13.4 Mil. Notes
CALLIDUS DEBT: Moody's Raises Rating of Class B-2 Notes to 'Ba1'
CANYON CAPITAL: S&P Raises Rating on Class D Notes to 'BB-'
CBA COMMERCIAL: S&P Lowers Series 2005-1 Class M-2 Rating to 'D'
CGCMT 2006-FL2: Moody's Lowers Rating of Cl. K Notes to 'B3'
CD 2005-CD1: Moody's Affirms Rating of Cl. D Notes at 'Ba1'
CITIGROUP COMMERCIAL: S&P Cuts 4 Classes Ratings to 'D'
COAST INVESTMENT: S&P Affirms 'CCC+' Ratings on 2 Classes of Notes
COMM 2006-FL12: Moody's Lowers Rating of Cl. D Notes to 'Ba1'
COMM 2006-FL12: S&P Lowers Ratings 6 Classes of Certs. to 'CCC-'
CONCORD REAL ESTATE: Moody's Affirms 'Ba3' Rating of Cl. B Notes
CONTINENTAL AIRLINES: Moody's Affirms Series 1998-3B Rating at Ba2
CSFB 2001-CKN5: Moody's Reviews 'B2' Cl. J Notes Rating
CSFB 2006-TFL2: Moody's Affirms Rating of Cl. KER-B Notes at 'Ba2'
CSFB 2007-TFL1: Moody's Raises Rating of Cl. F Notes to 'Ba1'
CWALT INC: Moody's Lowers Rating of Cl. A-2-A Notes to 'Caa1'
EQUIFIRST LOAN: Moody's Lowers Rating of Cl. A-2A Notes to Caa1
FIFTH THIRD: DBRS Confirms Series G Rating at 'BB'
FIRST HORIZON: S&P Raises Rating on Class I-A-2 Cert. From 'CCC'
G-STA 2003: Fitch Affirms Junk Rating on Four Note Classes
GE COMMERCIAL: DBRS Confirms Class E Rating at 'B'
GECMC 2002-2: Moody's Affirms Rating of Cl. K Notes at 'Ba2'
GMAC 1999-C2: Moody's Raises Rating of Cl. J Notes to 'Ba2'
GMAC 1999-C3: Moody's Downgrades Rating of Cl. H Notes to 'B3'
GMAC 2002-C1: Moody's Affirms Rating of Cl. J Notes at 'B1'
GMAC COMMERCIAL 2002-C3: S&P Lowers Class J Cert. Rating to 'D'
GREENWICH CAPITAL: S&P Affirms 'B-' Rating on Class O
GULF STREAM: Moody's Upgrades Class D Notes Rating to 'Ba2'
INDYMAC MANUFACTURED: S&P Cuts Rating on Class A-2 Certs. to 'CC'
IVY HILL: Moody's Gives Ba2 Rating to US$19-Mil. Class E Notes
IVY HILL: S&P Gives 'BB' Rating on Class E Deferrable Notes
JPMCC 2000-C10: Moody's Affirms Rating of Cl. G Notes at 'Caa3'
JPMORGAN CHASE: S&P Lowers Rating on Class D Certificates to 'CCC'
KNIGHTSBRIDGE CLO: S&P Withdraws 'BB' Rating on Class E Notes
MACH ONE: Fitch Affirms Rating on 14 Classes of Notes
MAGMA CDO: Moody's Upgrades Rating of $14.5MM Notes to 'Ba3'
MERRILL LYNCH: DBRS Cuts Ratings on Two Loan Classes to 'D'
MERRILL LYNCH: DBRS Downgrades Class M Rating to 'D'
MERRILL LYNCH: S&P Cuts Rating on Class B-5 to 'CC'
MERRILL LYNCH: S&P Withdraws 'D' Rating on Class G
MILL CREEK: S&P Gives 'BB' Rating on Class E Deferrable Notes
MIRAMAX LLC: S&P Gives 'BB' Rating on Class B Asset-Backed Notes
MLCFC 2006-4: Moody's Reviews 'Ba2' Rating of Cl. B Notes
MLMT COMMERCIAL: Fitch Junks Rating on Nine Note Classes
MORGAN STANLEY: S&P Cuts 2 Certs. Classes Ratings to 'D'
MORGAN STANLEY: S&P Cuts Rating on Class C Certs. to 'D'
NEWCASTLE CDO: Fitch Affirms Junk Rating on Three Note Classes
SALT VERDE: S&P Keeps 'B' Rating on Subordinated Bonds
SARGAS CLO: Fitch Raises Rating on Class E Notes to 'BBsf'
SOUTH COAST: Moody's Lowers Rating of Class A-2 Notes to 'B1'
SPGS SPC: S&P Lowers 2 Classes of Notes Ratings to 'D' on Losses
STRUCTURED ASSET: S&P Lowers Rating on Class B-2 to 'CC'
TENNESSEE ENERGY: Moody's Reviews 'Ba3' Bond Rating For Upgrade
TRICADIA CDO: Moody's Raises Rating of US$35-Mil. Notes to 'Ba2'
TRUP CDO: Moody's Lowers Rating of $67 Million Notes to 'Ba3'
UBS-CITIGROUP COMMERCIAL: DBRS Assigns Class F Rating at 'BB'
UBSC 2011-C1: Moody's Assigns (P)Ba2 Rating to Cl. F Notes
VALHALLA CLO: Moody's Lowers Rating of Class B Notes to 'Ba3'
WACHOVIA BANK 2006-C26: S&P Cuts Rating on Class E Certs. to 'B-'
WRIGHTWOOD CAPITAL: Moody's Affirms Rating of Cl. B Notes at 'Ba3'
ZAIS INVESTMENT: Moody's Upgrades Rating of $25MM Notes to 'B1'
* S&P Affirms Ratings on 189 Cert. Classes From Canadian CMBS
* S&P Lowers Ratings on 14 Tranches From 5 US CDOs to 'D'
*********
1ST FINANCIAL: DBRS Confirms Sr. Cash Collateral Account at 'BB'
----------------------------------------------------------------
DBRS has assigned ratings to these classes issued by 1st Financial
Credit Card Master Note Trust II (Trust II), Series 2011-A:
-- $83.1 million Series 2011-A Notes, Class A rated AAA (sf)
-- $11.8 million Series 2011-A Notes, Class B rated AA (high)
(sf)
-- $13.4 million Series 2011-A Notes, Class C rated A (high)
(sf)
-- $16.5 million Series 2011-A Notes, Class D rated BBB (high)
(sf)
This transaction represents the first series issued by Trust II in
2011.
In connection with the issuance of Series 2011-A, approximately
$95 million of receivables will be transferred from 1st Financial
Credit Card Master Note Trust III ("Trust III") to 1st Financial
Credit Card Master Note Trust II ("Trust II"). After the
transaction is issued, there will be six series outstanding in
Trust II.
DBRS has also confirmed the exiting ratings in both Trust II and
Trust III. The rating confirmations on the existing series are
due to the ability of the transactions to withstand stressed cash
flow assumptions, the conservative nature of DBRS base case
variables (principal payment rate, charge-offs and yield), the
credit enhancement for each series, rated note and rated Cash
Collateral Accounts, the presence of excess spread triggers with a
3.5% buffer and the current level of excess spread. Current
performance has also been in line with DBRS expectations.
The ratings reflect the ability of the transaction structure to
withstand significant stresses relative to base case losses, yield
stresses and payment rate stresses, as appropriate for the rating
category.
1st Financial Credit Card Master Note Trust II, Series 2009-A
Intermediate Cash Collateral Account Confirmed BB (sf) --
Dec 15, 2011
ABACUS 2005-1: S&P Lowers Rating on Class A-1 From 'CC' to 'D'
--------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 37
tranches from 11 corporate-backed synthetic collateralized debt
obligation (CDO) transactions, 15 tranches from 13 synthetic CDO
transactions backed by residential mortgage-backed securities
(RMBS), and 8 tranches from two synthetic CDO transactions backed
by commercial mortgage-backed securities (CMBS). "In addition, we
affirmed our ratings on 44 tranches from 22 corporate-backed
synthetic CDO transactions, 32 tranches from 10 synthetic CDO
transactions backed by CMBS, and two tranches from one synthetic
CDO transaction backed by RMBS. We withdrew our rating on
one class from one synthetic CDO retranching," S&P said.
"We lowered our ratings on classes from synthetic CDOs that had
experienced negative rating migration in their underlying
reference portfolios or had reductions to the credit enhancement
available to them. We lowered our ratings to 'D (sf)' on tranches
that either experienced principal losses or are expected not to
receive their full principal back at maturity. The affirmations
reflect, in our view, the sufficient credit support available at
the current rating levels," S&P said.
Standard & Poor's 17g-7 Disclosure Report
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at:
http://standardandpoorsdisclosure-17g7.com
Ratings Lowered
ABACUS 2005-1 Ltd.
Rating
Class To From
A-1 D (sf) CC (sf)
ABACUS 2005-2 Ltd.
Rating
Class To From
A-1 D (sf) CC (sf)
A-2 D (sf) CC (sf)
ABACUS 2006-13 Ltd.
Rating
Class To From
L D (sf) CC (sf)
M D (sf) CC (sf)
ABSpoke 2005-IVA Ltd.
Rating
Class To From
ABSpoke D (sf) CC (sf)
ABSpoke 2005-VA Ltd.
Rating
Class To From
ABSpoke D (sf) CC (sf)
Arlo III Ltd.
$35 mil ARLO III Limited Series 2005 (Hyde Park)
Rating
Class To From
Notes D (sf) CC (sf)
Calculus HG CDO Trust Series 2006-1
Rating
Class To From
VarDisTrUn D (sf) CC (sf)
Calculus HG CDO Trust Series 2006-2
Rating
Class To From
VarDisTrUn D (sf) CC (sf)
Credit Default Swap
$666.667 mil Swap Rating - Portfolio CDS Ref No. 37798402
Rating
Class To From
Notes Dsrp (sf) CCsrp (sf)
Eirles Two Ltd.
Series 212
Rating
Class To From
212 D (sf) CC (sf)
Eirles Two Ltd.
Series 211
Rating
Class To From
211 D (sf) CC (sf)
Eirles Two Ltd.
Series 210
Rating
Class To From
Series 210 D (sf) CC (sf)
Eirles Two Ltd.
Series 209
Rating
Class To From
Series 209 D (sf) CC (sf)
Eirles Two Ltd.
Series 208
Rating
Class To From
Series 208 D (sf) CC (sf)
Eirles Two Ltd.
Series 242-245 & 247
Rating
Class To From
Series 242 D (sf) CC (sf)
Series 245 D (sf) CC (sf)
Infiniti SPC Ltd.
EUR16.4 mil, $178 mil Kenmore Street Synthetic CDO 2006-2
Segregated
Portfolio
Rating
Class To From
7A-2 D (sf) CCC- (sf)
7B-1 D (sf) CCC- (sf)
7C-1 D (sf) CC (sf)
7EA-2 D (sf) CCC- (sf)
7EB-1 D (sf) CCC- (sf)
Infiniti SPC Limited
EUR8 mil, $95 mil Aladdin Synthetic CDO 2006-1
Rating
Class To From
A D (sf) CCC- (sf)
B D (sf) CC (sf)
Mint 2005-1 Ltd.
Rating
Class To From
2C-1 D (sf) CCC- (sf)
2C-2 D (sf) CCC- (sf)
2C-3 D (sf) CCC- (sf)
C-1 D (sf) CCC- (sf)
C-2 D (sf) CCC- (sf)
C-3 D (sf) CCC- (sf)
C-4 D (sf) CCC- (sf)
D-1 D (sf) CC (sf)
D-2 D (sf) CC (sf)
E D (sf) CC (sf)
2E D (sf) CC (sf)
Morgan Stanley Managed ACES SPC
Series 2006-6
Rating
Class To From
IIIA D (sf) CC (sf)
IIIB D (sf) CC (sf)
IIIC D (sf) CC (sf)
IIID D (sf) CC (sf)
Morgan Stanley Managed ACES SPC
Series 2006-9
Rating
Class To From
IIIA D (sf) CC (sf)
IIIB D (sf) CC (sf)
Morgan Stanley Managed ACES SPC
Series 2007-5
Rating
Class To From
IIA D (sf) CC (sf)
III SrB D (sf) CC (sf)
IIIA D (sf) CC (sf)
IIIF D (sf) CC (sf)
IIIH D (sf) CC (sf)
IIII D (sf) CC (sf)
IIIJ D (sf) CC (sf)
Morgan Stanley Managed ACES SPC
Series 2007-10
Rating
Class To From
IIA D (sf) CC (sf)
IIIA D (sf) CC (sf)
Morgan Stanley Managed ACES SPC
Series 2007-15
Rating
Class To From
IIIA D (sf) CC (sf)
North Street Referenced Linked Notes 2005-8 Ltd.
Rating
Class To From
B D (sf) CC (sf)
REVE SPC
Series 60
Rating
Class To From
A D (sf) CC (sf)
SPGS SPC
Series MSC2007-SRR3
Rating
Class To From
D CC (sf) CCC- (sf)
E CC (sf) CCC- (sf)
F CC (sf) CCC- (sf)
G CC (sf) CCC- (sf)
H CC (sf) CCC- (sf)
J CC (sf) CCC- (sf)
Ratings Affirmed
ABACUS 2006-10 Ltd.
Class Rating
A CCC- (sf)
B CCC- (sf)
C CCC- (sf)
D CCC- (sf)
E CCC- (sf)
F CCC- (sf)
G CCC- (sf)
J CCC- (sf)
K CC (sf)
L CC (sf)
ABACUS 2006-13 Ltd.
Class Rating
A CC (sf)
B CC (sf)
C CC (sf)
D CC (sf)
E CC (sf)
F CC (sf)
G CC (sf)
H CC (sf)
K CC (sf)
ABACUS 2007-18 Ltd.
Class Rating
A-1 CC (sf)
A-3 CC (sf)
Credit Default Swap
EUR50 mil Morgan Stanley Capital Services Inc. - DekaBank Deutsche
Girozentrale, Series NG5HV
Class Rating
Notes CCC-srp (sf)
Credit Default Swap
$250.25 mil MBIA Insurance Corp - Deutsche Bank AG New York Branch
Class Rating
Tranche CCsrp (sf)
Credit Default Swap
$50 mil Morgan Stanley Capital Services Inc - K2 Corporation,
Series NG5FG
Class Rating
Notes CCC-srp (sf)
Credit Default Swap
$50 mil Morgan Stanley Capital Services Inc - K2 Corporation,
Series NG5FR
Class Rating
Notes CCC-srp (sf)
Global Credit Pref Corp.
Class Rating
Pfd Shares P-5(Low) (sf)
CCC- (sf)
High Grade Structured Credit 2004-1 Ltd.
Class Rating
D CCC- (sf)
E CCC- (sf)
Infiniti SPC Ltd. EUR16.4 mil, $178 mil Kenmore Street Synthetic
CDO 2006-2
Segregated Portfolio
Class Rating
7A-1 CCC- (sf)
M-2 SPC
Series 2005-L
Class Rating
Note CCC- (sf)
M-2 SPC
Series 2005-K
Class Rating
FRN CCC- (sf)
M-2 SPC
Series 2005-J
Class Rating
FRN CCC- (sf)
M-2 SPC
Series 2005-G
Class Rating
FRN CCC- (sf)
M-2 SPC
Series 2005-1
Class Rating
Notes CCC- (sf)
Maclaurin SPC
Series 2007-1
Class Rating
B CC (sf)
Maclaurin SPC
Series 2007-2
Class Rating
B CC (sf)
Mint 2005-1 Ltd.
Class Rating
A-1 CCC- (sf)
A-2 CCC- (sf)
2A CCC- (sf)
B-1 CCC- (sf)
B-2 CCC- (sf)
B-3 CCC- (sf)
2B-1 CCC- (sf)
2B-2 CCC- (sf)
Morgan Stanley Managed ACES SPC
Series 2006-6
Class Rating
Jr Sup Sr CCC- (sf)
IA CCC- (sf)
IB CCC- (sf)
IC CCC- (sf)
IIA CCC- (sf)
IIB CCC- (sf)
IID CCC- (sf)
Morgan Stanley Managed ACES SPC
Series 2006-9
Class Rating
JrSuperSr CCC- (sf)
JrSuperSrB CCC- (sf)
SbJrSuprSr CCC- (sf)
IA CCC- (sf)
IC CCC- (sf)
IIA CCC- (sf)
IIB CCC- (sf)
IIC CCC- (sf)
IID CCC- (sf)
Pivot Master Trust
Series 1
Class Rating
Series 1 CCC- (sf)
Pivot Master Trust
Series 2
Class Rating
Series 2 CCC- (sf)
Pivot Master Trust
Series 3
Class Rating
Series 3 CCC- (sf)
Pivot Master Trust
Series 4
Class Rating
Series 4 CCC- (sf)
Pivot Master Trust
Series 8
Class Rating
Series 8 CCC- (sf)
Pivot Master Trust
Series 6
Class Rating
Series 6 CCC- (sf)
Pivot Master Trust
Series 7
Class Rating
Series 7 CCC- (sf)
Pivot Master Trust
Series 5
Class Rating
Series 5 CCC- (sf)
Rutland Rated Investments
$12.5 mil Dryden XII - IG Synthetic CDO 2006-3
Class Rating
A6-$LS CCC- (sf)
SPGS SPC
Series MSC 2006-SRR1-A2
Class Rating
A2 CC (sf)
A2-S CC (sf)
SPGS SPC
Series MSC 2006-SRR1-B
Class Rating
B CC (sf)
B-S CC (sf)
SPGS SPC, acting for the account of SRRSPOKE 2007-IA Segregated
Porfolio
Class Rating
I CC (sf)
Sub Notes CC (sf)
SPGS SPC, acting for the account of SRRSPOKE 2007-IB Segregated
Portfolio
Class Rating
I CC (sf)
Sub Notes CC (sf)
Rating Withdrawn
Structured Investments Corp.
Series 81
Rating
Class To From
Notes NR CCC- (sf)
NR -- Not rated.
Other Ratings Outstanding
ABACUS 2005-1 Ltd.
Class Rating
A-2 D (sf)
B D (sf)
C D (sf)
D D (sf)
ABACUS 2005-2 Ltd.
Class Rating
A-3 D (sf)
B D (sf)
C D (sf)
D D (sf)
ACACIA CRE CDO 1: Moody's Lowers Rating of Cl. A Notes to 'C'
-------------------------------------------------------------
Moody's has downgraded the rating of one class and affirmed the
ratings of five classes of Notes issued by Acacia CRE CDO 1, Ltd.
The downgrade is due to the deterioration in the credit quality of
the underlying portfolio as evidenced by increased level of under-
collateralization, the occurance of an Event of Default (EOD), and
amount of interest rate swap termination fee. The affirmations
are due to key transaction parameters performing within levels
commensurate with the existing ratings levels. The rating action
is the result of Moody's on-going surveillance of commercial real
estate collateralized debt obligation and re-remic (CRE CDO and
Re-Remic) transactions.
Cl. A, Downgraded to C (sf); previously on Feb 16, 2011 Downgraded
to Ca (sf)
Cl. B, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to
C (sf)
Cl. C, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to
C (sf)
Cl. D, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to
C (sf)
Cl. E, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to
C (sf)
Cl. F, Affirmed at C (sf); previously on Mar 5, 2010 Downgraded to
C (sf)
RATINGS RATIONALE
Acacia CRE CDO 1, Ltd., is a static cash CRE CDO backed by a
portfolio of commercial mortgage backed securities (CMBS) (79.8%),
CRE CDO debt (11.8%), and residential mortgage backed securities
(RMBS) (8.4%) as noted in the October 31, 2011 Trustee report. The
aggregate Note balance of the transaction, including Preferred
Shares, has decreased to $277.9 million from $300 million at
issuance, with the pay-down directed to the Class A Notes. The
pay-down was triggered by the principal repayment of underlying
collateral, and reclassification of interest payments from
Defaulted Securities as Principal Proceeds, and the failure of
certain par value tests.
There are thirty-three assets with a par balance of $90.0 million
(62.7% of the current pool balance) that are considered Defaulted
Securities as of the October 31, 2011 Trustee report, compared to
forty-six assets (66.9% of the pool balance) at last review. We
are expecting high losses to occur once they are realized.
Also, as of the October 31, 2011 Trustee report, the current
par balance of the collateral, including Defaulted Securities, is
$143.6 million, which represents a 44.8% under-collateralization
to the transaction, compared to 23% under-collateralization
at last review. This corresponds to the current senior
overcollateralization ratio of 34.5%, compared to 43.7% at
last review.
As of the October 2011 payment date, interest shortfalls from the
underlying collateral resulted in (i) a default in the interest
swap payment which triggered an early termination of the interest
rate swap agreement; (ii) non-payment of interest on all Non-
PIKable and PIKable classes. The default in payment of interest on
Class A Notes or Class B Notes caused an Event of Default (EOD) on
October 13, 2011. As of the October 31, 2011 Trustee report, the
total amount of the termination payment on the interest rate swap
due was approximately $22.5 million, which represents 10.2% of
the current total collateral par amount. Currently, the EOD is
continuing and the Acceleration of Maturity has not been declared.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
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.
We have updated credit estimates for the non-Moody's rated
collateral. The bottom-dollar WARF is a measure of the default
probability within a collateral pool. Moody's modeled a bottom-
dollar WARF of 7,439 compared to 7,986 at last review. The
distribution of current ratings and credit estimates is: Aaa-Aa3
(0.0% compared to 1.6% at last review), A1-A3 (5.2% compared to
3.7% at last review), Baa1-Baa3 (4.7% compared to 3.7% at last
review), Ba1-Ba3 (13.8% compared to 8.5% at last review), B1-B3
(0.7% compared to 0.9% at last review), and Caa1-C (75.6% compared
to 81.6% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 3.9 years compared
to 5.7 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
4.5% compared to 11.5% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 100.0%, the same as last review.
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. However, in light of the
performance indicators noted above, Moody's believes that it is
unlikely that the ratings announced are sensitive to further
change.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected
range will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on
an assessment of a range of factors including, but not
exclusively, the performance metrics.
Primary sources of assumption uncertainty are the extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline
and job creation rebounds. The hotel and multifamily sectors
are in recovery and improvements in the office sector continue,
with fundamentals in Gateway cities outperforming their
suburban counterparts. However, office demand is closely tied
to employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector has
been mixed with on-going rent deflation and leasing challenges.
Across all property sectors, the availability of debt capital
continues to improve with monetary policy expected to remain
supportive and interest rate hikes postponed. Moody's central
global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter, amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The methodologies used in this rating were "Moody's Approach to
Rating SF CDOs" published in November 2010, and "Moody's Approach
to Rating Commercial Real Estate CDOs" published in July 2011.
AEGIS ASSET: S&P Lowers Rating NIMs Class N2 From 'CCC' to 'D'
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on two net
interest margin securities (NIMS) classes to 'D (sf)' from two
U.S. residential mortgage-backed securities (RMBS) transactions
issued in 2005.
"For this review, we applied the performance tests described in
'Standard & Poor's Surveillance Methodology For U.S. RMBS Net
Interest Margin Securities,' published March 17, 2009, and
analyzed whether each NIMS class is receiving, in our view,
sufficient cash flows to make appropriate payments of applicable
interest and principal to the NIMS holders," S&P said.
"The downgrades reflect our view that the NIMS classes are
not receiving adequate cash flows to pay the applicable
interest and principal amounts that are due to the NIMS
holders. We attribute these interest shortfalls to the
underlying transactions' inability to maintain sufficient
overcollateralization (O/C) needed for residual interest
to be released to the applicable NIMS classes. Generally,
for each of these NIMS classes, the O/C levels for the
underlying deals have been below their targets for a period
of six months or greater, and therefore the NIMS classes have
experienced interest shortfalls during this time. Additionally,
based on our observations of the performance trends of products
and vintages consistent with the underlying transactions, we
believe that it is unlikely that residual interest will be
available for the NIMS classes going forward. As a result, the
downgrades incorporate our interest shortfall criteria (refer to
'Methodology for Assessing The Impact Of Interest Shortfalls On
U.S. RMBS,' published Sept. 23, 2011)," S&P related.
Rating Actions
Aegis Asset Backed Securities Trust 2005-2
Series 2005-2
Rating
Class CUSIP To From
N2 00764MFM4 D (sf) CCC (sf)
FBR Securitization Trust 2005-5
Series 2005-5
Rating
Class CUSIP To From
N1 30246QDC4 D (sf) CC (sf)
ALTIUS I: S&P Lowers Ratings on 2 Classes From 'CCC-' to 'CC'
-------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on four
classes from two collateralized debt obligation (CDO) transactions
to 'CC (sf)'.
The downgraded classes had an initial combined issuance amount of
$2.19 billion. Both transactions are structured finance CDOs
backed substantially by residential mortgage-backed securities.
The downgraded notes have lower credit support available to
maintain their current ratings.
Ratings Lowered
Altius I Funding Ltd.
Rating
Class To From
A-1LT-a CC (sf) CCC- (sf)
A-1LT-b CC (sf) CCC- (sf)
TIAA Structured Finance CDO I Ltd.
Rating
Class To From
A-1 CC (sf) CCC- (sf)
A-2 CC (sf) CCC- (sf)
Other Ratings Outstanding
Altius I Funding Ltd.
Class Rating
A-2 CC (sf)
B CC (sf)
C CC (sf)
D CC (sf)
E CC (sf)
ARES X CLO: Moody's Raises Rating of Class D-1 Notes to 'Ba1'
-------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Ares X CLO Ltd.:
US$4,000,000 Class C-1 Deferrable Floating Rate Notes Due 2017;
Upgraded to Aa3 (sf); previously on July 12, 2011 Upgraded to A1
(sf);
US$20,000,000 Class C-2 Deferrable Fixed Rate Notes Due 2017;
Upgraded to Aa3 (sf); previously on July 12, 2011 Upgraded to A1
(sf);
US$30,000,000 Class D-1 Deferrable Floating Rate Notes Due 2017
(current outstanding balance of $25,294,868), Upgraded to Ba1
(sf); previously on July 12, 2011 Upgraded to Ba2 (sf);
US$10,000,000 Class D-2 Deferrable Floating Rate Notes Due 2017
(current outstanding balance of $8,431,623), Upgraded to Ba1 (sf);
previously on July 12, 2011 Upgraded to Ba2 (sf); and
US$5,000,000 Combination Securities Due 2017 (current rated
balance of $3,314,817.23), Upgraded to Aa1 (sf); previously on
July 12, 2011 Upgraded to Aa2 (sf).
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of delevering of the Class A Notes, which also
resulted in an increase in the transaction's overcollateralization
ratios since the rating action in July 2011. Moody's notes that
the Class A Notes have been paid down by approximately 20.9%, or
about $35.1 million since the last rating action. Based on the
trustee report dated October 20, 2011, the Class A/B, Class C, and
Class D overcollateralization ratios are reported at 149.4%,
129.2%, and 108.6%, respectively, versus June 2011 levels of
129.3%, 118.3%, and 105.7%, respectively.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, 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 $231.15 million,
defaulted par of $0, a weighted average default probability of
15.4% (implying a WARF of 2593), a weighted average recovery rate
upon default of 47.45%, and a diversity score of 39. 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.
Ares X CLO Ltd., issued in September 2005, is a collateralized
loan obligation backed primarily by a portfolio of senior secured
loans.
The methodologies used in this rating were "Moody's Approach to
Rating Collateralized Loan Obligations" published in June 2011,
and "Using the Structured Note Methodology to Rate CDO Combo-
Notes" published in February 2004.
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 June 2011.
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 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
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% (2074)
Class A-1: 0
Class A-2: 0
Class A-3: 0
Class B: 0
Class C-1: +2
Class C-2: +2
Class D-1: +1
Class D-2: +1
Combination securities: +1
Moody's Adjusted WARF + 20% (3112)
Class A-1: 0
Class A-2: 0
Class A-3: 0
Class B: 0
Class C-1: -1
Class C-2: -1
Class D-1: -1
Class D-2: -1
Combination securities: -1
A source of additional performance uncertainties is:
Delevering: A 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 bond and loan market and/or collateral sales by the
manager, which may have significant impact on the notes' ratings.
ARMSTRONG LOAN: Moody's Raises Cl. F Notes Rating to Baa2 From Ba1
------------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of the
following notes issued by Armstrong Loan Funding, Ltd.:
US$36,360,000 Class D Floating Rate Senior Secured Deferrable
Interest Notes Due 2016 (current outstanding balance of
$35,571,375), Upgraded to Aaa (sf); previously on July 12, 2011
Upgraded to Aa1 (sf);
US$18,180,000 Class E Floating Rate Senior Secured Deferrable
Interest Notes Due 2016 (current outstanding balance of
$17,785,688), Upgraded to Aa3 (sf); previously on July 12, 2011
Upgraded to A1 (sf);
US$18,180,000 Class F Floating Rate Senior Secured Deferrable
Interest Notes Due 2016 (current outstanding balance of
$17,785,688), Upgraded to Baa2 (sf); previously on July 12, 2011
Upgraded to Ba1 (sf).
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of deleveraging and an increase in the
transaction's overcollateralization ratios. Moody's notes that the
Class A Notes have been paid down in full and the Class B Notes
have paid down approximately 18% or $24 million since the rating
action in July 2011. As a result of the deleveraging, the
overcollateralization ratios have increased since the last rating
action. Based on the latest trustee report dated October 20, 2011,
the Class C, Class D, Class E, and Class F overcollateralization
ratios are reported at 171.0%, 138.67%, 126.70%, and 116.63%,
respectively, versus May 2011 levels of 155.92%, 131.84%, 122.38%,
and 114.20%, respectively.
Additionally, Moody's notes that the underlying portfolio includes
a number of investments in securities that mature after the
maturity date of the notes. Based on the October 2011 trustee
report, reference securities that mature after the maturity date
of the notes currently make up approximately 24.25% of the
underlying reference 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" published in June 2011, 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 $258 million,
defaulted par of $5 million, a weighted average default
probability of 19.8% (implying a WARF of 3226), a weighted average
recovery rate upon default of 50.4%, and a diversity score of 32.
The 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.
Armstrong Loan Funding, Ltd. issued on March 19, 2008, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
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 June 2011.
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 2013 and
2015 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.
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% (2580)
Class B: 0
Class C: 0
Class D: 0
Class E: +2
Class F: +1
Moody's Adjusted WARF + 20% (3871)
Class B: 0
Class C: 0
Class D: -1
Class E: -2
Class F: -1
Sources of additional performance uncertainties are:
1) Deleveraging: The main source of uncertainty in this
transaction is whether deleveraging from unscheduled principal
proceeds will continue and at what pace. Deleveraging 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) 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.
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 deals'
overcollateralization levels. Further, the timing of recoveries
and the manager's decision to work out versus selling defaulted
assets create additional uncertainties. Moody's analyzed defaulted
recoveries assuming the lower of the market price and the recovery
rate in order to account for potential volatility in market
prices.
ASHFORD CDO: Moody's Raises Rating of Class A-1LB Notes to 'Ba2'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 5 classes of
notes issued by Ashford CDO I, Ltd. The classes of notes affected
by the rating actions are:
US$121,600,000 Class A-1LA Notes (current balance of
$102,853,988), Upgraded to A3 (sf); previously on August 30, 2011
Upgraded to Baa3 (sf) and Remained On Review for Possible Upgrade;
US$30,400,000 Class A-1LB Notes, Upgraded to Baa3 (sf); previously
on August 30, 2011 Upgraded to Ba2 (sf) and Remained On Review for
Possible Upgrade;
US$38,000,000 Class A-2L Notes, Upgraded to Ba2 (sf); previously
on August 30, 2011 Upgraded to B1 (sf) and Remained On Review for
Possible Upgrade;
US$27,000,000 Class A-3L Notes, Upgraded to B1 (sf); previously on
August 30, 2011 Upgraded to B3 (sf) and Remained On Review for
Possible Upgrade;
US$20,000,000 Class B-1L Notes, Upgraded to Caa2 (sf) (current
balance of $16,880,302); previously on August 30, 2011 Upgraded to
Caa3 (sf) and Remained On 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 portfolio.
The rating actions on the notes reflect CLO tranche upgrades that
have taken place within the last six months, as well as a two
notch adjustment for CLO tranches which are currently on review
for possible upgrade. Since Moody's June 22nd announcement that
nearly all CLO tranches currently rated Aa1 and below were placed
on review for possible upgrade, 85.52% of the collateral had been
upgraded, 22.9% of which took place following the previous rating
action on the Notes in August. According to Moody's, .44% of the
collateral remains on review.
As of the latest trustee report in November 2011, the Class A and
Class B overcollateralization ratios improved and are reported at
116.03% and 86.94% versus August 2011 levels of 115.23% and
85.16%, respectively. Currently the B OC test is failing,
resulting in diversion of interest proceeds to the payment of
principal on the Class A-1LA notes and resulting in the deferral
of interest payments to the Classes B-1LNotes. All IC ratios are
currently passing their test levels.
Ashford CDO I Ltd. is a collateralized debt obligation backed
primarily by a portfolio of CLO tranches originated between 2004
and 2007.
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Moody's applied the Monte Carlo simulation framework within
CDOROMv2.8 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 the following:
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 (EL) 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 rating action factors in a number of sensitivity analyses
and stress scenarios, discussed below. Results are 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 Performing Assets notched up by 1 rating notch:
Class A-1LA: +2
Class A-1LB: +3
Class A-2L: +2
Class A-3L: +2
Class B-1L: +2
Moody's Performing Assets notched down by 1 rating notch:
Class A-1LA: -3
Class A-1LB: -2
Class A-2L: -2
Class A-3L: -3
Class B-1L: -2
ASSET REPACKAGING 2009-2: S&P Says Class B 'BB' Rating Off Watch
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on six
classes from two Asset Repackaging Vehicle Ltd. transactions and
removed three of them from CreditWatch with negative implications.
"In addition, we affirmed our ratings on 32 classes from these
two transactions and five additional Asset Repackaging Vehicle
Ltd. transactions, and we removed 26 of them from CreditWatch
negative. We also withdrew our ratings on class A1 from Asset
Repackaging Vehicle Ltd.'s series 2009-7 and class B from Asset
Repackaging Vehicle Ltd.'s series 2009-4 because the classes
were paid in full. Our rating on class A1 from Asset Repackaging
Vehicle Ltd.'s series 2009-7 was on CreditWatch negative prior
to being withdrawn. All of the Asset Repackaging Vehicle Ltd.
transactions are residential mortgage-backed securities (RMBS)
resecuritized real estate mortgage investment conduit (re-REMIC)
transactions," S&P said.
The payment waterfalls for each of these transactions were amended
by the issuer to reflect:
A sequential payment of interest;
A defined coupon on the bonds of the lesser of one-month LIBOR
and 8%;
The use of available principal collections to pay interest and
interest shortfalls before principal payments on each of the
rated bonds sequentially; and
The use of excess interest to pay principal. This allows the
bond balance in the resecuritization to be lower than the
collateral balance of the underlying certificates, which
creates overcollateralization.
"The most senior payment in the waterfall for these transactions
reimburses the issuer for the payment of any corporation taxes.
However, because the issuer is a Cayman Island entity and is not
assessed any corporation taxes due to current Cayman Island tax
law, our stresses assume that the current tax status is maintained
and no taxes are assessed," S&P said.
Prior to the payment waterfall revisions noted above, the
transactions paid interest pro rata and pari passu to each of the
re-REMIC classes based on the interest received from the
underlying certificates backing these re-REMIC transactions.
Additionally, in the prior structures, interest was only available
to pay interest and principal was only available to pay principal.
"On Dec. 15, 2010, we placed our ratings on 29 classes from five
transactions in this review on CreditWatch negative, along with
ratings from a group of other RMBS re-REMIC securities (for more
information, see 'S&P Corrects: 1,196 Ratings On 129 U.S. RMBS Re-
REMIC Transactions Placed On CreditWatch Negative'). Additionally,
on April 1, 2011, we provided an update on the CreditWatch
placements and provided clarification regarding our analysis of
interest payment amounts within re-REMIC transactions (see
'Standard & Poor's Provides An Update On Outstanding RMBS Re-REMIC
CreditWatch Placements And Outlines Their Resolution')," S&P said.
"Our ratings on the re-REMIC classes are intended to address the
timely payment of interest and ultimate payment of principal. We
reviewed the interest and principal amounts due on the underlying
securities, which are then passed through to the applicable re-
REMIC classes. When performing this analysis, we applied our loss
assumptions and loss projections to the underlying collateral
to identify the principal and interest amounts that could be
passed through from the underlying securities under our rating
scenario stresses. We stressed our loss projections at various
rating categories to assess whether the re-REMIC classes could
withstand the stressed losses associated with their ratings while
receiving timely payment of interest and principal consistent
with our criteria," S&P said.
"In applying our loss projections, we incorporated, where
applicable, our revised loss assumptions into our review (see
'Revised Lifetime Loss Projections For Prime, Subprime, And Alt-A
U.S. RMBS Issued In 2005-2007,' published on March 25, 2011). Some
of the transactions affected by the revised loss assumptions are
associated with the re-REMICs we reviewed (see tables 1 and 2 for
the overall prior and revised vintage- and product-specific
lifetime loss projections as percentages of the original structure
balance)," S&P said.
TABLE 1
Lifetime Loss Projections For Prime And Subprime RMBS
(Percent of original balance)
Prime RMBS Subprime RMBS
aggregate aggregate
Vintage Updated Prior Updated Prior
2005 5.5 4.00 18.25 15.40
2006 9.25 6.60 38.25 35.00
2007 11.75 9.75 48.50 43.20
TABLE 2
Lifetime Loss Projections For Alternative-A RMBS
(Percent of original balance)
Fixed/aggregate Long-reset
Vintage Updated Prior Updated Prior
2005 13.75 11.25 12.75 9.60
2006 29.50 26.25 25.25 25.00
2007 36.00 31.25 31.75 26.25
Short-reset/hybrid Option ARM
Vintage Updated Prior Updated Prior
2005 13.25 14.75 15.50 13.25
2006 30.00 30.50 34.75 26.75
2007 41.00 40.75 43.50 37.50
"As a result of this review, we lowered our ratings on classes A6
and A7 from Asset Repackaging Vehicle Ltd.'s series 2009-6 and
classes A1, A2, A3, and A4 from Asset Repackaging Vehicle Ltd.'s
series 2009-17 based on our assessment of principal and/or
interest shortfalls from the underlying securities that would
impair the re-REMIC classes at the applicable rating stresses. The
affirmations reflect our assessment of the likelihood that the re-
REMIC classes will receive timely interest and the ultimate
payment of principal under the applicable stressed assumptions,"
S&P said.
Asset Repackaging Vehicle Ltd.'s series 2009-2 contains an
underlying transaction that is currently pending a court ruling.
At issue is a discrepancy between the prospectus supplement and
the pooling and servicing agreement (PSA) for Impac SAC Assets
Corp.'s series ISC 2006-04, specifically class A2B, which is
pledged to the re-REMIC transaction. The prospectus supplement
states that once the subordinate certificate balances and
overcollateralized amount have been reduced to zero, the senior
certificates should switch from their current combination of
sequential and pro rata payment priority to a fully pro rata
payment priority. The PSA, however, states that there should be no
change to the payment priority once the subordinate certificate
balances and overcollateralized amount have been reduced to zero.
On Sept. 24, 2010, Deutsche Bank, as trustee, submitted a verified
petition for instruction regarding the internal affairs of the
trust (trust instruction proceeding) to the Superior Court of the
State of California. On April 15, 2011, the trustee issued a
letter stating that "The Trustee continues to escrow all
distributions to class A holders pending resolution of the matters
raised in the trust instruction proceedings. All allocations of
principal, interest, losses, and other amounts among various
classes of certificates reported in the distribution statements
are subject to change based on the outcome of the trust
instruction proceedings and should not be relied upon."
"Given that principal and interest distributions, as well
as principal write-downs, have been withheld from the
certificateholders and have therefore not been passed
through to the re-REMIC transaction, we assumed that any
current escrowed payments and principal write-down amounts
have been reflected on the underlying class balance, but
not on the balances of the re-REMIC classes, and the current
escrowed monies will not be paid to the re-REMIC. In addition,
we analyzed the re-REMIC transaction cash flow stresses two ways.
In the first scenario, future payments on the underlying class
will continue to be paid according to the PSA payment priority.
In the second scenario, the entire class balance from underlying
class A2B from ISC 2006-04 was removed from the re-REMIC cash
flows while keeping the re-REMIC transaction balance constant,
thus creating undercollateralization. We view the latter stress
as a worst-case scenario in an attempt to determine the impact on
the re-REMIC if precluded from receiving any further principal,
interest, and loss distributions from the affected underlying
transaction. Classes A1 and A2 were not affected in either
scenario, and we observed minimal negative impact on class B.
Therefore, we affirmed our ratings on classes A1, A2, and B from
Asset Repackaging Vehicle Ltd.'s series 2009-2 and removed the
rating on class B from CreditWatch negative. We will take any
necessary rating actions that we consider appropriate based on the
duration of the pending litigation and outcome of the ruling," S&P
said.
"On July 26, 2011, we placed our rating on class B from Asset
Repackaging Vehicle Ltd.'s series 2009-2 on CreditWatch negative
along with ratings from a group of other RMBS securities. We
placed our rating on class B from series 2009-2 on CreditWatch
because Intex had reported interest shortfalls for this security
(for more information, see '271 RMBS Ratings Placed On Watch
Negative Due To Interest Shortfalls; 122 Other Ratings Remain On
Watch Negative '). Since that time, we have confirmed that Intex
incorrectly calculated and reported the interest shortfall to this
class," S&P said.
Rating Actions
Asset Repackaging Vehicle Ltd.
Series 2009-2
Class To From
B BB (sf) BB (sf)/Watch Neg
Asset Repackaging Vehicle Ltd.
Series 2009-4
Class To From
B NR BB (sf)
Asset Repackaging Vehicle Ltd.
Series 2009-6
Class To From
A1 AAA (sf) AAA (sf)/Watch Neg
A2 AA (sf) AA (sf)/Watch Neg
A3 A (sf) A (sf)/Watch Neg
A4 BBB (sf) BBB (sf)/Watch Neg
A5 BB+ (sf) BB+ (sf)/Watch Neg
A6 BB- (sf) BB (sf)/Watch Neg
A7 B- (sf) BB- (sf)/Watch Neg
Asset Repackaging Vehicle Ltd.
Series 2009-7
Class To From
A1 NR AAA (sf)/Watch Neg
A2 AA (sf) AA (sf)/Watch Neg
A3 A (sf) A (sf)/Watch Neg
A4 BBB (sf) BBB (sf)/Watch Neg
A5 BB+ (sf) BB+ (sf)/Watch Neg
A6 BB (sf) BB (sf)/Watch Neg
A7 BB- (sf) BB- (sf)/Watch Neg
Asset Repackaging Vehicle Ltd.
Series 2009-8
Class To From
A1 AAA (sf) AAA (sf)/Watch Neg
A2 AA (sf) AA (sf)/Watch Neg
A3 A (sf) A (sf)/Watch Neg
A4 BBB (sf) BBB (sf)/Watch Neg
A5 BB+ (sf) BB+ (sf)/Watch Neg
A6 BB (sf) BB (sf)/Watch Neg
A7 BB- (sf) BB- (sf)/Watch Neg
Asset Repackaging Vehicle Ltd.
Series 2009-15
Class To From
A1 AAA (sf) AAA (sf)/Watch Neg
A2 AA (sf) AA (sf)/Watch Neg
A3 A (sf) A (sf)/Watch Neg
A4 BBB (sf) BBB (sf)/Watch Neg
A5 BB+ (sf) BB+ (sf)/Watch Neg
A6 BB (sf) BB (sf)/Watch Neg
A7 BB- (sf) BB- (sf)/Watch Neg
Asset Repackaging Vehicle Ltd.
Series 2009-17
Class To From
A1 CC (sf) B- (sf)/Watch Neg
A2 CC (sf) CCC (sf)
A3 CC (sf) CCC (sf)
A4 CC (sf) CCC (sf)
Ratings Affirmed
Asset Repackaging Vehicle Ltd.
Series 2009-1
Class Rating
A1 AAA (sf)
A2 BBB (sf)
B CCC (sf)
Asset Repackaging Vehicle Ltd.
Series 2009-2
Class Rating
A1 AAA (sf)
A2 BBB (sf)
Asset Repackaging Vehicle Ltd.
Series 2009-17
Class Rating
A5 CC (sf)
AURUM CLO: S&P Affirms Ratings on 2 Classes of Notes at 'B'
-----------------------------------------------------------
Standard & Poor's Ratings Services raised its rating on the class
B notes from Aurum CLO 2002-1 Ltd., a U.S. collateralized loan
obligation (CLO) transaction managed by Deutsche Asset Management
Inc., and removed it from CreditWatch with positive implications.
"At the same time, we affirmed our ratings on the class A-2, C,
D-1, and D-2 notes and removed three of these ratings from
CreditWatch with positive implications," S&P said.
"The upgrade mainly reflects an improvement in the
overcollateralization (O/C) available to support the rated notes
following the complete $41.8 million paydown of the A-1 notes and
$33.0 million in paydowns to the A-2 notes since the January 2011
trustee report, which we referenced for our February 2011 rating
actions," S&P said. As of the Nov. 1, 2011, trustee report, each
of the transaction's O/C ratios had improved since January 2011:
The class A O/C ratio is 718.3% versus 404.6%;
The class B O/C ratio is 400.4% versus 294.6%;
The class C O/C ratio is 305.7% versus 246.7%; and
The class D O/C ratio is 194.5% versus 175.7%.
"We affirmed our ratings on the class A-2, C, D-1, and D-2 notes
to reflect the availability of credit support at the current
rating levels," S&P said.
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 it deems necessary.
Rating And CreditWatch Actions
Aurum CLO 2002-1 Ltd.
Rating
Class To From
B AAA (sf) AA+ (sf)/Watch Pos
C A (sf) A (sf)/Watch Pos
D-1 B (sf) B (sf)/Watch Pos
D-2 B (sf) B (sf)/Watch Pos
Rating Affirmed
Aurum CLO 2002-1 Ltd.
Class Rating
A-2 AAA (sf)
AXIS EQUIPMENT: DBRS Puts 'BB' on Class D Rating
------------------------------------------------
DBRS discontinued its provisional ratings on the Axis Equipment
Finance Receivables LLC securities. Since these provisional
ratings have been outstanding for an extended period, DBRS
believes that the collateral supporting the transaction may not be
representative of that which was reviewed for issuance of the
provisional ratings.
These ratings have been discontinued:
-- Class A previously rated AA (sf) are now rated Disc
(Withdrawn)
-- Class B previously rated A (sf) are now rated Disc
(Withdrawn)
-- Class C previously rated BBB (sf) are now rated Disc
(Withdrawn)
-- Class D previously rated BB (sf) are now rated Disc
(Withdrawn)
-- Class E-1 previously rated B (sf) are now rated Disc
(Withdrawn)
BACM 2002-PB2: Moody's Reviews 'B1' Rating of Cl. G Notes
---------------------------------------------------------
Moody's Investors Service placed the ratings of eight classes of
Banc of America Commercial Mortgage Pass-Through Certificates,
Series 2002-PB2 on review for possible downgrade:
Cl. A-4, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Mar 9, 2011 Confirmed at Aaa (sf)
Cl. B, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Mar 9, 2011 Confirmed at Aaa (sf)
Cl. C, Aa1 (sf) Placed Under Review for Possible Downgrade;
previously on Mar 9, 2011 Confirmed at Aa1 (sf)
Cl. D, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on Oct 13, 2010 Downgraded to Aa3 (sf)
Cl. E, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Oct 13, 2010 Downgraded to A3 (sf)
Cl. F, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Oct 13, 2010 Downgraded to Baa3 (sf)
Cl. G, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Oct 13, 2010 Downgraded to B1 (sf)
Cl. XC, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Mar 9, 2011 Confirmed at Aaa (sf)
RATINGS RATIONALE
The classes were placed on review for possible downgrade due to an
expected increase in interest shortfalls. Bank of America, N.A,
the deal's Master Servicer, informed Moody's that it deemed any
outstanding advances made in respect to six specially serviced
loans to be non-recoverable. The pool has less than a one year
weighted average remaining life, and therefore the Master Servicer
has begun to recoup the $6.2 million of advances it deemed non-
recoverable. The Master Servicer informed Moody's that Classes
D through P will experience interest shortfalls beginning in
December 2011 due to the advance recoupment. Classes D through P
are due approximately $900 thousand of interest in December 2011,
so the classes will likely experience shortfalls for several
months to enable the Master Servicer to recoup the non-recoverable
advances.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) 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 June 2, 2011.
The methodologies used in this rating were "Moody's Approach to
Rating Fusion U.S. CMBS Transactions" published in April 2005, and
"Moody's Approach to Rating CMBS Large Loan/Single Borrower
Transactions" published in July 2000.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on BACM 2002-PB2 Class XC may be negatively affected.
Please refer to Moody's request for Comment, titled "Proposal
Changing the Global Rating Methodology for Structured Finance
Interest-Only Securities," for further details regarding the
implications of the proposed methodology change on Moody's rating.
DEAL PERFORMANCE
As of the November 14, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 66% to $382 million
from $1.12 billion at securitization. The Certificates are
collateralized by 30 mortgage loans ranging in size from less than
1% to 19% of the pool, with the top ten loans representing 72% of
the pool. One loan, representing 10% of the pool, has an
investment grade credit estimate. Three loans, representing 7% of
the pool, have been defeased by US Government securities.
As of the November 14, 2011 distribution date, fifteen loans,
representing 37% of the pool, are on the master servicer's
watchlist. The watchlist includes loans which meet certain
portfolio review guidelines established as part of the CRE Finance
Council (CREFC) 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.
As of the November 14, 2011 distribution date, sixteen loans have
been liquidated from the pool, resulting in a realized loss of
$25 million (28% loss severity). Nine loans, representing 49% of
the pool, are in special servicing.
Moody's review will focus on potential losses from specially
serviced and troubled loans, interest shortfalls and the
performance of the overall pool.
BALBOA CDO: Moody's Raises Cl. B Notes Rating to 'B2' From 'Caa2'
-----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Balboa CDO I, Limited:
US$31,000,000 Class B Notes Due July 2014, Upgraded to B2 (sf);
previously on May 19, 2009 Downgraded to Caa2 (sf).
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of an improvement in the credit quality of the
underlying portfolio since the rating action in May 2009. Based on
the latest trustee report dated November 7, 2011, the weighted
average rating factor is currently 542 compared to 963 in the
April 2009 report.
The rating actions also reflect Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, 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 $69 million,
defaulted par of $4.4 million, a weighted average default
probability of 0.5% (implying a WARF of 478), a weighted average
recovery rate upon default of 29.7%, and a diversity score of 18.
The 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.
Balboa CDO I, Limited, issued in June 2001, is a collateralized
bond obligation backed primarily by a portfolio of senior
unsecured bonds.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011. This publication incorporates rating criteria that
apply to both collateralized loan obligations and collateralized
bond obligations.
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 June 2011. In addition, due to the low
diversity of the collateral pool, CDOROM 2.8 was used to simulate
a default distribution that was then applied as an input in the
cash flow model.
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 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.
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% (382)
Class A: 0
Class B: 0
Moody's Adjusted WARF + 20% (574)
Class A: 0
Class B: 0
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.
4) Lack of portfolio granularity: The performance of the portfolio
depends to a large extent on the credit conditions of a few large
obligors. Due to the deal's low diversity score and lack of
granularity, Moody's supplemented its typical Binomial Expansion
Technique analysis with a simulated default distribution using
Moody's CDOROM(TM) software and individual scenario analysis.
BANC OF AMERICA: Moody's Raises Rating of Cl. K-CP Notes to 'Ba1'
-----------------------------------------------------------------
Moody's Investors Service (Moody's) upgraded the ratings of three
non-pooled, or rake, classes of Banc of America Large Loan, Inc.
Commercial Mortgage Pass-Through Certificates, Series 2006-BIX1:
Cl. J-CP, Upgraded to Baa3 (sf); previously on Mar 17, 2011
Downgraded to Ba3 (sf)
Cl. K-CP, Upgraded to Ba1 (sf); previously on Mar 17, 2011
Downgraded to B1 (sf)
Cl. L-CP, Upgraded to Ba2 (sf); previously on Mar 17, 2011
Downgraded to B2 (sf)
RATINGS RATIONALE
The upgrades are due to the reduction in loan balance and the
improved performance of the CarrAmerica-Pool 3 (National
Portfolio) Loan.
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 extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial real
estate property markets are gaining momentum, a consistent upward
trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline
and job creation rebounds. The hotel and multifamily sectors
are in recovery and improvements in the office sector continue,
with fundamentals in Gateway cities outperforming their
suburban counterparts. However, office demand is closely tied
to employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector has
been mixed with on-going rent deflation and leasing challenges.
Across all property sectors, the availability of debt capital
continues to improve with monetary policy expected to remain
supportive and interest rate hikes postponed. Moody's central
global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter, amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The principal methodology used in this rating was "Moody's
Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for structured
finance interest-only securities. If the revised methodology is
implemented as proposed, the rating on Banc of America Large Loan
Inc. Series 2006-BIX1 Classes X-1B, X-2, X-3, X-4 and X-5 may be
negatively affected Please refer to Moody's Request for Comment
titled "Proposal Changing the Global Rating Methodology for
Structured Finance Interest-Only Securities.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.2. 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 (CMBS) 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 review is
summarized in a press release dated December 10, 2010.
DEAL PERFORMANCE
The Blackstone/Carr America National Portfolio Loan
($125.6 million -- 65% of the pooled balance) is the 40%
portion of a pari passu split loan structure that is securitized
in COMM 2006-FL12 (52.5%) and CGCMS 2006-FL2 (7.5%). There is
also $16.7 million of non-pooled trust debt (Classes J-CP, K-CP
and L-CP), a $173 million non-trust junior secured component, and
$129 million of mezzanine debt. The total outstanding loan balance
is $657.7 million. The loan is secured by 25 office and research
and development (R&D) properties. Twenty-two properties containing
approximately 5 million square feet are subject to first mortgage
liens. The borrower's joint venture interests in three properties
are secured by pledges of refinance and sale proceeds. The
outstanding trust balance has decreased by 77% since
securitization from the payment of loan collateral release
premiums and a loan pay down included in the terms of a loan
modification. At securitization the loan was secured by 73
properties. The remaining portfolio has geographic concentration
in California's Silicon Valley with 17 properties representing 80%
of the mortgage collateral by net rentable area (NRA) located in
San Jose (12 properties -55%), Santa Clara (2 properties -- 11%),
Sunnyvale (1 property - 9%), Fremont (1 property -- 3%) and Palo
Alto (1 property - 2%). The other five properties are located in
Dallas (2 properties -- 10%), Los Angeles (2 properties -- 8%) and
Seattle (1 property -- 2%).
The loan was transferred to special servicing on February 1, 2011
due to imminent maturity default. The borrower had indicated that
the national economic recession had hurt the performance of the
properties that secure the loan and that it wasn't able to
refinance the loan at maturity. The loan was modified and the
final maturity date was extended to August 2013. The mortgage debt
was paid down by $67 million that included a $27 million premium
payment for the release from loan collateral of one pledged joint
venture property. Additionally, the mezzanine debt was paid down
by $18 million. The loan will amortize at the rate of $5 million
per year through August 2012 and $7.5 million per year through
August 2013. Lockbox deposits greater than the amount of unfunded
tenant improvement and leasing commission expenses will be
additional collateral for the loan.
As of June 2011 the loan collateral secured by first mortgage
liens had a weighted average occupancy rate of 83% compared to 79%
at Moody's last review and 89% at securitization. The June 2011
rent roll indicates accretive leasing which hasn't been seen in
the portfolio for several quarters. Moody's credit estimate is
Baa2, compared to Ba2 at last review.
BEAR STEARNS: DBRS CONFIRMS CLASS J AT 'BB'
-------------------------------------------
DBRS has confirmed these ratings of 12 classes of Bear Stearns
Commercial Mortgage Securities Trust 2004-PWR5:
-- Class A-4 at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class B at AAA (sf)
-- Class C at AA (high) (sf)
-- Class D at AA (low) (sf)
-- Class E at A (high) (sf)
-- Class F at A (low) (sf)
-- Class G at BBB (sf)
-- Class H at BBB (low) (sf)
-- Class J at BB (high) (sf)
-- Class K at BB (sf)
-- Class X-1 at AAA (sf)
-- Class X-2 at AAA (sf)
In addition, DBRS has downgraded the ratings of these four
classes:
-- Class L to B (sf) from BB (low) (sf)
-- Class M to CCC (sf) from B (high) (sf)
-- Class N to CCC (sf) from B (sf)
-- Class P to CCC (sf) from B (low) (sf)
DBRS does not rate the first loss piece, Class Q. The trends for
Classes A-4 through L are Stable.
The downgrades to Classes L through P are largely due to the
projected loss associated with the Palmetto Business Park loan
(Prospectus ID#23, 1.44% of the current pool balance). The
collateral for the loan is a 535,000 sf flex industrial property
in Palmetto, Florida. The loan transferred to the special
servicer in March 2011 because of imminent default. The property
currently has an economic vacancy rate of 89% and a physical
vacancy rate of 100% after a former tenant holding 60% of the Net
Rentable Area (NRA) vacated at lease expiry in February 2011. The
property received an updated "as is" appraisal value of $6.75
million in April 2011, which is substantially less than the
current outstanding loan balance of $11.6 million. Although DBRS
does anticipate a loss to the trust associated with this loan, the
loss is expected to be contained to the unrated Class Q.
The ratings confirmations are supported by transaction-level
performance that is consistent with the metrics at the time of the
last DBRS review in December 2010. As of the November 2011
remittance report, there are 108 loans remaining in the pool,
reporting a weighted-average debt service coverage ratio (DSCR) of
1.47 times (x) and a weighted-average debt yield of 14.1%.
Furthermore, eight loans, representing 21.9% of the current pool
balance, are fully defeased. Approximately 34.2% of the
collateral has been reduced since issuance.
DBRS shadow-rates one loan, New Castle Marketplace (Prospectus
ID#19, 1.23% of the current pool balance), as investment grade.
DBRS has confirmed that the performance of this loan remains
consistent with investment-grade loan characteristics.
Since the last annual review in December 2010, one loan previously
in special servicing has been liquidated from the trust. This
loan caused a realized loss of $4.28 million to the trust. The
DBRS liquidation scenario at the time of the last review assumed a
loss to the trust of approximately $5.1 million.
The DBRS analysis for this review included an in-depth look at the
top 15 loans in the transaction, in addition to the loans on the
servicer's watchlist, the shadow-rated loan and the loan in
special servicing. Cumulatively, these loans represent 50.5% of
the current pool balance.
DBRS continues to monitor this transaction on a monthly basis for
changes at the bond and loan level. Although DBRS has projected
losses for the specially serviced and most pivotal loans in the
transaction, we continue to monitor these loans on a monthly basis
for any changes that may affect the losses that those loans may
realize.
DBRS will publish a full report shortly that will provide
additional analytical detail on this rating action. If you are
interested in receiving this report, contact us at info@dbrs.com.
BEAR STEARNS: S&P Lowers Class J Cert. Rating to 'D'
----------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 11
classes of U.S. commercial mortgage-backed securities (CMBS)
from Bear Stearns Commercial Mortgage Securities Trust series
2007-PWR17. "In addition, we affirmed our ratings on seven
other classes from the same transaction," S&P said.
"Our rating actions follow our analysis of the transaction
primarily using our U.S. CMBS conduit/fusion criteria. Our
analysis included a review of the credit characteristics of all
of the loans in the pool, the transaction structure, and the
liquidity available to the trust. The downgrades reflect credit
support erosion that we anticipate will occur upon the eventual
resolution of the 15 assets ($127.21 million, 4.2%) with the
special servicer and two loans that we determined to be credit
impaired ($15.9 million, 0.5%). We also considered monthly
interest shortfalls affecting the trust. We lowered our rating
on the class J certificate to 'D (sf)' because we believe the
resulting accumulated interest shortfalls will remain outstanding
for the foreseeable future," S&P said.
"The affirmed ratings on the principal and interest certificates
reflect subordination levels and liquidity that is consistent with
the outstanding ratings. We affirmed our 'AAA (sf)' ratings on the
X-1 and X-2 interest-only (IO) certificates based on our current
criteria," S&P said.
"Our analysis included a review of the credit characteristics of
the remaining assets in the pool. Using servicer-provided
financial information, we calculated an adjusted debt service
coverage (DSC) of 1.32x and a loan-to-value (LTV) ratio of 116.5%
for the loans in the pool. We further stressed the loans' cash
flows under our 'AAA' scenario to yield a weighted average DSC of
0.83x and an LTV ratio of 162.6%. The implied defaults and loss
severity under the 'AAA' scenario were 86.3% and 45.6%,
respectively. We separately estimated losses for all fifteen of
the specially serviced assets and the two loans that we deemed to
be credit impaired and included them in our 'AAA' scenario implied
default and loss severity figures," S&P said.
"As of the Nov. 14, 2011, trustee remittance report, the trust
had experienced monthly interest shortfalls totaling $252,355.
The total interest shortfall amount primarily reflects appraisal
subordinate entitlement reduction (ASER) amounts totaling $223,793
and special servicing and workout fees of $28,562. The interest
shortfalls affected classes J and K. Class J experienced
cumulative interest shortfalls for two consecutive months, and
we expect these interest shortfalls to continue in the near term.
Consequently, we lowered the rating of the class J certificates
to 'D (sf)'. We previously lowered the rating of the class K
certificates to 'D (sf)'," S&P said.
Credit Considerations
As of the Nov. 14, 2011, trustee remittance report, 15 loans
($127.2 million; 4.3%) in the pool were with the special
servicer, C-III Asset Management LLC (C-III). The reported
payment status of these loans as of the Nov. 14, 2011
trustee remittance report is: one is real estate owned (REO;
$19.5 million; 0.7% of the pool), three are in foreclosure
($18.9 million, 0.6%), 10 are 90-plus-days delinquent
($86.7 million; 2.9%), and one is current ($2.1 million;
0.1%). Ten loans ($99.3 million, 3.3%) have appraisal
reduction amounts (ARAs) in effect totaling $43.5 million.
Details of the two largest specially serviced loans are:
The ANC Parkway Medical Center loan ($19.5 million, 0.7%) is the
largest asset with the special servicer and is secured by an
81,423-sq.-ft. medical office building in Henderson, Nev., built
in 1997. The loan was transferred to the special servicer due to
imminent monetary default on Nov. 8, 2010, and is now REO. An ARA
of $8.9 million is in effect against this asset. The property is
currently listed for sale. "We expect a moderate loss upon the
resolution of this asset," S&P said.
The ANC 1301 & 1401 GV Parkway loan ($12.9 million, 0.4%) is the
second-largest asset with the special servicer and is secured by
two office buildings containing 76,066 sq. ft. in Henderson, Nev.
The loan was transferred to the special servicer on Nov. 5, 2010,
due to imminent monetary default. The asset is under receivership
and will be listed for sale in the first quarter of 2012. An ARA
of $4.7 million is in effect against this asset. We expect a
moderate loss upon the resolution of this asset.
"The remaining 13 assets with the special servicer ($94.8 million;
3.2%) have individual balances of less than $15.0 million and
individually represent less than 1% of the total pool balance.
Approximately $29.8 million in ARAs is in effect for eight of
these 13 assets. We estimated losses for the 13 assets at
a weighted-average loss severity of 50.5%," S&P said.
"In addition to the specially serviced assets, we determined two
loans ($15.9 million, 0.5%) to be credit-impaired primarily
because of their payment statuses. The Kent Business Center loan
($10 million, 0.34%) is secured by an industrial property and has
a reported 60-day-delinquent payment status. The reported debt
service coverage (DSC) for this loan was 1.33x as of year-end
2010; however, the master servicer indicated that the top three
tenants' leases will or have expired during 2011. As a result,
occupancy at the property has declined significantly. The master
servicer transferred this loan to the special servicer on Dec. 2,
2011, which was subsequent to the Nov. 14, 2011, remittance
report. The other loan that we determined to be credit-impaired,
the Bollinger Crossing loan ($5.9 million, 0.20%), is secured
by a retail property and has a reported payment status of less
than 30 days delinquent. The reported DSC was 0.77x as of June 30,
2011. The master servicer also transferred this loan to the
special servicer after the Nov. 14, 2011, remittance report. We
believe these two loans are at an increased risk of loss to the
trust," S&P said.
Transaction Summary
"As of the Nov. 14, 2011, trustee remittance report, the
transaction had an aggregate trust balance of $2.98 billion
comprising of 253 loans and one REO asset, compared with
$3.2 billion (264 loans) at issuance. Wells Fargo Bank N.A.
(Wells Fargo) and Prudential Asset Resources Inc. (Prudential),
the master servicers, provided financial information for 98.3%
of the pool (by balance), which was primarily full-year 2010
information. We calculated a weighted-average DSC of 1.35x
for the loans in the pool based on the reported figures. Our
adjusted DSC and LTV were 1.32x and 116.5%, which exclude all
15 ($127.2 million; 4.3%) of the transaction's specially serviced
assets, as well as the two loans that we deemed to be credit-
impaired ($15.8 million, 0.5%). The trust has experienced 10
principal losses to date totaling $115.8 million. Eighty-one loans
($640.4 million, 21.5%) are on the master servicers' watchlist,
including two of the top 10 loans. Eighteen loans ($182.3 million,
6.1%) have a reported DSC between 1.00x and 1.10x, and 41 loans
($318.5 million, 10.7%) have reported DSCs of less than 1.00x,"
S&P said.
Summary of Top 10 Loans
"The top 10 loans have an aggregate outstanding trust balance of
$1.0 billion (34.7%). Using servicer-reported information, we
calculated a weighted-average DSC of 1.33x for the top 10 loans.
Our adjusted DSC and LTV figures for the top 10 loans were 1.24x
and 123.8%. Two of the top 10 loans ($119.3 million, 4.0%) are on
the master servicers' watchlist," S&P said.
The Logan Hotel Portfolio loan is the sixth-largest loan in the
pool ($70.3 million, 2.4%) and is secured by three full-service
hotels in Bloomington, Minn., Little Rock, Ark., and Duluth, Minn.
As of the first quarter ended March 31, 2011, the portfolio
reported a a DSC of 0.70x and the combined occupancy was 63.6%.
The loan appears on the master servicers' watchlist due to its low
DSC.
The DRA Retail Portfolio loan is the seventh-largest loan in the
pool ($49.0 million, 1.7%) and is secured by three retail
properties containing 402,937 sq. ft. located in Greenville, S.C.,
Nesconset, N.Y., and Redwood City, Calif. As of Dec. 31, 2010, the
reported DSC for the portfolio was 0.88x; however, the DSC had
increased to 1.07x as of June 30, 2011. This loan appears and will
remain on the master servicers' watchlist due to its low DSC.
"Standard & Poor's stressed the loans in the pool according to our
criteria and the resultant credit enhancement levels are
consistent with our lowered and affirmed ratings," S&P said.
Ratings Lowered
Bear Stearns Commercial Mortgage Securities Trust
Commercial mortgage pass-through certificates 2007-PWR17
Rating
Class To From Credit enhancement (%)
A-M BBB-(sf) BBB+ (sf) 18.02
A-MFL BBB-(sf) BBB+ (sf) 18.02
A-J B+(sf) BB (sf) 8.98
B B(sf) BB- (sf) 8.02
C B(sf) B+ (sf) 6.52
D B-(sf) B+ (sf) 5.69
E B-(sf) B+ (sf) 5.01
F CCC+(sf) B+ (sf) 4.05
G CCC(sf) B (sf) 2.96
H CCC-(sf) CCC(sf) 1.72
J D (sf) CCC-(sf) 0.63
Ratings Affirmed
Bear Stearns Commercial Mortgage Securities Trust
Commercial mortgage pass-through certificates 2007-PWR17
Class Rating Credit enhancement (%)
A-2 AAA (sf) 28.97
A-3 AAA (sf) 28.97
A-AB AAA (sf) 28.97
A-4 A+(sf) 28.97
A-1A A+(sf) 28.97
X-1 AAA (sf) N/A
X-2 AAA (sf) N/A
N/A -- Not applicable.
BELIZE MORTGAGE: Moody's Raises Cl. A Notes Rating to Aaa From Ba1
------------------------------------------------------------------
Moody's Investors Service has upgraded the global foreign currency
ratings of Belize Mortgage Company 2002-1's Class A and Class B
bonds to Aaa (sf).
The complete rating action is:
Issuer: Belize Mortgage Company 2002-1
Class A Notes upgraded to Aaa (sf) from Ba1 (Global Scale, Foreign
Currency)
Class B Notes upgraded to Aaa (sf) from B3 (Global Scale, Foreign
Currency)
RATINGS RATIONALE
The upgrades reflect that as of today, the trust funds of
USD$6,585,286 invested in eligible investments are sufficient to
fully cover the remaining principal and interest payments of
USD$5,061,795 due on the Class A and B Notes through their
maturity date in September 2012 (note their scheduled final
payment date is in June 2012). With the exception of some minor
interest earnings amounts that may be released back to the issuer,
the Bank of New York Mellon as trustee will use the funds in the
accounts to make upcoming payments on the notes. As of today, the
available funds are held as cash or certificates of deposit (CDs)
with the Bank of New York Mellon. Moody's bank deposit and senior
unsecured rating for Bank of New York Mellon is Aaa.
In addition to the accumulated trust funds available as of today,
the first loss protection available to the Class A and Class B
bonds is the underlying collateral, which consists of mortgages
and small business loans for agriculture and industry projects,
originated by the Development Finance Corporation of Belize (DFC)
and Belize's Social Security Board (BSSB). Given the limited
securitization experience for mortgages and small business loans
in Belize, Moody's has not given benefit to the underlying
collateral when rating the notes. The Class A and Class B bonds
also benefit from guarantees provided by the DFC of Belize and by
the government of Belize. In addition, the Class A bonds benefit
from a non-honoring insurance policy provided by Steadfast
Insurance Company which, subject to certain conditions and
limitations, insures Class A bondholders against a failure by the
government of Belize to make payments as required by the
guarantee.
Regarding the variability of the ratings, so long as the trustee
continues to invest the trust funds in permitted investments and
uses these funds to make timely scheduled payments on the notes,
Moody's current ratings would hold.
The principal methodology used in this rating was "The Temporary
Use of Cash In Structured Transactions: Eligible Investment
Guidelines" published on December 9, 2008.
BLACKROCK SENIOR: S&P Raises Ratings on 2 Classes of Notes to 'B+'
------------------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A, B-1, B-2, C, D-1, and D-2 notes from BlackRock Senior Income
Series, a collateralized loan obligation (CLO) transaction managed
by BlackRock Financial Management Inc..
"The transaction has commenced paying down its class A notes
following the end of its reinvestment period in September 2010.
Based on the October 2011 monthly report, the class A note balance
is $276 million (approximately 92% of its original balance), down
from $296 million in September 2009, which was used for the
analysis in October 2009 when we last downgraded the notes," S&P
said.
As a result of the lower balance, all the tranches experienced an
increase in their overcollateralization (O/C) ratios. The trustee
reported the O/C ratios in the October 2011 monthly report:
The A O/C ratio was 127%, compared with a reported ratio of
122.68% in September 2009;
The B O/C ratio was 113.07%, compared with a reported ratio of
110.03% in September 2009;
The C O/C ratio was 106.86%, compared with a reported ratio of
104.37% in September 2009; and
The D O/C ratio was 104.95%, compared with a reported ratio of
101.96% in September 2009.
The class C and D OC ratios are currently passing; they were
failing in September 2009 (minimum trigger of 105.30% and 103.20%.
The failure of the class D O/C ratio resulted in deferring (PIK)
of their interest in the past. The PIK balances have been paid in
full and these notes are current in their interest.
The notes also benefit from a lower level of defaults and an
improvement in the credit quality of the portfolio. The trustee
reports that the transaction has $1.93 million par in defaults,
down from $9.1 million in September 2009. Some of the defaulted
positions were disposed at values higher than the assumed recovery
rates.
"The reduction in the 'CCC' rated assets improved the class D's
supplemental test results, particularly the largest obligor
default test. These supplemental tests reflect our updated
criteria for corporate CDO transactions published on Sept. 17,
2009. The ratings assigned to the class D-1 and D-2 notes continue
to be driven by the largest obligor default test, as they failed
to withstand the specified combination of underlying asset
defaults above the 'B' rating level," S&P said.
"As a result of the improvement in the credit support, we upgraded
the class A, B-1, B-2, C, D-1 and D-2 notes," S&P related.
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 it deems necessary.
Rating Actions
BlackRock Senior Income Series
Rating
Class To From
A AAA (sf) AA+ (sf)
B-1 A+ (sf) A- (sf)
B-2 A+ (sf) A- (sf)
C BB (sf) B+ (sf)
D-1 B+ (sf) CCC- (sf)
D-2 B+ (sf) CCC- (sf)
BRASCAN STRUCTURED: Fitch Affirms Junk Rating on $13.4 Mil. Notes
-----------------------------------------------------------------
Fitch Ratings has upgraded one and affirmed one class of Brascan
Structured Notes 2005-2 (Brascan 2005-2) reflecting Fitch's base
case loss expectation of 69.5%. In addition, Fitch assigned a
Positive Outlook to one of the classes. Fitch's performance
expectation incorporates prospective views regarding commercial
real estate market value and cash flow declines.
The upgrade to class D is the result of substantial paydown of the
transaction's senior liabilities. Since the last rating action,
three loans were repaid in full, while another was repaid with
only a minimal loss resulting in paydown $69.6 million (23% of the
original deal balance) to the senior classes. An additional $5.4
million is currently held in principal cash. The Positive Outlook
on class D reflects the class' senior position in the capital
structure and the substantial credit enhancement to the class.
The portfolio has become extremely concentrated with only five
loans remaining. The portfolio is comprised of mezzanine debt
(62.6%), B-notes (32.9%), and principal cash (4.5%). The current
percentage of defaulted assets and Loans of Concern is 20.9% and
19.1%, respectively, compared to 13.2% and 21.5%, respectively, at
the last rating action.
Brascan 2005-2 is a commercial real estate collateralized debt
obligation (CRE CDO) managed by Brookfield Real Estate Partners,
LLC. The transaction exited its reinvestment period on Dec. 15,
2010. As of the October 2011 trustee report, all
overcollateralization and interest coverage tests were in
compliance.
Under Fitch's methodology, approximately 76.7% of the portfolio is
modeled to default in the base case stress scenario, defined as
the 'B' stress. In this scenario, the modeled average cash flow
decline is 8.2% from, generally, year-end 2010 or trailing 12-
month second quarter 2011.
The largest component of Fitch's base case loss expectation is
related to a defaulted mezzanine loan (20.9%) secured by interests
in a large multifamily loan located in New York City. The
property is currently in foreclosure. Fitch modeled a full loss
on the CDO's position in its base case scenario.
The next largest component of Fitch's base case loss expectation
is related to a B-note (19.1%) secured by a 157,000 square foot
office property located in Greenwich, CT. The largest tenant (39%
of NRA) vacated the property in April 2010. Although a new tenant
(18.2% of NRA) signed a lease, cash flow at the property is
significantly lower than at issuance. Fitch modeled a term default
and a full loss on this overleveraged position in its base case
scenario.
The third largest component of Fitch's base case loss expectation
is related to a mezzanine loan (30.8%) secured by a portfolio of
office properties. Fitch modeled a maturity default and a
significant loss in its base case scenario on this highly
leveraged position.
This transaction was analyzed according to the 'Surveillance
Criteria for U.S. CREL CDOs and CMBS Large Loan Floating-Rate
Transactions', which applies stresses to property cash flows and
debt service coverage ratio tests to project future default levels
for the underlying portfolio. Recoveries are based on stressed
cash flows and Fitch's long-term capitalization rates. Cash flow
modeling was not performed as part of the analysis due to the
significant cushion between the base case expected loss of the
transaction and the credit enhancement of each class. Due to the
concentration of the pool and the subordinate nature of all
collateral, further upgrades are not warranted at this time.
The 'CCC' rating on class E is based on a deterministic analysis
that considers Fitch's base case loss expectation for the pool and
the current percentage of defaulted assets and Fitch Loans of
Concern factoring in anticipated recoveries relative to each
class' credit enhancement.
Fitch has upgraded and revised the Rating Outlook as indicated:
-- $8.1 million class D to 'BBBsf' from 'Bsf'; Outlook to
Positive from Stable.
In addition, Fitch has affirmed and assigned a Recovery Estimate
(RE) as indicated:
-- $13.4 million class E at 'CCCsf'; assign RE 100%.
Classes A, B, and C have paid in full.
CALLIDUS DEBT: Moody's Raises Rating of Class B-2 Notes to 'Ba1'
----------------------------------------------------------------
Moody's Investors Service has upgraded the rating of these notes
issued by Callidus Debt Partners CDO Fund I, Ltd.:
US$24,700,000 Class B-2 Floating Rate Second Priority Senior
Secured Notes due December 2013 (current outstanding balance of
$7,117,061), Upgraded to Ba1 (sf); previously on July 29, 2011
Upgraded to B1 (sf).
RATINGS RATIONALE
According to Moody's, the rating action taken on the notes is
primarily a result of delevering of the Class B-2 Notes since the
rating action in July 2011. Moody's notes that the Class B-2 Notes
have been paid down by approximately 58% or $9.8 million since the
rating action in July 2011. Based on the latest trustee report
dated November 2011, the Class B overcollateralization ratio is
reported at 143.64% versus the June 2011 level of 144.39%. This
decrease is attributed to a higher OC haircut amount as of the
November 2011 measurement date.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, 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 $15.2 million,
defaulted par of $1.3 million, a weighted average default
probability of 18.82% (implying a WARF of 4259), a weighted
average recovery rate upon default of 35.12%, and a diversity
score of 9. The 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.
Callidus Debt Partners CDO Fund I, Ltd., issued in December 2001,
is a collateralized bond obligation backed primarily by a
portfolio of senior unsecured bonds and senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011. This publication incorporates rating criteria that
apply to both collateralized loan obligations and collateralized
bond obligations.
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 June 2011. In addition, due to the low
diversity of the collateral pool, CDOROM 2.8 was used to simulate
a default distribution that was then applied as an input in the
cash flow model.
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 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
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% (3486)
Class B-2: +1
Moody's Adjusted WARF + 20% (5020)
Class B-2: -1
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 bond/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) Lack of portfolio granularity: The performance of the portfolio
depends to a large extent on the credit conditions of a few large
obligors that are rated Caa1 or lower/non investment grade,
especially when they experience jump to default. Due to the deal's
low diversity score and lack of granularity, Moody's supplemented
its typical Binomial Expansion Technique analysis with a simulated
default distribution using Moody's CDOROM(TM) software and/or
individual scenario analysis.
4) The deal has a pay-fixed receive-floating interest rate swap
that is currently out of the money. If fixed rate assets prepay or
default, there would be a more substantial mismatch between the
swap notional and the amount of fixed assets. In such cases,
payments to hedge counterparties may consume a large portion or
all of the interest proceeds, leaving the transaction, even with
respect to the senior notes, with poor interest coverage. Payment
timing mismatches between assets and liabilities may cause
additional concerns. If the deal does not receive sufficient
projected principal proceeds on the payment date to supplement the
interest proceeds shortfall, a heightened risk of interest payment
default could occur. Similarly, if principal proceeds are used to
pay interest, there may ultimately be a risk of payment default on
the principal of the notes.
CANYON CAPITAL: S&P Raises Rating on Class D Notes to 'BB-'
-----------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on the class
A-1-A, A-1-B, A-2-A, A-2-B, B, C, and D notes from Canyon Capital
CLO 2004-1 Ltd., a collateralized loan obligation (CLO)
transaction managed by Canyon Capital Advisors LLC. "We also
removed four of these ratings from CreditWatch with positive
implications," S&P said.
"The upgrades mainly reflect an improvement in the
overcollateralization (O/C) available to support the rated notes
following $76.8 million in paydowns to the A-1-A, A-1-B, A-2-A,
and A-2-B notes since the January 2011 trustee report, which we
referenced for our February 2011 rating actions," S&P said. As of
the Nov. 7, 2011, trustee report, each of the transaction's
overcollateralization (O/C) ratios had improved since January
2011:
The class A O/C ratio is 152.9% versus 137.2%;
The class B O/C ratio is 129.9% versus 121.6%;
The class C O/C ratio is 115.8% versus 111.3%; and
The class D O/C ratio is 110.2% versus 107.1%.
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 we deem necessary.
Rating And CreditWatch Actions
Canyon Capital CLO 2004-1 Ltd.
Rating
Class To From
A-1-A AAA (sf) AA+ (sf)/Watch Pos
A-1-B AAA (sf) AA+ (sf)/Watch Pos
A-2-A AAA (sf) AA+ (sf)/Watch Pos
A-2-B AAA (sf) AA+ (sf)/Watch Pos
B AA- (sf) A+ (sf)
C BBB- (sf) BB+ (sf)
D BB- (sf) B (sf)
CBA COMMERCIAL: S&P Lowers Series 2005-1 Class M-2 Rating to 'D'
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating to 'D (sf)'
on the class M-2 commercial mortgage pass-through certificates
from CBA Commercial Assets 2005-1, a U.S. commercial mortgage
backed securities (CMBS) transaction.
"The downgrade of the class M-2 certificate to 'D (sf)' reflects a
$1,234,968 principal loss, 21.9% to the outstanding principal
balance. The current outstanding principal balance for class M-2
as of the Nov. 25, 2011, remittance report is $4,405,031. In
addition, the class M-3 certificate also experienced a principal
loss. The current outstanding principal balance of class M-3 has
been reduced to zero. We previously lowered the rating on class
M-3 to 'D (sf)'," S&P said.
As of the Nov. 25, 2011 remittance report, the collateral pool
consisted of 207 assets with an aggregate trust balance of
$70.6 million, down from 572 assets totaling $214.9 million at
issuance. To date, the trust has experienced losses totaling
$24.9 million from 87 assets.
CGCMT 2006-FL2: Moody's Lowers Rating of Cl. K Notes to 'B3'
------------------------------------------------------------
Moody's Investors Service (Moody's) upgraded two pooled and three
non-pooled or rake classes; downgraded one pooled class; and
affirmed four pooled and seven non-pooled or rake classes of
Citigroup Commercial Mortgage Trust, Commercial Mortgage Pass-
Through Certificates, Series 2006-FL2. Moody's rating action is:
Cl. F, Affirmed at Aaa (sf); previously on Jul 21, 2010 Upgraded
to Aaa (sf)
Cl. G, Upgraded to Aaa (sf); previously on Jul 21, 2010 Upgraded
to Aa1 (sf)
Cl. H, Upgraded to Aa3 (sf); previously on Jul 21, 2010 Upgraded
to A1 (sf)
Cl. J, Affirmed at A3 (sf); previously on Jul 21, 2010 Upgraded to
A3 (sf)
Cl. K, Downgraded to B3 (sf); previously on Mar 17, 2011
Downgraded to B1 (sf)
Cl. L, Affirmed at Caa3 (sf); previously on Mar 17, 2011
Downgraded to Caa3 (sf)
Cl. X-3, Affirmed at Aaa (sf); previously on Nov 14, 2006 Assigned
Aaa (sf)
Cl. RAM-1, Affirmed at Caa3 (sf); previously on Mar 17, 2011
Downgraded to Caa3 (sf)
Cl. RAM-2, Affirmed at Caa3 (sf); previously on Mar 17, 2011
Downgraded to Caa3 (sf)
Cl. DSG-1, Affirmed at B1 (sf); previously on Mar 17, 2011
Downgraded to B1 (sf)
Cl. DSG-2, Affirmed at B2 (sf); previously on Mar 17, 2011
Downgraded to B2 (sf)
Cl. DHC-1, Affirmed at Caa3 (sf); previously on Mar 17, 2011
Downgraded to Caa3 (sf)
Cl. DHC-2, Affirmed at Caa3 (sf); previously on Mar 17, 2011
Downgraded to Caa3 (sf)
Cl. SRL, Affirmed at Caa3 (sf); previously on Mar 17, 2011
Downgraded to Caa3 (sf)
Cl. CAN-1, Upgraded to Baa3 (sf); previously on Mar 17, 2011
Downgraded to Ba3 (sf)
Cl. CAN-2, Upgraded to Ba1 (sf); previously on Mar 17, 2011
Downgraded to B1 (sf)
Cl. CAN-3, Upgraded to Ba2 (sf); previously on Mar 17, 2011
Downgraded to B2 (sf)
RATINGS RATIONALE
The upgrades were due to the principal paydowns to the pool as
well as a principal paydown and better than expected performance
of the CarrAmerica-Pool 3 (National Portfolio ) Loan. The
downgrade was due to a decrease in Moody's value of the Radisson
Ambassador Plaza Hotel and Casino Loan given the revised appraisal
and the refinancing risk associated with loans approaching
maturity in an adverse environment. Four of the five loans are
scheduled to mature in the next eight months or have already
matured. The affirmations were due to key parameters, including
Moody's loan to value (LTV) ratio remaining within an acceptable
range.
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 extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline
and job creation rebounds. The hotel and multifamily sectors
are in recovery and improvements in the office sector continue,
with fundamentals in Gateway cities outperforming their
suburban counterparts. However, office demand is closely tied
to employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector has
been mixed with on-going rent deflation and leasing challenges.
Across all property sectors, the availability of debt capital
continues to improve with monetary policy expected to remain
supportive and interest rate hikes postponed. Moody's central
global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter , amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The principal methodology used in this rating was "Moody's
Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on Citigroup Commercial Mortgage Trust, Series 2006-
FL2, Class X-3 may be negatively affected. Please refer to Moody's
request for Comment, titled "Proposal Changing the Global Rating
Methodology for Structured Finance Interest-Only Securities," for
further details regarding the implications of the proposed
methodology change on Moody's rating.
Moody's review incorporated the use of the excel-based CMBS Large
Loan Model v 8.2 which is used for both large loan and single
borrower transactions. The large loan model derives credit
enhancement levels based on an aggregation of adjusted loan level
proceeds derived from Moody's loan level LTV ratios. Major
adjustments to determining proceeds include leverage, loan
structure, property type, and sponsorship. These aggregated
proceeds are then further adjusted for any pooling benefits
associated with loan level diversity, other concentrations and
correlations. 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 (CMBS) 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 17, 2011.
DEAL PERFORMANCE
As of the November 18, 2011 distribution date, the transaction's
certificate balance decreased by approximately 89% to $126 million
from $1.19 billion at securitization due to the payoff of eleven
loans and partial pay-down of four loans. The Certificates are
collateralized by five floating-rate loans ranging in size from
10% to 40% of the pooled trust mortgage balance. The largest three
loans account for 77% of the pooled balance.
The pool has not experienced any losses since securitization. Four
of the five loans (81.0% of the pooled balance) are currently in
special servicing including the Radisson Ambassador Plaza Hotel &
Casino ($50 million - 40%); CarrAmerica -- Pool 3 (National
Portfolio) Loan ($23.6 million, 19% of the pooled balance); the
Doubletree Hospitality & Centre Plaza Loan ($16.3 million - 13%);
and the Snake River Lodge & Spa Loan ($12.2 million - 10%). All
loans are in the process of negotiating a resolution including
loan extensions.
Moody's weighted average LTV ratio for the pooled trust mortgage
balance is 133% compared to 93% at last review and 61% at
securitization. Moody's stressed debt service coverage ratio
(DSCR) for the pooled trust mortgage balance is 1.11X, compared to
0.95X at last review and 1.66X at securitization.
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. Large
loan transactions generally have a Herf of less than 20. The pool
has a Herf of 4, compared to 5 at last review.
The largest pooled exposure is the Radisson Ambassador Plaza Hotel
and Casino Loan ($50 million -- 39.7% of the pooled balance) which
is secured by a 233 room full-service hotel with a 15,000 square
feet casino located in San Juan, Puerto Rico. There is also $4.4
million of non-pooled trust debt and $35.6 million in mezzanine
debt. Casino revenue, which continues to represent more than 50%
of the total revenue from the property, has declined since
securitization. Year end 2005 casino revenue of $19.6 million
declined to $14.6 million in 2009 and $13.9 million in 2010. The
loan transferred to special servicing in June 2011 due to maturity
default. Currently, negotiations are ongoing. An August 2011
appraisal valued the property for $31.2 million. Moody's LTV for
the trust debt is over 100%. Moody's current underlying rating for
the pooled balance is Caa3, the same as last review.
The second largest pooled exposure is the Doubletree Suites
Galleria Loan ($23.8 million -- 19.0% of pooled balance) which is
secured by a 355-room full service hotel located in the Galleria
submarket in Houston, Texas. There is also $2.2 million of rake
trust debt, and $25.3 million of non-trust junior secured debt.
Revenue per available room (RevPAR) has decreased 18% from a high
of $113 in 2008 to $93 for year-end 2010. The loan was recently
modified and returned to the master servicer on November 14, 2011.
The modification included a 1-year extension and $808,000 paydown.
Moody's LTV for the trust debt is 79% and Moody's stressed DSCR is
1.51X. Moody's current underlying rating for the pooled balance is
Ba3, the same as last review.
The third largest loan is the CarrAmerica-Pool 3 (National
Portfolio ) Loan ($23.6 million -- 18.7% of the pooled balance)
which is the 7.5% portion of a pari passu split loan structure
that is securitized in COMM 2006-FL-12 (52.5%) and BALL 2006-BIX
(40%). There is also $3.1 million of non-pooled, or rake, trust
debt, a $179 million non-trust junior secured component, and $129
million of mezzanine debt. The total outstanding loan balance is
$657.7 million. The loan is secured by 26 office and research and
development (R&D) properties. Twenty-three properties containing
approximately 5.1 million square feet are subject to first
mortgage liens. The borrower's joint venture interests in three
properties are secured by pledges of refinance and sale proceeds.
The outstanding trust balance has decreased by 72% since
securitization from the payment of loan collateral release
premiums. The remaining portfolio has geographic concentration in
California's Silicon Valley with 17 properties representing 80% of
the mortgage collateral by net rentable area (NRA) located in San
Jose (12 properties -55%), Santa Clara (2 properties -- 11%),
Sunnyvale (1 property - 9%), Fremont (1 property - 3%) and Palo
Alto (1 property - 2%). The other five properties are located in
Dallas (2 properties -- 10%), Los Angeles (2 properties -- 8%) and
Seattle (1 property -- 2%). As of the September 2010 rent rolls,
the current loan collateral secured by first mortgage liens had a
weighted average occupancy rate of 79%, compared to 82% at Moody's
last review and 89% at securitization. The San Jose office and R&D
markets ended 2010 with vacancy rates exceeding 20%. Although the
market experienced positive absorption in the 4th quarter it was
preceded by several quarters of negative absorption that resulted
in an increase in the vacancy rate. Although the market is
beginning to show some improvement, Moody's expects that it will
be some time before real estate fundamentals recover to pre-
recession levels. Moody's credit estimate for the pooled debt is
Baa2, compared to Ba2 at last review.
CD 2005-CD1: Moody's Affirms Rating of Cl. D Notes at 'Ba1'
-----------------------------------------------------------
Moody's Investors Service (Moody's) affirmed the ratings of 23
classes CD 2005-CD1 Commercial Mortgage Trust, Commercial Mortgage
Pass-Through Certificates, Series 2005-CD1:
Cl. A-2FL, Affirmed at Aaa (sf); previously on Jan 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-2FX, Affirmed at Aaa (sf); previously on Jan 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on Jan 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-SB, Affirmed at Aaa (sf); previously on Jan 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-4, Affirmed at Aaa (sf); previously on Jan 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-1A, Affirmed at Aaa (sf); previously on Jan 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-M, Affirmed at Aaa (sf); previously on Jan 13, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-J, Affirmed at A3 (sf); previously on Dec 17, 2010
Downgraded to A3 (sf)
Cl. B, Affirmed at Baa1 (sf); previously on Dec 17, 2010
Downgraded to Baa1 (sf)
Cl. C, Affirmed at Baa3 (sf); previously on Dec 17, 2010
Downgraded to Baa3 (sf)
Cl. D, Affirmed at Ba1 (sf); previously on Dec 17, 2010 Downgraded
to Ba1 (sf)
Cl. E, Affirmed at Ba3 (sf); previously on Dec 17, 2010 Downgraded
to Ba3 (sf)
Cl. F, Affirmed at B3 (sf); previously on Dec 17, 2010 Downgraded
to B3 (sf)
Cl. G, Affirmed at Caa2 (sf); previously on Dec 17, 2010
Downgraded to Caa2 (sf)
Cl. H, Affirmed at Ca (sf); previously on Dec 17, 2010 Downgraded
to Ca (sf)
Cl. J, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded
to C (sf)
Cl. K, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded
to C (sf)
Cl. L, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded
to C (sf)
Cl. M, Affirmed at C (sf); previously on Dec 17, 2010 Downgraded
to C (sf)
Cl. N, Affirmed at C (sf); previously on Jan 6, 2010 Downgraded to
C (sf)
Cl. O, Affirmed at C (sf); previously on Jan 6, 2010 Downgraded to
C (sf)
Cl. X, Affirmed at Aaa (sf); previously on Jan 13, 2006 Definitive
Rating Assigned Aaa (sf)
Cl. OCS, Affirmed at Baa3 (sf); previously on Jan 13, 2006
Definitive Rating Assigned Baa3 (sf)
RATINGS RATIONALE
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), 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
6.2% of the current balance. At Moody's last full review, Moody's
cumulative base expected loss was 7.1%. Moody's stressed scenario
loss is 15.5% 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.
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 extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial real
estate property markets are gaining momentum, a consistent upward
trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline
and job creation rebounds. The hotel and multifamily sectors
are in recovery and improvements in the office sector continue,
with fundamentals in Gateway cities outperforming their
suburban counterparts. However, office demand is closely tied
to employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector has
been mixed with on-going rent deflation and leasing challenges.
Across all property sectors, the availability of debt capital
continues to improve with monetary policy expected to remain
supportive and interest rate hikes postponed. Moody's central
global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter, amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions" published in
April 2005.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on CD 2005-CD1 Commercial Mortgage Trust, Commercial
Mortgage Pass-Through Certificates, Series 2005-CD1 Class X may be
negatively affected. Please refer to Moody's request for Comment,
titled "Proposal Changing the Global Rating Methodology for
Structured Finance Interest-Only Securities," for further details
regarding the implications of the proposed methodology change on
Moody's rating.
Moody's review incorporated the use of the Excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
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 46, compared to 51 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 (CMBS) 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 17, 2010.
DEAL PERFORMANCE
As of the November 18, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 11% to $3.44
billion from $3.88 billion at securitization. The Certificates are
collateralized by 208 mortgage loans ranging in size from less
than 1% to 8% of the pool, with the top ten loans representing 36%
of the pool. The pool includes three loans with investment grade
credit estimates, representing 12% of the pool. There are
currently six loans, representing 1% of the pool that have
defeased have and are collateralized by U.S. Government
securities.
Forty-six 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 (CREFC) 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 realized loss of
approximately $50.4 million (36% loss severity). There are
currently 19 loans representing 8% of the pool in special
servicing. The largest loan in special servicing is the Union
Square Apartments Loan ($58.0 million-1.7% of the pool), which is
secured by a 542-unit multifamily property located in Palm Beach
Gardens, Florida. The loan was transferred to special servicing in
May 2010 as the result of imminent default. The loan matured in
November 2011 and subsequently, foreclosure was filed in February
2011. An appraisal dated June 27, 2011, valued the property at
$45.0 million.
The remaining 18 specially serviced loans are secured by a mix of
property types. The master servicer has recognized an aggregate
$92.4 million appraisal reduction for 15 of the specially serviced
loans. Moody's has estimated an aggregate $108.4 million loss (42%
expected loss on average) for the specially serviced loans.
Moody's has assumed a high default probability for 21 poorly
performing loans representing 9% of the pool and has estimated a
$45.0 million loss (30% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2010 financials for 90% of the
pool. Excluding specially serviced and troubled loans, Moody's
weighted average LTV for the conduit component is 100% compared to
103% at Moody's prior review. Moody's net cash flow reflects a
weighted average haircut of 10% to the most recently available net
operating income (NOI). Moody's value reflects a weighted average
capitalization rate of 9.0%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs for the conduit component are 1.41X and 1.02X,
respectively, compared 1.41X and 1.0X at last review. Moody's
actual DSCR is based on Moody's net cash flow (NCF) 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 an investment grade credit estimate is the
One Court Square-Citibank Loan ($290.0 million -- 8.4% of the
pool), which is secured by a 1.4 million square foot Class A
office building located in Long Island City (Queens), New York.
The property is also encumbered by a $25 million B-Note which
secures non-pooled Class OCS. The property is 100% leased to
Citibank (Citibank N.A. - Moody's senior unsecured rating A1,
negative outlook) through May 2020. Moody's current credit
estimate and stressed DSCR of the pooled note are Baa2 and 1.03X,
respectively, compared to Baa2 and 1.04X at last review. Moody's
current credit estimate of the B-Note is Baa3, the same as at last
review.
The second loan with a credit estimate is the 100 East Pratt Loan
($105.0 million - 3.1% of the pool), which is secured by a 656,000
square foot office building located in Baltimore, Maryland. As of
June 2011, the property was 96% leased compared to 99% at last
review. The largest tenant is T. Rowe Price Associates, which
leases 65% of the premises through June 2017. Moody's current
credit estimate and stressed DSCR are Baa3 and 1.29X,
respectively, compared to Baa3 and 1.33X at last review.
The third loan with a credit estimate is 220 East 67th Street
Loan ($2.4 million -- 0.1% of the pool), which is secured by a
114-unit residential cooperative located in Manhattan, New York.
Performance has improved since last review. Moody's current credit
estimate is Aaa and 8.70X, compared to Aaa and 7.32X at last
review.
The top three performing conduit loans represent 13% of the
pool balance. The largest loan is the Yahoo! Center Loan
($250.0 million -- 7.3% of the pool), which is secured by a
1.1 million square foot Class A office campus located in Santa
Monica, California. The largest tenant is Yahoo! Inc. which leases
23% of the property through August 2015. Performance has slightly
declined since last review due to a tax reimbursement during the
year of 2009 which increased last review's NOI. Since then,
taxes have leveled out and the property received a lower tax
reimbursement. Moody's LTV and stressed DSCR are 89% and 1.03X,
respectively, compared to 74% and 1.24X at last review.
The second largest conduit loan is the Maine Mall Loan
($131.6 million - 3.8% of the pool), which is secured by the
borrower's interest in a 1.0 million square foot regional mall
located in Portland, Maine. The loan sponsor is GGP. The loan had
been in special servicing due to GGP's bankruptcy filing but has
returned to the master servicer in 2010 after being restructured.
The maturity date was extended to December 2016. The property is
also encumbered by a $70.5 million B note which is held outside
the trust. As of March 2011, overall occupancy was 84% compared
to 80% at last review. As a result of increased occupancy,
performance has improved. Moody's LTV and stressed DSCR are 92%
and 1.03X, respectively, compared to 95% and 0.99X at last review.
The third largest conduit loan is the TPMC Portfolio Loan
($101.5 million -- 3.0% of the pool), which is secured by two
office properties, a theatre/retail building and parking garage
located in Houston, Texas. As of June 2011, the properties were
96% leased compared to 98% at last review. Performance has
improved since last review. Moody's LTV and stressed DSCR are 89%
and 1.16X, respectively, compared to 94% and 1.09X at last review.
CITIGROUP COMMERCIAL: S&P Cuts 4 Classes Ratings to 'D'
-------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 13
classes of commercial mortgage pass-through certificates from
Citigroup Commercial Mortgage Trust 2008-C7, a U.S. commercial
mortgage-backed securities (CMBS) transaction. "Concurrently, we
affirmed our 'AAA (sf)' ratings on five other classes from the
same transaction," S&P said.
"Our rating actions follow our analysis of the transaction
primarily using our U.S. conduit/fusion CMBS criteria. Our
analysis also included a review of the deal structure and the
liquidity available to the trust. The downgrades reflect credit
support erosion that we anticipate will occur upon the eventual
resolution of 13 ($152.5 million, 9.3%) of the 14 ($164.4 million,
10.1%) assets that are currently with the special servicer. We
also considered the monthly interest shortfalls affecting the
trust. We lowered our ratings on the class E, F, G, and H
certificates to 'D (sf)' because we believe the accumulated
interest shortfalls will remain outstanding for the foreseeable
future," S&P said.
"The affirmed ratings on the principal and interest certificates
reflect subordination and liquidity support levels that are
consistent with the outstanding ratings. We affirmed our 'AAA
(sf)' rating on the class X interest-only (IO) certificate based
on our current criteria," S&P said.
"Our analysis included a review of the credit characteristics
of the remaining assets in the pool. Using servicer-provided
financial information, we calculated an adjusted debt service
coverage (DSC) of 1.30x and a loan-to-value (LTV) ratio of 112.7%.
We further stressed the loans' cash flows under our 'AAA' scenario
to yield a weighted average DSC of 0.82x and an LTV ratio of
162.1%. The implied defaults and loss severity under the 'AAA'
scenario were 92.0% and 44.7%. The DSC and LTV calculations noted
above exclude 13 ($152.5 million, 9.3%) of the 14 ($164.4 million,
10.1%) assets with the special servicer. We separately estimated
losses for these assets and included them in our 'AAA' scenario
implied default and loss severity figures," S&P said.
"As of the Nov. 14, 2011, trustee remittance report, the trust
had experienced monthly interest shortfalls totaling $343,890.
The current interest shortfalls primarily reflect appraisal
subordinate entitlement reduction (ASER) amounts of $280,201,
and special servicing and workout fees of $62,746. The interest
shortfalls affected all classes subordinate to and including
class E. Classes E and F have experienced accumulated interest
shortfalls for one month, while classes G and H have experienced
accumulated interest shortfalls for four months. We expect these
interest shortfalls to continue in the near term. Consequently, we
lowered our ratings on classes E, F, G, and H to 'D (sf)'," S&P
said.
Credit Considerations
As of the Nov. 14, 2011 trustee remittance report, 14
assets ($164.4 million, 10.1%) in the pool were with the
special servicer, LNR Partners LLC (LNR). The reported payment
status of the specially serviced assets as of the most recent
trustee remittance report is: two are real estate owned (REO;
$9.7 million, 0.6%), six are in foreclosure ($40.2 million, 2.5%),
three are 90-plus-days delinquent ($60.5 million, 3.7%), two are
in their grace period ($42.1 million, 2.6%), and one is current
($11.9 million, 0.7%). Appraisal reduction amounts (ARAs) totaling
$55.4 million are in effect for 10 of the specially serviced
assets. Details of the two largest specially serviced
assets, one of which is a top 10 loan, are set forth," S&P said.
The Bush Terminal loan is the fifth-largest loan in the pool and
is the largest asset with the special servicer. The $300.0 million
whole loan is split into two pari passu notes: a $50.0 million
(3.1%) note included in the trust ($52.9 million total reported
exposure as of the Nov. 14, 2011, trustee remittance report) and
a $250.0 million note included in the Commercial Mortgage
Trust 2007-GG11 transaction. The loan is secured by 16 cross-
collateralized and cross-defaulted industrial, office, and loft
buildings comprising 6.0 million sq. ft. in Brooklyn, N.Y. The
loan was transferred to the special servicer on Jan. 13, 2011,
due to payment default. LNR indicated that it is pursuing
foreclosure while discussing a possible loan modification.
As of the Nov. 14, 2011 trustee remittance report, the
reported payment status is 90-plus-days delinquent and an
ARA of $31.3 million in effect against the loan. The reported
DSC and occupancy for the loan were 0.42x and 63.0% for the
six months ended June 30, 2010. "We expect a significant loss
upon the eventual resolution of this loan," S&P said.
The Chant Portfolio-Pool 3 loan ($22.7 million, 1.4%) is the
second-largest specially serviced asset with a total reported
exposure of $22.7 million. The loan is secured by three office
buildings totaling 146,449 sq. ft. in Albuquerque, N.M., that were
built in 1997. The loan was transferred to the special servicer on
Sept. 30, 2011, due to imminent default, and its payment status is
currently reported to be in its grace period. LNR indicated that
it is currently evaluating various workout strategies. As of year-
end 2010, the reported DSC was 1.59x. "We expect a significant
loss upon the eventual resolution of this loan," S&P said.
"The 12 remaining assets with the special servicer have
individual balances that represent less than 1.2% of the pooled
trust balance. ARAs totaling $24.1 million are in effect against
nine of these assets. We estimated losses for 11 of the 12
remaining assets, arriving at a weighted-average loss severity
of 46.3%," S&P said.
Four loans totaling $86.7 million (4.7%) that were previously with
the special servicer have been returned to the master servicer.
According to the transaction documents, the special servicer is
entitled to a workout fee equal to 1.0% of all future principal
and interest payments on the corrected loans, provided that they
continue to perform and remain with the master servicer.
Transaction Summary
As of the Nov. 14, 2011 trustee remittance report, the collateral
pool had an aggregate trust balance of $1.6 billion, down from
$1.8 billion at issuance. The pool comprises 86 loans and two REO
assets, down from 97 loans at issuance. The master servicers,
Berkadia Commercial Mortgage LLC and Midland Loan Services,
provided financial information for 97.6% of the loans in the
pool, the majority of which reflected full-year 2010 data.
"We calculated a weighted average DSC of 1.35x for the loans in
the pool based on the servicer-reported figures. Our adjusted DSC
and LTV were 1.30x and 112.7%. Our adjusted figures exclude 13
($152.5 million, 9.3%) of the 14 ($164.4 million, 10.1%) assets
with the special servicer. We separately estimated losses for
these assets and included them in our 'AAA' scenario implied
default and loss severity figures. To date, the transaction
has experienced $98.5 million in principal losses from nine
assets. Sixteen loans ($246.1 million, 15.1%) in the pool are on
the master servicers' combined watchlist, including one of the top
10 loans. Seventeen loans ($238.2 million, 14.6%) have a reported
DSC of less than 1.10x, 14 of which ($214.8 million, 13.1%) have a
reported DSC of less than 1.00x," S&P said.
Summary of Top 10 Loans
"The top 10 loans have an aggregate outstanding balance of
$828.2 million (50.6%). Using servicer-reported numbers, we
calculated a weighted average DSC of 1.33x for nine of the top
10 loans. The remaining top 10 loan ($50.0 million, 3.1%) is
with the special servicer. Our adjusted DSC and LTV for nine of
the top 10 loans were 1.19x and 117.0%, excluding the top 10
specially serviced loan. In addition, one other loan is on the
master servicers' combined watchlist. The DLJ East Coast Portfolio
loan ($51.4 million, 3.1%) is the fourth-largest loan in the pool
and the largest loan on the master servicers' combined watchlist.
The loan is secured by three Courtyard by Marriott hotels totaling
425 rooms in North Carolina, New Jersey, and Virginia. The loan
has a reported current payment status as of the Nov. 14, 2011
trustee remittance report. The loan is on the master servicers'
combined watchlist due to a low reported combined DSC, which was
1.19x for the 12 months ended March 31, 2011. The reported
combined occupancy was 70.1% for the same period," S&P said.
Standard & Poor's stressed the pool collateral according to its
criteria. The resultant credit enhancement levels are consistent
with our lowered and affirmed ratings.
Ratings Lowered
Citigroup Commercial Mortgage Trust 2008-C7
Commercial mortgage pass-through certificates
Rating
Class To From Credit enhancement (%)
A-4 A- (sf) A+ (sf) 27.92
A-1A A- (sf) A+ (sf) 27.92
A-M BB (sf) BBB+ (sf) 16.60
A-MA BB (sf) BBB+ (sf) 16.60
A-J B- (sf) BB+ (sf) 7.84
A-JA B- (sf) BB+ (sf) 7.84
B CCC (sf) BB (sf) 6.71
C CCC- (sf) BB- (sf 5.57
D CCC- (sf) B+ (sf) 4.44
E D (sf) B+ (sf) 3.88
F D (sf) CCC+ (sf) 2.89
G D (sf) CCC (sf) 1.76
H D (sf) CCC- (sf) 0.62
Ratings Affirmed
Citigroup Commercial Mortgage Trust 2008-C7
Commercial mortgage pass-through certificates
Class Rating Credit enhancement (%)
A-2A AAA (sf) 27.92
A-2B AAA (sf) 27.92
A-3 AAA (sf) 27.92
A-SB AAA (sf) 27.92
X AAA (sf) N/A
N/A -- Not applicable.
COAST INVESTMENT: S&P Affirms 'CCC+' Ratings on 2 Classes of Notes
------------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its 'CCC+ (sf)'
ratings on the class B-1 and B-2 notes and its 'CC (sf)' ratings
on the class C-1 and C-2 notes from Coast Investment Grade 2001-1
Ltd., an arbitrage cash flow collateralized debt obligation (CDO)
of CDO transaction.
"We affirmed our ratings based on the credit support available to
the notes and the credit quality of underlying collateral, which
in our view indicated that the class has sufficient subordination
to maintain its current rating," S&P said.
Standard & Poor's will continue to review whether, in its opinion,
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.
Ratings Affirmed
Coast Investment Grade 2001-1 Ltd.
Class Rating
B-1 CCC+ (sf)
B-2 CCC+ (sf)
C-1 CC (sf)
C-2 CC (sf)
COMM 2006-FL12: Moody's Lowers Rating of Cl. D Notes to 'Ba1'
-------------------------------------------------------------
Moody's Investors Service upgraded the ratings of ten non-pooled,
or rake, classes and affirmed the ratings of 15 pooled classes and
18 non-pooled classes of COMM 2006-FL12 Commercial Pass-Through
Certificates:
Cl. A-2, Affirmed at Aaa (sf); previously on Dec 1, 2006
Definitive Rating Assigned Aaa (sf)
Cl. A-J, Affirmed at A1 (sf); previously on Mar 17, 2011
Downgraded to A1 (sf)
Cl. B, Affirmed at A3 (sf); previously on Mar 17, 2011 Downgraded
to A3 (sf)
Cl. C, Affirmed at Baa2 (sf); previously on Mar 17, 2011
Downgraded to Baa2 (sf)
Cl. D, Affirmed at Ba1 (sf); previously on Mar 17, 2011 Downgraded
to Ba1 (sf)
Cl. E, Affirmed at Ba2 (sf); previously on Mar 17, 2011 Downgraded
to Ba2 (sf)
Cl. F, Affirmed at B1 (sf); previously on Mar 17, 2011 Downgraded
to B1 (sf)
Cl. G, Affirmed at B3 (sf); previously on Mar 17, 2011 Downgraded
to B3 (sf)
Cl. X-2, Affirmed at Aaa (sf); previously on Dec 1, 2006
Definitive Rating Assigned Aaa (sf)
Cl. X-3-BC, Affirmed at Aaa (sf); previously on Dec 1, 2006
Definitive Rating Assigned Aaa (sf)
Cl. X-3-DB, Affirmed at Aaa (sf); previously on Dec 1, 2006
Definitive Rating Assigned Aaa (sf)
Cl. X-3-SG, Affirmed at Aaa (sf); previously on Dec 1, 2006
Definitive Rating Assigned Aaa (sf)
Cl. X-5-BC, Affirmed at Aaa (sf); previously on Dec 1, 2006
Definitive Rating Assigned Aaa (sf)
Cl. X-5-DB, Affirmed at Aaa (sf); previously on Dec 1, 2006
Definitive Rating Assigned Aaa (sf)
Cl. X-5-SG, Affirmed at Aaa (sf); previously on Dec 1, 2006
Definitive Rating Assigned Aaa (sf)
Cl. CN1, Upgraded to Baa3 (sf); previously on Mar 17, 2011
Downgraded to Ba3 (sf)
Cl. CN2, Upgraded to Ba1 (sf); previously on Mar 17, 2011
Downgraded to B1 (sf)
Cl. CN3, Upgraded to Ba2 (sf); previously on Mar 17, 2011
Downgraded to B2 (sf)
Cl. KR1, Affirmed at B3 (sf); previously on Mar 17, 2011
Downgraded to B3 (sf)
Cl. KR3, Affirmed at Caa3 (sf); previously on Mar 17, 2011
Downgraded to Caa3 (sf)
Cl. IP1, Affirmed at Ba3 (sf); previously on Mar 17, 2011
Downgraded to Ba3 (sf)
Cl. IP2, Affirmed at B1 (sf); previously on Mar 17, 2011
Downgraded to B1 (sf)
Cl. IP3, Affirmed at B2 (sf); previously on Mar 17, 2011
Downgraded to B2 (sf)
Cl. FSH1, Affirmed at Caa1 (sf); previously on Mar 18, 2010
Downgraded to Caa1 (sf)
Cl. FSH2, Affirmed at Caa2 (sf); previously on Mar 18, 2010
Downgraded to Caa2 (sf)
Cl. FSH3, Affirmed at Caa3 (sf); previously on Mar 18, 2010
Downgraded to Caa3 (sf)
Cl. AN3, Affirmed at B3 (sf); previously on Mar 17, 2011
Downgraded to B3 (sf)
Cl. FG1, Upgraded to Baa3 (sf); previously on Mar 17, 2011
Downgraded to Ba3 (sf)
Cl. FG2, Upgraded to Ba2 (sf); previously on Mar 17, 2011
Downgraded to B2 (sf)
Cl. FG3, Upgraded to Ba3 (sf); previously on Mar 17, 2011
Downgraded to Caa1 (sf)
Cl. FG4, Upgraded to B2 (sf); previously on Mar 17, 2011
Downgraded to Caa3 (sf)
Cl. FG5, Upgraded to B3 (sf); previously on Mar 17, 2011
Downgraded to Ca (sf)
Cl. LS1, Affirmed at Caa1 (sf); previously on Mar 17, 2011
Downgraded to Caa1 (sf)
Cl. LS2, Affirmed at Caa2 (sf); previously on Mar 17, 2011
Downgraded to Caa2 (sf)
Cl. LS3, Affirmed at Caa3 (sf); previously on Mar 17, 2011
Downgraded to Caa3 (sf)
Cl. TC1, Upgraded to Ba2 (sf); previously on Mar 18, 2010
Downgraded to Caa2 (sf)
Cl. TC2, Upgraded to Ba3 (sf); previously on Mar 18, 2010
Downgraded to Caa3 (sf)
Cl. LB1, Affirmed at C (sf); previously on Mar 17, 2011 Downgraded
to C (sf)
Cl. LB2, Affirmed at C (sf); previously on Mar 17, 2011 Downgraded
to C (sf)
Cl. LB3, Affirmed at C (sf); previously on Mar 17, 2011 Downgraded
to C (sf)
Cl. ES1, Affirmed at B2 (sf); previously on Mar 18, 2010
Downgraded to B2 (sf)
Cl. ES2, Affirmed at B3 (sf); previously on Mar 18, 2010
Downgraded to B3 (sf)
Cl. ES3, Affirmed at Caa1 (sf); previously on Mar 18, 2010
Downgraded to Caa1 (sf)
RATINGS RATIONALE
The upgrades of the non-pooled classes were due to reductions
in total debt of the Blackstone/CarrAmerica National Portfolio
Loan, the Ft. Lauderdale Grande Loan and the Avenue at Tower
City Loan along with the improved asset performance of the
Blackstone/CarrAmerica National Portfolio Loan and the Ft.
Lauderdale Grande Loan. The affirmations of the pooled and non-
pooled classes were due to key parameters, including Moody's loan
to value (LTV) ratio remaining with an acceptable range.
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 extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial real
estate property markets are gaining momentum, a consistent upward
trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are in
recovery and improvements in the office sector continue, with
fundamentals in Gateway cities outperforming their suburban
counterparts. However, office demand is closely tied to
employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector has
been mixed with on-going rent deflation and leasing challenges.
Across all property sectors, the availability of debt capital
continues to improve with monetary policy expected to remain
supportive and interest rate hikes postponed. Moody's central
global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter, amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The principal methodology used in this rating was "Moody's
Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on COMM 2006-FL12, Classes X-2, C-3BC, X-3-DB, X-3-SG,
X-5-BC, X-5-DB and X-5-SG may be negatively affected. Please refer
to Moody's request for Comment, titled "Proposal Changing the
Global Rating Methodology for Structured Finance Interest-Only
Securities," for further details regarding the implications of the
proposed methodology change on Moody's rating.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.2. 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 (CMBS) 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 review is
summarized in a press release dated March 17, 2011.
DEAL PERFORMANCE
As of the November 15, 2011 Payment Date, the transaction's
aggregate certificate balance has decreased by approximately 47%
to $1.6 billion from $3.0 billion at securitization due to the
payoff of four loans in the pool and the liquidation of two loans
(the Hotel del Coronado Loan and the Charleston Marriott Loan)
and the payment of release premiums and/or pay downs from loan
modifications from six loans (Kerzner International Portfolio
Loan, Blackstone/CarrAmerica National Portfolio Loan, Four
Seasons Hualalai Loan, Albertson's Portfolio Loan, Avenue at
Tower City Loan and the Legacy Bayside Loan). The certificates
are collateralized by 11 floating rate loans ranging in size
from 1% to 38% of the pooled trust balance.
The pool has experienced a $2.8 million loss as the result
of the special servicer's workout fee related to the Hotel
del Coronado Loan. The loss was applied to Class J and non-
pooled class H-DC. There are currently five loans in special
servicing, the Independence Plaza Loan ($209.1 million -- 16%),
the Blackstone/CarrAmerica National Portfolio Loan ($164.9 million
-- 13%), the Albertsons (Newkirk) Portfolio Loan ($82.0 million --
6%), the Superstition Springs Mall Loan ($67.5 million -- 5%) and
the Legacy Bayside Loan that is REO ($21.9 million -- 2%).
There are currently three loans on the master servicer's watchlist
equal to 50% of the pooled trust balance. As part of Moody's on-
going monitoring of a transaction Moody's reviews the watchlist
to assess which loans have material issues that could impact
performance. Watchlisted loans are loans which meet certain
portfolio review guidelines established as part of the CRE
Finance Council (CREFC) monthly reporting package.
Moody's weighted average pooled LTV ratio is 76%, compared to 82%
at last review. Moody's stressed debt service coverage (DSCR) is
1.39x, compared to 1.28x at last review.
The largest loan is the Kerzner International Portfolio Loan
($492.2 million -- 38% of the pooled balance), a 50% portion
of a pari passu split loan structure that is securitized in CSFB
2006-TFL2. There is also $148.2 million of non-pooled, or rake,
trust debt (Classes KR1, KR2 and KR3) and a $1.2 billion non-
trust junior secured loan component. The loan is secured by
substantially all of the borrower's real estate assets located
on Paradise Island, Bahamas, including the Atlantis Hotel (2,917
keys) and the One & Only Ocean Club Hotel and golf course (106
keys, located one mile from the Atlantis), a marina and vacant and
improved land. The resort features the largest casino and ballroom
in the Caribbean and water-themed attractions, including the
world's largest open-air marine habitat. The loan is also
supported by a pledge of Kerzner's 100% interest in management
agreements and fees relating to the properties, a right to receive
Kerzner's 50% interest in excess net cash flow and/or sales
proceeds generated from the One & Only Palmilla Hotel in Mexico,
Harborside timeshare units, and the Residences at Atlantis and
Ocean Club condos. Revenue per available room (RevPAR), calculated
by multiplying the average daily rate by the occupancy rate, for
the trailing 12-month period ending July 2011 was $197 at the
Atlantis and $770 at the One & Only Ocean Club. A comparison of
RevPAR for the year-to-date period ending July 2011 with the same
period in the prior year indicates a 3% increase in room revenue
but a 4% decrease in operating profit. Casino operations that
account for 15% of total revenue saw a 25% decrease in operating
profit and operating profit from all revenue components declined
6%.
The trust debt has decreased 10% since securitization to
$640.5 million from $715.0 million and total debt has decreased to
$2.5 billion from $2.8 billion at securitization. The loan matured
on November 21, 2011. On November 1, 2011, the loan was paid down
by $100 million from funds in the Excess Cash Reserve Fund in
consideration of a short term extension. A cash trap is in place
whereby excess cash flow after debt service is held by the
servicer and applied to replenish reserves after which excess
funds will be applied to pay down the loan balance.
The borrower has expressed an unwillingness to invest any
additional funds into the property and has agreed to a deed in
lieu of foreclosure with Brookfield Asset Management, the holder
of the $175.4 million B-4-B Participation. An assumption of the
mortgage loan and assignment of the loan collateral to Brookfield
would reduce the total outstanding debt by $175.4. A concern is
the additional competition from the $3.4 billion Baha Mar resort
complex that broke ground in March 2011 on Nassau's Cable Beach.
Baha Mar is a single-phase project backed by the Chinese
government that is scheduled to open in late 2014. The resort
will feature four hotels with a total of approximately 2,250
rooms, a golf course, convention center, a casino that is to be
the largest in the Caribbean and a 10-acre Eco Water Park. In
overall size and amenities it is expected to be very similar to
the Atlantis. Although scheduled completion is three years away,
the project is expected to be future competition for the Atlantis
and complicate the re-financing of the current debt. Moody's
credit estimate for the pooled debt is Ba3, the same as last
review. Moody's is affirming the ratings of the rake certificates
due to the de-leveraging and the expectation of additional future
de-leveraging resulting from the in-place cash management
agreement.
The Independence Plaza Loan ($209.1 million -- 16%) is secured
by a 1,322 unit rental apartment complex located in the Tribeca
neighborhood of New York City. There is also $26.0 million of non-
pooled trust debt (Classes IP1, IP2 and IP3) and a $160.0 million
non-trust junior secured component and $150.0 million in mezzanine
debt. In addition to the residential units, the property contains
74,915 square feet of commercial space and a 230,000 square foot
parking garage. The largest commercial tenants include the New
York City Board of Education (18,600 square feet, lease expiration
in 2015) and Shopwell Supermarket (21,862 square feet, lease
expiration in 2013). As of October 2011 the complex was
approximately 98% leased.
Independence Plaza exited the Mitchell-Lama Housing Program, a
form of housing subsidy in the state of New York, in 2004 but
continued to receive J-51 tax breaks for two years while rents
were raised at the complex by deregulating stabilized apartments.
In August 2010 a state Supreme Court judge reversed the state's
Department of Housing and Community Renewal's earlier decision and
ruled that rents had been illegally destabilized after taxes at
Independence Plaza were reduced from a J-51 tax abatement.
Approximately 35% of the total residential units in Independence
Plaza are rented at fair market rents. Laurence Gluck, the
borrower, is appealing the court decision.
The loan was transferred to special servicing in April 2011. The
loan was modified in August 2011 with an extension of the maturity
date to August 9, 2013 and a $26.5 million pay down of the A-note.
Additionally, a cash flow sweep has been established with all
excess cash flow swept to reduce the A-Note. Moody's credit
estimate is Ba3, the same as last review.
The Blackstone/Carr America National Portfolio Loan
($164.9 million -- 13% of the pooled balance) is the 52.5%
portion of a pari passu split loan structure that is securitized
in BALL 2006-BIX1 (40%) and CGCMS 2006-FL2 (7.5%). There is
also $21.9 million of non-pooled trust debt (Classes CN1,
CN2 and CN3), a $173 million non-trust junior secured component,
and $129 million of mezzanine debt. The total outstanding loan
balance is $657.7 million. The loan is secured by 25 office and
research and development (R&D) properties. Twenty-two properties
containing approximately 5 million square feet are subject to
first mortgage liens. The borrower's joint venture interests in
three properties are secured by pledges of refinance and sale
proceeds. The outstanding trust balance has decreased by 77%
since securitization from the payment of loan collateral release
premiums and a loan pay down included in the terms of a loan
modification. At securitization the loan was secured by 73
properties. The remaining portfolio has geographic concentration
in California's Silicon Valley with 17 properties representing 80%
of the mortgage collateral by net rentable area (NRA) located in
San Jose (12 properties -55%), Santa Clara (2 properties -- 11%),
Sunnyvale (1 property - 9%), Fremont (1 property - 3%) and Palo
Alto (1 property - 2%). The other five properties are located in
Dallas (2 properties -- 10%), Los Angeles (2 properties -- 8%) and
Seattle (1 property -- 2%).
The loan was transferred to special servicing on February 1,
2011, due to imminent maturity default. The borrower had indicated
that the national economic recession had hurt the performance of
the properties that secure the loan and that it wasn't able to
refinance the loan at maturity. The loan was modified and the
final maturity date was extended to August 2013. The mortgage debt
was paid down by $67 million that included a $27 million premium
payment for the release from loan collateral of one pledged joint
venture property. Additionally, the mezzanine debt was paid down
by $18 million. The loan will amortize at the rate of $5 million
per year through August 2012 and $7.5 million per year through
August 2013. Lockbox deposits greater than the amount of unfunded
tenant improvement and leasing commission expenses will be
additional collateral for the loan.
As of June 2011 the loan collateral secured by first mortgage
liens had a weighted average occupancy rate of 83% compared to 79%
at Moody's last review and 89% at securitization. The June 2011
rent roll indicates accretive leasing which hasn't been seen in
the portfolio for several quarters. Moody's credit estimate is
Baa2, compared to Ba2 at last review.
The Albertsons Portfolio Loan ($82.0 million -- 6%) was
transferred to special servicing on August 5, 2011 due to
immanent maturity default. There is also $15.2 million in non-
pooled trust debt (Classes (AN1, AN2 and AN3) and a $29.6 million
non-trust junior secured component. The loan is collateralized by
46 retail properties with all but one leased to grocery stores
doing business as Albertsons (26 locations -- 55% of total gross
leasable area), Southern Family Markets, Ralph's Food 4 Less Save
Mart and others. Albertsons' senior unsecured rating is B2, the
same as at securitization. The portfolio was 87% occupied as of
July 2011, the same as at last review. Moody's credit estimate is
B1, the same as last review.
The Fort Lauderdale Grande Loan ($33.3 million -- 3%) is secured
by a 579 room hotel that underwent a $70 million renovation in
2008 and is currently operating as the Hilton Ft. Lauderdale
Marina Hotel. The hotel is located on the Inter-coastal Waterway
in Ft. Lauderdale, Florida. There is also $26.2 million in non-
pooled trust debt (Classes FG1, FG2, FG3, FG4 and FG5) and a
$39.0 million non-trust junior secured component. A loan
modification was closed in May 2011 that extended the loan
term through February 2013. Terms of the loan modification
included a $6.6 million pay down of the trust debt and repayment
of the outstanding mezzanine debt. Additionally, a cash flow
sweep was established with excess funds to be used to reduce
the loan balance. RevPAR for the trailing 12-month period ending
August 2011 was $92, a 12% increase from RevPAR of $82 during the
same period in 2010. Moody's credit estimate is A3, compared to
Ba1 at last review.
The Avenue at Tower City Loan ($15.8 million -- 1%) is secured
by a 364,824 square foot retail mall in downtown Cleveland,
Ohio. The mall is part of the Tower City Center that contains
1.5 million square feet of office space, two hotels and
Cleveland's professional sports stadiums. There is also
$2.3 million in non-pooled trust debt (Classes TC1 and TC 2)
and a $10.1 million non-trust junior secured component. As
of June 2011 the property was 66% leased compared to 92% at
securitization. Significant tenants include Tower City Cinema,
Brooks Brothers and Hard Rock Cafe. These three tenants combined
occupy 23% of the gross leasable area.
The borrower sold a parcel of land in January 2011 to Rock Ohio
Caesars Cleveland LLC for $45 million for the construction of a
casino. The parcel was released from the lien of the mortgage and
$35 million of the sale proceeds were applied to pay down the
loan. Additionally, $1.7 million was deposited into the Rollover
Fund, and if the borrower exercises its option to extend the
maturity date of the loan an additional $2.5 million deposit is
required prior to December 15, 2011. The final maturity date is in
September 2012. Moody's credit estimate is Ba1 compared to Caa2 at
last review.
The Legacy Bayside Loan ($21.9 million -- 2%) was transferred to
special servicing in June 2010. The loan is REO. There is also
$4.1 million of non-pooled trust debt (Classes LB1, LB2 and LB3)
and a $6.7 million non-trust junior secured component. The loan is
secured by three office/research & development (R&D) buildings
with a total of 233,740 square feet located in Fremont,
California. The property is currently 100% vacant. It was
appraised in August 2010 for $13.0 million. Moody's credit
estimate for the trust balance is C, the same as at last review.
COMM 2006-FL12: S&P Lowers Ratings 6 Classes of Certs. to 'CCC-'
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on 17
classes of commercial mortgage pass-through certificates from
COMM 2006-FL12, a U.S. commercial mortgage-backed securities
(CMBS) transaction. "We also raised our rating on the 'TC1'
raked certificates and affirmed our ratings on 17 other classes
from this transaction. In addition, we lowered our ratings on the
'KER' raked certificates from Credit Suisse First Boston Mortgage
Securities Corp.'s series 2006-TFL2 (CSFB 2006-TFL2). Furthermore,
we affirmed the 'CP' raked certificates from Banc of America Large
Loan Inc.'s series 2006-BIX1 (BALL 2006-BIX1)," S&P said.
"Our downgrades and affirmations of the COMM 2006-FL12 pooled
certificate classes follow our analysis of the COMM 2006-FL12
transaction, which included the revaluation of the collateral
securing the remaining 11 floating-rate loans in the pool,
seven of which are currently with the special servicer. All
of the loans are indexed to one-month LIBOR. The downgrades
reflect our adjusted valuations at a stressed loan-to-value
(LTV) ratio of 79.2% on the aggregate pool balance for the
remaining collateral. The analysis of the ratings on the
certificates was consistent with the rating approach outlined
in the 'Approach' and "Surveillance" sections of the J.P. Morgan
Chase Commercial Mortgage Securities Trust 2011-FL1 presale
report, published Nov. 8, 2011 (see 'Presale: J.P. Morgan Chase
Commercial Mortgage Securities Trust 2011-FL1)," S&P said
"We took various rating actions on the raked certificates in
COMM 2006-FL12, CSFB 2006-TFL2, and BALL 2006-BIX1. The raked
certificates in each of these transactions are solely tied
to individual loans that derive 100% of their cash flow from
a subordinate nonpooled component of the respective loan.
Further details on each raked certificate class are noted,"
S&P said.
"We downgraded the 'LS' raked certificates from the COMM 2006-FL12
transaction based on our analysis of the Legacy SoCal Portfolio
loan. These raked certificates derive 100% of their cash flow from
a subordinate nonpooled component of the Legacy SoCal Portfolio
loan," S&P said.
"We affirmed our 'AAA (sf)' rating on the class X-2, X-3-BC, X-3-
DB, X-3-SG, X-5-BC, and X-5-DB interest-only certificates based on
our current criteria," S&P related.
Lodging properties secure four loans totaling $699.9 million
(53.6% of the COMM 2006-FL12 pooled trust balance as per the
Nov. 15, 2011 trustee remittance report). These properties are in
the Bahamas (37.7%), Ka'upulehu-Kona, Hawaii (11.6%), Ft.
Lauderdale, Fla. (2.5%), and Orlando, Fla. (1.7%).
"We based our lodging analyses, in part, on a review of the
borrowers' operating statements for the trailing-12-month 2011
(varying months), the year-end 2010, the year-end 2009, and the
borrowers' 2011 budgets. Based on our analysis, our lodging
valuations yielded a stressed LTV ratio of 100.8% for the trust
balance. Details on the two largest lodging loans are set forth,"
S&P said.
The Kerzner International Portfolio loan, the largest loan in the
COMM 2006-FL12 pool, is secured by two full-service resort hotels
totaling 3,023 rooms. The collateral for this loan also includes
a water park, casino, 18-hole golf course, vacant land, the
assignment of the borrower's 50% joint-venture interest in
timeshare units, 50% joint-venture in net sale proceeds from an
on-site condo project, and a marina project, all located on
Paradise Islands, Bahamas. To date, the whole-loan balance has
been paid down to $2.5 billion, which is bifurcated into a
$1.3 billion senior participation interest and a $1.2 billion
subordinate nontrust junior participation interest. The senior
participation interest is split into two pari passu notes. One
of the notes is in the COMM 2006-FL12 transaction, which includes
a $492.2 million senior pooled component (37.7% of the pooled
trust balance) and a $148.3 million subordinate nonpooled
component raked to the "KR" certificates. The other pari passu
note is in the CSFB 2006-TFL2 transaction, which has a balance
of $640.5 million that consists of a $358.3 million senior pooled
component and a $282.2 million subordinate nonpooled component
raked to the "KER" certificates.
"On Nov. 29, 2011, Kerzner International Bahamas Ltd. (Kerzner),
the sponsor of the Kerzner International loan, announced that it
will transfer ownership of the underlying collateral of the
mortgage loan to Brookfield Asset Management Inc. (Brookfield),
the current holder of a junior participation interest in the whole
loan. Per discussions with the master servicer, Wells Fargo, and
Brookfield, it is our understanding that Kerzner was not able to
refinance the loan at the time of maturity and therefore and has
decided to transfer ownership to Brookfield. Kerzner will manage
the property under a new management agreement," S&P said.
"Wells Fargo and Brookfield informed us that they are currently
working with Kerzner on finalizing the assignment and assumption
terms, which include modifying the loan. The transaction is
expected to close by Dec. 31, 2011," S&P said.
"The loan matures on Dec. 30, 2011. Brookfield has indicated that
it is looking for a two-year loan extension to allow time to
secure refinancing funding. Wells Fargo Bank N.A. (Wells Fargo)
reported a debt service coverage (DSC) of 5.05x for the trust
balance and a 62.2% occupancy for the year ended Dec. 31, 2010.
Our adjusted valuation, using a capitalization rate of 11.08%,
yielded a stressed in-trust LTV ratio of 71.3%, resulting in the
downgrade of the 'KR' and 'KER' raked certificates in the COMM
2006-FL12 and CSFB 2006-TFL2 transactions, respectively. We expect
to evaluate the workout terms after its completed and may take
further rating or CreditWatch actions if we believe they are
appropriate," S&P said.
The Four Seasons Hualalai, the fourth-largest loan in the COMM
2006-FL12 pool, is secured by the leasehold interest in a 243-room
full-service resort hotel on the Kona-Kohala Coast of Hawaii's Big
Island and situated on over 400 acres. In addition, the loan is
partially secured by the leasehold interest in single-family home
lots and parcels planned for condominium development. Subsequent
to issuance, approximately 37 acres of this land was sold and
released, and the remaining land totals 83 acres. The property
also includes two 18-hole golf courses. The whole-loan balance of
$324.5 million consists of a $175.9 million senior participation
interest and a $148.6 million junior participation interest held
outside of the trust. The senior participation interest is further
split into a $151.6 million senior pooled component (11.6%
of the COMM 2006-FL12 pooled trust balance) and subordinate
nonpooled components totaling $24.3 million that are raked to the
"FSH" certificates. The master servicer, Berkadia Commercial
Mortgage (Berkadia), reported revenue per available room (RevPAR)
of $507.22 for the trailing 12 months ending September 2011, a
decline of 9% from year-end 2010. The loan is scheduled to
mature on June 9, 2012, and has no extension options remaining.
Berkadia reported an in-trust DSC of 4.51x and occupancy of 63.3%
for the trailing-12-months ending March 2011. "Our adjusted
valuation, using a capitalization rate of 10.00%, yielded a
stressed in-trust LTV ratio of 127.0%, resulting in the
affirmation of the rating on the 'FSH' raked certificates," S&P
said.
Office properties secure three loans totaling $235.1 million
(18.0% of the COMM 2006-FL12 pooled trust balance as per the Nov.
15, 2011, trustee remittance report).
"We based our office analyses, in part, on a review of the
borrowers' operating statements for the trailing-12-months 2011
(varying months), the year-end 2010, the year-end 2009, the
borrowers' 2011 budgets, and 2011 rent rolls. Based on our
analysis, our office valuations yielded a stressed LTV ratio of
59.3% on the trust balance. Details on the office loans are set
forth," S&P said.
The Blackstone/CarrAmerica National Portfolio loan is the third-
largest loan in the pool and is secured by office properties.
Forty-seven office properties have been released since issuance.
The remaining collateral consists of 26 office properties totaling
5.4 million sq. ft. (including joint-venture {JV} interests) in
various locations throughout California, Texas, Colorado, and
Washington. This loan has a whole-loan balance of $529.4 million,
consisting of a $355.2 million senior participation that is
split into three pari passu pieces and a $174.1 million junior
participation that is held outside the trust. The senior
participation is further divided into two portions: a senior
pooled component totaling $313.5 million and a subordinate
nonpooled component with a balance of $41.7 million. The trust's
portion of the pooled balance is $164.9 million (12.6% of the
pooled trust balance), and its portion of the nonpooled balance is
$21.9 million, which is raked to the "CN1", "CN2", and "CN3"
certificates (Standard & Poor's does not rate the "CN2" and "CN3"
certificates). The BALL 2006-BIX1 transaction's portion of the
pooled balance is $125.2 million, and its portion of the nonpooled
balance is $16.7 million, which is raked to the "J-CP", "K-CP",
and "L-CP" certificates. In addition, the borrower's equity
interests in the properties secure a $128.9 million mezzanine
loan. The trust balance reflects $468.9 million in paydowns since
issuance due to collateral releases. The primary servicer, Bank of
America, reported an in-trust DSC of 12.15x for year-end 2010 and
occupancy of 84.5% as of September 2011. The loan was recently
modified and extended to Aug. 9, 2012, and the loan has one 12-
month extension option remaining. The terms of the modification
and extension include, among other things, a principal paydown of
$40.0 million and scheduled quarterly amortization. The loan has
experienced a significant amount of deleveraging due to property
releases. "Our adjusted valuation using a capitalization rate of
9.74%, yielded a stressed in-trust LTV ratio of 54.2%, resulting
in the affirmation of the CN1 and 'CP' raked certificates in the
COMM 2006-FL12 and CSFB 2006-TFL2 transactions," S&P said.
The Legacy SoCal Portfolio, the seventh-largest loan in the COMM
2006-FL12 pool, is secured by two office complexes totaling
851,354 sq. ft. in Sante Fe Springs and San Diego, Calif. The loan
has whole-loan balance of $96.4 million, which is split into a
$56.2 million senior participation and a $40.2 million junior
participation held outside the trust. The senior participation
is further split into a $48.4 million senior pooled component
(3.7% of the pooled trust balance) and a $7.8 million nonpooled
component that supports the 'LS' raked certificates. The master
servicer, Berkadia, reported an in-trust DSC of 2.94x and
occupancy of 83.0% as of year-end 2010. "Our adjusted valuation,
using a capitalization rate of 9.20%, yielded a stressed in-trust
LTV ratio of 86.9%, resulting in the downgrade of the 'LS' raked
certificates," S&P said.
The Legacy Bayside Business Park, the smallest asset in the COMM
2006-FL12 pool, is secured by three office buildings totaling
313,490 sq. ft. in Freemont, Calif. The loan has a whole-loan
balance of $34.9 million, which is split into a $25.9 million
senior participation and a $9.0 million junior participation held
outside the trust. The senior participation is further split into
a $21.8 million senior pooled component (1.7% of the pooled trust
balance) and a $4.1 million nonpooled component that supports the
"LB" raked certificates (unrated). The asset was transferred to
the special servicer, LNR Partners LLC (LNR), on June 18, 2010,
for imminent default and became REO in June 2011. The REO asset
sale closed on Dec. 1, 2011, for $14.0 million and will be
reflected in the Dec. 15, 2011, trustee remittance report.
Multifamily properties secure one loan, the Independence Plaza,
which has a whole-loan balance of $391.5 million that is split
into $231.5 million senior participation and a $160.0 million
junior participation held outside the trust. The senior
participation is further split into a $205.8 million senior
pooled component (12.6% of the COMM 2006-FL12 pooled trust
balance) and a $25.7 million nonpooled component that supports the
"IP" raked certificates. In addition, the borrower's equity
interests in the properties secure a $150.0 million mezzanine
loan. The loan is secured by three 39-story apartment buildings
comprising 1,332 apartment units, 123,750 sq. ft. of parking
garage space with 550 spaces, 49,730 sq. ft. of retail space, and
17,000 sq. ft. of office space. The master servicer, Berkadia,
reported an in-trust DSC of 5.70x and occupancy of 99.0% for year-
end 2010. The loan was transferred to the special servicer,
CWCapital LLC on April 29, 2011 due to its near-term maturity. The
loan was modified and extended to Aug. 9, 2013, and has no
extension options remaining. "Our adjusted valuation, using a
capitalization rate of 8.00%, yielded a stressed in-trust LTV
ratio of 58.7%. Accordingly, we affirmed our rating on the 'IP'
raked certificates," S&P said.
Retail properties secure three loans totaling $165.4 million
(12.7% of the COMM 2006-FL12 pooled trust balance as per the Nov.
15, 2011, trustee remittance report).
"We based our retail analyses, in part, on a review of the
borrowers' operating statements for the trailing-12-months 2011
(varying months), the year-end 2010, the year-end 2009, the
borrowers' 2011 budgets, and 2011 rent rolls. Based on our
analysis, our retail valuations, yielding a stressed LTV ratio of
74.1% on the trust balance. Details on the retail loans are set
forth," S&P said.
The Albertsons Portfolio loan, the fifth-largest loan in COMM
2006-FL12 the pool, is secured by 45 retail stores (majority
Albertson) totaling 2.1 million sq. ft. in 13 states. The loan
has a whole loan balance of $128.0 million, which is split into
$97.3 million senior participation and a $30.7 million junior
participation held outside the trust. The senior participation
is further split into a $82.0 million senior pooled component
(6.3% of the pooled trust balance) and a $15.2 million nonpooled
component that supports the "AN" raked certificates. The master
servicer, Berkadia, reported an in-trust DSC of 2.67x for year-end
2010 and occupancy of 90% as of August 2011. The loan matured on
Aug. 9, 2011, and was transferred to the special servicer, LNR, on
Aug. 10, 2011. LNR engaged counsel, ordered third-party reports,
and continues to gather information on the loan while having
discussions with the borrower. "Our adjusted valuation, using a
capitalization rate of 8.92%, yielded a stressed in-trust LTV
ratio of 75.5%. The 'AN' raked certificates have experienced
interest rate shortfalls due to special servicing fees for the
past three months. Accordingly, we downgraded the 'AN' raked
certificates. If these interest shortfalls continue for an
extended period of time, we may take additional rating actions,
including lowering some ratings as low as 'D (sf)'," S&P said.
The Superstition Springs Center loan, the sixth-largest loan in
the COMM 2006-FL12 pool, has a trust and whole-loan balance of
$67.5 million (5.2% of the pooled trust balance). The loan is
secured by the fee and leasehold interest in 377,768 sq. ft. of
in-line space within a 1.07 million-sq.-ft. regional mall in Mesa,
Ariz. Berkadia reported a 26.7x DSC and 98.5% occupancy for year-
end 2010. The loan was repaid in full on Oct. 28, 2011, and will
be reflected in the December 2011 trustee remittance report,
according to the special servicer, LNR.
The Avenue at Tower City loan, the ninth-largest loan in the
COMM 2006-FL12 pool, is secured by a 364,229-sq.-ft. retail
center in Cleveland, Ohio. The loan has whole-loan balance
of $28.3 million, which is split into a $18.1 million senior
participation and a $10.2 million junior participation held
outside the trust. The senior participation is further split
into a $15.8 million senior pooled component (1.2% of the
pooled trust balance) and a $2.3 million nonpooled component
that supports the "TC" raked certificates (Standard & Poor's
does not rate the "TC2" raked certificate). The master servicer,
Berkadia, reported an in-trust DSC of 2.16x and occupancy of
67.9% as fiscal year-end Jan. 31, 2011. "Our adjusted valuation,
using a capitalization rate of 9.29%, yielded a stressed in-trust
LTV ratio of 67.5%, resulting in the upgrade of the "TC1" raked
certificate. The upgrade also reflects deleveraging of the loan,"
S&P said.
One additional loan, the Embassy Suites Lake Buena Vista loan,
is with the special servicer. This is the 10th-largest loan in
COMM 2006-FL12 and has a whole loan balance of $42.5 million,
which is split into $27.5 million senior participation and a
$15.0 million junior participation held outside the trust. The
senior participation is further split into a $22.8 million
senior pooled component (1.7% of the pooled trust balance) and
a $4.7 million nonpooled component that supports the "ES" raked
certificates. In addition, the borrower's equity interests in the
properties secure a $12.0 million mezzanine loan. The master
servicer, Berkadia, reported an in-trust DSC of 2.05x for the
trailing-12-months ending March 2011 and occupancy of 80.4% as
of October 2011. The loan was transferred to the special servicer,
CT Investment Management Co. LLC, on Oct. 28, 2011 due to a
near-term final maturity of Nov. 9, 2011. CT Investment is
currently in discussions with the borrower regarding possible
resolutions. "Our adjusted valuation, using a capitalization rate
of 11.50%, yielded a stressed in-trust LTV ratio of 158.9%,
resulting in the affirmation of the 'ES' raked certificates," S&P
said.
Ratings Lowered
COMM 2006-FL12
Commercial mortgage pass-through certificates
Rating
Class To From Credit enhancement (%)
A-J AA- (sf) AA (sf) 29.69
B BBB (sf) A (sf) 23.65
C BB+ (sf) BBB+ (sf) 19.40
D BB- (sf) BBB- (sf) 14.72
E B+ (sf) BB+ (sf) 11.23
F B- (sf) BB (sf) 7.75
G CCC+ (sf) BB- (sf) 4.43
H CCC (sf) B+ (sf) 2.36
J CCC- (sf) B- (sf) N/A
AN1 CCC+ (sf) BBB- (sf) N/A
AN2 CCC (sf) BB+ (sf) N/A
AN3 CCC- (sf) BB+ (sf) N/A
AN4 CCC- (sf) BB (sf) N/A
KR1 CCC- (sf) CCC+ (sf) N/A
KR2 CCC- (sf) CCC (sf) N/A
LS1 CCC (sf) BB (sf) N/A
LS2 CCC- (sf) B+ (sf) N/A
Credit Suisse First Boston Mortgage Securities Corp. Commercial
mortgage pass-through certificates series 2006-TFL2
Rating
Class To From Credit enhancement (%)
KER-A B (sf) BB+ (sf) N/A
KER-B CCC (sf) BB (sf) N/A
KER-C CCC- (sf) BB- (sf) N/A
KER-D CCC- (sf) B- (sf) N/A
KER-E CCC- (sf) CCC (sf) N/A
Rating Raised
COMM 2006-FL12
Commercial mortgage pass-through certificates
Rating
Class To From Credit enhancement (%)
TC1 B (sf) CCC- (sf) N/A
Ratings Affirmed
COMM 2006-FL12
Commercial mortgage pass-through certificates
Class Rating Credit enhancement (%)
A-2 AAA (sf) 68.40
X-2 AAA (sf) N/A
X-3-BC AAA (sf) N/A
X-3-DB AAA (sf) N/A
X-3-SG AAA (sf) N/A
X-5-BC AAA (sf) N/A
X-5-DB AAA (sf) N/A
CN1 A- (sf) N/A
ES1 CCC- (sf) N/A
ES2 CCC- (sf) N/A
FSH1 CCC- (sf) N/A
FSH2 CCC- (sf) N/A
FSH3 CCC- (sf) N/A
IP1 BBB+ (sf) N/A
IP2 BBB- (sf) N/A
IP3 BBB- (sf) N/A
KR3 CCC- (sf) N/A
Credit Suisse First Boston Mortgage Securities Corp. Commercial
mortgage pass-through certificates series 2006-TFL2
Class Rating Credit enhancement (%)
KER-F CCC- (sf) N/A
Banc of America Large Loan Inc.
Commercial mortgage pass-through certificates series 2006-BIX1
Class Rating Credit enhancement (%)
J-CP A+ (sf) N/A
K-CP A- (sf) N/A
L-CP BBB (sf) N/A
N/A -- Not applicable.
CONCORD REAL ESTATE: Moody's Affirms 'Ba3' Rating of Cl. B Notes
----------------------------------------------------------------
Moody's has affirmed the ratings of all classes of Notes issued
by Concord Real Estate CDO 2006-1, Ltd. due to key transaction
parameters performing within levels commensurate with the existing
ratings levels. The rating action is the result of Moody's on-
going surveillance of commercial real estate collateralized debt
obligation and collateralized loan obligation (CRE CDO CLO)
transactions.
Cl. A-1, Affirmed at A1 (sf); previously on Dec 9, 2010 Downgraded
to A1 (sf)
Cl. A-2, Affirmed at Baa3 (sf); previously on Dec 9, 2010
Downgraded to Baa3 (sf)
Cl. B, Affirmed at Ba3 (sf); previously on Dec 9, 2010 Downgraded
to Ba3 (sf)
Cl. C, Affirmed at B2 (sf); previously on Dec 9, 2010 Downgraded
to B2 (sf)
Cl. D, Affirmed at Caa1 (sf); previously on Dec 9, 2010 Downgraded
to Caa1 (sf)
Cl. E, Affirmed at Caa2 (sf); previously on Dec 9, 2010 Downgraded
to Caa2 (sf)
Cl. F, Affirmed at Caa3 (sf); previously on Dec 9, 2010 Downgraded
to Caa3 (sf)
RATINGS RATIONALE
Concord Real Estate CDO 2006-1, Ltd., is a revolving cash CRE CDO.
As of the November 18, 2011 Trustee report, the transaction is
backed by a portfolio of whole loans (18.3% of the pool balance),
B-Notes (27.6%), mezzanine loans (22.1%), commercial mortgage
backed securities (CMBS) (26.8%), CRE CDO debt (2.4%), and rake
bond (2.8%). The aggregate Note balance of the transaction,
including Preferred Shares, has decreased to $347.0 million from
$465 million at issuance, due to approximately $22.7 million in
pay-downs to the Class A-1 Notes, and partial or full junior
cancellations of the Class C, Class D, Class E, and Class F, Class
G, and Class H Notes. During the current review, holding all key
parameters static, the junior note cancellations results in
slightly higher expected losses and longer weighted average lives
on the senior Notes, while producing slightly lower expected
losses on the mezzanine and junior Notes. However, this does not
cause, in and of itself, a downgrade or upgrade of any outstanding
classes of Notes. There are no losses to the transaction and the
transaction is passing all of its par value and interest coverage
ratio tests.
There are four assets with a par balance of $54.5 million
(13.9% of the current pool balance) that are considered Defaulted
Securities as of the November 18, 2011 Trustee report, compared to
six assets (15.4% of the pool balance) at last review. We are
expecting high losses to occur once they are realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
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.
We have updated credit estimates for the non-Moody's rated
collateral. The bottom-dollar WARF is a measure of the default
probability within a collateral pool. Moody's modeled a bottom-
dollar WARF of 4,950 compared to 5,818 at last review. The
distribution of current ratings and credit estimates is: Aaa-Aa3
(10.4% compared to 0.9% at last review), A1-A3 (4.5% compared to
4.1% at last review), Baa1-Baa3 (0.0% compared to 5.2% at last
review), Ba1-Ba3 (0.0% compared to 2.4% at last review), B1-B3
(27.1% compared to 15.9% at last review), and Caa1-C (58.0%
compared to 71.5% at last review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 3.1 years compared
to 4.1 at last review.
WARR is the par-weighted average of the mean recovery values for
the collateral assets in the pool. Moody's modeled a fixed WARR of
24.0% compared to 15.1% at last review.
MAC is a single factor that describes the pair-wise asset
correlation to the default distribution among the instruments
within the collateral pool (i.e. the measure of diversity).
Moody's modeled a MAC of 13.3% compared to 11.4% 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.
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
24.0% to 14.0% or up to 34.0% would result in average rating
movement on the rated tranches of 0 to 4 notches downward and 0 to
5 notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected range
will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on an
assessment of a range of factors including, but not exclusively,
the performance metrics.
Primary sources of assumption uncertainty are the extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial real
estate property markets are gaining momentum, a consistent upward
trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are in
recovery and improvements in the office sector continue, with
fundamentals in Gateway cities outperforming their suburban
counterparts. However, office demand is closely tied to
employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector has
been mixed with on-going rent deflation and leasing challenges.
Across all property sectors, the availability of debt capital
continues to improve with monetary policy expected to remain
supportive and interest rate hikes postponed. Moody's central
global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter, amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The methodologies used in this rating were "Moody's Approach to
Rating SF CDOs" published in November 2010, and "Moody's Approach
to Rating Commercial Real Estate CDOs" published in July 2011.
CONTINENTAL AIRLINES: Moody's Affirms Series 1998-3B Rating at Ba2
------------------------------------------------------------------
Moody's Investors Service affirmed its ratings on the tranches
of certain of the Enhanced Equipment Trust Certificates of
Continental Airlines, Inc., America West Airlines, Inc. and US
Airways, Inc. upon the replacement of the Liquidity Provider for
these financings. Morgan Stanley Bank, N.A. has replaced Morgan
Stanley Capital Services LLC as the provider of the separate
liquidity facilities that support each of the subject EETC
financing transactions. Moody's short-term rating of Morgan
Stanley Bank, N.A., is P-1, which meets the Threshold Rating
Requirement of the transactions' terms. The outlook on Morgan
Stanley Bank, N.A., is negative.
The following EETC Tranche ratings have been affirmed and remain
in force:
Continental Airlines, Inc., Series 1998-3B, at Ba2
America West Airlines, Inc., Series 1999-1G, at Ba3
US Airways, Inc., Series 2000-3G, at Ba3
US Airways, Inc., Series 2000-3C, at Caa1
RATINGS RATIONALE
The principal methodology used in rating UAL and US Airways Group,
Inc. was the Global Passenger Airlines Industry Methodology
published in March 2009 and the Enhanced Equipment Trust And
Equipment Trust Certificates Methodology published in December
2010.
United Continental Holdings, Inc. (NYSE: UAL) is the holding
company for both United Airlines and Continental Airlines.
Together with United Express, Continental Express and Continental
Connection, these airlines operate an average of 5,717 flights a
day to 376 airports on six continents from their hubs in Chicago,
Cleveland, Denver, Guam, Houston, Los Angeles, New York/Newark
Liberty, San Francisco, Tokyo and Washington, D.C.
US Airways Group, Inc., based in Tempe, Arizona, through its
subsidiaries operates one of the largest airlines in the U.S. with
service throughout the U.S. as well as Canada, Mexico, Europe, the
Middle East, the Caribbean, Central and South America.
CSFB 2001-CKN5: Moody's Reviews 'B2' Cl. J Notes Rating
-------------------------------------------------------
Moody's Investors Service (Moody's) placed eight CMBS classes of
Credit Suisse First Boston Mortgage Securities Corp, Commercial
Mortgage Pass-Through Certificates, Series 2001-CKN5 as follows:
Cl. D, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on Mar 9, 2011 Confirmed at Aaa (sf)
Cl. E, Aaa (sf) Placed Under Review for Possible Downgrade;
previously on May 11, 2011 Upgraded to Aaa (sf)
Cl. F, Aa3 (sf) Placed Under Review for Possible Downgrade;
previously on Aug 28, 2007 Upgraded to Aa3 (sf)
Cl. G, A3 (sf) Placed Under Review for Possible Downgrade;
previously on Aug 28, 2007 Upgraded to A3 (sf)
Cl. H, Baa2 (sf) Placed Under Review for Possible Downgrade;
previously on Aug 28, 2007 Upgraded to Baa2 (sf)
Cl. J, B2 (sf) Placed Under Review for Possible Downgrade;
previously on May 11, 2011 Downgraded to B2 (sf)
Cl. K, Caa3 (sf) Placed Under Review for Possible Downgrade;
previously on May 11, 2011 Downgraded to Caa3 (sf)
Cl. L, Ca (sf) Placed Under Review for Possible Downgrade;
previously on Aug 4, 2010 Downgraded to Ca (sf)
RATINGS RATIONALE
The classes were placed on review for possible downgrade due to an
increase in interest shortfalls, higher expected losses from the
Macomb Mall Loan ($41.8 million; 27.9% of the pool) and the One
Sugar Creek Place Loan ($40.6 million; 27.1% of the pool) and
decreased diversity of loan size in the pool.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) 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 May 11, 2011.
The methodologies used in this rating were "Moody's Approach to
Rating U.S. CMBS Conduit Transactions" published on September 15,
2000 and "Moody's Approach to Rating CMBS Large Loan/Single
Borrower Transactions" published on July 7, 2000.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on Credit Suisse First Boston Securities Corp.,
Commercial Mortgage Pass-Through Certificates, Series 2004-C5
Classes A-X and A-SP may be negatively affected. Please refer
to Moody's request for Comment, titled "Proposal Changing the
Global Rating Methodology for Structured Finance Interest-Only
Securities," for further details regarding the implications of
the proposed methodology change on Moody's rating.
DEAL PERFORMANCE
As of the November 18, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 86% to
$149.7 million from $1.94 billion at securitization. The
Certificates are collateralized by 26 mortgage loans ranging in
size from less than 1% to 28% of the pool, with the top ten loans
representing 97% of the pool. There are no loans with investment
grade credit estimates or that have been defeased by US Government
securities.
Three loans, representing 22% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) 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.
Sixteen loans have been liquidated from the pool, resulting in a
realized loss of $22.0 million (23% loss severity). Currently ten
loans, representing 76% of the pool, are in special servicing.
Moody's review will focus on potential losses from specially
serviced and troubled loans, interest shortfalls and the
performance of the overall pool.
CSFB 2006-TFL2: Moody's Affirms Rating of Cl. KER-B Notes at 'Ba2'
------------------------------------------------------------------
Moody's Investors Service (Moody's) affirmed the ratings of six
non-pooled, or rake, classes of Credit Suisse First Boston
Mortgage Securities Corp., Series 2006-TFL2:
Cl. KER-A, Affirmed at Baa3 (sf); previously on Mar 17, 2011
Downgraded to Baa3 (sf)
Cl. KER-B, Affirmed at Ba2 (sf); previously on Mar 17, 2011
Downgraded to Ba2 (sf)
Cl. KER-C, Affirmed at B1 (sf); previously on Mar 17, 2011
Downgraded to B1 (sf)
Cl. KER-D, Affirmed at B2 (sf); previously on Mar 17, 2011
Downgraded to B2 (sf)
Cl. KER-E, Affirmed at Caa1 (sf); previously on Mar 17, 2011
Downgraded to Caa1 (sf)
Cl. KER-F, Affirmed at Caa3 (sf); previously on Mar 17, 2011
Downgraded to Caa3 (sf)
RATINGS RATIONALE
The affirmations are due to a paydown loan balance that offsets a
deterioration in property performance of the Kerzner International
Portfolio Loan.
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 extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial real
estate property markets are gaining momentum, a consistent upward
trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are in
recovery and improvements in the office sector continue, with
fundamentals in Gateway cities outperforming their suburban
counterparts. However, office demand is closely tied to
employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector has
been mixed with on-going rent deflation and leasing challenges.
Across all property sectors, the availability of debt capital
continues to improve with monetary policy expected to remain
supportive and interest rate hikes postponed. Moody's central
global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter , amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The principal methodology used in this rating was "Moody's
Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for structured
finance interest-only securities. If the revised methodology is
implemented as proposed, the rating on CSFB 2006-TFL2 Class A-X-1
and Class A-X-3 may be negatively affected Please refer to Moody's
Request for Comment titled "Proposal Changing the Global Rating
Methodology for Structured Finance Interest-Only Securities.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.2. 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 (CMBS) 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 review is
summarized in a press release dated March 17, 2011.
DEAL PERFORMANCE
The Kerzner International Portfolio Loan ($358.3 million -- 74% of
the pooled balance), a 50% portion of a pari passu split loan
structure that is securitized in COMM 2006-FL12. There is also
$282.2 million of non-pooled, or rake, trust debt (Classes KER-A,
KER-B, KER-C, KER-D, KER-E, KER-F) and a $1.2 billion non-trust
junior secured loan component. The loan is secured by
substantially all of the borrower's real estate assets located on
Paradise Island, Bahamas, including the Atlantis Hotel (2,917
keys) and the One & Only Ocean Club Hotel and golf course (106
keys, located one mile from the Atlantis), a marina and vacant and
improved land. The resort features the largest casino and ballroom
in the Caribbean and water-themed attractions, including the
world's largest open-air marine habitat.
The loan is also supported by a pledge of Kerzner's 100% interest
in management agreements and fees relating to the properties, a
right to receive Kerzner's 50% interest in excess net cash flow
and/or sales proceeds generated from the One & Only Palmilla Hotel
in Mexico, Harborside timeshare units, and the Residences at
Atlantis and Ocean Club condos. Revenue per available room
(RevPAR), calculated by multiplying the average daily rate by the
occupancy rate, for the trailing 12-month period ending July 2011
was $197 at the Atlantis and $770 at the One & Only Ocean Club. A
comparison of RevPAR for the year-to-date period ending July 2011
with the same period in the prior year indicates a 3% increase in
room revenue but a 4% decrease in operating profit. Casino
operations that account for 15% of total revenue saw a 25%
decrease in operating profit and operating profit from all revenue
components declined 6%.
The trust debt has decreased 10% since securitization to
$640.5 million from $715.0 million and total debt has decreased to
$2.5 billion from $2.8 billion at securitization. The loan matured
on November 21, 2011. On November 1, 2011 the loan was paid down
by $100 million from funds in the Excess Cash Reserve Fund in
consideration of a short term extension. A cash trap is in place
whereby excess cash flow after debt service is held by the
servicer and applied to replenish reserves after which excess
funds will be applied to pay down the loan balance.
The borrower has expressed an unwillingness to invest any
additional funds into the property and has agreed to a deed in
lieu of foreclosure with Brookfield Asset Management, the holder
of the $175.4 million B-4-B Participation. An assumption of the
mortgage loan and assignment of the loan collateral to Brookfield
would reduce the total outstanding debt by $175.4.
A concern is the additional competition from the $3.4 billion Baha
Mar resort complex that broke ground in March 2011 on Nassau's
Cable Beach. Baha Mar is a single-phase project backed by the
Chinese government that is scheduled to open in late 2014. The
resort will feature four hotels with a total of approximately
2,250 rooms, a golf course, convention center, a casino that is to
be the largest in the Caribbean and a 10-acre Eco Water Park. In
overall size and amenities it is expected to be very similar to
the Atlantis. Although scheduled completion is three years away,
the project is expected to be future competition for the Atlantis
and complicate the re-financing of the current debt. Moody's
credit estimate for the pooled debt is Ba3, the same as last
review. Moody's is affirming the ratings of the rake certificates
due to the de-leveraging and the expectation of additional future
de-leveraging resulting from the in-place cash management
agreement.
CSFB 2007-TFL1: Moody's Raises Rating of Cl. F Notes to 'Ba1'
-------------------------------------------------------------
Moody's Investors Service (Moody's) upgraded the ratings of six
classes and affirmed eight classes of Credit Suisse First Boston
Mortgage Securities Corp. Commercial Pass-Through Certificates,
Series 2007-TFL1:
Cl. A-1, Affirmed at Aaa (sf); previously on Mar 9, 2011 Confirmed
at Aaa (sf)
Cl. A-2, Upgraded to Aa2 (sf); previously on Jun 30, 2010
Downgraded to A2 (sf)
Cl. B, Upgraded to A1 (sf); previously on Jun 30, 2010 Downgraded
to Baa2 (sf)
Cl. C, Upgraded to A2 (sf); previously on Jun 30, 2010 Downgraded
to Baa3 (sf)
Cl. D, Upgraded to A3 (sf); previously on Jun 30, 2010 Downgraded
to Ba1 (sf)
Cl. E, Upgraded to Baa2 (sf); previously on Jun 30, 2010
Downgraded to Ba2 (sf)
Cl. F, Upgraded to Ba1 (sf); previously on Jun 30, 2010 Downgraded
to Ba3 (sf)
Cl. G, Affirmed at B1 (sf); previously on Jun 30, 2010 Downgraded
to B1 (sf)
Cl. H, Affirmed at B3 (sf); previously on Jun 30, 2010 Downgraded
to B3 (sf)
Cl. J, Affirmed at Caa1 (sf); previously on Jun 30, 2010
Downgraded to Caa1 (sf)
Cl. K, Affirmed at Caa2 (sf); previously on Jun 30, 2010
Downgraded to Caa2 (sf)
Cl. L, Affirmed at Caa3 (sf); previously on Jun 30, 2010
Downgraded to Caa3 (sf)
Cl. A-X-1, Affirmed at Aaa (sf); previously on Mar 9, 2011
Confirmed at Aaa (sf)
Cl. A-X-2, Affirmed at Aaa (sf); previously on Mar 9, 2011
Confirmed at Aaa (sf)
RATINGS RATIONALE
The upgrades are due to increased credit support due to the pay
off of three loans and partial pay downs of two loans since
Moody's previous review. The affirmations are due to key
parameters, including Moody's loan to value (LTV) ratio
remaining with an acceptable range.
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 extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial
real estate property markets are gaining momentum, a consistent
upward trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline
and job creation rebounds. The hotel and multifamily sectors
are in recovery and improvements in the office sector continue,
with fundamentals in Gateway cities outperforming their
suburban counterparts. However, office demand is closely tied
to employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector has
been mixed with on-going rent deflation and leasing challenges.
Across all property sectors, the availability of debt capital
continues to improve with monetary policy expected to remain
supportive and interest rate hikes postponed. Moody's central
global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter, amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The principal methodology used in this rating was "Moody's
Approach to Rating CMBS Large Loan/Single Borrower Transactions"
published in July 2000.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on CSFB 2007-TFL1, Class AX1 and Class AX2 may be
negatively affected. Please refer to Moody's request for Comment,
titled "Proposal Changing the Global Rating Methodology for
Structured Finance Interest-Only Securities," for further details
regarding the implications of the proposed methodology change on
Moody's rating.
Moody's review incorporated the use of the excel-based Large Loan
Model v 8.2. 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 (CMBS) 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 review is
summarized in a press release dated May 12, 2011.
DEAL PERFORMANCE
As of the November 15, 2011 Payment Date, the transaction's
aggregate certificate balance has decreased by 30% to $881 million
from $1.27 billion at securitization due to the pay off of five
loans originally in the trust. A sixth loan, the RECP Hardin
Portfolio Loan ($23.2 million), paid off on November 17, 2011 and
is not reflected in the November Trustee Statement. The
certificates are currently collateralized by six floating rate
loans ranging in size from 7% to 26% of the pool. The two largest
loans, the Manhattan Mall Loan and the Park Central Loan account
for 49% of the total pooled balance. Four of the loans (60% by
pooled balance) are hotel properties.
Moody's weighted average LTV ratio for the total pool is 79%,
compared to 90% at last review. Moody's debt service coverage
(DSCR) ratio is 1.33, compared to 1.22x at last review.
There are currently three loans in special servicing, the Park
Central Hotel Loan ($203 million -- 23%), the JW Marriott Las
Vegas Resort & Spa Loan ($150 million -- 17%) and the Hines
Portfolio Loan ($125 million -- 14%).
The Manhattan Mall Loan ($232.0 million -- 26%), the largest loan
in the pool, is secured by a 13-story, 1.1 million square foot
mixed-use property consisting of approximately 815,000 square feet
of office space, 244,000 square feet of retail space, and 20,000
square feet of storage. The property is located on Sixth Avenue
between West 32rd and 33rd Streets in New York, NY. The retail
space is anchored by a 154,038 square foot JC Penney store that
opened in July 2009. JC Penney's only Manhattan location is in the
Manhattan Mall. The lease has a 20-year term, expiring in 2029. As
of January 2011 the office component was approximately 94% leased
and the retail component was 99% leased. The largest office
tenants include Interpublic Group and Bank of America N.A. who
lease 39% and 17% of the office space, respectively. Bank of
America, whose lease expires in May 2012, represents 23% of the
total office space and 15% of total property base rent. The three
largest retail tenants after JC Penney are Strawberry (5% of total
retail space), Charlotte Russe (4%) and Square One (3%). The
interest-only loan has a final maturity date in February 2012. The
borrower is reportedly talking to several lenders regarding a
refinancing. Moody's believes that given the quality of the asset
the borrower will be successful in refinancing the existing
mortgage loan even though credit markets remain constrained.
Moody's current pooled LTV ratio is 62% and stressed DSCR is
1.54X. Moody's current credit estimate is A2, compared to Baa1 at
last review.
The Park Central Hotel Loan ($203.0 million -- 23%), the second
largest loan, is secured by a full-service hotel condominium
unit containing a 934-guestrooms within a larger 33-story
condominium parcel that consists primarily of time share units.
The $407 million mortgage loan includes a $204 million non-trust
junior secured loan component. There is also $58 million in
mezzanine debt. The property is located on Seventh Avenue, between
West 55th and 56th Streets in New York, NY. Revenue per available
room (RevPAR) was $197 for the year-to-date period ending October
2011, compared to $176 for the trailing-12 month period ending
September 2011. The loan was transferred to special servicing in
June 2011 due to imminent default. The loan has a final maturity
date of December 31, 2011. The property is under contract of sale
and the special servicer has agreed to a discounted pay off of the
mortgage debt in an amount sufficient to pay off the trust debt
in full. The sale is expected to close by the end of the year.
Moody's current LTV is 63%, compared to 85% at last review.
Moody's current credit estimate is Ba1, compared to B1 at last
review.
The JW Marriott Las Vegas Resort & Spa Loan ($150.0 million --
17%), the third largest loan, is secured by a 548-guestroom full-
service hotel that was constructed in 1999 and renovated in 2006.
The hotel is located in Summerlin (Las Vegas), Nevada. Amenities
include a spa, five restaurants and a casino. The loan was
transferred to special servicing in September 2011 due to imminent
default. The borrower indicated an inability to repay the loan on
the November 9, 2011 maturity date. The $160 million mortgage loan
includes a $10 million non-trust junior secured loan component.
Revenue per available room (RevPAR) for the trailing 12-month
period ending June 2011 decreased 45% to $85 from $154 at
securitization. Casino revenue accounts for 20% of total revenue,
down from 34% at securitization. Moody's current LTV is greater
than 100%. Moody's current credit estimate is Caa3, the same as
last review.
The Hines Portfolio Loan ($125.0 million -- 14%), the fourth
largest loan, is secured by 44 cross-collateralized and cross-
defaulted office/R&D buildings in 17 separate properties located
primarily in San Jose and vicinity with a total of 1.6 million
square feet. The loan was transferred to special servicing in
August 2011 due to imminent default. The loan matured on
November 9, 2011. The $259.5 million mortgage loan includes a
$134.5 million non-trust junior secured loan component. As of
September 2011, the portfolio was approximately 59% leased,
compared to 58% at Moody's last review and 75% at securitization.
The increase in vacancy is the result of Mentor Graphics vacating
its space upon lease expiration in September 2010. Mentor Graphics
had been the largest tenant in the portfolio occupying 208,433
square feet (13% of total net rentable area). Asking rent for the
space is significantly lower than what Mentor Graphics had been
paying. CB Richard Ellis indicates vacancy rates for both office
and R&D in excess of 20% for the overall San Jose market. Moody's
current LTV ratio is 99% and stressed DSCR is 1.03X. Moody's
current credit estimate is Caa2, the same as last review.
CWALT INC: Moody's Lowers Rating of Cl. A-2-A Notes to 'Caa1'
-------------------------------------------------------------
Moody's Investors Service has downgraded the rating of the Class
A-2-A certificates issued by CWALT, Inc. Mortgage Pass-Through
Certificates, Series 2007-OH1.
RATINGS RATIONALE
The collateral backing these transactions consists primarily of
first-lien, adjustable rate, negative amortization, Alt-A
residential mortgage loans. CWALT 2007-OH1 Class A-2-A is
receiving less principal than anticipated, and Moody's now expects
the tranche to take a loss.
The methodologies used in these ratings were "Moody's Approach to
Rating US Residential Mortgage-Backed Securities" published in
December 2008, and "2005- 2008 US RMBS Surveillance Methodology"
published in July 2011.
To assess the rating implications of the updated loss levels on
Subprime RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R) (SFW), 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 extended foreclosure timelines by servicers is
taken into consideration when assigning ratings.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment levels remain
high, and weakness persists in the housing market. Moody's now
projects the house price index to reach a bottom in the first
quarter of 2012.
Complete rating actions are:
Issuer: CWALT, Inc. Mortgage Pass-Through Certificates, Series
2007-OH1
Cl. A-2-A, Downgraded to Caa1 (sf); previously on Nov 23, 2010
Downgraded to B1 (sf)
EQUIFIRST LOAN: Moody's Lowers Rating of Cl. A-2A Notes to Caa1
---------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of the Class
A-2A certificates issued by Securitized Asset Backed Receivables
(SABR) LLC Trust 2007-BR1, and the Class A-2A certificates issued
by EquiFirst Loan Securitization Trust 2007-1.
RATINGS RATIONALE
The collateral backing these transactions consists primarily of
first-lien, Subprime residential mortgage loans. The downgrade of
EquiFirst 2007-1 Class A-2A is the result of Moody's updated loss
expectation on the underlying pools as well as the tranche
receiving less principal payments than anticipated. The downgrade
of SABR 2007-BR1 Class A-2A is the result of the Group 2 senior
certificates' principal waterfall changing from sequential to pro
rata payment after the mezzanine certificates are written off,
which Moody's expects to occur in the next few months.
The methodologies used in these ratings were "Moody's Approach to
Rating US Residential Mortgage-Backed Securities" published in
December 2008, and "2005 - 2008 US RMBS Surveillance Methodology"
published in July 2011.
To assess the rating implications of the updated loss levels on
Subprime RMBS, each individual pool was run through a variety of
scenarios in the Structured Finance Workstation(R) (SFW), 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 extended foreclosure timelines by servicers is
taken into consideration when assigning ratings.
The primary source of assumption uncertainty is the current
macroeconomic environment, in which unemployment levels remain
high, and weakness persists in the housing market. Moody's now
projects the house price index to reach a bottom in the first
quarter of 2012.
Complete rating actions are:
Issuer: EquiFirst Loan Securitization Trust 2007-1
Cl. A-2A, Downgraded to Caa1 (sf); previously on Jul 14, 2010
Upgraded to B1 (sf)
Issuer: Securitized Asset Backed Receivables LLC Trust 2007-BR1
Cl. A-2A, Downgraded to Ca (sf); previously on Jul 8, 2010
Downgraded to Caa2 (sf)
FIFTH THIRD: DBRS Confirms Series G Rating at 'BB'
--------------------------------------------------
DBRS, Inc., has confirmed all ratings of Fifth Third Bancorp,
including its Issuer & Senior Debt rating of A (low) and the
Deposits & Senior Debt rating of Fifth Third Bank of "A".
The ratings action follows a detailed review of the Company's
operating results, financial fundamentals and future prospects.
The confirmation of Fifth Third's ratings reflects the
Company's stable revenue generation, solid liquidity profile
and ample capital base. Fifth Third's financial performance has
significantly improved since the financial crisis. Core revenue
and earnings levels have recovered to healthier levels while the
Company has built substantial balance sheet protection through its
reserves, writedowns and augmented capital levels.
During the crisis and recession, Fifth Third struggled with losses
from higher credit costs due to deteriorating asset quality
(primarily real estate) and weaker revenue. Subsequently, the
Company recorded six consecutive quarters of positive net income
to common shareholders even though credit costs remain elevated.
Importantly for DBRS, the $534 million of loan loss provisions
taken in the last four quarters were only 22% of the Company's
adjusted income before provisions and taxes (IBPT) of roughly
$2.4 billion marking a solid turnaround. As recently as 1Q10,
provisions were over 100% of IBPT.
Given its deeply entrenched franchise with a well-rooted sales
culture, the Company has maintained its revenue generation
ability despite the headwinds. Maintaining that momentum will be
important, however, as continued macroeconomic and regulatory
headwinds are expected in 2012 and the Durbin Amendment alone will
reduce annual interchange revenue by approximately $120 million
beginning in 4Q11, absent any mitigating actions.
DBRS notes that Fifth Third was proactive in managing its credit
issues including identifying portfolio problems, enhancing its
reporting abilities, building its work-out infrastructure and
moving to exit underperforming loan categories earlier in the
cycle of the recent financial crisis. The Company absorbed high
credit costs and built strong reserve and capital levels.
Credit quality continues to improve yet remains a diminishing
concern. Non-performing assets (NPAs) were 2.44% of loans at
3Q11 (excluding nonaccrual loans held for sale or 4.89% including
accruing restructured loans) and improved 28 basis points (bps)
over the year, while net charge-offs (NCOs) were 1.32% of average
loans, a 363 bps improvement over the year. To manage credit
risk, the Company continues to restructure consumer and commercial
loans which now total $2.4 billion including $404 million in
nonaccruing TDRs. Positively, redefault rates on restructured
residential mortgages at 27% and home equity loans at 16% continue
to outperform industry averages. Moreover, over half of consumer
TDRs are current, have been booked for over a year and reflect
improved vintage performance.
Elevated credit costs continue to come primarily from commercial
mortgage, home equity, residential mortgage and construction
loans. Additionally, Florida properties continue to produce a
disproportionate amount of nonaccrual loans and related credit
costs. DBRS also notes that the stressed real estate markets in
Michigan and Florida accounted for 42% of foreclosed real estate
at 3Q11. Fifth Third has reduced its home builder and developer
portfolio significantly and losses are far less material than in
previous years. Still of concern is the remaining $6 billion in
non-owner occupied commercial real estate as well as the $2.7
billion in residential mortgages and $4.2 billion in home equity
loans, both with over 90% weighted average LTVs.
DBRS does consider the Company's loan loss allowance at 3.08% of
loans and reserve coverage at 125% of non-performing assets as
ample given current portfolio trends, but notes that the reserve
ratio drops to 60% when restructured loans and nonaccrual loans
held for sale are included. Moreover, DBRS believes that Fifth
Third's substantial capitalization levels both on a tangible and
regulatory basis should enable it to absorb additional losses if
necessary. Positively, DBRS notes that the Company has materially
improved its funding and liquidity levels over the past few years.
The ratings of Fifth Third are underpinned by a core-funded
predominantly Midwest retail and small/middle market super-
regional banking franchise with a strong sales culture and a
recurrent revenue generating ability. The ratings also reflect
the strength of the Company's deposit shares in multiple markets
and its position as the leading depository in the State of Ohio.
DBRS currently sees Fifth Third's ratings as being comfortably
placed within its rating category.
Over the year capital has been enhanced primarily by additional
common shares and retained earnings. Moreover, the quality of
capital has also improved due to the repayment of preferred
shares. The Tier 1 common capital ratio of 9.3%, Tier 1 capital
of 11.96% and Total capital of 16.25% are well above regulatory
well-capitalized levels and the estimated Basel III Tier 1 Common
ratio of 9.8% suggests a smooth transition to the new capital
standard. The tangible common equity to tangible assets ratio
(TCE) increased 159 basis points since the end of 2010 to a much
stronger 8.63% at September 30, 2011, which places it in the upper
tier of its similarly-rated peer group. Liquidity has also been
enhanced as core deposits fully fund its loan portfolio and it has
substantial available borrowing capacity at the FHLB and Fed. In
addition, the Company has sufficient available liquidity at the
holding company to satisfy its obligations without relying on
upstreamed dividends from its subsidiaries for over 2 years.
Fifth Third, a diversified financial services corporation
headquartered in Cincinnati, Ohio, reported $115 billion in
consolidated assets as of September 30, 2011.
Fifth Third Bancorp Non-Cumulative Perpetual Convertible Preferred
Stock, Series G Confirmed BB Stb Dec 9, 2011
FIRST HORIZON: S&P Raises Rating on Class I-A-2 Cert. From 'CCC'
----------------------------------------------------------------
Standard & Poor's Ratings Services corrected its rating on class
I-A-2 from First Horizon Alternative Mortgage Securities Trust
2006-FA1 by raising it to 'AAA (sf)' from 'CCC (sf)'.
"Class I-A-2 is an interest-only (IO) class, with payments based
on a notional balance that is tied to the balances of the class I-
A-1 and I-A-6 certificates from this transaction. On July 24,
2009, we incorrectly lowered our rating on this class to 'CCC
(sf)'. The rating action corrects this error," S&P said.
The underlying collateral for this transaction consists of U.S.
fixed-rate Alternative-A mortgage loans secured by first liens on
one- to four-family residential properties.
Rating Corrected
First Horizon Alternative Mortgage Securities Trust 2006-FA1
Rating
Class CUSIP Current 07/24/09 Pre-07/24/09
I-A-2 32051GS55 AAA (sf) CCC (sf) AAA (sf)
G-STA 2003: Fitch Affirms Junk Rating on Four Note Classes
----------------------------------------------------------
Fitch Ratings has affirmed six classes issued by G-Star 2003-3
Ltd./Corp (G-Star 2002-2) as a result of stable performance on the
underlying portfolio since the last rating action.
Since the last rating action in May 2011, approximately 1.3% of
the collateral has been downgraded while 2.2% has been upgraded.
Currently, 46.8% of the portfolio has a Fitch derived rating below
investment grade and 37.5% has a rating in the 'CCC' category and
below. Additionally, the class A-1 notes have received $10.7
million in paydowns for a total of $261.6 million in principal
repayment since issuance.
On Sept. 15, 2011, the transaction entered into an event of
default (EOD) due to the failure to maintain an aggregate
principal amount of collateral debt securities and eligible
investments at 100% of the outstanding class A notes balance.
Noteholders had not given direction to accelerate the notes or
liquidate the portfolio at the time of this review.
This transaction was analyzed under the framework described in the
report 'Global Rating Criteria for Structured Finance CDOs' using
the Portfolio Credit Model (PCM) 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 CDOs'. Fitch also analyzed the
structure's sensitivity to the assets that are distressed,
experiencing interest shortfalls, and those with near term
maturities. Based on this analysis, the class A-1 notes'
breakeven rates are generally consistent with the rating assigned
below.
For the class A-2 through B notes, Fitch analyzed each class'
sensitivity to the default of the distressed assets ('CCC' and
below). Given the high probability of default of the underlying
assets and the expected limited recovery prospects upon default,
the class A-2 notes have been affirmed at 'CCsf', indicating that
default is probable. Similarly, the class A-3 and B notes have
been affirmed at 'Csf', indicating that default is inevitable.
The class B notes are currently receiving interest paid in kind
(PIK) whereby the principal amount of the notes is written up by
the amount of interest due.
The Stable Outlook on the class A-1 notes reflects Fitch's
expectation that the notes will continue to delever. Fitch does
not assign outlooks to classes rated 'CCC' and below.
The rating of the preferred shares addresses the likelihood that
investors will receive the ultimate return of the aggregate
outstanding rated balance by the legal final maturity date. The
assigned rating for the preferred shares indicates that default is
inevitable, as they are undercollateralized.
G-Star 2003-3 is a cash flow commercial real estate collateralized
debt obligation (CRE CDO) which closed on March 13, 2003. The
collateral is composed of 44.8% residential mortgage backed
securities (RMBS), 33.2% commercial mortgage backed securities
(CMBS), 11.7% real estate investment trusts (REIT), 8.9% asset
backed securities (ABS), and 1.4% structured finance CDOs.
Fitch has affirmed these classes:
-- $78,450,756 class A-1 notes at 'Bsf'; Outlook to Stable from
Negative;
-- $48,000,000 class A-2 notes at 'CCsf';
-- $18,000,000 class A-3 notes at 'Csf';
-- $5,705,934 class B-1 notes at 'Csf';
-- $17,495,298 class B-2 notes at 'Csf';
-- $24,000,000 preferred shares at 'Csf'.
GE COMMERCIAL: DBRS Confirms Class E Rating at 'B'
--------------------------------------------------
DBRS has confirmed the ratings of 22 classes of Commercial
Mortgage Pass-Through Certificates, Series 2005-C1, issued by GE
Commercial Mortgage Corporation, Series 2005-C1 (the Trust):
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-4 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-5 at AAA (sf)
-- Class A-1A at AAA (sf)
-- Class A-J at AAA (sf)
-- Class B at AA (low) (sf), Interest in Arrears
-- Class C at A (sf), Interest in Arrears
-- Class D at BBB (low) (sf), Interest in Arrears
-- Class E at B (sf), Interest in Arrears
-- Class F at C (sf), Interest in Arrears
-- Class G at C (sf), Interest in Arrears
-- Class H at C (sf), Interest in Arrears
-- Class J at C (sf), Interest in Arrears
-- Class K at C (sf), Interest in Arrears
-- Class L at C (sf), Interest in Arrears
-- Class M at C (sf), Interest in Arrears
-- Class N at C (sf), Interest in Arrears
-- Class O at C (sf), Interest in Arrears
-- Class X-C at AAA (sf)
-- Class X-P at AAA (sf)
Class B through Class O have Interest in Arrears. DBRS does not
rate the first-loss piece, Class P, which also has interest in
arrears. All trends are Stable.
DBRS has designated three investment-grade classes, Class B
through Class D, as having Interest in Arrears. These classes
have experienced an interest shortfall as a result of the full
payout of the Ward Centers loan (Prospectus ID#4) from the pool.
This loan was modified because of the bankruptcy of General Growth
Properties Inc. (GGP) and as a result, the special servicer was
due a 1% workout fee associated with the payoff of this loan,
which totaled more than $500,000. The master servicer paid this
fee from the interest due the Trust, which had a negative impact
on bondholders, as reflected in the November 2011 remittance
report. According to DBRS analysis and information provided to
DBRS, all else remaining the same, the interest shortfalls to
Class B should be recovered in one month; the interest shortfalls
to Class C should be recovered in two months; and the interest
shortfalls to Class D should be recovered in four to five months.
DBRS is also paying special attention to the Lakeside Mall loan
(Prospectus ID#1), as it is subject to the GGP bankruptcy rulings
as well. This loan, like the Ward Centers loan, was modified,
which would entitle the special servicer to another 1% workout fee
when the loan refinances. Like Ward Centers, the loan is not
prohibited from prepayment, and if it did repay earlier than its
2016 modified maturity date, it would cause interest shortfalls up
the capital structure within the transaction, much like was
experienced in the November 2011 remittance.
The rating confirmations are supported by transaction-level
performance that is in line with the metrics at the time of the
last DBRS review. As of the November 2011 remittance report,
there are 97 loans remaining in the pool, reporting a weighted-
average debt service coverage ratio (DSCR) of 1.59 times (x) and a
weighted-average debt yield of 10.9%. Approximately 36.5% of the
collateral has been reduced since issuance.
DBRS shadow-rates one loan, Buckhead Station (Prospectus ID#12,
2.2% of the current pool balance), as investment grade. DBRS has
confirmed that the performance of this loan remains consistent
with investment-grade loan characteristics.
Since the last annual review, four loans previously in special
servicing have been liquidated from the Trust. These four loans
caused a realized loss of $15.93 million to the Trust.
Five loans remain in special servicing, comprising 8.3% of the
current pool balance. The largest of these loans, Washington
Mutual Buildings (Prospectus ID#9, 3.5% of the current pool
balance), has been in special servicing for more than two years.
The loan is unsecured after the two office properties, located in
Chatsworth, California, that served as collateral for the loan
were sold and the proceeds were applied to the Trust in the
November 2010 remittance report. Using the updated information,
DBRS has re-modeled this loan, which has a current balance of
$39.05 million, at a 100% loss severity. The loan continues to
remain in the pool because of ongoing litigation between the
lender and guarantor that may result in additional recoveries for
the Trust.
The two remaining lender-owned properties in the pool are Oak Park
Office Center (Prospectus ID#25, 1.8% of the current pool balance)
and Heritage on the River (Prospectus ID#42, 1.2% of the current
pool balance). The Oak Park Office Center loan is secured by a
173,000 square foot (sf) office property in Houston and has a
current balance of $20.48 million. The Heritage on the River loan
is secured by a 301-unit multifamily property in Jacksonville,
Florida, and has a current balance of $13.18 million. Using
updated appraisals for both properties, the Oak Park Office Center
loan was re-modeled with a loss severity of 1% and the Heritage on
the River loan was modeled with a loss severity of 48%.
There are 23 loans on the servicer's watchlist, representing 30.1%
of the current pool balance. More information on these loans can
be found in the DBRS Monthly CMBS Surveillance Report.
The DBRS analysis included an in-depth look at the top 15 loans in
the transaction, in addition to the loans on the servicer's
watchlist, shadow-rated loans and the loans in special servicing.
Cumulatively, these loans represent 51% of the current pool
balance.
DBRS continues to monitor this transaction on a monthly basis for
changes at the bond and loan level. Although DBRS has
conservatively projected losses for the specially serviced and
most pivotal loans in the transaction, we continue to monitor
these loans on a monthly basis for any changes that may affect the
losses that those loans may realize.
GECMC 2002-2: Moody's Affirms Rating of Cl. K Notes at 'Ba2'
------------------------------------------------------------
Moody's Investors Service upgraded the ratings of three classes
and affirmed 12 classes of GE Capital Commercial Mortgage
Corporation, Commercial Mortgage Pass-Through Certificates,
Series 2002-2:
Cl. A-2, Affirmed at Aaa (sf); previously on Aug 15, 2002
Definitive Rating Assigned Aaa (sf)
Cl. A-3, Affirmed at Aaa (sf); previously on Aug 15, 2002
Definitive Rating Assigned Aaa (sf)
Cl. B, Affirmed at Aaa (sf); previously on Mar 1, 2006 Upgraded to
Aaa (sf)
Cl. C, Affirmed at Aaa (sf); previously on Mar 1, 2006 Upgraded to
Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Apr 12, 2007 Upgraded
to Aaa (sf)
Cl. F, Affirmed at Aaa (sf); previously on Mar 30, 2011 Upgraded
to Aaa (sf)
Cl. G, Upgraded to Aa1 (sf); previously on Mar 30, 2011 Upgraded
to Aa3 (sf)
Cl. H, Upgraded to A2 (sf); previously on Sep 25, 2008 Upgraded to
Baa1 (sf)
Cl. J, Upgraded to Baa3 (sf); previously on Aug 15, 2002
Definitive Rating Assigned Ba1 (sf)
Cl. K, Affirmed at Ba2 (sf); previously on Aug 15, 2002 Definitive
Rating Assigned Ba2 (sf)
Cl. L, Affirmed at Ba3 (sf); previously on Aug 15, 2002 Definitive
Rating Assigned Ba3 (sf)
Cl. M, Affirmed at B1 (sf); previously on Aug 15, 2002 Definitive
Rating Assigned B1 (sf)
Cl. N, Affirmed at B2 (sf); previously on Aug 15, 2002 Definitive
Rating Assigned B2 (sf)
Cl. O, Affirmed at Caa1 (sf); previously on Mar 1, 2006 Downgraded
to Caa1 (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on Aug 15, 2002
Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The upgrades are due to an increase in defeasance and credit
subordination levels due to loan payoffs and amortization. The
pool has paid down 5% since Moody's last review.
The affirmations are due to key parameters, including Moody's
loan to value (LTV) ratio, Moody's stressed debt service coverage
ratio (DSCR) and the Herfindahl Index (Herf), 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
1.8% of the current pooled balance, which is the same as at last
review. Moody's stressed scenario loss is 6.0% 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.
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 extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial real
estate property markets are gaining momentum, a consistent upward
trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are in
recovery and improvements in the office sector continue, with
fundamentals in Gateway cities outperforming their suburban
counterparts. However, office demand is closely tied to
employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector has
been mixed with on-going rent deflation and leasing challenges.
Across all property sectors, the availability of debt capital
continues to improve with monetary policy expected to remain
supportive and interest rate hikes postponed. Moody's central
global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter , amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on GECMC 2002-2 Class X-1 may be negatively affected.
Please refer to Moody's request for Comment, titled "Proposal
Changing the Global Rating Methodology for Structured Finance
Interest-Only Securities," for further details regarding the
implications of the proposed methodology change on Moody's rating.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
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 pool has a Herf of 29 as compared to 32
at last review.
Moody's ratings are determined by a committee process that
considers both quantitative and qualitative factors. Therefore,
the rating outcome may differ from the model output.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated March 30, 2011.
DEAL PERFORMANCE
As of the November 14, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 27% to $706 million
from $972 million at securitization. The Certificates are
collateralized by 96 mortgage loans ranging in size from less than
1% to 5% of the pool, with the top ten loans representing 26% of
the pool. Thirty-seven loans, representing 46% of the pool, have
defeased and are secured by US Government securities. Defeasance
accounted for 36% of the pool at last review.
Seventeen loans, representing 19% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC; formerly the Commercial Mortgage
Securities Association) monthly reporting package.
Three loans have been liquidated resulting in $4 million of
realized losses (17% average loss severity). Another loan
experienced a $4 million principal write-down, which brings total
realized losses to $8 million. One loan, representing less than 1%
of the pool, is currently in special servicing. Moody's is not
estimating a loss from this loan.
Moody's has assumed a high default probability for five poorly
performing loans representing 4% of the pool and has estimated a
$5 million loss (15% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2010 and partial year 2011
operating results for 99% and 82% of the conduit loans,
respectively. The conduit portion of the pool excludes specially
serviced, troubled and defeased loans. Moody's weighted average
conduit LTV is 79% compared to 77% at last 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%.
Moody's actual and stressed DSCRs are 1.36X and 1.40X,
respectively, compared to 1.39X and 1.41X at last review. Moody's
actual DSCR is based on Moody's net cash flow (NCF) 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. All of the
pool's loans mature within the next 18 months. The stressed DSCR
is greater than the actual DSCR because loans' actual debt
constant is greater than Moody's stressed 9.25% rate.
The top three performing conduit loans represent 12% of the pool
balance. The largest loan is the Town Center at the Waterfront
Loan ($36 million -- 5.1%), which is secured by the borrower's
interest in a 500,000 square foot (SF) retail center located
approximately five miles southeast of downtown Pittsburgh in
Homestead, Pennsylvania. The property was 94% leased as of October
2011 compared to 98% at last review. The loan matures in August
2012. Moody's LTV and stressed DSCR are 87% and 1.18X,
respectively, compared to 88% and 1.17X at last review.
The second largest conduit loan is the Town & Country Village -
Sacramento Loan ($30 million - 4.3%), which is secured by a
235,000 SF grocery-anchored retail center located in Sacramento,
California. The center was 76% leased as of November 2011 compared
to 81% at last review. The loan is currently on the master
servicer's watchlist due to low DSCR and matures in July 2012.
Moody's LTV and stressed DSCR are 118% and 0.85X, respectively,
compared to 105% and 0.95X at last full review.
The third largest conduit loan is the Inner Harbor Center Loan
($21 million -- 3.0%), which is secured by a 141,000 SF office
building located in Baltimore, Maryland. The property was 87%
leased as of September 2011 compared to 93% at last review. Leases
for approximately 24% of the net rentable area expire in 2012.
Moody's stressed the property's cash flow to account for the lease
rollover risk. The loan matures in May 2012. Moody's LTV and
stressed DSCR are 78% and 1.38X, respectively, compared to 63% and
1.73X at last review.
GMAC 1999-C2: Moody's Raises Rating of Cl. J Notes to 'Ba2'
-----------------------------------------------------------
Moody's Investors Service (Moody's) upgraded the ratings of four
classes and affirmed four classes of GMAC Commercial Mortgage
Securities, Inc., Commercial Mortgage Pass-Through Certificates,
Series 1999-C2:
Cl. X, Affirmed at Aaa (sf); previously on Jul 6, 1999 Definitive
Rating Assigned Aaa (sf)
Cl. E, Affirmed at Aaa (sf); previously on Apr 15, 2009 Upgraded
to Aaa (sf)
Cl. F, Affirmed at Aaa (sf); previously on Jan 28, 2011 Upgraded
to Aaa (sf)
Cl. G, Upgraded to Aaa (sf); previously on Jan 28, 2011 Upgraded
to Aa3 (sf)
Cl. H, Upgraded to Baa2 (sf); previously on Jul 6, 1999 Definitive
Rating Assigned Ba2 (sf)
Cl. J, Upgraded to Ba2 (sf); previously on Jul 6, 2005 Downgraded
to B1 (sf)
Cl. K, Upgraded to Caa3 (sf); previously on Apr 15, 2009
Downgraded to C (sf)
Cl. L, Affirmed at C (sf); previously on Mar 30, 2007 Downgraded
to C (sf)
RATINGS RATIONALE
The upgrades are due to increased credit subordination levels
resulting from paydowns and amortization and overall stable pool
performance. The pool has paid down 14% since Moody's prior
review.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), 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
7.0% of the current balance. At last review, Moody's cumulative
base expected loss was 6.5%. Moody's stressed scenario loss is
12.6% 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.
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 extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial real
estate property markets are gaining momentum, a consistent upward
trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are in
recovery and improvements in the office sector continue, with
fundamentals in Gateway cities outperforming their suburban
counterparts. However, office demand is closely tied to
employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector
has been mixed with on-going rent deflation and leasing
challenges. Across all property sectors, the availability of debt
capital continues to improve with monetary policy expected to
remain supportive and interest rate hikes postponed. Moody's
central global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter , amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The methodologies used in this rating were "Moody's Approach to
Rating Fusion U.S. CMBS Transactions" published in April 2005, and
"Moody's Approach to Rating CMBS Large Loan/Single Borrower
Transactions" published in July 2000.
In rating this transaction, Moody's used also its credit-tenant
lease ("CTL") financing methodology approach ("CTL" approach).
Under Moody's CTL approach, the rating of a transaction's
certificates is primarily based on the senior unsecured debt
rating (or the corporate family rating) of the tenant, usually an
investment grade rated company, leasing the real estate collateral
supporting the bonds. This tenant's credit rating is the key
factor in determining the probability of default on the underlying
lease. The lease generally is "bondable", which means it is an
absolute net lease, yielding fixed rent paid to the trust through
a lock-box, sufficient under all circumstances to pay in full all
interest and principal of the loan. The leased property should be
owned by a bankruptcy-remote, special purpose borrower, which
grants a first lien mortgage and assignment of rents to the
securitization trust. The dark value of the collateral, which
assumes the property is vacant or "dark", is then examined to
determine a recovery rate upon a loan's default. Moody's also
considers the overall structure and legal integrity of the
transaction. For deals that include a pool of credit tenant loans,
Moody's currently uses a Gaussian copula model, incorporated in
its public CDO rating model CDOROMv2.8 to generate a portfolio
loss distribution to assess the ratings
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on GMAC 1999-C2 transaction Class X maybe negatively
affected. Please refer to Moody's request for Comment, titled
"Proposal Changing the Global Rating Methodology for Structured
Finance Interest-Only Securities," for further details regarding
the implications of the proposed methodology change on Moody's
rating. Please see the Credit. Policy page on www.moodys.com for a
copy of this methodology and the Request for Comment.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity,
is a primary determinant of pool level diversity and has a
greater impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
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 5, compared to 6 at the Moody's prior review.
In cases where the Herf falls below 20, Moody's employs also the
large loan/single borrower methodology. This methodology uses the
excel-based Large Loan Model v 8.2. 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 (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated January 20, 2011.
DEAL PERFORMANCE
As of the November 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 90% to
$101.3 million from $974.5 million at securitization. The
Certificates are collateralized by 18 mortgage loans ranging in
size from less than 1% to 34% of the pool, with the top ten non-
defeased loans representing 91% of the pool. Seven loans,
representing 77% of the pool, are secured by credit tenant leases
(CTLs). Seven loans, representing 8% of the pool, have defeased
and are secured by U.S. Government securities.
One loan, representing 2% of the pool, is on the master servicer's
watchlist. The watchlist includes loans which meet certain
portfolio review guidelines established as part of the CRE Finance
Council (CREFC) 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.
Fifteen loans have been liquidated from the pool, resulting in an
aggregate realized loss of $21.6 million (16% loss severity on
average). At Moody's prior review the pool had experienced an
aggregate $20.1 million realized loss.
There are no loans currently in special servicing.
Moody's was provided with full year 2010 operating results for
100% of the pool, excluding defeasance and CTL loans. The conduit
portion of the deal is composed of four loans. Moody's weighted
average LTV is 52% compared to 59% at Moody's prior review.
Moody's net cash flow reflects a weighted average haircut of 17%
to the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.9%.
Moody's actual and stressed DSCRs are 1.49X and 2.41X,
respectively, compared to 1.36X and 2.06X at last review. Moody's
actual DSCR is based on Moody's net cash flow (NCF) 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 conduit loans represent 12% of the outstanding
pool balance. The largest loan is the Bal Seal Engineering Loan
($5.9 million -- 5.9%), which is secured by a 125,000 square foot
industrial property located in Foothill Ranch, California. The
property is 100% leased to Bal Seal Engineering Company through
January 2019. Performance has been stable. Moody's LTV and
stressed DSCR are 40% and 2.71X, respectively, compared to 47%
and 2.29X at last review.
The second largest loan is the Anchorage Business Park Loan
($4.2 million -- 4.2%), which is secured by a 189,000 square foot
retail center located in Anchorage, Alaska. The property was 98%
leased as of June 2011, the same as last review. Performance has
been stable. Moody's LTV and stressed DSCR are 33% and 3.16X,
respectively, compared to 40% and 2.66X at last review.
The third largest loan is the Dendrite Office Building Loan
($2.3 million -- 2.3%), which is secured by a 26,280 square feet
office complex located in Basking Ridge, New Jersey. The property
was 70% leased as of May 2011. Performance has declined due to
lower revenues. The loan is on the servicer's watchlist. Moody's
LTV and stressed DSCR are 85% and 1.27X, respectively, compared to
66% and 1.64X at last review.
The CTL component includes seven loans ($78.4 million -- 77.4%)
secured by properties leased to six tenants under bondable leases.
The largest exposures are Ingram Micro Inc. (Moody's senior
unsecured rating Baa3, stable outlook; 62% of the CTL component),
CarMax (19% of the CTL component), and Costco Wholesale
Corporation (Moody's senior unsecured rating A2; stable outlook;
13% of the CTL component).
Credits representing approximately 81% of the CTL exposure are
publicly rated by Moody's. The bottom-dollar weighted average
rating factor (WARF) for the CTL component is 1,473 compared to
1,247 at last review. WARF is a measure of the overall quality of
a pool of diverse credits. The bottom-dollar WARF is a measure of
the default probability within the pool.
GMAC 1999-C3: Moody's Downgrades Rating of Cl. H Notes to 'B3'
--------------------------------------------------------------
Moody's Investors Service (Moody's) downgraded the ratings of two
classes and affirmed four classes of GMAC Commercial Mortgage
Securities, Inc. Mortgage Pass-Through Certificates, Series 1999-
C3:
Cl. G, Downgraded to Baa1 (sf); previously on Oct 20, 2011 A1 (sf)
Placed Under Review for Possible Downgrade
Cl. H, Downgraded to B3 (sf); previously on Oct 20, 2011 B1 (sf)
Placed Under Review for Possible Downgrade
Cl. J, Affirmed at Caa1 (sf); previously on Apr 27, 2011
Downgraded to Caa1 (sf)
Cl. K, Affirmed at C (sf); previously on Oct 28, 2010 Downgraded
to C (sf)
Cl. L, Affirmed at C (sf); previously on Mar 8, 2007 Downgraded to
C (sf)
Cl. X, Affirmed at Aaa (sf); previously on Sep 13, 1999 Definitive
Rating Assigned Aaa (sf)
RATINGS RATIONALE
The downgrades are due to current and expected interest
shortfalls. Class H is currently experiencing interest shortfalls.
Class G experienced interest shortfalls in October 2011 and it is
likely that it may experience interest shortfalls in the future.
Two loans, representing approximately 34% of the pool, have
defeased and are collateralized by U.S. Government. These loans
mature in August 2014. Because of the defeasance, which is
sufficient to repay the entire outstanding balance of Class G and
all but $700,000 of Class H, it is highly unlikely that these
classes will suffer any principal loss. However, Moody's rates to
the timely receipt of interest payments and the current and
expected interest shortfalls for Class G & H are not commensurate
with the current ratings.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), remaining within
acceptable ranges. Based on Moody's current base expected loss,
the credit enhancement levels for the affirmed classes are
sufficient to maintain their current ratings.
On October 20, 2011 Moody's placed two classes on review for
possible downgrade due to a spike in interest shortfalls caused by
the master servicer, Berkadia Commercial Mortgage LLC, recovering
outstanding advances on three specially serviced loans. This
action concludes Moody's review.
Moody's rating action reflects a cumulative base expected loss of
20.5% of the current pooled balance, as compared to 25.1% at last
review. Moody's stressed scenario loss is 25.5% 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.
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 extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial real
estate property markets are gaining momentum, a consistent upward
trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline and
job creation rebounds. The hotel and multifamily sectors are in
recovery and improvements in the office sector continue, with
fundamentals in Gateway cities outperforming their suburban
counterparts. However, office demand is closely tied to
employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector has
been mixed with on-going rent deflation and leasing challenges.
Across all property sectors, the availability of debt capital
continues to improve with monetary policy expected to remain
supportive and interest rate hikes postponed. Moody's central
global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter , amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The methodologies used in this rating were "Moody's Approach to
Rating Fusion U.S. CMBS Transactions" published in April 2005, and
"Moody's Approach to Rating CMBS Large Loan/Single Borrower
Transactions" published in July 2000.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on GMACC 1999-C3 Class X may be negatively affected.
Please refer to Moody's request for Comment, titled "Proposal
Changing the Global Rating Methodology for Structured Finance
Interest-Only Securities," for further details regarding the
implications of the proposed methodology change on Moody's rating.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
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 conduit has a Heft of 3, which is the
same as 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 8.2 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 (CMBS) 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 27, 2011.
DEAL PERFORMANCE
As of the November 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 96% to $45 million
from $1.15 billion at securitization. The Certificates are
collateralized by nine mortgage loans ranging in size from 1% to
15% of the pool.
Currently no loans 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's
(CREFC) 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.
Nineteen loans have been liquidated from the pool since
securitization, resulting in an aggregate $26 million loss (16%
loss severity on average). Currently four loans, representing 47%
of the pool, are in special servicing. All of the loans in special
servicing were transferred due to imminent maturity default. The
largest specially serviced loan is the Jewelry Building Loan
($6.5 million -- 14.5% of the pool), which is secured by a 63,000
square foot (SF) retail/office building catered solely to jewelry
tenants. The collateral is located in the Diamond District of
Manhattan. The loan transferred to special servicing in June 2009.
The special servicer is pursuing foreclosure and awaiting a final
judgment and scheduling of a sale date from the court.
Two of the remaining three specially serviced loans are office
properties, while the third is a retail property. The servicer has
recognized an aggregate $10 million appraisal reduction for three
of the four specially serviced loans, while Moody's estimates a $9
million loss for three of the four specially serviced loans.
Based on the most recent remittance statement, Classes G through
N have experienced cumulative interest shortfalls totaling
$5.2 million. Moody's anticipates that the pool will continue to
experience interest shortfalls because of the high exposure to
specially serviced loans. Interest shortfalls are caused by
special servicing fees, including workout and liquidation fees,
appraisal subordinate entitlement reductions (ASERs) and
extraordinary trust expenses.
The pool only contains three loans that are not defeased and not
in special servicing. Moody's was provided with full year 2010 and
partial year 2011 operating statements for all three of those
loans. Excluding specially serviced and defeased loans, Moody's
weighted average LTV is 75% as compared to 73% at last review.
Moody's net cash flow reflects a weighted average haircut of 7% to
the most recently available net operating income. Moody's value
reflects a weighted average capitalization rate of 9.6%.
Excluding specially serviced and defeased loans, Moody's actual
and stressed DSCRs are 1.22X and 1.47X, respectively, compared to
1.29X and 1.52X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) 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 stressed DSCR is greater
than the actual DSCR for this deal because the pool's loans are at
or near maturity and the actual debt constant is greater than
Moody's 9.25% stressed rate.
GMAC 2002-C1: Moody's Affirms Rating of Cl. J Notes at 'B1'
-----------------------------------------------------------
Moody's upgraded three classes, affirmed nine classes and
downgraded the ratings of one class of GMAC Commercial Mortgage
Securities, Inc., Series 2002-C1:
Cl. C, Affirmed at Aaa (sf); previously on Feb 27, 2006 Upgraded
to Aaa (sf)
Cl. D, Affirmed at Aaa (sf); previously on Jul 9, 2007 Upgraded to
Aaa (sf)
Cl. E, Upgraded to Aaa (sf); previously on Aug 28, 2007 Upgraded
to Aa1 (sf)
Cl. F, Upgraded to Aa1 (sf); previously on Aug 28, 2007 Upgraded
to Aa3 (sf)
Cl. G, Upgraded to A1 (sf); previously on Aug 28, 2007 Upgraded to
A2 (sf)
Cl. H, Affirmed at Baa1 (sf); previously on Feb 27, 2006 Upgraded
to Baa1 (sf)
Cl. J, Affirmed at B1 (sf); previously on Jun 2, 2011 Downgraded
to B1 (sf)
Cl. K, Affirmed at Caa1 (sf); previously on Jun 2, 2011 Downgraded
to Caa1 (sf)
Cl. L, Downgraded to Caa3 (sf); previously on Sep 2, 2010
Downgraded to Caa2 (sf)
Cl. M, Affirmed at Ca (sf); previously on Sep 2, 2010 Downgraded
to Ca (sf)
Cl. N, Affirmed at C (sf); previously on Sep 2, 2010 Downgraded to
C (sf)
Cl. O, Affirmed at C (sf); previously on Sep 2, 2010 Downgraded to
C (sf)
Cl. X-1, Affirmed at Aaa (sf); previously on Feb 4, 2002
Definitive Rating Assigned Aaa (sf)
RATINGS RATIONALE
The upgrades are due to amoritization and loan payoffs due
to loan maturities. A total of 62 loans have paid off or
liquidated since last review, including three loans that paid off,
totaling $11.3 million, that are not reflected on the most recent
remittance statement. The affirmations are due to key parameters,
including Moody's loan to value (LTV) ratio, Moody's stressed debt
service coverage ratio (DSCR) and the Herfindahl Index (Herf),
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.
The downgrade is primarily due to anticipated losses from
specially serviced and troubled loans. The pool balance has
declined approximately 77% since last review and the majority
of remaining loans in the pool have already matured or mature
within the next several months. Many of these loans have not yet
obtained refinancing due to property specific issues as well as a
challenging refinancing market, thus contributing to a significant
increase in expected losses.
Moody's rating action reflects a cumulative base expected
loss of 25.3% of the current balance compared to 4.9% at last
review. On a numerical basis, the base expected loss increased
$4.0 million since last review. Moody's stressed scenario loss
is 28.7% of the current balance compared to 7.3% at last review
and on a numerical basis, the stressed expected loss increased
$3.4 million. 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.
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 performance in the commercial real
estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation
rebounds. The hotel and multifamily sectors are continuing to
show signs of recovery through the first half of 2011, while
recovery in the non-core office and retail sectors are tied to
pace of recovery of the broader economy. Core office markets are
showing signs of recovery through lending and leasing activity.
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 as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The methodologies used in this rating were "Moody's Approach to
Rating U.S. CMBS Conduit Transactions" published in September
2000, and "Moody's Approach to Rating CMBS Large Loan/Single
Borrower Transactions" published in July 2000.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on GMAC Commercial Mortgage Trust Series 2002-C1 Class
X-1 may be negatively affected. Please refer to Moody's request
for Comment, titled "Proposal Changing the Global Rating
Methodology for Structured Finance Interest-Only Securities,"
for further details regarding the implications of the proposed
methodology change on Moody's rating.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity, is a
primary determinant of pool level diversity and has a greater
impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
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 10, the same as at Moody's prior full 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 (CMBS) 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 June 2, 2011.
DEAL PERFORMANCE
As of the November 15, 2011 distribution date, the transaction's
aggregate certificate balance had decreased by 84% to
$110.6 million from $710.1 million at securitization. Since
that distribution date, three loans totaling $11.3 million have
matured and been paid off further reducing the total aggregate
certificate balance by a total of 85% to $105.6 million. As of
the distribution date, the Certificates were collateralized by 24
mortgage loans which have since been reduced to 21 mortgage loans
ranging in size from less than 1% to 3% of the pool, with the top
ten loans representing 73% of the pool. All 24 previously defeased
loans have paid off since last review.
At present, four loans, representing 22% of the pool, are on the
master servicer's watchlist. The watchlist includes loans which
meet certain portfolio review guidelines established as part of
the CRE Finance Council (CREFC) 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 $8.8 million loss (average 20%
loss severity). The pool had experienced an aggregate $8.2 million
loss at last review from ten loans. Ten loans, representing 43% of
the pool, are currently in special servicing, including several
loans that were transferred to special servicing since the last
distribution period. The largest specially serviced loan is the
Tempe City Center Loan ($14.1 million --1 3.1% of the pool), which
is secured by a 163,814 square foot (SF) office complex located in
Tempe, Arizona. The loan was transferred to special servicing in
June 2009 due to imminent payment default and became real estate
owned (REO) in January 2011. The property's net operating income
(NOI) has declined in concert with lower occupancy now at 66% and
the property is presently being marketed for sale. The remaining
five specially serviced loans represent a mix of property types.
Moody's estimates an aggregate $21.0 million loss for all
specially serviced loans (47% expected loss severity on average).
As of the most recent remittance statement date, the transaction
has experienced unpaid accumulated interest shortfalls totaling
$2.95 million affecting Classes K through P compared to
$2.3 million of interest shortfalls hitting the same classes
at last review. Moody's anticipates that the pool will continue
to experience interest shortfalls caused by specially serviced
loans. Interest shortfalls are caused by special servicing fees,
appraisal reductions, extraordinary trust expenses, interest
payment reductions due to loan modifications and reduced advancing
by the servicer for loans which have been determined to be non-
recoverable. The Royal Oaks loan, totaling $2.9 million is REO and
was declared non-recoverable in September 2011.
Moody's has assumed a high default probability for four poorly
performing loans representing 6% of the pool and has estimated a
$3.8 million loss (20% expected loss based on a 50% probability
default) from these troubled loans.
Moody's was provided with full year 2010 operating results for 85%
of the pool and partial year 2011 results for 57% of the pool.
Excluding specially serviced and troubled loans, Moody's weighted
average LTV is 68% versus 79% at last full review. Moody's net
cash flow reflects a weighted average haircut of 10.5% to the most
recently available net operating income. Moody's value reflects a
weighted average capitalization rate of 9.5%.
Excluding specially serviced and troubled loans, Moody's actual
and stressed DSCRs are 1.73X and 1.69X, respectively, compared to
1.32X and 1.40X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) 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 2551 Broadway Loan ($13.1 million
-- 12.4% of the pool), which is secured by a 36,000 SF mixed use
property located on the Upper West Side of Manhattan in New York
City. As of March 2011, the property was 100% leased, the same as
at last review. The largest tenants are JPMorgan Chase, Gristedes
and Rite Aid. Financial performance has been stable since last
review due to sustained high occupancy. This loan had an
anticipated repayment date (ARD) of November 1, 2011 and is now
hyper-amortizing. Moody's LTV and stressed DSCR are 46% and 2.01X,
respectively, compared to 50% and 1.94X at last review.
The second largest loan is the Crown Commerce Center Loan -- A
Note ($9.9 million -- 9.3% of the pool) which is secured by a
244,501 SF office property located in Los Angeles, California. The
loan is now current after having been in special servicing due to
payment default followed by a borrower bankruptcy filing in March
2009. The reorganization plan was approved in June 2011. Moody's
LTV and stressed DSCR are 121% and 0.97X, respectively, compared
to 282% and 0.83X at last full review prior to resolution of the
bankruptcy reorganization plan.
The third largest loan is the Lake Park Corporate Center Loan
($8.5 million --8.0% of the pool), which is secured by a 121,540
SF office property located in West Valley City, Utah. As of June
2011, the property was 93% leased, the same as at last review. The
loan remains current despite the fact that it matured November 1,
2011. Moody's LTV and stressed DSCR are 48% and 2.25X,
respectively, compared to 49% and 2.2X at last review.
GMAC COMMERCIAL 2002-C3: S&P Lowers Class J Cert. Rating to 'D'
---------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on five
classes of commercial mortgage pass-through certificates from
GMAC Commercial Mortgage Securities Inc.'s series 2002-C3, a U.S.
commercial mortgage-backed securities (CMBS) transaction and
removed our ratings on three of these classes from CreditWatch
with negative implications. "In addition, we affirmed our ratings
on six other classes from the same transaction and removed our
ratings on three of these classes from CreditWatch with negative
implications," S&P said.
"Our rating actions primarily reflect our analysis of the
transaction using our U.S. CMBS conduit/fusion criteria. Our
analysis included a review of the credit characteristics of the
remaining assets in the pool, the transaction structure, and the
liquidity available to the trust. Our analysis also considered the
transaction's near-term maturities. By balance, 98.8% of the
loans are scheduled to mature by the end of 2012, after excluding
the 24 defeased loans, four specially serviced assets, and one
loan that we determined to be credit-impaired," S&P said.
"Our analysis also reflects our application of the 'U.S.
Government Support In Structured Finance And Public Finance
Ratings,' published on Sept. 19, 2011, on RatingsDirect on the
Global Credit Portal at www.globalcreditportal.com. We placed
our ratings on the class B, C, D, E, F, and G certificates on
CreditWatch with negative implications on July 15, 2011, after
we placed our U.S. sovereign long-term rating on CreditWatch
negative. As of the Nov. 10, 2011, trustee remittance report,
31.8% of the trust balance consisted of defeased collateral," S&P
said.
"The downgrades also reflect our analysis of the liquidity
available to the trust. As of the Nov. 10, 2011, trustee
remittance report, the trust experienced monthly interest
shortfalls totaling $216,658, primarily related to reimbursement
of nonrecoverable advances ($144,000), interest not advanced on
two assets that have been deemed nonrecoverable by the master
servicer ($62,759), and special servicing fees ($8,504). The
interest shortfalls have affected all classes subordinate to and
including class J. Class J has had accumulated interest shortfalls
outstanding for eight consecutive months, and we expect these
interest shortfalls to continue for the foreseeable future.
Consequently, we lowered our rating on class J to 'D (sf)'," S&P
said.
"The affirmed ratings on the principal and interest certificates
reflect subordination and liquidity support levels that are
consistent with the outstanding ratings. We affirmed our 'AAA
(sf)' rating on the class X-1 interest-only (IO) certificate based
on our current criteria," S&P said.
"Using servicer-provided financial information, we calculated an
adjusted debt service coverage (DSC) of 1.42x and a loan-to-value
(LTV) ratio of 83.7% for the pool. We further stressed the loans'
cash flows under our 'AAA' scenario to yield a weighted average
DSC of 1.22x and a LTV ratio of 103.5%. The implied defaults and
loss severity under the 'AAA' scenario were 38.8% and 21.1%. The
DSC and LTV calculations exclude two ($11.5 million, 2.1%) of the
transaction's four ($27.5 million, 4.9%) specially serviced
assets, one loan ($9.5 million, 1.7%) that we determined to
be credit-impaired, and 24 loans ($177.2 million, 31.8%) that have
been defeased. We separately estimated losses for the two excluded
specially serviced assets and credit-impaired loan and included
them in our 'AAA' scenario implied default and loss severity
figures," S&P said.
Credit Considerations
As of the Nov. 10, 2011 trustee remittance report, four
($27.5 million, 4.9%) assets in the pool were with the special
servicer, Berkadia Commercial Mortgage LLC. The reported payment
status of the specially serviced assets as of the November 2011
trustee remittance report is: two ($11.5 million, 2.1%) are
real estate-owned (REO) and two ($16.0 million, 2.9%) are in
their grace periods. Appraisal reduction amounts (ARAs) totaling
$8.9 million are in effect for two of the specially serviced
assets," S&P said. Details of the specially serviced assets are:
The Holiday Inn - Select (New Orleans) loan ($8.9 million 1.6%) is
secured by a 170-room hotel in New Orleans, La. The total exposure
outstanding is $8.9 million. The loan was transferred to the
special servicer on Oct. 1, 2010, due to imminent default. The
payment status of the loan was reported as being in its grace
period.
The Cherryland Center REO asset ($7.6 million, 1.4%) comprises a
166,391-sq.-ft. retail center in Traverse City, Mich. Total
exposure outstanding is $10.4 million. The asset was transferred
to the special servicer on Dec. 19, 2008, due to imminent payment
default and was foreclosed on Aug. 18, 2010. According to the
special servicer, the asset was deemed nonrecoverable by the
master servicer effective Sept. 26, 2011. A $4.7 million ARA is in
effect against this asset. S&P anticipates a significant loss upon
the eventual resolution of this asset.
The Main Place loan ($7.1 million, 1.3%) is secured by an 86,777-
sq.-ft. office building in Vancouver, Wash. Total exposure
outstanding is $7.1 million. The loan was transferred to the
special servicer on April 18, 2011, due to nonmonetary default.
The payment status of the loan was reported as being in its grace
period. Reported DSC was 1.53x as of December 2010.
"The Wakefield Forest Apartments REO asset ($3.9 million, 0.7%)
consists of a 67-unit multifamily property in Southfield, Mich.
Total exposure outstanding is $4.1 million. The asset was
transferred to the special servicer on Aug. 8, 2009, due to
payment default, was foreclosed on Sept. 28, 2010, and was later
deemed nonrecoverable by the master servicer. A $4.2 million ARA
is in effect against this asset. We anticipate a significant loss
upon the eventual resolution of this asset," S&P said.
"In addition to the specially serviced assets, we determined
the Nashville Business Center loan ($9.5 million, 1.7%) to
be credit-impaired due to current delinquency and potential
default. The loan is secured by an 893,100-sq.-ft. industrial
property in Murfreesboro, Tenn. The reported payment status of
this loan is 60 days delinquent, and the master servicer has
indicated that occupancy has fallen to 50%. Consequently, we view
this loan to be at an increased risk of default and loss," S&P
said.
Transaction Summary
As of the Nov. 10, 2011 trustee remittance report, the pool
balance was $556.5 million, which is 71.6% of the pool balance
at issuance. The pool comprises 91 loans and two REO assets,
down from 108 loans at issuance. The master servicer, Berkadia
Commercial Mortgage LLC, provided financial information for 92.7%
of the assets in the pool, 83% of which was full-year 2010 data.
"We calculated a weighted average DSC of 1.46x for the loans in
the pool based on the servicer-reported figures. Our adjusted DSC
and LTV ratio were 1.42x and 83.7%. Our adjusted DSC and LTV
figures exclude two ($11.5 million, 2.1%) of the transaction's
four ($27.5 million, 4.9%) specially serviced assets, one loan
($9.5 million, 1.7%) that we determined to be credit-impaired,
and 24 defeased loans ($177.2 million, 31.8%). To date, the
transaction has experienced $13.3 million in principal losses
from four assets. Eighteen loans ($112.3 million, 20.2%) in the
pool are on the master servicers' watchlist. Nineteen loans
($113.8 million, 20.4%) have a reported DSC of less than 1.10x,
13 of which ($81.1 million, 14.6%) have a reported DSC of less
than 1.00x," S&P said.
Summary of Top 10 Loans Secured By Real Estate
"The top 10 loans secured by real estate have an aggregate
outstanding balance of $148.3 million (26.6%). Using servicer-
reported numbers, we calculated a weighted average DSC of 1.43x.
Our adjusted DSC and LTV ratio for the top 10 loans were 1.25x and
91.0%. All of the top 10 loans are scheduled to mature in 2012.
Five of the top 10 loans are on the master servicer's watchlist,"
S&P said.
The Parkway Manor Apartments loan ($12.2 million, 2.2%), the
sixth-largest loan in the transaction, is secured by a 176-unit
multifamily property in Carson City, Nev. The loan is on the
master servicer's watchlist due to low reported DSC, which was
0.97x for the 12 months ended Dec. 31, 2010. Reported occupancy
was 93.2% for the same period.
The Riverside Business Park loan ($11.3 million, 2.0%), the
seventh-largest loan in the transaction, is secured by a 484,257-
sq.-ft. industrial property in Riverside, Calif. The loan is on
the master servicer's watchlist due to low reported occupancy,
which was 68.7% as of June 30, 2011.
The Broadmoor Apartments loan ($10.9 million, 2.0%), the eighth-
largest loan in the transaction, is secured by a 384-unit
multifamily property in Tampa, Fla. The loan is on the master
servicer's watchlist due to low reported DSC, which was 0.96x for
the 12 months ended Dec. 31, 2010. Reported occupancy was 84.4% as
of April 2011.
The LaCrosse Apartments loan ($9.8 million, 1.8%), the ninth-
largest loan in the transaction, is secured by a 176-unit
multifamily property in Wichita, Kansas. The loan is on the master
servicer's watchlist due to low reported DSC, which was 0.97x for
the 12 months ended Dec. 31, 2010. Reported occupancy was 98.3%
for the same period.
The Sandpebble Village loan ($7.7 million, 1.4%) and Spanish Oaks
Apartments loan ($7.1 million, 1.3%) are cross-collateralized and
cross-defaulted loans ($14.8 million, 2.7%) that appear on the
watchlist. The Sandpebble Village loan is secured by a 236-unit
multifamily property in Reno, Nev. The loan is on the master
servicer's watchlist due to low reported DSC, which was 1.09x
for the 12 months ended Dec. 31, 2010. Reported occupancy was
95.3% for the same period. The Spanish Oaks Apartments loan is
secured by a 212-unit multifamily apartment in Reno. The loan is
on the master servicer's watchlist due to low reported DSC, which
was 1.06 for the 12 months ended Dec. 31, 2010. Reported occupancy
was 87.3% for the same period.
Standard & Poor's stressed the assets in the pool according to its
current criteria. The resultant credit enhancement levels are
consistent with S&P's lowered and affirmed ratings.
Ratings Lowered And Removed From CreditWatch Negative
GMAC Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates series 2002-C3
Rating
Class To From Credit enhancement (%)
E A+ (sf) AA (sf)/Watch Neg 14.20
F A- (sf) AA- (sf)/Watch Neg 12.45
G BBB- (sf) A (sf)/Watch Neg 10.70
Ratings Lowered
GMAC Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates series 2002-C3
Rating
Class To From Credit enhancement (%)
H B+ (sf) BB+ (sf) 8.96
J D (sf) CCC-(sf) 5.64
Ratings Affirmed And Removed From CreditWatch Negative
GMAC Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates series 2002-C3
Rating
Class To From Credit enhancement (%)
B AAA (sf) AAA (sf)/Watch Neg 21.70
C AAA (sf) AAA (sf)/Watch Neg 19.61
D AA+ (sf) AA+(sf)/Watch Neg 16.29
Ratings Affirmed
GMAC Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates series 2002-C3
Class Rating Credit enhancement (%)
A-1 AAA (sf) 26.94
A-2 AAA (sf) 26.94
X-1 AAA (sf) N/A
N/A -- Not applicable.
GREENWICH CAPITAL: S&P Affirms 'B-' Rating on Class O
------------------------------------------------------
Standard & Poor's Ratings Services raised its ratings on three
classes from Greenwich Capital Commercial Funding Corp. 2004-GG1,
a U.S. commercial mortgage-backed securities (CMBS) transaction.
"Concurrently, we affirmed two raked ratings and 13 other ratings
from the same transaction," S&P said.
"The ratings reflect our analysis on the credit characteristics of
the remaining collateral in the transaction primarily using our
U.S. conduit/fusion CMBS criteria. The upgrades of the class B, C,
and D certificates reflect increased credit enhancements levels
due to the deleveraging of the pool balance, and the defeasance of
the collateral securing 30.7% ($444.5 million) of the pool
balance," S&P said.
"The affirmed ratings on the principal and interest certificates
reflect subordination and liquidity support levels that are
consistent with the outstanding ratings. We affirmed our 'AAA
(sf)' rating on the class X-C interest-only (IO) certificate
based on our current criteria," S&P said.
"The affirmed 'AA+ (sf)' ratings on the class OEA-B1 and OEA-B2
raked certificates reflect the application of our U.S. CMBS
defeasance criteria and follows the lowering of our long-term
credit rating on the U.S. to 'AA+/Negative' on Aug. 5, 2011. Prior
to the defeasance, the raked 'OEA' certificates entirely derived
their cash flows from a loan secured by 111 Eighth Avenue, an
office building totaling 2.9 million sq. ft. in New York, N.Y. The
commercial real estate securing the 111 Eighth Avenue loan was
previously released from its lien and substituted by defeasance
collateral consisting of U.S. government obligations," S&P said.
"Using servicer-provided financial information, we calculated an
adjusted debt service coverage (DSC) of 1.45x and a loan-to-value
(LTV) ratio of 85.5%. We further stressed the loans' cash flows
under our 'AAA' scenario to yield a weighted average DSC of 1.14x
and an LTV ratio of 109.3%. The implied defaults and loss severity
under the 'AAA' scenario were 39.6% and 21.9%. The DSC and LTV
calculations exclude 11 defeased loans ($444.5 million, 30.7%),
one loan ($4.0 million, 0.3%) that we determined to be credit-
impaired, and seven loans ($44.3 million, 3.1%) that are with the
special servicer. We separately estimated losses for the specially
serviced and credit impaired assets and included them in our 'AAA'
scenario implied default and loss severity figures," S&P said.
Transaction Summary
As of the Nov. 14, 2011 trustee remittance report, the collateral
pool had an aggregate principal balance of $1.45 billion or 55.7%
of the balance at issuance. The pool comprises 96 loans and four
REO assets, down from 125 loans at issuance. The master servicer,
Wells Fargo Bank N.A. (Wells Fargo), provided financial
information for 99.4% of the assets in the pool, the
majority of which reflected full-year 2010 data.
"We calculated a weighted average DSC of 1.48x for the loans in
the pool based on the servicer-reported figures. Our adjusted DSC
and LTV ratio were 1.45x and 85.5%. Our adjusted figures exclude
11 defeased loans ($444.5 million, 30.7%), one loan ($4.0 million,
0.3%) that we determined to be credit-impaired, and seven assets
($44.3 million, 3.1%) that are with the special servicer. We
separately estimated losses for these specially serviced and
credit-impaired assets and included them in our 'AAA' scenario
implied default and loss severity figures. To date, the
transaction has experienced $20.0 million in principal losses
from six assets. Thirty-two loans ($326.3 million, 22.5%) in the
pool are on Wells Fargo's watchlist, including one of the top 10
loans. Twenty loans ($144.0 million, 9.9%) have a reported DSC
below 1.10x, 15 of which ($120.3 million, 8.3%) have a reported
DSC of less than 1.00x," S&P said.
Two loans totaling $88.9 million (6.1%) were previously specially
serviced and have been returned to Wells Fargo. Pursuant to the
transaction documents, the special servicer is entitled to a
workout fee equal to 1.0% of all future principal and interest
payments on the loans (including the final balloon payments, if
applicable) if they continue to perform and remain with the
master servicer.
Summary Of Top 10 Loans Secured By Real Estate
"As of the Nov. 14, 2011 trustee remittance report, the top
10 loans secured by real estate have an aggregate outstanding
balance of $459.2 million (31.7%). Using recent servicer-
reported financial information, we calculated a weighted-
average DSC of 1.60x. Our adjusted DSC and LTV ratio for the
top 10 loans were 1.48x and 85.2%, respectively. One of the
top 10 loans ($105.5 million, 7.3%) in the pool appears on
Wells Fargo's watchlist," S&P said.
The Aegon Center loan ($105.5 million, 7.3%) is the largest
loan in the pool secured by real estate and the largest loan on
the watchlist. The loan is secured by a 663,650-sq.-ft. office
building and a leasehold interest in an attached 504-space parking
garage located in Louisville, Ky. The loan appears on Wells
Fargo's watchlist due to the expected Aegon lease rollover, who
currently leases 39.0% of its gross leasable area (GLA). The
master servicer indicated that Aegon has publicly announced it
will downsize its operations, therefore reducing its occupancy at
the subject property to approximately 7.9% of its GLA. The loan's
reported payment status was current. For the six months ended June
30, 2011, the reported DSC and occupancy were 1.49x and 94.0%,"
S&P said.
Credit Considerations
As of the Nov. 14, 2011 trustee remittance report, seven assets
($44.3 million, 3.1%) in the pool are with the special servicer,
CWCapital Asset Management LLC (CWCapital). The reported payment
status of the specially serviced assets as of the most recent
trustee remittance report is: four are real estate owned (REO;
$21.2 million, 1.5%), one is in foreclosure ($8.3 million, 0.6%),
one is 90-plus-days delinquent ($11.6 million, 0.8%), and one is
60-plus-days delinquent ($3.3 million, 0.2%). Appraisal reduction
amounts (ARAs) totaling $8.9 million are in effect for four of the
specially serviced assets. Details of the two largest specially
serviced assets are set forth
The 510 Glenwood Avenue loan ($11.6 million, 0.8%) is the largest
asset with the special servicer. The loan is secured by a suburban
office building with a total of 67,369 net rentable sq. ft. in
Raleigh, N.C. The property was built in 2000. The loan was
transferred to the special servicer on Oct. 5, 2011, due to
monetary default. CWCapital indicated that it is reviewing the
file to determine a workout strategy going forward. For the six-
months ended June 30, 2011, the reported DSC and occupancy were
0.71x and 91.0%. Standard & Poor's expects a moderate loss upon
the eventual resolution of this asset.
The Palisades I Office Building loan ($8.3 million, 0.6%) is the
second-largest specially serviced asset. The loan is secured by
an office building with a total of 79,148 net rentable sq. ft.
in Raleigh, N.C. The property was built in 2001. The loan was
transferred to the special servicer on Aug. 3, 2011, due to
monetary default. CWCapital indicated that it is currently
pursuing foreclosure. As of year-end 2010, the reported DSC and
occupancy were 0.74x and 68.0%. Standard & poor's expects a
minimum loss upon the eventual resolution of this asset.
The five remaining assets with the special servicer have
individual balances that represent less than 0.5% of the pooled
trust balance. ARAs totaling $8.9 million are in effect against
four of these assets. "We estimated losses for all these assets,
arriving at a weighted-average loss severity of 33.7%," S&P said.
"In addition to the specially serviced assets, we determined one
loan to be credit impaired. The Rockefeller Industrial Buildings
loan ($4.0 million, 0.3%) consists of two multi-tenant warehouse
distribution buildings totaling 130,916 sq. ft. located in Ceres,
California. The buildings were built in 1991 and renovated in
2002. The loan appears on the master servicer's watchlist due
to low DSC (0.43x as of September 30, 2011), and low occupancy
(43.0%). As a result, we view this loan to be at an increased risk
of default and loss," S&P said.
Standard & Poor's stressed the collateral in the pool according to
its criteria. The resultant credit enhancement levels are
consistent with S&P's affirmed ratings.
Ratings Raised (Pooled)
Greenwich Capital Commercial Funding Corp.
Commercial mortgage pass-through certificates series 2004-GG1
Rating
Class To From Credit enhancement (%)
B AAA (sf) AA+ (sf) 20.26
C AA+ (sf) AA (sf) 18.43
D AA- (sf) A+ (sf) 14.79
Ratings Affirmed (Pooled)
Greenwich Capital Commercial Funding Corp.
Commercial mortgage pass-through certificates series 2004-GG1
Class Rating Credit enhancement (%)
A-6 AAA (sf) 24.59
A-7 AAA (sf) 24.59
E A- (sf) 12.51
F BBB+ (sf) 10.23
G BBB (sf) 8.40
H BBB- (sf) 5.67
J BB+ (sf) 5.21
K BB (sf) 4.30
L BB- (sf) 3.39
M B+ (sf) 2.70
N B (sf) 2.02
O B- (sf) 1.56
X-C AAA (sf) N/A
Ratings Affirmed (Nonpooled)
Greenwich Capital Commercial Funding Corp.
Commercial mortgage pass-through certificates series 2004-GG1
OEA-B1 AA+ (sf) N/A
OEA-B2 AA+ (sf) N/A
N/A -- Not applicable.
GULF STREAM: Moody's Upgrades Class D Notes Rating to 'Ba2'
-----------------------------------------------------------
Moody's Investors Service has upgraded the ratings of these notes
issued by Gulf Stream - Compass CLO 2004-1, Ltd.:
US$34,000,000 Class C Floating Rate Notes Due 2016, Upgraded to
Aaa (sf); previously on July 6, 2011 Upgraded to Aa1 (sf);
US$20,000,000 Class D Floating Rate Deferrable Notes Due 2016
(current outstanding balance of $20,888,090), Upgraded to Ba2
(sf); previously on July 6, 2011 Upgraded to B1 (sf).
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes are
primarily a result of delevering of the Class A Notes and an
increase in the transaction's overcollateralization ratio, since
the rating action in July 2011. Moody's notes that the Class A
Notes have been paid down by approximately 46% or $50 million
since the rating action in July 2011. Based on the latest trustee
report dated November 2011, the Senior Overcollateralization Ratio
is reported at 203.2% versus June 2011 levels of 156.3%.
The Class D Notes continue to defer interest because all the
available interest proceeds after payment of interest on the
Class C Notes are applied towards reducing the Loss Replenishment
Amount ("LRA"). The LRA currently stands at $7.6 million versus
$9.5 million in June 2011. Once the LRA is reduced to $0 the Class
D Notes will begin to receive its interest payments to the extent
there are avilable interest proceeds.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, 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 $125 million,
defaulted par of $2.2 million, a weighted average default
probability of 19.18% (implying a WARF of 3230), a weighted
average recovery rate upon default of 49.13%, and a diversity
score of 48. The 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.
Gulf Stream - Compass CLO 2004-1, issued in August 2004, is a
collateralized loan obligation backed primarily by a portfolio of
senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
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 June 2011.
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 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
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% (WARF 2584)
Class A: 0
Class C: 0
Class D: +3
Moody's Adjusted WARF + 20% (WARF 3876)
Class A: 0
Class C: -1
Class D: -1
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.
INDYMAC MANUFACTURED: S&P Cuts Rating on Class A-2 Certs. to 'CC'
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on the class
A-2 certificates from IndyMac Manufactured Housing Contract Pass-
Through Certificates Series 1998-2 to 'CC (sf)' from 'BB (sf)'.
The lowered rating on the class A-2 certificates reflects the high
likelihood that the class will not receive its full principal
balance on the final scheduled principal distribution date of
Dec. 25, 2011, causing a payment default.
Standard & Poor's will continue to monitor the outstanding ratings
associated with this transaction.
IVY HILL: Moody's Gives Ba2 Rating to US$19-Mil. Class E Notes
--------------------------------------------------------------
Moody's Investors Service has assigned these ratings to notes
issued by Ivy Hill Middle Market Credit Fund III, Ltd. (the
"Issuer" or "Ivy Hill III"):
US$168,000,000 Class A-1 Senior Floating Rate Notes due 2022, (the
"Class A-1 Notes"), Definitive Rating Assigned Aaa (sf);
US$16,000,000 Class A-2 Senior Floating Rate Notes due 2022 (the
"Class A-2 Notes"), Definitive Rating Assigned Aaa (sf);
US$19,000,000 Class B Deferrable Mezzanine Floating Rate Notes due
2022 (the "Class B Notes"), Definitive Rating Assigned Aa2 (sf);
US$20,000,000 Class C Deferrable Mezzanine Floating Rate Notes due
2022 (the "Class C Notes"), Definitive Rating Assigned A2 (sf);
US$20,000,000 Class D Deferrable Mezzanine Floating Rate Notes due
2022 (the "Class D Notes"), Definitive Rating Assigned Baa2 (sf);
US$19,000,000 Class E Deferrable Mezzanine Floating Rate Notes due
2022 (the "Class E Notes"), Definitive Rating Assigned Ba2 (sf).
RATINGS RATIONALE
Moody's ratings of the notes address the expected losses posed to
noteholders. The ratings reflect the risks due to defaults on the
underlying portfolio of loans, the transaction's legal structure,
and the characteristics of the underlying assets.
Ivy Hill III is a managed cash flow CLO. The issued notes are
collateralized substantially by middle market first-lien senior
secured corporate loans. At least 95% of the portfolio must be
invested in senior secured loans or eligible investments and up to
5% of the portfolio may consist of second-lien loans, secured
bonds and unsecured loans. The underlying collateral pool will be
approximately 75% ramped up as of the closing date.
The issuance of these notes is a refinancing of the existing notes
initially issued by Knightsbridge CLO 2008-1 Limited
("Knightsbridge") in June 2008. Knightsbridge will be renamed Ivy
Hill Middle Market Credit Fund III, Ltd. in connection with the
issuance of these notes. The proceeds from the issuance of the new
notes and from the sale of a portion of the underlying collateral
pool will be used to redeem in full the existing Knightsbridge
notes and to pay all other expenses associated with Knightsbridge.
The Knightsbridge SPV has been named as a defendant in a complaint
filed by the bankruptcy trustee in the Chapter 7 bankruptcy case
of International Architectural Group and certain of its affiliates
("IAG"), and is part of a larger group of lenders named as
defendants in this action. The complaint alleges that the lenders
breached their fiduciary duty to the IAG debtors and their
creditors, and seeks equitable subordination and tort damages.
Following discussions with numerous third parties, Moody's
understanding is that the risk of a judgment against the Issuer is
remote.
The transaction incorporates payment mechanisms to address prior
claims or expenses arising from Knightsbridge. Based on
information Moody's has received, such as payoff acknowledgements,
lien search results and other information, Moody's expects that
all amounts due and payable in Knightsbridge, save for those
associated with the IAG litigation, were paid in full as of the
closing date.
Ivy Hill Asset Management, L.P. (the "Manager"), a wholly-owned
portfolio company of Ares Capital Corporation, will direct the
selection, acquisition and disposition of collateral on behalf of
the Issuer and may engage in trading activity during the
transaction's three and one quarter year reinvestment period,
including discretionary trading. Thereafter, purchases are
permitted using principal proceeds from unscheduled principal
payments and sales of credit risk obligations, and are subject to
certain restrictions.
In accordance with the respective priority of payments, interest
and principal will be paid to the Moody's-rated notes prior to the
subordinated notes. The transaction incorporates interest and par
coverage tests which, if triggered, divert interest and principal
proceeds to pay down the rated notes in order of seniority.
For modeling purposes, Moody's used the following base-case
assumptions:
Par of $315,000,000
Diversity of 40
WARF of 3200
Weighted Average Spread of 3.9%
Weighted Average Coupon of 8.0%
Weighted Average Recovery Rate of 45.9%
Weighted Average Life of 7.5 years.
Together with the set of modeling assumptions above, Moody's
conducted additional sensitivity analyses which were an important
component in determining the ratings assigned to the notes. These
sensitivity analyses include increased default probability
relative to the base case.
A summary of the impact of an increase in default probability
(expressed in terms of WARF level) on the notes (shown in terms of
the number of notch difference versus the current model output,
whereby a negative difference corresponds to higher expected
losses), assuming that all other factors are held equal:
Moody's WARF + 15% (3680)
Class A-1 Notes: -1
Class A-2 Notes: -1
Class B Notes: -1
Class C Notes: -1
Class D Notes: -2
Class E Notes: -1
Moody's WARF +30% (4160)
Class A-1 Notes: -1
Class A-2 Notes: -1
Class B Notes: -2
Class C Notes: -2
Class D Notes: -3
Class E Notes: -2.
The principal methodology used in assigning the ratings of the
notes was "Moody's Approach to Rating Collateralized Loan
Obligations," published in June 2011.
The V Score for this transaction is Medium/High. This V Score has
been assigned in a manner similar to the Medium/High V score
assigned for the global cash flow CLO sector, as described in the
special report titled "V Scores and Parameter Sensitivities in the
Global Cash Flow CLO Sector," (the "CLO V Score Report") dated
July 6, 2009, available on www.moodys.com. A significant portion
of the underlying collateral assets for this transaction are SME
corporate loans, which receive Moody's credit estimates, rather
than publicly rated corporate loans. This distinction is an
important factor in the determination of this transaction's V
Score, since loans publicly rated by Moody's are the basis for the
CLO V Score Report.
Several scores for sub-categories of the V Score differ from the
CLO sector benchmark scores. The scores for the quality of
historical data for U.S. SME loans and for disclosure of
collateral pool characteristics and collateral performance reflect
higher volatility. This results from lack of a centralized default
database for SME loans, as well as obligor-level information for
SME loans being more limited and less frequently provided to
Moody's than that for publicly rated companies. Finally, to
account for potential litigation risk, Moody's assigned a score of
Medium to the "Legal and Regulatory Uncertainty" component of the
Governance category due to the pending IAG litigation.
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.
IVY HILL: S&P Gives 'BB' Rating on Class E Deferrable Notes
-----------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to Ivy
Hill Middle Market Credit Fund III Ltd./Ivy Hill Middle Market
Credit Fund III Corp.'s $262 million floating-rate notes.
The note issuance is a collateralized loan obligation
securitization backed primarily by senior secured loans to middle-
market obligors. The transaction is a refinancing of the existing
Knightsbridge CLO 2008-1 Ltd. transaction, which closed on June
11, 2008.
The ratings reflect S&P's assessment of:
The credit enhancement provided to the rated notes through the
subordination of cash flows that are payable to the
subordinated notes.
The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting excess spread) and cash flow structure, which
can withstand the default rate projected by Standard & Poor's
CDO Evaluator model, as assessed by Standard & Poor's using
the assumptions and methods outlined in its corporate
collateralized debt obligation (CDO) criteria, (see "Update To
Global Methodologies And Assumptions For Corporate Cash Flow
And Synthetic CDOs," published Sept. 17, 2009).
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 to middle-
market obligors.
The collateral manager's experienced management team.
"Our projections regarding the timely interest and ultimate
principal payments on the rated notes, which we assessed using
our cash flow analysis and assumptions commensurate with the
assigned ratings under various interest rate scenarios,
including LIBOR ranging from 0.30%-11.36%," S&P said.
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 balance of the
rated notes outstanding.
Standard & Poor's 17g-7 Disclosure Report
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at
http://standardandpoorsdisclosure-17g7.com/1111334.pdf
Ratings Assigned
Ivy Hill Middle Market Credit Fund III Ltd./Ivy Hill Middle Market
Credit Fund
III Corp.
Class Rating Amount
(mil. $)
A-1 AAA (sf) 168.00
A-2 AAA (sf) 16.00
B (deferrable) AA (sf) 19.00
C (deferrable) A (sf) 20.00
D (deferrable) BBB (sf) 20.00
E (deferrable) BB (sf) 19.00
Subordinated notes NR 53.00
NR -- Not rated.
JPMCC 2000-C10: Moody's Affirms Rating of Cl. G Notes at 'Caa3'
---------------------------------------------------------------
Moody's Investors Service upgraded the rating of one class and
affirmed five classes of J.P. Morgan Commercial Mortgage Finance
Corp., Commercial Mortgage Pass-Through Certificates, Series 2000-
C10:
Cl. D, Affirmed at Aaa (sf); previously on Jul 17, 2008 Upgraded
to Aaa (sf)
Cl. E, Upgraded to Aaa (sf); previously on Jul 17, 2008 Upgraded
to A2 (sf)
Cl. F, Affirmed at Baa1 (sf); previously on Jul 17, 2008 Upgraded
to Baa1 (sf)
Cl. G, Affirmed at Caa3 (sf); previously on Mar 30, 2011
Downgraded to Caa3 (sf)
Cl. H, Affirmed at C (sf); previously on Mar 30, 2011 Downgraded
to C (sf)
Cl. X, Affirmed at Aaa (sf); previously on Nov 8, 2000 Definitive
Rating Assigned Aaa (sf)
RATINGS RATIONALE
The upgrade is due to credit subordination from loan payoffs and
amortization along with lower than expected losses from loans in
special servicing. The pool has paid down by 14% since Moody's
last review.
The affirmations are due to key parameters, including Moody's loan
to value (LTV) ratio, Moody's stressed debt service coverage ratio
(DSCR) and the Herfindahl Index (Herf), 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 16.7% of the current balance. At last review, Moody's
cumulative base expected loss was 21.0%. Moody's stressed
scenario loss is 18.0% of the current balance. Realized losses
increased from $36.7 million (5.0% of the original pooled balance)
to $41.2 million (5.6% of the original pooled balance) due to the
liquidation of three loans since the last full review. 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.
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 performance in the commercial real
estate property markets. While commercial real estate property
markets are gaining momentum, a consistent upward trend will not
be evident until the volume of transactions increases, distressed
properties are cleared from the pipeline and job creation
rebounds. The hotel and multifamily sectors are continuing to show
signs of recovery through the first half of 2011, while recovery
in the non-core office and retail sectors are tied to pace of
recovery of the broader economy. Core office markets are
showing signs of recovery through lending and leasing activity.
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 as
the most likely scenario through 2012, amidst ongoing individual,
corporate and governmental deleveraging, persistent unemployment,
and government budget considerations, however the downside risks
to the outlook have risen since last quarter.
The methodologies used in this rating were "Moody's Approach to
Rating U.S. CMBS Conduit Transactions" published in September
2000, and "Moody's Approach to Rating CMBS Large Loan/Single
Borrower Transactions" published in July 2000.
Moody's noted that on November 22, 2011, it released a Request for
Comment, in which the rating agency has requested market feedback
on potential changes to its rating methodology for Interest-Only
Securities. If the revised methodology is implemented as proposed
the rating on J.P. Morgan Commercial Mortgage Finance Corp.,
Commercial Mortgage Pass-Through Certificates, Series 2000-C10
Class X may be negatively affected. Please refer to Moody's
request for Comment, titled "Proposal Changing the Global Rating
Methodology for Structured Finance Interest-Only Securities," for
further details regarding the implications of the proposed
methodology change on Moody's rating.
Moody's review incorporated the use of the excel-based CMBS
Conduit Model v 2.60 which is used for both conduit and fusion
transactions. Conduit model results at the Aa2 (sf) 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 (sf) level are driven by a paydown analysis
based on the individual loan level Moody's LTV ratio. Moody's
Herfindahl score (Herf), a measure of loan level diversity,
is a primary determinant of pool level diversity and has a
greater impact on senior certificates. Other concentrations and
correlations may be considered in Moody's analysis. Based on the
model pooled credit enhancement levels at Aa2 (sf) and B2 (sf),
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 7 compared to 9 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 8.1 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 (CMBS) transactions. Moody's
monitors transactions on a monthly basis through two sets of
quantitative tools -- MOST(R) (Moody's Surveillance Trends) and
CMM (Commercial Mortgage Metrics) on Trepp -- and on a periodic
basis through a comprehensive review. Moody's prior full review is
summarized in a press release dated March 30, 2010.
DEAL PERFORMANCE
As of the November 15, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 91% to
$68.6 million from $738.5 million at securitization. The
Certificates are collateralized by 15 mortgage loans ranging
in size from less than 1% to 26% of the pool, with the top ten
non-defeased loans representing 92% of the pool.
Three loans, representing 6% 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 (CREFC) 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-seven loans have been liquidated from the pool, resulting
in a realized loss of $41.2 million (43% loss severity on
average). Currently four loans, representing 62% of the pool,
are in special servicing. The largest specially serviced loan is
the Liberty Fair Mall Loan ($18.0 million -- 26.3% of the pool),
which is secured by a 435,402 square foot (SF) mall located in
Martinsville, Virginia. The loan was transferred to the special
servicer in December 2009 due to imminent default after the
borrower indicated it would not continue to cover the loan's debt
service. A foreclosure sale was expected to occur during the first
quarter of 2011 but was delayed due to environmental concerns at
the property. Subsequently, the special servicer received a "No
further action" letter from the Virginia DEQ after the Phase II
environmental report indicated no elevated levels of hazardous
substances. The special servicer is currently marketing the note
for sale while dual tracking foreclosure.
The second largest loan in special servicing is the Embassy Suites
-- Chicago Loan ($13.3 million -- 19.3% of the pool), which is
secured by a 237 room full-service hotel located in Deerfield,
Illinois. The loan transferred to the special servicer in October
2009 due to imminent monetary default and became real estate owned
(REO) in December 2010 via a deed-lieu of foreclosure. The
property was recently sold in November 2011 and the special
servicer is awaiting confirmation of wired funds from the buyer.
Liquidation proceeds are expected to be released in the December
2011 remittance statement.
The remaining two specially serviced properties are secured
by a retail and hotel property. Moody's estimates an aggregate
$10.2 million loss for the specially serviced loans (24% expected
loss on average).
Moody's has assumed a high default probability for three poorly
performing loans representing 6% of the pool and has estimated an
aggregate $1.0 million loss (25% expected loss based on a 50%
probability default) from these troubled loans.
Moody's was provided with full year 2010 operating results for
89% of the pool. Excluding specially serviced and troubled loans,
Moody's weighted average LTV is 54% compared to 59% 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 10.5%.
Excluding special serviced and troubled loans, Moody's actual and
stressed DSCRs are 1.28X and 2.23X, respectively, compared to
1.26X and 2.01X at last review. Moody's actual DSCR is based on
Moody's net cash flow (NCF) 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 Stressed DSCR is higher than
the actual DSCR due to the higher interest rate environment that
existed in 2000.
The top three performing conduit loans represent 19% of the pool
balance. The largest loan is the Pavilion East Loan ($7.1 million
-- 10.3% of the pool), which is secured by a 171,157 SF anchored
retail center located in Richardson, Texas. Major tenants include
Richardson Bike Mart (19% of the net rentable area (NRA) -- lease
expiration December 31, 2017), Sprouts Grocers (17% of the NR --
lease expiration October 11, 2016), and TJ Maxx (17% of the NRA -
lease expiration October 11, 2016). Spouts Grocers and TJ Maxx
sublease their space from Albertson's, a supermarket retailer, who
vacated the property in 2006. The property was 91% leased in
October 2011 compared to 93% at last review. Property performance
has been stable and the loan has amortized 36% since
securitization. Moody's LTV and stressed DSCR are 47% and 2.31X,
respectively, compared to 51% and 2.13X at last full review.
The second largest loan is the Thomas Jefferson II Apartments Loan
($3.1 million -- 4.50% of the pool), which is secured by a 23 unit
multifamily property located in Hoboken, New Jersey. The property
was 100% leased as of October 2010, the same as the prior review.
Property performance has been stable and the loan has amortized
29% since securitization. Moody's LTV and stressed DSCR are 52%
and 1.97X, compared to 59% and 1.74X at last full review.
The third largest loan is the Pavilion East Loan ($3.1 million --
4.5% of the pool), which is secured by a 84,250 SF retail center
located in Dallas, Texas. The anchor tenant is 24 Hour Fitness
(38% of the NRA -- lease expiration September 2016). The property
was 88% leased as of October 2011, compared to 90% at last review.
Property performance has been stable and the loan has amortized
35% since securitization. Moody's LTV and stressed DSCR are 37%
and 3.15X, respectively, compared to 39% and 3.01X at last full
review.
JPMORGAN CHASE: S&P Lowers Rating on Class D Certificates to 'CCC'
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on eight
classes of commercial mortgage pass-through certificates from
JPMorgan Chase Commercial Mortgage Securities Trust 2007-CIBC19, a
U.S. commercial mortgage-backed securities (CMBS) transaction.
"In addition, we affirmed our ratings on four other classes from
the same transaction," S&P said.
"Our rating actions follow our analysis of the transaction
primarily using our U.S. conduit/fusion CMBS criteria. Our
analysis also included a review of the deal structure and the
liquidity available to the trust. The downgrades reflect credit
support erosion that we anticipate will occur upon the eventual
resolution of the 21 specially serviced assets ($355.3 million,
11.5%) and three loans ($13.9 million, 0.4%) that we determined to
be credit-impaired. In addition, we considered that 42.8% of the
pool balance comprises partial or full interest-only (IO) loans,"
S&P said.
"The affirmed ratings on the principal and interest certificates
reflect subordination and liquidity support levels that are
consistent with the outstanding ratings. We affirmed our 'AAA
(sf)' rating on the class X IO certificate based on our current
criteria," S&P said.
"Our analysis included a review of the credit characteristics of
the remaining assets in the pool. Using servicer-provided
financial information, we calculated an adjusted debt service
coverage (DSC) of 1.24x and a loan-to-value (LTV) ratio of 124.0%.
We further stressed the loans' cash flows under our 'AAA' scenario
to yield a weighted average DSC of 0.77x and an LTV ratio of
173.4%. The implied defaults and loss severity under the 'AAA'
scenario were 90.3% and 47.5%, respectively. The DSC and LTV
calculations noted above exclude one defeased loan ($22.6 million,
0.7%), the 21 specially serviced assets ($355.3 million, 11.5%),
and three loans ($13.9 million, 0.4%) that we determined to be
credit-impaired. We separately estimated losses for the specially
serviced and credit-impaired assets and included them in our
'AAA' scenario implied default and loss severity figures," S&P
said.
Credit Considerations
As of the Nov. 14, 2011 trustee remittance report, 20 assets
($350.6 million, 11.3%) in the pool were with the special
servicer, LNR Partners LLC (LNR). The master servicer for the
Met Life Building loan ($4.7 million, 0.2%) indicated that the
loan was transferred to the special servicer on Nov. 7, 2011
(subsequent to the November trustee remittance report), because
of its reported 60-day-delinquent payment status. The reported
payment status of the specially serviced assets is: three are
real estate owned (REO; $30.6 million, 1.0%), five are in
foreclosure ($106.4 million, 3.4%), eight are 90-plus-days
delinquent ($138.7 million, 4.5%), four are 60 days delinquent
($70.4 million, 2.3%), and one is in its grace period
($9.2 million, 0.3%). Appraisal reduction amounts (ARAs)
totaling $161.5 million are in effect against 17 of the
specially serviced assets. Details of the three largest
specially serviced assets, one of which is a top 10 loan,
are:
The Doubletree Guest Suites loan ($39.8 million, 1.3%), the ninth-
largest loan in the pool, is secured by a 253-room, full-service
hotel in Plymouth Meeting, Penn. The loan, which is reported to
be in foreclosure, was transferred to the special servicer on
Feb. 25, 2010, due to imminent default. LNR indicated that the
foreclosure sale was held on Nov. 30, 2011, and title to the
property should be delivered to the trust shortly. The reported
DSC was 0.87x for year-end 2009, and the reported occupancy was
69.7% as of September 2009. An ARA of $15.2 million is in effect
against the loan. "We expect a moderate loss upon the eventual
resolution of this loan," S&P said.
"The Harrisburg Portfolio loan ($36.5 million, 1.2%) is secured
by eight suburban office properties totaling 356,502 sq. ft. in
Camp Hill and Harrisburg, Penn. The loan, which has a reported
60-day-delinquent payment status, was transferred to LNR on
Aug. 1, 2011, due to imminent default. LNR stated that it is
pursuing foreclosure while in discussions with the borrower
regarding possible alternative workout strategies. The combined
reported DSC was 1.24x for year-end 2010, and the combined
reported occupancy for the portfolio was 83.0% as of July 2011.
We expect a significant loss upon the eventual resolution of this
loan," S&P said.
The Bronx Apartment Portfolio loan ($36.5 million, 1.2%) is
secured by two high-rise multifamily apartment complexes totaling
490 units in the Bronx, N.Y. The loan, which has a reported 90-
plus-days delinquent payment status, was transferred to LNR on
March 5, 2009, due to imminent default. The loan has a reported
combined occupancy of 95.4% as of June 2011. No recent financial
data is available for the loan. An ARA of $17.4 million is in
effect against the loan. "We expect a significant loss upon the
eventual resolution of the loan," S&P said.
"The 18 remaining specially serviced assets have individual
balances that represent less than 0.9% of the trust balance. ARAs
totaling $128.9 million are in effect against 15 of these assets.
We estimated losses for the 18 assets, arriving at a weighted-
average loss severity of 59.4%," S&P said.
"In addition to the specially serviced assets, we determined three
loans ($13.9 million, 0.4%) to be credit-impaired primarily due to
their reported payment statuses. Two of the three loans, both of
which are secured by retail properties, have reported 30-day-
delinquent payment statuses, while the remaining loan, secured by
a 302-space parking garage, has a reported in grace payment
status. Two of the three loans had a reported DSC of 0.92x as of
year-end 2010, while the remaining loan had a reported 1.52x DSC
as of year-end 2010. As a result, we view these three loans to be
at an increased risk of default and loss," S&P said.
Transaction Summary
As of the Nov. 14, 2011, trustee remittance report, the collateral
pool balance was $3.1 billion, which is 94.4% of the balance at
issuance. The pool consists of 220 loans and three REO assets,
down from 241 loans at issuance. The master servicers, Berkadia
Commercial Mortgage LLC and Wells Fargo Bank N.A., provided
financial information for 94.6% of the loans in the pool, of
which 80.3% was partial- or full-year 2010 data.
"We calculated a weighted average DSC of 1.26x for the loans in
the pool based on the servicer-reported figures. Our adjusted DSC
and LTV ratio were 1.24x and 124.0%. Our adjusted DSC and LTV
figures excluded one defeased loan ($22.6 million, 0.7%), the 21
specially serviced assets ($355.3 million, 11.5%), and three loans
($13.9 million, 0.4%) that we determined to be credit-impaired. We
separately estimated losses for the specially serviced and credit-
impaired assets and included them in our 'AAA' scenario implied
default and loss severity figures. The transaction has experienced
$87.3 million in principal losses from 18 assets to date. Fifty-
four loans ($665.7 million, 21.5%) in the pool are on the master
servicers' combined watchlist. Thirty-five loans ($502.1 million,
16.2%) have a reported DSC of less than 1.00x, and 20 loans
($255.9 million, 8.3%) have a reported DSC between 1.00x
and 1.10x," S&P said.
Summary Of Top 10 Loans
"The top 10 loans have an aggregate outstanding balance of
$756.4 million (24.5%). Using servicer-reported numbers, we
calculated a weighted average DSC of 1.19x for nine of the
top 10 loans. The remaining top 10 loan ($39.8 million, 1.3%)
is currently with the special servicer. In addition, three
($150.1 million, 4.8%) of the top 10 loans are on the master
servicers' combined watchlist. Our adjusted DSC and LTV ratio
for nine of the top 10 loans were 1.06x and 143.7% after
excluding the top 10 specially serviced loan," S&P said.
The Cabot Industrial Portfolio V loan ($60.0 million, 1.9%), the
fifth-largest loan in the pool, is secured by 10 flex industrial
properties and five warehouse/distribution properties totaling
1.9 million sq. ft. in Tennessee, Texas, Kentucky, Ohio, Arizona,
Georgia, and Indiana. The loan is on the master servicers'
combined watchlist due to a low reported combined DSC, which was
0.92x as of year-end 2010. The combined occupancy was 66.5%,
according to the Feb. 14, 2011, rent rolls.
The Crowne Plaza Metro Chicago loan ($48.8 million, 1.6%), the
sixth-largest loan in the pool, is secured by a 398-room, full-
service hotel in Chicago, Ill. The loan is on the master
servicers' combined watchlist due to a low reported DSC, which
was 0.57x for year-end 2010. The reported occupancy was 58.0%
for the same period.
The Marriott - Farmington loan ($41.3 million, 1.3%), the eighth-
largest loan in the pool, is secured by a 381-room, full-service
hotel in Farmington, Conn. The loan is on the master servicers'
combined watchlist due to a low reported DSC, which was 0.75x for
year-end 2010. The reported occupancy was 49.0% for the same
period.
"We stressed the collateral in the pool according to our current
criteria. The resultant credit enhancement levels are consistent
with our lowered and affirmed ratings," S&P said.
Ratings Lowered
JPMorgan Chase Commercial Mortgage Securities Trust 2007-CIBC19
Commercial mortgage pass-through certificates
Rating
Class To From Credit enhancement (%)
A-4 A- (sf) A+ (sf) 28.95
A-SB A- (sf) A+ (sf) 28.95
A-1A A- (sf) A+ (sf) 28.95
A-M BB (sf) BBB (sf) 18.36
A-J B (sf) BB (sf) 9.89
B B- (sf) BB- (sf) 9.09
C CCC+ (sf) B+ (sf) 7.90
D CCC (sf) B- (sf) 6.84
Ratings Affirmed
JPMorgan Chase Commercial Mortgage Securities Trust 2007-CIBC19
Commercial mortgage pass-through certificates
Class Rating Credit enhancement (%)
A-2 AAA (sf) 28.95
A-3 AAA (sf) 28.95
E CCC- (sf) 5.25
X AAA (sf) N/A
N/A -- Not applicable.
KNIGHTSBRIDGE CLO: S&P Withdraws 'BB' Rating on Class E Notes
-------------------------------------------------------------
Standard and Poor's Ratings Services withdrew its ratings on the
class A, B, C, D, and E notes from Knightsbridge CLO 2008-1 Ltd.,
a U.S. collateralized loan obligation (CLO) transaction managed by
A.C. Corp. "Prior to being withdrawn, our ratings on the class B
and C notes were on CreditWatch positive," S&P said.
The withdrawals follow the optional redemption of the rated notes
on the Dec. 8, 2011 payment date.
Ratings Withdrawn And Removed From CreditWatch
Knightsbridge CLO 2008-1 Ltd.
Rating
Class To From
B NR AA (sf)/Watch Pos
C NR A (sf)/Watch Pos
Ratings Wtihdrawn
Knightsbridge CLO 2008-1 Ltd.
Rating
Class To From
A NR AAA (sf)
D NR BBB (sf)
E NR BB (sf)
NR -- Not rated.
MACH ONE: Fitch Affirms Rating on 14 Classes of Notes
-----------------------------------------------------
Fitch Ratings has affirmed 14 classes of notes issued by MACH
ONE 2004-1, LLC (MACH ONE). The rating actions are a result of
deleveraging of the capital structure and improved credit quality
on the underlying portfolio.
Since the last rating action in January 2011, approximately
3.5% of the collateral has been downgraded while 19.9% has been
upgraded. Currently, 53.8% of the portfolio has a Fitch derived
rating below investment grade, and 15.8% has a rating in the 'CCC'
category and below. Additionally, the class A-3 notes have
received $39.8 million in paydowns since the last rating action.
This transaction was analyzed under the framework described in the
report 'Global Rating Criteria for Structured Finance CDOs' using
the Portfolio Credit Model (PCM) for projecting future default
levels for the underlying portfolio. Fitch also analyzed the
structure's sensitivity to the assets that are distressed,
experiencing interest shortfalls, and those with near-term
maturities. Based on this analysis, the credit characteristics
of classes A-3 through H are generally consistent with the
ratings assigned below.
For the class J through O notes, Fitch analyzed each class'
sensitivity to the default of the distressed assets ('CCC' and
below). Given the high probability of default of the underlying
assets and the expected limited recovery prospects upon default,
the class J notes have been affirmed at 'CCsf', indicating that
default is probable. Similarly, the class K through O notes have
been affirmed at 'Csf', indicating default is inevitable. As of
the Nov. 30, 2011 trustee report, the class K notes received a
partial interest payment of approximately 73% of its full interest
due and classes L through O are deferring their interest payments.
The Positive and Stable Outlooks assigned to the notes indicate
the cushion in the modeling results, which serve to mitigate
potential further deterioration in the portfolio.
MACH ONE is a static Re-REMIC backed by CMBS B-pieces that closed
July 28, 2004. The transaction is collateralized by 38 assets from
28 obligors from the 1996 through 2003 vintages.
Fitch has affirmed these ratings and revised Outlooks where
indicated:
-- $95,177,269 class A-3 at 'AAsf'; Outlook to Positive from
Negative;
-- $51,460,000 class B at 'BBBsf'; Outlook to Positive from
Negative;
-- $10,453,000 class C at 'BBBsf'; Outlook to Positive from
Negative;
-- $28,142,000 class D at 'BBsf'; Outlook to Positive from
Negative;
-- $7,236,000 class E at 'BBsf'; Outlook to Stable from
Negative;
-- $17,689,000 class F at 'Bsf'; Outlook to Stable from
Negative;
-- $15,277,000 class G at 'Bsf'; Outlook to Stable from
Negative;
-- $14,473,000 class H at 'CCCsf';
-- $17,689,000 class J at 'CCsf';
-- $8,844,000 class K at 'Csf';
-- $8,040,000 class L at 'Csf';
-- $8,844,000 class M at 'Csf';
-- $6,432,000 class N at 'Csf';
-- $6,432,000 class O at 'Csf'.
MAGMA CDO: Moody's Upgrades Rating of $14.5MM Notes to 'Ba3'
------------------------------------------------------------
Moody's Investors Service has upgraded the rating of these notes
issued by Magma CDO Ltd.:
US$14,500,000 Class C Second Subordinate Fixed Rate Notes Due
November 15, 2012 (current outstanding balance of 4,702,195.08),
Upgraded to Ba3 (sf); previously on October 14, 2009 Downgraded to
Caa3 (sf).
RATINGS RATIONALE
According to Moody's, the rating action taken on the notes is
primarily a result of amortization of the Class C notes and an
increase in the transaction's overcollateralization ratio since
the rating action in October 2009. Moody's notes that the Class C
Notes have been paid down by approximately 67.6% or $9.8 million
since the rating action in October 2009. Based on the latest
trustee report dated November 3, 2011, the Class C
overcollateralization ratio is reported at 129.684% before the
applying proceeds on the November 2011 Payment Date, versus
September 2009 level of 103.626%.
The rating action also reflects Moody's revised CLO assumptions
described in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011. The primary changes to the
modeling assumptions include (1) a removal of the temporary 30%
default probability macro stress implemented in February 2009 as
well as (2) increased BET liability stress factors and increased
recovery rate assumptions.
Additionally, Moody's notes that the underlying portfolio includes
a number of investments in securities that mature after the
maturity date of the notes. Based on the November 2011 trustee
report, reference securities that mature after the maturity date
of the notes currently make up approximately 91% of the underlying
reference 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" published in June 2011, 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 $16.1 million,
defaulted par of $2.3 million, a weighted average default
probability of 15.65% (implying a WARF of 4680), a weighted
average recovery rate upon default of 30.84% and a diversity
score of 4.
Magma CDO Ltd.: issued in November 2000, is a collateralized bond
obligation backed primarily by a portfolio of senior unsecured
bonds. Currently, the portfolio has a diversity score of 4 with
four remaining obligors in the portfolio.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011. This publication incorporates rating criteria that
apply to both collateralized loan obligations and collateralized
bond obligations.
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) 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.
3) Lack of portfolio granularity: The performance of the portfolio
depends to a large extent on the credit conditions of a few large
obligors, especially when they experience jump to default.
MERRILL LYNCH: DBRS Cuts Ratings on Two Loan Classes to 'D'
-----------------------------------------------------------
DBRS has downgraded these classes of the Merrill Lynch
Mortgage Trust 2005-CIP1:
-- Class M to D (sf) from C (sf)
-- Class N to D (sf) from C (sf)
The downgrades follow realized losses to the above mentioned
classes, which resulted from the liquidation of two loans in
addition to further liquidation expenses associated with a loan
that liquidated with the October 2011 remittance.
Courtyard Marriott Parsippany (Prospectus ID#29) was secured by a
151-room full-service hotel located in the Parsippany-Troy Hills
area of New Jersey. The loan was transferred to special servicing
in December 2010 for payment default, after having been on the
servicer's watchlist for a low DSCR. The note was sold on
October 28, 2011, which resulted in a $9.0 million loss to the
trust, realized with the November 2011 remittance.
Coco Center (Prospectus ID#65) was secured by a mixed-use property
in Margate, Florida. The loan had previously been on the
servicer's watchlist because the largest tenant's lease was
scheduled to expire on December 31, 2010. The loan was
transferred to special servicing shortly after in February 2011
for imminent default, and the note was sold on October 14, 2011,
which resulted in a loss of $2.9 million with the November 2011
remittance.
Additional liquidation expenses related to a loan that was
liquidated in October 2011, Village Park at Brookhaven (Prospectus
ID#118), were passed through the trust with the November 2011
remittance.
The cumulative losses for this transaction, to date, have resulted
in the full principal losses to Classes Q, P and N and have
reduced the balance of Class M to $1.9 million.
Since the last DBRS annual surveillance review in January 2011,
five loans have been transferred to special servicing: Park Forest
(Prospectus ID#113), Sunrise Plaza (Prospectus ID#89), Hampton Inn
Newton (Prospectus ID#35), Hampton Inn Great Valley (Prospectus
ID#58) and Kirkwood Bend Office (Prospectus ID#30). These loans
cumulatively comprise 2.74% of the pool balance, as of the
November 2011 remittance. DBRS continues to monitor this
transaction on a monthly basis, with increased focus on these
pivotal loans and the other loans currently in special servicing.
DBRS expects to complete a full annual surveillance review of this
transaction in the coming months.
MERRILL LYNCH: DBRS Downgrades Class M Rating to 'D'
----------------------------------------------------
DBRS has downgraded these classes of the Merrill Lynch Mortgage
Trust 2005-CIP1:
-- Class M to D (sf) from C (sf)
-- Class N to D (sf) from C (sf)
The downgrades follow realized losses to the above mentioned
classes, which resulted from the liquidation of two loans in
addition to further liquidation expenses associated with a loan
that liquidated with the October 2011 remittance.
Courtyard Marriott Parsippany (Prospectus ID#29) was secured by a
151-room full-service hotel located in the Parsippany-Troy Hills
area of New Jersey. The loan was transferred to special servicing
in December 2010 for payment default, after having been on the
servicer's watchlist for a low DSCR. The note was sold on October
28, 2011, which resulted in a $9.0 million loss to the trust,
realized with the November 2011 remittance.
Coco Center (Prospectus ID#65) was secured by a mixed-use
property in Margate, Florida. The loan had previously been
on the servicer's watchlist because the largest tenant's lease
was scheduled to expire on December 31, 2010. The loan was
transferred to special servicing shortly after in February 2011
for imminent default, and the note was sold on October 14, 2011,
which resulted in a loss of $2.9 million with the November 2011
remittance.
Additional liquidation expenses related to a loan that was
liquidated in October 2011, Village Park at Brookhaven (Prospectus
ID#118), were passed through the trust with the November 2011
remittance.
The cumulative losses for this transaction, to date, have resulted
in the full principal losses to Classes Q, P and N and have
reduced the balance of Class M to $1.9 million.
Since the last DBRS annual surveillance review in January 2011,
five loans have been transferred to special servicing: Park Forest
(Prospectus ID#113), Sunrise Plaza (Prospectus ID#89), Hampton Inn
Newton (Prospectus ID#35), Hampton Inn Great Valley (Prospectus
ID#58) and Kirkwood Bend Office (Prospectus ID#30). These loans
cumulatively comprise 2.74% of the pool balance, as of the
November 2011 remittance. DBRS continues to monitor this
transaction on a monthly basis, with increased focus on these
pivotal loans and the other loans currently in special servicing.
DBRS expects to complete a full annual surveillance review of this
transaction in the coming months.
MERRILL LYNCH: S&P Cuts Rating on Class B-5 to 'CC'
---------------------------------------------------
Standard & Poor's Ratings Services corrected its rating on class
X-B from Merrill Lynch Mortgage Investors Trust Series MLCC 2004-C
by raising it to 'AAA (sf)' from 'AA (sf)'. "In addition, we
lowered our ratings on four other classes and affirmed our ratings
on seven other classes from the same transaction," S&P said.
"Class X-B is an interest-only (IO) certificate, with payments
that are dependent on a notional balance tied to classes B-1, B-2,
and B-3 from this transaction. On Dec. 9, 2009, we incorrectly
lowered our rating on this class to 'AA (sf)' from 'AAA (sf)',"
S&P said.
"The downgrades reflect our view that the projected credit
enhancement will be insufficient to cover projected losses at the
previous rating levels. While the projected losses for this pool
of mortgage loans are low, the downgrades reflect the erosion of
credit enhancement due to the pay-down of the subordinate
classes," S&P said.
"The affirmations reflect our view that the projected credit
enhancement will be sufficient to cover projected losses at these
rating levels," S&P said.
This is the pool information for Merrill Lynch Mortgage Investors
Trust Series MLCC 2004-C as of the Nov., 2011 remittance period:
Original Lifetime
Balance* Pool Loss Total Severe
(mil $) Factor* Projection* Delinq.* Delinq.*
900 8.58% 0.21% 5.18% 1.13%
*Original Balance represents the original pool balance; Pool
Factor represents a percentage of the original pool balance
remaining; Lifetime Loss Projection is a percentage of the
original pool balance; and Total Delinquencies and Severe
Delinquencies are percentages of the current pool balance.
"To assess the creditworthiness of each class, we reviewed the
individual delinquency and loss trends of each transaction for
changes, if any, in the ability to withstand additional credit
deterioration. In order to maintain a 'B' rating on a class, we
assessed whether, in our view, a class could absorb the additional
base-case loss assumptions we used in our analysis. In order to
maintain a rating higher than 'B', we assessed whether the class
could withstand losses exceeding the remaining base-case
assumption at a percentage specific to each rating category, up to
235% for a 'AAA' rating. For example, in general, we would assess
whether a class could withstand approximately 127% of our
remaining base-case loss assumptions to maintain a 'BB' rating,
while we would assess whether a different class could withstand
approximately 154% of our remaining base-case loss assumptions to
maintain a 'BBB' rating. Each class with an affirmed 'AAA' rating
can, in our view, withstand approximately 235% of our remaining
base-case loss assumptions under our analysis," S&P said.
Subordination provides credit support for this transaction. The
underlying collateral for this deal consists of prime jumbo
mortgage loans secured by first liens on one- to four-family
residential properties.
Rating Corrected
Merrill Lynch Mortgage Investors Trust Series MLCC 2004-C
Series 2004-C
Rating
Class CUSIP Current 12/9/2009 Pre-12/9/2009
X-B 59020UEB7 AAA (sf) AA (sf) AAA (sf)
Rating Actions
Merrill Lynch Mortgage Investors Trust Series MLCC 2004-C
Series 2004-C
Rating
Class CUSIP To From
B-2 59020UDT9 AA (sf) AA+ (sf)
B-3 59020UDU6 B (sf) A+ (sf)
B-4 59020UEC5 CC (sf) BB+ (sf)
B-5 59020UED3 CC (sf) CCC (sf)
Ratings Affirmed
Merrill Lynch Mortgage Investors Trust Series MLCC 2004-C
Series 2004-C
Class CUSIP Rating
A-1 59020UDN2 AAA (sf)
A-2 59020UDP7 AAA (sf)
A-2A 59020UDV4 AAA (sf)
A-2B 59020UDW2 AAA (sf)
X-A 59020UDR3 AAA (sf)
A-3 59020UDQ5 AAA (sf)
B-1 59020UDS1 AAA (sf)
MERRILL LYNCH: S&P Withdraws 'D' Rating on Class G
--------------------------------------------------
Standard & Poor's Ratings Services withdrew its ratings on 94
classes from 38 U.S. commercial mortgage-backed securities (CMBS)
transactions.
"We withdrew our ratings on 80 securities from 35 CMBS
transactions following the repayment of each class' principal
balance, as noted in each transaction's November 2011 trustee
remittance report. We withdrew our ratings on six interest-only
(IO) classes from six CMBS transactions following the reduction
of each class' notional balance, as noted in each transaction's
November 2011 trustee remittance report," S&P said.
"We also withdrew our ratings on seven additional IO classes from
three CMBS transactions following the repayment of all principal
and interest paying classes rated 'AA- (sf)' or higher from the
respective CMBS transactions, in accordance with our criteria for
rating interest-only securities. For further details, see 'Global
Methodology For Rating Interest-Only Securities,' published April
15, 2010, on RatingsDirect on the Global Credit Portal, at
www.globalcreditportal.com," S&P said
"Lastly, we withdrew our 'D (sf)' rating on class G from Merrill
Lynch Mortgage Investors Inc.'s series 1996-C2 transaction
following the repayment of all classes not rated 'D (sf)' in the
transaction's November 2011 remittance report," S&P said.
Ratings Withdrawn Following Repayment Or Reduction Of Principal
Balance
Banc of America Commercial Mortgage Inc.
Commercial mortgage pass-through certificates series 2000-1
Rating
Class To From
F NR AA+ (sf)
Banc of America Commercial Mortgage Inc.
Commercial mortgage pass-through certificates series 2004-5
Rating
Class To From
XP NR AAA (sf)
Banc of America Large Loan Inc.
Commercial mortgage pass-through certificates series 2006-BIX1
Rating
Class To From
C NR AAA (sf)
Bank of America N.A.-First Union National Bank Commercial Mortgage
Trust
Commercial mortgage pass-through certificates series 2001-3
Rating
Class To From
D NR AAA (sf)
E NR AAA (sf)
Battery Park City Authority
Senior revenue bonds series 2003-A
Rating
Cusip To From
07133ADC3 NR AAA (sf)
07133ADA7 NR AAA (sf)
07133ADB5 NR AAA (sf)
Bear Stearns Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates series 2000-WF1
Rating
Class To From
F NR BBB- (sf)
Bear Stearns Commercial Mortgage Securities Inc.
Commercial mortgage pass-through certificates series 2001-TOP4
Rating
Class To From
E NR A- (sf)
Bear Stearns Commercial Mortgage Securities Trust 2007-TOP26
Commercial mortgage pass-through certificates
Rating
Class To From
A-1 NR AAA (sf)
CD 2007-CD4
Commercial mortgage pass-through certificates
Rating
Class To From
A-2A NR AAA (sf)
CD 2007-CD5
Commercial mortgage pass-through certificates
Rating
Class To From
A-2 NR AAA (sf)
COMM 2004-LNB4
Commercial mortgage pass-through certificates
Rating
Class To From
X-P NR AAA (sf)
COMM 2005-FL10
Commercial mortgage pass-through certificates
Rating
Class To From
A-J1 NR AAA (sf)
A-J2 NR AAA (sf)
A-J3 NR AAA (sf)
B NR A- (sf)
C NR BBB+ (sf)
D NR BBB- (sf)
E NR BB+ (sf)
F NR BB (sf)
N-PC NR B- (sf)
O-PC NR CCC+ (sf)
P-PC NR CCC (sf)
Q-PC NR CCC (sf)
COMM 2007-FL14
Commercial mortgage pass-through certificates
Rating
Class To From
A-1 NR AAA (sf)
PG1 NR BB+ (sf)
PG2 NR BB+ (sf)
PG3 NR BB (sf)
PG4 NR BB- (sf)
Credit Suisse First Boston Mortgage Securities Corp.
Commercial mortgage pass-through certificates series 2001-CK6
Rating
Class To From
A-3 NR AAA (sf)
B NR AAA (sf)
Credit Suisse First Boston Mortgage Securities Corp.
Commercial mortgage pass through certificates series 2004-C4
Rating
Class To From
A-SP NR AAA (sf)
First Union National Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2000-C1
Rating
Class To From
C NR AAA (sf)
First Union National Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2001-C4
Rating
Class To From
A-2 NR AAA (sf)
GE Capital Commercial Mortgage Corp.
Commercial mortgage pass-through certificates series 2001-3
Rating
Class To From
B NR AAA (sf)
C NR AAA (sf)
GMAC Commercial Mortgage Securities Inc.
Mortgage pass-through certificates series 2002-C1
Rating
Class To From
B NR AAA (sf)
GMAC Commercial Mortgage Securities Inc. Series 2006-C1 Trust
Commercial mortgage pass-through certificates
Rating
Class To From
A-2 NR AAA (sf)
GS Mortgage Securities Corp. II
Commercial mortgage pass-through certificates series 2005-GG4
Rating
Class To From
A-DP NR AAA (sf)
JPMorgan Chase Commercial Mortgage Securities Corp.
Commercial mortgage pass-through certificates series 2001-C1
Rating
Class To From
B NR AAA (sf)
JPMorgan Chase Commercial Mortgage Securities Corp.
Commercial mortgage pass-through certificates series 2004-CIBC10
Rating
Class To From
X-2 NR AAA (sf)
JPMorgan Chase Commercial Mortgage Securities Corp.
Commercial mortgage pass-through certificates series 2005-FL1
Rating
Class To From
A-2 NR AAA (sf)
B NR AAA (sf)
C NR AAA (sf)
D NR AA+ (sf)
E NR AA (sf)
F NR AA- (sf)
G NR A- (sf)
H NR BBB (sf)
J NR BBB- (sf)
K NR BB+ (sf)
L NR B (sf)
X-2 NR AAA (sf)
LB Commercial Mortgage Trust 2007-C3
Commercial mortgage pass-through certificates
Rating
Class To From
A-1 NR AAA (sf)
LB-UBS Commercial Mortgage Trust 2002-C2
Commercial mortgage pass-through certificates
Rating
Class To From
A-3 NR AAA (sf)
X-D NR AAA (sf)
LB-UBS Commercial Mortgage Trust 2004 -C6
Commercial mortgage pass-through certificates
Rating
Class To From
A-4 NR AAA (sf)
LB-UBS Commercial Mortgage Trust 2004-C8
Commercial mortgage pass-through certificates
Rating
Class To From
A-4 NR AAA (sf)
X-CP NR AAA (sf)
Lehman Brothers Floating Rate Commercial Mortgage Trust 2007-LLF
C5
Commercial mortgage pass-through certificates
Rating
Class To From
HRH NR B+ (sf)
Merrill Lynch Mortgage Investors Inc.
Commercial mortgage pass-through certificates series 1996-C2
Rating
Class To From
F NR B (sf)
ML-CFC Commercial Mortgage Trust 2007-8
Commercial mortgage pass-through certificates
Rating
Class To From
A-1 NR AAA (sf)
Morgan Stanley Dean Witter Capital I Trust 2001-TOP1
Commercial mortgage pass-through certificates
Rating
Class To From
C NR A (sf)
Morgan Stanley Dean Witter Capital I Trust 2001- TOP5
Commercial mortgage pass-through certificates
Rating
Class To From
C NR AAA (sf)
D NR AA+ (sf)
E NR A+ (sf)
F NR BBB+ (sf)
Salomon Bros. Commercial Mortgage Trust 2000-C3
Commercial mortgage pass-through certificates
Rating
Class To From
D NR AA+ (sf)
UBS 400 Atlantic Street Mortgage Trust
Commercial mortgage pass-through certificates series 2002-CIA
Rating
Class To From
B-1 NR AA+ (sf)
B-2 NR AA+ (sf)
B-3 NR AA+ (sf)
B-4 NR AA+ (sf)
B-5 NR AA+ (sf)
UBS Commercial Mortgage Trust 2007-FL1
Commercial mortgage pass-through certificates
Rating
Class To From
O-HA NR CCC- (sf)
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2004-C15
Rating
Class To From
180ML-A NR BB- (sf)
180ML-B NR B+ (sf)
180ML-C NR B- (sf)
180ML-D NR CCC+ (sf)
180ML-E NR CCC (sf)
180ML-F NR CCC- (sf)
180ML-G NR CCC- (sf)
A-2 NR AAA (sf)
XP NR AAA (sf)
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2006-C27
Rating
Class To From
A-2 NR AAA (sf)
Ratings Withdrawn Due To Repayment Of All Principal And Interest
Paying Classes Rated 'AA- (Sf)' Or Higher
COMM 2007-FL14
Commercial mortgage pass-through certificates series 2007-FL14
Rating
Class To From
X-2 NR AAA (sf)
X-3-DB NR AAA (sf)
X-3-SG NR AAA (sf)
X-5-DB NR AAA (sf)
X-5-SG NR AAA (sf)
Morgan Stanley Dean Witter Capital I Trust 2001-TOP5
Commercial mortgage pass-through certificates
Rating
Class To From
X1 NR AAA (sf)
Salomon Brothers Commercial Mortgage Trust 2000-C3
Commercial mortgage pass-through certificates
Rating
Class To From
X NR AAA (sf)
Rating Withdrawal
Merrill Lynch Mortgage Investors Inc.
Commercial mortgage pass-through certificates series 1996-C2
Rating
Class To From
G NR D (sf)
NR -- Not rated.
MILL CREEK: S&P Gives 'BB' Rating on Class E Deferrable Notes
-------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to Mill
Creek CLO Ltd./Mill Creek CLO LLC's $241.75 million floating-rate
notes.
The note issuance is a collateralized loan obligation
securitization backed by a revolving pool consisting primarily of
broadly syndicated senior secured loans.
The ratings reflect S&P's assessment of:
The credit enhancement provided to the rated notes through the
subordination of cash flows that are payable to the
subordinated notes.
The transaction's credit enhancement, which is sufficient to
withstand the defaults applicable for the supplemental tests
(not counting excess spread) and cash flow structure, which
can withstand the default rate projected by Standard & Poor's
CDO Evaluator model, as assessed by Standard & Poor's using
the assumptions and methods outlined in its corporate
collateralized debt obligation criteria, (see "Update To
Global Methodologies And Assumptions For Corporate Cash Flow
And Synthetic CDOs," published Sept. 17, 2009).
The transaction's legal structure, which is expected to be
bankruptcy remote.
The diversified collateral portfolio, which consists primarily
of broadly syndicated speculative-grade senior secured term
loans.
The portfolio manager's experienced management team.
"Our projections regarding the timely interest and ultimate
principal payments on the rated notes, which we assessed using
our cash flow analysis and assumptions commensurate with the
assigned ratings under various interest-rate scenarios,
including LIBOR ranging from 0.30%-12.35%," S&P related.
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 balance of the
rated notes outstanding.
The transaction's reinvestment overcollateralization test, a
failure of which will lead to the reclassification of 75% of
excess interest proceeds that are available prior to paying
uncapped administrative expenses and fees; subordinated hedge
termination payments; portfolio manager incentive fees; and
subordinated note payments to the principal proceeds for the
purchase of additional collateral assets during the
reinvestment period and to reduce the balance of the rated
notes outstanding, sequentially, after the reinvestment
period.
Standard & Poor's 17g-7 Disclosure Report
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities.
The Standard & Poor's 17g-7 Disclosure Report included in this
credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com/1111298.pdf
Ratings Assigned
Mill Creek CLO Ltd./Mill Creek CLO LLC
Class Rating Amount
(mil. $)
A AAA (sf) 178.0
B AA (sf) 15.0
C (deferrable) A (sf) 26.0
D (deferrable) BBB (sf) 12.3
E (deferrable) BB (sf) 10.5
Subordinated notes NR 32.8
NR -- Not rated.
MIRAMAX LLC: S&P Gives 'BB' Rating on Class B Asset-Backed Notes
----------------------------------------------------------------
Standard & Poor's Ratings Services assigned its ratings to Miramax
LLC's $500 million series 2011-1 film library asset-backed notes
class A And B.
The note issuance is an asset-backed securitization backed by the
rights to the intellectual property (including distribution
rights) and film materials relating to a portfolio of 670 films
and 14 TV series, mini-series, specials, and shorts (the film
portfolio), as well as rights in over 240 books and 300
development projects.
The ratings reflect S&P's view of:
The likelihood that timely interest and ultimate principal
payments will be made on or before the legal final maturity
date;
The expected amount of cash flow to be derived from the
exploitation of the film portfolio (the collateral) in various
distribution channels during the term of the transaction;
The credit enhancement available in the form of
overcollateralization and subordination of the class B notes;
The transaction's legal and payment structure;
Miramax Film NY LLC's (Miramax's or the manager's) ability to
exploit the film portfolio;
The interest reserve account, which requires a minimum balance
of three months interest on the initial principal amount of
the notes; and
Certain contingent debt service and collateral protection
advances made by the servicer.
Ratings Assigned
Miramax LLC - Series 2011-1
Class Rating Amount
(mil. $)
A BBB (sf) 350.00
B BB (sf) 150.00
MLCFC 2006-4: Moody's Reviews 'Ba2' Rating of Cl. B Notes
---------------------------------------------------------
Moody's Investors Service (Moody's) placed 11 classes of ML-CFC
Commercial Mortgage Trust 2006-4 Commercial Mortgage Pass-Through
Certificates, Series 2006-4 on review for possible downgrade:
Cl. AM, Aa2 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 22, 2010 Downgraded to Aa2 (sf)
Cl. AJ, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 22, 2010 Downgraded to Baa3 (sf)
Cl. AJ-FL, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 22, 2010 Downgraded to Baa3 (sf)
Cl. AJ-FX, Baa3 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 22, 2010 Downgraded to Baa3 (sf)
Cl. B, Ba2 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 22, 2010 Downgraded to Ba2 (sf)
Cl. C, B1 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 22, 2010 Downgraded to B1 (sf)
Cl. D, B2 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 22, 2010 Downgraded to B2 (sf)
Cl. E, B3 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 22, 2010 Downgraded to B3 (sf)
Cl. F, Caa2 (sf) Placed Under Review for Possible Downgrade;
previously on Apr 22, 2010 Downgraded to Caa2 (sf)
Cl. G, Ca (sf) Placed Under Review for Possible Downgrade;
previously on Apr 22, 2010 Downgraded to Ca (sf)
Cl. H, Ca (sf) Placed Under Review for Possible Downgrade;
previously on Apr 22, 2010 Downgraded to Ca (sf)
The classes were placed on review due to higher expected losses
for the pool resulting from actual and anticipated losses from
specially serviced and troubled loans.
The rating action is a result of Moody's on-going surveillance of
commercial mortgage backed securities (CMBS) 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 2, 2011.
DEAL AND PERFORMANCE SUMMARY
As of the November 14, 2011 distribution date, the transaction's
aggregate certificate balance has decreased by 17% to $3.8 billion
from $4.5 billion at securitization. The Certificates are
collateralized by 250 mortgage loans ranging in size from less
than 1% to 11% of the pool, with the top ten loans representing
33% of the pool.
Sixty-three loans, representing 19% of the pool, are on the master
servicer's watchlist. The watchlist includes loans which meet
certain portfolio review guidelines established as part of the CRE
Finance Council (CREFC) 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-two loans have been liquidated from the pool, resulting in
an aggregate realized loss of $129.7 million (65% loss severity).
Thirty-seven loans, representing 22% of the pool, are currently in
special servicing. The largest loan is special servicing is the
YPI Transwestern Portfolio Loan ($224.4 -- 5.9% of the pool),
which is secured by seven office properties located in Chicago,
Illinois and Dallas, Texas. The loan was transferred to special
servicing in October 2011 due to imminent maturity default. The
remaining specially serviced loans are secured by a mix of
multifamily, retail, hotel and office property types. The master
servicer has recognized appraisal reductions totaling
$150.4 million for 23 of the specially serviced loans.
Moody's review will focus on potential losses from specially
serviced and troubled loans and the performance of the overall
pool.
The principal methodology used in this rating was "Moody's
Approach to Rating Fusion U.S. CMBS Transactions" published in
April 2005.
MLMT COMMERCIAL: Fitch Junks Rating on Nine Note Classes
--------------------------------------------------------
Fitch Ratings has downgraded 10 classes and affirmed 13 classes of
MLMT Commercial Mortgage Trust 2007-C1 (MLMT 2007-C1) due to
further deterioration of loan performance, most of which involves
significantly higher losses on the specially serviced loans than
at the last rating action. In addition, Fitch has resolved the
Rating Watch Negative on class A-M and assigned a Negative Outlook
to class A-4.
The downgrades reflect an increase in Fitch expected losses across
the pool. Fitch modeled losses of 17.2% for the pool, including
0.9% in realized losses already incurred to date. Fitch has
identified 83 Loans of Concern (41%) including 21 specially
serviced loans (27.6%). Currently, Fitch expects classes H
through Q may be fully depleted and class G significantly impacted
from losses associated with the specially serviced assets. At the
prior rating action, Fitch expected 11.8% in losses. The increase
was attributed to lower valuations of specially serviced loans
including the assets discussed below.
As of the November 2011 distribution date, the pool's aggregate
principal balance has been reduced by approximately 5.4% to $3.83
billion from $4.05 billion at issuance. Interest shortfalls
totaling $11.8 million are affecting classes B through Q.
The largest two contributors to modeled losses are the Empirian
Portfolio Pool 1 (10.1% of the pool) and Pool 3 (8.5%) loans. The
two loans were transferred to special servicing in November 2010
due to the borrower's failure to make the October 2010 and
subsequent debt service payments. Pool 1 is secured by 78
multifamily properties (7,964 units) located across eight states.
Pool 3 is secured by 79 multifamily properties (6,864 units)
located across eight states. The properties within the two
portfolios are generally class B and C complexes, many of which
were constructed in the 1980s and lack common amenities. All of
the properties suffer significant deferred maintenance. A loan
modification was expected to close on December 1st.
As of September, the occupancy for Pool 1 and Pool 3 declined to
84% and 83.9%. Occupancy has been declining for the past few years
with 93% and 90.9% at issuance. The debt-service coverage ratio
(DSCR), on a net-operating income (NOI) basis, has also declined.
On an annualized basis, the September 2011 NOI DSCR was 1.09 times
(x) and 1.06x for Pool 1 and Pool 3, representing a significant
decline from 1.50x and 1.51x at issuance. This is expected to
continue to decline.
In Fitch's analysis, Fitch derived its modeled losses by applying
a haircut to the year-end (YE) 2010 NOI to account for further
performance deterioration and applying a 9.5% capitalization rate
to account for the condition and location of the properties.
The third largest contributor to loss is a specially serviced loan
(2.2%) initially secured by a portfolio of 11 multifamily
properties (totaling 2,904 units) located in Georgia, North
Carolina, and Virginia. The loan transferred to special servicing
in February 2009 due to payment default. The properties were
foreclosed upon between November 2009 and April 2010 and became
real estate owned. According to the special servicer, nine of the
properties (those located in Georgia and North Carolina) have been
sold. The two remaining properties are currently in contract to
be sold. Closing is expected in December 2011. Significant losses
to the loan are expected after the liquidation of these two
remaining properties.
Fitch has downgraded and removed from Rating Watch Negative the
following class:
-- $405 million class A-M to 'BBsf' from 'AAAsf'; remove from
Rating Watch Negative; Outlook Negative.
Fitch has downgraded, assigned Recovery Estimate (REs), and
assigned Rating Outlooks to the following classes, as indicated:
-- $134.1 million class AJ to 'CCCsf' from 'Bsf'; 'RE 100%';
-- $200 million class AJ-FL to 'CCCsf' from 'Bsf'; 'RE 100%';
-- $86.1 million class B to 'CCCsf' from 'B-sf'; 'RE 40%';
-- $40.5 million class C to 'CCsf' from 'CCCsf'; 'RE 0%';
-- $45.6 million class D to 'CCsf' from 'CCCsf'; 'RE 0%';
-- $45.6 million class E to 'CCsf' from 'CCCsf'; 'RE 0%';
-- $50.6 million class F to 'CCsf' from 'CCCsf'; 'RE 0%';
-- $40.5 million class G to 'Csf' from 'CCsf'; 'RE 0%';
-- $40.5 million class H to 'Csf' from 'CCsf'; 'RE 0%'.
In addition, Fitch has affirmed, assigned REs, and revised Rating
Outlooks to the following classes, as indicated:
-- $1.20 billion class A-1A at 'AAAsf'; Outlook Stable.
-- $279.9 million class A-2 at 'AAAsf'; Outlook Stable;
-- $187.3 million class A-2FL at 'AAAsf'; Outlook Stable;
-- $322.2 million class A-3 at 'AAAsf'; Outlook Stable;
-- $130 million class A-3FL at 'AAAsf'; Outlook Stable;
-- $90.3 million class A-SB at 'AAAsf'; Outlook Stable;
-- $442.2 million class A-4 at 'AAAsf'; Outlook to Negative from
Stable;
-- $15.2 million class J at 'Csf'; 'RE 0%';
-- $15.2 million class K at 'Csf'; 'RE 0%';
-- $10.1 million class L at 'Csf'; 'RE 0%';
-- $10.1 million class M at 'Csf'; 'RE 0%';
-- $10.1 million class N at 'Csf'; 'RE 0%';
-- $5.1 million class P at 'Csf'; 'RE 0%'.
Class A-1 has paid in full. Fitch does not rate the $22.3 million
class Q certificates.
MORGAN STANLEY: S&P Cuts 2 Certs. Classes Ratings to 'D'
--------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on four
classes of commercial mortgage pass-through certificates from
Morgan Stanley Capital I Trust 2007-HQ12, a U.S. commercial
mortgage-backed securities (CMBS) transaction. "In addition, we
affirmed our ratings on 10 other classes from the same
transaction," S&P said.
"Our rating actions follow our analysis of the transaction, using
our U.S. conduit/fusion CMBS criteria. Our analysis also included
a review of the deal structure and the liquidity available to the
trust. The downgrades further reflect credit support erosion that
we anticipate will occur upon the eventual resolution of five
($52.8 million, 3.2%) of the nine assets ($297.6 million, 18.0%)
that are currently with the special servicer. We also considered
the monthly interest shortfalls that are affecting the trust and
the potential for additional interest shortfalls associated with
revised appraisal reduction amounts (ARAs) on the specially
serviced assets. We lowered our ratings on the class C and D
certificates to 'D (sf)' because we believe the accumulated
interest shortfalls will remain outstanding for the foreseeable
future," S&P said.
The affirmed ratings on the principal and interest certificates
reflect subordination and liquidity support levels that are
consistent with the outstanding ratings.
"Our analysis included a review of the credit characteristics
of the remaining assets in the pool. Using servicer-provided
financial information, we calculated an adjusted debt service
coverage (DSC) of 1.10x and a loan-to-value (LTV) ratio of 155.3%.
We further stressed the loans' cash flows under our 'AAA' scenario
to yield a weighted average DSC of 0.63x and an LTV ratio of
217.4%. The implied defaults and loss severity under the 'AAA'
scenario were 90.9% and 56.4%. The DSC and LTV calculations
noted above exclude five ($52.8 million, 3.2%) of the nine
($297.6 million, 18.0%) specially serviced assets and one ground
lease loan ($58.0 million, 3.5%). We separately estimated losses
for the excluded specially serviced assets and included them in
our 'AAA' scenario implied default and loss severity figures," S&P
said.
"As of the Nov. 15, 2011 trustee remittance report, the trust had
experienced monthly interest shortfalls totaling $1,069,242. ASER
recoveries of $133,322 offset the total interest shortfalls during
this period. The total interest shortfall amount primarily
reflects interest shortfalls due to loan modifications of
$668,114, aggregate ASER amount of $168,487, and special servicing
and workout fees of $125,209. The interest shortfalls affected all
classes subordinate to and including class AJ. The class C and D
certificates experienced cumulative interest shortfalls for two or
more consecutive months, and we expect these interest shortfalls
to continue in the near term. Consequently, we lowered our ratings
on the class C and D certificates to 'D (sf)'," S&P said.
Credit Considerations
As of the Nov. 15, 2011 trustee remittance report, nine
assets ($297.6 million, 18.0%) in the pool were with the
special servicer, LNR Partners Inc. (LNR). The reported
payment status of the specially serviced assets as of the
most recent trustee remittance report is: two are real
estate-owned (REO, $16.7 million, 1.0%), two are 90-plus
days delinquent ($2.8 million, 0.2%), one is 60 days
delinquent ($8.4 million, 0.5%), three are late but less
than 30 days delinquent ($155.7 million, 9.4%), and one is
current ($113.9 million, 6.9%). Appraisal reduction amounts
(ARAs) totalling $41.6 million are in effect for five of the
specially serviced assets. Details of the three largest
specially serviced assets, two of which are top 10 assets,
are:
The Beacon Seattle D.C. & Portfolio loan ($113.9 million,
6.9%) is the third-largest loan in the pool and the largest
loan with the special servicer. The loan has a whole-loan
balance of $1.9 billion and is split into seven pari passu
pieces totalling $1.86 billion, and a $39.0 million B note,
which is only subordinate to the $274.8 million A-4 note in
the Banc of America Commercial Mortgage Trust 2007-2 transaction
and the $338.2 million A-5 note in the Bear Stearns Commercial
Mortgage Securities Trust 2007-PWR16 transaction. The A-2 and A-3
notes, which total $113.9 million, are part of this trust. The
loan is currently secured by the fee interests in 13 office
properties totalling 6.0 million sq. ft. in Northern Virginia,
Washington, and the District of Columbia, and the pledge of the
borrower's cash flow from a 1.1 million-sq.-ft. office building in
Seattle. The loan has a reported current payment status and was
transferred to the special servicer on April 7, 2010, due to
imminent default. The special servicer for this loan, Centerline
Servicing Inc., indicated that the loan has since been modified.
The modification terms include, but are not limited to, extending
the maturity date to May 7, 2017, from May 7, 2012, releasing
certain properties, and lowering the contractual interest rate.
The reported combined DSC was 0.89x for year-end 2010 and combined
occupancy was 83.3%, according to the June 30, 2011, rent rolls.
The Douglas Entrance loan ($101.5 million, 6.2%) is the fourth-
largest loan in the pool and the second-largest specially serviced
loan. The loan is secured by a 465,474-sq.-ft. office building in
Coral Gables, Fl. The loan was transferred to the special servicer
on April 22, 2010, due to imminent default. LNR indicated that the
loan has since been modified. The modification terms include, but
are not limited to, extending the maturity date to April 8, 2014,
from April 8, 2012, bifurcating the trust's $102.5 million note
into a $86.0 million senior A note and a $16.5 million subordinate
note. Subsequent to the loan modification, the A note was paid
down by $1.0 million to its current principal balance of
$85.0 million. Both the A note and the B note are with the
special servicer. The loan was reported as being late, but
less than 30 days delinquent. As of year-end 2009, the reported
DSC and occupancy were 1.08x and 77.0%.
The Timberland Buildings loan ($33.2 million, 2.0%) is the third-
largest specially serviced loan. The loan is secured by three
three-story class A office buildings comprising 354,320-sq.-ft.
in Troy, Michigan. The loan was transferred to the special
servicer on Sept. 23, 2011, due to imminent default. The loan
was reported as being late, but less than 30 days delinquent. A
November 2011 broker's opinion of value estimates the collateral's
value as $7.0 million. Standard & Poor's expects a significant
loss upon the eventual resolution of this asset.
"The six remaining assets with the special servicer have
individual balances that represent less than 1.3% of the total
pooled trust balance. ARAs totaling $11.3 million are in effect
against four of these assets. We estimated losses for four of
these assets, arriving at a weighted-average loss severity of
56.4%," S&P said.
Transaction Summary
As of the Nov. 15, 2011 remittance report, the collateral pool
had an aggregate trust balance of $1.65 billion, down from
$1.96 billion at issuance. The pool comprises 86 loans and two
REO assets, down from 97 loans at issuance. The master servicer,
Wells Fargo Bank N.A. (Wells Fargo), provided financial
information for 93.8% of the loans in the pool, the majority
of which reflected full-year 2010 data.
"We calculated a weighted average DSC of 1.11x for the loans
in the pool based on the servicer-reported figures. Our
adjusted DSC and LTV were 1.10x and 155.3%. Our adjusted figures
exclude five ($52.8 million, 3.2%) of the nine ($297.6 million,
18.0%) specially serviced assets and one ground lease loan
($58.0 million, 3.5%). We separately estimated losses for the
excluded specially serviced assets and included them in our 'AAA'
scenario implied default and loss severity figures. To date, the
transaction has experienced $27.3 million in principal losses from
nine assets. Thirty-six loans ($797.0 million, 48.3%) in the pool
are on the master servicer's watchlist, including three of the top
10 assets. Thirty loans ($984.5 million, 59.7%) have a reported
DSC of less than 1.10x, 19 of which ($760.8 million, 46.1%) have a
reported DSC of less than 1.00x," S&P said.
Summary of Top 10 Loans
The top 10 loans have an aggregate outstanding balance of
$1.08 billion (65.3%). "Using servicer-reported numbers, we
calculated a weighted average DSC of 1.07x for the nine top
10 loans with reported information. Two of the top 10 loans
($215.4 million, 13.1%) are with the special servicer and three
other top 10 loans ($585.0 million, 35.5%) are on the master
servicer's watchlist. Our adjusted DSC and LTV for the top 10
assets are 1.05x and 169.7%. Our adjusted figures exclude the one
top 10 ground lease loan ($58.0 million, 3.5%)," S&P said.
The Columbia Center loan ($380.0 million, 23.0%) is the largest
loan in the pool and on the watchlist. The loan is secured by a
76-story class A office building in Seattle, Wash. The property
was built in 1985 and comprises 1,521,506 sq. ft. of office space.
The loan appears on the master servicer's watchlist for low
reported DSC. For the three months ended March 31, 2011, the
reported DSC and occupancy were 0.89x and 80.0%.
The Parkoff Portfolio Roll-Up loan ($170.0 million, 10.3%) is
the second-largest loan in the pool and on the watchlist. The
loan is secured by 312-multifamily units in the Upper East Side
neighbourhood of New York City. The loan is on the master
servicer's watchlist because of a low reported DSC. For the six
months ended June 30, 2011, the reported DSC and occupancy were
0.76x and 96.7%.
The Eagle Glen Apartments loan ($35.0 million, 2.1%) is the
10th-largest loan in the pool and the third-largest loan on
the watchlist. The loan is secured by a 320-unit garden-style
apartment complex in Murrieta, Calif. The property was built in
2002. The loan is on the master servicer's watchlist because of a
low reported DSC. For year-end 2010, the reported DSC and
occupancy were 1.05x and 86.0%.
Standard & Poor's stressed the pool collateral according to its
criteria. The resultant credit enhancement levels are consistent
with our lowered ratings.
Standard & Poor's 17g-7 Disclosure Report
SEC Rule 17g-7 requires an NRSRO, for any report accompanying
a credit rating relating to an asset-backed security as defined
in the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors
and a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
Ratings Lowered
Morgan Stanley Capital I Trust 2007-HQ12
Commercial mortgage pass-through certificates
Rating
Class To From Credit enhancement (%)
AJ CCC+ (sf) B+ (sf) 13.30
AJFL CCC+ (sf) B+ (sf) 13.30
C D (sf) CCC- (sf) 9.45
D D (sf) CCC- (sf) 7.97
Ratings Affirmed
Morgan Stanley Capital I Trust 2007-HQ12
Commercial mortgage pass-through certificates
Class Rating Credit enhancement (%)
A-1A BBB (sf) 33.89
A-2 BBB (sf) 33.89
A-2FL BBB (sf) 33.89
A-2FX BBB (sf) 33.89
A-3 BBB (sf) 33.89
A-4 BBB (sf) 33.89
A-5 BBB (sf) 33.89
A-M BB (sf) 22.04
AMFL BB (sf) 22.04
B CCC- (sf) 10.79
MORGAN STANLEY: S&P Cuts Rating on Class C Certs. to 'D'
--------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on three
classes of commercial mortgage pass-through certificates from
Morgan Stanley Capital I Trust 2007-HQ13, a U.S. commercial
mortgage-backed securities (CMBS) transaction. "In addition, we
affirmed our ratings on six other classes from the same
transaction," S&P said.
"Our rating actions follow our analysis of the transaction
primarily using our U.S. conduit/fusion CMBS criteria. Our
analysis also included a review of the deal structure and
the liquidity available to the trust. The downgrades reflect
credit support erosion that we anticipate will occur upon the
eventual resolution of seven ($185.1 million, 21.0%) of the
eight ($223.4 million, 25.3%) specially serviced assets. We
also considered monthly interest shortfalls affecting the trust
and the potential for additional interest shortfalls due to
revised appraisal reduction amounts (ARAs) on the specially
serviced assets. We lowered our rating on the class C certificate
to 'D (sf)' because we believe the accumulated interest shortfalls
will remain outstanding for the foreseeable future. We also
lowered our ratings on classes A-J and B due to reduced liquidity
support available to these classes resulting from recurring
interest shortfalls and the potential for these classes to
experience interest shortfalls in the future relating to the
specially serviced assets," S&P said.
"The affirmed ratings on the principal and interest certificates
reflect subordination and liquidity support levels that are
consistent with the outstanding ratings. We affirmed our 'AAA
(sf)' rating on the class X interest-only (IO) certificate based
on our current criteria," S&P said.
"Our analysis included a review of the credit characteristics
of the remaining assets in the pool. Using servicer-provided
financial information, we calculated an adjusted debt service
coverage (DSC) of 1.27x and a loan-to-value (LTV) ratio of
120.4%. We further stressed the loans' cash flows under our
'AAA' scenario to yield a weighted average DSC of 0.83x and
an LTV ratio of 163.8%. The implied defaults and loss severity
under the 'AAA' scenario were 90.8% and 43.5%. The DSC and LTV
calculations exclude seven ($185.1 million, 21.0%) of the eight
($223.4 million, 25.3%) specially serviced assets. We separately
estimated losses for these specially serviced assets and included
them in our 'AAA' scenario implied default and loss severity
figures," S&P said.
As of the Nov. 18, 2011 trustee remittance report, the trust
experienced monthly interest shortfalls totaling $464,259.
The current interest shortfalls were primarily related to
appraisal subordinate entitlement reduction (ASER) amounts of
$221,551 associated with three of the specially serviced assets,
nonrecoverable determination of $167,773, special servicing
and workout fees of $49,597, and rate reduction due to loan
modification of $25,018. Interest shortfalls have affected all
classes subordinate to and including class C. "We anticipate that
these shortfalls will continue for the foreseeable future," S&P
said.
Credit Considerations
As of the Nov. 18, 2011, trustee remittance report, eight
assets ($223.4 million, 25.3%) in the pool were with the
special servicer, C-III Asset Management LLC (C-III). The
reported payment status of the specially serviced assets is:
three are real estate owned (REO; $119.7 million, 13.6%),
three are 90-plus-days delinquent ($63.8 million, 7.2%), one
is 30 days delinquent ($1.6 million, 0.2%), and one is current
($38.3 million, 4.3%). Appraisal reduction amounts (ARAs)
totaling $73.0 million are in effect against four of the
specially serviced assets. Details of the four largest
specially serviced assets, all of which are top 10 assets,
are:
The Piers at Caesars asset ($80.5 million, 9.1%), the largest
asset in the pool, consists of a 303,788-sq.-ft. unanchored retail
center in Atlantic City, N.J., along the boardwalk in front of the
Caesars Atlantic City property. The asset has a reported exposure
of $87.1 million. The asset was transferred to the special
servicer on Oct. 15, 2009, due to a shortage of cash flow to cover
debt service payments and became REO on Oct. 28, 2011. C-III
indicated that it has appointed a management company and leasing
broker to manage and lease the property. The most recent reported
DSC and occupancy were 0.87x and 92.8% for the six months ended
June 30, 2009. An ARA of $36.4 million is in effect against the
asset. "We expect a significant loss upon the eventual resolution
of this asset," S&P said.
The Crossroads Town Center loan ($50.8 million, 5.8%) is secured
by a 148,808-sq.-ft. anchored retail center in Las Vegas. The
loan, which has a reported 90-plus-days-delinquent payment status,
was transferred to C-III on Feb. 25, 2011, due to imminent
default. According to C-III, the borrower filed for Chapter 11
bankruptcy on Aug. 30, 2011. The loan had a reported DSC of
1.09x for year-end 2009 and a reported occupancy of 98.6% as of
October 2011. "We expect a significant loss upon the eventual
resolution of this loan," S&P said.
The Tower 17 loan ($38.3 million, 4.3%) is secured by a 231,598-
sq.-ft., 17-story class A office building and a five-story parking
garage in Irvine, Calif. The loan, which has a reported current
payment status, was transferred to C-III on April 20, 2011, due
to imminent default. According to the special servicer, a loan
modification is currently under review. The modification terms
under review include, but not limited to, extending the loan's
maturity to July 11, 2017, from July 11, 2012, and providing a
4.0% pay rate and 6.0% accrual interest rate. The reported DSC
and occupancy were 0.89x and 56.9% for year-end 2010.
The Comfort Inn & Suites - Sea World asset ($29.7 million, 3.4%)
is a 216-room, two-story limited service hotel in San Diego,
Calif. The asset was transferred to the special servicer on
Dec. 8, 2009, due to payment default and became REO on Nov. 5,
2010. The total reported exposure on the asset was $32.1 million.
C-III indicated that an updated appraisal and broker opinion of
values have been ordered and is currently exploring liquidation
strategies. The most recent reported DSC and occupancy were 0.77x
and 74.7% for the trailing-12-months ended June 30, 2009. An ARA
of $26.1 million is in effect against the asset. "We expect a
significant loss upon the eventual resolution of this asset," S&P
said.
"The four remaining specially serviced assets have individual
balances that represent less than 1.1% of the trust balance. ARAs
totaling $10.5 million are in effect against two of these assets.
We estimated losses for the four assets arriving at a weighted-
average loss severity of 45.2%," S&P said.
Transaction Summary
As of the Nov. 18, 2011 trustee remittance report, the collateral
pool balance was $883.6 million, which is 85.0% of the balance at
issuance. The pool consists of 70 loans and three REO assets, down
from 82 loans at issuance. The master servicer, Wells Fargo Bank
N.A., provided financial information for 85.4% of the loans in the
pool: 11.2% of which was partial-year 2011 data, 58.6% of which
was partial- or full-year 2010 data, and the remainder was full-
year 2009 data.
"We calculated a weighted average DSC of 1.28x for the loans in
the pool based on the servicer-reported figures. Our adjusted DSC
and LTV ratio were 1.27x and 120.4%. Our adjusted DSC and LTV
figures exclude seven ($185.1 million, 21.0%) of the eight
($223.4 million, 25.3%) specially serviced assets. We separately
estimated losses for the specially serviced assets and included
them in our 'AAA' scenario implied default and loss severity
figures. The transaction has experienced $10.1 million in
principal losses from four assets to date. Sixteen loans
($117.4 million, 13.3%) in the pool are on the master servicer's
watchlist. Our analysis also considered 15 ($182.2 million,
20.6%) loans in the pool that have a reported DSC of less than
1.10x, six of which ($71.5 million, 8.1%) have a reported DSC
below 1.00x," S&P said.
Summary of Top 10 Assets
"The top 10 assets have an aggregate outstanding balance of
$474.2 million (53.7%). Using servicer-reported numbers and
excluding three of the top 10 specially serviced assets
($161.0 million, 18.3%), we calculated a weighted average DSC
of 1.27x for seven of the top 10 assets. Four of the top 10
assets ($199.3 million, 22.6%) are with the special servicer.
Our adjusted DSC and LTV ratio for seven of the top 10 assets
were 1.18x and 131.6%," S&P said.
"We stressed the collateral in the pool according to our current
criteria. The resultant credit enhancement levels are consistent
with our lowered and affirmed ratings," S&P said.
Standard & Poor's 17g-7 Disclosure Report
SEC Rule 17g-7 requires an NRSRO, for any report accompanying
a credit rating relating to an asset-backed security as defined
in the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and
a description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at
http://standardandpoorsdisclosure-17g7.com
Ratings Lowered
Morgan Stanley Capital I Trust 2007-HQ13
Commercial mortgage pass-through certificates
Rating
Class To From Credit enhancement (%)
A-J CCC (sf) BB (sf) 14.15
B CCC- (sf) BB- (sf) 12.09
C D (sf) CCC+ (sf) 10.77
Ratings Affirmed
Morgan Stanley Capital I Trust 2007-HQ13
Commercial mortgage pass-through certificates
Class Rating Credit enhancement (%)
A-1 AAA (sf) 34.15
A-2 AAA (sf) 34.15
A-3 A+ (sf) 34.15
A-1A A+ (sf) 34.15
A-M BBB- (sf) 22.39
X AAA (sf) N/A
N/A -- Not applicable.
NEWCASTLE CDO: Fitch Affirms Junk Rating on Three Note Classes
--------------------------------------------------------------
Fitch Ratings has upgraded four and affirmed four classes issued
by Newcastle CDO IV, Ltd./Corp. (Newcastle IV). The rating
actions are a result of de-leveraging of the capital structure.
Since the last rating action in January 2011, approximately
11.2% of the collateral has been downgraded while 12% has been
upgraded. Currently, 46.7% of the portfolio has a Fitch derived
rating below investment grade and 12.1% has a rating in the 'CCC'
category and below. Additionally, the class I notes have received
$108.6 million in paydowns since the last rating action.
This transaction was analyzed under the framework described in the
report 'Global Rating Criteria for Structured Finance CDOs' using
the Portfolio Credit Model (PCM) 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 CDOs'. Fitch also analyzed the
structure's sensitivity to the assets that are distressed,
experiencing interest shortfalls, and those with near-term
maturities.
The transaction has benefited from the sale of distressed
collateral at higher recoveries than modeled at last rating
action. The class II and III notes have been upgraded and the
class I notes assigned a positive outlook. The breakeven rates in
Fitch's cash flow model for the class II and III notes are
generally consistent with the ratings assigned below. The cash
flow model passing rates for the class I notes are higher than the
class' current rating; however, this is offset by the
concentration risk on the underlying portfolio.
For the class IV and V notes, Fitch analyzed each class'
sensitivity to the default of the distressed assets ('CCC' and
below). Given the high probability of default of the underlying
assets and the expected limited recovery prospects upon default,
the class IV and V notes have been affirmed at 'Csf', indicating
that default is inevitable. The class V notes are currently
receiving interest paid in kind (PIK) whereby the principal amount
of the notes is written up by the amount of interest due.
The Positive Outlook on the class I notes is primarily driven by
the significant cushion in the modeling results, which serve to
mitigate potential further deterioration in the portfolio. Fitch
does not assign outlooks to classes rated 'CCC' and below.
Newcastle IV is a collateralized debt obligation (CDO), which
closed March 30, 2004. The portfolio is composed of 45.3%
commercial mortgage-backed securities (CMBS); 25.1% commercial
real estate loans (CREL), including single borrower 'rake' classes
of CMBS; 20.2% real estate investment trust securities (REIT);
8.4% residential mortgage-backed securities (RMBS); and 1% asset
backed securities (ABS).
Fitch has taken these actions as indicated below:
-- $144,706,780 class I notes affirmed at 'Bsf'; Outlook to
Positive from Negative;
-- $13,162,059 class II-FL notes upgraded to 'Bsf' from 'CCCsf';
Outlook Stable
-- $7,250,000 class II-FX notes upgraded to 'Bsf' from 'CCCsf';
Outlook Stable
-- $7,500,000 class III-FL notes upgraded to 'CCCsf' from
'CCsf';
-- $12,085,000 class III-FX notes upgraded to 'CCCsf' from
'CCsf';
-- $8,325,213 class IV-FL notes affirmed at 'Csf';
-- $9,890,857 class IV-FX notes affirmed at 'Csf';
-- $16,375,418 class V-FX notes affirmed at 'Csf'.
SALT VERDE: S&P Keeps 'B' Rating on Subordinated Bonds
------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on
10 natural gas prepay transactions. The rating actions follow
the Nov. 29, 2011, downgrade of various banks that act as
counterparties in the transactions. According to the transaction
documents, the ratings on these transactions are weak-linked to
the ratings of the counterparties (for additional information
on the bank rating actions, see "Standard & Poor's Applies Its
Revised Bank Criteria To 37 Of The Largest Rated Banks And Certain
Subsidiaries," Nov. 29, 2011).
"In assessing the impact of the bank downgrades on our natural gas
prepay transaction ratings, we applied our current counterparty
criteria (see 'Counterparty And Supporting Obligations Methodology
And Assumptions,' published on Dec. 6, 2010, and 'Counterparty And
Supporting Obligations Update,' published on Jan. 13, 2011)," S&P
said.
The Affected Transactions And Their Weak-Links
The rating on Long Beach Bond Finance Authority (Gas Prepay)
(A-/Negative) is linked to the rating and outlook of Merrill
Lynch & Co. Inc., which guarantees the obligations of Merrill
Lynch Commodities Inc. (MLCI; unrated) and Merrill Lynch
Capital Services Inc. (MLCS; unrated);
The rating on M-S-R Energy Authority (Gas Prepay) (A-
/Negative) is linked to the rating and outlook of Citigroup,
which guarantees the obligations of Citigroup Energy Inc.
(CEI), M-S-R Energy Authority's gas supplier;
The rating on the Main Street Natural Gas Inc. (Gas Prepay)
2006A (A/Stable) bonds is linked to the rating and outlook of
JPMorgan Chase & Co., the guarantor of the gas supplier. The
rating on the 2006B and 2007A (A-/Negative/--) bonds are
linked to the rating and outlook of Merrill Lynch & Co. Inc.,
the guarantor of the commodity supplier;
The rating on Northern California Gas Authority No. 1 (Gas
Prepay) (A-/Negative) is linked to the rating and outlook of
Morgan Stanley, which guarantees the obligations of Morgan
Stanley Capital Group Inc. (MSCG; not rated), NCGA's gas
supplier and interest rate swap counterparty;
The rating on Public Authority for Colorado Energy (Gas
Prepay) (A-/Negative) is linked to the rating and outlook of
Merrill Lynch & Co. Inc., which guarantees the obligations of
Merrill Lynch Commodities Inc. (MLCI; not rated), the
commodity supplier;
The rating on Roseville Natural Gas Financing Authority (Gas
Prepay) (A-/Negative) is linked to the rating and outlook of
Merrill Lynch & Co. Inc., which guarantees the obligations of
Merrill Lynch Commodities Inc. (MLCI; unrated)
The rating on SA Energy Acquisition Public Facility Corp. (Gas
Prepay) (A-/Negative) is linked to the rating and outlook of
Goldman Sachs Group Inc., which guarantees the obligations of
J. Aron & Co. (unrated), the gas supplier; and
The rating on the Salt Verde Financial Corp. (Gas Prepay)
senior secured bonds (A-/Negative) is linked to the rating and
outlook of Citigroup, which guarantees the obligations of
Citigroup Energy Inc. (CEI), the gas supplier. The
subordinated bonds are currently rated 'B', are linked to the
rating on MBIA Insurance Corp. (B/Negative/--), and are not
affected by the bank downgrades.
The rating on the Texas Municipal Gas Acquisition and Supply
Corp. I (Gas Prepay) (A-/Negative) is linked to the rating and
outlook of Merrill Lynch & Co. Inc., which guarantees the
obligations of Merrill Lynch Commodities Inc. (MLCI; unrated),
the commodity supplier and the guarantor of the interest
rateswap provider.
The rating on the Texas Municipal Gas Acquisition and Supply
Corp. II (Gas Prepay) (A/Stable) is linked to the rating and
outlook of JPMorgan Chase & Co., which guarantees the
obligations of JP Morgan Venture Energy Corp. (JPMVEC; not
rated), TexGas II's gas supplier.
Unaffected Transactions
The rating on Southern California Public Power Authority (Gas
Prepay) (BBB/Developing) is not affected by the downgrade of
Goldman Sachs Group Inc. (The) because the transaction rating
is lower than the rating of Goldman Sachs. The bonds are
linked to the rating and outlook of National Public Finance
Guarantee Corp.
The rating on Tennessee Energy Acquisition Corp. (Gas Prepay)
series 2006A (B/Negative) is not affected by the downgrade of
Goldman Sachs Group Inc. (The), Royal Bank of Canada,
Citigroup Inc., or Wells Fargo. The bond ratings are linked to
the rating and outlook of MBIA Insurance Corp., the guarantor
of the guaranteed investment contract provider.
The rating on Tennessee Energy Acquisition Corp. (Gas Prepay)
series 2006C (BBB/Developing) is not affected by the
downgrades of Goldman Sachs Group Inc. (The) or Royal Bank of
Canada. The bond ratings are linked to the rating and outlook
of National Public Finance Guarantee Corp., the surety bond
provider.
Standard & Poor's will publish individual reports on the natural
gas prepay transactions identified, as well as the ratings by debt
type whether senior or subordinated. The reports will be available
at www.standardandpoors.com and on RatingsDirect on the Global
Credit Portal. Ratings on specific issues will be available on
RatingsDirect on the Global Credit Portal and
www.standardandpoors.com.
Rating List
Issuer
Long Beach Bond Finance Authority (Gas Prepay)
Series To From
2007A, 2007B (A-/Negative) (A/Negative)
M-S-R Energy Authority (Gas Prepay)
Series To From
2009A, 2009B, 2009C (A-/Negative) (A/Negative)
Main Street Natural Gas Inc. (Gas Prepay)
Series To From
2006B, 2007A (A-/Negative) (A/Negative)
2006A (A/Stable) (A+/Stable)
Northern California Gas Authority No. 1 (Gas Prepay)
Series To From
2007B (A-/Negative) (A/Negative)
Public Authority for Colorado Energy (Gas Prepay)
Series To From
Bonds due 2008 (A-/Negative) (A/Negative)
Roseville Natural Gas Financing Authority (Gas Prepay)
Series To From
2007A (A-/Negative) (A/Negative)
SA Energy Acquisition Public Facility Corp. (Gas Prepay)
Series To From
2007A (A-/Negative) (A/Negative)
Salt Verde Financial Corp. (Gas Prepay)
Series To From
Senior Secured Bonds (A-/Negative) (A/Negative)
Texas Municipal Gas Acquisition and Supply Corp. I (Gas Prepay)
Series To From
2006A, 2006B, 2008D (A-/Negative) (A/Negative)
Texas Municipal Gas Acquisition and Supply Corp. II (Gas Prepay)
Series To From
2007A, 2007B (A/Stable) (A+/Stable)
SARGAS CLO: Fitch Raises Rating on Class E Notes to 'BBsf'
----------------------------------------------------------
Fitch Ratings has upgraded three classes of notes issued by Sargas
CLO II, Ltd./LLC (Sargas CLO II) as follows:
-- $5,638,660 class C notes to 'AAAsf' from 'Asf'; Outlook
Stable;
-- $16,113,528 class D notes to 'AAsf' from 'BBsf'; Outlook
Stable;
-- $19,199,097 class E notes to 'BBsf' from 'Bsf'; Outlook to
Stable from Negative.
The upgrades reflect the significant amortization that has
occurred since Fitch's last rating action in conjunction with the
relatively stable performance of the underlying loan portfolio.
Since Fitch's last rating action in December 2010, the capital
structure has been amortized by over $93 million, including the
payment-in-full of the class A-2 and class B notes. The class C
notes are now the senior-most class and have been repaid about
83.4% of their initial par balance to date. The continued
amortization of the liabilities has led to increased credit
enhancement levels for all remaining classes of notes.
Additionally, the underlying portfolio has not experienced any new
defaults since Fitch's last rating action and the average credit
quality of the performing assets has remained fairly stable over
this time, though still in the 'B-/CCC+' range.
Fitch notes that the rapid pace of loan repayments in the
portfolio has inevitably led to increased obligor concentration,
as only 12 performing obligors remain. Although exposure to 'CCC'
assets is relatively high at 47% of the performing portfolio, this
actually represents an improvement from a level of 53.6% at the
last rating action.
Fitch believes that important mitigants to the high obligor
concentration at this time are the degree of available
subordination for each tranche, in addition to the fact that all
remaining performing loans are senior secured and would therefore
be expected to generate relatively high recoveries in the event of
a default. Even under severely stressed scenarios of high
defaults and well below-average recoveries, Fitch would expect the
class C and class D notes to be repaid. The class E notes will
rely on a degree of continued performance in the underlying
portfolio, but Fitch believes their credit quality has improved
due to the increase in relative subordination available. In
addition to the upgrade, Fitch has revised the Outlook on the
class E notes to Stable.
Fitch currently considers the remaining portfolio to consist of
approximately $62.6 million of senior secured loans from 12
obligors (the performing portfolio) and three defaulted loans
totaling $6.9 million of par from two obligors. Additionally,
the asset manager has informed Fitch of the sale at par of a
$3.6 million loan after the record date for the Oct. 31, 2011
trustee report, which is the latest report available to Fitch.
These sales proceeds should be available for distribution at the
next payment date in January 2012.
This review was conducted under the framework described in the
report 'Global Rating Criteria for Corporate CDOs' using the
Portfolio Credit Model (PCM) for projecting future default and
recovery levels for the underlying portfolio. These default and
recovery levels were then utilized in Fitch's cash flow model
under various default timing and interest rate stress scenarios,
as described in the report 'Global Criteria for Cash Flow Analysis
in CDOs'. While Fitch's cash flow analysis indicates higher
passing rating levels for the class D and class E notes, the
extent of the upgrades captures the improvements in credit
enhancement while accounting for the profile of the remaining
portfolio.
Sargas CLO II is a collateralized debt obligation (CDO) that
closed on Aug. 16, 2006 and was originally named De Meer Middle
Market CLO 2006-1 Ltd./LLC. In December 2010 management duties of
the transaction were purchased by Fortress Investment Group from
Pangaea Asset Management, the prior manager. The transaction's
substitution period ended in March 2009.
SOUTH COAST: Moody's Lowers Rating of Class A-2 Notes to 'B1'
-------------------------------------------------------------
Moody's Investors Service has downgraded the rating of one class
of notes issued by South Coast Funding IV Ltd. The class of notes
affected by the rating action is:
US$120,000,000 Class A-2 Second Priority Senior Secured Floating
Rate Notes Due 2038 (current balance: 119,728,018), Downgraded to
B1 (sf); previously on March 10, 2011 Upgraded to Ba1 (sf).
RATINGS RATIONALE
According to Moody's, the rating downgrade is the result of
deterioration in the credit quality of the underlying portfolio.
Such credit deterioration is observed through numerous factors,
including an increase in the dollar amount of defaulted securities
and an increase in the Moody's WARF. Since the last rating action
in March 2011, defaulted securities, as reported by the trustee,
have increased from $35.9 million in March 2011 to $56.3 million
in October 2011. Additionally, the Trustee reported a WARF of 1110
in March 2011 compared to a WARF of 3000 in October 2011. In
select cases, the current analysis shows asset specific WARF
deterioration resulting in ratings below the stresses modeled
during the previous review, which took place in March 2011.
South Coast Funding IV Ltd. is a collateralized debt obligation
backed primarily by a portfolio of RMBS, CMBS and Home Equity
Loans originated in 2003 and 2004.
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Moody's applied the Monte Carlo simulation framework within
CDOROMv2.8 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 the following:
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 (EL) 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 rating action factors in a number of sensitivity analyses
and stress scenarios, discussed below. Results are 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 Caa Assets notched up by 2 rating notches:
Class A-2: +2
Moody's Caa Assets notched down by 2 rating notches:
Class A-2: -1
SPGS SPC: S&P Lowers 2 Classes of Notes Ratings to 'D' on Losses
----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on the
class K and L notes from SPGS SPC, acting for the account of MSC
2007-SRR3 Segregated Portfolio, to 'D (sf)' from 'CCC-(sf)'.
The downgrades follow a number of write-downs in the underlying
reference portfolio, causing the class K notes to incur a partial
principal loss and the class L notes to incur a complete principal
loss.
Standard & Poor's 17g-7 Disclosure Report
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Report
included in this credit rating report is available at:
http://standardandpoorsdisclosure-17g7.com
Ratings Lowered
SPGS SPC, acting for the account of MSC 2007-SRR3 Segregated
Portfolio
Rating
Class To From
K D (sf) CCC- (sf)
L D (sf) CCC- (sf)
STRUCTURED ASSET: S&P Lowers Rating on Class B-2 to 'CC'
--------------------------------------------------------
Standard & Poor's Ratings Services corrected its rating on class
2-A2 from Structured Asset Securities Corp. 2003-6A by reinstating
it to 'AAA (sf)'. "In addition, we lowered our ratings on two
other classes and affirmed our ratings on six other classes
from the same transaction," S&P said.
"On Dec. 9, 2009, we incorrectly withdrew our rating on class 2-
A2. According to our interest-only criteria, the rating should
have remained at 'AAA (sf)'," S&P said.
"The downgrades reflect our view that the projected credit
enhancement will be insufficient to cover projected losses at the
previous rating levels. While the projected losses for this pool
of mortgage loans are low, the downgrades reflect the erosion of
credit enhancement due to the pay-down of the subordinate
classes," S&P said.
"The affirmations reflect our view that the projected credit
enhancement will be sufficient to cover projected losses at these
rating levels," S&P said.
This the pool information for Structured Asset Securities
Corporation 2003-6A as of the Nov., 2011 remittance period:
Original Lifetime
Balance* Pool Loss Total Severe
(Mil $) Factor* Projection* Delinq.* Delinq.*
703 7.93% 0.53% 13.09% 6.65%
*Original balance represents the original pool balance; pool
factor represents a percentage of the original pool balance
remaining; lifetime loss projection is a percentage of the
original pool balance; and total delinquencies and severe
delinquencies are percentages of the current pool balance.
"To assess the creditworthiness of each class, we reviewed the
ability of the credit enhancement of each class to withstand its
allocation of projected losses in the stress scenario associated
with its rating. In order to maintain a 'B' rating on a class, we
assessed whether, in our view, a class could absorb the additional
base-case loss assumptions we used in our analysis. In order to
maintain a rating higher than 'B', we assessed whether the class
could withstand losses exceeding the remaining base-case
assumption at a percentage specific to each rating category, up to
235% for a 'AAA' rating. For example, in general, we would assess
whether a class could withstand approximately 127% of our
remaining base-case loss assumptions to maintain a 'BB' rating,
while we would assess whether a different class could withstand
approximately 154% of our remaining base-case loss assumptions to
maintain a 'BBB' rating. Each class with an affirmed 'AAA' rating
can, in our view, withstand approximately 235% of our remaining
base-case loss assumptions under our analysis," S&P said.
Subordination provides credit support for this transaction. The
underlying collateral for this deal consists of prime jumbo
mortgage loans secured by first liens on one- to four-family
residential properties.
Rating Corrected
Structured Asset Securities Corp. 2003-6A
Series 2003-6A
Rating
Class CUSIP Current 12/9/2009 Pre-12/9/2009
2-A2 86359AMS9 AAA (sf) NR AAA (sf)
Rating Actions
Structured Asset Securities Corp. 2003-6A
Series 2003-6A
Rating
Class CUSIP To From
B-1 86359AMT6 BB (sf) BBB (sf)
B-2 86359AM23 CC (sf) B- (sf)
Ratings Affirmed
Structured Asset Securities Corp. 2003-6A
Series 2003-6A
Class CUSIP Rating
1-A1 86359AMP5 AAA (sf)
2-A1 86359AMR1 AAA (sf)
3-A1 86359AMT7 AAA (sf)
3-A2 86359AMU4 AAA (sf)
4-A1 86359AMW0 AAA (sf)
B-3 86359ANA7 CC (sf)
TENNESSEE ENERGY: Moody's Reviews 'Ba3' Bond Rating For Upgrade
---------------------------------------------------------------
Moody's Investors Service places on review for upgrade the Ba3
rating of the Tennessee Energy Acquisition Corporation Gas Project
Revenue Bonds, Series 2006A.
The current rating on the Bonds (Ba3) is based on the rating of
MBIA Inc., as the lowest rated entity material to the rating on
the Bonds.
Moody's has received and reviewed proposed amendments to the
structure of the transaction which would provide credit support
for the project participants, MBIA Inc. and DEPFA BANK plc, as the
investment agreement providers for the senior subaccount and
reserve subaccount of the debt service reserve account. The
support is in the form of a receivables purchase agreement among
the trustee, J. Aron & Company and Tennessee Energy Acquisition
Company. Pursuant to the receivables purchase agreement the
trustee may sell to the Gas Supplier (i) receivables consisting of
the net amount owed by a specified project participant to TEAC
under the gas supply contract between TEAC and such project
participant if amounts in the senior subaccount of the debt
service reserve account are insufficient or unavailable and (ii) a
DEPFA receivable participation interest consisting of a beneficial
right to participate in and receive payments with respect to all
or a portion of the net amount owed by DEPFA to the trustee in
connection with an extraordinary redemption of the Bonds or during
the month prior to the final maturity of the Bonds. The existing
guarantee provided by The Goldman Sachs Group, Inc., would be
amended to include the Gas Supplier's payment obligations under
the receivables purchase agreement.
The proposed amendments also include an amendment to the Gas
Purchase Agreement to eliminate a Seller Default (as defined in
the gas purchase agreement), which provides that the failure by
Goldman Sachs to maintain a credit rating of "Baa3" or higher by
Moody's, or otherwise post credit support in response to a demand
by TEAC, is a Seller Default triggering an extraordinary
redemption of the Bonds. Conditioned on (i) receipt of consent
from a majority of Bondholders; (ii) execution of the receivables
purchase agreement and (iii) execution of the proposed amendments,
the ratings of DEPFA (Baa3) and MBIA (Ba3) would no longer be
considered as material to Moody's rating on the Bonds. As a
result, the rating on the Bonds would be upgraded to A3, based on
the rating of Citigroup Financial Products Inc., as the lowest
rated entity material to the rating on the Bonds.
PRINCIPAL METHODOLOGY USED
For further information on Moody's approach to the incorporation
of repo provider ratings into ratings on gas prepayment bonds, see
Moody's Methodology Update: "Ratings that Rely on Guaranteed
Investment Contracts" dated December 2008.
The principal methodology used in this rating was Gas Prepayment
Bonds published in December 2008.
TRICADIA CDO: Moody's Raises Rating of US$35-Mil. Notes to 'Ba2'
----------------------------------------------------------------
Moody's Investors Service has upgraded the ratings of 6 classes of
notes issued by Tricadia CDO 2003-1, Ltd. The classes of notes
affected by the rating actions are:
US$76,500,000 Class A-1LA Floating Rate Notes Due February 2016
(current balance: 23,590,185), Upgraded to Aa1 (sf); previously on
August 12, 2011 Upgraded to Aa3 (sf) and Remained On Review for
Possible Upgrade;
US$8,500,000 Class A-1LB Floating Rate Notes Due February 2016,
Upgraded to A3 (sf); previously on August 12, 2011 Upgraded to
Baa2 (sf) and Remained On Review for Possible Upgrade;
US$85,000,000 Class A-2L Floating Rate Notes Due February 2016
(current balance: 32,090,185), Upgraded to A1 (sf); previously on
August 12, 2011 Upgraded to A3 (sf) and Remained On Review for
Possible Upgrade;
US$35,000,000 Class A-3L Floating Rate Notes Due February 2016,
Upgraded to Ba2 (sf); previously on August 12, 2011 Upgraded to
Ba3 (sf) and Remained On Review for Possible Upgrade;
US$12,000,000 Class A-4L Floating Rate Notes Due February 2016,
Upgraded to B2 (sf); previously on August 12, 2011 Upgraded to B3
(sf) and Remained On Review for Possible Upgrade;
US$20,000,000 Class B-1L Floating Rate Notes Due February 2016
(current balance: 15,195,189) Upgraded to Caa1 (sf); previously on
August 12, 2011 Upgraded to Caa2 (sf) and Remained On Review for
Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes result
primarily from the improvement in the credit quality of the
portfolio.
As of the latest trustee report in October 2011, the Sr. Class A,
Class A, and Class B overcollateralization ratios improved and are
reported at 136.2%, 121.5%, and 106.91% versus August 2011 levels
of 130.46%, 118.26%, and 102.48%, respectively. Currently all the
OC and IC ratios are passing their test levels.
The rating actions on the notes also reflect CLO tranche upgrades
that have taken place within the last six months. Since Moody's
June 22nd announcement that nearly all CLO tranches currently
rated Aa1 and below were placed on review for possible upgrade,
63.33% of the collateral had been upgraded, 20.6% of which took
place following the previous rating action on the Notes in August.
Tricadia CDO 2003-1 is a collateralized debt obligation backed
primarily by a portfolio of CLOs.
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Moody's applied the Monte Carlo simulation framework within
CDOROMv2.8 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 the following:
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 (EL) 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 rating action factors in a number of sensitivity analyses
and stress scenarios, discussed below. Results are 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 Performing Assets notched up by 1 rating notch:
Class A1La: 0
Class A1Lb: +2
Class A2L: +1
Class A3L: +2
Class A4L: +2
Class B1L: +2
Moody's Performing Assets notched down by 1 rating notch:
Class A1La: -2
Class A1Lb: -3
Class A2L: -3
Class A3L: -2
Class A4L: -2
Class B1L: -1
TRUP CDO: Moody's Lowers Rating of $67 Million Notes to 'Ba3'
-------------------------------------------------------------
Moody's Investors Service has upgraded the rating on these notes
issued by Preferred Term Securities X, Ltd.
US$287,000,000 Floating Rate Class A-1 Senior Notes Due 2033
(current balance of $174,735,513.34), Upgraded to Baa1 (sf);
previously on June 24, 2010 Downgraded to Baa3 (sf);
US$67,000,000 Floating Rate Class A-2 Senior Notes Due 2033,
Upgraded to Ba1 (sf); previously on June 24, 2010 Downgraded to
Ba3 (sf);
US$2,000,000 Fixed/Floating Rate Class A-3 Senior Notes Due 2033,
Upgraded to Ba1 (sf); previously on June 24, 2010 Downgraded to
Ba3 (sf).
RATINGS RATIONALE
According to Moody's, the rating upgrade actions taken are
primarily the result of the improvement in the credit quality of
the underlying portfolio and deleveraging of the Class A-1 Notes.
The improvement in credit quality of the portfolio is indicated by
a weighted average rating factor (WARF) decrease to 893, from
1446, as of the last rating action date. The deleveraging is due
to significant pay down of the Class A-1 Notes, which have
received about $49.8 million since the last rating action. The
$49.8 million of pay down came from a combination of excess
interest proceeds and redemptions of underlying assets.
Preferred Term Securities X, Ltd, issued on June 26, 2003, is a
collateralized debt obligation backed by a portfolio of bank trust
preferred securities (the 'TRUP CDO'). On June 24, 2010, the last
rating action date, Moody's downgraded three classes of notes as a
result of the deterioration in the credit quality of the
transaction's underlying portfolio.
In Moody's opinion, the banking sector outlook continues to
remain negative although there have been some recent signs of
stabilization. The pace of bank failures in 2011 has declined
compared to 2009 and 2010, and some of the previously deferring
banks have resumed interest payments on their trust preferred
securities.
The portfolio of this CDO is mainly composed of trust preferred
securities issued by small to medium sized U.S. community banks
that are generally not publicly rated by Moody's. To evaluate
their credit quality, Moody's uses RiskCalc, an econometric model
developed by Moody's KMV, to derive credit scores for these non-
publicly rated bank trust preferred securities. Moody's evaluation
of the credit risk for a majority of bank obligors in the pool
relies on FDIC financial data received as of Q2-2011. Moody's also
evaluates the sensitivity of the rated transactions to the
volatility of the credit estimates, as described in Moody's Rating
Implementation Guidance "Updated Approach to the Usage of Credit
Estimates in Rated Transactions," October 2009.
Moody's performed a number of sensitivity analyses of the results
to some of the key factors driving the ratings. The sensitivity of
the model results to changes in the WARF (representing a slight
improvement and a slight deterioration in the credit quality of
the collateral pool) was examined. If WARF is increased by 142
points from the base case of 893, the model results in an expected
loss that is one notch worse than the result of the base case for
the Class A-1 Notes. Similarly, if the WARF is decreased by 123
points, expected losses are one notch better than the base case
results. Moody's also took into consideration, both quantitatively
and qualitatively, the possibility that some of the deferring
banks in the portfolio may resume interest payments on their trust
preferred securities.
In addition to the quantitative factors that are explicitly
modeled, qualitative factors are part of rating committee
considerations. Moody's considers as well the structural
protections in the transaction, the risk of triggering an Event of
Default, the recent deal performance in the current market
conditions, 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.
The principal methodology used in this rating was "Moody's
Approach to Rating TRUP CDOs" published in May 2011.
Due to the impact of revised and updated key assumptions
referenced in these rating methodologies, key model inputs used by
Moody's in its analysis, such as par, weighted average rating
factor, Moody's Asset Correlation, and weighted average recovery
rate, may be different from the trustee's reported numbers. The
transaction's portfolio was modeled, according to Moody's rating
approach, using CDOROM v.2.8 to develop the default distribution
from which the Moody's Asset Correlation parameter was obtained.
This parameter was then used as an input in a cash flow model
using CDOEdge. CDOROM v.2.8 is available on moodys.com under
Products and Solutions -- Analytical models, upon return of a
signed free license agreement.
UBS-CITIGROUP COMMERCIAL: DBRS Assigns Class F Rating at 'BB'
-------------------------------------------------------------
DBRS has assigned provisional ratings to classes of Commercial
Mortgage Pass-Through Certificates, Series 2011-C1 (the
Certificates) to be issued by UBS-Citigroup Commercial Mortgage
Trust, Series 2011-C1. The trends are Stable.
-- Class A-1 at AAA (sf)
-- Class A-2 at AAA (sf)
-- Class A-3 at AAA (sf)
-- Class A-AB at AAA (sf)
-- Class A-S at AAA (sf)
-- Class X-A at AAA (sf)
-- Class X-B at AAA (sf)
-- Class B at AA (sf)
-- Class C at "A" (sf)
-- Class D at BBB (high) (sf)
-- Class E at BBB (low) (sf)
-- Class F at BB (sf)
-- Class G at B (sf)
The collateral consists of 32 fixed-rate loans secured by 38
multifamily, mobile home parks and commercial properties. The
portfolio has a balance of $673,920,599. The pool consists of
moderate leverage financing, with a DBRS weighted-average term
debt service coverage ratio and debt yield of 1.35 times and
10.0%, respectively. Of the collateral, 87.5% is located in
suburban or urban locations and benefits from relatively diverse
economies. Underwriting was generally prudent, and the average
DBRS net cash flow variance was -5.6%.
The pool suffers from concentrations of both number of loans and
loan size among the top ten. The 32-loan pool is approximately
half the size of the average conduit deal brought to market in
2011, and the top ten loans represent 63.2% of the pool by cutoff
date balance. DBRS has accounted for these concentration concerns
by applying a pool-wide upward adjustment of probability of
default at each rating category of approximately 10%. The deal
is further challenged by the concentration of hotel loans,
representing 15.4% of the pool balance, including three of the
largest 15 loans in the pool. These riskier property types are
mitigated by applying hotel-specific cash flow volatiles, which
assume between a 31% and 40% cash flow decline for a BBB stress
and a 67% to 85% cash flow decline for a AAA stress.
The ratings assigned to the Certificates by DBRS are based
exclusively on the credit provided by the transaction structure
and underlying trust assets. All classes will be subject to
ongoing surveillance, upgrades or downgrades by DBRS after the
date of issuance.
Finalization of ratings is contingent upon receipt of final
documents conforming to information already received.
UBSC 2011-C1: Moody's Assigns (P)Ba2 Rating to Cl. F Notes
----------------------------------------------------------
Moody's Investors Service has assigned provisional ratings to
thirteen classes of CMBS securities, issued by UBS-Citigroup
Commercial Mortgage Trust Commercial Mortgage Pass-Through
Certificates 2011-C1.
Cl. A-1, Assigned (P)Aaa (sf)
Cl. A-2, Assigned (P)Aaa (sf)
Cl. A-3, Assigned (P)Aaa (sf)
Cl. A-AB, Assigned (P)Aaa (sf)
Cl. X-A, Assigned (P)Aaa (sf)
Cl. X-B, Assigned (P)Aaa (sf)
Cl. A-S, Assigned (P)Aaa (sf)
Cl. B, Assigned (P)Aa2 (sf)
Cl. C, Assigned (P)A2 (sf)
Cl. D, Assigned (P)Baa1 (sf)
Cl. E, Assigned (P)Baa3 (sf)
Cl. F, Assigned (P)Ba2 (sf)
Cl. G, Assigned (P)B2 (sf)
RATINGS RATIONALE
The Certificates are collateralized by 32 fixed rate loans secured
by 38 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 1.34X is greater than the 2007
conduit/fusion transaction average of 1.31X. The Moody's Stressed
DSCR of 1.07X is greater than the 2007 conduit/fusion transaction
average of 0.92X.
Moody's Trust LTV ratio of 98.2% is lower than the 2007
conduit/fusion transaction average of 110.6%. Moody's Total LTV
ratio, (inclusive of subordinated debt) of 101.0% is also
considered when analyzing various stress scenarios for the rated
debt.
Moody's approach to rating the transaction incorporated a blend of
both Moody's conduit and Moody's large loan rating methodologies.
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
(includes cross collateralized and cross defaulted loans)
Herfindahl Index is 18.3. The transaction's loan level diversity
is lower than the band of Herfindahl scores found in most multi-
borrower transactions issued since 2009. With respect to property
level diversity, the pool's property level Herfindahl Index is
19.0. The transaction's property diversity profile is lower than
the indices calculated in most multi-borrower transactions issued
since 2009.
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 2.2, which is better
than the indices calculated in most multi-borrower transactions
since 2009.
The principal methodology used in this rating was "Moody's
Approach to Rating U.S. CMBS Conduit Transactions" published in
September 2000.
On November 22, 2011, Moody's released a Request for Comment, in
which the rating agency has requested market feedback on potential
changes to its rating methodology for interest-only securities. If
the revised methodology is implemented as proposed, the ratings on
UBSC 2011-C1 Classes X-A and X-B may be negatively affected.
Please refer to Moody's Request for Comment, titled "Proposal
Changing the Global Rating Methodology for Structured Finance
Interest-Only Securities," for further details regarding the
implications of the proposed methodology changes on Moody's
ratings.
Other methodologies and factors that may have been considered in
the process of rating this issuer can also be found on Moody's
website.
Moody's analysis employs the excel-based CMBS Conduit Model v2.60
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%, 14%, or 22%, the model-indicated rating for the currently
rated junior Aaa class would be Aa1, Aa2, A1, respectively.
Parameter Sensitivities are not intended to measure how the rating
of the security might migrate over time; rather they are designed
to provide a quantitative calculation of how the initial rating
might change if key input parameters used in the initial rating
process differed. The analysis assumes that the deal has not aged.
Parameter Sensitivities only reflect the ratings impact of each
scenario from a quantitative/model-indicated standpoint.
Qualitative factors are also taken into consideration in the
ratings process, so the actual ratings that would be assigned in
each case could vary from the information presented in the
Parameter Sensitivity analysis.
VALHALLA CLO: Moody's Lowers Rating of Class B Notes to 'Ba3'
-------------------------------------------------------------
Moody's Investors Service has downgraded the ratings of these
notes issued by Valhalla CLO, Ltd.:
US$39,500,000 Class B Floating Rate Deferrable Senior Subordinate
Extendable Notes, Downgraded to Ba3 (sf); previously on June 22,
2011 Ba1 (sf) Placed Under Review for Possible Upgrade;
US$21,000,000 Class C-1 Floating Rate Deferrable Senior
Subordinate Extendable Notes, Downgraded to Caa3 (sf); previously
on June 22, 2011 B3 (sf) Placed Under Review for Possible Upgrade;
US$5,000,000 Class C-2 Fixed Rate Deferrable Senior Subordinate
Extendable Notes, Downgraded to Caa3 (sf); previously on June 22,
2011 B3 (sf) Placed Under Review for Possible Upgrade.
Moody's also confirmed the rating of these notes:
US$56,000,000 Class A-2 Floating Rate Senior Extendable Notes
(current balance of $52,920,650) Confirmed at A3 (sf); previously
on June 22, 2011 A3 (sf) Placed Under Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, these rating actions result primarily from
corrections to the modeling of assumptions as to the treatment of
long-dated assets, amortization of the reinvested assets, and
tracking of the GIC account that were used in Moody's previous
analyses of the transaction. Due to errors in the modeling of
these assumptions, the ratings assigned in the previous rating
action may have been higher than warranted. These errors have been
corrected, and today's rating actions reflect the appropriate
assumptions.
Today's rating actions also reflect consideration of applying
Moody's revised CLO assumptions described in "Moody's Approach to
Rating Collateralized Loan Obligations" published in June 2011.
The primary changes to the modeling assumptions include (1) a
removal of the temporary 30% default probability macro stress
implemented in February 2009 as well as (2) increased BET
liability stress factors and increased recovery rate assumptions.
The actions also considered credit improvement of the underlying
portfolio and an increase in the transaction's
overcollateralization ratios. Moody's notes that the Class A-1
Notes have been paid down in full since the last rating action in
December 2009 due to the diversion of excess interest to delever
the Class A-1 Notes in the event of a Class C
overcollateralization test failure. As a result of the delevering,
the overcollateralization ratios have increased since the last
rating action. Based on the October 2011 trustee report, the Class
A, Class B, and Class C overcollateralization ratios are reported
at 264.9%, 151.7%, and 118.4%, respectively, versus October 2009
levels of 159.8%, 114.8%, and 96.4%, respectively. In addition,
the weighted average rating factor is currently 2528 compared to
2924 in October 2009.
Additionally, Moody's noted that the underlying portfolio
includes a number of investments in securities that mature after
the maturity date of the notes, and that such exposure has grown
as a result of the deal's decision to participate in amend-and-
extend activities. Based on Moody's calculations, as of the
October 2011 trustee report, securities that mature after the
maturity date of the notes make up approximately 11.2% of the
underlying portfolio versus 0.5% in October 2009. The high
percentage of these securities potentially exposes the notes to
market risk in the event of liquidation at the time of the notes'
maturity.
Furthermore, the rating action taken on the Class A-2 Notes
also reflects the additional risk posed to the noteholders due
to the insurance financial strength rating of Financial Security
Assurance Inc., which acts as Guarantor under the Investment
Agreement in the transaction. In its analysis, Moody's added the
Aa3 default risk associated with Financial Security Assurance Inc.
to the expected loss of each class of rated notes, resulting in an
A3 rating for Class A-2 Notes in expected loss terms. The impact
on the Class A-2 Notes was more pronounced due to their higher
rating relative to the ratings of other classes of rated notes.
Due to the impact of revised and updated key assumptions
referenced in "Moody's Approach to Rating Collateralized Loan
Obligations" published in June 2011, 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 reference pool to have a swap notional
balance of $787 million, an eligible investments balance of $139.5
million, defaulted par balance of $47 million, a weighted average
default probability of 17.7% (implying a WARF of 2959), a weighted
average recovery rate upon default of 48.3%, and a diversity score
of 51. The default and recovery properties of the reference 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 reference pool. The average recovery
rate to be realized on future defaults is based primarily on the
seniority of the assets in the reference pool. In each case,
historical and market performance trends and collateral manager
latitude for trading the collateral are also factors.
Valhalla CLO, Ltd., issued in August of 2004, is a synthetic
collateralized loan obligation referencing a portfolio of
primarily senior secured loans.
The principal methodology used in this rating was "Moody's
Approach to Rating Collateralized Loan Obligations" published in
June 2011.
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 June 2011.
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 2013 and
2015 which may create challenges for issuers to refinance. CLO
notes' performance may also be impacted by 1) the manager's
investment strategy and behavior and 2) divergence in legal
interpretation of CLO documentation by different transactional
parties due to embedded ambiguities.
Sources of additional performance uncertainties are:
1) Amortization of the reference pool: The main source of
uncertainty in this transaction is the pace of amortization of the
reference pool from scheduled and unscheduled payments. Delevering
of the notes 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.
WACHOVIA BANK 2006-C26: S&P Cuts Rating on Class E Certs. to 'B-'
-----------------------------------------------------------------
Standard & Poor's Ratings Services lowered its ratings on six
classes of commercial mortgage pass-through certificates from
Wachovia Bank Commercial Mortgage Trust's series 2006-C26, a
U.S. commercial mortgage-backed securities (CMBS) transaction.
"Concurrently, we affirmed our ratings on eight other classes
from the same transaction," S&P said.
"Our rating actions follow our analysis of the transaction
primarily using our U.S. conduit/fusion CMBS criteria. Our
analysis also included a review of the deal structure and the
liquidity available to the trust. The downgrades reflect credit
support erosion that we anticipate will occur upon the eventual
resolution of the 10 ($112.1 million, 7.7%) assets that are with
the special servicer, as well as two loans ($60.1 million, 4.1%)
that we determined to be credit-impaired," S&P said.
"The rating affirmations on the principal and interest
certificates reflect subordination and liquidity support levels
that we consider to be consistent with our outstanding ratings on
these classes. We affirmed our 'AAA (sf)' ratings on the class X-C
and X-P interest-only (IO) certificates based on our current
criteria," S&P said.
"Our analysis included a review of the credit characteristics of
all the remaining loans in the pool. Using servicer-provided
financial information, we calculated an adjusted debt service
coverage (DSC) of 1.29x and a loan-to-value (LTV) ratio of 114.5%.
We further stressed the loans' cash flows under our 'AAA' scenario
to yield a weighted-average DSC of 0.87x and an LTV ratio of
152.2%. The implied defaults and loss severity under the 'AAA'
scenario were 85.5% and 38.6%. The DSC and LTV calculations
exclude the 10 ($112.1 million, 7.7%) assets with the special
servicer and two ($60.1 million, 4.1%) loans that we determined
to be credit-impaired. We separately estimated losses for the
excluded specially serviced and credit-impaired assets and
included them in our 'AAA' scenario implied default and loss
severity figures," S&P said.
Credit Considerations
As of the Nov. 18, 2011 trustee remittance report, 10 assets
($112.1 million, 7.7%) in the pool were with the special
servicer, CWCapital Asset Management LLC (CWCapital). The
reported payment statuses of the specially serviced assets are:
seven are real estate owned (REO; $74.2 million, 5.1%); one is
in foreclosure ($4.0 million, 0.3%); one is 90-plus-days
delinquent ($13.7 million, 0.9%); and one is a matured balloon
loan ($20.2 million, 1.4%). Appraisal reduction amounts (ARAs)
totaling $45.8 million are in effect against nine ($108.1 million,
7.4%) of the 10 assets with the special servicer. Details on the
four largest assets with the special servicer are:
The Cameron Brown Office Building loan ($20.2 million, 1.4%)
is the largest specially serviced asset, and was transferred
to special servicing on May 3, 2011, due to imminent maturity
default. The loan matured on May 11, 2011, and the loan's
payment status is reported as a matured balloon loan. The loan
is secured by an 182,624-sq.-ft., 12-story office building in
Charlotte, N.C. According to CWCapital, the borrower has requested
a loan modification. As of year-end 2010, the DSC for the loan was
reported as 0.99x. An ARA of $3.6 million is in effect for this
loan. Standard & Poor's anticipates a moderate loss upon the
eventual resolution of this loan.
The second-largest specially serviced asset, the La Ventana
Apartment Homes asset ($18.1 million, 1.2%), comprises a 256-
unit garden apartment complex in Las Vegas and has a total
reported exposure of $20.1 million. The loan was transferred
to the special servicer on Oct. 1, 2009, due to imminent payment
default and became REO on June 3, 2010. CWCapital indicated that
a new property manager has been hired to manage the property.
While recent DSC information is not available for this asset,
the reported occupancy was 84.0% as of October 2011. An ARA of
$9.2 million is in effect for this asset. Standard & Poor's
anticipates a significant loss upon the eventual resolution of
this asset.
The Northbay Commerce Center asset ($18.0 million, 1.2%) is the
third-largest specially serviced asset, comprising a 97,644-sq.-
ft. retail shopping center in Tampa, Fla. The total reported
exposure was $19.1 million as of the November 2011 remittance
report. The loan was transferred to special servicing on April 2,
2009, due to an imminent payment default and became REO on
April 14, 2011. CWCapital indicated that it is exploring various
liquidation strategies. While recent DSC information is not
available for this asset, the reported occupancy was 60.7% as
of October 2011. An ARA of $9.9 million is in effect against
this asset. Standard & Poor's anticipates a significant loss
upon the eventual resolution of this asset.
The Church Ranch Office Center Buildings 2 & 4 asset
($16.5 million, 1.1%) is the fourth-largest specially serviced
asset, and consists of two office/flex buildings totaling 184,738
sq. ft. in Westminster, Colo., which is in the Denver metropolitan
area. The loan was transferred to the special servicer on Nov. 23,
2010, due to imminent payment default and became REO on Aug. 2,
2011. As of the nine months ended Sept. 30, 2010, DSC was reported
as 0.64x and the current reported occupancy was 79.0%. CWCapital
indicated that it is currently focused on leasing up the property.
An ARA of $7.3 million is in effect against this asset. Standard &
Poor's anticipates a moderate loss upon the eventual resolution of
this asset.
The remaining six loans with the special servicer have individual
balances that represent less than 1.0% of the total pool balance.
ARAs totaling $15.8 million were in effect against five of these
assets. Standard & Poor's estimated losses representing a
weighted-average loss severity of 41.8% for the six assets with
the special servicer.
"In addition to the specially serviced assets, we determined two
loans ($60.1 million, 4.1%) in the pool to be credit-impaired,"
S&P said. Given the reported poor performance, S&P considers these
two loans to be at an increased risk of default and loss. Details
are:
The Tan-Tar-A Resort loan ($46.8 million, 3.2%) is the fifth-
largest loan in the pool, and is secured by a 497-room, full-
service lakefront hotel/resort located in the Lake of the Ozarks
region of Missouri, about 175 miles from St. Louis. The loan
appears on the master servicer's watchlist due to a decline in
DSC. The loan's reported payment status is current. As of the
year-ended Dec. 31, 2010, the reported DSC and occupancy were
0.88x and 34.7%. Operating performance continues to decline as
the reported DSC for the six months ending June 30, 2011 was
0.62x.
The Sunrise Springs Apartment Homes loan ($13.3 million, 0.9%) is
secured by a 192-unit, two-story apartment complex in Las Vegas.
The loan appears on the master servicer's watchlist due to a
decline in DSC. The loan's reported payment status is 60-plus-days
delinquent. The master servicer indicated that the DSC has dropped
to 0.89x as of the nine months ended Sept. 30, 2011, from 0.95x as
of year-end 2010.
Transaction Summary
As of the Nov. 18, 2011 trustee remittance report, the collateral
pool balance was $1.5 billion, which is 83.8% of the balance at
issuance. The pool includes 99 loans and seven REO assets, down
from 115 loans at issuance. The master servicer, Wells Fargo Bank
N.A., provided financial information for 95.5% of the loan
balance, 79.6% of which was interim- or full-year 2010 data,
and the remainder reflected full-year 2009 or interim-2011 data.
"We calculated a weighted average DSC of 1.33x for the loans in
the pool based on the servicer-reported figures. Our adjusted DSC
and LTV ratio were 1.29x and 114.5%. Our adjusted DSC and LTV
figures exclude the transaction's 10 specially serviced assets
($112.1 million, 7.7%) and two loans ($60.1 million, 4.1%) that
we determined to be credit-impaired. The transaction has
experienced $10.2 million in principal losses to date from
two assets. Twenty-eight loans ($377.9 million, 25.9%) in the
pool are on the master servicer's watchlist, including the
second-largest loan ($69.6 million, 4.8%) and the 10th-largest
loan ($32.6 million, 2.2%) in the pool. Thirty-two loans
($469.9 million, 32.2%) have a reported DSC of less than 1.10x,
26 of which ($400.6 million, 27.4%) have reported a DSC of less
than 1.00x," S&P said.
Summary of The Top 10 Loans
"The top 10 loans have an aggregate outstanding balance of
$566.1 million (38.8%). Using servicer-reported numbers, we
calculated a weighted average DSC of 1.38x for nine of the top 10
loans. Our adjusted DSC and LTV ratio, were 1.19x and 115.5% for
nine of the top 10 loans. We excluded the fifth-largest loan from
these figures because we determined it to be credit-impaired. The
second-largest and 10th-largest loans in the pool are on the
master servicer's watchlist," S&P said.
The Eastern Shore Centre loan ($69.6 million, 4.8%) is the second-
largest loan in the pool and is secured by a 432,689-sq.-ft.
lifestyle retail center in Spanish Fort, Ala., just outside
Mobile. The loan was placed on the master servicer's watchlist due
to a decline in DSC. The loan is a corrected mortgage loan which
was returned to the master service on Feb. 8, 2011. The loan was
modified and the modification terms included an interest rate
reduction that resulted in $136,553 of interest shortfall to the
trust and $2,396 of workout fees during the November 2011
reporting period. The reported occupancy declined to 81.8% as
of June 30, 2011, from 83.5% at Dec. 31, 2010. However, the
servicer-reported DSC increased to 0.93x as of the six months
ended June 30, 2011, from 0.88x at year-end 2010, due to lower
reported operating expenses.
The Northland Plaza loan ($32.6 million, 2.2%) is the 10th-largest
loan in the pool and is secured by a 192-unit, 303,013-sq.-ft.
retail shopping center in DeKalb, Ill., about 65 miles west of
Chicago. The loan was placed on the master servicer's watchlist
due to a decline in DSC. According to the June 30, 2011, rent
roll, a new lease, effective Jan. 1, 2011, was signed with Hobby
Lobby for 54,019 sq. ft., or 17.8% of the gross leaseable area. As
a result, the servicer-reported DSC and occupancy increased to
1.02x and 88.8% for the six months ended June 30, 2011, compared
with 0.76x and 71.5% at year-end 2010.
Standard & Poor's stressed the loans in the pool according to its
current criteria. The resultant credit enhancement levels are
consistent with S&P's rating actions.
Standard & Poor's 17g-7 Disclosure Report
SEC Rule 17g-7 requires an NRSRO, for any report accompanying a
credit rating relating to an asset-backed security as defined in
the Rule, to include a description of the representations,
warranties and enforcement mechanisms available to investors and a
description of how they differ from the representations,
warranties and enforcement mechanisms in issuances of similar
securities. The Rule applies to in-scope securities initially
rated (including preliminary ratings) on or after Sept. 26, 2011.
If applicable, the Standard & Poor's 17g-7 Disclosure Reports
included in this credit rating report are available at
http://standardandpoorsdisclosure-17g7.com
Ratings Lowered
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2006-C26
Rating
Class To From Credit enhancement (%)
A-M A (sf) AA- (sf) 23.03
A-J BB+ (sf) BBB+ (sf) 13.69
B BB (sf) BBB- (sf) 11.61
C BB- (sf) BB+ (sf) 10.42
D B (sf) BB- (sf) 8.50
E B- (sf) B+ (sf) 7.16
Ratings Affirmed
Wachovia Bank Commercial Mortgage Trust
Commercial mortgage pass-through certificates series 2006-C26
Class Rating Credit enhancement (%)
A-2 AAA (sf) 34.89
A-PB AAA (sf) 34.89
A-3 AAA (sf) 34.89
A-3FL AAA (sf) 34.89
A-1A AAA (sf) 34.89
F CCC- (sf) 5.83
X-C AAA (sf) N/A
X-P AAA (sf) N/A
N/A -- Not applicable.
WRIGHTWOOD CAPITAL: Moody's Affirms Rating of Cl. B Notes at 'Ba3'
------------------------------------------------------------------
Moody's has affirmed the ratings of nine classes of Notes issued
by Wrightwood Capital Real Estate CDO 2005-1 Ltd. due to key
transaction parameters performing within levels commensurate
with the existing ratings levels. The rating action is the
result of Moody's on-going surveillance of commercial real
estate collateralized debt obligation and collateralized loan
obligation (CRE CDO CLO) transactions.
Cl. A-1, Affirmed at Aa3 (sf); previously on Apr 15, 2009
Downgraded to Aa3 (sf)
Cl. A-R, Affirmed at Aa3 (sf); previously on Apr 15, 2009
Downgraded to Aa3 (sf)
Cl. B, Affirmed at Ba3 (sf); previously on Dec 9, 2010 Downgraded
to Ba3 (sf)
Cl. C, Affirmed at B2 (sf); previously on Dec 9, 2010 Downgraded
to B2 (sf)
Cl. D, Affirmed at B3 (sf); previously on Dec 9, 2010 Downgraded
to B3 (sf)
Cl. E, Affirmed at Caa1 (sf); previously on Apr 15, 2009
Downgraded to Caa1 (sf)
Cl. F, Affirmed at Caa2 (sf); previously on Apr 15, 2009
Downgraded to Caa2 (sf)
Cl. G, Affirmed at Caa3 (sf); previously on Apr 15, 2009
Downgraded to Caa3 (sf)
Cl. H, Affirmed at Caa3 (sf); previously on Apr 15, 2009
Downgraded to Caa3 (sf)
RATINGS RATIONALE
Wrightwood Capital Real Estate CDO 2005-1, Ltd. is a CRE CDO
transaction backed by a portfolio A-Notes and whole loans (100% of
the pool balance). As of the November 15, 2011 Trustee report, the
aggregate Note balance of the transaction is $630.5 million the
same as at last review. There is an undrawn balance of Class A-R
of approximately $19.5 million, if drawn that would increase the
aggregate Note balance of the transaction to $650.0 million.
There are two assets with a par balance of $19.2 million (3.2% of
the current pool balance) that are considered Defaulted Securities
as of the November 15, 2011 Trustee report. Moody's expects
moderate losses from those Defaulted Securities to occur once they
are realized.
Moody's has identified the following parameters as key indicators
of the expected loss within CRE CDO transactions: weighted average
rating factor (WARF), weighted average life (WAL), weighted
average recovery rate (WARR), and Moody's asset correlation (MAC).
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 has updated credit estimates for the non-Moody's rated
collateral. The bottom-dollar WARF is a measure of the default
probability within a collateral pool. Moody's modeled a bottom-
dollar WARF of 6,808 compared to 7,049 at last review. The
distribution of current ratings and credit estimates is as
follows: Baa1-Baa3 (0.0% compared to 0.5% at last review), Ba1-Ba3
(2.7% compared to 2.1% at last review), B1-B3 (0.0% compared to
1.5% at last review), and Caa1-C (97.3% compared to 96.0% at last
review).
WAL acts to adjust the probability of default of the collateral in
the pool for time. Moody's modeled to a WAL of 2.5 years compared
to 3.4 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 56.5% compared to 56.3% 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 25.7% compared to 20.5% 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.
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
56.5% to 46.5% or up to 56.5% would result in average rating
movement on the rated tranch of 0 to 3 notches downward and 0 to 6
notches upward, respectively.
The performance expectations for a given variable indicate Moody's
forward-looking view of the likely range of performance over the
medium term. From time to time, Moody's may, if warranted, change
these expectations. Performance that falls outside the given range
may indicate that the collateral's credit quality is stronger or
weaker than Moody's had anticipated when the related securities
ratings were issued. Even so, a deviation from the expected
range will not necessarily result in a rating action nor does
performance within expectations preclude such actions. The
decision to take (or not take) a rating action is dependent on
an assessment of a range of factors including, but not
exclusively, the performance metrics.
Primary sources of assumption uncertainty are the extent of the
slowdown in growth in the current macroeconomic environment and
the commercial real estate property markets. While commercial real
estate property markets are gaining momentum, a consistent upward
trend will not be evident until the volume of transactions
increases, distressed properties are cleared from the pipeline
and job creation rebounds. The hotel and multifamily sectors are
in recovery and improvements in the office sector continue, with
fundamentals in Gateway cities outperforming their suburban
counterparts. However, office demand is closely tied to
employment, where fundamentals remain weak, so significant
improvement may be delayed. Performance in the retail sector has
been mixed with on-going rent deflation and leasing challenges.
Across all property sectors, the availability of debt capital
continues to improve with monetary policy expected to remain
supportive and interest rate hikes postponed. Moody's central
global macroeconomic scenario reflects an overall downward
revision of forecasts since last quarter, amidst ongoing fiscal
consolidation efforts, household and banking sector deleveraging,
persistently high unemployment levels, and weak housing markets
that will continue to constrain growth.
The methodologies used in this rating were "Moody's Approach to
Rating SF CDOs" published in November 2010, and "Moody's Approach
to Rating Commercial Real Estate CDOs" published in July 2011.
ZAIS INVESTMENT: Moody's Upgrades Rating of $25MM Notes to 'B1'
---------------------------------------------------------------
Moody's Investors Service has upgraded the rating one class of
notes and confirmed the ratings of three classes of notes issued
by ZAIS Investment Grade Limited V. The classes of notes affected
by the rating actions are:
US$285,000,000 Class A-1 Senior Secured Floating Rate Notes
(current balance of $138,407,253), Upgraded to Aa3 (sf) ;
previously on August 3, 2011 Upgraded to Baa1 (sf) and Remained On
Review for Possible Upgrade;
US$25,000,000 Class A-2 Senior Secured Fixed Rate Notes, Confirmed
at B1 (sf) ; previously on August 3, 2011 Upgraded to B1 (sf) and
Remained On Review for Possible Upgrade;
US$37,000,000 Class B-1 Senior Secured Floating Rate Notes,
Confirmed at Caa3 (sf) ; previously on August 3, 2011 Upgraded to
Caa3 (sf) and Remained On Review for Possible Upgrade;
US$14,000,000 Class B-2 Senior Secured Fixed Rate Notes, Confirmed
at Caa3 (sf) ; previously on August 3, 2011 Upgraded to Caa3 (sf)
and Remained On Review for Possible Upgrade.
RATINGS RATIONALE
According to Moody's, the rating actions taken on the notes result
primarily from the improvement of the credit quality of the
portfolio and the deleveraging of the Class A-1 Notes.
As of the latest trustee report dated November 3, 2011, the Class
A and Class B overcollateralization ratios are reported at 115%
and 88.56%, respectively, versus July 2011 levels of 96.89% and
79.32%. Also based on this November report the WARF reported is
1829 versus July 2011 reported WARF of 2449. The transaction
triggered an EOD on April 27, 2009 and, subsequently, acceleration
was declared on August 6, 2009. Due to the acceleration the Class
A-1 Notes are receiving all interest and principal payments and
the Class A-2, B-1 and B-2 notes are currently deferring interest
amounting to $4mm, $2.66mm and $2.5mm, respectively. Since the
last review the Class A-1 Notes have amortized by $55mm.
Today's rating actions on the notes also reflect CLO tranche
upgrades that have taken place within the last six months. Since
Moody's June 22nd announcement that nearly all CLO tranches
currently rated Aa1 and below were placed on review for possible
upgrade, 76% of the performing collateral has been upgraded, 39%
of which took place following the previous rating action on the
Notes in August.
ZAIS Investment Grade Limited V is a collateralized debt
obligation backed primarily by a portfolio of CLOs.
The principal methodology used in this rating was "Moody's
Approach to Rating SF CDOs" published in November 2010.
Other Factors used in this rating action are described in "Moody's
Approach to Rating Structured Finance Securities in Default"
published in November 2009.
Moody's applied the Monte Carlo simulation framework within
CDOROMv2.8 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: 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 (EL) 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 rating action factors in a number of sensitivity analyses
and stress scenarios, discussed below. Results are 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 Performing Assets notched up by 1 rating notches:
Class A-1: +2
Class A-2: +3
Class B-1: +2
Class B-2: +2
Moody's Performing Assets notched down by 1 rating notches:
Class A-1: -2
Class A-2: -1
Class B-1: -1
Class B-2: -2
* S&P Affirms Ratings on 189 Cert. Classes From Canadian CMBS
-------------------------------------------------------------
Standard & Poor's Ratings Services affirmed its ratings on 189
classes of commercial mortgage pass-through certificates from 22
Canadian commercial mortgage-backed securities (CMBS)
transactions.
The complete ratings list is available for free at:
http://bankrupt.com/misc/S&P_CanadianCMBSRatingList_12711.pdf
"Our rating affirmations primarily reflect the credit stability of
the affected Canadian CMBS transactions and the low likelihood
that the securities will experience large adverse changes in
credit quality. Our analysis considered the individual deal
structures as well as the liquidity available to each
transaction," S&P said.
"Based primarily on the information reported in the November 2011
trustee remittance reports for the affected transactions, the
affirmations also reflect our anticipation that the deals will
experience minimal credit support erosion upon the eventual
resolution of specially serviced assets (eight assets, C$54.0
million) across the 22 deals. We also considered that no
monthly interest shortfalls are affecting any of the rated
securities and only accumulated interests of C$7,694 are affecting
two rated securities, which we considered immaterial in each case.
To date, the affected transactions have experienced C$2.8 million
in realized losses sustained by unrated first-loss tranches from
six transactions. Only one of these six transactions has
experienced a principal loss greater than C$200,000 to date," S&P
said.
"Accordingly, we believe the credit quality of the pool of assets
collateralizing the affected transactions is performing as
expected based on the observed factors we determined are relevant,
and the credit enhancement levels are consistent with our affirmed
ratings," S&P said.
* S&P Lowers Ratings on 14 Tranches From 5 US CDOs to 'D'
---------------------------------------------------------
Standard & Poor's Ratings Services lowered its rating on 16
tranches from five U.S. synthetic CDO transactions. "At the same
time, we affirmed our ratings on 15 tranches from five synthetic
CDO transactions. Two of the transactions reviewed are directly
linked to commercial mortgage-backed securities (CMBS) bonds that
were downgraded, while the remaining are CDOs backed by commercial
mortgage-backed securities (CMBS)," S&P said.
"The downgrades are from synthetic CDOs that experienced a
downgrade to one of their direct-linked reference obligations
or had reductions to the credit enhancement available to them,
resulting in interest shortfalls or principal losses. The
affirmations reflect our opinion of the availability of
sufficient credit support at the current rating levels," S&P
said.
Rating Actions
Seawall 2006-4 Ltd
Rating
Class To From
D-2 D (sf) CC (sf)
E-1 D (sf) CC (sf)
E-2 D (sf) CC (sf)
Seawall 2006-4a Ltd
Rating
Class To From
D-2 D (sf) CC (sf)
E-1 D (sf) CC (sf)
E-2 D (sf) CC (sf)
Seawall 2007-1 Ltd
Rating
Class To From
A D (sf) CC (sf)
B D (sf) CC (sf)
C-1 D (sf) CC (sf)
C-2 D (sf) CC (sf)
D-1 D (sf) CC (sf)
D-2 D (sf) CC (sf)
E-1 D (sf) CC (sf)
E-2 D (sf) CC (sf)
Seawall SPC
Series 2008 CMBS CDO-1
Rating
Class To From
Notes B+ (sf) BB (sf)
Seawall SPC
Series 2008 CMBS CDO-5
Rating
Class To From
Notes CCC+ (sf) B+ (sf)
Ratings Affirmed
Seawall 2006-1 Ltd
Class Rating
A-2 AAA (sf)
B AA- (sf)
C-1 A (sf)
C-2 BBB- (sf)
Seawall 2006-4 Ltd
Class Rating
A CC (sf)
B CC (sf)
C CC (sf)
D-1 CC (sf)
Seawall 2006-4a Ltd
Class Rating
D-1 CC (sf)
Seawall 2007-2 Ltd
Class Rating
Super Senior AAA (sf)
A A+ (sf)
B A- (sf)
Seawall 2007-3 Ltd
Class Rating
Super Senior AAA (sf)
A A+ (sf)
B A- (sf)
Other Ratings Outstanding
Seawall 2006-4 Ltd
Class Rating
E-3 D (sf)
E-4 D (sf)
Seawall 2006-4a Ltd
Class Rating
E-3 D (sf)
E-4 D (sf)
*********
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*********
S U B S C R I P T I O N I N F O R M A T I O N
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